Application by BT Funds Management Ltd
[2017] NSWSC 45
•03 February 2017
Supreme Court
New South Wales
Medium Neutral Citation: Application by BT Funds Management Ltd [2017] NSWSC 45 Hearing dates: 3 February 2017 Decision date: 03 February 2017 Jurisdiction: Equity Before: Stevenson J Decision: Advice given for the purpose of rules governing a superannuation fund that the trustee must treat a direction concerning the deceased’s death benefit in favour of his widow as a request because the trustee had actual knowledge that the deceased and his widow were permanently separated; trustee not compelled to pay all or any part of the death benefit to the deceased’s widow and may instead pay any remaining part of the death benefit to the deceased’s dependants and/or legal personal representative
Catchwords: TRUSTS AND TRUSTEES; JUDICIAL ADVICE – s 63 of the Trustee Act 1925 (NSW) – superannuation fund – conditional consent to non-lapsing direction revoked where trustee had actual knowledge that the deceased and his widow were permanently separated – trustee not compelled to pay death benefit to deceased’s widow as provided in the direction – direction then treated as a request Legislation Cited: Succession Act 2006 (NSW)
Superannuation Industry (Supervision) Act 1993 (Cth)
Superannuation Industry (Supervision) Regulations 1994 (Cth)
Trustee Act 1925 (NSW)Cases Cited: Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 Category: Principal judgment Parties: BT Funds Management Limited (Plaintiff) Representation: Counsel:
Solicitors:
D Barlin (Plaintiff)
Herbert Smith Freehills (Plaintiff)
File Number(s): SC 2016/335099
EX TEMPORE Judgment (REVISED)
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The plaintiff (“the Trustee”) is the trustee of a regulated superannuation fund known as "BT Retirement Wrap" (“the Fund”).
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The late Mr Kevin Jones was a member of the Fund.
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On 25 August 2009, Mr Jones gave the Trustee a "Non-Lapsing Direction" (“the Direction”) that his "Death Benefit" (an amount in the order of $660,000) be paid to his wife, Grace Chin-Fong-Jones (“the Widow”).
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Mr Jones died on 3 November 2012.
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The Direction was thus given more than three years before Mr Jones’ death. However, I am satisfied that the Trustee would be justified in concluding that the Direction is governed by s 59(1) of the Superannuation Industry (Supervision) Act 1993 (Cth) rather than s 59(1A) of that Act and that accordingly it is not subject to reg 6.17A(7) of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (which provides that notices such as the Direction lapse after three years).
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The "Rules for paying Death Benefits" are found in cl 5.3 of Sch 2 of the deed establishing the trust.
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Clause 5.3(g)(iii) provides that the Trustee is "required" to accept a Non-Lapsing Direction (such as that with which this case is concerned) to which it has given conditional consent under cl 5.3(h).
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In turn, cl 5.3(h) provides that the Trustee "must" give that conditional consent unless it has "actual knowledge" that, in this case Mr Jones, did not understand the consequences of making the Non-Lapsing Direction. There is no question of a Trustee having any such knowledge in this case.
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The Trustee has thus given its conditional consent to the Direction.
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Clause 5.3(j) provides that on the death of a member, the Trustee "must" consider whether to make its conditional approval absolute and that it "must" form the view that its conditional consent is absolute unless, relevantly, it has "actual knowledge” that the member has "separated on a permanent basis from their Spouse or partner" (curiously whether or not the Non-Lapsing Direction is for the benefit of such spouse or partner).
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In that event, cl 5.3(j) goes on to provide that the Trustee's conditional consent is revoked and the Trustee must treat the Direction as a "Request".
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I am satisfied that the Trustee has actual knowledge that, after the date of the Direction, the Widow separated on a permanent basis from Mr Jones. That knowledge derives from a number of sources but in particular, a letter Mr Jones wrote on 19 October 2012 addressed to "The Presiding Judge", which evidently was written in anticipation of a claim by the Widow for provision under s 59 of the Succession Act2006 (NSW). In that letter Mr Jones explained in some detail why he had made no provision for the Widow. It is clear from his letter that he and the Widow were then permanently separated.
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The result is that the Trustee must now treat the Direction as a "Request" under the rules.
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In that regard, cl 5.3(i) provides that the Trustee "may" pay the relevant benefit to the Widow as the "Nominated Beneficiary" if, as has happened, she survived Mr Jones by 30 days. Otherwise, cl 5.3(k)(i) provides that the Trustee "must" pay the benefit to, relevantly, such of Mr Jones’ dependants and legal representatives as it, in its absolute discretion, determines.
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The Trustee has been joined as a defendant in proceedings 2015/36817 in this Court commenced by Mr Jones’ children pursuant to s 59 of the Succession Act.
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In those proceedings Mr Jones’ children, as well as seeking provision from Mr Jones’ estate, seek to agitate the question to which I have referred at [5] above. These reasons do not, of course, conclusively determine that question.
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The Trustee has incurred costs in relation to the family provision proceedings. In my opinion, the Trustee would be justified in concluding that it is entitled to indemnity for those costs from the Death Benefit in question, whether under the general law (for example see Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 at 247, by reason of s 59(4) of the Trustee Act 1925 (NSW) or by reason of cll 5.3 and 8.3 of Sch 2 of the deed).
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In those circumstances I make the following orders:
Order pursuant to section 63 of the Trustee Act 1925 (NSW) that BT Funds Management Limited ("the Trustee") is justified:
in determining that its conditional consent to the Non-Lapsing Direction ("the Direction") dated 25 August 2009 given to the Trustee by the late Kevin James Jones ("the Deceased") pursuant to cl 5.3(c)(ii) of Sch 2 of the Trust Deed for Retirement Wrap (and in particular, the SuperWrap Plan) consolidated to 15 September 2016 ("the Deed") is revoked pursuant to cl 5.3(j)(iii) of Sch 2 of the Deed, on the basis that the Trustee has actual knowledge that since the Deceased gave the Direction to the Trustee, the Deceased and Nee Ching Fong (also known as Grace Jones or Grace Chin-Fong Huang) ("Grace") were separated on a permanent basis;
in determining that cl 5.3(k)(i) of Sch 2 of the Deed no longer applies, with the result that the Trustee is not compelled to pay a benefit which arises following the death of the Deceased ("the Death Benefit") to Grace as provided in the Direction;
in treating the Direction as a "Request" pursuant to cl 5.3(j) of Sch 2 of the Deed;
in exercising its discretion pursuant to cl 5.3(i) of Sch 2 of the Deed to pay the whole or a specified part of the Death Benefit to Grace, being the "Nominated Beneficiary" under the Direction;
in concluding that it is not compelled to pay all or any part of the Death Benefit to Grace, in Grace's capacity as the "Nominated Beneficiary" under the Direction;
in concluding that it must pay any remaining part of the Death Benefit, which the Trustee does not pay to Grace pursuant to that paragraph, to any of the Deceased's "Dependants" and / or "Legal Personal Representative" as those terms are defined in the Superannuation Industry (Supervision) Act 1993 (Cth);
in concluding that if the Trustee appoints the Death Benefit to the "Legal Personal Representative" of the Deceased, the Trustee is not compelled to pay all or any part of the Death benefit to Grace, in Grace's capacity as a "Dependant" of the Deceased; and
in paying the costs that have been incurred in relation to New South Wales Supreme Court Proceedings Number 2015/360817 from the Death Benefit on an indemnity basis.
Order that the Trustee’s costs in relation to these proceedings be paid from the Death Benefit on an indemnity basis.
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Decision last updated: 07 February 2017