05/07/2018

In the case of Ainsworth v Davern [2018] the Supreme Court of Victoria had to decide the following issues:

1.    which of the trust deeds governed the deceased’s SMSF; and

2.    who should act as the trustees of the fund.

What were the facts?

Mr Davern (the deceased) passed away in April 2016. His SMSF had two individual trustees – his daughter, Pamela, and himself. He was survived by his domestic partner, Ms Ainsworth and three adult children.

The deceased adopted a trust deed dated 20 June 2008. The 2008 deed changed the fund’s name and named the deceased as the sole trustee of the fund. A binding death benefit nomination was signed by the deceased in December 2014 which left the whole of the deceased’s death benefits to Ms Ainsworth.

The issues raised in this case was that the fund was not in compliance with the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) as the deceased (who was the sole member of the fund) was named as the sole trustee of the fund. It was also argued that the 2008 trust deed had not been validly adopted and that the death benefit may be of no effect.  

What orders were sought?

The orders that were sought were:

1.    that the fund had validly adopted the 2008 deed;

2.    the appointment of the deceased as sole trustee was done in accordance with the 2008 deed;

3.    that Pamela be removed as a trustee of the fund pursuant to s48(1) of the Trustee Act 1958; and

4.    that the individuals suggested by Ms Ainsworth be appointed as trustees of the fund.

What did the Court consider?

In reaching its decision the Court looked at the following evidence:

1.    whether or not there were any other parties who wanted the daughter to be removed as trustee – here the siblings did not want the daughter to be removed as trustee, however the children’s interests conflicted with the interests of Ms Ainsworth;

2.    there was evidence that the daughter had stopped recurring payments from the fund that were being paid to Ms Ainsworth; and

3.    the children of the estate wanted more money from the deceased’s estate.

What was the decision?

The Court held that where there is a conflict between interest and duty, it is in the interests of all that the fund be administered by independent trustees. The daughter was removed as a trustee and two independent trustees were appointed as they were both suitably qualified and experienced and would not be charging remuneration for their services.

The Court also held that the appointment would also ensure that the fund complied with s 17A of the SIS Act and that the assets of the fund would be preserved pending the determination of which is the governing trust deed of the Fund.

The key issues highlighted in this case include the importance of ensuring that your SMSF is compliant with s 17A of the SIS Act. Otherwise as in this case, courts may have to step in and appoint independent trustees, which is not only time consuming but expensive.

For further information, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222 or info@townsendslaw.com.au to see how we can assist.