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Wills & Estates | Wills & Estates

Are you sure changes to your self-managed super fund docs are valid?

A recent Supreme Court of Queensland decision provides a timely reminder to those who have self-managed superannuation funds (SMSF) and their advisors to ensure any changes made to SMSF documents are legally valid. The case highlights the necessity of ensuring any changes to SMSFs, including the acceptance of binding death benefit notices (BDBN), comply with the terms of the deed and the SMSF Rules.

In Perry v Nicholson [2017] the Court heard an application for declarations as to whether the removal of a trustee, the appointment of a new trustee and the making of a BDBN were validly effected. The judgment showed that the Court will place heavy reliance on the terms contained in the trust deed as to whether amendments have been validly effected.

Background

In September 2009, Mr Maurice established the Colin Maurice Superannuation Fund (the Fund). The original trustees of the Fund were Mr Maurice and his daughter, the Applicant in the proceedings. The only member of the Fund was Mr Maurice.

In October 2010 Mr Maurice commenced a de-facto relationship with the Respondent in the proceedings.

In February 2015, Mr Maurice engaged accountants to administer the Fund, after his son indicated that he no longer wished to administer the Fund.

A few months later Mr Maurice arranged for the accountants to prepare a number of documents in relation to the Fund. Those documents included a minutes of meeting of the trustees of the Fund (which were subsequently signed by Mr Maurice, the daughter and the Respondent (the partner), a confirmation of resignation as trustee signed by the daughter, an application to become a member signed by the partner and a consent to appointment as trustee signed by the daughter.  

Thereafter the Fund was administered by Mr Maurice and his partner as trustees. From time to time the partner signed documents in that role. 

In late 2016 Mr Maurice was diagnosed with Melanoma. He was admitted to hospital in January 2017. 

Prior to being admitted to hospital, in December 2016, Mr Maurice met with his solicitor to provide instructions to prepare a new Will.

Mr Maurice instructed his solicitor that he wanted to leave 15% of his estate to each of his children with the balance going to his partner. The solicitor provided advice on the possibility of his children making a claim against his estate. The solicitor recommended Mr Maurice give his children a larger share of his estate. He also advised Mr Maurice that his superannuation death benefit may fall outside the terms of his Will and recommended he liaise with his accountant to check on its terms. The solicitor recorded that Mr Maurice’s intention was for his partner  to receive the entire contents of his superannuation death benefit because he wanted her to be looked after following his death. 

On 4 January 2017 Mr Maurice signed a BDBN in which he directed the trustees of the Fund to pay 100% of the death benefit to his partner. 

The day after signing the BDBN, Mr Maurice’s solicitor visited him in hospital. Mr Maurice confirmed he had seen his accountant about the Fund and had left his entire death benefit to his partner in case there were challenges to his Will. He again reiterated that he wanted his partner to be looked after financially as he feared his children may challenge the Will. Mr Maurice instructed he wanted to leave his estate equally between his two children and his partner. The solicitor returned the same day and the Will was executed.

In February 2017 the accountant advised Mr Maurice and his partner that a change of trustee deed had not been supplied to them in respect of the removal of the daughter and the appointment of the partner as trustee of the Fund. Mr Maurice, the daughter and the partner signed a further document titled “Change of Trustee Deed for Self-Managed Super Fund”. The date inserted on that Deed was 23 April 2015, however it was accepted that it was only prepared and signed in February 2017. 

On 7 March 2017 Mr Maurice died.

The proceedings

The relevant terms of the Fund provided that the trustee may accept the trustee’s resignation in writing. It also stated the appointment or removal of a trustee must be in writing and must immediately be advised to any other trustee.

There is a distinction at law between the retirement of a trustee versus the removal of a trustee.

Mr Maurice’s daughter made submissions to the Court that she had not been validly removed as a trustee, the partner had not been validly appointed as the trustee, and the BDBN did not comply with the Fund rules because it had not been given to the trustees of the Fund.

Removal of the daughter as a trustee

The document signed by the daughter in April 2015 was entitled “confirmation of resignation of trustee”. The minutes of meeting signed the same day did not record an “acceptance” by the trustee of the daughter’s resignation. Instead, it recorded that the trustees had decided to “remove” the daughter as trustee.

The Court found:

  • in the minutes of meeting, where it was decided to “remove” the daughter as trustee - this was in writing. The Fund’s deed did not require any particular method of notification of her removal as trustee therefore the minutes of meeting met this criteria.
  • The minutes of meeting were signed by Mr Maurice, the daughter and the partner. The trustee was therefore immediately advised of the removal of a trustee.

The Court found that, properly read, the minutes of meeting satisfied the terms in the trust deed as it was in writing and signed which constituted the removal of the daughter as trustee of the Fund.

Appointment of the partner as a trustee

The partner signed a confirmation of her consent to be appointed as a trustee of the Fund in April 2015. The minutes of meeting recorded that it was “decided” to appoint the partner as a trustee of the Fund. There was no formal document entitled “Appointment of Trustee”.

The terms of the Fund’s deed regarding the appointment of a trustee are in the same terms as the removal of a trustee, in that it must be in writing and must immediately be advised to any other trustee.

The Court found that the minutes of trustee, properly read, constitute an appointment of the partner as trustee because those minutes were in writing and the deceased was immediately advised as he signed those minutes.

The Court found the partner was validly appointed as trustee.

Binding Death Benefit Notices

The written judgment did not deal with whether the BDBN was valid.

Lessons Learnt

The outcome of this case may have been vastly different if the particular terms of the trust deed for the Fund provided that any amendments to the trust deed must be by way of deed rather than just in writing.

This case is a reminder for both professional advisors to SMSFs and persons who have their own SMSF to review any documents amending the trust deed, including the appointment and removal of trustees, the appointment and removal of members and BDBNs to ensure they comply with the terms of the particular trust deed.

Similarly, when accepting new clients who have existing SMSFs, professional advisors should review all amendments to ensure that they have been validly effected.

"The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication."