Lost Self-Managed Superannuation Fund (SMSF) Deed

Introduction

Losing a SMSF deed can create significant difficulties for clients and their advisors.

Banks and other third parties will often require certified copies of the original SMSF deed in order to carry out basic functions, such as opening bank accounts or providing loans.

Therefore, even if the physical and/or electronic copies of the signed original are available, these may not suffice if the original SMSF deed is in fact lost. 

What can you do if the original SMSF deed is lost but there are copies of the signed original?

The safest way to proceed in these circumstances is to approach the court for advice under the various State/Territory Trustees legislation. For example, under section 63 of the Trustees Act 1925 (NSW), a Trustee may apply to the court for an opinion, advice or direction on any question regarding the management or administration of the SMSF property, or the interpretation of the SMSF instrument. 

In Sutton v NRS(J) Pty Ltd [2020] NSWSC 826 (Sutton), the original signed deed for a Discretionary Trust had been lost and the relevant parties instead operated on the basis of a signed copy of the original Trust deed. Several banks that had been used by the Trust asked to sight the original signed deed. As Mr. Sutton/his advisors were unable to produce the original deed, one of the Trust's bank accounts was rendered frozen. 

In their search for the original Trust deed, Mr. Sutton's solicitor made inquiries to the law firm that had prepared the Trust deed. Among a packet of documents, a photocopy of the Trust deed (which was identical to the copy held by Mr. Sutton/relevant parties) was discovered. 

Whilst the Court declined the declaratory relief sought by Mr. Sutton, it provided advice pursuant to its power under s 63 of the Trustee Act 1925 (NSW) and held that the Trustees of the Trust were justified in administering the Trust on the basis that the copy of the signed Trust deed was a true copy of the original Trust deed. In this case, the evidence established directly that the parties to the Trust had always acted on the basis that it sets out the terms of the Presumed Trust and, on the balance of probabilities, made it overwhelmingly likely that the photocopy was indeed a copy of the lost original.

Sutton highlights the significance of retaining original signed copies of the Trust deed. It also exemplifies a situation where judicial advice should be sought as an alternative to declaratory relief (i.e. where the uncertainty relates more to a question of fact rather than a question of law, and where all interested parties are not able to be present in the proceedings). Although this case directly related to Discretionary Trusts, it is also relevant for SMSFs because an SMSF is essentially another type of Trust! 

What can you do if the original SMSF deed is lost and there are no copies of the signed original? 

Despite living in a digital age, it is a surprisingly common situation where, not only the original SMSF deed is lost, but also copies of the signed original deed cannot be located. In these circumstances, approaching the Court remains the most appropriate and prudent avenue for assistance. 

The leading case for the situation where a Trust deed had been lost, and secondary evidence was being relied upon to prove its existence, was Maks v Maks (1986). The Court held that, in such circumstances, there must be clear and reliable evidence not only of the existence of the Trust, but also of its terms. In that case, the schedule of the Trust deed, despite providing some basic information on the Trust, failed to satisfy this. 

From a Trust law perspective, it may seem unnecessary to apply to the Court for adopting a new Trust deed if all potential beneficiaries consent to it. However, Kafataris v DCT [2008] highlights that care must be taken if going down this route - in that case, despite the Trust having a seemingly narrow pool of potential "beneficiaries", it turned out that the sole Member SMSF had a potential class of 21 beneficiaries!

Are there any alternatives to approaching the Court?

Whilst it is possible to have a Deed of Restatement produced (also known as a Deed of Acknowledgment or Deed of Confirmation), particularly where you have copies of the original signed SMSF deed, this carries a great risk of potentially triggering tax and/or duty issues by triggering resettlement. This risk is amplified where a Trustee has no documentation at all and is, essentially, not in a position to confirm the Deed of Restatement is the same or substantially the same as the original deed.

In saying this, however, a potential solution was provided in Re Bowmil Nominees Pty Ltd [2004] - the Court's decision suggests that if all the Members and beneficiaries of the SMSF are adults of sound mind then, irrespective of what the existing or lost deed requires, they may effectively execute a deed varying the rules of the SMSF. However, care must be taken before relying on this decision. This decision applies specifically to the circumstances of that case and, furthermore, the pool of potential "beneficiaries" can be unexpectedly vast.  

Conclusion 

In relation to lost SMSF deeds, prevention is better than a cure - clients should be made aware to:

(a) safely retain signed original(s); and

(b) make multiple copies (physical and/or digital).

Of course, the practical reality is some SMSF deeds will be lost or onboarding clients may have already lost their SMSF deed. In these circumstances, both clients and practitioners should carefully assess the information and evidence they have on hand as to the terms of the original SMSF deed and proceed accordingly. 

So, how can NowInfinity help you?

Every circumstance is unique and the above article is for legal information purposes only.

We suggest you seek legal advice in matters relating to a lost Trust deed. If you would like to be referred to our Legal Service Providers providers, you can email us via legal@nowinfinity.com.au and a solicitor can provide you with advice as to your options along with a quote for drafting any required documents.