‘The Vibe’, family trusts and family law (part 1)**

Previous posts have referenced the legal principle known as ‘The Vibe’, as developed by the legendary Australian movie ‘The Castle’.

In an arguably analogous decision the family law case of Romano & June [2013] FamCA 344 is relevant. As usual, if you would like a copy of the decision please let me know.

The case was complex and the judgement took over 19 months to be issued by the court following completion of the trial and ran to almost 100 pages in length.

It is important to note that the court held that the husband was not being honest about many of his arguments concerning the trust. Furthermore, several of the witnesses whose evidence the husband also relied upon (for example, close friends and colleagues) was also held not to be honest.

One, of many examples, listed in the case of the courts view of the husband is best captured in the following extract -

“I am quite satisfied that the husband’s resignation as a director of [British Virgin Island company] X1 and several other companies, after the commencement of these proceedings, was effected not for the reasons advanced by the husband and those of his witnesses who gave evidence about the matter, but so that he could not be required to obtain access to any of the records of the companies that directors lawfully have access to. That he did so resign after being put on notice by the solicitors for the wife that he should not do so gives me added cause for such satisfaction, on the balance of probabilities.”

Briefly, the factual matrix was as follows:

1. the relationship was around 16 years in length (9 years of marriage);
2. there were no children of the union;
3. the husband had set up a family trust some years before meeting the wife as part of a number of entities, including (for example) a company the husband was deemed to control (despite having no legal ownership) in the British Virgin Islands, that was set up around the time the husband was advised to (and did) move to Monaco (apparently for tax planning purposes);
4. at all relevant times the husband was one of two directors of the corporate trustee of the trust and a primary beneficiary of the trust; and
5. the husband however was never an appointor of the trust, nor a shareholder of the corporate trustee.

In rejecting the husband's argument that he did not control the trust (and was merely a potential beneficiary of future distributions), the court confirmed:

1. while the husband did not have legal control of the trust, he did have effective control;
2. the husband deliberately looked to avoid being in legal control of the trust, while in reality regarding the assets of the trust as his; and
3. given the level of control the husband exercised over the trust assets, it was appropriate to include them as assets of the marriage and available for division in the property settlement.

The key aspect of the court's reasoning is arguably best captured by the combination of its assessment of the husband's lack of honesty and the following extract from the judgement

“The question whether the property of the trust is, in reality, the property of the parties or one of them.... is a matter dependent upon the facts and circumstances of each particular case including the terms of the relevant trust deed ... [Here the] husband’s actual control would allow him to cause those assets to be appointed to himself or his wife along with his and her right to due consideration constitute property of the parties.”

** for the trainspotters Dennis Denuto and his need no introduction.