The Supreme Court of Queensland has ruled that a member’s 2013 superannuation ‘binding death benefit nomination’ (BDBN), was validly confirmed and extended, in 2016 by the donees of an enduring power of attorney (Power of Attorney).

However an attempt to further amend (slightly) the beneficiaries under the DBDN, failed as it benefited one of the donees of the Power, which was similarly vary (slightly) the member’s wishes, so as to slightly benefit one of the donee attorneys, was a “conflict transaction” and not permitted under the Qld Powers of Attorney Act 1998 without the express authorisation of the donor of the Power of Attorney.

The facts were these.

  1. The applicant, Narumon Pty Ltd, is the trustee of a SMSF with a member (Mr Giles) who passed away in June 2017, aged 80.
  2. He was survived by his spouse (Mrs Giles) and their 16-year old son.
  3. At the time of his death, Mr Giles’ interest in the SMSF included a $1m accumulation account and a lifetime complying pension valued at $3m (with Mrs Giles the nominated reversionary beneficiary).
  4. In June 2013, Mr Giles had signed a BDBN directing the SMSF trustee to pay his benefits upon death to Mrs Giles (47.5%), his 16-year old son (47.5%) and his sister (5%). The BDBN stated that it would cease to have effect 3 years after it was signed.
  5. Mrs Giles and his sister (Mrs Keenan) were also appointed as Mr Giles’ attorneys pursuant to an enduring Power of Attorney.
  6. In March 2016, the enduring attorneys signed a document to confirm and extend the June 2013 BDBN for a further 3 years.
  7. At the same time, the attorneys signed a new BDBN in favour of Mrs Giles and her son to each receive 50%. This new BDBN sought to address the problem that Mrs Keenan was not a “dependant” of Mr Giles.

The result was as follows.

  1. The Court held that the document executed by the member’s enduring attorneys (confirming the member’s previous 2013 nomination) was a valid and effective BDBN made in accordance with the fund’s trust deed. The Court said that the trust deed of a SMSF governs the form in which a binding nomination may be given, and there was nothing in the deed which would prohibit an attorney signing a nomination for the member.
  2. However, the Court found that the new 2016 BDBN (which varied the member’s 2013 wishes slightly) was invalid as it would be a “conflict transaction” under the Powers of Attorney Act 1998 (Qld) requiring express authorisation from the principal.
  3. Accordingly, the Court ordered that the member’s benefits (other than the lifetime complying pension that automatically reverted to Mrs Giles) should be paid in accordance with the 2013 BDBN as confirmed by the attorneys in 2016.
  4. Since Mrs Keenan was not a dependant, the Court said the 5% nomination in her favour was not binding on the trustee and it would be a matter for the trustee to deal with that 5%, in accordance with clause 31.1 of the 2014 deed.

A lesson

Reg 6.17A of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (‘SISR’) and s 59(1A) of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘SISA’) contain certain rules around when a superannuation fund trustee will be bound by the directions under a BDBN. Subject to certain provisos, reg 6.17A(7) of the SISR provides that such a notice will expire at the end of the period of three years after the day it was first signed.

However in the key case of Munro v Munro [2015] QSC 61 (‘Munro’), Mullins J held that s 59(1A) of the SISA and reg 6.17A of the SISR do not apply to SMSFs. In Narumon, Bowskill J agreed with and confirmed the view of Mullins J in Munro. This means that the trust deed for the Fund unnecessarily imported the three year expiration requirement from reg 6.17A of the SISR.

(Re Narumon Pty Ltd [2018] QSC 185, Queensland Supreme Court, Bowskill J, 24 August 2018.)

FJM 16.9.18

[Greenfields Lawyers: Report; DBA Lawyers: Newsfeed; LTN 165, 28/8/18; Tax Month – August 2018]

 

Comprehension questions (answers available)

  1. Did the Deceased make a BDBN, in 2013 (when he was alive) benefiting mainly his surviving wife, his 16 year old son and his sister?
  2. Was the BDBN expressed to have a 3 year life?
  3. Did the Deceased (also when he was a live) give his wife and sister an enduring power of attorney?
  4. Did the donees of this power, in 2016, confirm and extend the 2013 BDBN?
  5. Was this held effective (binding)?
  6. Did the donees of the Power of Attorney also execute a further BDBN varying the donor’s 2013 wishes, by excluding the sister, giving 5% that equally to the son and the other donee of the power?
  7. Was that effective?
  8. Why?
  9. Did that make any difference?

[Answers:1.yes;2.yes;3.yes;4.yes;5.yes(deed&lawPermitted);6.yes;7.no;

8.conflicted(benefitingAdoneeRequiredDonor’sExpressAuthorisation);9.no(couldn’tBindTrusteeToBenefitTheNonDependantSister)]

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