Trust Deeds

Superannuation Funds are generally based on the legal concept of an express “trust” and the Fund is established by a Deed, known as the “Trust Deed“.

A “deed” is a particular kind of legal instrument.

A deed is the most solemn form of document a person can execute {Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 367,369}.

The characteristics which set a deed apart from other legal instruments in writing relate to its form, legal effects and delivery. At common law, traditionally, a deed was a writing on paper, vellum or parchment and sealing the deed by the person making it was crucial to its validity, whereas a signature was not required. This part of the law has been modified by statute and signature is now an essential element.

On its operation, a deed does one of the following:

  • transfers an interest, right or property
  • creates an obligation binding on some person or persons
  • confirms an act by which an interest, right or property has already passed

Instruments which on their face appear to be deeds but on analysis do not perform one of the functions set out above are not in fact , deeds.

The term “signed, sealed and delivered” is traditionally associated with deeds.

At common law, deeds required neither signing nor witnessing. What was required was sealing, a more practical obligation in the days before widespread literacy. The use of wax was not imperative; any mark or impression on paper sufficed if made with the intention of affixing a seal {Re Sandilands (1871) LR 6 CP 411 at 413}.

It may now be the common law that a document purporting to be executed as a deed is regarded as sealed if the document contains a printed or written indication of where the seal should appear {First National Securities Ltd v Jones [1978] Ch 109 at 19 (deed bearing printed circle enclosing the initials “LS” (“locus sigilli” – the “place for the seal“) to indicate where the seal should be affixed, held to be sealed. Stromdale & Ball Ltd v Burden [1952] Ch 223 at 230}.

Furthermore, where a document is expressed to be sealed, then even though it neither bears a seal nor indicates a place for the seal to be affixed, the party executing it may be estopped from denying that it has sealed, as where an attestation clause states that the document has been “signed, sealed and delivered” {TCB Ltd v Gray [1986] Ch 621 at 633-634 (aff’d on a different ground, [1987] Ch 458; Farrow Mortgage Services Pty Ltd v Hogg (1995) 64 SASR 450)

The term “delivery” means the intention of the maker to be bound by the instrument as his or her deed and despite some or all of the formalities being present, before an instrument becomes a deed the maker must intend that the instrument operates as a deed.

Originally “delivery” was the physical act of handing the deed over to the other party, or instructing him to take it up, but the matter is essentially a question of the intention of the maker of the deed. A deed  is delivered in law “as soon as here are acts or words sufficient to show that it is intended by the party to be executed as his deed presently binding on him“, and even though that party retains possession of the document {Xenos v Wickham (1866) LR 2 HL 296, 312 per Blackburn J}.

Delivery may be actual or constructive. Actual delivery involves physically handing over the deed. The question is whether the grantor has intended to part with dominion and control over the instrument and vest that dominion and control in the grantee {Carson v Wilson (1961) 26 DLR (2d) 307 at 313-314}. But delivery need not involve handing over: a deed may be “delivered” without ever leaving the possession of the executing party. This is “constructive” delivery.

Once a deed is delivered, the party delivering it cannot withdraw or resile from the deed {Beesly v Hallwood Estates Ltd [1961] Ch 105 at 212}

The form of the instrument takes plays a significant part in assisting a Court in its deliberations on whether an instrument is a deed or an agreement. Some of the aspects are:

  • Whether the instrument is signed and attested as if it were a deed
  • Whether the instrument refers to instelf as a deed
  • Whether it is a formal document drawn up by solicitors {Dean and Westham Holdings Pty Ltd v Lloyd [1991] WAR 235 at 239}
  • Whether it complies with the technical legal requirement of transferring and interest, right or property or creating an obligation.

The last factor must be satisfied or the instrument fails to be a deed. The others are not of themselves necessarily determinative.

Important factors include whether the instrument reflects the phraseology and structure commonly found in deeds, whether it is cast in the most solemn form of documentation appropriate for that particular transaction {Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 368-369; Comptroller of Stamps v Associated Broadcasting Services Ltd [1990] VR 335; Dean v Lloyd (1991) 3 WAR 235}.

For this purpose, extrinsic evidence is admissible in determining the parties’ intention when executing the instrument {Dean v Lloyd (1991) 3 WAR 235}

Further differences between deeds and other documents include the following:

(a) As a general rule the maker of a deed is estopped from claiming that the contents of the deed did not correctly express the maker’s intentions, or that there are reasons why the deed should not take effect {First National Bank plc v Tompson [1996] 2 WLR 293, 298, per Millett LJ}.

(b) There is a general rule of interpretation that where a doubt arises on the construction of a deed, it should be construed most strongly against its maker and in favour of the grantee or covenantee

(c) The use of a deed may also trigger certain statutory consequences. For example the appointment or retirement of a trustee by deed will give effect to the provisions set out in Section 40 of the Trustee Act 1925 (UK), including the vesting of the trust property in the new trustee without the need for a separate conveyance.

Types of Deeds

There are two basic types of Deeds – indentures and deed polls.

An indenture is a deed made between two or more parties representing different interests (inter parties).

Traditionally it was usual to insert after each of the parties, “of the first part“, “of the second part” and so on. The rationale for doing this was that the deed was thus charactised as a deed inter parties as opposed to a deed poll. However the charactisation is obvious from the description of the status of each of the relative parties, so these words are superfluous.

A deed poll is a deed made by one person or if made by two or more persons, made by them all with the same intention and representing the same interest.

In some jurisdictions, an appointment of a new trustee or the retirement of a trustee is required to be by deed:

Section 16 of the Trustee Act 1936 (SA) {also refer to Section 15}

Section 6, Section 7, Section 8 & Section 9 of the Trustee Act 1925 (NSW)

 Formal Parts of the Deed

The formal parts of a deed are listed as follows:

  • Type of Deed
  • Date
  • Parties
  • Recitals
  • Testatum – Operative Part
  • Parcels {Property, right or interest transferred}
  • Covenants {Obligations that the parties place in the deed}
  • Testamonium  {This part appears after the operative parts of the deed and before the execution and attestation}

Attestation

At common law, attestation was not necessary. The common law prevails in Victoria apart from deeds of appointment. {Refer to Section 159 of the Real Property Law Act 1958)

Attestation is mandatory in NSW {s 38(1)}, WA {s((9(1)(b)}, SA {s 41(2}, Tas {s 63(2)}, ACT {s 219(1).

In Qld {s 45(2)} and the NT {s 47(1)}, attestation is not mandatory, but if it is missing. sealing will have to be proved

Recitals

The recitals set out as statements of fact, in chronological order, the background to the deed. They set the scene for its operation. Traditionally recitals begin with the word “WHEREAS“.

There are two types of recitals:

  • Narrative recitals, which set out the history of affairs leading to the deed, and
  • Introductory recitals, which explain why the current situation is to be altered and how it is to be done.

Recitals are useful in interpreting the deed. There is a rule of evidence which prevents a party from denying that which appears in the recital.

 

Jurisdictions

Depending of the Governing Law that the settlor chooses for the deed, different requirements apply to the formalities of a deed.

NSW: Conveyancing Act 1919 {Section 7(1)}

Vic:Property Law Act 1958 {Section 18(1)}

Qld: Property Law Act 1974 {Schedule 6}

WA: Property Law Act 1969 {Section 7}

SA: Law of Property Act 1936 {Section 7}

Tas: Conveyancing and Law of Property Act 1884 {Section 2}

ACT: Civil Law (Property) Act 2006 

NT: Law of Property Act 2000 {Section 4}

Whilst a signature is not required under the Common Law, this has been modified by statutory law and a signature in now an essential element.

NSW: Conveyancing Act 1919 {Section 38(1)}

Vic:Property Law Act 1958 {Section 18(1)}

Qld: Property Law Act 1974 {Section 45}

WA: Property Law Act 1969 {Section 9(1)}

SA: Law of Property Act 1936 {Section 41(1)}

Tas: Conveyancing and Law of Property Act 1884 {Section 63}

ACT: Civil Law (Property) Act 2006 {Section 219}

NT: Law of Property Act 2000 {Section 47(1)}

Execution of Deeds by Companies

At common law, the seal of a company will bind the company in a transaction if affixed in a manner prescribed by its rules. However a document is not a deed merely because it is signed by a corporation under its common seal, although the document is executed under seal.

There must be evidence of acts or words which show that the instrument was intended to be executed as a deed { Xenos v Wickham (1867) LR 2 HL 296 at 312; Rose and Burges v Commissioner of Stamp Duties South Australia (1979) 21 SASR 84}

Also refer to Equity Nominees Ltd v Tucker [1967] HCA 22; (1967) 116 CLR 518

South Australia

A natural person executes a deed by signing, or making a mark, on the deed, while a body corporate executes a deed by affixing of the common seal of the body corporate to the deed in accordance with the rules governing the use of the common seal {also refer to Section 127 of the Corporations Act 2001}

The execution of a deed must be attested (where the deed is executed by a natural person by at least one witness who is not a party to the deed){subsection 41(2)}.

Delivery of the deed is no longer necessary {subsection 41(3)} {Since 1 July 1989}.

Subsection 41(5)         Notwithstanding any other law, an instrument executed in accordance with this section is a deed if—

  •             (a)         the instrument is expressed to be an indenture or deed; or
  •             (b)         the instrument is expressed to be sealed and delivered or, in the case of an instrument executed by a natural person, to be sealed; or
  •             (c)         it appears from the circumstances of execution of the instrument or from the nature of the instrument that the parties intended it to be a deed.

In Rose and Rose v Commissioner of Stamps [1979] 22 SASR 84 Zeiling J held that an instrument expressed to be a “Agreement” but which included the words “Signed, Sealed and Delivered}” was not a deed because the parties had not intended the instrument to be a deed.

Victoria

At common law, attestation was not necessary. The common law prevails in Victoria apart from deeds of appointment (Ref to Section 159 of the Property Law Act 1958.)

New South Wales

Section 38 of the Conveyancing Act 1919 has altered the common law requirements for a deed. SEction 38(1) provides:

Every deed….shall be signed as well as sealed, and shall be attested by at least one witness not being a party to the deed; but no particular form of words shall be required for the attestation.

This provision adds to the common law requirements two others: signing and attesting by a witness.

Section 38(1) preserves the requirement for sealing. However this requirement can be satisfied without any seal  being actually affixed, because Section 38(3) provides that an instrument id deemed to be sealed if it is:

  • (i) signed and attested in accordance with Section 38, and
  • (ii) expressed to be an indenture or a deed or expressed to be sealed.

In practice most documents intended to be deeds are expressed to be such, or contain the formula “signed, sealed and delivered” {Re Dunn (1981) 53 FLR 102}

 

The High Court of Australia

Equity Nominees Ltd v Tucker [1967] HCA 22; (1967) 116 CLR 518

“The passing of a resolution to execute a document under seal cannot thereby result in its having been executed.”

 

Reinstatement of Trust Deeds

For the reinstatement of Trust Deeds refer to:

In Re Glenfor P/L [2007] VSC 222 (discretionary trust); In Re Bowmil Nominees P/L [2004] NSWSC 161 (superannuation fund); Re Plator Nominees P/L [2012] VSC 284 and James N Kirby Foundation v AG-NSW [2004] NSWSC 1153; (2004) 62 NSWLR 276).

Also see FCT v Commercial Nominees of Australia Ltd [1999] FCA 1455;(1999) 167 ALR 147; (1999) 43 ATR 42 and FCT v Commercial Nominees of Australia Ltd [2001] HCA 33; 179 ALR 655; (2001) 75 ALJR 1172

The Courts Power to Vary the Terms of the Trust

Perpetual Trustees Victoria Ltd v Barns & Anor [2012] VSCA 77;Re McDonald Family Trust No. 1 [2010] VSC 324 and Thomas Hare Investments Limited v Hare & Ors [2012] VSC 200.

 Alteration of Deeds

Pigot’s Case (1614) 11 CoRep 26b at 27a; 77 ER 1177

The principles arising from this case were stated by Lord Coke to be that:

when any deed is altered in a point material, by the plaintiff himself, or by any stranger, without the privity of the obligee, be it by interlineation, addition, rasing, or by drawing of a pen through a line, or through the midst of any material word, that the deed thereby becomes void.

It was also resolved that:

if the obligee himself alters the deed by any of the said ways, although it is in words not material, yet the deed is void: but … if a stranger, without his privity, alters the deed by any of the said ways in any point not material, it shall not avoid the deed.

1.6 The decision of the court can be summarised as follows:

    • a deed is void if it is altered in any way by the promisee (the one to whom the deed is made);
    • a deed is also void if altered in a material way by a stranger (that is, a third party) to the transaction; however
    • a deed is not void if it is altered in a way that is not material by a stranger to the transaction.

Also refer to Farrow Mortgage Services Pty Ltd (In Liquidation) v Slade and Nelson [1996] NSWSC 276  and Armor Coatings (Marketing) Pty Ltd v General Credits (Finance) Pty Ltd (1978) 17 SASR 259.

In Leybourne v Permanent Custodians Ltd [2010] NSWCA 78 the Court of Appeal stated at [102]:

The rule in Pigot’s case [1595] EngR 12; (1614) 11 Co Rep 26b; 77 ER 1177, one of alteration to a deed, has been applied to other written instruments, but the modern cases doubt the present justification for the rule and consider fraudulent intention in the alteration to be of importance: Warburton v National Westminster Finance Australia Ltd (1988) 15 NSWLR 238; Armor Coatings (Marketing) Pty Ltd v General Credits (Finance) Pty Ltd  (1978) 17 SASR 259.  On any view, the alteration must be material: Farrow Mortgage Services Pty Ltd (In Liq) v Slade & Anor (1996) 38 NSWLR 636 at 639; Iannello v Sharpe [2007] NSWCA 61; (2007) 69 NSWLR 452. Assuming that “per” was added to the loan agreement initialled by the appellant after he returned it to Turnbull Hill, it was not a material alteration.

Also refer to Paradise Constructors & Co Pty Ltd v Poyser [2007] VSCA 316 at [61].

Lost Deeds

If a deed is accidentally (in whole or part) destroyed, lost or defaced the deed is not thereby avoided and it may still be given in evidence {Doctor Leyfield’s Case (1611) 77 ER 1057; Clerke d Prin v Heath (1669) 86 ER 691); Wilcox v Sturt (1682) 23 ER 324; Dalston v Coatsworth (1721) 24 ER 589; Cowper v Earl Cowper (1734) All ER Rep 216 at 227; (1734) 24 ER 930 at 939-40; Cookes v Hellier (1749) 27 ER 1003; Whitfield v Fausset (1950) 27 ER 1097; Saltern v Mellish (1974) 100 ER 504 at 508; Master v Miller (1791) 100 ER 1042; Atkinson v Leonard (1791) 29 ER 499 at 502; Bolton v Bishop of Carlisle (1793) All ER Rep 189 at 190; 126 ER 540 at 542; Ex parte Greenway (1802) 31 ER 1321 at 1322}.

In the case of deliberate alteration of a deed, modern cases have cast doubt on Pigot’s Case. Fraudulent intention behind the alteration now appears to be important {Leyboune v Permanent Custodians Ltd [2010] NSWCA 78 at [102] per Giles and Tobias JJA and Sackville AJA}.

Concealment of Execution

If a deed is validly executed and as a consequence of execution purports, for example, to confer a benefit upon some person, the benefit will immediately vest in the person so named and the deed will take effect notwithstanding that at the time of the execution the benefit (and the fact of the execution) is concealed or he or she does not know of the conferral of the benefit or the execution of the deed {Thompson v Leach (1690) 86 ER 391; Hall v Palmer (1844) 67 ER 491); Fletcher v Fletcher (1844) 67 ER 564; Standing v Bowring (1885) All ER Rep 702; Re McCallum; McCallum v McCallum [1901] 1 Ch 143; Mallott v Wilson [1903] 2 Ch 494; [1900-03] All ER Rep 326}

Counterparts

Deeds inter parties are frequently executed with multiple copies (counterparts) to enable each party to the deed to have a copy in his or her possession. Counterparts that are executed are considered to be one deed and the court has the right to look at each in order to ascertain the proper construction of the deed {Burchell v Clark (1876) 35 LT 690; Matthews v Smallwood [1910] 1 Ch 777 at 785;[1908-10] All ER Rep 536 at 541}

 

 

 

 

 

 

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