Absolute Vision Technologies: Former SMSF Corporate Trustee in Administration Still Holding SMSF Property
In this matter, the Court addressed whether a former corporate trustee of a self-managed superannuation fund (SMSF) could complete a sale contract for SMSF property and distribute the proceeds to the new trustee after entering voluntary administration.
Background
The case involved Absolute Vision Technologies Pty Ltd (AVT), which was the previous corporate trustee of the Absolute Vision Technology Pty Ltd Super Fund (Fund) until it was replaced by a new corporate trustee (AVT SF) in March 2017 pursuant to a deed of change of trustee. The Fund held the real property (Suite 901).
Despite the change in trustee, the transfer of the title of Suite 901 to AVT SF as trustee for the Fund was not completed, and AVT remained as the registered proprietor of the Suite 901.
AVT was under voluntary administration and had been trading as an independent cloud-based software vendor.
In May 2024, AVT entered a contract to sell Suite 901 despite being under administration and no longer being trustee of the Fund. With evident authority issues arising, the voluntary administrator of AVT approached the Court to seek judicial advice regarding whether AVT could enter the contract of sale for Suite 901 despite the incorrect corporate trustee being listed on title.
The major question considered by this case is whether the asset of the Fund is protected against AVT’s creditors in circumstances where AVT had been removed as trustee of the Fund but subsequently purported to act as trustee.
An audit of the Fund’s 2020-21 financial year had raised concerns about contraventions of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act), including non-lodgement of tax returns. This added complexity to the situation, as the Fund’s compliance with the SIS Act was also in question.
In its decision, the Court considered a range of matters, including:
AVT had originally held Suite 901 as trustee for the Fund, and the property had been purchased using the Fund’s assets.
AVT's failure to transfer the property to AVT SF in 2017 constituted a breach of trust, as required under the deed of change of trustee and the Trustee Act 1925 (NSW) (Trustee Act).
AVT was acting as a bare trustee at the time of the sale, meaning it had no power to deal with the trust property unless specifically authorised by the Court.
Decision
The Court ultimately ruled in favour of AVT, allowing AVT to complete the sale of the property, despite the fact that the sale would be in breach of trust. Several factors influenced this decision including:
The Court found that completing the sale would not prejudice the SMSF or its members. The sale had been conducted at market value, and the beneficiaries of the SMSF had given their informed consent to the sale. The Court noted that failing to complete the sale could expose AVT to claims under the contract and other legal risks, including potential issues arising from a problematic lease arrangement related to the property.
While AVT was acting as a bare trustee, it lacked the power to sell Suite 901 under normal circumstances. However, under section 81(1) of the Trustee Act, the Court has the power to confer on trustees the necessary authority to complete a sale if it is deemed expedient. The Court exercised this power, granting AVT the authority to complete the sale despite the breach of trust.
The Court also addressed the distribution of the proceeds from the sale. Although the Fund had potential compliance issues under the SIS Act, the Court found no immediate need to deposit the sale proceeds funds into Court’s account. Since the Commissioner of Taxation, APRA, and ASIC had been notified of the proceedings and did not express any intention to intervene, the Court concluded that the net proceeds could be transferred to AVT SF. This decision, however, did not preclude future regulatory action or penalties against AVT SF for past contraventions.
The Court directed that the costs incurred by the administrator in managing the sale and the legal proceedings be paid from the sale proceeds, recognising the need to properly manage the administration of the fund and its assets.
Key Takeaways
This case also serves as a cautionary tale regarding the importance of timely asset transfers when changing trustees. Had the transfer of the property to AVT SF been completed in 2017 then there would have been no need for the time and expense of seeking a Court judicial advice.
Trustees should be mindful of their ongoing duties even when in external administration as the penalties may apply when trustees fail to meet their obligations, particularly with respect to SMSF property.
If you require further assistance or have questions regarding SMSF administration or trustee duties, please contact:
Alasdair Woodford
Principal
T: 03 5225 5217 | M: 0436 456 144
E: awoodford@ha.legal
Joseph Flanagan
Senior Associate
T: 03 5226 8504 | M: 0491 307 550
E: jflanagan@ha.legal
Tayla Berger
Senior Associate
T: 03 5226 8559 | M: 0407 825 365
E: tberger@ha.legal
