A fundamental duty of all trustees is to administer a trust according to the terms of that trust. Trustees are therefore required to not only know the terms of the trust that they are administering but also must be able to produce those terms for inspection by courts and other interested parties.
However, this is not to say that all trustees are able to do so. Over the years, DBA Lawyers has received many requests from trustees for assistance in confirming or ascertaining the terms of trusts when the relevant trust deeds have been lost. Being unable to produce the terms of the trust can mean that trustees may be unable to deal with banks or may have difficulty engaging in other transactions.
This year has seen a significant increase in the body of case law on lost trust deeds. Some valuable similarities and noteworthy differences are arisen in these cases.
In this article we will juxtapose certain recent approaches of the NSW and WA supreme courts. In each of these cases, the courts have given examples for trustees as to:
- what might constitute a ‘due search’ in WA or NSW; and
- what secondary evidence might be necessary for a WA or NSW court to feel comfortable it is being presented with the true trust terms.
Case 1: Willmington Investments Pty Ltd v Sarich [2023] WASC 191 (Sarich case)
The Sarich Family Trust was established in 1976 by a deed, with Donald Sarich as the sole director of the trustee company. After his passing in 2010, his adult daughter, Ms. Sarich, took over as the sole director.
Ms. Sarich was unaware as to when the original deed was lost, but she had access to a scanned copy which she used to facilitate transactions for the trust. Unfortunately, this scanned copy was not always accepted as valid proof of trust terms. The trustee company eventually filed an application to the court seeking clarification on whether the scanned copy was a true and accurate representation of the trust terms.
Here, the court was convinced that given the entirety of the evidence provided to it the terms of the trust were those contained in the scanned copy provided to it by the trustee.
Case 2: In the Application of Nyasa No. 19 Pty Ltd [2023] NSWSC 578 (Canfield case)
In 1979 the Canfield family decided to split their assets into three portions. Though there is some debate regarding the date of document execution, the general consensus was that the decision was made to split the assets into two trusts, with the remainder being kept outside the trust environment by the owner at the time.
The trust deed of one of the trusts was subsequently lost.
Here, the court was convinced that given the entirety of the evidence provided to it the terms of the lost trust deed matched that of the second trust created at the same time
Case 3: Application of DEK Technologies Pty Ltd as trustee for DEK Technologies Unit Trust [2023] NSWSC 544 (DEK Case)
During 1999, Mr. Mulla, Mr. Tanovic, and Mr. Yim formed a business referred to as DEK. They consulted with an advisory company, seeking advice on the optimal structure for conducting their business the result of which was said to be a discussion (which could not be accurately related to the court other than to say that the advice was agreed to) and a letter.
The discussion and letter were said to pre-date and to initiate the establishment of certain trusts, the relevant deeds having since been lost. The letter described discretionary trusts (which the drafters of the trust documents were able to provide payment records for and a contemporary template for) and characteristics of a ‘Special Hybrid Trust’.
Here, the court was comfortable that the discretionary trust templates contained the terms of the discretionary trusts in question. Interestingly, the court also held that enough details were presented to it as to the terms of the ‘Special Hybrid Trust’ that it could make orders enunciating its terms also (even though there was no template available).
The standards
‘Due search’ will, of course, be satisfied in different ways according to the differing circumstances of each case. In each of the cases we have discussed, the courts were willing to consider the matters as they had found that the applicants had completed the required level of searching.
| Sarich Case (WA) | DEK Case (NSW) |
| Testimony of people who have done the searching
Ms. Sarich and her brother testified that they had conducted extensive searches to locate the original deed. Review of advisor records Ms. Sarich’s brother even went as far as sorting through the documents kept by the former accountant’s widow. |
Testimony of people who have done the searching
Mr. Mulla, Mr. Tanovic and Mr. Yim claimed to have started searching in 2006. They were able to produce an email noting the existence of the deed describing the trust terms being held by an advisor in 2007. Later, the advisor claimed not to have the deed and instead said that the policy at the time would not to have been to retain the deed and instead, would have been to give it to the client. Inquiries of people related to the setup of the trust The trustees provided evidence of discussions with employees of the advisor, evidence of that company’s systems and processes at the time and evidence of a search of the advisor’s records. Evidence was also provided by the drafter of the two discretionary trusts. The drafting firm had evidence of the discretionary trusts existing/ being drafted and paid for but not of any special unit trust. Evidence was also provided of unsuccessful: Review of public records and government authority registers · the Australian Taxation Office; · the Queensland Revenue Office; and · the State Revenue Office Victoria.
Inquiries of industry body records · the National Tax; and Accountants’ Association.
Inquiries of parties that the trustee may have had dealings with · the Commonwealth Bank Australia; · the Macquarie Group Limited; · the Macquarie Investment Management Limited; and · the National Australia Bank Limited.
Review of the trusts’ records [Though the records did not provide a copy of the terms of trusts a letter of advice was provided to the court describing the reason for which the trust was said to have been established and certain special characteristics (a ‘Special Hybrid Trust’) that the advisor was recommending. Entity mapping documentation was also found in this search which was used to support the existence of the trust.] Review of public and trust documentation and reporting [Tax returns and financial statements were reviewed for the way that they described the trusts.] |
The necessary secondary evidence too will vary between cases. What evidence can be used to demonstrate the terms of the trust may vary between cases, however both the WA and NSW supreme courts applied the balance of probabilities test as to the standard of proof required to convince the court that it is being presented with the terms of the trust. For further discussion relating to the balance of probabilities test, see Vanta Pty Ltd v Mantovani [2023] VSCA 53.
| Sarich Case (WA) | Canfield Case (NSW) |
| Scanned copy
A scanned copy of the trust was presented to the court as evidence of the terms of the trust at the time of scanning. Affidavits and personal evidence The attestation by the current director of the trustee company (Ms. Sarich) was taken to be proof of the fact that the terms of the trust had not been changed since the scanning of the copy was made. She also attested to the physical places that she had searched and to the history of the corporate trustee. Public document searches ASIC historical extracts were used to examine the history of the trustee company and confirm evidence attested by Ms. Sarich. |
Affidavits and personal evidence
Though the founder of the trusts and the advisor had since passed, a relative (who had been at the meeting where the advice had been given) was able to attest to the advice and the plan that the family’s solicitors of the time were to be relied upon for the creation of the trusts. Documentation referencing the trust’s existence and demonstrating its management Other evidence was also supplied to demonstrate that the properties had been dealt with according to the advice (as recounted by the relative). Other evidence included tax returns claiming a trust existed over the relevant properties. Mirror trust terms Per the attestations regarding the overall plan to divide the assets into three portions, the deed for the second trust was presented as the same terms as those that would be found in the missing trust deed. The court accepted that they were plainly ‘standard form’ trust terms which would have been used in many trusts produced by that law firm. The court considered the family’s plan and circumstances and found that there would have been no reason for these terms to have been tailored in either deed, and so the court was able to accept that the deed which was produced was a mirror of the deed which was lost. |
The circumstances of the individual matter will influence what will happen post the court being convinced of the terms of the trust.
| Sarich Case (WA) | Canfield Case (NSW) | DEK Case (NSW) |
| The court provided advice which enabled the trustees to treat the copy of the terms of the trust provided to the court as the true terms of the trust (an order that the trustee was justified in managing and administering a trust by reference to the terms annexed to a decision). | Stepping in as the protector of the rights of certain beneficiaries of the trust per the terms the court had found were likely, the court participated in a deed update which confirmed modern trust terms. | The court declared a set of ‘rules’ via order based on the facts provided to the court which were found to be true facts of the terms of the trust (the court did not implement them as best practice or the best set of rules going forward, but found that given the circumstances the original trust terms must have at least included these). |
Warning
This article has provided cases with successful outcomes for the trustee applicants to demonstrate what level of searching may be acceptable depending on the circumstances. However, an applicant might not receive the outcome that they hope for, particularly if a court feels that they have not conducted an adequate search or adduced appropriate evidence of that search. See, for example, Application by Barry McMahon Nominees Pty Ltd [2021] VSC 351. It is important to approach each case with proper effort, diligence and attention to detail.
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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 in your SMSF practice, visit www.dbalawyers.com.au.
Bryce Figot, Special Counsel ([email protected]) and Cassandra Hurley, Lawyer ([email protected]), DBA Lawyers Pty Ltd
DBA LAWYERS
21 September 2023
