LSJ_April 2019


dant, and the financial circumstances and needs of the dependants. The trustee ignored Riccardo’s ‘substantial relationship with the deceased and relatively limited financial circumstances’ and this demonstrated a failure of the trustee to take into account a relevant consideration (at [52]). The Court drew the inference that Caroline acted ‘arbitrarily in distributing the fund, with ignorance of, or insolence toward, her duties... in the context of uncertainty, misapprehensions as to the identity of a beneficiary, her duties as trustee, and her position of conflict. As such, she was not in a position to give real and genuine consideration to the interests of the dependants’ (at [56]). The Court next considered whether the decision to distribute the fund to Caroline was made for an improper purpose. It noted that Caroline fell within the class of objects that are the subject of the relevant power. It observed that evidence of anger or resentment was not sufficient by itself to establish fraud on the power. ‘In sum- mary, it is apparent that [Caroline] acted arbitrarily…However, it is unclear whether such arbitrariness and lack of consideration was on account of her personal animosity toward [Riccardo] or that the fund needed to be distributed as soon as practicable. The latter would appear to be a purpose falling within the intention of the fund to comply with the [ Superannuation Industry (Supervision) Act ]. Accordingly, the Court is not satisfied that the power of dis- tribution was exercised for an improper purpose’ (at [64]). Riccardo sought the removal of the trustee of the fund. The Court observed that a breach of trust will not necessarily lead to the removal of a trustee, nor will the existence of a conflict between duty and interest (but it may). The Court’s chief consideration is the welfare of the beneficiaries (at [72]). The Court decided to remove the trustee in this instance because, in ‘distributing the proceeds of the fund to [Caroline] they arbitrarily dealt with the entirety of the property subject to the trust. They did so in the context of substantial personal conflict with [Riccardo]’ (at [73]). The Court sought further submissions on a replacement trustee (at [80]). These facts are reminiscent of Katz v Grossman [2005] NSWSC 934, Ioppolo & Hesford v Conti [2013] WASC 389 and oth- er cases which emphasise the care needed with the inheritance arrangements for self-managed superannuation funds. The Court remarked that ‘While it is not suggested that in every instance spe- cialist advice should be sought, in the circumstances of this pro- ceeding, particularly in light of the size of the fund and complex- ities surrounding the fund deed and compliance with the SIS Act , The Elder Law, Capacity and Succession Committee has updat- ed the FAQs on superannuation death benefits. They incorporate recent decisions such as Re Narumon Pty Ltd [2018] QSC 185 and changes such as AFCA. The FAQs are live on the Law Soci- ety website at my-practice-area/elder-law/superannuation-FAQs. specialist advice appears justified’ (at [71]). Superannuation death benefits FAQs

Unsuitable and ineffective use of trust property In University of NewSouthWales vAttorneyGeneral forNewSouth Wales [2019] NSWSC 178 (Ward CJ in Eq) the basis for the appli- cation was different. The University is the trustee of the UNSW International House Charitable Trust. It made an application for the establishment of a scheme comprised cy-près and administra- tive elements on the basis that the purposes of the Trust had ceased to provide a suitable and effective method of using the trust prop- erty, within the meaning of s 9 of the Charitable Trusts Act 1993 . As the Court explained, an administrative scheme ‘is not direct- ed towards altering the trust purposes. Rather, an administrative scheme enables the Court to provide further and detailed machin- ery for the practical application of the trust property, where the stipulated means for the achievement or pursuit of the charitable objects have not been specified or are not sufficient for the practi- cal application of the gift for the charitable purpose’ (at [34]). The Court was satisfied that the purposes of the Trust had ceased to provide a suitable and effective method of using the trust property, and that the proposed order should be made. Challenge to a trustee’s distribution from a self- managed superannuation fund Helen Marsella was the sole member of the Swanston Superannu- ation Fund. She and her daughter, Caroline Wareham, were the trustees of the fund. Helen died on 27 April 2016. With the stated aim of avoiding the fund becoming noncomplying (and there- by losing its concessional tax status), on 17 April 2017 Caroline resolved to pay Helen’s death benefit of $450,416 to herself. Ric- cardo Marsella, Helen’s husband of 32 years, sought to set aside the distribution from the fund on the basis that the trustee did not act in good faith, after giving real and genuine consideration to the dependants of the fund, and in accordance with the purpose for which the power of distribution was conferred. In considering that issue, the Court in Re Marsella; Marsella v Wareham (No 2) [2019] VSC 65 (McMillan J) observed that it may ‘look at the inquiries the trustee made, the information they had, and their reasons for, and manner of, exercising their discretion’ (at [36]). It noted that a lack of good faith included taking account of irrelevant considerations and a refusal to take into account relevant considerations. However, mere carelessness or honest blundering was not enough (at [37]). The Court acknowledged that while it was not its ‘role to consider the fairness or reasonableness of the outcome of the exercise of discretion and usurp the role of the trustee, the outcome itself, par- ticularly where the result is ‘grotesquely unreasonable’, may form evidence that the discretion was never properly exercised, or was exercised in bad faith. In the circumstances of this proceeding, the outcome of the [trustee’s] exercise of discretion, that is, the distri- bution of the entire proceeds of the fund to [Caroline], supports the conclusion that there was a lack of real and genuine consid- eration’ (at [51]). The Court considered that relevant factors for consideration included the intention of the deceased as the settlor of the fund, the relationship between the deceased and the depen-

98 LSJ I ISSUE 54 I APRIL 2019

Made with FlippingBook Annual report