The original beneficiaries were omitted in the confirmation deed after the original was lost
The NSW Supreme Court has recently allowed the rectification of a trust deed to reflect the original beneficiaries named in a deed created 26 years earlier.
In 1989, Nicolas Ristevski set up a discretionary trust for his and the benefit of his two daughters, Natasha Mladenovk and Tatjana Tanevski. He appointed his accountant, Keith Doust, as settlor and trustee. The 1989 Deed of Settlement identified the trust beneficiaries as Ristevski, his two daughters, and no other persons.
The trust had an initial fund of $10 settled on the trustee, which was eventually augmented through acquisitions of investment property and business assets. Since 1989, the trust has put in income tax returns, conducted bank accounts, borrowed money, transacted, acquired assets, and conducted businesses.
Ristevski believed that the original of the 1989 deed had been kept with the Marrickville branch of the ANZ bank. The branch eventually closed. In 2010, Ristevski asked the ANZ bank for the 1989 deed, but the bank replied that it could not locate the original or a copy. Between 2012 and 2015, Ristevski searched for the original of the 1989 deed at his own home, and he inquired with the family of his accountant, who died in 2006. However, he did not find the 1989 deed.
The trust continued to do business but needed a trust deed to prove its constitution to lenders and government authorities. In 2015, Ritevski attempted to replace the 1989 deed with his new accountant, Llyod Agha. They instructed Hunt & Hunt solicitors to prepare a new deed executed in February 2015. The new deed described itself as a "confirmation deed." It recited that the trust had been created by the execution of an original trust deed, and the original trust deed had been misplaced.
However, the 2015 deed was constructed on the incorrect basis that the original beneficiaries of the trust named in the 1989 deed were Ristevski and his wife, Marka. In 2020, Ristevski found an incomplete copy of the 1989 deed at the family home. The unfinished 2020 copy deed correctly showed the beneficiaries of the trust created in the 1989 deed were Ristevski and his two daughters.
The trustee brought the matter to NSW Supreme Court, seeking an order to rectify the 2015 deed and judicial advice under the Trustee Act 1925 that the trustee would be justified in treating the rectified 2015 deed as the operative deed in the trust administration.
The court accepted the 2020 document as an authentic but incomplete copy of the 1989 deed. The court used the 2020 document to infer the essential elements of the 1989 deed and to determine whether the 2015 deed is an accurate rendering of the 1989 deed. The 2020 document shows the original beneficiaries under the 1989 deed were Ristevski and his daughters. The court inferred that when Ristevski was instructing Hunt & Hunt solicitors for the 2015 deed, he must have mistakenly thought the trust beneficiaries were himself and his wife.
The court noted that the clear intention behind the 2015 deed was to reproduce the essential trustee-beneficiary structure of the 1989 deed. Still, the parties miscarried that objective because of the gaps in Ristevski's memory of the deed. The court pointed out that Ristevski made the 1989 deed 26 years earlier, and no other copies of the original were available.
The court explained that to grant the remedy of rectification, the plaintiff must necessarily establish that the parties to the deed had a common intention that continued up to the time of execution of the instrument, but the executed document failed to reflect that common intention.
The court noted that Ristevski's claim for rectification is "unusual" in one sense. The court said that the remedy sought a change in the identity of the trust's beneficiaries. The parties to the 1989 deed were Ristevski and his accountant. The parties to the 2015 deed were Ristevski, his wife, and the trustee. However, anyone affected by the rectification orders supported the contention that the 2020 document reflects the current terms of the trust. Ristevski's wife has even sworn that she was never a trust beneficiary.
The court pointed out that it could be problematic to rectify an instrument by changing the name of a party unless the parties could demonstrate an appropriate common intention to contract. In this case, the only necessary parties are those to the 1989 deed, as the common intention of what the 2015 deed was to reproduce was that of the 1989 deed. The court said that the beneficiaries were extra participants, though not strictly parties to either deed. Nevertheless, these additional participants have given their consent, particularly Ristevski's wife, who could otherwise have complained that her interests might have been adversely affected.
The court concluded that it is appropriate to grant the rectification relief and to order the amendment of the list of beneficiaries in the 2015 deed to reflect the 1989 deed. The court also advised that the trustee could act in the administration of the trust on the basis that the 2015 deed, as rectified, accurately reflects the form of the 1989 deed with respect to the identity of the trust beneficiaries.