Category Archives: Superannuation

Lost Trust Deeds: A Serious Issue

 

Discretionary trusts and self-managed superannuation funds are often used as wealth management tools for businesses, families and individuals.

But if the trust deed is lost - not just the original, but every copy, serious problems may arise. True, there is no problem for the trust relationship – that stays on foot. But administering the trust can become difficult and uncertain.

Drafting a deed afresh is a no-go – you risk creating a new trust or a resettlement with significant tax consequences. Not to mention that an invalid amendment (eg in re Cavill Hotels Pty Ltd [1998] 1 Qd R 396), appointment of a trustee (H Ford & W Lee, Principles of the Law of Trusts (Loose-leaf) at [9050]) or appointment of a beneficiary (eg Ramsden v FCT [2005] FCAFC 39; BRK (Bris) Pty Ltd v FCT 2001 ATC 4111) will be void ab initio (from the start), and distributing to a non-beneficiary risks a claim for breach of trust.

Where should we look? 

Your first step is to undertake searches to try and locate a copy of the original deed, or evidence of its terms.  Avenues to pursue include:

  • Trustee:  The trustee bears the primary obligation in relation to the whereabouts of a trust deed, because a trustee has the duty to ascertain the terms of the trust: Hallows v Lloyd (1888) 39 Ch D 686. Have all current and former trustees and directors of corporate trustees been contacted?
  • Settlor: Has the settlor of the trust (if known) been approached? They may be deceased – what about the executor of their estate who should have control of their personal papers?
  • Trust Provider: More complex deeds may have been drafted by a firm of solicitors or accounting firm. Try them, and any successor partnerships or incorporated legal practices. Sometimes this turns up an unsigned copy of the execution copy of the trust deed prepared by the firm, or they may be able to provide a copy of the trust deed precedent that was current at the date of establishing the trust, and it can be reconstituted from there. The application form, file notes or other contemporaneous documents and even the recollection of relevant persons may also be found which would permit reconstitution of the terms of the precedent trust deed. In Sugden v Lord St Leonards (1876) LR 1 PD 154, the Court stated:

“… if the evidence of the contents of a long and complicated [document] were given by a professional man who had himself drawn the instrument or upon one or repeated occasions had had the opportunity of reading, that would, under ordinary circumstances, be more satisfactory than the evidence of a non-professional person, above all the evidence of a lady [sic].”

  • Relatives: You can also make inquiries of all adult relatives of the trustee, and those who may have had an association, such as a family business, or lived in the local region.
  • Beneficiaries: Inquiries should also be formally made of those thought to be beneficiaries of the trust. In turn, their  personal accountants and lawyers should also be contacted. If one of the beneficiaries has since died, inquiries should also be made of their legal personal representatives (executor/administrator) and in turn their lawyers. Since the purpose is not only to try to locate the original or copy of the trust, but (should it become necessary) to identify sufficient grounds to enable the trust’s terms to be reconstituted by secondary evidence, the past pattern of distributions disclosed in minutes and tax returns should identify some of the beneficiaries within the class of beneficiaries.
  • Financiers: Finally,  try to locate current and former banks, financiers and brokers who may have obtained a copy of the deed as part of any finance application. A property ownership search could demonstrate the identity of all properties acquired by the trust, and in turn identify any mortgage providers and conveyancing solicitors of whom final inquiries can be made.

We Found Something – What Now?

If you are lucky, and you find an executed and stamped copy of the trust deed, that copy (and copies of that copy) should constitute adequate evidence of and stand as a sufficient substitute for a lost original trust deed for most purposes (including litigation): see ss 47 and 48 Evidence Act 1995 (Cth).  A deed of confirmation can be executed referencing the original deed and its terms.

With less certain documentary trails, deciding whether to approach the Court will in part be a function of the size of the trust estate. In small estates or estates with passive investments, it may be sufficient to accept a degree of restriction and administrative uncertainty and to administer the trust in accordance with trust law and the relevant Trustee Act.

But if the trust is carrying on a business, in most cases the restricted powers will be inadequate (and section 57 of the Trusts Act, which provides some statutory assistance for the purpose of winding up the business, may be unpalatable). And for larger and more complex trusts, if there is an unsigned execution copy or reconstructed copy of the trust deed, it is usually appropriate to apply for a court order that the unsigned execution copy or reconstructed copy of the trust deed stand in place of the terms of the original trust deed.

The likely success of such an application is dependant on the evidence that can be adduced as to the terms of the original trust deed. The less evidence of the terms of the original trust the less likely such an application will be successful. There must be “clear and convincing proof not only of the existence, but also of the relevant contents, of the writingMaks v Maks (1986) 6 NSWLR 34, 37. Documentation of those enquiries and responses is essential to establish a proper audit trail, should an application be required to be made to the Court to establish that sufficient inquiries and investigations have been made to no avail.

Affidavit material by the settlor (if alive), the trustee or the original and current directors of a corporate trustee, and the principal beneficiaries would need to be prepared and filed in support of the originating motion. The matters dealt with in the affidavit material would need to include evidence of:

  • the due and valid establishment of the trust;
  • the terms of the trust;
  • the continued administration of the trust;
  • the assets that constitute the trust fund;
  • the purpose of the trust and how the proposed orders will give effect to that purpose;
  • the enquiries undertaken to locate the original trust deed; and
  • any explanation for the loss of the original trust deed.

But … we found nothing!

There will be cases where no trace of the original trust or its terms exists. Such cases will vary in degrees of uncertainty as to the terms of the trust and each will turn on its own facts.

Your problem is that if the Court has no evidence as to the likely terms of the original trust on which to base a declaration, it is unlikely that an application under the Trusts Act would be successful. Your available options could end up very limited: the limited powers under the Trusts Act  will only get you so far, and you may need to face up to winding up the trust. You will certainly need detailed legal, accounting and taxation advice before settling on the appropriate course.

11 November 2014

Dominique Hogan-Doran is an Australian barrister specialising in commercial litigation, regulatory action and public inquiries. 

For more information, visit her website and blog at www.hogandoran.com and follow on Twitter and LinkedIn.

Liability limited pursuant to a scheme approved under professional standards legislation. Read further the Disclaimer.

Bar CPD Alert: Optimising Your Superannuation

This Wednesday 26 February 2014, the NSW Bar Association will host a CPD seminar “Optimising Your Superannuation” in the Bar Common Room from 5.15pm. To be presented by Vanessa Woodley, Financial Strategist at SentinelWealth, and chaired by Dominique Hogan-Doran, the presentation is designed to provide an informative overview of key superannuation concepts and strategies to optimise benefits to barristers. For full details, please click here. The seminar provides 1.5 points in the CPD Management Strand. Attendance is free and no registration is required.

Update: for Barristers, you can stream this CPD from the NSW Bar’s website: http://cpd-streaming.nswbar.asn.au/seminar/151 

Upcoming CPD on Optimising Your Superannuation

NSW Bar Association – CPD (Management Strand)

Please join me on Wednesday 26 February 2014 at 5.15pm in the NSW Bar Association Common Room when I chair this timely presentation by Vanessa Woodley of Sentinel Wealth.

Download Flyer

The session is designed to provide an informative overview of key superannuation concepts and strategies to optimise your benefits. It will address:

- What are the benefits and traps of superannuation?

- How can you optimise your contributions and withdrawals?

- How much is enough to fund your retirement?

- Should you make superannuation contributions, repay your mortgage or invest elsewhere?

- What do you need to consider when consolidating your superannuation accounts?

- Is a Self-Managed Super Fund (SMSF) right for you?

The session is suitable for barristers of all ages who are interested in optimising their superannuation benefits.

The event is co-hosted by the NSW Women Barristers Forum.

Registration Details

Superannuation law ~ not so simple

A salutary reminder of the complexities of advising superannuation fund trustees per French CJ:

“On its face it sounds like a narrow field of practice. In truth it requires a generalist’s skills.  It straddles private and public law. It involves the application of equitable doctrines, particularly the law relating to trusts and fiduciary obligations. It involves contractual relations between employers and employees and is affected by statutory regimes specific to superannuation and of more general application. Its development has been linked to that of industrial relations law. From time to time it engages with the Constitution. Overlapping regulatory arrangements affect the administration of superannuation funds and impact on the rights and duties of trustees and beneficiaries.The relevant regulators include APRA, ASIC, and the Commissioner of Taxation. The exercise of their powers may attract the application of that branch of administrative law which involves judicial review.”

http://www.hcourt.gov.au/assets/publications/speeches/current-justices/frenchcj/frenchcj15jul13.pdf

29 July 2013

Dominique Hogan-Doran is an Australian barrister. As part of her practice, she routinely advises trustees including the corporate trustee of a major industry superannuation fund.

This blog post does not constitute legal advice. Read further the DisclaimerLiability limited pursuant to a scheme approved under professional standards legislation.