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Legal Issues for Superannuation Case Study » McIntosh v McIntosh

Rachael Hocking

Given our recent experience in acting for the successful Plaintiffs in arguably one of the most significant Supreme Court decisions concerning superannuation, Wooster v Morris [2013] VSC 594, it is important to take note of some other important recent decisions.

McIntosh v McIntosh [2014] QSC 99

This case involved a 41 year old man who had died intestate (without a will) leaving no spouse or children. He was survived by his mother, father and two siblings.

A dispute arose between the deceased’s parents who had long since divorced and had an acrimonious relationship.

Letters of Administration had been granted solely to the mother as a result of the conflict between her and her former husband. The father had withdrawn his opposition to the mother’s application on the basis of her undertaking to the Court that she proposed to faithfully collect her son’s assets, pay his liabilities and distribute his residuary estate equally between herself and the deceased’s father as soon as possible in accordance with the rules of intestacy.

The deceased’s net assets totalled approximately $80,000 however the majority of the deceased’s wealth comprised three superannuation funds in excess of $453,000 in total.

The mother had submitted to each of the three superannuation funds that she should be paid the deceased’s superannuation entitlements as she was in an interdependent relationship with her son (they lived together, shared the household expenses and she provided assistance to the deceased as a result of his bipolar disorder and physical disability). The mother also produced evidence that there were death benefits in favour of her, however they were non-binding nominations which means the trustee was not bound to follow them. Each of the three funds accepted the mother’s submissions and paid the funds to her.

As a result of correspondence passing between the solicitors for the mother and father, the mother brought an application before the Court to determine whether she was required to account to the estate for the superannuation funds.

The mother argued that the deceased’s superannuation entitlements did not form part of the estate and should be paid to her in her personal capacity for the reasons outlined above. The father argued that the mother should be required to account to the estate for those monies in her capacity as legal personal representative and thus distributed in accordance with the rules of intestacy i.e. 50 / 50.

At the time of applying for Letters of Administration, the mother did not disclose to the Court that she intended to seek to have the superannuation funds paid to her in her personal capacity. The Court therefore did not have sufficient information to consider the potential conflict of interest when granting the application appointing her as the estate’s administrator.

The Court found that there was a clear conflict between the obligations of the mother in her capacity as administrator and her personal interests. The role of administrator comes with a duty to apply for payment of superannuation funds to an estate, in the absence of a binding death benefit nomination. The only exception to this requirement is where superannuation funds are paid to a deceased’s dependent. The Court did acknowledge that it is a matter for the trustee’s to exercise its discretion as to whom the funds are paid, however a legal personal representative must urge the trustee to exercise the discretion in favour of the estate. By seeking to have the superannuation funds paid to her, the mother was preferring her own personal interests to those of the other beneficiaries of the estate i.e. her former husband, which is a breach of her fiduciary duties. Interestingly, the Court did not deal with the mother’s contention that she was in an interdependency relationship with her son.

The mother was ordered to account to the estate for the entire superannuation proceeds.

Importantly, the Court drew a distinction between an appointment as Legal Personal Representative under a Will by the testator exercising a testamentary choice and a voluntary appointment such as applying to be an administrator by way of Letters of Administration. The former instance is said to be an exception to the rule forbidding conflicts of interest as the testator is said to have known of and consented to the conflict. Whereas the latter cannot act where he or she has a conflicting personal interest and the exception does not apply.

Her Honour Justice Atkinson recognised that ‘this decision deals with an area of the law which has growing importance in view of the growth of personal superannuation’. A comment I am sure we would all agree with.

WHAT DOES THIS MEAN FOR YOU?

In considering estate planning, whether as a professional or in relation to your own personal affairs, in situations such as this it is always important to ensure you have properly considered and put mechanisms in place so that your assets go to whom you wish and the person you wish to manage your affairs is properly appointed. It will not only give you peace of mind but may provide protection for your intended beneficiaries.