Property Settlement – Unit Trust Controlled By Husband But Beneficially Owned By His Father Not Property

Background

In the recent case of Harris & Dewell & Anor [2018] Fam CAFC 94 (25 May 2018), the Full Court of the Family Court of Australia considered an appeal from a judgement of a Family Court judge.

The parties had been married 24 years. The wife asserted that the assets owned by a unit trust should have been included in the pool of assets available for division by the parties and defined as property within the meaning of the Family Law Act. The wife claimed that the unit trust was the husband’s puppet or alter ego. The husband argued the trust was a third party to the litigation and the court did not have the power to deal with its substantive rights.

The Trial Court Analysis

At first instance, Rees J found that the husband controlled the trust, but that the units were not property but a financial resource of the husband. Based on that finding, the net pool was found to be $16.78 million. Contributions were assessed at 65:35 in favour of the husband but a 17.5 per cent adjustment was made in favour of the wife, being a 52.5:47.5 division overall.

The Full Court Analysis

The trust was established by deed in mid-1981, the trust had a corporate trustee from inception and at the date of trial. The corporate trustee was incorporated in mid-1981. The establishment of the trust pre-dated the parties’ relationship by 5 years. The beneficial interest in the trust was divided into 60 units. The husband’s father was the sole unit holder and the husband was never a unit holder. The husband and husband’s father were the sole shareholders in the corporate trustee. The husband ceased acting as a director of the corporate trustee in 2011. The ostensible picture of control of the trust thus presented was of ultimate control vesting in the husband’s father by reason of his sole unit holding and his control of the voting rights in the trustee. On consideration of the evidence the Judge found that since 2002 the husband treated the trust assets as his own. Further the husband most likely will, on the death of his father, inherit the trust units.

The Court was not satisfied that whist the husband’s father remains the owner of the trust the husband has some lawful right to benefit from the assets of the trust. Despite the control exhibited by the husband in respect of the dealings of the trust, the Court was not satisfied that the trust was an alter ego or device used by the husband for his sole benefit.

Orders

Accordingly, the trust assets were not held to be property of the husband for the purposes of s 79 of the Act.

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