WHEN James and Mary were married in the early 80s, they enjoyed a wonderful evening, dancing to Lionel Richie all night long.

As years passed, so did their taste in music… thankfully.

Sadly however their relationship eventually soured, leading to a lengthy Court battle.

James, who ran a successful business, had established a discretionary trust before his marriage, naming himself as the trust appointer and trustee.

The trust continued to grow throughout their marriage, holding significant assets, including real estate and investments, which were integral to the family’s wealth.

During the Court proceedings, Mary argued that she had contributed to the value of the trust assets and that the family regularly used funds from the trust to live a ‘comfortable lifestyle’.

Mary’s legal team submitted that based on these facts, the trust assets had effectively been used as family assets over the years and should be regarded as an asset of the relationship.

However, James’ legal team contended that the legal and structural independence of the trust functioned separately from his personal financial dealings and therefore the trust was not his or his wife’s property that could be divided under the Family Law Act (Act).

More facts emerged during the trial, notably that after separation, James amended the trust deed to preserve the trust’s structure and he removed any entitlements to Mary and the children.

The Court had to determine if the trust assets were part of the asset pool for distribution under the Act.

The Court found that James had effectively treated the trust assets as part of the family’s financial resources. His control over the trust and the amendments he made post-separation were seen as attempts to exclude Mary from accessing trust resources.

The Court looked beyond the formal legal structure of the trust, to the substance of how the trust was used and controlled.

The Court ultimately determined that under the circumstances, the trust was a “sham”, used to conceal assets from Mary… and the trust was busted.

Thank you to Anthony Fogarty for his assistance with this column. Email Manny Wood, principal solicitor at TB Law at manny@tblaw.net.au or call him on (02) 66 487 487.

This fictional column cannot be relied upon as legal advice.

By Manny WOOD, Solicitor