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Lost trust deeds – a forgotten saviour?

August 20th, 2019

Lost, destroyed or missing trust deeds can sometimes lead to tears, misery and heart attacks.  But is the situation as dire as it seems if a document, crucial to organising your financial affairs, disappears?

Maybe it is the advent of trusts as a useful financial planning structure, or the rise of the self‑managed super fund (“SMSF”) (read our previous article on self-managed super funds here), but in recent times, well recent for the law, there have been a number of cases which are resurrecting a seemingly forgotten principle of law, the presumption of regularity.

The presumption of regularity is that deeds and other documents will be presumed to have been validly executed and made, unless there is some contrary evidence.  The cases below illustrate the point, and highlight that the presumption is only applied in very limited circumstances, often where there is a substantial lack of evidence.

Sutherland v Woods[1]

In Sutherland v Woods there was a question as to whether a SMSF had been validly established.  The trust deed could not be located, and because there was no deed, Woods claimed that it was not a valid SMSF.

Sutherland sought to rely upon the presumption of regularity and contended that despite the absence of the deed, the fund was valid.  The subsequent conduct of the parties, including their bank and the ATO, led to the conclusion that the SMSF must have been correctly established, even if the deed was now missing.

Importantly, the parties did all they could to locate a signed copy of the original deed, contacting Westpac, the ATO and titles office to see if any of those entities held a signed copy.  These enquiries were unsuccessful, and the parties were forced to rely upon an unsigned copy of the alleged deed.

The court ultimately agreed with Sutherland, and held that although a true signed copy of the deed was unavailable, that did not prevent the inference that the trust had been validly created.

The missing deed would have been conclusive evidence that the SMSF was established correctly.  In absence of the deed, Sutherland was instead required to prove the validity of the SMSF through other means, such as subsequent dealings.

It was apparent that through the actions of the parties, and third parties, relying upon the existence of the deed, the trust had always been intended as a superannuation fund and had been validly created as such.

The absence of the missing document did not invalidate the fund, and indeed the evidence in the circumstances led to the presumption that the establishing deed must have existed at some point.

Re Thomson[2]

In Re Thomson, the deed establishing the trust was not an issue.  Instead, there were two subsequent amending deeds, one was missing and the other unsigned.

The first deed, which was missing entirely, purported to remove two of the original trustees.  The second deed, which was unsigned, referred to the first deed and amended the trust so that if both of the remaining trustees were to pass away, the trust would vest in the estate of whomever survived the longest.

The dispute arose around the validity of the two amending deeds. If they were not valid, then the two trustees who were allegedly removed would be entitled to the property of the trust.  If both were valid, then the trust would vest in the estate of Thomson.

Such matters around the validity of documents when it comes to the administration of an estate are not uncommon, and is the context in which the presumption is commonly applied.

In determining the validity of the irregular deeds, the court again looked at similar factors as in Sutherland.

In particular, the court relied on the fact that since the removal of the trustees, only the two remaining trustees had been signing off on the trust’s financial reports, indicating that the deed existed, and the parties had been acting as if it were the true state of affairs.

The court found that the two irregular deeds could be presumed to be regular because the evidence indicated that was probably the correct and true situation.  The executor was therefore entitled to include the trust property in the deceased’s estate.

So what is the presumption?

So now that we have reviewed a couple of examples of the presumption, when should you be considering relying upon it?

The presumption will only apply in limited circumstances, it should not be considered a cure-all for any trust problems you have.

The courts have held that before applying the presumption:

  1. a considerable amount of time must have passed since the event happened;
  2. there is no other way to prove the existence or validity of the missing deed;
  3. there is some other extrinsic evidence indicating the deed, or missing instrument was valid and people have since acted as if it were valid; and
  4. the presumption must only be applied to a procedural or formal detail.

Point 3 above is clearly identified in the two cases.  The evidence from the bank, the ATO, and financial reports all indicated the legitimacy of the actions being undertaken, even where the deed was not located.

The presumption should not be thought of as applying in all situations, indeed, its limited application throughout the last 50 years suggests it should only be thought of as a last resort.

In many circumstances, simply claiming the deed is lost, without exhausting all possibilities will not be enough.

Before relying on the presumption, consideration should be given to some of the following alternatives:

  1. preparing a deed of rectification;
  2. relying on the trustee powers in the Trusts Act;
  3. for a SMSF, where practicable, rolling the assets over to another SMSF which does not have any issues with documentation; and
  4. last but certainly not least, no effort should be spared in locating the original deed.

Of course, these options are not always available, some may rely on the original trustees still being available, or simply be inapplicable in the circumstances.

Lost or irregular trust documents often have circumstances unique to each case.  For that reason, when irregularities are detected, efforts should immediately be made to correct them.

In most cases involving the presumption, it is not raised until there is a crisis, for example the breakdown of a marriage or the administration of a deceased estate.  By taking proactive steps, most of these situations, and possibly expensive litigation, can be avoided.

The experienced team at Miller Harris can help you, or your clients in dealing with lost or irregular deeds.  Many situations will require a bespoke solution, and our experience across many areas of the law enable us to come up with the right solution to your problem.

Should you have any questions or enquiries, please do not hesitate to contact Ashley Jan on 07 4036 9700, or ashleyjan@millerharris.com.au.

[1] Sutherland v Woods [2011] NSWSC 13 ( http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/nsw/NSWSC/2011/13.html ).

[2] Re Thomson [2015] VSC 370. ( http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/vic/VSC/2015/370.html )

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Rotary FNQ Field Days Update

May 24th, 2019

The largest field days in Northern Australia returns this year to the Mareeba Rodeo Grounds on 29, 30 and 31 May.

The Rotary FNQ Field Days is a biennial event running since the mid 1980’s and delivering the largest community event on the Tablelands.

A combined event of the Rotary Clubs of Atherton and Mareeba, the event raises funds for charities and local community organisations.

With a focus on Farm Safety, Innovation and Mental Wellness, not to mention the tractor pull, the event is not to be missed.

Be sure to visit the friendly team from Miller Harris Lawyers at the event, or drop into our new Mareeba branch in the meantime.

We look forward to seeing you there!

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The Great Wheelbarrow Race

May 13th, 2019

The annual Mareeba-Chillagoe Wheelbarrow Race is on this weekend.

Each year, competitors gather to run the 140 km along the Wheelbarrow Way from Mareeba through to Chillagoe, and this weekend will be no different.

Starting on Friday 17 May 2019 in Mareeba, individuals and teams in 12 different categories will set off on their journey with wheelbarrows in tow.

Last year, “The Fit Bucks” set the fastest ever time for the race at a cracking pace of 6 hours, 6 minutes and 12 seconds, which will set a tough challenge for competitors this year.

If you are looking to see the action, the event starts Mareeba with a parade down Byrnes Street, directly past the new Mareeba office of Miller Harris Lawyers.

The parade then proceeds to Vaughan Street, with the main event starting at 9.30 am.

If you are in the area, be sure to get along and support this unique and incredible local event.

Additional information can be found on the official website.

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A gift for consumers in time for Christmas

October 23rd, 2018

In a win for consumers, the Commonwealth government passed legislation on Thursday providing for greater consumer protections in relation to gift cards.  It is expected this legislation will come into force on 1 November 2019.

The new laws provide that gift cards will now be required to have a minimum expiry period of three years and also ban most ‘post-supply’ fees for gift cards and vouchers.

What is a gift card?

While many of us would expect that laws on gift cards will only impact big business, the definition used in the legislation potentially creates a much broader application.

A gift card is defined to mean ‘an article that is commonly known to be a gift card or gift voucher, whether in physical or electronic form and is redeemable for goods or services.’

While this definition is quite broad and uncertain, future clarification is expected to be provided through regulations.* In the meantime, parliament has provided the following comments in relation to interpreting gift card:

“Gift cards may be redeemable in a single store or across multiple different businesses. They are generally defined with reference to a dollar amount or as being redeemable for a specific good or service and cannot have additional value added to them after they have been supplied. Gift cards are also generally not redeemable for cash beyond a minimal amount in change.”

As these provisions have a broad application, you should consider carefully whether they apply to you or your business.  It is not necessary for a card to be purchased and given to someone else – a card used by the purchaser can still be a gift card.   It is possible that ‘gift card or voucher’ will apply to most pre-paid services such as pre‑purchased passes for entry to a venue, or provision of services such as classes at a gym.

The new laws

The most significant change is that gift cards must now have a minimum expiry period of three years.

The expiry information must be prominently displayed on the card itself.  This can be either the expiry date itself, or the supply date and a statement about the period of validity.  Even where a gift card has no expiry date, this must be displayed on the card or voucher.

The new laws additionally prohibit charging of certain fees after the card is supplied.  Again this provision is drafted broadly and currently forbids all post-supply fees except those prescribed by the regulations.

The draft regulations currently allow the following fees or charges:

  1. for making a booking;
  2. for disputing a transaction;
  3. for exchanging currencies;
  4. for replacing a stolen, lost or damaged card; and
  5. payment surcharges.

While this is only a draft list, it seems parliament only intends to allow administrative fees. Monthly fees or other fees that are deducted automatically without explicit communication of the request or demand are prohibited.

Final thoughts

Business owners will not know exactly what they need to do to prepare for these new laws until the regulations are finalised and registered, which should be prior to 1 November 2019.  However, it will be worthwhile considering how this requirement might potentially change you business and what administrative changes might be required, so that you are ready to comply once the laws come into force.  In many instances the changes required for businesses may be minor.  The new laws will apply to all gift cards issues on or after 1 November 2019.

A failure to comply with these new laws carries significant financial penalties.  In the case of a corporation it could be up to $30,000, while individuals face penalties of up to $6,000.

If you have any doubt about your compliance obligations, or whether these new laws will apply to you, please do not hesitate to contact our commercial team on 07 4036 9700.

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