A challenge to the validity of the removal of a trustee from a self-managed super fund ended up in the Queensland Supreme Court recently, and the decision has shed light on how precisely trustees must adhere to the terms of their trust deeds.

In Perry v Nicholson [2017] QSC 163, the court found that documents specified in the deed were not produced, but the deed was sufficiently flexible that the procedure that was followed constituted a valid removal.

Colin Maurice died from melanoma in March this year. He was survived by his adult daughter, Sonia Perry, an adult son and his de facto spouse, Jennifer Nicholson.

Maurice had established a single-member SMSF in 2009, with himself and his daughter as trustees.

In April 2015 he removed his daughter as a trustee and appointed his de facto. This was documented in signed minutes.

Several months before his death, Maurice signed a binding death benefit nomination, directing the trustees to pay 100 per cent of any death benefit to his de facto.

Following Maurice’s death, Perry sought a declaration that she had not been validly removed as a trustee of the fund. This in turn called into question the validity of the binding death benefit nomination.

Under clause 183 of the trust deed, any removal of a trustee must be in writing. None of the documents signed on April 2015 were in terms of a formal notification to the applicant of her removal as a trustee. There was also no document purporting to immediately advise the other trustee of the removal of the applicant as trustee. Both are requirements of clause 183.

What happened was that Perry executed a document headed “confirmation of resignation as trustee”. The minutes of the meeting of the trustees signed the same day did not record an acceptance of the Perry’s resignation as trustee.

The court found that “there is no acceptance of that resignation in any of the documents signed by the trustees at that time.”

It also found: “While it may have been the intention of the parties that the resignation be accepted by the trustees, the resolution recorded in the minutes is consistent with the trustees not accepting the resignation.”

However, clause 183 of the deed does not require any particular method of notification of the removal of a trustee, other than that it be in writing. The court ruled that the minutes of the meeting signed by the deceased, the applicant (Perry) and the respondent (Nicholson) in 23 April 2015, “properly read, constitute a removal of the applicant as trustee of the fund.”

“That removal is in writing in that it is recorded in those minutes. As the minutes are signed by the deceased, the minutes also record that the deceased as the other trustee was advised immediately,” the judgment says.

The court accepted that Perry was validly removed and the Nicholson was validly appointed.