While SMSF trustees should be aware of the ATO’s concerns in relation to property development (for example, as outlined in SMSFRB 2020/1), a recent Full Court of the Supreme Court of South Australia decision has highlighted the commercial risks of such arrangement. In Zollo & Ors v Polley & Anor [2020] SASCFC 100, a former builder was ordered to pay damages to an SMSF for the breach of fiduciary duties under the joint venture agreement for a housing development.
The case had a number of interesting points for SMSFs, including:
The former builder was found to owe fiduciary duties to the SMSF trustee under the joint venture arrangement
The former builder breached his fiduciary duties - in particular his duties of loyalty to act in good faith and make full disclosure
The joint venture arrangement was found (by the trial judge) to be in breach of the Superannuation Industry (Supervision) Act 1993, in particular the sole purpose test contained in section 62 but no relief was granted as a result of such breach
To discuss further or for more information please contact:
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au
Philippa Briglia
Senior Associate
T +61 3 9611 0173
E pbriglia@sladen.com.au
Lucy Liang
Graduate Lawyer
E lliang@sladen.com.au
