Genikas v Statewide Superannuation Trust

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FEDERAL COURT OF AUSTRALIA

Genikas v Statewide Superannuation Trust [2007] FCA 1049

Superannuation (Resolution of Complaints) Act 1993 (Cth)

Briffa v Hay (1997) 75 FCR 428 cited
National Mutual Life Association of Australia Ltd v Campbell (2000) 99 FCR 562 cited
Cullinane v Mercer Benefit Nominees Ltd (2006) 152 FCR 1 cited
Croft v Minister for Health (1983) 45 ALR 449 cited
Mendoza v Minister for Immigration, Local Government and Ethnic Affairs (1991) 31 FCR 405 cited
Stead v State Government Insurance Commission (1986) 161 CLR 141 cited
Turner v Official Trustee in Bankruptcy (1996) 71 FCR 418 at 420 cited
Sommer v NM Superannuation Pty Ltd [2001] FCA 923 cited
Miller v Cameron (1936) 54 CLR 572 cited
Re Estate of Roberts (1983) 20 NTR 13 cited
Re Henderson [1940] Ch 764 cited

Re Grace [1955] QWN 81 cited

ROLAND EDWARD GENIKAS v STATEWIDE SUPERANNUATION TRUST

SAD 278 OF 2006

MANSFIELD J
17 JULY 2007
ADELAIDE


IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

SAD 278 OF 2006
ON APPEAL FROM THE SUPERANNUATION COMPLAINTS TRIBUNAL CONSTITUTED BY

BETWEEN:

ROLAND EDWARD GENIKAS
Appellant

AND:

STATEWIDE SUPERANNUATION TRUST
Respondent

JUDGE:

MANSFIELD J

DATE OF ORDER:

17 JULY 2007

WHERE MADE:

ADELAIDE

THE COURT ORDERS THAT:

1.The appeal be dismissed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

SAD 278 OF 2006
ON APPEAL FROM THE SUPERANNUATION COMPLAINTS TRIBUNAL CONSTITUTED BY

BETWEEN:

ROLAND EDWARD GENIKAS
Appellant

AND:

STATEWIDE SUPERANNUATION TRUST
Respondent

JUDGE:

MANSFIELD J

DATE:

17 JULY 2007

PLACE:

ADELAIDE

REASONS FOR JUDGMENT

INTRODUCTION

  1. Roland Genikas (Mr Genikas) appeals under s 46 of the Superannuation (Resolution of Complaints) Act 1993 (Cth) (the Act) on a question of law from a determination of the Superannuation Complaints Tribunal.

  2. On 24 November 2006 the Tribunal affirmed the decision of 30 September 2005 of the Trustee (the Trustee) of the Trust Deed of the Statewide Superannuation Trust (SST) to pay the benefit payable by SST on the death of Rachael Appleby (Ms Appleby) to Nathan Genikas (Nathan) to be held on his behalf on trust by Public Trustee for South Australia (Public Trustee) until reaching the age of 18 years.  The amount of that benefit is about $106,000 (the SST benefit).  The concern of Mr Genikas was that Public Trustee, rather than himself, was the trustee of the SST benefit.  (I should note that the decision of the Trustee was made by a delegate of the Trustee, but nothing turns upon that and it is convenient to refer to the Trustee in the course of these reasons).

    THE PRIMARY FACTS

  3. Ms Appleby was born in 1958 and died in January 2004.  She had previously been in a de facto marital relationship with Mr Genikas, during which time Nathan was born on 13 June 1992.  Following their separation in 1994, Mr Genikas was granted custody of Nathan by order of the Family Court of Australia.  Ms…

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Details
Case
[2007] FCA 1049
Decision Date

CaseChat Overview and Summary

Nathan Genikas brought an appeal against the decision of the Tribunal affirming the decision of the Trustee of the Trust Deed of the Statewide Superannuation Trust to pay the benefit payable by the Trust on the death of Rachael Appleby to Nathan to be held on his behalf on trust by the Public Trustee for South Australia until reaching the age of 18 years. The Trustee had decided to pay all the benefit to the Public Trustee in trust for Nathan because, as the Trustee said in a letter to Mr Genikas dated 25 October 2005, the trustee had a duty to protect the interests of minor children and had adopted a policy to pay such death benefits to the Public Trustee (in trust). Mr Genikas said that he should have been appointed trustee of the benefit on behalf of Nathan, as it would be then more valuable to Nathan upon him attaining 18 years of age. The Tribunal affirmed the decision of the Trustee. The appeal to the Supreme Court was dismissed.

The primary issue before the Supreme Court was whether the Tribunal erred in law by affirming the decision of the Trustee to appoint the Public Trustee as the trustee of the benefit payable to Nathan. The Supreme Court held that the Tribunal did not err in law in its understanding or application of cl 27(g)(ii) of the Trust Deed of SST even though the Trustee may have done so. The Tribunal’s reasons recognised that the Trustee had a discretion as to who to appoint as trustee of the SST benefit for Nathan, and then considered (as it was required to do by s 37(6) of the Act) whether the proper exercise of that discretion could fairly and reasonably have led to the appointment of the Public Trustee. It did not treat the policy of the Trustee as decisive, or indeed as relevant. Consequently, the Tribunal did not err in law in its understanding or application of cl 27(g)(ii) of the Trust Deed of SST even though the Trustee may have done so.

The appeal was dismissed with costs.

Orders

Orders of the court

1. The appeal be dismissed.

Background

Background to the litigation

On 24 November 2006 the Tribunal affirmed the decision of 30 September 2005 of the Trustee (the Trustee) of the Trust Deed of the Statewide Superannuation Trust (SST) to pay the benefit payable by SST on the death of Rachael Appleby (Ms Appleby) to Nathan Genikas (Nathan) to be held on his behalf on trust by Public Trustee for South Australia (Public Trustee) until reaching the age of 18 years. The amount of that benefit is about $106,000 (the SST benefit). The concern of Mr Genikas was that Public Trustee, rather than himself, was the trustee of the SST benefit. (I should note that the decision of the Trustee was made by a delegate of the Trustee, but nothing turns upon that and it is convenient to refer to the Trustee in the course of these reasons).THE PRIMARY FACTS Ms Appleby was born in 1958 and died in January 2004. She had previously been in a de facto marital relationship with Mr Genikas, during which time Nathan was born on 13 June 1992. Following their separation in 1994, Mr Genikas was granted custody of Nathan by order of the Family Court of Australia. Ms Appleby was given certain access rights, and was ordered to pay child support towards the upkeep and support of Nathan. At the time of her death, she was apparently in arrears to the extent of about $13,000. Ms Appleby died intestate. Public Trustee for the Northern Territory administered her estate. In addition to the benefit payable from the SST fund, a benefit was payable upon Ms Appleby’s death from the Australian Government Employees Superannuation Trust (AGEST) of about $56,000. The trustee of AGEST decided to pay 80% of that benefit to Nathan, 10% to Ellen Appleby, the twin sister of Ms Appleby, and 10% to a niece of Ms Appleby. The payment of 80% was made to Mr Genikas as trustee for Nathan. That decision was also subject to a complaint to the Tribunal. It was affirmed by the Tribunal on 4 April 2006. The material before the Court does not suggest that any other alternative trustee was considered, or that Ellen Appleby (or anyone else) suggested that Mr Genikas would be an inappropriate trustee. The Trustee decided to pay all the SST benefit to Public Trustee in trust for Nathan because, as the Trustee said in a letter to Mr Genikas dated 25 October 2005:The trustee has a duty to protect the interests of minor children and has adopted a policy to pay such death benefits to Public Trustee (in trust). Monies may then be used for the maintenance, education, benefit and advancement of minor children until age of majority, ie 18 years with the approval of Public Trustee. As noted, the complaint of Mr Genikas is simply about appointment of Public Trustee as the Trustee of the SST benefit to be paid to Nathan. He says that he should have been appointed trustee of the SST benefit on behalf of Nathan, as it would be then more valuable to Nathan upon him attaining 18 years of age. That is partly because he would avoid paying Public Trustee’s fees (which the Tribunal found to be about $5,060 initial charge upon the capital, and then about $732 per annum), and partly because Mr Genikas proposes, on advice from a financial adviser, to amalgamate the fund received from the SST benefit with the benefit available to him as trustee for Nathan from AGEST to purchase a home unit or equivalent real estate which he will then lease and to apply the revenue for Nathan’s education. He gave no precise analysis of the cost of buying and maintaining a rental property, or of the likely net rental, even assuming no borrowing costs. Mr Genikas said that Nathan would benefit from a greater net revenue stream, and from an asset escalating in value until he turned 18.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

MANSFIELD J
However, Ellen Appleby also participated before the Tribunal to support the order that the benefits payable to Nathan be held by Public Trustee on behalf of Nathan, rather than by Mr Genikas on behalf of Nathan. In her submissions to the Tribunal, and in material she provided to the Tribunal, she asserted that Mr Genikas was of unsound character, having acted fraudulently in the past, having been dishonest, and having applied monies for his own benefit when he ought not to have done so.THE TRIBUNAL’S DECISION On the issue upon which the Tribunal is said to have erred in law, and which is the subject of this appeal, the Tribunal said:The final issue is the suitability of the Complainant to be the Trustee of the benefit on behalf of the infant son. The Tribunal accepts the Trustee’s submission concerning the fees charged by the Public Trustee. The fact that the Complainant did not check this, and made no mention of the legitimate on costs submitted by the Trustee in its response, perhaps reveals a casualness inconsistent with the duty of such a Trustee not only in assessing the costs associated with the making of a form of investment he proposed but also an inconsistency in understating the need to have access to the money for a present purpose (the education of the infant son) rather than in the tying up of that money in a longer term investment in real estate.While the above is a consideration, the determinative factor is that the material would establish to the satisfaction of a reasonably operating trustee that the Complainant has at least one conviction for an offence involving dishonesty. The Tribunal took into account that the offence involved a third party and not a member of the Complainant’s family, but the offence is of such a nature that it would be remiss of the Trustee if it had not considered this aspect when reaching its decision that the benefit ought be managed by the Public Trustee rather than the Complainant. It is of concern that the Complainant has not sought to dispute the commission of the offence. It is an offence which renders him unsuitable to be a trustee of the benefit and there is, in the circumstances, nothing unfair and unreasonable to the Complainant in the operation of the Trustee’s decision to appoint the Public Trustee to fulfil that function. Clearly the Trust Deed gives the Trustee power to reach such a decision in clause 27(g). The complaint to the Tribunal was made under s 14 of the Act. Its determination is expressed in that way because s 37 of the Act required it to do so. Section 37(1) gives the Tribunal all the powers, obligations and discretions conferred on the Trustee, but then provide that, subject to s 37(6) it must make a determination in accordance with s 37(3). That is, its determination must be in writing either affirming the decision of the Trustee, varying it, setting it aside and substituting a fresh decision, or remitting the matter to the decision-maker for reconsideration in accordance with the directions of the Tribunal. Section 37(6) provides:The Tribunal must affirm a decision referred to under subsection (3) if it is satisfied that the decision, in its operation in relation to:(a) the complainant; and(b)so far as concerns a complaint regarding the payment of a death benefit – any person (other than the complainant, a trustee, insurer or decision-maker) who:(i) has become a party to the complaint; and(ii)has an interest in the death benefit or claims to be, or to be entitled to benefits through, a person having an interest in the death benefit;was fair and reasonable in the circumstances.

Ratio Decidendi

Legal Principle Established

Established by: MANSFIELD J

I shall deal with each of those matters in turn.CONSIDERATION Nathan, as the child of Ms Appleby, was a dependant (as defined) in the Trust Deed. Under cl 26 of the Trust Deed, the Trustee (because no death benefit notice had been given by Ms Appleby) was empowered to pay or apply the SST benefit to one or more of Ms Appleby’s dependants in such proportions, form, manner and at such times as the Trustee shall from time to time in its discretion determine. Clause 27(g) of the Trust Deed dealt with payments to others on behalf of beneficiaries. It provided:When any Beneficiary is under the age of 18 years or is under any legal disability or when in the opinion of the Trustee it would be in the best interests of the Beneficiary, the Trustee may pay all or part of any Benefit in such one or more of the following ways as the Trustee shall determine:(i)to or towards the maintenance, education, advancement, support or benefit of the Beneficiary in such manner and on such terms and conditions as the Trustee shall determine; or(ii)to any other person who appears to the Trustee to be a trustee for the Beneficiary or Spouse, child, parent or guardian or a person having custody of the Beneficiary for application on behalf of the Beneficiary,and the receipt of the person to whom the Benefit is paid shall be a complete discharge of the Trustee for the payment in respect of the Beneficiary and the Trustee shall not be bound or concerned to see to the application of the Benefit so paid. Consequently, the Trustee was clearly entitled to determine to pay the whole of the SST benefit arising on the death of Ms Appleby to the benefit of Nathan, and to pay that benefit to Public Trustee in trust for Nathan. This appeal challenges the exercise of that power, upheld by the Tribunal, rather than the existence of that power. I agree with the contention that the Trustee did fail properly to apply cl 27(g) of the Trust Deed. It is clear that it had a discretion as to whether to appoint Public Trustee or some other person to be trustee for the SST benefit: see cl 27(g)(ii). It does not appear to have exercised that discretion, because it has said in its letter of 25 October 2006 that it simply applied a rule or policy without regard to the particular circumstances of the case. See Croft v Minister for Health (1983) 45 ALR 449; Mendoza v Minister for Immigration, Local Government and Ethnic Affairs (1991) 31 FCR 405. However, that is not the end of the issue. Section 37(6) of the Act indicates that the Tribunal is obliged to affirm the decision if it is satisfied that the decision in its operation was fair and reasonable in the circumstances. The Tribunal concluded that it was fair and reasonable in the circumstances for Public Trustee to be appointed trustee of the SST benefit notwithstanding the competing claim of Mr Genikas to be so appointed. Its reasons are set out in [9] above. The Tribunal’s reasons recognised that the Trustee had a discretion as to who to appoint as trustee of the SST benefit for Nathan, and then considered (as it was required to do by s 37(6) of the Act) whether the proper exercise of that discretion could fairly and reasonably have led to the appointment of Public Trustee. It did not treat the policy of the Trustee as decisive, or indeed as relevant. Consequently, the Tribunal did not err in law in its understanding or application of cl 27(g)(ii) of the Trust Deed of SST even though the Trustee may have done so.