Tuesday, August 13, 2019

Family Court: ‘I’ve Got the Power’** to make orders against third parties

The powers of the family court in relation to structures such as trusts are potentially extensive.

At a simplistic level, there is the specific power to force the change of a trustee of a trust.

Potentially, there is also the ability to bring forward the vesting date of a trust to require it to end immediately and thereby crystallise the interests of a party to the relationship.

One leading case in this regard is the decision in AC and ORS & VC and ANOR [2013] 93 FLC 540 FamCAFC 60. As usual, if you would like a copy of the decision please contact me.

Briefly in that case:
  1. The husband’s mother was in control of the corporate trustee and the trust at the relevant times.
  2. The husband and his former wife had a fixed entitlement to the capital of the trust on its vesting, which, at the time of the property settlement, was still 50 years in the future. That is, the trust was not a traditional discretionary trust where there are no fixed entitlements.
  3. The court found that the entitlement was rightly considered property of the parties and therefore ordered the trustee to vest the trust.
  4. The Attorney General intervened in the proceedings, given that the practical result of the decision was that the property entitlements of a third party were substantially altered.
  5. Critically, it was held that the husband and wife did in fact have an interest in the trust property despite the fact that it was accepted that the control of the trust was with the husband’s mother. 
  6. In other words, the ability to alter the structure of trusts can be made even where a party to the marriage is not in control of the trust.
  7. In a more traditional discretionary trust however there may not be the required nexus between the trust assets and the parties to the marriage.
  8. For completeness however, in this particular case, the forced vesting of the trust ultimately failed due to the appeal court’s conclusion that procedural fairness had not been given to the husband’s mother, particularly given that the parties to the marriage had other assets that could have likely achieved financial closure between the parties without the need to impose orders on a third party.
** For the trainspotters, ‘I’ve Got the Power’ is a song by Snap! from 1990.