Changing the trustees of a self-managed superannuation fund (SMSF) is not necessarily a straightforward task, as evidenced by a recent Queensland Supreme Court case.
Perry v Nicholson is a case concerning the removal and appointment of trustees and a binding death benefit nomination.
The Colin Maurice Superannuation Fund (Fund) was established on 17 September 2009. The original trustees were Mr Maurice (the deceased) and his daughter (the applicant Ms Perry). The deceased and Ms Nicholson (the respondent) started living together in October 2010. They had a break in cohabitation from September/October 2015 but recommenced living together in December 2016 when the deceased was diagnosed with melanoma.
On 23 April 2015, the deceased arranged for his accountants to prepare a suite of documents. These were:
- minutes of a meeting of the trustees of the Fund, which were signed by the deceased, the applicant and the respondent
- a confirmation of resignation as trustee, signed by the applicant
- an application to become a member, signed by the respondent
- a consent to appointment as trustee, signed by the respondent.
The minutes of the meeting read:
“The trustees of the fund refer to the deed of the fund dated 17 September 2009.
It is decided to remove Sonia May Perry as a trustee of the fund.
It is decided to appoint Jennifer Mary Nicholson as a trustee of the fund.”
The confirmation of resignation as trustee read:
“I confirm my resignation as trustee of the Colin Maurice Superannuation fund.”
Clause 183 of the Fund’s trust deed provided that:
“The appointment or removal of a trustee must be in writing and must immediately be advised to any other trustee.”
On 4 January 2017, the deceased executed a binding death benefit nomination form directing the trustees of the Fund to pay 100% of his death benefit to the respondent. On 5 January 2017, the deceased saw his solicitor in hospital. He was due to have brain surgery the following day. He executed a Will leaving his estate equally to his two adult children and the respondent (with an adjustment to take account of an advance he had made to one of the children).
The deceased died on 7 March 2017, having been paralysed and unable to communicate since his surgery on 6 January.
The judgment indicates that a further document titled Change of Trustee Deed for Self-managed Superannuation Fund was signed by the deceased, the applicant and the respondent in February 2017 after the accountants noticed that a change of trustee deed had not been supplied in respect of the change of trustees. It is not clear how this document was signed by the deceased, given his physical state at that time.
The applicant argued that she remained a trustee of the Fund and that the respondent was not validly appointed. In consequence, the binding death benefit nomination was not valid (presumably because it had not been delivered to the actual trustees of the Fund.)
Consideration by the Court
The Court considered whether there had been a removal and appointment of trustees in writing and pointed out some defects in the process that had been followed.
There was no record of the trustees having accepted the applicant’s resignation as a trustee. Rather, the minutes referred to removal as a trustee. In addition, there was no written notification to the applicant of her removal as a trustee and no document purporting to advise the other trustee of the removal.
Nonetheless, the Court held that the minutes of the meeting, having been signed by all parties, were enough to constitute removal of the applicant as a trustee. Signature of the minutes by the deceased was enough to signify that he had been advised of the removal.
As regards the appointment of the respondent as a trustee, there was no formal document entitled ‘Appointment of Trustee’ making the appointment. However, the minutes constituted an appointment in writing.
The Court did not go on to consider the importance of the document executed in February 2017, presumably because it could not affect the events that had occurred in April 2015.
The Court is to hear further from the parties on the issue of whether the binding death benefit nomination was given to the trustees of the Fund.
Warning for SMSFs
This case is a timely warning for trustees of SMSFs of the importance of following the terms of the trust deed in taking steps such as the replacement of trustees. While the applicant was not successful in her arguments that the change of trustees was ineffective, the confusion caused by the trustees failing to follow strictly the regime of the trust deed led to costly and time consuming litigation. The dispute could have been avoided had care been taken to ensure that the requirements of the trust deed were clearly followed.
Perry v Nicholson  QSC 163