Key Learnings
- Powers of Attorney are not a bilateral document like a contract where one is looking for an objectively ascertained intention attributed to the When looking at the intention of the principal, one must have regard to the factual matrix.
- Powers of Attorney can allow binding death benefit nominations to be ‘renewed’ if the circumstances of the parties have changed, as the principal might have done had they not become incapacitated.
Background/Facts
The Applicant was the corporate trustee of the Robert Stannett Superannuation Fund (the Fund). Robert Stannett (the Member) was the sole member of the Fund at his death on 5 December Peter Stannett, the Member’s brother, was the sole director of the corporate trustee.
On 31 May 2019, the Member executed an Enduring Power of Attorney (EPA) in favour of Peter and the Member’s wife, The EPA contained an express power to renew a binding death benefit nomination (BDBN), in the following express terms:
“I authorise my attorney/s to renew any binding death benefit nomination made by me for any superannuation benefits or entitlement…”.
In December 2020, the Member fell from a ladder and suffered a brain injury, losing his capacity to make both personal and financial decisions.
On 26 February 2021, Valerie passed away. Relevantly, there were 4 BDBNs executed:
- The First BDBN executed by the Member on 13 June 2019, which gave 100% to Valerie, and if she did not survive, $200,000 to each of the Member’s two children and Valerie’s 2 children, with the balance allocated to Robert’s Estate.
- The Second BDBN executed by the Member on 23 October 2020, which gave 50% to Valerie, and 25% to each of the Member’s two children.
- The Third BDBN executed by Peter (pursuant to the EPA) on 9 May 2022, which gave 40% to each of the Member’s two children and 10% to each of Valerie’s two.
- The Fourth BDBN executed by Peter (pursuant to the EPA) on 17 May 2022, which gave 25% to each of the Member’s two children, and the remaining 50% to Robert’s Estate.
Issues Considered
The Applicant sought declarations as to the:
- Validity of BDBN in respect of a self-managed superannuation fund; and
- Eligibility of certain persons to receive death benefits from that.
The need for the declarations arose because notwithstanding that the Rules of the Fund permitted an attorney to make a BDBN on behalf of an incapacitated member, the express term in the EPA permitted the attorney to “renew” a BDBN (as opposed to, or in addition to, permitting the replacement or revocation of an earlier BDBN).
Therefore, the issue that arose was whether the terms of the EPA permitted the attorney to make the Third and Fourth BDBNs, each of which was different to the Second If the Fourth BDBN was not valid, the declarations sought in the application were sought in the alternative.
Decision
Judgment was delivered on 23 October 2023 by Justice Applegarth.
The Court held that the Fourth BDBN constituted the Member’s last valid binding.
The Court’s main reasoning centred around a necessarily broader and practicable interpretation of the word ‘renew’, as the Trustee was empowered to renew It considered the meaning of the word ‘renew’ as used in the EPA and favoured the ‘dictionary definition’ meaning of the term – to ‘restore to freshness’.
In light of the Member’s changed circumstances, specifically Valerie’s death, the Court considered that the appropriate interpretation was to empower Peter to make a ‘fresh updated’ nomination that addresses those changed circumstances, which in this case nominated 50% of the benefit to the estate. In other words, to make a new BDBN that addressed fresh circumstances that had arisen since the last In favouring this less narrow meaning, the Court noted that it would seem inconvenient, to say the least, if the attorney could not address changed circumstances. The Court went on to say:
“A narrow construction would produce capricious, unreasonable and certainly inconvenient results for a principal who became incapacitated and whose circumstances had changed or where other circumstances had changed. One would think that it is precisely the existence of changed circumstances that gave rise to the authority given to the attorney to renew any binding death benefit in the sense of making a fresh BDBN, that is, to make a new BDBN to address those circumstances or to renew the BDBN”.
The Court found therefore that the Fourth BDBN was within Peter’s authority as attorney to make. The Court therefore proposed to make declarations for its validity.
This article was written by Nicholas Matkovich, Partner and Rebecca Kort, Associate.
