Lost Trust Deed? Why a Photocopy May Not Be Enough
Many family and discretionary trusts have been in existence for decades. It is therefore not unusual for trustees, accountants or advisers to discover that the original trust deed has disappeared and that only a photocopy or scanned version can be found.
This issue often arises at the worst possible time, such as during a property sale, refinancing, succession planning exercise or business restructure. Faced with a copy deed, trustees frequently ask whether they can simply continue to operate the trust as they always have.
The answer is: proceed with caution.
Does the Trust Fail Because the Original Deed Is Missing?
Not necessarily.
The loss of an original trust deed does not automatically mean that the trust ceases to exist. If the trust was validly established and there is reliable evidence of its historical operation, the trust itself may continue notwithstanding the loss of the original document.
However, the real issue is not whether the trust exists. The issue is whether the trustee can prove the terms upon which the trust is administered.
The Problem with Relying on a Copy
A photocopy is only secondary evidence of the original document.
Even where a copy appears complete, it may be difficult to establish:
- that the deed was properly executed;
- that all schedules and annexures were attached to the original;
- that the copy is an exact reproduction of the original document;
- that no subsequent amendments have been made; and
- that the copy being relied upon is the operative trust deed.
These concerns are no longer merely academic. Banks, auditors, revenue authorities and professional advisers are increasingly scrutinising trust documentation, particularly where substantial assets are involved.
Should Trustees Simply Sign a Confirmation Deed?
In our experience, trustees should be wary of rushing to prepare a deed of confirmation, restatement or replacement.
While such documents may appear to offer a practical solution, they can create unintended consequences. If not carefully drafted, a document intended merely to confirm existing trust terms may be regarded as varying the trust itself.
Depending upon the circumstances, this may raise trust law, taxation and duty issues that could ultimately create more problems than it solves.
Every situation needs to be assessed on its own facts.
When Is Court Involvement Appropriate?
Where the original trust deed has been lost and only a copy remains, court involvement should be considered whenever there is uncertainty regarding the terms of the trust or a significant transaction is proposed.
This may include circumstances involving:
- substantial trust assets;
- trustee succession arrangements;
- amendments to trust provisions;
- estate planning strategies;
- business restructures;
- financing transactions; or
- trust winding-up arrangements.
The Supreme Court has jurisdiction to provide directions to trustees and make declarations concerning the existence and terms of a trust where uncertainty exists.
In some cases, obtaining judicial confirmation of the trust terms may provide a far more secure foundation than relying indefinitely upon an unauthenticated copy deed.
What Evidence Will Be Important?
If court assistance becomes necessary, the trustee will generally need to assemble as much evidence as possible regarding the trust's establishment and administration.
Relevant material may include:
- copies of the trust deed;
- deeds of variation;
- income tax returns;
- financial statements;
- trustee resolutions;
- accounting records;
- bank documentation;
- correspondence from solicitors and accountants; and
- evidence from persons involved in establishing or administering the trust.
The objective is to establish, on the balance of probabilities, what the original trust deed contained and whether the copy accurately reflects those terms.
Prevention Is Better Than Cure
The best way to deal with a lost trust deed is to avoid losing it in the first place.
Trustees should ensure that original trust deeds, deeds of variation and trustee appointment documents are stored securely and that high-quality electronic copies are maintained. A complete trust document register can save considerable time, cost and uncertainty in the future.
Final Thoughts
The existence of a photocopy trust deed should not automatically be treated as a complete solution to a missing original. While a copy may provide valuable evidence of the trust's terms, significant legal and evidentiary issues can remain.
Before undertaking any major transaction involving a trust where the original deed has been lost, trustees should obtain legal advice. In appropriate cases, the prudent course may be to seek the assistance of the Supreme Court to confirm the trust's terms and protect the trustee from future challenge.
This article is general information only and does not constitute legal advice. Specific advice should be obtained having regard to the terms of the trust deed, the available evidence and the circumstances of the particular trust.