Tratter v Aware Super

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FEDERAL COURT OF AUSTRALIA

Tratter v Aware Super [2024] FCAFC 36

Appeal from: Tratter v Aware Super [2023] FCA 491
File number(s): VID 440 of 2023
Judgment of: O’CALLAGHAN, ANDERSON AND MCELWAINE JJ
Date of judgment: 19 March 2024
Catchwords: SUPERANNUATION — appeal under s 1057(1) of the Corporations Act 2001 (Cth) from determination of the Australian Financial Complaints Authority (AFCA) affirming a decision of the trustee of a superannuation fund in relation to the apportionment of a death benefit — where the trustee of the fund apportioned the death benefit 70% to the deceased member’s former spouse and 30% to the deceased member’s mother — whether AFCA made error of law in determining that the trustee’s determination was neither unfair nor unreasonable — no error of law established — appeal dismissed
Legislation:

Acts Interpretation Act 1901 (Cth) s 25D

Corporations Act 2001 (Cth) ss 1053, 1055, 1055A, 1057

Superannuation Industry (Supervision) Act 1993 (Cth) s 10(1)
Cases cited:

Board of Trustees of the State Public Sector Superannuation Scheme v Edington [2011] FCAFC 8; 119 ALR 272

Carrascalao v Minister for Immigration and Border Protection [2017] FCAFC 107; 252 FCR 352

Corbisieri v NM Superannuation Proprietary Limited [2023] FCA 1319

EEU20 v Meat Industry Employees’ Superannuation Fund Pty Ltd [2020] FCA 1359

Minister for Immigration and Border Protection v Eden [2016] FCAFC 28; 240 FCR 158

Minister for Immigration and Border Protection v Stretton [2016] FCAFC 11; 237 FCR 1

Minister for Immigration and Border Protection v SZSRS [2014] FCAFC 16; 309 ALR 67

QSuper Board v Australian Financial Complaints Authority Limited [2020] FCAFC 55; 276 FCR 97

Reeves v Nulis Nominees (Australia) Limited (Trustee) [2022] FCA 627

Wan v BT Funds Management Limited [2022] FCFCA 189
Division: General Division
Registry: Victoria
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs: 95
Date of hearing: 20 February 2024
Counsel for the Appellant: The Appellant appeared in person
Counsel for the First Respondent: Mr O Wolahan
Solicitor for the First Respondent: KHQ Lawyers
Counsel for the Second Respondent: The Second Respondent filed a submitting notice
Counsel for the Third Respondent: The Third Respondent filed a submitting notice

ORDERS

VID 440 of 2023
BETWEEN:

RENATE TRATTER

Appellant
AND:

AWARE SUPER

First Respondent

CHRISTOS ORFANIDIS

Second Respondent

AUSTRALIAN FINANCIAL COMPLAINTS AUTHORITY

Third Respondent

ORDER MADE BY:

O’CALLAGHAN, ANDERSON AND MCELWAINE JJ

DATE OF ORDER:

19 MARCH 2024

THE COURT ORDERS THAT:

1.The appeal is dismissed.

2.The appellant pay the first respondent’s costs of the appeal.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

O’CALLAGHAN J:

  1. I agree with Anderson J.

I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice O’Callaghan.

Associate:

Dated:       19 March 2024

REASONS FOR JUDGMENT

ANDERSON J:

INTRODUCTION

  1. The late Trevor Tratter (the deceased) died in March 2019.…

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Details
Case
[2024] FCAFC 36
Decision Date

CaseChat Overview and Summary

In the case of Tratter v Aware Super, the appellant, who was the former partner of the deceased, appealed against the Australian Financial Complaints Authority's (AFCA) decision that upheld the trustee's determination to apportion the death benefit of the deceased member of a superannuation fund. The deceased had nominated the appellant as the beneficiary of the death benefit, but the nomination was non-binding according to the fund's trust deed. The deceased's former spouse contested the nomination, claiming they should receive the entirety of the death benefit. The trustee of the fund, Aware Super, decided to distribute the death benefit 70% to the former spouse and 30% to the appellant. Both parties objected to this decision, leading to the complaint being lodged with AFCA.

The legal issues before the court were whether AFCA erred in law in determining that the trustee's decision was neither unfair nor unreasonable, and if the trustee exercised its discretion in accordance with the relevant legislation and fund rules. The court had to consider the statutory context and the specific provisions of the Superannuation Industry (Supervision) Act 1993 (Cth) and the rules of the fund that defined "dependant" and outlined the process for determining the recipients of death benefits. The court also had to assess if the trustee's consideration of the financial dependence of the parties and the deceased's prior nomination aligned with the legal framework.

The court concluded that AFCA did not make an error of law in affirming the trustee's decision. It held that the trustee appropriately exercised its discretion by considering the statutory definition of "dependant," the non-binding nature of the deceased's nomination, and the financial dependence of both parties. The court found that the trustee's decision to distribute the death benefit 70% to the former spouse and 30% to the appellant was fair and reasonable, given the circumstances, and aligned with the statutory requirements and fund rules. The appellant's arguments did not establish any error of law on the part of AFCA. Consequently, the appeal was dismissed.

The final orders of the court were that the appeal be dismissed and that the appellant pay the first respondent's costs of the appeal. This decision underscores the importance of trustees adhering to statutory provisions and fund rules when determining the distribution of death benefits, and it reaffirms the role of AFCA in ensuring that these determinations are fair and reasonable.

Orders

Orders of the court

1. The appeal is dismissed.

2. The appellant pay the first respondent’s costs of the appeal.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The grounds articulated in the Amended NOA are set out at [39] below. The appellant filed written submissions on the appeal dated 22 January 2024, and made oral submissions at the hearing on 20 February 2024. As will be further discussed, the appellant’s written and oral submissions did not proceed by reference to the grounds in the Amended NOA. BACKGROUND The deceased joined the Health Super superannuation fund on 16 March 2009. Health Super and the Fund, which at the time was named First State Super, merged on 30 June 2011. The deceased held insurance cover through Health Super and (after the merger) the Fund, including death cover. On or before 12 August 2010 (as a member of Health Super), the deceased nominated the appellant as the preferred recipient of the whole of any death benefit payable from Health Super in respect of him. By reason of the terms of the Health Super fund trust deed, the nomination was not binding on the trustee of Health Super. The deceased’s nomination was transferred from Health Super to the Fund upon the merger. The Trustee indicated in the deceased’s annual benefit statements that his nomination was non-binding. From 2014, the deceased’s annual benefit statements included an explanation of the implications of having a non-binding nomination and drawing attention to the option of making a binding nomination under the rules of the merged fund. The deceased died on or around 25 March 2019. The Fund was governed by a Trust Deed dated 19 February 1999 (as amended from time to time) (Trust Deed) and the Rules of the Fund annexed to the Trust Deed (Fund Rules). At the relevant time, rule 8.6 of Division 1A of the Fund Rules relevantly provided as follows: (italics in original):Recipient of a member’s benefit – on death 8.6 Subject to any contrary provision in a Section or Division of these Rules, if a member dies: …(b) … the member’s benefit must be cashed in favour of either or both of: (i) the member’s legal personal representative; and (ii) one or more of the member’s dependants, as the Trustee determines… Rule 1.11 of Division 1A of the Fund Rules provided that italicised words and expressions in the Fund Rules had the same meaning as in the Superannuation Industry (Supervision) Act 1993 (Cth) and Superannuation Industry (Supervision) Regulations 1994. Accordingly, for the purposes of rule 8.6(b)(ii) of Division 1A of the Fund Rules, “dependant” had the meaning given in s 10(1) of the SIS Act, which was as follows (bolding and italics in original):dependant, in relation to a person, includes the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship. Relevantly, for the purposes of this appeal, the term spouse was defined in s 10(1) of the SIS Act as including “another person who, although not legally married to the person, lives with the person on a genuine domestic basis in a relationship as a couple”. The SIS Act definition of “dependant” was inclusive and did not exclude financial dependants. Accordingly, a person that was financially dependent on the deceased before death could be a dependant for the purposes of the SIS Act.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Rules 8.9 and 8.10 provided as follows:8.9 The Trustee may permit a member to inform the Trustee (by notice) of the person or persons that the member would prefer to receive the member’s benefit on or after the death of the member (non-binding nomination notice).8.10 If the Trustee has received a non-binding nomination notice from a member, the Trustee must consider the notice but must exercise its own discretion as to the person or persons to whom the member’s benefit is to be paid.The Trustee’s decision The Trustee communicated to the second respondent and the appellant that it proposed to distribute the death benefit payable in respect of the deceased in the following proportions:(a)70% to the second respondent; and (b)30% to the appellant. The second respondent and the appellant objected to this decision, with each party disputing the financial dependence of the other. The Trustee, after conducting an internal review, determined to affirm its decision. Its reasons were communicated to the appellant and second respondent by separate letters dated 11 May 2020. Those letters relevantly stated:(a)both the appellant and the second respondent were considered as dependants within the meaning of the “superannuation law”; (b)the deceased’s nomination of the appellant as a beneficiary preceded the commencement of his relationship with the second respondent;(c)the deceased’s nomination was not binding, and therefore the Trustee was required to exercise its discretion to determine the shares to be distributed to the dependants; (d)as the spouse of the deceased, the second respondent was recognised in “superannuation law” as a dependant and had the primary right to receive the deceased’s death benefit. (e)the appellant had provided evidence of partial financial dependence in relation to sharing some expenses for the property she jointly owned with the deceased; and(f)weighing up the amount of those expenses, the Trustee considered a distribution of 30% of the deceased’s death benefit to the appellant was a reasonable provision to cover the approximate amount she would have continued to receive from the deceased had he not died.AFCA’s Determination On 12 May 2020, the second respondent lodged a complaint with AFCA in relation to the Trustee’s decision, claiming that he should have received 100% of the deceased’s death benefit. The appellant was joined as a party to the complaint and submitted to AFCA that she should have received 100% of the death benefit. Before turning to AFCA’s Determination of the complaint, it is useful to outline the statutory context in which AFCA made the Determination. Section 1053(1) of the Corporations Act prescribes the nature of complaints that may be made to AFCA in relation to superannuation. Section 1053(1)(j) provides that a person may make a complaint to AFCA that a decision relating to the payment of a death benefit is or was “unfair or unreasonable”. In the determination of a superannuation complaint by AFCA, s 1055(3) provides:(3) AFCA must affirm a decision relating to the payment of a death benefit if AFCA is satisfied that the decision, in its operation in relation to: (a) the complainant; and (b) any other person joined under subsection 1056A(3) as a party to the complaint; was fair and reasonable in all the circumstances.

Ratio Decidendi

Legal Principle Established

The appellant brought an appeal against the Determination pursuant to s 1057(1) of the Corporations Act 2001 (Cth). That appeal was dismissed by order of the primary judge on 19 May 2023 (Order). The primary judge’s reasons are Tratter v Aware Super [2023] FCA 491 (Judgment). By her further amended notice of appeal filed on 21 December 2023, the appellant appeals from the Judgment and Order (Amended NOA). The active parties on the appeal are the appellant and the Trustee. AFCA and the second respondent have filed submitting notices. The grounds articulated in the Amended NOA are set out at [39] below. The appellant filed written submissions on the appeal dated 22 January 2024, and made oral submissions at the hearing on 20 February 2024. As will be further discussed, the appellant’s written and oral submissions did not proceed by reference to the grounds in the Amended NOA. BACKGROUND The deceased joined the Health Super superannuation fund on 16 March 2009. Health Super and the Fund, which at the time was named First State Super, merged on 30 June 2011. The deceased held insurance cover through Health Super and (after the merger) the Fund, including death cover. On or before 12 August 2010 (as a member of Health Super), the deceased nominated the appellant as the preferred recipient of the whole of any death benefit payable from Health Super in respect of him. By reason of the terms of the Health Super fund trust deed, the nomination was not binding on the trustee of Health Super. The deceased’s nomination was transferred from Health Super to the Fund upon the merger. The Trustee indicated in the deceased’s annual benefit statements that his nomination was non-binding. From 2014, the deceased’s annual benefit statements included an explanation of the implications of having a non-binding nomination and drawing attention to the option of making a binding nomination under the rules of the merged fund. The deceased died on or around 25 March 2019. The Fund was governed by a Trust Deed dated 19 February 1999 (as amended from time to time) (Trust Deed) and the Rules of the Fund annexed to the Trust Deed (Fund Rules). At the relevant time, rule 8.6 of Division 1A of the Fund Rules relevantly provided as follows: (italics in original):Recipient of a member’s benefit – on death 8.6 Subject to any contrary provision in a Section or Division of these Rules, if a member dies: …(b) … the member’s benefit must be cashed in favour of either or both of: (i) the member’s legal personal representative; and (ii) one or more of the member’s dependants, as the Trustee determines… Rule 1.11 of Division 1A of the Fund Rules provided that italicised words and expressions in the Fund Rules had the same meaning as in the Superannuation Industry (Supervision) Act 1993 (Cth) and Superannuation Industry (Supervision) Regulations 1994. Accordingly, for the purposes of rule 8.6(b)(ii) of Division 1A of the Fund Rules, “dependant” had the meaning given in s 10(1) of the SIS Act, which was as follows (bolding and italics in original):dependant, in relation to a person, includes the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship.