In the recent decision of Harris & Dewell [2018] FamCAFC 94 the wife sought an appeal to have a unit trust (“the E Unit Trust”) included as part of the property pool available for distribution between herself and her husband at the settlement of property pursuant to their separation.

She did so on the basis that the E Unit Trust was a ‘puppet’ or ‘creature’ of the husband by reason of the control exhibited by him in respect of the dealings of the E Unit Trust.

The Unit Trust was controlled by the husband but his 99 year old father was the sole unit holder.  The husband (33%) and the father (67%) were the sole shareholders of the corporate trustee (‘FPL’).

The primary judge cited an earlier decision where it was said that control is not sufficient of itself to permit the assets of the trust to be treated as property of the party who has that control.[1]

‘What is required is control over a person or entity who, by reason of the powers contained in the trust deed can obtain, or effect the obtaining of, a beneficial interest in the property of the trust.’[2]

In other words, ‘property… of a trust can be treated as property of a party for s 79 purposes where evidence establishes that the person or entity in whom the trust deed vests effective control is the ‘puppet’ or ‘creature’ of that party.  The metaphor is used to connote a situation where the person or entity with control (the ‘puppet’) does nothing without the party (the ‘puppet master’) controlling or directing that person or entity.’[3]

The primary judge held that despite the control exhibited by the husband in respect of the dealings of the E Unit Trust, he did not have a lawful right to benefit from the assets of the trust.

‘The husband did not have powers vested in him…that permitted that result for him…the trustee does not have ultimate control over the vesting of trust property.  The ultimate control has at all time rested with, and currently rests with the father.’ [4]

It is the father alone who, by reason of the powers contained in the trust deed and his position as the sole unit holder, can obtain or effect the obtaining of, a beneficial interest in the property of the trust.

It was found that the units in the E Unit Trust should not be regarded as property of the husband but as a financial resource.

Please note this is not legal advice but may help you understand the law. If you have a query regarding family trusts, contact our dedicated team at Kenmore Mediation and Law Centre on (07) 3378 4006

[1] cf Stephens and Stephens (2007) FLC 93-336 [81-767] [81-768] per Finn J

[2] Ibid [68]

[3] Ibid [67]

[4] Ibid [71]