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The recent Victorian case Mantovani v Vanta Pty Ltd (No 2) [2021] VSC 771 involved a lost discretionary trust deed. The trustee held only a copy of the Schedule to the deed. Various other secondary evidence was put before the Court to show the existence of the trust, such as accounts, tax returns and distribution schedules etc. Directors of the trustee company gave evidence that they acted in the same way as directors of a discretionary trustee company ordinarily do, by deciding how to distribute trust income each year (albeit without reference to the terms of the deed, which it was their duty to follow).
The Court nevertheless held that the trust failed for uncertainty. It ordered that:
1) All property which was considered to have been trust property was in fact held by the trustee on a resulting trust for the estate of a certain individual who had earlier transferred it to the trust; and
2) The beneficiaries who received purported distributions of income for the previous six years (the limitation period) were required to pay those amounts to the above estate.
It is possible that the case was wrongly decided, or that the plaintiff took the wrong approach to the litigation. It may have been possible to have the Court vary the terms of the trust by specifying a new set of terms for it, under its power to do so under the Trustees Act (Vic) (which has a counterpart in all States and Territories). That is a subject for another article, however, and it may or may not have been possible. Obviously there is a conceptual difficulty in amending a document when it is not known what terms the document is being amended from. It would be necessary for the amendments to have retrospective effect, and the issue would arise about whether a Court may do this under its power to vary a trust deed.
The key lessons of the case are:
1) Review your trust files and ensure that you have a copy of all trust deeds and deeds of amendment. (Of course there could be a deed of amendment that you have never been given that you know nothing about, and there is little you can do about that. If, however, there is correspondence indicating that a deed of amendment was made, ensure that you have a copy.)
2) Where complete trust documentation cannot be found, take legal advice on how to deal with trust assets and income going forward. An adviser who is involved in a trustee making a distribution under a purported trust, which a court subsequently declares to be invalid due to a missing deed, may be jointly liable to the party to whom the assets and income are ultimately determined to belong.
3) Where the trust deed is lost, collate as much secondary evidence to support its existence and terms as possible. It may be possible to establish what the terms of the trust deed were if the trust was ordered from a deed provider, if it can be established what their standard discretionary trust terms were at that time, say from other trusts which you may have established contemporaneously. In any event, take legal advice on whether the Court may make an order varying the terms of the trust, by substituting specific provisions for those of the missing deed, with retrospective effect if required.
