Background
A trustee of a family trust must act strictly in accordance with the terms of the trust deed. It is therefore important that the original trust deed is kept safe. In circumstances where the trust deed cannot be located, significant complications can arise for both the trustee and the trust itself.
In the absence of the trust deed and without sufficient secondary evidence proving the essential terms, the trust could fail due to uncertainty and be unable to operate.
The recent decision of the Supreme Court of Victoria Court of Appeal in Vanta Pty Ltd v Mantovani [2023] VSCA 53 has highlighted the importance of this issue.
The Case & Judgement
The initial case1 came before the Victorian Supreme Court as a result of a disagreement between siblings – John Mantovani and his brothers Nic Mantovani and Rocky Mantovani as directors of the trustee company, Vanta Pty Ltd – following the death of their mother (Teresa Mantovani).
The trust was created on 27 July 1976 by deed, which had been lost. The only part of the trust deed that could be located was a copy of its schedule, which set out the following:
- the date of making the deed, 27 July 1976;
- the name of the trust, ‘Mantovani Family Trust’;
- the settlor, Rocco Orsida;
- the trustee, Vanta Pty Ltd;
- the settled sum, $50;
- the appointor, Teresa and on her death, whoever is named in her Will; and
- the beneficiaries (being Teresa, her children, her grandchildren).
The Court accepted that the deed was lost, and in that case needed to decide if there was enough certain evidence to rule that the trust was valid. The initial judgment by the Court held that there was not sufficient evidence of the terms of the trust and ruled that it failed for uncertainty. As a result, the assets of the trust were determined to be held as resulting trust in favour of Teresa’s estate, as she had transferred the assets from her sole name to the trust at various points during her lifetime.
On appeal2, the Court of Appeal relied on the schedule of the trust deed, financial reports and tax returns of the trust and held that they were satisfactory secondary evidence which identifies the essential terms of the trust and met the ‘three certainties’ test. As such the trust did not fail for uncertainty. However, given there was a lack of evidence as to the powers of the trustee and the vesting date, the Court of Appeal allowed the trustee to continue to operate the trust on the basis of an undertaking that the trustee would seek guidance from the Supreme Court of Victoria as to how it could manage the trust (with the further costs that would be incurred).
Key Takeaways
Although as a result of the decision of the Court of Appeal the trust remained valid and on face value is a win for the trustee, the Court of Appeal noted the following:
- the trustee, as a responsible trustee, should have possessed a copy of the trust deed;
- the trustee should have made an application to the court to seek directions as to how to continue to operate as a trust in absence of the trust deed;
- the criticisms of the trustee’s behaviour by John were mainly valid; and
- although the loss of the deed did not in and of itself mean that the trustee breached its duties, the Court of Appeal hinted that the trustee committed other breaches of trust and that John would have remedies against the trustee – ‘such as an order for the taking of accounts or an order for the removal of the trustee’.
As such, the issues that arose (and the legal costs associated) could have been avoided had the trustee ensured the original trust deed was kept in a safe place or at a minimum, retained a complete copy of which it complied with.
How we can help
Notably, issues such as this arise on the death of a key person involved in the trust or dispute as to trust distributions. It is therefore important that as soon as a trustee is aware that the original trust deed is lost, they act proactively to remedy the issue and seek appropriate guidance.
Contact us
Please contact us for more detailed and tailored help.
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1 – Mantovani v Vanta Pty Ltd (No 2) [2021] VSC 771
2 – Vanta Pty Ltd v Mantovani [2023] VSCA 53