Does a change of trustee deed in NSW require registration?

Preparing a valid change of trustee deed can prove complex as, among other things, the governing rules of the trust or SMSF must be complied with, the correct parties must be made a party and the deed needs to be appropriately drafted. Moreover, in New South Wales (NSW), the question also arises –– whether a change of trustee deed should be registered to be legally valid and take effect.

On the question of registration, the case law on point remains unsettled and this article covers the main views reflected in recent court judgments.

This article has relevance to changes of trustees for discretionary trusts, unit trusts and self managed superannuation funds (SMSFs).

The legislation: Trustee Act 1925 (NSW) section 6

A change of trustee deed should be registered in NSW if:

• the trust deed specifically requires it;¹ or
• legislation provides for it.

Section 6(1) provides that:

A new trustee may by registered deed be appointed in place of a trustee, either original or substituted, and whether appointed by the Court or otherwise.

In accordance with s 6(1), changes of trustee can be effected by registered deed if it is being done in circumstances under s 6(2) including:

1. where a trustee is dead;
2. where a trustee remains out of NSW for more than one year without having properly delegated the execution of the trust;
3. where a trustee remains out of NSW for more than two years;
4. where a trustee desires to be discharged from all or any of the trusts or powers reposed in or conferred on the trustee;
5. where a trustee refuses or is unfit to act in such trusts or powers, or is incapable of acting therein, or is a minor;
6. where a trustee is removed under a power contained in the instrument creating the trust;
7. where a trustee being a corporation is dissolved.²

The primary judgement in Statewide Developments Pty Ltd (in liquidation) (receivers and managers appointed) v Azure Property Group (Holdings) Pty Ltd [2012] NSWSC 616 (Statewide) provides an interesting discussion of the relevant NSW legislation.

In Statewide, Pembroke J was asked to determine if the words “may be appointed by registered deed” imposed a restriction on a change of trustee for the change to be effective, ie, whether a change must be by way of a registered deed.

Pembroke J was critical of the drafting of the section and formed his view based on the following grammatical observations of s 6:

The first is that the word “may” is classically permissive. The second is that the adverbial phrase “by registered deed” must modify the passive subjunctive “may be appointed”. It must describe the way in which such an appointment is to be effected, namely by registered deed. It is not however a prescriptive formula. The use of “may” makes clear that any such appointment may – or may not – be effected by registered deed.⁴

This was a departure from the unreported decision of Young J fifteen years earlier,⁵ who took the view that the plain meaning of the section required that a change of trustee be effective only if there was a registered deed.⁶ Instead, Pembroke J preferred the interpretation of a Queensland Supreme Court justice in Muir J in Kendell v Sweeney & Ors [2005] QSC 64, who focused on the legislative intention which he found not to be restrictive or to override any express powers that the trust instrument conferred, with “statutory powers only relevant if the instrument is silent or if the provisions of the trust instrument do not apply”.⁷

Without clear provision in trust or SMSF deeds a registered deed may be required for a change of trustee 

It appears that Pembroke J’s view has since been adopted, at least by the parties, in at least one case. ⁸ However, the decision in Statewide was appealed and it was not necessary for the court of appeal to determine the dispute regarding s 6.⁹ Pembroke J’s analysis was therefore neither confirmed nor rejected.

Conclusions

Without clear change of trustee provisions in a deed, s 6 must be relied upon and therefore registration obtained in relation to a NSW change of trustee. It is therefore recommended that a quality deed supplier be used for changes of trustees. DBA Lawyers has extensive experience in this regard and would be pleased to provide assistance or advice.

Related articles

• Change of Trustee — online ordering
• Changing SMSF trustees — why advisers should be more alert to the tips and traps
• Leave SMSF changes of trustee to the lawyers

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By Daniel Butler ([email protected]), Director, and Cassandra Hurley ([email protected]), Lawyer, DBA Lawyers

Note: DBA Lawyers presents regular SMSF Online Updates. 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.

This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.

8 April 2024

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¹See eg, the discussion regarding the Trustee Act 1925 (NSW), ss 6(4) and (10) in Cihan v Cihan [2022] NSWSC 538 and In the Matter of Beechworth Land Estates Pty Ltd (in liquidation) and Griffith Estates Pty Ltd (in liquidation) [2018] NSWSC 1703 [16].
² S 6(2).
³ Statewide [10].
⁴ Ibid [11].
⁵ Retravision (NSW) Ltd v Copeland (Supreme Court of New South Wales, Young J, 8 October 1997, unreported) (Retravision).
⁶ STATEWIDE [13].
⁷ Ibid [14], [15].
⁸ In the Matter of Beechworth Land Estates Pty Ltd (in liquidation) and Griffith Estates Pty Ltd (in liquidation) [2018] NSWSC 1703 [16].
⁹ Distinctive FX9 Pty Limited v Statewide Developments Pty Limited [2013] NSWCA 110 [17].