In this article we discuss the decision in Lynn v Australian Financial Complaints Authority [2025] FCA 175 (Lynn) in which an appeal against a determination by AFCA[1] in relation to the payment of a superannuation death benefit was dismissed.
This is a useful case as it sets out the procedural steps and factors to be considered in resolving a dispute about payment of the benefit totalling $171,301 to a deceased member’s dependants and in what proportions. The common view is that super belongs to the member, and many are surprised to learn that it may be the trustees or a substituted decision-maker who decides who will receive your benefit, and that decision may be inconsistent with your wishes.
Takeaways
- Understand the effect of the superannuation death benefit nomination offered by your super fund
- Keep your estate plan up to date to take into account any changes of your personal and financial circumstances
- Communicate to your potential beneficiaries about your wishes
- Understand the principles applied when resolving super disputes – it may not work out the way you think
- Even if you have a non-lapsing death benefit nomination in place – you will need to check to ensure that it continues to reflect your wishes
Background
Mr Richard Lynn joined his super fund on 1 June 2006 and married Consuella Lynn (Ms Lynn) in 2007.
In 2018, Mr Lynn made a non-binding death benefit nomination in favour of his four daughters and his two step-sons.
In 2019, Mr Lynn made a will leaving his entire estate to Ms Lynn.
The couple finally separated on 5 June 2020 after periods of separation commencing in 2018.
On 10 December 2021 and 30 December 2021, the parties were living separately, and the relationship between them had deteriorated to the point that they had each obtained domestic violence orders against the other.
On 12 December 2021, Mr Lynn instructed his lawyer by email to revoke his will and to prepare a will in favour of his four daughters which was not executed.
On 30 December 2021, Mr Lynn, aged 53 years, was found deceased from natural causes when police officers personally served Ms Lynn’s domestic violence order on him.
At the date of death, Mr Lynn was providing $500 per month to his youngest daughter Kate until she finished her university studies at the end of 2021, but otherwise, the children were all adults and not financially dependent on Mr Lynn.
Although Mr Lynn had given instructions to commence divorce proceedings, the couple were not divorced at the date of Mr Lynn’s death, and therefore Ms Lynn was the deceased’s legal spouse.
Resolving super disputes
Superannuation is a non-estate asset and cannot be disposed of by your will.
A super fund is a trust and the trustees have the discretion to decide to whom your superannuation death benefit will be paid, limited only by the fund’s trust deed, the Superannuation Industry Supervision Act 1993 (SIS Act) and its regulations and if you have validly executed a binding death benefit nomination.
Most super funds offer a mechanism by which a member can direct the trustees, or express their wishes, to have their benefit paid to nominated individuals or their legal personal representative. The types of nominations typically offered include, but are not limited to:
- a preferred nomination;
- a non-binding nomination;
- a binding death benefit nomination which may lapse after a certain time, often three years, after which time it expires;
- a non-lapsing binding death benefit nomination.
Further, a nomination may be invalid if it nominates individuals who are not dependants (a spouse, child or person who was financially dependent on the deceased at or around the date of death of the member) under the SIS Act.
If a nomination is a preferred nomination or a non-binding or has lapsed or is invalid, it is not binding on the trustee and the trustee is required to exercise its discretion in relation to the payment of the benefit. In other words, the trustee will choose to whom your benefit is paid.
Mr Lynn’s nomination appointed his children and step-children who are dependants and eligible to receive the benefit.
As his nomination was non-binding, the trustees of the super fund had to exercise their discretion as to how to pay out his benefit. Of course, if the recipients of the benefit agreed with the trustee’s decision, the matter would end there. If the parties object, the trustee of the super fund proceeds with its dispute processes to ensure that all parties have an opportunity to provide it with the relevant evidence upon which to make a decision.
Decision by the trustee
The initial decision by the trustee was to pay out 100% of the benefit to the legal personal representative (the estate). Both Ms Lynn and Mr Lynn’s daughters objected to the initial decision.
The trustee considered further evidence provided by the parties and issued an amended decision to pay out 100% of the benefit to Ms Lynn.
The trustee’s reasons were that Ms Lynn was Mr Lynn’s spouse at the date of death and, despite the couple being separated, was still financially dependent on him, and she would have a reasonable expectation of receiving ongoing financial support had he not died.[1] They owned property jointly and mortgage repayments were being paid by Mr Lynn at the date of his death. Ms Lynn was also in receipt of the disability pension.
Mr Lynn’s daughters argued that the trustee had not properly taken into account the change in the relationship between the deceased and Ms Lynn at the date of death and that it should have placed greater weight on the financial dependency of Kate on Mr Lynn. The trustee reasoned that the $500 per month paid to Kate did not amount to her being financially dependent on Mr Lynn, as it was for a finite period of time and it was more akin to a gift. Mr Lynn’s daughters also argued that their late father’s wishes were not being honoured.
On 1 February 2023, the trustee considered the objections and advised the parties that the amended decision would stand.
AFCA complaints process – the regulatory framework
The daughters lodged a complaint with AFCA.
The AFCA complaints process is an external dispute resolution scheme designed to be a “one stop shop” for disputes about financial products and services (including superannuation) established following amendments in 2018 to the Corporations Act 2001.[2]
The scheme provides for AFCA to assume the same role and responsibilities as the person or institution with the original decision-making power. In considering its decision, AFCA’s powers “are not judicial in nature.” It is less about determining the legality or veracity of the trustee’s decision but rather determining if any unfairness or unreasonableness has arisen as a result of the decision. If AFCA finds that the trustee’s decision was fair and reasonable, it must affirm the trustee’s decision. If not, AFCA is required to remove the element of unfairness and unreasonableness by either varying the decision, setting it aside or remitting it back to the original trustee for reconsideration. [3]
AFCA assesses whether the trustee’s decision was fair and reasonable by considering whether the decision is consistent with the purpose of the benefit, which is to provide for dependents who:
- were financially reliant on the deceased member at or around the date of death; and
- might have expected ongoing financial support from the member into retirement but for the member’s death; and
- member’s wishes as set out in the non-binding nomination or will.
In considering the member’s wishes, AFCA would consider the relevant evidence in light of the circumstances prevailing at the date of the member’s death. For example, while Mr Lynn’s will provided that his entire estate was to pass to Ms Lynn, the will was made before their relationship had ended on a final basis and there was evidence that he had given instructions to a lawyer to draft a new will which did not provide for her.
After considering the objections from the parties, AFCA satisfied itself that the trustee’s decision was not fair and reasonable and upheld the complaint.
AFCA determined that:
- Ms Lynn would receive 50% of the benefit
- the six (6) children received the balance equally.
The basis for AFCA’s decision was as follows:
- As there was no binding nomination, the trustee was required to pay the benefit to the LPR or the dependants pursuant to the SIS Act in the proportion determined by AFCA in the exercise of its discretion;
- All parties to the dispute were dependants;
- AFCA’s usual approach was to determine what was fair and reasonable considering that the purpose of the benefit is to provide for dependants who are financially reliant on the deceased or who might have expected ongoing financial support and the deceased’s wishes;
- That Kate and Ms Lynn were both financially reliant on the deceased, but neither would have a reasonable expectation of ongoing financial support had Mr Lynn not died as:
- There was no evidence to suggest Mr Lynn would continue to financially support Kate after her university studies ended in December 2021;
- As Mr Lynn was planning to divorce Ms Lynn, she would not receive ongoing financial support if Mr Lynn had lived;
- It was not fair and reasonable for Ms Lynn to receive 100% of the benefit;
- It was fair and reasonable that Ms Lynn received 50% of the benefit as that sum equated to the expenses that, based on the evidence, Ms Lynn would have to pay for the 18 months after the deceased’s death and 18 months was considered a reasonable timeframe for the divorce and property proceedings to have been finalised had Mr Lynn lived; and
- As no other dependants had a reasonable expectation of ongoing financial support, it was fair and reasonable to pay the remaining 50% to the six (6) adult children equally.
Appeal to the Federal Court of Australia
Ms Lynn appealed the decision on the basis that AFCA had made an error of law and represented herself in the appeal.
In relation to Ms Lynn’s complaints about procedural fairness, the court noted that it is a requirement of a statutory body such as AFCA to provide procedural fairness to the parties to the dispute. The court found that AFCA did so by sharing relevant documents and submissions between the parties according to its document sharing protocol, its communication with the parties and that it provided ample opportunity for each of the parties to provide new material to be considered by it.
With respect to the more substantive grounds, the court found that AFCA correctly:
- Identified who the relevant dependants were within the meaning of the trust deed and the SIS Act;
- Concluded from the evidence as to who was financially reliant and had a reasonable expectation of ongoing financial support;
- Took into account Ms Lynn’s marital status, the foreshadowed divorce proceedings and the domestic violence orders and his wishes;
- Concluded that the relevant evidence was sufficient to satisfy it that the decision by AFCA was fair and reasonable;
- Incorrectly assumed that she only had a limited period in which she could hold a reasonable expectation for ongoing financial support.
The FCA dismissed the appeal on the basis that it was satisfied that no error of law had been made by AFCA.
The table below shows the varied outcomes as the matter passed through the various decision-making processes. The ultimate outcome differed significantly from Mr Lynn’s wishes, particularly in light of the deterioration of his relationship with Ms Lynn at the end of his life.
Further, the dispute over a relatively modest benefit spanned 2 and a half years and, while the case does not disclose the costs, it is inferred that significant costs were incurred. While it may be difficult in a time of change in your personal life to turn your mind to estate planning matters, ensuring your will and nomination will operate in accordance with your wishes will save your loved ones time and money.
Table 1: Details of the nomination in dispute and a summary of the decisions regarding Mr Lynn’s superannuation death benefit
Decision maker | Decision |
| Date | Outcome |
Member | Sarah and Kate 16% Tye Ben, Christina and Bethany 17% | Non-binding death benefit nomination | 02.02.2018 | |
Trustee | 100% to LPR | Initial decision | 09.09.2022 | Rejected |
Trustee | 100% to wife | Amended decision | 12.12.2022 | Rejected |
Trustee | 100% to wife | Final Decision | 01.02.2023 | Rejected |
AFCA | $3,000 Kate Lynn Balance to wife | Recommendation | 14 .08.2023 | Rejected |
AFCA | 50% to wife 50% to 6 children equally | Determination | 11.10.2023 | Rejected |
FCA | 50% to wife 50% to 6 children equally | Judgment | 13.03 2025 | Maintained |
[1] AFCA is the successor to the Superannuation Complaints Tribunal
[2] Lynn v Australian Financial Complaints Authority [2025] FCA 174, 11 [64]
[3] Corporations Act 2001, section 1053
[4] Ibid note 2 [19]
[5] Ibid note 2, page 5 [26] and [27]
