In the decision of Application by Gainer Associates Pty Ltd [2024] NSWSC 1437, the Court found that, due to the lost trust deed for the Werner Thelen Family Trust (Trust), the corporate trustee of the Trust (Gainer Associates Pty Ltd – referred to as Gainer) would hold the assets purportedly held for the Trust on resulting trust for the sole beneficiary the late Werner Thelen (Werner), husband of the late Gail Thelen (Gail).

The assets would form part of the estate of Werner rather than be held in the Trust, which was found to have failed the certainty of objects test for the existence of a trust.

Sequel to the SMSF case

This is the second time in recent times that Gainer related questions have been brought to the Court. The first one related to an SMSF. See our articles on that decision - Part 1, Part 2, Part 3, Part 4, Part 5 and Part 6.

Circumstances of the lost trust deed

The only evidence of establishment of the Trust was secondary from a fixed and floating charge in favour of the Bank of Western Australia by Gainer “in its own capacity and as trustee of the Werner Thelen Family Trust”. The information in that charge document included a date of establishment of the Trust of 1 April 1982 and the parties to the Trust being Gainer as trustee and Werner’s assistant Narelle Margaret Mayes (Narelle) as settlor.

Narelle could not recall signing a trust deed or providing a settled sum, only signing documents as a witness for Werner.

The assets of the Trust under the most recent financial statements for the Trust (at 30 June 2024) recorded a net value of the Trust of $2.8 million, being a service station at Beenleigh in Queensland and cash in a bank account.

Mr Heesh (the step-in director of Gainer) made numerous searches and inquiries which have been made (which the Court found were more than adequate) to find out any terms of the Trust or the location of its trust deed to no avail.

Conclusion 1 – Court finds Trust failed certainty of objects (beneficiaries)

Because the trust deed could not be located and there was no other evidence as to its terms, the beneficiaries class could not be identified and the therefore the Court found the Trust failed for want of certainty of objects.

On the failure of the Trust, the Court determined its assets were held to be held on resulting trust in favour of Werner’s estate, stating at paragraph 23:

[23] As Sir John Stuart V-C said in Clarke v Hilton (1866) LR 2 Eq 810 at 815 in relation to failed trusts, “Where, however, an estate is given to a man in the character of a trustee, without anything to indicate that a beneficial interest is intended, then there is a resulting trust”.

Because Gail was the sole beneficiary of Werner’s estate, the assets of the Trust were to be be paid directly into Gail’s estate.

Conclusion 2 – Court finds that resulting trust is for Werner alone

Counsel for the plaintiff submitted the Court should comfortably conclude that what was recorded in the fixed and floating charge was a mistake, most likely someone recording Narelle as a party when she was no more than a witness for Werner’s signature.

Alternatively, if Narelle was the settlor of the Trust, because her position was merely secretarial the Court should conclude that Werner provided the settled property and that he did not intend to divest himself of any rights he had in that property to Narelle.

The Court preferred the evidence in the fixed and floating charge to Narelle’s lack of recollection of the trust deed of the Trust and upheld the alternative position above stating at paragraph 28:

[28] […] [T]he Court also finds that [Narelle] was the settlor in name only, with any initial settled property provided to her by Werner (for example, the generally nominal amount paid to the trustee as the initial corpus of the trust). This finding is based on the Court’s experience with family trust deeds and common knowledge to the effect that it is not unusual for the named settlor to be someone such as the family solicitor or accountant, or a secretary or clerk in the employ of such a person. Whatever their position, there could be no doubt that they were never intended [for Narelle] to have any beneficial interest in the relevant trust.

Take away point

This case shows the importance of retaining the trust deed of trusts (or at least copies of them). In the absence of a trust deed, as this case shows, the trust may fail with adverse consequences to the beneficiaries and the potential trigger of tax or duty.

Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au

Terence Wong
Senior Associate
T +61 3 9611 0112 l M +61 0458 846 022
E twong@sladen.com.au