BDBN Case: was the nomination given to the trustee?

A significant decision has been handed down by the South Australian Full Court.  The critical issue was whether a binding death benefit nomination (BDBN) was valid.   If valid, then the death benefit was payable to the estate of the deceased member.  If invalid, then the trustee would decide the allocation of the benefit.  The validity turned upon the issue of whether the BDBN had been served on the corporate trustee.   The BDBN had been signed by the member and then left in the possession of the accountants for the superannuation fund, which was a self managed superannuation fund, at their office which was also the registered office of the corporate trustee of the superannuation fund.

The member was Malcolm Cantor and the sole director and shareholder of the corporate trustee was his brother, Christopher Cantor.  The executor of the estate of Malcolm Cantor was his first cousin, Louise Booth.

As Malcolm Cantor, the sole member, was frequently overseas, the member had given an enduring power of attorney to his brother, Christopher Cantor, thereby permitting the brother to be appointed as sole director without contravening the definition “self managed superannuation fund”.  Presumably, the appointment of the brother as sole director was made to ensure that the SMSF remained an Australian resident superannuation fund (thereby enjoying the superannuation tax concessions).

The executor, the deceased member’s first cousin, commenced legal proceedings in South Australia for declarations that certain land situated in Queensland was an asset of the SMSF and that the BDBN nomination made in September 2012 was valid (the member had made some earlier nominations but no party to the litigation argued that an earlier nomination was valid).  In the alternative, the executor argued that she should be appointed trustee of the SMSF instead of the current corporate trustee.  

The Full Court held that a death benefit nomination, to be valid and binding under the terms of the trust deed of the SMSF, had to be “given to the trustee”.  The issue was whether the BDBN has been given to the trustee.

The BDBN was nominated “Legal Personal Representative – Malcolm Cantor”.  It seems neither party argued that the description was incorrect or rendered the nomination to be invalid.  The Court implicitly held that as a BDBN is, like a will, ambulatory, and only takes effect on the death of the member, the expression “Legal Personal Representative” could only mean the Legal Personal Representative of the member immediately after the death of the member.  As death terminates the appointment of the enduring attorney, the term “Legal Personal Representative” could only mean the executor /administrator of the estate of Malcolm Cantor, the deceased member – namely the first cousin.  

The sole director of the corporate trustee had argued that as neither the BDBN had been provided to the director nor had the accountants been expressly authorised to accept and hold the BDBN on behalf of the corporate trustee, then the BDBN had not been served on the corporate trustee.

The Court did not accept the argument put by the corporate trustee.  The Chief Justice held that it was sufficient to constitute service on the corporate trustee for the BDBN to be held by the accountants of the SMSF at the registered office of the corporate trustee.   The other justices agreed with the Chief Justice.