Lost the Trust Deed — Now What? Options and Courtroom Lessons

Trust deeds go missing more often than most people think. A deed is misplaced, an adviser’s office closes, a family member dies and papers are lost, and suddenly, the deed that supports the entire trust arrangement is nowhere to be found.

The consequences can be severe. Without the original deed, a trustee may be unable to open a bank account, obtain finance, deal with a land titles registry, prepare annual distribution minutes for tax purposes, or carry on a business through a complex trust structure.

It is important to understand that a trust does not cease to exist simply because its deed has been misplaced. The trust relationship continues for as long as a trustee holds trust property on behalf of beneficiaries. However, trustees have a fundamental duty to act strictly in accordance with the terms of the trust deed. If the deed is lost, the trustee cannot know what it requires and can’t be sure that it is properly discharging its duties.

This article draws on Australian case law to explore what happens when a trust deed is lost and what options are available to trustees, beneficiaries, and their advisers.

The Mantovani Saga: A Cautionary Tale

Please read our previous article The case of the lost trust deed - Mantovani v Vanta Pty Ltd (No 2) (Mantovani v Vanta Pty Ltd (No 2)) which confirms the serious consequences of a lost trust deed.

The matter of Mantovani v Vanta Pty Ltd (No 2) concerned a discretionary family trust established in 1976, settled by Mr Mantovani and administered by Vanta Pty Ltd as trustee. Over time, control of the trustee passed between members of the Mantovani family. Following the deaths of Mr and Mrs Mantovani and ensuing family disputes, extensive searches were undertaken and it was agreed that the original trust deed could not be located, leaving only a limited trust schedule and various tax and financial records evidencing the trust’s existence and administration.

The Court held that where a trust deed is lost and its contents cannot be established by clear and convincing secondary evidence, the trust will fail for uncertainty. In those circumstances, an automatic resulting trust arises, with the trustee holding the trust property for the settlor (or, on the facts, the person who contributed the trust property).

The original decision reinforced trustees’ positive duty to take action if a trust deed is lost and warns that continuing to administer a trust without knowing its terms may expose trustees to breaches of duty and orders to account for improperly made distributions.

The appeal: trust survives, but questions remain

This decision was appealed to the Victorian Supreme Court of Appeal, who disagreed that the trust had failed for uncertainty and found the trust still existed. This meant that the trust property continued to be held by the trustee for the beneficiaries of the trust, and did not form part of the late mother’s estate.

The Court of Appeal did acknowledge that there remained a lack of evidence as to the trustee's powers and the vesting date. So, the Court of Appeal allowed the appeal on various conditions which required the trustee to seek further court guidance regarding the effective administration of the trust.

The costs judgment provides a powerful example of the financial risks relating to trust disputes of this kind. The court ordered that the costs of all parties (including the sibling who initiated the original claim) be paid out of the trust.

The practical lesson is clear: years of litigation and substantial legal costs being borne by the trust eroded the very assets the family was disputing, an outcome that could have been avoided through reasonable trust management, including retaining a copy of the trust deed.

Lessons From Other Australian Cases

A number of other Australian cases illustrate various outcomes when trust deeds are lost, and Courts have:

• confirmed that it is very difficult for a trustee to discharge their duty to know and manage the trust when they do not have a copy of the governing rules;[1]
• ordered that insufficient enquiries had been undertaken, directing trustees to carry out additional searches and file further evidence;[2]
• ordered a trust to be administered on the basis of a copy of the deed, where the original cannot be located;[3]
• given judicial advice pursuant to the relevant ‘Trust Act’ that a trustee was justified in administering a trust substantially in accordance with the terms of another trust said to ‘mirror’ the missing deed, where secondary evidence of the trust's terms met the applicable standard;[4]
• considered the subsequent conduct of parties, including their dealings with their bank and the ATO, to conclude that the fund must have been correctly established even though a true signed copy of the deed was unavailable.[5]

These cases collectively demonstrate that outcomes in relation to trust deeds are highly fact-specific. The quality and extent of available secondary evidence, the adequacy of the trustee's searches, and the conduct of the parties all play an important role.

Practical Options When a Trust Deed Is Lost

If you are a trustee or adviser faced with a missing trust deed, the starting point is always a thorough search. That means approaching all possible third parties such as current and past trustees, beneficiaries, and the estates of any deceased parties who may have held a copy.

If these initial enquiries yield no results, the search should be widened to accountants, lawyers, financial advisers, business partners, and banks who may have come into contact with the trust over the years. If the trust holds real property, the land titles registry in the relevant state or territory may have a record of the deed on title.

[Important Disclaimer: Cleardocs and Maddocks do not retain executed copies of trust deeds ordered through Cleardocs. Cleardocs may be able to provide a copy of the deed as it appeared when ordered. Enquiries should be directed to Cleardocs or the person who arranged the original order.]

If the deed truly cannot be found, the following options are available:

• Confirmation deed - In many cases, a deed where the key parties confirm that a signed or unsigned copy reflects the trust’s true terms will be sufficient to satisfy the requirements of banks and other institutions without the need for court proceedings.
• Replacement deed - The trustee may consider replacing the trust deed altogether. However, a replacement deed may, depending on the relevant circumstances, be treated as a resettlement of the trust, potentially triggering capital gains tax and stamp duty consequences.
• Court application for reconstruction - The trustee may apply to the Supreme Court in the relevant jurisdiction to have the deed reconstructed. This is an expensive option that requires giving evidence to the court about the deed’s terms.
• Administration under the relevant ‘Trust’ or ‘Trustee’ Act - If the trust is not complex, it may be possible to continue administering it in accordance with the general provisions of the relevant state or territory legislation.

It is worth noting issues regarding tax. Even where a deed of variation or confirmation is used, revenue authorities (or financiers) such as the ATO may not necessarily accept the reconstituted terms at face value. Courts have determined that a trust may be taxed on the basis of its actual activities rather than on the basis of the rights and obligations under the new or confirmed terms. Accordingly, our view is that parties who are seeking to replace a lost trust deed should always obtain tax and/or legal advice first.

Checklist

The following checklist consolidates the key action points for practitioners and trustees:

1. Search comprehensively: Approach all current and former trustees, beneficiaries, estates of deceased parties, the drafting solicitor, accountants, financial advisers, banks, and the relevant land titles registry.
2. Document your searches: Courts will scrutinise whether reasonable efforts have been made to locate the deed.
3. Collate all available secondary evidence: Collect photocopies, schedules, financial records, tax returns, solicitors' files, and any correspondence referencing the trust's terms.
4. Assess the trust's complexity: A simple trust may be capable of administration under the relevant Trust or Trustee Act but a more complex trust is likely to require court intervention.
5. Consider a confirmation deed: Where a signed or unsigned copy is available and the key parties agree, a confirmation deed may be the simplest and most cost-effective path.
6. Be alive to resettlement risk: Replacing a deed entirely may constitute a resettlement, with CGT and stamp duty consequences.
7. Seek judicial advice promptly: If there is any doubt or dispute, do not delay in bringing the matter before the court. The trustee bears the onus of doing so.
8. Cease distributions if the deed cannot be located: Continuing to distribute without authority risks personal liability and an order for the taking of accounts.
9. Scan all trust deeds as a preventative measure: Electronic copies are invaluable insurance against future loss.
10. Be mindful of tax implications: The ATO may not accept reconstituted terms at face value, and a trust may be taxed on the basis of its actual activities.

This article is intended as general guidance only and does not constitute legal advice. Specific advice should be sought in relation to any particular trust.

What are the Cleardocs products available?

Cleardocs offer the following relevant products:

• Trusts Documents

More Cleardocs information on related topics

• The case of the lost trust deed - Mantovani v Vanta Pty Ltd (No 2)
• Trust Issues: Learning to Read the Green, Red (and Beige) Flag

Please read the Product Benefits, Product Information and Frequently Asked Legal Questions carefully and consider if it is appropriate in your circumstances before purchasing any Cleardocs product.

[1] Jowill Nominees Pty Ltd v Cooper [2021] SASC 76.

[2] Re Barry McMahon Nominees Pty Ltd [2021] VSC 351.

[3] The Application of M & L Richardson Pty Ltd [2021] NSWSC 105.

[4] Barp Nominees Pty Ltd [2016] NSWSC 990.

[5] Sutherland v Woods [2011] NSWSC 13.