Can’t find the deed?
A recent decision of McMillian J in Melbourne is a good reminder for all with trustee clients who can’t find the deed. In Application by South Melbourne Continental PL [2018] VSC 398 Her Honour made clear that a Court will not simply make declarations as to the content and execution of a trust deed on application. The court was willing neither to make the declarations nor to approve transactions.
The two things a trustee must be able to demonstrate to the court if a trust deed is to be reconstructed are:
• the terms and execution of the original deed; and
• that all reasonable efforts have been made to find that original deed.
Here, the terms of the deed were evidenced by a solicitor’s template from 1981, three years prior to the deed in question being settled. The solicitor who drafted the deed in 1984 recalled little of the matter but thought the deed was likely to be similar to his 1981 precedent which he produced. He thought the settlor may have been his secretary as this was his usual practice, however he was not certain and the secretary did not give evidence. Evidence was given by a beneficiary, the sole director of the Trustee as to his memory of the deed his father had caused to be settled. In 1984 the director of the Trustee had been 23 and working in his father’s business.
Her Honour noted that there was no evidence to show “how the plaintiff’s accountants undertook the task of preparing financial statements for the family trust up until the year 2017 without having in their possession a copy of the deed.” Complete sets of accounts and tax returns were not put into evidence prior to 2011 which was the year in which the Trustee first found that the deed was missing.
Efforts made to find the deed included asking current and former accountants and solicitors, banks and the State Revenue Office of Victoria. No deed was found although the Trustee had evidently obtained mortgages for purchases of real property before granting which a bank generally requires provision of a trust deed.
The Court determined the terms of the deed were not sufficiently established on the evidence provided and the Court was not satisfied all reasonable efforts had been made to locate one of the 4 deeds which the solicitor said it was his practice to provide in the 1980s.
So what should a trustee do when the deed cannot be found?
First make all reasonable efforts to find it. This includes not only contacting current and former accountants and solicitors but also financial planners, banks and title registries. Where the settlor was a family member he or she may have a copy of the deed, where a beneficiary has had a will prepared the preparer will generally ask for a copy of the deed and will retain one on file or where finance is obtained the provider will generally require a copy of the deed. Tax authorities used to request copies of deeds and although this is no longer the case with the ATO, RevenueSA certainly require copies of deeds to make determinations concerning transactions in which a trustee is involved.
Even a trustee who is certain a deed will not be found must make all reasonable efforts to find one as evidence of the enquiry is itself essential in replacing the missing document. A complete copy, particularly a signed copy, may be used as a basis for a Deed of Confirmation. Without this it is possible to prepare a deed adopting terms but this is a risk to the trustee and the preparer as the potential to accidentally resettle the original trust or for the trustee to potentially breach the original trust is high.
Finally, in South Australia one can, if the trustee holds land, for the princely sum of $22.10 register a deed under section 31 of the Registration of Deeds Act 1935 (SA) and the registrar must receive it ‘for safe and perpetual custody’.