Court rulings shed light on what to do if trust deed is lost

“Recent decisions reinforce the importance of having original executed copies of all trust documents,” he said.

“A lost trust deed is not a mere procedural or administrative matter. It will cause risk and uncertainty for the life of the trust. A prudent trustee should seek advice on how to manage a trust where there is any doubt regarding the terms of any trust.”

Despite the best efforts of a trustee, there is always the chance that a trust deed is lost but Mr Backhaus said recent court decisions can help trustees navigate what steps they can take in the circumstances.

“Ideally, if the trust deed cannot be located, an approach should be made to the court. However, such an approach will involve significant cost and effort, which many trustees may not be willing to accept,” Mr Backhaus said.

“A trustee that does not seek court input can risk being viewed in a negative way if a dispute subsequently arises.

“There may also be merit in considering other legal solutions to confirm the terms of a trust, as far as practicable. These options may put a trustee in a better position but, again, risks are likely to remain.”

One of the cases that deals with a lost trust deed is Vanta Pty Ltd v Mantovani [2023] VSCA 53 (Vanta).

In this case, the only page that was available for the Mantovani Family Trust was the schedule containing minimal information for the trust, such as naming the trustee, settlor and some beneficiaries.

Mr Backhaus said the Court initially found the trust failed and relevant assets that were contributed to the trust would go to the contributor’s estate.

However, on appeal it was held that the trust still existed, however, the trustee was directed to seek judicial direction on the continued administration of the trust.

“While Vanta indicates that a trust can continue with minimal information to evidence its existence, it does not provide any helpful guidance on how the trust can actually continue to be administered,” Mr Backhaus said.

Another earlier case, Sutton v NRS(J) Pty Ltd [2020] NSWSC 826 (Sutton), in contrast to the Vanta ruling, shows that where sufficient evidence of the terms of a trust exist an appropriate outcome can be obtained from a court.

In this case, while the original trust deed could not be obtained, the trustee did have a photocopy of the signed deed and the Court exercised its advice power under the relevant state Trustee Act to confirm that the trustee was justified in administering the trust on the basis that the photocopy was a true copy of the original deed, allowing the trustee to administer the trust on those terms.

“In Sutton, it was a bank that raised concerns with regards to having an original trust deed as part of their own requirements, showing that trust deed issues can arise due to acts of third parties,” Mr Backhaus said.

A third relevant and important case is Re Barry McMahon Nominees Pty Ltd [2021] VSC 351 (Re Barry) in which the original trust deed could not be located, although some documents including a later deed of variation were available.

In this instance, the trustee sought declarations from the Court that it could adopt a new trust deed, but the Court ordered that insufficient enquiry had occurred to properly establish key points relating to the existence of the trust, and the trustee was ordered to conduct additional searches to file further evidence with the Court.

Mr Backhaus said the three cases highlight the importance of securing and retaining the original trust deed.

He said if a trustee doesn’t hold the original executed hard copy trust deed, they should firstly conduct an extensive and exhaustive search to find evidence and existence of the terms of the trust as this will be necessary for any court assistance.

“This could include contacting all accountants, lawyers, auditors, financial planners, banks and financial institutions that may have a complete copy of the deed as part of their records,” he said. “It could also involve contacting the initial deed supplier to determine whether they have an unexecuted copy or template of the relevant document.

“Evidence from parties relevant to the trust, such as the asserted settlor, trustee and beneficiaries would also need to be considered.”

However, after a thorough search if the original executed document can’t be found, the trustee should consider making an application to the Supreme Court for an appropriate declaration or orders in the relevant jurisdiction.

“This option is likely to place the trustee in the best possible These decisions reinforce the importance of having original executed copies of all trust documents,” Mr Backhaus said.

“The outcome of court proceedings will likely depend on the available evidence provided and where there is a photocopy, template or similar evidence of the terms of a trust, there is a reasonable chance of a helpful outcome.”

If approaching the Court is not a viable option, the trustee can consider using other documents that confirm the terms of the trust or can rectify apparent issues.

These documents will depend on the available evidence that can be gathered and while their aim is to place the trust in a better position, it is unlikely to be a perfect solution.

"While the aim of such documents is to place the trust in a better position, this is unlikely to be a perfect solution. Moreover, extreme care is needed as varying the terms of a trust may give rise to tax and duty implications and should only be undertaken by a lawyer with expertise in trusts, tax and duty law.," Mr Backhaus said

“Thus, a trustee would generally be accepting risk by proceeding without court input. Where a court considers a trustee has acted inappropriately, it can make orders removing the trustee from that office."

He added that it is always prudent for a trustee to seek advice on how to manage a trust where there is any doubt regarding the terms of a trust.

"Where one or more documents are missing in the trust’s document history, expert legal advice should be obtained.," he said

"Resolving uncertainty now may cost some time and money. However, moving forward without a trust deed may prove substantially more expensive especially if any issue or dispute arises in the future.

"Any actions or transactions undertaken by a trustee without a trust deed may be at risk. In particular, the ATO would want to be satisfied that distributions of net income are to relevant beneficiaries in respect of each financial year and otherwise in accordance with the trust deed."

Related articles

• A 1976 deed can’t be found … trust fails as a result!
• Sutton v NRS(J) Pty Ltd [2020] NSWSC 826: Lessons for managing lost trust deeds
• Recent judgement has important implications for SMSFs with incomplete deed histories
• Dealing with a lost SMSF trust deed
• DBA Lawyers’ lost SMSF deed service

This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional. The above does not constitute financial product advice. Financial product advice can only be obtained from a licenced financial adviser under the Corporations Act 2001 (Cth).

Note: DBA Lawyers presents monthly online SMSF training. Our next update is on 9 June 2023 with Daniel Butler presenting. For more details or to register, visit www.dbanetwork.com.au or call 03 9092 9400.

For more information regarding how DBA Lawyers can assist in your SMSF practice, visit www.dbalawyers.com.au.