Reminder to read the deed

A recent Queensland case has provided a timely reminder about the importance of reading the trust deed — and satisfying its requirements — before taking any action under it. While the Supreme Court of Queensland in Perry v Nicholson^[1] found that the documents prepared by advisers were compliant, it was a close call.

Jessica Leppert, Maddocks Lawyers

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Facts

A Self-Managed Superannuation Fund (the Fund) was established in 2009 with the original trustees being Colin (the Deceased) and his daughter (the Daughter). In 2015, the Deceased arranged for his accountants to prepare various documents to remove his Daughter as trustee and replace her with his new de facto spouse (the New Spouse).

The documents prepared were:

• minutes of meeting of the trustees of the Fund, which were signed by all parties (Minutes);
• a confirmation of resignation as trustee, signed by the Daughter;
• application to become a member signed by the New Spouse;
• a consent to appointment as trustee, signed by the New Spouse.

The Daughter argued that these documents did not comply with the trust deed and that her removal, and the New Spouse's appointment, were invalid.

In particular, she based this on a clause in the trust deed which required the removal or appointment of trustees to be in writing and that the other trustee be immediately advised (the Relevant Clause).

Findings

The Court held that both the Daughter's removal as trustee and the New Spouse's appointment complied with the Relevant Clause as:

• the Minutes, which effected the removal and appointment, were in writing; and
• the parties were notified of the removal and appointment as evidenced by their signatures on the Minutes.

While the Court noted that the Minutes did not record the Fund's acceptance of the Daughter's resignation, this did not prove fatal.

Implications

This case serves as a timely reminder to trustees and advisers about the importance of reading the SMSF trust deed as a whole and ensuring you follow the provisions of the trust deed when taking certain action under it, such as replacing or appointing a trustee.

For example, the Cleardocs SMSF trust deed states generally that:

• (as was the case in Perry v Nicholson) appointment and removal needs to be in writing and the parties notified;
• an appointment must be effected by deed.

The deed in Perry v Nicholson, on the facts, bears some similarities to the Cleardocs deed. However the deed in that case seems not to have required an appointment to be made by deed. If it had contained such a requirement, then it is very difficult to see how the Court would have seen past that requirement for a deed: the Minutes would not have been sufficient.

Even without such a requirement, the parties' reliance on informal documents to effect the change of trustee caused considerable headaches (and cost) for all involved.

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Commercial team.

More Cleardocs information on related topics

You can read earlier ClearLaw articles on a range of topics, such as:

• The reality of ageing SMSF trustees: death of an SMSF trustee
• What does it take to be removed as a SMSF trustee? Views from the NSW Supreme Court
• Corporate Trustee v Individual Trustee: Key Differences for SMSFs

Order related document packages

• Superannuation Trust (SMSF)
• SMSF set up + register Corporate Trustee
• Change SMSF Trustee (Cleardocs deed)
• Change SMSF Trustee (death of a trustee)