A recent decision by the Full Federal Court around a man’s tragic death by suicide clarified the standing of a de facto spouse in the context of a non-lapsing death benefit nomination on a life insurance policy made by the deceased person.

Just prior to C’s death in September 2019, the death benefit under his insurance policy was valued at $1.1 million, with the death benefit nomination in favour of his de facto spouse, N, having been made in December 2018.

On the night of his death, C sent a text message to his sister, purporting to be his last will and testament and indicating his wish that all his assets should pass to his family, with N receiving nothing. The text was not copied to N and it was later established that it was sent while C was under the influence of cocaine and alcohol.

The trustee of the policy took the view that the de facto relationship had continued right up to the time of C’s death and that N was therefore entitled to the death benefit. This decision was challenged by C’s family before the Australian Financial Complaints Authority (AFCA), which argued that the text was evidence that the relationship between C and N had ended before C’s death. However, AFCA decided that relationships have their ups and downs, and people say and write a lot of things they don’t mean all the time. This meant the trustee was right, the relationship remained ongoing just before C’s death, and N was entitled to receive the death benefit.

The family then appealed to the Federal Court, where a single judge ruled that AFCA had erred in law in not construing the text message as proof that C’s relationship with N had come to an end, meaning that N was not a valid beneficiary after all.

Finally (one would think), N appealed to the Full Federal Court, which held unanimously that in the absence of communication from C to N, there needed to be some other course of conduct, such as a refusal to cohabitate, which would clearly be inconsistent with a continuation of the relationship. Since there was no evidence of such conduct, the Full Court ruled in favour of N. The decision by AFCA was therefore upheld.

This case, with its own peculiar facts, highlights the importance of keeping things like binding death benefit nominations up to date and being clear about spousal relationships, especially when couples live apart.