This decision of the Federal Court favoured the children of the deceased member, who benefited from being his non-binding death benefit nomination beneficiaries (there was no BDBN) and it disadvantaged the wishes of his estranged wife.

The Federal Court affirmed the decision of the Australian Financial Complaints Authority (AFCA), which reversed the AustralianSuper trustee’s decision to distribute 100% of the member’s superannuation benefits to his estranged wife, she was self-represented before the Federal Court.

Background

The member had 4 daughters and 2 step sons. The 4 daughters were in dispute against the member’s wife and the 2 step sons and 4 daughters were joined as parties but did not wish to be heard before the Court.

The couple married in September 2007, had consent orders of separation and property and financial settlement in June 2020, which was later discharged in April 2021 and divorce proceedings commenced around December 2021, with a claim that they had been estranged for 6 years at that point (but still remaining legally married at the time of the member’s death). They were living separately a considerable distance away from each other. The member executed his will leaving his estate to his wife on 8 March 2019, which he later sought to revoke.

The wife claimed she was unemployed, on a disability support pension and that the deceased was financially supporting her. The total amount in dispute was around $171,301, together with accrued interest.

The member left a non-binding death benefit nomination dated 2 February 2018 to leave his entire superannuation benefits to his 6 children in roughly equal shares, excluding his wife. As is standard the superannuation doesn’t automatically form part of his estate.

On a Google search, the AustralianSuper website shows the non-binding nomination can be made via the mobile app or on the website but “your nomination is not legally binding and although we’ll consider who you choose, ultimately we are legally responsible and will need to consider relevant laws when making a decision”.

The member obtained a violence restraining order against his wife on 12 December 2021 and on that same day emailed his lawyer asking to immediately amend his will (which named her as the sole beneficiary) to instead give his entire estate to his 4 daughters in equal share revoking all of his prior wills.

No reference was made that the amended was signed completed (the email instruction to his lawyer was acknowledged by the AustralianSuper trustee but ultimately disregarded) and on 30 December 2021 the police attended the member’s house to serve on him a family violence restraining order taken out by his wife against him, and they notified his daughter that he was found having been deceased for a number of days of natural causes with no signs of suicide. His daughters had not seen him alive since Christmas day.

The daughter’s objection to AFCA

The AustralianSuper trust deed included an obligation for the trustee to distribute death benefits to the usual superannuation dependants being the spouse or children or legal personal representative (LPR) (i.e. his estate).

The AustralianSuper trustee initially ignored the non-binding death benefit nomination and distributed the entire superannuation interest to his LPR (i.e. his estate – of which could be disputed – we are not made fully aware of the status of his requested amendment to his will).

His wife disputed the trustee’s decision and requested the superannuation benefit be paid to herself. One of his daughters disputed the trustee’s decision and requested the benefit be paid to his 4 daughters in equal shares.

The AustralianSuper trustee notified them of its amended decision to then pay the entire superannuation benefit to the wife, after which the four daughters lodged an objection to AustralianSuper and shortly after lodged an email complaint with AFCA.

AFCA decided it was unreasonable for the children to obtain nothing where its guidelines stated that it would take into account the member’s wishes “even where a nomination is non-binding”.

AFCA reallocated the member’s benefits 50% to his wife, mainly to settle jointly owned house mortgage obligations following property settlement of the divorce, and the other 50% to be divided equally between his six children.

The Federal Court Judgment

The Federal Court found no reason to overturn AFCA’s decision based on rejecting all of the wife’s four broad arguments: (1) that AFCA had misapplied the superannuation law and the AustralianSuper trust deed – it was found that AFCA had not, (2) that AFCA had wrongly made assumptions about reasonable expectations of financial support to the beneficiaries including the wife – it was found that no party had expectations of financial support extending beyond what they would receive under AFCA’s reallocation of the superannuation benefits 50% to the wife and 50% to the 6 children equally, (3) the wife was not provided an opportunity to address AFCA’s reasons for its change from the trustee’s initial amended decision to distribute 100% of the member’s death benefits to her to her receiving only 50%, and (4) that some evidence considered was obtained ‘by trespass’.

In relation to (4), the Federal Court found no evidence of criminal activity as the police who were to serve the family violence restraining order on the member (who then found him deceased in his home) then provided his mobile phone and house keys to his daughters (presumably as his next of kin) who (two of his daughters being police officers themselves) could then lawfully attend their father’s house once the police investigation was completed.

And in relation to (3), the Court stated that the wife “had every opportunity to provide additional information relating to her financial circumstances and prospective divorce proceedings. She did in fact provide information to AFCA.” … “The mere fact that AFCA substituted a different manner of apportionment of the benefit in this case does not evidence an absence of procedural fairness but rather is the result of AFCA undertaking the task required of it. The complaint process anticipates a potential change in outcomes.” (i.e. AFCA could come to the same decision of the trustee or it might not, but this is not a given in every case).

Take away points

Apart from the more favourable outcome for the member’s daughters, this decision also reminds us of the importance of knowing the difference in outcome between a binding and non-binding death benefits nomination (which can often look similar to the untrained eye) and in completing estate documents without delay rather than risking that the person may pass away before they are signed and witnessed.

If the non-binding death benefit nomination was a binding non-lapsing one, the 4 daughters would have received more than double what they ultimately did here, and would not have incurred legal costs to apply to AFCA and then to the Federal Court.

It will be interesting to see the outcome in relation to the remainder of the member’s estate (which would not include his superannuation as decided in this case), given he instructed his lawyer to revoke and re-do his will (that previously favoured his estranged wife), for which we have no confirmation had been completed.

It might have been the case that the four daughters did not understand the legal difference between the non-binding and binding death benefit nomination (one requiring two witnesses and the other being made electronically via a mobile app or via the AustralianSuper website login for the member), such that they thought the trustee still needed to take into account the member’s non-binding wishes in the event there was no other competing BDBN. This was not the case as shown here as the non-binding death benefit nomination was ignored by the AustralianSuper trustee.

Or it might have been the case that the four daughters and their father understood they needed to put a binding death benefit nomination in place to secure their intended allocation and did not get to it because the focus was amending the will.

Or they might have correctly assumed that the AustralianSuper trustee was going to distribute the superannuation to the father’s estate, and they were relying on the revocation and re-signing of the amended will, for which we are not told in this Judgment was completed, and they did not expect the wife to challenge the trustee’s decision and then have all of his superannuation benefits allocated to her.

The progression of this to the Federal Court could have been avoided if a binding death benefit nomination had been understood by the parties to be of most importance with regard to the superannuation which doesn’t automatically form part of the estate. But the circumstances show that it is possible the daughters and father did not fully understand these legal concepts, and were not advised specifically about this by their retail superannuation fund, which could be why they may have relied on a false confidence in the non-binding death benefits nomination.

It will be interesting to see the outcome in relation to the remainder of the member’s estate, given he instructed his lawyer to revoke and re-do his will, for which we have no confirmation had been completed. Now that the superannuation benefits have been affirmed as allocated half to the wife and half to the children and none to the member’s estate.

On a side note if the father had granted the binding death benefit nomination to his wife some superannuation trust deeds invalidate the BDBN once family court proceedings are commenced as an attempt to read the mind of the member.