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If the husband was the puppet master, who was the puppet?

In a recent Family Law Full Court case, it was not in dispute that the husband exercised control over his 99 year old father’s unit trust (UT) including directing agents on behalf of the UT, using the UT’s assets as security for his own personal borrowings; intermingling his funds with the funds of UT and, since 2002, treating the UT as if it was his own.   It was the expectation of his estranged wife therefore that the assets of the UT should be included in the assets to be adjusted between the parties on settlement because the father’s UT was simply a puppet for the husband.

The Full Court and the trial Judge however disagreed and found, that whilst the father remained the owner of the UT, he was not a puppet of his son.  The husband had some “lawful right to benefit from the assets of the trust” and controlled some of the dealings of the UT, but they were not satisfied that the UT was a device used by him for his sole benefit.

There is no authority in the Family Courts that hold that control alone without some lawful right to benefit from the assets of a trust is sufficient to permit the assets of the trust to be treated as property of the party who has that control.  In this instance, the Court did however make a substantial adjustment of the remaining property in favour of the wife due to the UT being a financial resource available to the husband.

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