There appears to be an emerging view that where a superannuation death benefit (SDB) arises, a legal personal representative (LPR) must take all available steps to cause that benefit to be paid into the estate, irrespective of any other fiduciary duty or personal interest the LPR may hold in relation to the SDB. The case of McIntosh v McIntosh [2014] QSC 99 reminds us that this is not always the case, and in many instances the LPR may be entitled to act in a way which results in the estate not receiving all or indeed any of the SDB.

The respondent in the McIntosh case asserted that the applicant administrator of the estate had a fiduciary obligation to maximise the value of the estate. Implicit in that assertion was the proposition that this obligation overrode any other duties owed or other interests held by the LPR which may conflict with this obligation.

Exception to the general rule

The general rule is that no one who owes fiduciary duties is allowed to enter into engagements in which the fiduciary has or may have a personal interest conflicting with the interests of those whom the fiduciary is bound to protect. However, as was pointed out in McIntosh, there is an exception to that rule. The exception is set out by

Hope JA in Mordecai v Mordecai1:

That exception is where a testator or settlor, with knowledge of the facts, imposes on a trustee a duty which is inconsistent with a pre-existing interest or duty which he has in another capacity. In that situation the trustee is not thereby debarred from accepting the trust or from performing the duties which are imposed under it.

Is the exception commonplace?

Although described as an exception, it will arise in a significant number of instances where an SDB is involved. Consider the following scenario. A husband and wife both prepare wills, nominating one another as executors of their respective estates, with each will establishing a testamentary discretionary trust on the death of the testator. The class of beneficiaries might include the surviving spouse, the couples’ infant children along with a wider class of potential beneficiaries (e.g. companies and trusts in which any of these beneficiaries has a shareholding or interest). The husband and wife are members of public offer superannuation funds, and have not put in place binding death benefit nominations.

If the paramount duty of the LPR was to collect in the SDB as part of the estate, then the surviving spouse would need to take steps to have the entire SDB paid to the estate. It may, however, be considered by the spouse more appropriate and tax effective to press for payment of, and for the fund to pay that spouse, the SDB directly, perhaps in the form of a pension. Notably, the testator made a testamentary choice to appoint their spouse as LPR, and presumably knew of the potential conflict for the surviving spouse, and has accepted the conflict.

Consequently, the exception to the general rule applies, and it is open to the surviving spouse to seek a payment directly (albeit that it would be appropriate for the spouse to also apply for payment to the estate).

Atkinson J further pointed out that the exception to the general rule “does not however extend to allowing a trustee, by the trustee’s own act, voluntarily to put himself or herself into a new position of conflict.”2

Suggested actions

It would be appropriate for a testator wanting to appoint an executor to consider including a conflict provision in the will to further confirm that the executor is entitled to act despite any conflict of interest or duty with regard to the superannuation benefit. A more general conflict provision may be less appropriate given that it might allow, for example, an executor transfer estate assets to themselves for less than market value consideration. Limiting the conflict provision to superannuation would be less problematic because it would be difficult for an executor to abuse the power by moving estate assets into the superannuation environment.

Separately, the executor should ensure that they, in that capacity, make application to the superannuation fund for payment of the benefit to the estate. This application should be made separately from any application in another capacity.

The most specific outcome of the McIntosh case is that someone seeking to be appointed administrator of an estate should consider whether they have any other duties or interests that could conflict with their duties if their appointment is successful. If so, they should consider whether it is more appropriate for others to seek appointment so that the person is free to carry out or pursue their other rights, obligations and interests.