Dependency decisions

CASE 1

This case explores the concept of "dependency" in the context of the deceased member having a fiancée at the date of his death, and while they did not live together, they did share many expenses with a view to a shared life.

The deceased was only 22 years old when he tragically died. The deceased’s parents agreed to an IVF authority with a view to the fiancée being able to conceive a baby sometime in the future. However, the relationship between the deceased’s parents and the fiancée soon deteriorated.

The father applied for letters of administration of his son’s estate and while he initially complained to the Tribunal in his own capacity, that was later changed to in his capacity as the deceased’s legal personal representative. The father wanted the death benefit of $223,420.37 (including an insured amount of $208,000) to be paid to the estate. He argued that the trustee’s decision to pay the fiancée as the deceased’s de facto was unfair and unreasonable in the circumstances.

In particular, the father argued that the fiancée was not the de facto of the deceased. He pointed out that while they jointly owned a property, furniture and a car, and shared the mortgage and other utilities, the relationship was under strain and his son was considering calling off the wedding. He also pointed out that they did not live together as they each resided with their respective parents and spent only one or two nights in each other’s parents’ homes. Finally, he and the deceased’s mother had organised the funeral and paid for three graves at a total cost of $88,858 with no financial assistance from the fiancée.

The trustee disagreed with the father and formed the view that the fiancée and deceased were a de facto couple. Their relationship had existed for two and a half years and their wedding was only months away. They spent nights together in each other’s parents’ homes and planned to move into their jointly owned property after the wedding. There was evidence of a joint mortgage, joint bank account and shared expenses. While the father provided anecdotal evidence suggesting the relationship was not harmonious, the evidence of a kitchen tea being held the day before the deceased’s death and the IVF authority pointed to an intact relationship.

The trustee viewed the fiancée as the only person who had an expectation of regular and ongoing direct financial support from the deceased, for not only the mortgage but also daily living expenses, as evidenced by copies of bills in joint names and a shared bank account.

The additional evidence from the fiancée was that they actually spent at least five nights of each week together and the wedding reception remained booked at the date of death. While there was stress in arranging the wedding some three months away, the deceased was repairing a car to be used for the wedding. She argued that if she was not in a de facto relationship, she was financially dependent on the deceased and entitled to the death benefit.

The Tribunal had a different way at looking at the facts from both the complainant and the trustee. First, the Tribunal noted the deceased died intestate and without a beneficiary or making a binding death benefit nomination. The Tribunal felt that the focus on whether the fiancée was a de facto somewhat missed the point. This was because the trust deed required a decision as to whether she was a ‘spouse’ (as defined), not whether she was a de facto. The two definitions are quite distinct. The Tribunal held it did not have to determine if she was a "spouse" given, in its view, she was clearly a "dependant" on the grounds of her financial arrangements with the deceased. This was because the deceased and the fiancée combined their finances and assumed joint responsibility for a mortgage and outgoings on a property (together with other financial commitments), and the fact the fiancée had the sole responsibility for this debt following his death.

The Tribunal was satisfied that she had an expectation of ongoing financial support and this meant she satisfied the definition of dependant in the trust deed. The Tribunal set aside the trustee’s decision and substituted its own; namely, that the entire death benefit be paid to the fiancée not on the grounds she was a de facto but rather a dependant according to the terms of the trust.

- D16-17\150

CASE 2

This is a case where the trustee’s administration process was not aligned to both the provisions of the Superannuation Industry (Supervision) Act (SIS) and the terms of the trust. Needless to say, the Tribunal substituted its own decision, notwithstanding the trustee had already paid out the entire death benefit. The deceased member completed a non-lapsing binding death benefit nomination (NLN) in which he nominated his sister as the recipient of any death benefit on the grounds of an interdependency relationship. The trustee accepted this on the basis there was evidence the deceased sent money to his sister’s husband (with whom she resided) in an overseas country. The trustee contended that it had acted on a valid NLN and was, therefore, not required to contact potential beneficiaries before distributing the death benefit. The trustee was of the opinion it had acted fairly in paying the death benefit amount of $463,557.35 to the sister.

The problem was that the trustee’s actions were wrong at law. Under the terms of SIS and the trust deed, the NLN was only valid if it nominated either the legal personal representative or a dependant(s) (as defined in SIS). According to SIS, a dependant includes someone in an interdependency relationship, but the sister’s circumstances did not actually satisfy SIS (and hence the trust deed which reflected SIS). For two people to be in an interdependency relationship, section 10A(1) of SIS requires all four criteria of the section to be satisfied. That is:

• they have a close personal relationship; and
• they live together; and
• one or each of them provides the other with financial support; and
• one or each of them provides the other with domestic support and personal care.

On the facts of this case, the sister and the deceased lived in different countries so it was impossible to satisfy the second element of the definition, together with there being no evidence of domestic support and personal care.

For completeness, SIS also provides that if two people have a close personal relationship but they do not satisfy all of the remaining elements of the definition of interdependency, they can be regarded as having such a relationship if the reason why they do not satisfy the other requirements is that either or both of them suffer from a physical, intellectual or psychiatric disability. The facts in this case did not comply with this extension to the definition. The Tribunal also attempted to discover if the sister was a dependant by virtue of financial dependency, but the sister provided no submissions to the Tribunal and, therefore, it could not take that line of inquiry any further.

Under the terms of the trust deed where an NLN was invalid, the trustee was required to pay the benefit to the legal personal representative (LPR) – if there was one. The complainant was the LPR and he also acted under a power of attorney for the deceased’s son.

So in light of these facts, the Tribunal determined the decision of the trustee to pay the benefit according to the invalid NLN was unfair and unreasonable. It ordered the trustee to pay the death benefit (together with interest at the fund’s cash rate from the date the benefit was paid to the sister) to the LPR, as it was required to do so under both the terms of the trust and SIS.

- D16-17\149

This article was first published in Super Funds, 1 July 2017.