Court confirms ‘self-evident’ trustee appointments

court confirms trustee appointments

A court case has highlighted the role an SMSF deed plays in trustee appointments, with one expert claiming the result confirms a self-evident process.

Trustee appointments under an enduring power of attorney (EPOA) cannot be removed by another trustee unless formal documentation exists to allow for that to happen, which is a self-evident situation that has been proved in a recent court case, according to an SMSF expert.

Commenting on the recent court case of Dawson v Dawson, in which a decision was handed down on 3 July in the New South Wales Supreme Court, SMSF Alliance practice principal David Busoli said the case “confirms several matters that have always seemed self-evident, but it’s always great to have a case law example as well”.

The case related to the Dawson Superannuation Fund, which had two members and trustees – Peter Dawson and Estelle Dawson – who had separated before the death of the former, who had also appointed his son, Tony Dawson, as trustee in his place. Tony was also Peter’s financial manager and guardian, and held his power of attorney.

According to court documents, after Peter’s death in 2015, his executor and Estelle Dawson’s son-in-law, George Holland, signed a deed of confirmation in April 2018 that aimed to ratify his appointment as trustee to replace Tony from the date of death of Peter.

Tony, however, challenged this move, claiming he and Estelle remained trustees of the fund in opposition to the view of Estelle and Holland that his appointment ended with the death of Peter.

Tony Dawson also challenged the view that Holland’s appointment was necessary to meet the trustee requirements for an SMSF to have two members under the Superannuation Industry (Supervision) (SIS) Act, as he remained a trustee even after the death of Peter Dawson.

In handing down judgment, Justice Trish Henry said the SIS Act was not a central issue in this case, but rather the issue was who was able to be a trustee under the SMSF deed drawn up in 2005.

“The issue in these proceedings is whether the plaintiff or the second defendant is a trustee of the fund. That issue is determined by a consideration of the provisions in the fund deed dated 1 July 2005 that deal with how trustees cease to hold office and how they are appointed, as applied to the facts in this case,” Justice Henry said.

“It is not determined by identifying which of the plaintiff and the second defendant should hold the office of trustee to ensure the fund remains a SMSF, which in turn, depends on whether the fund is a one or two-member fund for the purposes of the SIS Act.”

As such, she found Tony remained a trustee of the fund after the death of Peter, as did Estelle, but Holland’s purported appointment was not a valid appointment under the terms of the fund deed.

Busoli said the case confirmed that “when a trustee is appointed pursuant to an enduring power of attorney, they are personally appointed. They do not represent the appointor. They act independently in place of them”.

“Unless the deed, or constitution of the corporate trustee, states otherwise, that appointment continues after death of the grantor of the enduring power of attorney,” he added.

He also pointed out Justice Henry’s reliance on the trust deed confirmed that where there were only two trustees of a fund, unless the deed stated otherwise, trustee decisions had to be unanimous if material changes were proposed.

“Each of these factors are important when considering possible blended family dispute scenarios,” he said.

“Where the deceased’s wishes may be contrary to the surviving trustee’s intent, I have generally considered that appointing a trustee under an EPOA can be a valuable precautionary measure, particularly if the appointee will also be the member’s benefit guardian or, even better, executor of the member’s estate.

“Conversely, such an appointment can cuse problems where the appointee feels aggrieved by the deceased’s intent.”

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