The Full Court of the SA Supreme Court has upheld a superannuation binding death benefit nomination (BDBN) after finding that it had been given to the corporate trustee of the self-managed superannuation fund (SMSF) in accordance with the trust deed: Cantor Management Services P/L & Ors v Booth [2017] SASCFC 122 (Supreme Court of South Australia, Full Court, Kourakis CJ, Peek and Nicholson JJ, 22 September 2017).
Background
The deceased (Malcolm Cantor) was the single member of his SMSF. The deceased’s brother (Christopher Cantor) was the sole director of the corporate trustee of the SMSF (the appellant) pursuant to an enduring power of attorney (EPOA) executed by the deceased during his lifetime. This corporate trustee and EPOA structure was adopted as the deceased frequently resided outside Australia. The main asset of the SMSF is an industrial shed at Coolum Beach in Queensland that is used by a company controlled by Christopher Cantor under a market value tenancy.
The deceased had executed a BDBN in which he nominated his siblings as the beneficiaries of his superannuation benefits. In September 2012, he completed a second BDBN (the 2012 BDBN) but this time he nominated his “Legal Personal Representative” (LPR) as the beneficiary. In February 2013, the deceased executed his last will in which he acknowledged the 2012 BDBN and directed his executors to hold that benefit for his wife in accordance with a family will trust.
Following the deceased’s death in April 2013, the respondent (Dr Susan Booth), as the executor of her cousin’s estate, brought an action for declarations that the appellant was bound by the 2012 BDBN and that it held the land in Queensland on trust for the deceased’s estate. The appellant, as the corporate trustee of the SMSF, argued that the 2012 BDBN was not effective on the grounds that it had not been given to the trustee in accordance with the trust deed.
At first instance, the SA Supreme Court held that the 2012 BDBN was effective and that Dr Booth, as the executor of the will of the deceased, was the LPR for the purposes of the BDBN: Booth v Cantor Management Services Pty Ltd & Ors (unreported, SA Supreme Court, 18 March 2016).
Decision
In dismissing the appeal, the Full Court affirmed the first instance decision that the BDBN had been given to the trustee in accordance with the trust deed and was effective upon the member’s death. In terms of the finding that the respondent, as the executor of the deceased’s will, was the LPR for the purposes of the BDBN, the Court noted that the EPOA granted to the brother had automatically terminated upon the death of the EPOA grantor.
While the BDBN nominated the deceased’s LPR as the beneficiary, the Court noted that the brother, as the donee of the EPOA given by the deceased, was only the LPR of the deceased during his lifetime. The Court said it is well established at law that an EPOA is terminated upon the death of the donor. Accordingly, it followed that upon the member’s death and the consequential termination of the EPOA granted to the brother, the SMSF trust arrangement ceased to comply with s 17A(3)(b) of the SIS Act. In these circumstances, the Court said the LPR of the deceased’s estate must assume the directorship of the corporate trustee for the SMSF to remain compliant pursuant to s 17A(3)(a) of the SIS Act. In making this point, the Full Court cited Negline T, The Essential SMSF Guide 2016-17 (Thomson Reuters) which states that, “If an enduring power of attorney is terminated for any reason then the attorney would need to step down as the SMSF trustee and the member would have to be re-appointed.”
Requirement to “give” BDBN to trustee
While the trust deed defined a BDBN as a document which is “given by a member to the trustee”, the Court noted that the deed in this case did not expressly prescribe any particular form of service. Rather, it simply required a BDBN to be “given” to the trustee to be effective. The Court considered that the word “given” should take its ordinary meaning. Although the trust deed did not incorporate the service of documents rules in s 109X of the Corporations Act 2001, the Court observed the well-established practice of service on the registered office of a corporation to inform its interpretation of the deed provisions.
The Court held that the evidence supported a finding that the BDBN had been “given” to the corporate trustee. In this regard, the Court said that a document executed before, and then left with, a person, is “given” to him or her. After the BDBN was signed, it was left in the possession, management and control of the deceased’s accountants at their place of business, which was also the registered office of the SMSF corporate trustee.
According to the Court, leaving the BDBN at the registered address with the accountants (also engaged by the SMSF corporate trustee) puts the question beyond doubt. Having regard to the working practices of accountants in these circumstances, the Court said the accountants who witnessed the execution of the BDBN took possession of it, and filed it, for the purposes of both the SMSF corporate trustee and the deceased. The accountants were then duty bound to keep the BDBN safe and to bring it to the attention of their client (the appellant), the Court said.