“This case concerns the situation where a prior self-managed superannuation fund trustee had failed to transfer title to a new trustee, and a court order – or more accurately speaking ‘judicial advice’ – was required to sell an asset to transfer the proceeds to the SMSF,” Hurley said.

“It highlights the risks associated with a company having more than one role as the SMSF assets could have easily been the centre of a dispute between the company’s creditors and the SMSF trustees/members.”

Hurley said that failing to transfer title to a new trustee can result in breaches of superannuation, trust and contractual law, and can have significant negative consequences for prior trustees, new trustees, SMSF members, and future property purchasers.

In this instance, she said, the applicant seeking judicial advice was the voluntary administrator of the previous SMSF trustee.

The key facts of the case revealed that a property (Property A) was purchased by an SMSF through its trustee company, and the fund later experienced a change in its corporate trustee.

After the change of trustee, the previous trustee did not transfer the title of Property A to the new trustee. Despite this, Property A continued to be listed as an asset of the SMSF in the fund’s records.

The prior trustee contracted to sell multiple properties, including Property A, to a single new purchaser who had received finance based on the plan that all properties were being purchased together.

“Having considered the governing rules of the fund, the change of trustee deed, and superannuation and trust legislation, Justice Ashely Black noted that the failure to transfer title to property after the change of trustee created a bare trust in favour of the SMSF whereby the prior trustee held the property for the new trustee on behalf of the SMSF,” Hurley said.

“This resulted in various breaches of trust and superannuation law. Justice Black noted that it is appropriate for the bare trustee to seek judicial advice to confirm the existence of the bare trust and allow for any action (other than a transfer to the new trustee) to be taken. This is the case even when all parties are in agreement that a bare trust exists and that a sale is desirable.”

Hurley continued that the facts in this case favoured the SMSF's interests.

“The view that the prior trustee was holding the property as bare trustee for the SMSF was supported by the administrator, the new trustee, the SMSF members and the directors of the previous trustee,” she said.

“It is easily foreseeable that in circumstances where there is a dispute as to the original intended owner of the property such an order may not be as easily granted. For example, if the original purchase contract did not record the purchaser as the prior trustee ‘as trustee for’ the SMSF, or if the prior trustee’s books incorrectly showed the property as an asset of its business, then the rights of the SMSF may have been uncertain.”