20/06/2022

The case of Wan v BT Funds Management Limited [2022] has affirmed some relevant legal principles when defining a ‘dependent’ for the purposes of distributing superannuation death benefits.

Mr Walker passed away in 2017 after a period of ill health. He had been living with Ms Wan (the applicant) from 2014. Mr Walker had never been married and had never had children of his own. However, he had two previous de facto relationships, and maintained a paternal relationship with the son of one of those former partners.

Each year, when Mr Walker signed his annual superannuation member statement, he recorded a nomination that his estate be the sole beneficiary of his death benefit. His will provided that his residuary estate be distributed in equal shares to Ms Wan, to a former partner and to that former partner’s son.

After a series of objections, the trustee ultimately resolved to pay the entirety of Mr Walker’s death benefit to his estate in accordance with his nominations. Ms Wan appealed this decision to the Australian Financial Complaints Authority (AFCA).

Ms Wan claimed that, at the time of Mr Walker’s death, they were in a de facto relationship and she was financially dependent upon him. The other beneficiaries disputed this claim, submitting that Ms Wan was merely Mr Walker’s carer, and with this in mind she had been fairly provided for in the will.

AFCA found against Ms Wan on two key grounds.

First, Ms Wan maintained her own residence while she lived with Mr Walker. This informed AFCA’s determination that Mr Walker’s home was not a ‘common residence’ despite the fact that Ms Wan stayed there regularly and left her clothes there.

Second, Mr Walker referred to Ms Wan in his will as a “friend”. There was some evidence that he had been reluctant, when chatting with friends, to call Ms Wan his girlfriend or partner. This label was significant. Superannuation regulations say that an ‘interdependency relationship’ must be more than a ‘mere friendship’.

Ms Wan appealed AFCA’s decision in the Federal Court. She submitted that AFCA had failed to take into account the emotional support that she had provided to Mr Walker, and that this emotional support was of such a degree that it elevated their relationship to “emotional dependency”.

Ms Wan’s justification for this submission was that the ordinary and natural meaning of ‘dependent’ included the concept of emotional support, reflected in the regulations.

The Court held that although emotional support may be a relevant consideration, it is not determinative by itself and does not give rise to an unrecognized category of dependency based on mere emotion.

The judge was concerned that the concept of emotional dependency would give rise to material forensic difficulties: its scope would be so broad, and its nature so nebulous, that it would be extremely challenging for a third party (such as a trustee) to effectively determine whether an emotional dependency existed.

Ms Wan had been labelled a “friend” in the Will demonstrating (at least as far as Mr Walker was concerned) the degree of emotional support between them. The Court was not prepared to elevate a relationship to the dependency status based merely on emotional support thereby effectively creating a new category of dependent and radically altering the principle of dependency.

For further information, please contact Townsends Business & Corporate Lawyers on 02 8296 6222 or email info@townsendslaw.com.au.