Who is entitled to the assets in a unit trust?
In the 2018 case of Harris and Dewell the facts were that the Trust Deed establishing the unit trust had conferred the benefits of the trust upon the sole unit holder who was the father of the husband in the family law proceedings. The father held the power of appointment and was the only beneficiary lawfully entitled to the assets of the trust.
The court at first instance and the judges in the appeal proceedings in the Full Court determined that, in spite of the facts which are referred to below, the husband had no interest in the assets and was not in his own right entitled to the assets of the unit trust. In short, no matter what the husband did and how he acted, the father was entitled to give his son “the run of the trust” to do what he wished which in fact gave the impression to the world that the son owned the assets in his own right.
What were the facts?
- The husband took money from the trust but did not show these withdrawals of funds as any form of loan that required him to make a repayment
- The husband mortgaged assets of the trust for his own purposes
- The husband made deposits into the accounts of the trust and intermingled his own funds with that of the trust
- When the husband borrowed funds he included in his own balance sheet the assets of the trust as his own
- Both the husband and the father had sworn statutory declarations describing themselves as beneficiaries
- The husband was the director of the trustee company
- The husband executed leases and mortgage documents on behalf of the trust
- The unitholder (the father of the husband) gave evidence that he had no knowledge of the affairs of the trust and the son looked after those affairs
In summary, the assets remained as the property of the father and not the son and the wife in the family law proceedings could not claim an entitlement to any part of the assets in a property division.