Brine v Carter

Case [2015] SASC 205

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

BRINE v CARTER

[2015] SASC 205

Judgment of The Honourable Justice Blue

22 December 2015

SUPERANNUATION - BENEFITS

SUPERANNUATION - BENEFITS - WHO ENTITLED TO RECEIVE - SPOUSE

EQUITY - GENERAL PRINCIPLES - FIDUCIARY OBLIGATIONS - FIDUCIARY DUTY - ACCOUNT FOR BENEFITS GAINED

EQUITY - GENERAL PRINCIPLES - EQUITABLE DEFENCES - LACHES AND DELAY

ESTOPPEL

The plaintiffs are the sons of the late Professor Brine.  The defendant is the former de facto spouse of Professor Brine.

Professor Brine had a superannuation policy with UniSuper. Upon his death in December 2012, its capital value of approximately $545,000 became payable in the exercise of the trustee’s discretion to one or more of his dependants or his estate or a combination thereof.

Professor Brine appointed the plaintiffs and the defendant as executors. The plaintiffs and the defendant were each dependants within the meaning of the superannuation trust deed and eligible for consideration of exercise of the trustee’s decision in their own right as well as the estate being eligible.

The defendant in her capacity as a dependant made enquiries of UniSuper and lodged a form claiming payment of the lump sum benefit as his de facto spouse.  She also had communications with the plaintiffs about the superannuation policy.  Ultimately, the trustee exercised its discretion to pay the entire benefit to the defendant.

The plaintiffs claim that the defendant misled them concerning the superannuation policy and who were eligible beneficiaries and claimed payment to herself in circumstances in which she had a conflict of interest between her duty as executor and personal interest. They claim that she is obliged to account to the estate for the benefit received from UniSuper.

The defendant denies any misleading conduct or breach of duty. She contends that she was implicitly authorised by Professor Brine's will to act in her personal interest notwithstanding her position of conflict. She contends that the plaintiffs consented to her conduct. She contends that the action is an abuse of process and relies on defences of estoppel and laches. She denies any causal connection between any breach of duty and the benefit she received. She seeks relief for any breach of duty under section 56 of the Trustee Act 1936.

The plaintiffs also seek a declaration that, on the proper construction of Professor Brine’s will, the grant of a life interest in “my principal residence in Australia at the time of my death” comprised his property at 440 Gilles Street Adelaide and did not incorporate the adjoining property at 446 Gilles Street Adelaide.

Held:

1. The action is not an abuse of process (at [110]).

2. The plaintiffs are not precluded from bringing the action by estoppel or laches (at [118], [121]).

3. The defendant misled her fellow executors up to 4 March 2013 (at [137]).

4. The defendant breached her fiduciary duties up to 4 March 2013 (at 140]).

5. Professor Brine did not authorise the defendant's conduct (at [148], [157]).

6. The plaintiffs did not consent…

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AGLC
Brine v Carter [2015] SASC 205
Case
[2015] SASC 205
Decision Date

CaseChat Overview and Summary

In the case of Brine v Carter, the parties involved are the Brine siblings and their former de facto spouse, Ms Carter. The dispute revolves around the distribution of superannuation benefits and the fiduciary obligations of Ms Carter. The matter was heard in the Supreme Court of South Australia. The court was tasked with determining several legal issues, including whether the claim by the Brines constituted an abuse of process, whether Ms Carter was estopped from bringing the claim due to her conduct, if the defence of laches applied, whether Ms Carter breached her fiduciary duties, if Professor Brine authorised Ms Carter’s conduct, whether the Brines consented to Ms Carter’s actions, if Ms Carter was obliged to account for the benefits received, and if Ms Carter acted honestly and reasonably, warranting an exemption from her fiduciary duty breach under the Trustee Act.

The court examined the evidence and found that Professor Brine's will and the UniSuper Regulations provided clear guidelines regarding the distribution of his superannuation benefits. It was established that Professor Brine had appointed Ms Carter as an executor of his will, but had also made provisions for his children and grandchildren. The court concluded that Ms Carter did breach her fiduciary duties by failing to disclose the full extent of Professor Brine's superannuation benefits to the Brines and by acting in her own interest. Furthermore, it was determined that Professor Brine did not authorise Ms Carter’s conduct, and the Brines did not consent to her actions. The court ruled that Ms Carter was obliged to account for the benefits she received and found that she did not act honestly and reasonably, therefore, she was not excused from her breach of fiduciary duty under the Trustee Act.

The final orders of the court include dismissing the Brines' claim except for a declaration regarding the proper construction of Professor Brine's will, and directing the Brines and Ms Carter to provide further information and arguments on the appropriate orders to be made in the case. The court also directed that the matter be heard to determine if a declaration should be made regarding the proper construction of Professor Brine's will, and to discuss the appropriate orders to be made in the case.

Orders

Orders of the court

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Background

Background to the litigation

The following issues arise:1.Is the claim by the Brines an abuse of process? 2.Are the Brines estopped by their conduct from bringing the claim?3.Does the defence of laches apply?4.Did Ms Carter breach her fiduciary duties?5.Did Professor Brine authorise Ms Carter’s conduct?6.Did the Brines consent to Ms Carter’s conduct?7.Is Ms Carter obliged to account to the estate for the benefit received?8.Did Ms Carter act honestly and reasonably and ought she fairly to be excused for any breach of fiduciary duty under the Trustee Act?Background The general background is set out in my reasons for judgment in relation to Ms Carter’s action. I address matters particularly relevant to this action below. At the beginning of July 1997, Professor Brine retired from his position as Associate Professor at the University of Adelaide. He commenced receiving monthly payments of an Indexed Pension annuity (the Indexed Pension). He also became entitled to a lump sum superannuation payment, which he continued to invest with UniSuper and which he could draw down when he chose (the Flexi Pension). On 15 January 2001, Professor Brine applied to the trustee UniSuper to restructure his superannuation entitlements to receive a regular monthly Allocated Pension against the capital balance of his Flexi Pension. He wrote on the application form that his preferred beneficiary on death was his estate. He wrote a covering letter saying that in respect of his Indexed Pension his de facto spouse was Ms Carter. He said that with respect to his Flexi Pension the beneficiary was to be his estate, he having made provision for his children in his will and the funds remaining were to be applied to the provisions of his will. On 20 April 2001, he wrote a further letter confirming these matters. On 18 January 2001, the capital balance of Professor Brine’s Flexi Pension was $410,111 and he commenced receiving a regular monthly Allocated Pension of $2,177. The payments of his Allocated Pension were deducted from the capital balance of his Flexi Pension, which continued to accrue net investment earnings. On 13 March 2008, Professor Brine made a will. By his will, he appointed his three sons and Ms Carter as executors. He left beneficial life interests in two properties to Ms Carter and otherwise left his estate essentially to his sons and grandchildren. The will was witnessed by Ms Carter. She was aware of the terms of the will including that she was named as an executor. On 20 May 2008, Professor Brine made a French will. By his will, he left a life interest in any French property to Ms Carter and the remainder to his sons. As at June 2012, Professor Brine’s net monthly payments were $3,141 for the Indexed Pension and $2,192 for the Flexi Pension. Over the course of his receipt of the Flexi Pension, UniSuper issued six monthly statements showing the movements in the value of the lump sum benefit. As at 14 December 2012, the lump sum value of the Flexi Pension was $542,000.[2] Professor Brine was receiving net monthly payments of his Flexi Pension of $2,192.[2] Estimate rounded to the nearest thousand dollars based on value at 31 December 2011 of $486,273 and at 4 March 2013 of $556,463 by assuming 80% of the growth of $56,152 over that period had accrued by 14 December 2012.

Evidence

Evidence Before The Court

On 26 June 2015, the Brine brothers instituted this action.Evidence Ms Carter gave evidence and called Ms McEwin to give evidence. Martin, Matthew and Daniel Brine gave evidence. Both parties tendered numerous documents. I have addressed Ms Carter’s credit in my reasons for judgment in relation to her action. I formed an adverse impression of Ms Carter’s credit and reliability and am unable to rely on her evidence where it depends on acceptance of her credibility and reliability. As expressed in my reasons for judgment in relation to Ms Carter’s action, I find that Martin, Matthew and Daniel were honest and generally reliable witnesses. In cases of conflict between their evidence and that of Ms Carter, I have preferred their evidence.The superannuation trust deed The entitlements of Professor Brine in respect of his Flexi Pension were governed by the UniSuper Consolidated Trust Deed and the UniSuper Regulations. The Trust Deed and the Regulations in the form they took as at 14 December 2012 were tendered. Regulation 6.22(1)(a)(ii) and (2) of the Superannuation Industry (Supervision) Regulations 1994 (Cth) effectively constrained UniSuper to pay only Professor Brine’s dependants[8] and/or legal personal representatives but said nothing about the exercise by the trustee of its discretion as between such eligible beneficiaries. That regulation relevantly provided:[8] Defined by section 10 of the Superannuation Industry (Supervision) Act 1993 (Cth) to include a spouse (including a de facto spouse) and a child of the member.6.22 Limitation on cashing of benefits in regulated superannuation funds in favour of persons other than members or their legal personal representatives(1)Subject to subregulation (6) and regulations 6.22B, 7A.13, 7A.17 and 7A.18, a member’s benefits in a regulated superannuation fund must not be cashed in favour of a person other than the member or the member’s legal personal representative:(a) unless:(i)the member has died; and(ii)the conditions of subregulation (2) or (3) are satisfied; or…(2)The conditions of this subregulation are satisfied if the benefits are cashed in favour of either or both of the following:(a) the member’s legal personal representative;(b) one or more of the member’s dependants. Professor Brine was a Division A member. He had elected under clause A.3.2(a)(ii) of the Trust Deed to receive part of his benefits on retirement as a lump sum benefit under clause A.7. Clause A.7 provided that the lump sum benefit was payable in accordance with clause 45. Clause 45.2 provided that:If the Member dies before the benefit payable under Clauses A.7 … has been paid in full, any part of the benefit which has not previously been dealt with on behalf of the Member will be payable to such of the Member’s Dependants and legal personal representatives and in such shares as the Trustee may determine. Clause 1.1 defined “Dependants” to include a spouse (including a de facto spouse) and a child of the Member.Factual issuesAcceptance of appointment as executor

Decision

Reasons for decision

In Ms Carter’s action, I have been called upon to determine the proper construction of Professor Brine’s will insofar as he granted to Ms Carter a life interest in “my principal residence in Australia at the time of my death”. I have determined in that action that this comprised his property at 440 Gilles Street Adelaide and did not incorporate the adjoining property at 446 Gilles Street Adelaide. In this action, the Brines seek a declaration to that effect. I will hear the parties as to whether a declaration should be made in the exercise of my discretion.Conclusion Apart from the declaration sought as to the proper construction of Professor Brine’s will, the action must be dismissed. I will hear the parties as to appropriate orders.

Ratio Decidendi

Legal Principle Established

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