Court ruling highlights the importance of secure deeds

The case involves the missing deed of a discretionary trust and whether directions should be given for the administration of the trust, and if taking of accounts should be ordered.

The case was first before the Victorian Supreme Court in 2021 when the plaintiff Giovanni Mantovani filed an application against Vanta Pty Ltd (as trustee of the Mantovani Family Trust) Pty Ltd, after the trustees threatened to sell the property in which he had lived his entire life.

In the 2021 case, it was stated the Mantovani Family Trust (the Family Trust) was established in 1976 and the trustee of which was Vanta Pty Ltd (Vanta).

Over the years, Vanta has been controlled by members of the Mantovani family.

Since the Family Trust was established a number of properties owned by Mantovani family members have been transferred to the Family Trust.

However, despite extensive searches, the original deed for the Family Trust (the Deed) were not located.

The parties at the time of the 2021 case agree the Deed had been lost and the only document in the parties’ possession relating to the Family Trust was a document which sets out some information pertaining to the trust.

“Two years ago Justice Macmillan ruled that in this case, all assets of the trust must go back to the contributor,” Mr Figot said.

“In this context it makes its way back to the matriarch’s estate, but if you slavishly transplant this into the world of SMSF trusts it means that if you lose the deed to the trust, theoretically, your employer could then get back all the contributions made to fund.”

The appeal against the 2021 ruling in which the judgement was handed down on 16 March stated:

(a) Notwithstanding criticisms of Vanta’s behaviour (which in the main were valid), her Honour’s declaration that the Trust had failed was incorrect and that the consequential declaration of a resulting trust and the order for the taking of accounts should not have been made.

(b) The appropriate course is for the declarations and orders to be set aside, and for a new proceeding to be instituted in the Trial Division to determine what orders should be made pursuant to the Trustee Act [1958] to enable the Trust to continue to be administered in a proper fashion or (if an application is made and the Court so determines) to be wound up.

“So up until this ruling was made last week there was a possibility that if you lose the deed to a SMSF trust, and if it was ever challenged in court, the whole super fund could fail for lack of certainty, and all funds could go back to the employer.

“The court has concluded in the appeal judgement that the whole trust should not actually fail. However, it does raise some difficult questions.

“For example, if the trust exists what rules govern it? How do we know the trust did not have certain provisions in place in this case in regard to the property in question? And that is why a deed is so important.

The judgement from the appeal case has given Vanta and others two months to seek guidance from the court as what governing rules it should use.

“Some of the things that could happen now is that the court may get rid of Vanta Pty Ltd as the Trustee and get an independent person or body to take over,” Mr Figot said.

“So how does this apply to SMSFs? Lots of deeds are now being made electronically but they can still get lost. Even if you save it to the cloud, if someone dies, or they forget their two-factor authentication, the deed could effectively be lost, unlike in the old days when you could open the old roll-top desk and find a deed in a stack of papers.

“My feeling is that despite all these developments of electronic documents, there will still be the issue of lost deeds.

“My advice is, if you lose a deed the trustee should be strongly considering prospective judicial advice. If it is going to get litigated, seek judicial advice otherwise you could be bouncing around in the court system for a long time which is not just stressful, but costly.”