As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers the above mentioned topic in a ‘vidcast’ at the following link - https://youtu.be/kOMhiXHR-5A
As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
The case of Morton & Morton (email me if you want a copy of the decision) is one we often refer to as the Blues Brothers’ case.
The structure was a corporate trustee where there were two shareholders. Those two shareholders were brother 1 and brother 2.
The percentage share that they each had was 50%. The two brothers were the two directors. There were two primary beneficiaries, being the two brothers. You might start to see a pattern with this one.
There were two appointors – again, brother 1 and brother 2. The one point of distinction was there was one bucket company, so one corporate beneficiary. That bucket company was owned by the family trust itself.
Brother 1 was busting up with his wife. Her argument was ‘everything is 50-50 here. Clearly, my husband is entitled to 50% of the trust assets because he’s got 50% of the control, got 50% of the appointorship, got 50% of the shareholding, got 50% of the distributions.’
‘My husband is entitled to 50% of everything and therefore I'm entitled to a percentage share of his 50%.’
The court said no. The court said because all relevant aspects are 50-50 for each brother, then this is in fact analogous to each brother effectively having 0%, because it was the same as nothing. Thus, the assets of the trust were protected.
Ultimately, the Blues Brothers case is a really important decision. It is a decision that should give everybody confidence that structured properly, trusts can be a very powerful instrument in the context of matrimonial breakdowns.