“The court ordered that a contract be completed where the former trustee entered into a contract of sale of real estate (Suite 901) notwithstanding it was in administration,” Wong said.

The court heard that the SMSF corporate trustee (AVT) had been replaced by a deed of change of trustee in March 2017, however, the title to Suite 901 was not transferred to the new SMSF corporate trustee (AVT SF). Suite 901 was subsequently sold by the administrator in May 2024.

An audit report and audit management letter to AVT ST for the 2020–21 financial year identified several contraventions of the superannuation law, including a failure to lodge tax returns.

Wong said at the time of its voluntary administration AVT had been trading as an independent cloud-based software vendor and had formerly acted as trustee for the Absolute Vision Technology Pty Ltd Super Fund (SMSF) until March 2017.

“The administrator of the SMSF sought the court’s advice on dealing with the contract of sale for Suite 901 entered into with the incorrect corporate trustee on the title,” he said.

“The court considered that AVT originally held Suite 901 as trustee for the SMSF and not in its own capacity. Although the land title details did not record trust names and capacities, the original contract of sale for Suite 901 and the financial records of the SMSF supported the view that it was purchased out of SMSF assets rather than out of AVT’s own assets.”

Wong said the court had to consider whether it would be a breach of trust for AVT to not transfer Suite 901 to AVT SF, which it held as trustee for the SMSF.

“Clause 2(c) of the deed of change of trustee contained the standard provisions binding AVT to take all steps necessary to transfer and give control of the SMSF assets to the new corporate trustee AVT SF.”

“The breach of trust point was further explained with regards to the Trustee Act 1925 (NSW) (Trustee Act), in particular section 9 on vesting of trust property in a new trustee. Section 9(3) provides that real estate trust assets shall not vest in the new trustee until the transfer of land is registered on title, and section 9(7) then provides for the right of the new trustee to call for or sue the former trustee if such transfer of real estate of the trust is not registered on title.”

The facts of the case showed, he said, that at the time of the sale, Suite 901 was held by AVT as bare trustee, pending the transfer of Suite 901 to AVT ST as trustee of the SMSF or completion of its sale.

“As AVT would be acting as bare trustee in holding Suite 901 it would not be empowered to sell trust assets and must instead protect the trust assets (Caterpillar Financial Australia Pty Ltd v Ovens Nominees Pty Ltd [2011] FCA 677).”

“However, under section 81(1) of the Trustee Act, the court may by order confer a necessary power on the trustee in the absence of such a power where it is expedient to do so in the court’s opinion.”

He continued that the court ultimately held that although the sale would be in breach of trust, completing the sale would not prejudice the SMSF or its members, who had given their informed consent to the sale.

Additionally, the court noted that failure to complete the sale would expose AVT to claims under the sale contract and under the problematic lease arrangement.

“Therefore the court granted the direction that AVT was justified in completing the contract of sale for Suite 901,” Wong said.

“It also directed that AVT was justified in distributing the net proceeds for the sale of Suite 901 to AVT ST, rather than paying those funds into court, in part because the Commissioner of Taxation had been notified of the proceedings and had indicated that they did not intend to participate.”

He noted that this direction would not prevent the commissioner from pursuing any available regulatory penalty or claim against AVT ST in future.

“If the title had been appropriately transferred to the new trustee in 2017, there would have been no need for the time and expense of seeking a court direction.”