Can EPAs ‘renew’ BDBNs?

He said in this case the member had made BDBNs before losing capacity, with his attorney then making further BDBNs relying on an express power in the EPA to 'renew any binding death benefit nomination made by me for any superannuation benefits or entitlement'.

Matthew Burgess, director of View Legal, said the case follows from a similar decision in Re Narumon Pty Ltd [2018] QSC 185, which confirmed a BDBN could be made by an EPA.

“There have, however, been a number of questions raised about the extent of the application of this decision,” Mr Burgess said.

“For example, in SM [2019] WASAT 22 the court confirmed that in its view a BDBN is often a testamentary act, and therefore cannot be delegated, for example to an EPA.”

The court concluded in this instance, that a BDBN is a “testamentary disposition” where the member of a superannuation fund has a present equitable entitlement to the money and the BDBN was not made further to a contractual right.

Mr Burgess said in later cases, superior courts have largely ignored the reasoning and conclusions in SM [2019] WASAT 22 and the court noted it did not need to comment on whether an attorney can make a BDBN for the issues in question.

The most recent case, Re Rentis Pty Ltd [2023] QSC 252, involved Robert, a member of the Robert Stannett Superannuation Fund, who had appointed his wife and brother Peter as attorneys under an EPA.

The EPA gave express power to ‘renew’ a BDBN.

In October 2020, before losing capacity, Robert made a BDBN directing the trustee to pay his death benefits – 50 per cent to his wife, and 25 per cent to each of his children.

Robert lost capacity in December 2020, and his wife died in February 2021, leaving Peter as the sole attorney under the EPA.

In his capacity as attorney to Robert, Peter made two new BDBNs regarding Robert’s death benefits on 9 May 2022 and 17 May 2022, which changed the BDBN to allocate 25 per cent to each of Robert’s children and 50 per cent to Robert’s estate.

Mr Backhaus said this case considered the validity of the 17 May BDBN as this was the last one made.

He said the EPA contained the following express term:

“I authorise my attorney/s to renew any binding death benefit nomination made by me for any superannuation benefits or entitlement”.

“The court considered the meaning of the term ‘renew’ and whether it should be construed narrowly or given a purposive interpretation,” Mr Backhaus explained.

“On a narrow interpretation, it was argued that the term ‘renew’ would only allow an attorney to make another BDBN that repeats the terms of the previous BDBN made by the principal.”

However, the court did not favour this narrow interpretation.

In its judgement, the court stated:

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.

“It was held that the term ‘renew’ did allow the attorney to make a BDBN that differed from the earlier BDBN made by the member,” Mr Backhaus said.

“Importantly, the court did make a distinction between the issue of whether an attorney has the power to make such a BDBN, being the issue in this case, as compared to a contention that the power should have been exercised in a different way, which was not considered here.”

Mr Burgess said the wider interpretation of the word “renew” was supported by the rule that “if the language is open to two constructions, (the interpretation) that will be preferred (is that) which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust (see Spina v Permanent Custodians Ltd [2008] NSWSC 561)”.

“The conclusion was reinforced by the fact that under the trust deed which was updated a week before the EPA was signed, by default, BDBNs were non-lapsing and did not require regular renewal,” he said.

“Therefore, the power to renew in the EPA could not have been required to address the risk of a lapsing BDBN.”

He said the court also concluded that undue weight should not be put on the failure to use words of wider interpretation such as “vary” or “amend” in the EPA.

Mr Backhaus said Rentis provides helpful guidance on how courts may determine the meaning of the power to “renew a BDBN” when this appears in an EPA.

“When members are considering their succession and death benefits plans, they should ensure that all relevant documents, including the SMSF deed/rules, EPA and will are harmonised and take the other documents into account,” he said.

“As Re Rentis shows, without clear directions and wording in a document, parties may be required to seek court orders where there is doubt.

“While not an issue in this case, where a member would like their attorney to have the power to make a new BDBN under which they benefit, an EPA should contain express conflict authorisation provisions.”