The case of Re Narumon Pty Ltd examines a number of important SMSF issues including defects in a chain of SMSF trust deeds, proving whether a pension and a reversionary nomination exists without original pension documents and whether a binding death benefit nomination (BDBN) can be renewed or made by an attorney. This snippet looks at the issue relating to defects in a chain of SMSF trust deeds.
The SMSF trust deed in question, like many SMSFs had been varied by a number of deeds of variation and changes of trustee over the years. One of the deeds of variation executed in 2007 was executed by the sole member/director as an individual on behalf of the corporate trustee as its “authorised representative”. The signatory was not stated to be in the director’s capacity as a director. The Court found that the execution of the deed and consequently the 2007 deed was defective and the terms of the 2007 deed were not adopted as the terms of the SMSF. Therefore, at that time the trust deed of the SMSF continued to be governed by the most recent deed (in 2004).
In 2014 a deed of ratification and variation was prepared which purported to ratify the 2007 deed of variation and amend the provisions of the SMSF trust under the 2007 provisions. The Court found that the ratification of the 2007 deed was not effective (although the Court did not explain why) and that therefore the variation of the SMSF trust deed using the 2007 provisions was not valid. However, the Court found that the variation under the 2014 deed of ratification and variation was effective under the 2004 provisions (notwithstanding the recitals of the 2014 deed referred to the 2007 provisions).
This an important reminder that, when amending an SMSF trust deed that it is important to review the chain of SMSF deeds. Although the variation might be effective under the latest version of the deed, if prior deeds are defective then the latest deed could also be defective. The chain of deeds should also be reviewed when other important trustee actions are implemented (for example changes of trustees or when making binding death benefit nominations). As the saying goes a chain is only as strong as its weakest link.
To discuss this further or for more information please contact:
Phil Broderick
Principal
Sladen Legal
T +61 3 9611 0163 l M +61 419 512 801
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: pbroderick@sladen.com.au
Ashleigh Eynaud
Associate
Sladen Legal
T +61 3 9611 0129
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: aeynaud@sladen.com.au
