A recent decision of the Victorian Supreme Court has confirmed that the consequences for a Trustee are potentially disastrous if the Trust Deed is mislaid and cannot be located.
A Trustee of a Trust has a duty to keep proper accounts and records of the Trust. This includes all documents which detail the terms of the Trust, including the initial Deed as well as subsequent variations and amendments.
Technology has simplified this process however where Trust Deeds have been set up decades ago before the advent of email and scanning, clients often find themselves searching for copies of old Trust Deeds.
Without a Trust Deed, the Trust may be deemed, void for uncertainty.
In Mantovani v Vanta P/L, it was common ground that the Deed to the Family Trust had been lost. The only document that could be located was a schedule page indicating the date of the Deed, the name of the Trust, the Settlor, the Settled Sum, the Appointor and Beneficiaries.
The Trust held several properties, one of which had been lived in by Giovanni for several decades. Giovanni was not a Director of the Trustee and was not named as a beneficiary of the Trust.
The trustee and the named beneficiaries wish to sell that property. Giovanni bought the matter to the Supreme Court seeking a Declaration that the Trust had failed for uncertainty.
There was no evidence to clarify the contents and terms of the Deed or the nature of the Trust. Was it a Fixed or Discretionary Trust? What was the basis for making trust distributions and what was the vesting procedure?
The Court observed that the Trust had been administered by the Trustee without any knowledge of its terms and such guesswork amounted to a breach of Trust by the trustee.
Further the loss of the Trust Deed rendered the Trustee incapable of determining how it could act in the future, meaning there was no basis upon which the Trust could continue to operate.
Therefore, the Court held that the Trust failed for uncertainty.
Record keeping for Trustees of privately managed trusts, such as Discretionary Trusts, Self Managed Superannuation Funds and Unit Trusts are therefore critical.
If you need assistance with respect to creating, amending, locating or advice regarding your Trust, contact us at Everingham Solomons because Helping You is Our Business.
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