Who Is Entitled to Assets in a Unit Trust?
Harris & Dewell (2018): Family Law and Unit Trust Assets
The 2018 case of Harris & Dewell considered whether a husband in family law proceedings had any entitlement to assets held in a unit trust established by his father. The Court examined the legal distinction between ownership and control of trust assets and confirmed that appearances can be misleading.
Background
The unit trust in question conferred benefits exclusively on the sole unit holder, who was the father of the husband. The father held the power of appointment and was the only person lawfully entitled to the assets of the trust.
Despite the husband having significant control over the trust’s affairs, the courts – at first instance and on appeal – found that he had no legal interest in the trust assets in his own right. Effectively, the father could allow the son to manage and use the assets as he wished, giving the impression to the outside world that the husband owned them.
Key Facts of the Case
The court considered several actions by the husband, including:
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Taking money from the trust without recording it as a loan.
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Mortgaging trust assets for his own purposes.
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Depositing and intermingling his personal funds with trust funds.
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Including trust assets in his personal balance sheet when borrowing funds.
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Both the husband and father submitting statutory declarations claiming to be beneficiaries.
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Serving as the director of the trustee company.
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Executing leases and mortgage documents on behalf of the trust.
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The father confirming he had no knowledge of the trust affairs, which were managed entirely by his son.
Court’s Decision
Despite the husband’s control and apparent use of the trust assets, the courts confirmed:
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The assets remained the property of the father, the lawful unitholder.
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The husband had no personal entitlement to the trust assets.
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Consequently, the wife in the family law proceedings could not claim any part of the trust assets in the property division.
Key Takeaway
Harris & Dewell (2018) demonstrates that control over a trust does not equate to ownership. In family law property settlements, courts will look beyond appearances and consider legal entitlements under the trust deed. This case underscores the importance of clearly understanding trust structures and beneficiary rights when assessing property claims.
