Recent judgement has important implications for SMSFs with incomplete deed histories

The Victorian Court of Appeal recently handed a judgment regarding a trust with a lost deed: Vanta Pty Ltd v Mantovani [2023] VSCA 53 (http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/vic/VSCA//2023/53.html). Although this involved a family trust, rather than an SMSF, this case also has important implications for SMSFs with lost trust deeds.

Facts

John Mantovani was born in 1960. John’s older siblings include Nic and Rocky.

Shortly before John was born, his parents purchased a residential property in Broadway Street, Cobram, Victoria.

John has always lived in the Broadway Street property, with his wife also living there since 1982. They assert to spending substantial sums of money maintaining and improving the property.

At some stage (probably in the 1970s) the Broadway Street Property was transferred to a company named Vanta Pty Ltd. It was well accepted that Vanta Pty Ltd acted as trustee of a trust known as the Mantovani Family Trust. Despite extensive searches, the trust deed for this trust was lost. The only document in the possession of the parties relating to the family trust was a schedule. There was no suggestion that the schedule was inaccurate, or that it was not originally attached to the (now lost) deed. The schedule stated:

• the ‘date of making this deed’ (27 July 1976)
• the name of the trust (Mantovani Family Trust)
• the settlor (John’s grandfather)
• the trustee (Vanta Pty Ltd)
• the settled sum ($50)
• the appointor (John’s mother and on her death, whoever is named in her will)
• the beneficiaries are John’s mother, John, John’s siblings and any of their children or grandchildren.

John’s mother died in 2015. Two of John’s siblings (Nic and Rocky) became the directors of Vanta Pty Ltd. John and his siblings were in dispute between John and his siblings.

Since April 2017, John sought details of the Mantovani Family Trust from Nic and Rocky and has made numerous requests for access to trust documents and accounts. These requests were reasonable. However, to use the language of the court, Nic and Rocky ‘stonewalled’ John’s requests.

John applied to the Supreme Court seeking certain orders and declarations against the trustee and Nic and Rocky. The Supreme Court, in 2021, declared that the Mantovani Family Trust failed for uncertainty due to the loss of the trust deed and that all its assets form part of the estate of John’s late mother’s estate (this would allow John to challenge his late mother’s estate).

The appeal

The trustee appealed the 2021 decision. The trustee was successful, and the Court of Appeal ordered that the Mantovani Family Trust is still in existence.

However, there remained many uncertainties surrounding the governing rules of the trust. The Court of Appeal addressed this by accepting an undertaking from the trustee that within two months, the trustee would seek guidance from the Supreme Court ‘for the effective administration of the Mantovani Family Trust’.

Is this a victory for the trustee?

On its face yes, the judgement of the Court of Appeal is a victory for the trustee.

However, the Court of Appeal do not appear to have been overly pleased with the conduct of the trustee. For example:

• The Court of Appeal noted that a responsible trustee would have possessed a copy of the deed, but Vanta Pty Ltd did not. See paragraph 6.
• The Court of Appeal noted that Vanta Pty Ltd could have prospectively sought a court application, but it did not. See paragraph 6.
• The Court of Appeal described John’s requests as ‘reasonable’ and the trustee’s denial of information as ‘stonewall[ing].’ See paragraph 38.
• The Court of Appeal concluded that earlier criticism of the trustee’s behaviour was mainly valid. See paragraph 9(a).
• The Court of Appeal seem to foreshadow that the trustee might have committed breaches of trust and perhaps John has remedies ‘such as an order for … the removal of Vanta as trustee.’ See paragraph 154.

Accordingly, it seems possible the Vanta Pty Ltd might be removed as trustee of the Mantovani Family Trust and some other entity might end up as the trustee.

What lessons can SMSF trustees draw from this case?

This is not a superannuation case. However, it is well accepted that the general law of trusts applies to superannuation funds.

Accordingly, the outcome for Vanta Pty Ltd could equally apply to an SMSF.

Therefore, an SMSF trustee with:

• a lost trust deed; or
• only part of deed available;

should strongly consider addressing this situation one way or another. One option is to seek prospective guidance from the Supreme Court. Depending on the facts, other options might be available as well. DBA Lawyers is well placed to advise on the options and has worked on advising many assignments involving SMSF and trust deeds over many years. However, a trustee that does nothing is generally in a far worse position than one that acts prospectively and proactively.

Issues in the deed are most likely to come to light when certain key events occur, such as a the death of a key person, a legal dispute including a relationship breakdown and an ATO review or audit is underway.

Related articles

• Options to minimise risk if you lose a trust deed
• Dealing with a lost SMSF trust deed
• DBA Lawyers’ lost SMSF deed service
• A 1976 deed can’t be found … trust fails as a result!
• Dealing with a lost SMSF trust deed
• Discretionary trusts – variations and issues

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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. 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, visit www.dbalawyers.com.au.

By Bryce Figot ([email protected]) Special Counsel, and Daniel Butler ([email protected]) Director, DBA Lawyers

DBA LAWYERS

29 March 2023