Caldwell & Caldwell
[2025] FedCFamC1F 506
•30 July 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
FIRST INSTANCE
Caldwell & Caldwell [2025] FedCFamC1F 506
File number: BRC 2242 of 2024 Judgment of: CAREW J Date of judgment: 30 July 2025 Catchwords: FAMILY LAW – PROPERTY – TRUSTS – PROPER PURPOSE RULE – Declaration sought – Whether declaration necessary – Where a determination is sought that trusts and/or trust assets are property of the marriage or either of them within the meaning of the Family Law Act 1975 (Cth) – Where it is determined that the trusts are not a sham or alter ego of the husband – Where the wife is an excluded beneficiary of the trusts – Where the assets of the trusts do not represent labours or contributions of either party –Where the husband and wife have accumulated significant wealth outside the trusts from which a just and equitable settlement may be achieved – Where it is conceded that the trusts’ assets are a financial resource of the husband for the purposes of s 79 – Where it is decided that the trusts and/or trust assets are not property within the meaning of s 79. Legislation: Corporations Act 2001 (Cth) ss 224, 229, 232
Family Law Act 1975 (Cth) ss 4, 78, 79, 90AE, 106B, 114
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 9, 25(1), 44, 141
Federal Court of Australia Act 1976 (Cth) s 23
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 1.05, 10.10, 10.11
Cases cited: Accurate Financial v Koko Black (2008) 66 ACSR 325
Ainsworth v Criminal Justice Commission (1992) 175 CLR 564
Ashton and Ashton (1986) FLC 91-777
B Pty Ltd v K (2008) FLC 93-380
Baba v Sheehan [2021] NSWCA 58
Barrett & Winnie (2022) FLC 94-093
Bevan & Bevan (2103) FLC 93-545
Bonnici & Bonnici (1992) FLC 92-272
Davidson v Davidson (1991) 8 Leg Rep SL 1
Davidson and Davidson (No 2) (1991) FLC 92-197
Dovgan & Dovgan [2021] FamCA 306
Duff and Duff (1977) FLC 90-217
Eclairs Group Ltd v JKX & Gas Plc [2015] UKSC 71
Essex & Essex (2009) FLC 93-423
Goldsmith & Stinson (2019) FLC 93-930
Goodwin & Goodwin (1991) FLC 92-192
Harris & Caladine (1991) FLC 92-217
Harris & Dewell (2018) FLC 93-839
Harris & Harris (1991) FLC 92-254
Hickey & Hickey (2003) FLC 93-143
Ho v Grigor (2006) 151 FCR 236
JEL v DDF (2001) FLC 93-075
Kelly & Kelly (No 2) (1981) FLC 91-108
Kennon & Spry (2008) 238 CLR 366
Mantel & Mantel [2020] FamCA 157
Martin & Newton (2011) FLC 93-490
Milankov & Milankov (2002) FLC 93-095
Mills v Mills (1938) 60 CLR 150
Montevento Holdings Pty Ltd v Scaffidi (2012) 246 CLR 325
Ogden & Ogden (2010) 245 FLR 1
Owies v JJE Nominees Pty Ltd [2022] VSCA 142
Pittman & Pittman (2010) FLC 93-430
QYFM v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 279 CLR 148
R v Dovey; Ex parte Ross (1979) 141 CLR 526
R v R [1990] FamCA 50
Re Skeats’ Settlement: Skeats v Evans 91889) 42 Ch D 522
Scaffidi v Montevento Holdings Pty Ltd (2011) 6 ASTLR 446
Stages & Wenty [2009] FamCAFC 31
Stanford v Stanford (2012) 247 CLR 108
Webster & Webster (1998) FLC 92-832
White & Tulloch (1995) FLC 93-030
Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285
Number of paragraphs: 236 Date of hearing: 28 – 29 May 2025 Place: Brisbane Counsel for the Applicant: Mr Richardson SC with Mr May Solicitor for the Applicant: Damien Greer Lawyers Counsel for the First Respondent: Mr North SC with Mr Wraith Solicitor for the First Respondent: Suke and Associates Counsel for the Second, Third, Fourth and Fifth Respondents: Mr Williams KC with Ms Horsley Solicitor for the Second, Third, Fourth and Fifth Respondents: Hartley Family Law The Sixth Respondent: No appearance The Seventh Respondent: No appearance The Eighth Respondent: No appearance ORDER
BRC 2242 of 2024 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS CALDWELL
Applicant
AND: MR CALDWELL
First Respondent
B PTY LTD AS TRUSTEE FOR B TRUST
Second Respondent
C PTY LTD AS TRUSTEE FOR C TRUST (and others named in the Schedule)
Third Respondent
ORDER MADE BY:
CAREW J
DATE OF ORDER:
30 JULY 2025
THE COURT ORDERS THAT:
1.Paragraph 2A of the Further Amended Initiating Application filed on 28 October 2024 is dismissed.
2.The question of the parties’ costs of and incidental to an Application in a Proceeding filed on 4 April 2025 and the appearance on 20 November 2024 are reserved to the trial judge.
3.The matter is listed for a case management hearing before Judicial Registrar Brooks on 5 August 2025 at 11.00 am.
4.All parties and practitioners have leave to appear at the case management hearing before Judicial Registrar Brooks via Microsoft Teams video.
NOTATIONS:
A.There is no Court by the name “Federal Circuit and Family Court of Australia”. This Court was formerly known as the Family Court of Australia and is now known as the Federal Circuit and Family Court of Australia (Division 1).
B.The design of the seal affixed to this Order issued by the Federal Circuit and Family Court of Australia (Division 1) was determined by the Attorney-General pursuant to the undated Federal Circuit and Family Court of Australia (Seal) Determination 2021 signed by the Attorney-General.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth). In addition to the use of pseudonyms for the parties, other changes have been made to the published judgment to protect the identity of a party or a witness. Such changes (other than when a letter is used instead of a name or an address) are apparent on the face of the judgment by the use of square brackets.
REASONS FOR JUDGMENT
CAREW J:
1 The substantive proceedings involve an application between parties to a marriage, Ms Caldwell (“the wife”) and Mr Caldwell (“the husband”), for a property settlement pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”). Additional parties have been joined to those proceedings and the matter has proceeded by way of pleadings.
2 By order made on 8 November 2024 by Baumann J, the matter was listed for a discrete hearing pursuant to r 10.10 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“rules”), with the consent of the parties.
3 Rule 10.10 of the rules relevantly provides:
(1) A party may apply for a decision on any issue, if the decision may:
(a) dispose of all or part of the proceeding; or
(b) make a trial unnecessary; or
(c) make a trial substantially shorter; or
(d) save substantial costs.
4 The discrete hearing raises some interesting legal questions in the context of an application by the wife for a declaration that certain discretionary trusts and/or the assets of the trusts are property of the parties to the marriage or either of them within the meaning of s 79 of the Act. The question of the parties’ costs of and incidental to an Application in a Proceeding filed on 4 April 2025 and the appearance on 20 November 2024 were also reserved to the discrete hearing,[1] but as no mention was made of those costs during the discrete hearing and no submissions were directed to it in the written outlines the issue of those costs will be reserved to the trial judge.
[1] Order made on 9 April 2025.
5 In summary, the issues that arise for my determination are as follows:
(a)Does the Court have jurisdiction (or power) to make the declaration sought?
(b)Does the husband have control of the trusts i.e. the ability to treat them as his own?
(c)If the husband does have control of the trusts, does his control and the power to distribute income and capital to himself necessarily result in the trusts and/or the assets of the trusts being property of the parties to the marriage or either of them within the meaning of s 79?
6 For reasons to be explained, the wife’s application will be dismissed as I have found that the trusts and/or assets of the trusts are not property of parties to the marriage or either of them within the meaning of s 79 of the Act.
BRIEF BACKGROUND
7 By way of brief background, the wife and husband were married for approximately 30 years before separating in early 2022. They divorced on [redacted] 2023.
8 They have three adult children, namely, Mr G born [redacted] 1993, Mr H born [redacted] 1997 and Ms J born [redacted] 2006. Mr G and Mr H are the seventh and eighth respondents respectively in the substantive proceedings.
9 The husband’s father was Mr K (“Mr K”), who died on [redacted] 2022, and his mother is Ms K (“Ms K”).
10 The husband has three siblings, Ms L, Mr M, and Ms N.
11 The Caldwell [redacted] business was established in [the early 1900s] by the husband’s great grandfather. The business was carried on by the husband’s grandfather and then by his father, Mr K, and since Mr K’s death, the business has been carried on predominantly by the husband, Mr G, and Mr H.
12 In the husband’s Points of Defence filed 30 September 2024 he says, among other things:
2. …
b) …[Mr K] inherited a [redacted] business from his father [redacted], who in turn inherited [the family] business from his father [redacted];
c) the [family] business … began in [the early 1900s] and is presently conducted by a group of related companies and trusts, including the companies [B Pty Ltd], [C Pty Ltd], and [D Pty Ltd] and the Trusts they administer;
…
13 The husband has spent his adult life working in the Caldwell business and it is common ground that he has been well remunerated for his various roles and that he has received other benefits from the trusts from time to time including by way of the provision of loans which were later forgiven.
14 The second respondent is B Pty Ltd as trustee for the B Trust (“B Trust”).
15 The third respondent is C Pty Ltd as trustee for the C Trust (“the C Trust”).
16 The fourth respondent is D Pty Ltd as trustee for the D Trust (“the D Trust”).
17 The fifth respondent is E Pty Ltd as trustee for the E Trust (“E Trust”). The wife includes a claim for 35 per cent of the net value of the assets of the E Trust in her Further Amended Initiating Application filed on 28 October 2024, although her pleading does not identify any basis for this claim.
18 When referred to collectively, the three trusts, the subjects of this discrete hearing, i.e. the B Trust, the C Trust, and the D Trust, will be referred to as “the trusts”.
19 The sixth respondent in the substantive proceedings is F Pty Ltd (“F Pty Ltd”).
20 Prior to his death, Mr K was the sole appointor of the trusts and sole shareholder of the A Class shares in the corporate trustees of the trusts, being the only shares with voting rights.
21 Mr K left a Will (dated [redacted] 2018) and two codicils (dated [redacted] 2020 and [redacted] 2021) that were the subject of a grant of probate made on [redacted] 2023. By clause 6 of the Will, as amended by clause 1 of the second codicil, Mr K left his shares in various companies including the trustee companies, B Pty Ltd, C Pty Ltd, and D Pty Ltd to the husband, Mr G, and Mr H as joint tenants.
22 Clause 16 of the Will was deleted by clause 3 of the second codicil and replaced with the following:
16. I have discussed with my family at various times over the years the origins of the [Caldwell] business and the intention of my father and me that the [Caldwell] Business remains within the [Caldwell] family. The overall purpose and intent is that the [Caldwell] Business upon my demise should go to and be under the control of [the husband, Mr G and Mr H] or the survivors of them acting jointly. [The husband, Mr G and Mr H] are and have been working in and directing the business and I consider that all three of them should have the privilege and opportunity to take the [Caldwell] Business into the future.
23 The main asset of the B Trust is its shareholding in O Pty Ltd. O Pty Ltd owns all the shares in P Pty Ltd, which owns all the shares in Q Pty Ltd. Q Pty Ltd, in turn, owns all the shares in the following companies (which operate retail businesses):
(a)Caldwell Pty Ltd;
(b)R Pty Ltd;
(c)S Pty Ltd; and
(d)T Pty Ltd.
24 The main asset of the C Trust is a property at [redacted], Brisbane.
25 D Trust owns 75% of the units in the E Trust (which holds an interest in a property at [redacted, Brisbane]).
26 It is uncontentious that the property held within the trusts was acquired by, and through the efforts of, Mr K and his predecessors. By way of example:
(a)Caldwell Pty Ltd was registered in 1947, Q Pty Ltd in 1951, P Pty Ltd in 1970, and O Pty Ltd in 2016;
(b)The two major retail [redacted] businesses now operated by those entities, being:
(i)[The Caldwell business], was first established by the husband’s great grandfather in [the early 1900s], and has grown in the [redacted] years since; and
(ii)S, was acquired in late 1997 (with S Pty Ltd being registered around that time);
(c)[The redacted property described at paragraph 24], Brisbane was purchased in or around October 1982 (the property is unencumbered with mortgages obtained in 1997 and 2001 released in 2002); and
(d)[The redacted property described at paragraph 25] was purchased in March 1997 (the property has been unencumbered since its acquisition).
27 It is also uncontentious that the property of the husband and wife or either of them, outside the trusts, is substantial with an estimated value of approximately $16,000,000 – $22,000,000.
WHAT RELIEF IS SOUGHT?
28 The wife seeks the following discrete relief:[2]
2A. A declaration that the:
(a) [B] Trust and/or its assets;
(b) [C] Trust and/or its assets; and/or
(c) [D] Trust and/or its assets,
are property of the parties to the marriage or either of them within the meaning of s 79 of the [Act].
[2] Further Amended Initiating Application filed 28 October 2024 at [2A].
29 Relevantly, s 79 of the Act empowers the Court to make such order as it considers appropriate: in the case of proceedings with respect to the property of the parties or either of them – altering the interests of the parties to the marriage in the property. The Court must not make an order unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
30 ‘Property’ in relation to the parties to a marriage or either of them is defined in s 4 of the Act and means “property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion”.
31 The purpose of the declaration sought by the wife appears to be in furtherance of part of the final relief sought by her in the Further Amended Initiating Application filed on 28 October 2024:
47. The Husband must immediately do all acts and things and sign all documents to remove the Seventh Respondent [Mr G] and the Eighth Respondent [Mr H] from the role of appointer / principal / trust guardian from the [B] Trust, the [C] Trust, the [D] Trust and the [E] Trust and thereafter until the Wife has been paid pursuant to these orders the husband is restrained from appointing any other person or entity as an appointer / principal/ trust guardian to the [B] Trust, the [C] Trust, the [D] Trust and the [E] Trust or appointing any other trustee to the [B] Trust , the [C] Trust, the [D] Trust and the [E] Trust other than in compliance with these orders .
48. The Husband must immediately do all acts and things and sign all documents necessary to appoint the Sixth Respondent [F] Pty Ltd as trustee of [B] Trust, the [C] Trust, the [D] Trust and the [E] Trust and cause and declare a distribution of capital to the husband in the sum as determined in these proceedings to satisfy, in cash, a division equal to 35% of the nett value of the assets held by each of [B] Trust, the [C] Trust , the [D] Trust and the [E] Trust.
49. Upon the Husband receiving the distribution of funds or property pursuant to the previous Order he must immediately do all acts and things necessary pursuant to s79 of the Family Law Act 1975 to transfer such property to the Wife or as directed by the Wife in writing.
(As per the original)
32 The husband opposes the making of the declaration sought by the wife and submits that “what the wife seeks is in effect to compel the conjuring into existence of new property interests where none currently exist”. He contends that there is no jurisdiction to make the declaration sought but even if there were, if he exercised the powers sought by the wife he would be acting in breach of the ‘proper purpose rule’. It is nevertheless conceded by the husband that the trusts’ assets represent a financial resource to him, for the purposes of s 79 of the Act.
33 The trusts and the E Trust oppose the making of the declaration and largely adopt the submissions of the husband. In the Amended Response filed on 26 May 2025 to the wife’s Further Amended Initiating Application, the trusts, the E Trust, Mr G and Mr H seek, among other things, a final order in the following terms:
3. It is declared that:
a. the [B] Trust;
b. the [C] Trust;
c. the [D] Trust;
d. the property of those Trusts listed above;
is not property of the parties to the marriage or either of them within the meaning of s 79 of the [Act].
34 Mr Williams, King’s Counsel for the trusts and the E Trust, submitted that such a declaration would be unnecessary if the wife’s application for a declaration is dismissed.
35 Neither the sixth respondent, nor Mr G (in his personal capacity), nor Mr H (in his personal capacity) were represented at the discrete hearing, although I was informed by Mr Richardson, senior counsel for the wife, that the solicitors for Mr G and Mr H were present in Court. Notwithstanding their failure to formally participate in the discrete hearing, I note that the written outline of submissions filed on 23 May 2025 are represented to be on behalf of the trusts, the E Trust, and Mr G and Mr H. Further, the trusts and the E Trust rely on affidavits filed on 14 April 2025 by Mr G and Mr H. The sixth respondent does not appear to have any interest in the declaration sought by the wife.
36 It is uncontentious that all parties in the substantive proceedings will be bound by the outcome of this discrete hearing.
37 The wife does not identify a section of the Act or the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“FCFCOA Act”) Act to support the relief sought in clause 2A of her Further Amended Initiating Application. As earlier noted, all parties agreed to the listing of clause 2A as a discrete hearing. The alleged absence of jurisdiction to make the declaration did not arise as an issue until shortly prior to the discrete hearing. The husband advances his argument that the declaration sought by the wife must be reliant on s 78 of the Act, and that the Court lacks jurisdiction because s 78 can only declare “existing title or rights” (emphasis added).
38 On the first day of the two-day discrete hearing, there was discussion about whether the Court had jurisdiction to make the declaration pursuant to any other provision of the Act or the FCFCOA Act if not pursuant to s 78 and whether that made any difference. There was also some discussion about whether a declaration was needed at all and whether, when the matter was set down for a discrete hearing, it was really to determine an initial issue, namely, whether the trusts or trust assets are property for the purposes of s 79. Mr North, senior counsel for the husband, suggested that if that were so, then the wife would need to amend her application.
39 The wife rather audaciously suggests that if the Court’s jurisdiction is found wanting she would seek an order that the husband pay her costs of and incidental to the discrete hearing on an indemnity basis.
40 Irrespective of when a jurisdictional issue is raised by a party, it remains the first duty of a court to be satisfied of its own jurisdiction.[3]
[3] QYFM v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 279 CLR 148 at [27], [92].
41 While nothing may turn on the distinction for present purposes, it seems to me that the issue is one as to the ‘powers’ rather than the ‘jurisdiction’ of the Court. In Harris vCaladine,[4] Toohey J discussed the relationship between ‘jurisdiction’ and ‘power’ noting that the distinction between them is often blurred and said that “[j]urisdiction is the authority which a court has to decide the range of matters that can be litigated before it; in the exercise of that jurisdiction a court has powers expressly or impliedly conferred by the legislation governing the court and such powers as are incidental and necessary to the exercise of the jurisdiction or the powers so conferred”.[5]
[4] (1991) FLC 92-217 (‘Harris & Caladine’).
[5] Ibid at 78,493.
42 In my view, as the substantive proceedings are property settlement proceedings under s 79 of the Act, I have jurisdiction to determine whether the trusts and/or trust assets are property for the purposes of s 79, whether that be by way of making a declaration or by simply making a decision on an issue in the s 79 proceedings pursuant to r 10.10 of the rules. Whether I have the ‘power’ to grant the relief sought by the wife is perhaps the matter in contention.
THE TRUSTS
43 Before turning to consider the declaration sought by the wife, it will be helpful to summarise the relevant history of the trusts, the purpose of the trusts and the powers of the trustees. The trusts are what are commonly referred to as ‘discretionary trusts’ – a term that has “no fixed meaning and is used to describe particular features of certain express trusts” where there is no “obligation on the part of the trustee to apply any of the income or capital of the Trust to any of the beneficiaries at any time” and thus it is described as “purely discretionary”.[6]
[6] Kennon & Spry (2008) 238 CLR 366 at 386 per French CJ – footnotes omitted (‘Kennon & Spry’).
B Trust
44 The B Trust was established on [redacted] September 2016. Mr K was the original appointor and primary beneficiary. The husband was the only secondary beneficiary. Tertiary beneficiaries included a spouse, grandparent, parent, brother, sister, children, and grandchildren of the primary and secondary beneficiaries.
45 The trustee of the B Trust is B Pty Ltd.
46 The three directors of B Pty Ltd are Ms L (the husband’s sister), appointed on [redacted] October 2022, Mr G and Mr H (the sons of the husband and wife), both appointed on [redacted] June 2023. The husband has never been a director of this company.
47 The shareholders of the trustee are the husband, Mr G, and Mr H who jointly own one of one A class shares and one of one ordinary shares, with the husband’s name appearing first in the register of members. Prior to Mr K’s death, he was the sole owner of the A class share.
48 The A class share has voting rights but not the ordinary share.
49 At a general meeting only the vote of the first named person on the register, where shares are held jointly, is accepted to the exclusion of the other joint holders.
50 Directors can be removed and appointed by an ordinary resolution of the company subject to the power of the husband to appoint, remove, and appoint a replacement director provided that the nominee is a family member (including himself).
51 The husband, Mr G and Mr H are the appointors of the trust with the power to remove the trustee.
52 Under the B Trust deed, the trustee has broad powers to distribute income and capital to the beneficiaries including to the husband, in whatever proportions the trustee decides. The powers of the trustee are not limited or restricted in any way and all powers set out in the trust deed are to be construed as widely as possible. The trustee has the power to enter into contracts and arrangements, and the trustee is not liable to account to the trust for any profit or loss thereby derived. As the trustee is a corporation, its powers are exercised by a resolution of its board of directors.
53 Clause 25.1 of the trust deed prohibits the distribution of income or capital to a beneficiary who is an excluded beneficiary at the date of distribution. Prior to [redacted] June 2019, the wife was not an excluded beneficiary, as relatives (including a spouse) of Mr K and the husband were potential beneficiaries.
54 On [redacted] June 2019, the definition of ‘excluded beneficiaries’ was varied to include “a person who is not a direct lineal descendant of [Mr K]” and extends to any company whose directors and shareholders are not direct lineal descendants of Mr K, and a trust whose beneficiaries are not all direct lineal descendants.
55 On [redacted] April 2021, clause 19 of the trust deed was varied so that upon the death of Mr K (who was at that time the sole appointor), the husband, Mr G, and Mr H would become joint appointors (as has occurred). Any power, discretion, or authority exercisable by the appointor must, where more than one person is appointor, be exercised by those persons jointly and unanimously. However, the husband, at his absolute discretion, and without being required to give any reasons, can remove either or both of Mr G and Mr H as appointors and nominate and appoint one or more replacements.
C Trust
56 The C Trust was established on [redacted] September 1982. The principal was Mr K. The primary beneficiaries are the husband and his three siblings. The trust deed limits the beneficiaries to direct lineal descendants of Mr K.
57 Recital B to the trust deed provides as follows:
The Settlor has become aware of the desire of [Mr K] to ensure that sound financial provision is made for certain members of his family and for the future operation and administration of part of the [Caldwell] Family Business …
(Emphasis in original)
58 The trustee of the C Trust is C Pty Ltd.
59 The three directors of C Pty Ltd are the husband, appointed on [redacted] February 2021, Mr G and Mr H, both appointed on [redacted] June 2023. Mr K was a director from 1993 until his death. Ms K was a director from 1993 until [the day after Mr G and Mr H were appointed in] June 2023.
60 The shareholders of the trustee are the husband, Mr G, and Mr H who jointly own one of one A class shares, with the husband’s name appearing first in the register of members, and 9,900 of 10,000 ordinary shares. Ms K (the husband’s mother) owns the remaining 100 of the 10,000 ordinary shares.
61 Only the A class shareholders have voting rights.
62 At a general meeting, only the vote of the first named person on the register, where shares are held jointly, is accepted to the exclusion of the other joint holders.
63 Directors can be removed and appointed by an ordinary resolution of the company subject to the power of the husband to appoint, remove, and appoint a replacement director provided that the nominee is a family member.
64 Under the C Trust deed, the trustee has broad powers to distribute income and capital to the beneficiaries including to the husband and in such proportions as the trustee shall in its absolute discretion think fit. The trustee may exercise its powers and discretions notwithstanding a personal interest.
65 By clause 22 the trust fund was established:
… for the exclusive benefit of direct lineal descendants of [Mr K] and no person who is not a direct lineal descendent of [Mr K] shall be permitted by the Trustee to be a Beneficiary of the Trust Fund or to receive any benefit whether direct or indirect therefrom. No company or corporation shall be a Beneficiary of the Trust Fund unless all of the shareholders are direct lineal descendants of [Mr K] nor shall any Trust be a Beneficiary unless all of the potential or stated Beneficiaries thereof are similarly direct lineal descendants of [Mr K]. Notwithstanding the provisions of this Deed dealing with alterations or amendments no alteration or amendment shall be made which would have the effect of any person not being a direct lineal descendant of [Mr K] taking any benefit whether of income or capital and whether direct or indirect from the Trust Fund.
(Emphasis in original)
66 On [redacted] June 2019, the trust deed was varied to, among other things, insert a clause excluding as potential beneficiaries any person who is not a direct lineal descendant of Mr K, any company in which all directors and shareholders are not direct lineal descendants of Mr K, and any trust in which all beneficiaries are not direct lineal descendants of Mr K. Only direct lineal descendants are entitled to receive any benefit, direct or indirect, from the trust.
67 On [redacted] August 2021, clause 23 of the trust deed was varied so that upon the death of Mr K (who was at that time the sole principal), the husband, Mr G, and Mr H would become joint principals (as has occurred). Any power, discretion, or authority exercisable by the principals must, where more than one person is principal, be exercised by those persons jointly and unanimously. However, the husband, at his absolute discretion, and without being required to give any reasons, can remove either or both of Mr G and Mr H as principals and nominate and appoint one or more replacements.
D Trust
68 The D Trust was established on [redacted] June 1993.
69 The trustee of the D Trust is D Pty Ltd.
70 The three directors of D Pty Ltd are the husband, appointed on [redacted] February 1993, Mr G and Mr H, both appointed [redacted] June 2023. Mr K was a director from 1998 until his death. Ms K was a director from 2008 until [the day after Mr G and Mr H were appointed in] June 2023.
71 The shareholders of the trustee are the husband, Mr H, and Mr G who jointly own one of one A class shares with the husband’s name appearing first in the register of members and 10,000 of 20,000 ordinary shares. Ms K owns the remaining 10,000 of 20,000 ordinary shares. Prior to his death, Mr K owned the A class share and 10,000 of 20,000 ordinary shares.
72 Only the A class share has voting rights at a general meeting and, where the share is jointly held, only the vote of the first named person on the register is accepted to the exclusion of the others.
73 Directors can be removed and appointed by an ordinary resolution of the company subject to the power of the husband to appoint, remove, and appoint a replacement director provided that the nominee is a family member.
74 Under the D Trust deed, the trustee has broad powers to distribute income and capital to the beneficiaries including to class A beneficiaries, being the husband and his three siblings. The trustee may exercise its powers and discretions notwithstanding a personal interest.
75 On [redacted] June 2019, the trust deed was varied to, among other things, insert a clause excluding as potential beneficiaries any person who is not a direct lineal descendant of Mr K, any company in which all directors and shareholders are not direct lineal descendants of Mr K, and any trust in which all beneficiaries are not direct lineal descendants of Mr K. Only direct lineal descendants are entitled to receive any benefit, direct or indirect, from the trust.
76 On [redacted] April 2021, clause 26 of the trust deed was varied so that upon the death of Mr K (who was at that time the sole appointor), the husband, Mr G, and Mr H would become joint appointors (as has occurred). Any power, discretion, or authority exercisable by the appointor must, where more than one person is appointor, be exercised by those persons jointly and unanimously. However, the husband, at his absolute discretion, and without being required to give any reasons, can remove either or both of Mr G and Mr H as appointors and nominate and appoint one or more replacements.
THE HUSBAND’S SUBMISSIONS
77 The husband submits that whether the declaration sought by the wife is reliant on s 78 of the Act or some other provision in the Act or the FCFCOA Act or an implied power, such declarations are limited to declaring existing interests under general law and there is no jurisdiction to make the declaration in the circumstances of this case as there are no existing interests.
78 In the circumstances of this case, the husband argues that it would not be appropriate to make a declaration in the terms sought, even if otherwise available, unless and until the husband exercises the powers said to give rise to the degree of control necessary or has indicated by his words or conduct an intention to do so. The declaration as sought, therefore remains, hypothetical and should not be made. The husband cites Ainsworth v Criminal Justice Commission,[7] in support of his submission, where the High Court said:
It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which “[i]t is neither possible nor desirable to fetter ... by laying down rules as to the manner of its exercise.” However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. The person seeking relief must have “a real interest” and relief will not be granted if the question “is purely hypothetical”, if relief is “claimed in relation to circumstances that [have] not occurred and might never happen” or if “the Court's declaration will produce no foreseeable consequences for the parties”.
(Footnotes omitted)
[7] (1992) 175 CLR 564 at 581-582.
79 The husband argues that it is implicitly acknowledged in the relief sought in paragraphs 47 and 48 of the wife’s Further Amended Initiating Application, which require him to exercise certain powers, that “[w]hatever may be the consequence of him exercising powers in the future they do not result in him today having an existing proprietary interest in the trusts or their assets”.
80 What the wife seeks to do, in the husband’s submission, is to bring into existence new property interests that do not currently exist, contrary to the Full Court decision in B Pty Ltd v K[8]. In that case, the Full Court upheld an appeal against orders permitting a wife to join various third-party trustees so that she could seek orders against them that they make capital distributions to her husband pursuant to s 90AE of the Act. The Full Court said:
23. The orders sought by the wife against the trustees seek, not to divide, but to increase the present property of the parties. …
[8] (2008) FLC 93-380 at 82,796 [10], [11], 82,797 [23], 82,804 [63].
81 The husband seeks to extend the application of B Pty Ltd v K to the circumstances of the current case, where he argues the wife seeks to create new property interests by compelling the husband to exercise fiduciary or trust powers reposed in him by his father in such a way as to “disenfranchise” Mr G and Mr H, and to compel the distribution of assets from trusts that were neither created by the husband and/or wife nor hold assets produced solely or even substantially by the labours of the husband and/or wife. Further, the husband submits that the orders sought by the wife ignore the obligations constraining how the fiduciary or trust powers are to be exercised.
82 Section 78 of the Act relevantly provides:
78(1) In proceedings between the parties to a marriage with respect to existing title or rights in respect of property, the court may declare the title or rights, if any, that a party has in respect of the property.
(Emphasis added)
83 Reliance is placed by the husband on the Full Court in Hickey & Hickey,[9] where it was said at [38]:
Section 78 confers on the court what is essentially the jurisdiction previously exercised by state courts under the various state equivalents of s 17 of the English Married Women’s Property Act 1882 (UK). The section empowers the courts to declare existing interests in property according to the general principles of law and equity and to make consequential orders to give effect to the declaration. The power so conferred is entirely discretionary … However, the section empowers a court to make a declaration only with respect to existing title or rights in respect of property and to make any necessary consequential orders. The section does not allow a court to alter existing rights; such a power is contained in s. 79. Thus, a declaration under s. 78(1) is an order which determines the existing title or rights of parties to a marriage in respect of property …. By contrast s. 79 confers power upon the court to make orders altering the interests of parties in property, having regard to the matters referred to in s. 79.
(Citations omitted)
[9] (2003) FLC 93-143 at 737 [38].
84 The husband equates the task to be undertaken in s 78 of the Act with the first step in proceedings pursuant to s 79, i.e. to determine existing interests under the general law. In Stanford v Stanford,[10] the High Court said at [37] and [39]:
37First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to “altering the interests of the parties to the marriage in the property”…
…
39… Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be “decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses”. …
(Emphasis in original)
[10] (2012) 247 CLR 108.
85 It is submitted by the husband that as the declarations sought by the wife are not founded in ordinary common law and equitable principles that would apply to persons who are not spouses, there is no existing authority in common law or equity that would support the declaration sought.
86 Although not directly relevant for present purposes, I note that s 79 of the Act was recently amended, to insert the following:
(3) In considering what order (if any) should be made under this section in property settlement proceedings, the court:
(a) is to identify:
(i)the existing legal and equitable rights and interests in any property of the parties to the marriage or either of them; and
(ii) the existing liabilities of the parties to the marriage or either of them.
87 Unlike the first step in Stanford, the amendment does not qualify the identification of existing legal and equitable rights and interests “according to ordinary common law and equitable principles”. The amendment also includes a requirement not only to identify “existing legal and equitable interests” but also “rights” in any property.
88 While conceding that in appropriate cases, the Court may treat the combination of a power of a spouse-party to apply the assets of a discretionary trust coupled with a right of themselves or the other spouse-party to be considered for benefit, as if the assets of the trust were property of the spouse parties or either of them (for the purpose of s 79 of the Act), the husband argues that it does not follow that trusts or their assets are property of the parties to the marriage. Further, even in such cases where the assets of a trust are treated as if they were property, the husband submits that factors other than control will inform any decision to do so e.g. the history of the trust, the origin of the assets, and apparent purpose of the trust etc. The husband refers to a number of authorities which will be considered seriatim.
89 In Ashton and Ashton (“Ashton”),[11] it was conceded that the husband was in full control of the assets of the trust and had been applying the assets and the income of the trust as he wished and for his own benefit. The husband had established the trust early in the marriage and throughout the marriage had dealt with the assets, for practical purposes, as if they were his property. The trust was found to be no more than the husband’s alter ego but even on the construction of the trust deed the husband had power to appoint himself as trustee and could be both appointor and trustee. The wife was a potential beneficiary. Although the husband was an excluded beneficiary, the Court found that as he had the power to establish a company as a beneficiary in which his current wife and/or child were shareholders there was no impediment to him being the majority shareholder in such a company. As such, the Court found he had full access to the benefits of the trust. The Full Court (Strauss J, with whom Ellis and Emery JJ agreed) held at page 75,653:
In the result, having regard to the powers and discretions which the husband has, and having regard to what has in fact taken place, for the purposes of sec. 79, the husband's power of appointment, and all the attributes it carries with it, amounts to de facto ownership of the property of the trust. His Honour’s order that he should appoint himself trustee so as to make a requisite payment was not contrary to the trust deed on its proper construction, nor did it require the husband to deal with property which was not his own. … The powers which the husband has in the Ashton Family Settlement give him control of the trust either as trustee or through a trustee which is his creature, and at the same time he is able to apply all the income and property of the trust for his own benefit. In my opinion, in a family situation such as the one here, this court is not bound by formalities designed to obtain advantages and protection for the husband who stands in reality in the position of the owner. He has de facto legal and beneficial ownership. …
(Citations omitted)
[11] (1986) FLC 91-777.
90 Special leave to appeal to the High Court was refused.
91 Ashton was followed in Davidson and Davidson (No 2) (“Davidson”),[12] where the Full Court held that the terms of the family trust deed coincided closely with those in Ashton, and that although the husband was excluded as a beneficiary, the power under the trust deed to distribute capital to a company in which his current wife was a shareholder meant that he could distribute capital to a company in which he held a majority shareholding thereby giving him effective benefit to any distribution. The trust had been established by the husband during the marriage and into which the husband transferred the shareholding of a family company which had operated the parties’ family business. The Full Court endorsed the description (used in Ashton) of the husband having “the de facto ownership of the trust property”. The trust deed included a clause which gave the trustee “the same powers in relation to the Trust Fund in all respects as if it were the absolute owner beneficially entitled thereto …”. The trustee company was found to be the “creature” of the husband and to be regarded as his “alter ego”. The trust was also found to be a “‘creature’ of the husband”. The trustee was absolved from any liability for any loss or damage not attributable to the trustee’s own fraud or dishonesty. The wife was named in the trust deed as a potential beneficiary. The husband was ordered to pay a sum to the wife which was calculated by including the value of the trust assets. In that case, the trust assets were sourced from assets originally acquired by the husband and wife during their marriage and through their joint efforts. Special leave to appeal to the High Court was later refused,[13] with Mason CJ saying on behalf of the Court:
We are not persuaded that there was an error of principle on the part of the Full Court of the Family Court in concluding that the applicant [husband] could cause the trustee company to apply the capital of the trust fund for the benefit of the respondent [wife] or for the benefit of a company in which he was a shareholder, so long as a beneficiary is a shareholder.
The primary judge found as a fact that the trustee company was a creature of the applicant and the provisions of the trust deed are well open to an interpretation which supports the conclusion reached by the Full Court.
[12] (1991) FLC 92-197.
[13] Davidson v Davidson (1991) 8 Leg Rep SL 1 at 1.
92 Goodwin & Goodwin (“Goodwin”),[14] also followed Ashton, and dismissed an appeal against an order that the wife receive 10 per cent of a property pool which included the value of assets held in a family discretionary trust controlled by the husband. The husband in that case was a property developer who had established a discretionary trust to hold various assets acquired prior to the marriage through his efforts. The Full Court endorsed the findings of the trial judge, that in reality no person other than the husband had any real interest in the property or income of the trust except at the will of the husband and that the husband controlled the trustee. Historically, only the husband and/or the wife had benefited from distributions from the trust other than after separation when the husband made distributions to his relatives. Under the trust deed the trustee, found to be controlled by the husband, had unrestricted power to make alterations or to add or remove beneficiaries. The wife was removed as a potential beneficiary after separation and the husband conceded that it had been his decision to do so. The Full Court made, what was later described by French CJ in Kennon& Spry,[15] as an “unremarkable proposition”, namely:[16]
…[T]he 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.
[14] (1991) FLC 92-192.
[15] Kennon & Spry (fn 6) 389 at [57]. See also Harris & Dewell (2018) FLC 93-839 (‘Harris & Dewell’).
[16] Goodwin (fn 14) at 78,273 quoting R v R [1990] FamCA 50 (Simpson, Strauss & Smithers JJ) at 30.
93 In Webster & Webster,[17] two trusts were established during the marriage as a consequence of the wife receiving a substantial inheritance. The trial judge found that one trust was established with the intention of benefitting the parties’ children and the wife undertook not to make a distribution other than to the children of the marriage. The trial judge treated that trust, valued at $5,000,000, as a financial resource but not property of the wife. The value of the other trust was included as an asset of the wife although discounted its value because of the life interest of the wife’s mother. The husband appealed against the failure to find that the $5,000,000 trust was the alter ego of the wife and thereby an asset of the wife, the value of which should have been included in the pool of assets available for distribution. The Full Court endorsed the principles enunciated in Ashton, but held that while it may have been open to the trial judge to “find that the trust property was to be treated, in the circumstances of this case, as the property of the wife”, given that it was the intention of both parties that the children would have an interest in the property or income of the trust and certain undisputed facts relating to the circumstances leading to the establishment of the trust, it was open to the trial judge “in the somewhat unusual circumstances of this case, to conclude that the trust property should be taken into account in the proceedings as a financial resource of the wife and not as her property”.[18]
[17] (1998) FLC 92-832.
[18] Ibid at [109].
94 In JEL v DDF,[19] the husband and wife had established a company and trust structure during the marriage through which they operated several endeavours. The value of the trusts’ assets was included in the pool of property available for adjustment. In doing so, the trial judge said that her conclusion rested on an analysis of the trust deeds and the historical dealings of the trust property and income. The trial judge found that the husband and wife controlled the trustee companies and had power under the trust deeds to distribute any or all of the income or capital of the trusts to one or both of them in their absolute discretion. Further, that any other potential beneficiaries had no rights to income or capital other than at the ultimate discretion of the husband and the wife. The appeal did not challenge the inclusion of the trust assets in the property pool but rather the failure to provide an indemnity to the husband for the risks posed that other potential beneficiaries of the trust might bring legal proceedings against him for using his position as trustee to advance his own interest. The Full Court rejected the husband’s argument holding that any risks faced by the husband were “more illusory than real”.[20]
[19] (2001) FLC 93-075.
[20] Ibid at [203].
95 In Kelly & Kelly (No 2) (“Kelly (No 2)”),[21] the trial judge had concluded that the assets of a company and of a trust were a financial resource (but not property) of the husband as he had de facto control over the company and trust to draw upon them as he had done for his benefit and that of the family during the marriage. The husband’s appeal failed. The husband challenged the factual finding that he had de facto control over the company and the trust. The Full Court found that the term ‘property’ was not broad enough in that case to include the assets of the company and the trust, as the husband could not assert any legal or equitable right in respect of them. The Full Court accepted that “the financial resource of the husband was not the capital asset value, but the financial benefit he derived from those assets in whatever form, either to relieve him of an obligation or to supply some want or deficiency which he would otherwise have to meet from his, own funds”.[22]
[21] (1981) FLC 91-108.
[22] Ibid at 78,806.
96 In Kennon v Spry, when referring to Kelly (No 2), French CJ explained the decision as one “in which the husband had neither a legal nor a beneficial interest”.[23]
[23] Kennon v Spry (fn 6) at [55].
97 The husband submits that the approach taken by the Full Court in the authorities discussed above, “falls short of determining that the trusts or their assets were property of a spouse and was entirely consistent with earlier and more general observations by members of the High Court”. For example, the husband refers to R v Dovey; Ex parte Ross (“R v Dovey”),[24] where Gibbs J (as his Honour then was), with whom Barwick CJ and Mason J (as his Honour then was) agreed, said at page 534:
It is impossible to suppose that the Parliament intended that a husband might place the matrimonial home beyond the jurisdiction of the Family Court simply by vesting it in a private company which he himself controls: such a result would make it impossible for the Family Court properly to perform its functions in many cases.
[24] (1979) 141 CLR 526 (‘R v Dovey’).
98 As to the extent of control necessary, the husband cites Harris v Dewell,[25] and submits that the extent of control necessary before the assets in a company or trust can properly be treated as assets of a party to the marriage is such that the company and/or trust is “… nothing but a party to the marriage in another guise …”.[26]
[25] Harris & Dewell (fn 15).
[26] Ibid at 1,337 [43].
99 Relevantly, in Harris v Dewell, the wife challenged the findings of a trial judge that the assets of a unit trust were not the husband’s property for the purposes of s 79 of the Act. The wife had argued that the unit trust was the puppet or creature of the husband by reason of the extent of his control over it. The trust had been established in 1981, five years prior to the spouse parties commencing cohabitation, a fact noted by the Full Court in its judgment. The trustee was a company incorporated in 1981 and the husband’s father held 67 per cent of the shares and the husband held the balance. The sole director of the trustee was a solicitor retained by the husband. The Full Court held that the husband did not have powers pursuant to the trust deed or through the trustee company to effect a distribution of trust assets to him or to the wife and dismissed the wife’s appeal.
100 The husband submits that Ashton, Goodwin, and Kelly (No 2), were each referred to by French CJ in Kennon v Spry[27] with apparent approval and that Gummow and Hayne JJ with respect to Kelly (No 2) said at [92]:
Subsequently, in In the Marriage of Kelly [No 2], the Full Court remarked that, nevertheless, what had been said in Duff [[28]]as to the definition of “property” was not broad enough to cover the assets held by a family company or held by trustees of a discretionary trust. That may be accepted but, as will appear, will not be a sufficient answer to issues arising on these appeals.
(Footnotes omitted)
[27] Kennon v Spry (fn 6) at [55], [56], [57].
[28] Duff and Duff (1977) FLC 90-217.
101 The husband argues that “[n]ot only does [Kennon v] Spry not support a proposition that a trust or the assets of the trust can be the property of a party to the marriage where that party has the power to allocate those assets to himself or the other party, it is an authority contrary to that proposition”. Kennon & Spry decided, in the husband’s submission, “the power to allocate the property (“control”) together with the entitlement to be considered are each property and subject to other considerations, including to the terms of the trust deed and the contributions to its corpus made by the parties and the purpose served by the trust, capable of supporting an order requiring a party to satisfy an order under s79 from the assets of the trust”.
102 The husband submits that even if it is accepted that the husband has control over the trusts and can distribute benefits to himself or the wife without regard to the interests of others, “that conclusion does not result in a legal conclusion that the trusts or their assets are the property of either the husband or the wife”.
103 Kennon & Spry involved a discretionary trust created in 1968 by a husband, the terms of which were later recorded in an instrument executed in 1981, three years after he married his wife. The class of potential beneficiaries included the husband, his siblings, his and their issue and the spouses of all of them. The husband had the power to vary the terms of the trust and to distribute income and capital to all or any of the beneficiaries. In 1983, the husband varied the trust to remove himself as a potential beneficiary. In 1998, at a time when the marriage was failing, the husband again varied the trust to irrevocably exclude himself and the wife from all interest and rights in the capital of the trust fund and to remove the power to pay or apply the capital of the fund to himself or the wife. The husband and wife separated in 2001. In 2002, the husband established four separate discretionary trusts in identical terms, each relating to one of his four children and distributed to each of those trusts one quarter of all income and capital of the trust.
104 The trial judge accepted that the trust was established well before the marriage but found that the greater part of the assets of the trust had been acquired during the marriage, including the former matrimonial home, and that the trust was maintained to allow the parties to accumulate assets for the benefit of the family in the most tax effective way. The trial judge found that the 1998 and 2002 instruments had been made to defeat an anticipated order for property settlement pursuant to s 106B of the Act and set them aside. The trial judge found that the assets of the trust could be treated as property of the husband for the purposes of s 79 of the Act and included them in the pool of assets available for division between the husband and the wife. The husband was ordered to pay a specified amount to the wife.
105 The Full Court dismissed the husband’s appeal, as did the High Court. With one exception, the findings made by the trial judge were adopted. The finding that the property of the trust could be treated as property of the husband for the purposes of s 79 of the Act was found to be erroneous although not fatal, as the jurisdiction being exercised was over “proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them” (emphasis in original). With the setting aside of the 1998 and 2002 instruments, the wife was reinstated as a potential beneficiary to whom the husband could distribute income and capital.
106 Chief Justice French in Kennon v Spry, identified the question at the heart of that case as – “[whether] interests in or in relation to the assets of the Trust … could answer the description of ‘property of the parties to the marriage’ in s 79(1)” and noted that the term ‘property’ is used in different ways in different statutory contexts, such as for the purpose of revenue legislation.[29] Whether something is property for the purposes of a statute “is one of interpretation”.[30]
[29] Kennon v Spry (fn 6) at 387 [51]-[52], [54], [79].
[30] Ibid at 390 [63].
107 Further, French CJ said that the husband’s “power as trustee to apply the income or capital under the terms of the Trust was not a species of property according to general law but his legal title was” and that “[a]bsent a specific application of Trust capital or income to one of the objects of the Trust, there was no equitable interest in its assets held by anyone”. [31]
[31] Ibid at 386 [48]-[49].
108 French CJ said further at [62]:
In my opinion, the argument advanced on behalf of Mrs Spry should be accepted save that it is the Trust assets, coupled with the trustee’s power, prior to the 1998 Instrument, to appoint them to her and her equitable right to due consideration, that should be regarded as the relevant property. It should be accepted that, in the unusual circumstances of this case and but for the 1998 Instrument and the 18 January 2002 Dispositions, s 79 would have had effective application to the Trust assets. Dr Spry was the sole trustee of a discretionary family trust and the person with the only interest in those assets as well as the holder of a power, inter alia, to appoint them entirely to his wife. This is perhaps not quite the same as the second argument advanced on behalf of Mrs Spry which is accepted by Gummow and Hayne JJ in their joint judgment. But the distinction may not amount to a difference. Even on the second argument the power of appointment and the right to due consideration, absent a legal estate upon which they can operate, are meaningless.
109 The Chief Justice continued at [65] where he said:
Where property is held under such a trust by a party to a marriage and the property has been acquired by or through the efforts of that party or his or her spouse, whether before or during the marriage, it does not, in my opinion, necessarily lose its character as “property of the parties to the marriage” because the party has declared a trust of which he or she is trustee and can, under the terms of that trust, give the property away to other family or extended family members at his or her discretion.
For so long as Dr Spry retained the legal title to the Trust fund coupled with the power to appoint the whole of the fund to his wife and her equitable right, it remained, in my opinion, property of the parties to the marriage for the purposes of the power conferred on the Family Court by s 79. The assets would have been unarguably property of the marriage absent subjection to the Trust.
110 And at [70], French CJ said:
The characterisation of the assets of the Trust, coupled with Dr Spry’s power to appoint them to his wife and her equitable right to due consideration, as property of the parties to the marriage is supported by particular factors. It is supported by his legal title to the assets, the origins of their greater part as property acquired during the marriage, the absence of any equitable interest in them in any other party, the absence of any obligation on his part to apply all or any of the assets to any beneficiary and the contingent character of the interests of those who might be entitled to take upon a default distribution at the distribution date.
111 Chief Justice French described the rights of a potential beneficiary, to consideration as an object of benefaction and to due administration of the trust, as equitable choses in action and agreed with Gummow and Hayne JJ’s characterisation of such rights as part of the wife’s property for the purposes of the Act.[32] However, French CJ observed that the prospect of valuing such rights would be difficult although “might not be beyond the actuarial arts in relation to the right to due consideration”.[33]
[32] Ibid at 393 [75], 394 [78].
[33] Ibid at 394 [78].
112 Consistent with the observations made by French CJ in Kennon v Spry, Gummow and Hayne JJ said that “the term ‘property’ is not a term of art with one specific and precise meaning” and “[i]t is always necessary to pay close attention to any statutory context in which the term is used” and “[i]n particular it is, of course, necessary to have regard to the subject matter, scope and purpose of the relevant statute”.[34]
[34] Ibid at 397 [89].
113 Gummow and Hayne JJ said at [137]-[138]:
… the property of the parties to the marriage or either of them was to be identified as including the right of the wife to due administration of the Trust, accompanied by the fiduciary duty of the husband, as trustee, to consider whether and in what way the power should be exercised. And because, during the marriage, the husband could have appointed the whole of the Trust fund to the wife, the potential enjoyment of the whole of that fund was “property of the parties to the marriage or either of them”. Furthermore, because the relevant power permitted appointment of the whole of the Trust fund to the wife absolutely, the value of that property was the value of the assets of the Trust. In deciding what orders should be made under ss 79 and 80 of the Act, the value of that property was properly taken into account. …
If the husband wishes to satisfy his obligations to the wife under order 4 by recourse to the augmented assets of the Trust then it is open to him to approach the court for an appropriate order to assist him in doing so. …
(Emphasis in original)
114 The husband further submits that due to various constraints on the exercise of his powers as either a director, shareholder, or appointor, he does not have the requisite “control” of the trusts.
115 The constraints relied upon are argued to be:
(a)His fiduciary obligations as a director and trustee;
(b)The operation of the doctrine of fraud on a power/proper purpose rule;
(c)Section 224 of the Corporations Act 2001 (Cth) (“the Corporations Act”) which prohibits voting for a personal benefit; and
(d)Section 232 of the Corporations Act which prohibits oppressive or unfairly prejudicial or unfairly discriminatory behaviour.
116 The husband submits that whether it be by the very clear statement of purpose in clause 22 of the C Trust deed (reproduced at paragraph 65 above), or the very clear limitations to the potential beneficiaries in all three trusts, including in the case of the B Trust and the C Trust the identification of the wife as an excluded beneficiary, the purpose of all three trusts is to exclude anyone other than direct lineal descendants from benefiting from the trusts whether directly or indirectly.
117 The husband submits that the trustee’s powers are fiduciary in nature and “must be exercised solely in furtherance of the purpose for which they were conferred”. Even if not fiduciary in nature, the exercise of the powers the husband has as a joint shareholder whose name is first mentioned in the register and his power as an appointor of the trust are subject to the doctrine of “fraud on a power” or the “proper purpose rule”.
118 In relation to the application of the doctrine or proper purpose rule, the husband submits:
(a)They operate to prohibit the exercise of a power for a purpose or with an intention beyond the scope of, or not justified by, the instrument creating the power;
(b)They are concerned with abuse of power, the doing of acts which while within power are done for an improper purpose;
(c)They prohibit the exercise of a power with the intention of benefiting someone who is not an object of the power; and
(d)The exercise of the power need not be the dominant purpose.
119 The husband cites Eclairs Group Ltd v JKX & Gas Plc,[35] in support of his submission, where Lord Sumption said:
The proper purpose rule is a principle by which equity controls the exercise of a fiduciary's powers in respects which are not, or not necessarily, determined by the instrument. Ascertaining the purpose of a power where the instrument is silent depends on an inference from the mischief of the provision confirming it, which is itself deduced from its express terms, from an analysis of their effect, and from the court's understanding of the business context.
[35] [2015] UKSC 71 at [30].
120 The husband submits that the purpose of the trusts is “to facilitate the intergenerational management of the [Caldwell] families’ [redacted] business for the benefit of future generations of the lineal descendants of [Mr K]”.
121 While conceding the Court’s power under s 114(1) of the Act to order a party to exercise a power “in relation to the property of a party to the marriage”, and under s 90AE(2) to direct a third party to exercise such a power, so long as it is in relation to the property of the party to the marriage and the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect the division of property to the parties to the marriage pursuant to a s 79 order, the husband submits that such powers should only be exercised in cases where the trust is “a sham, or in cases such as [Kennon &] Spry where the assets of the trusts have accumulated via the labours of one or both of the spouses, and the trust was created and is controlled by one of the parties for the benefit of the spouses and their children, such that there is a proper basis for the court treating the trust or its assets as if the property of the spouses” (emphasis in original).
122 The husband also argues that there are constraints on the exercise of his powers as a shareholder of the corporate trustees of the trusts. For example, by clause 8 of the constitution of the corporate trustee of the B Trust, the Corporations Act is incorporated into the clause and prohibits a vote being cast in favour of a resolution at a general meeting by any person who is to receive a benefit from the resolution. Other than at a general meeting a vote of all shareholders is required to pass a resolution such that the husband has no unilateral power. Although s 224 of the Corporations Act provides that it applies to public companies, the husband contends that it is by inference incorporated into the relevant clause, otherwise the reference to the Corporations Act would be otiose.
123 Clause 8 of the constitution relevantly provides:
8.29 Subject to the Corporations Act, the Company may pass a resolution without a general meeting being held if all Voting Shareholders sign a document containing a statement they are in favour of the resolution set out in the document. If a share is held jointly, each of the joint members must sign.
Separate copies of a document may be used for signing by members if the wording of the resolution and statement is identical in each document.
The resolution is passed when the last member signs.
8.30 Where a general meeting is held to consider a matter the Corporations Act requires must be approved by a resolution at a general meeting with no votes being cast in favour of the resolution by any person who (or whose associate) is to receive a benefit or consideration, that person is prohibited from casting a vote in favour of the resolution and any vote purported to be cast by or on behalf of the person will not be counted.
124 Section 224 of the Corporations Act relevantly provides:
(1) At a general meeting, a vote on a proposed resolution under this Division must not be cast (in any capacity) by or on behalf of:
(a) a related party of the public company to whom the resolution would permit a financial benefit to be given; or
(b) an associate of such a related party.
125 Further, the husband argues that if the husband were to exercise his power as first named joint shareholder in a way that was oppressive to, unfairly prejudicial to, or unfairly discriminatory against Mr G or Mr H whether in their capacity as joint shareholders or as potential beneficiaries, he may be liable for a breach of s 232 of the Corporations Act.
126 Section 232 of the Corporations Act relevantly provides:
The Court may make an order under section 233 if:
(a) the conduct of a company’s affairs; or
(b) an actual or proposed act or omission by or on behalf of a company; or
(c) a resolution, or a proposed resolution, of members or a class of members of a company;
is either:
(d) contrary to the interests of the members as a whole; or
(e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.
127 The husband submits that even if he is found to have the requisite control of the trusts, the trusts and their assets should not be considered property of a party to the marriage because of the absence of the various other factors such as the origin of the trusts, the purpose of the trusts etc. Further, even if the husband is found to have the requisite control of the trusts, the rights the husband has, which may be property for the purposes of s 79 of the Act, namely equitable choses in action, are limited to:
(a)A right to be considered for distributions from the trusts; and
(b)A right to due administration of the trusts.
128 By the same process of reasoning, the husband submits Mr G and Mr H also have equitable choses in action.
129 Even in circumstances where the legal and beneficial title is vested in a party, the husband argues the Court has a discretion to exclude the property from the asset pool available for division if the ownership is subject to a moral obligation which the Court finds is likely to be met. The husband cites Martin & Newton,[36] in support of his proposition.
[36] (2011) FLC 93-490.
130 In Martin & Newton, the Full Court accepted that money donated to a company owned by the husband on the understanding that he would use it to fund research should not be included in the asset pool. The Full Court said:
226 In our view, the legislative scheme we have outlined is cast sufficiently widely to allow the court to take account of moral obligations. …Indeed, we suggest that an outcome which ignores moral obligations could not be a just outcome.
227 In our view, it would offend justice and equity if funds provided by a third party for a public benevolent purpose were to be regarded as available for distribution in a settlement between a husband and wife merely because the donor had not ensured the donation was accompanied by sufficient legal safeguards to guarantee it was expended on the intended purpose.
228 We accept that funds donated in such circumstances could properly be treated in the same way as any other assets if the court was not persuaded that the money would be spent on the intended purpose. …
131 The husband argues that even if the Court were to find that the trust funds are capable of being regarded as the husband’s property for the purposes of s 79 of the Act, the declaration sought by the wife should be refused if it is accepted that the husband has a moral obligation to manage the trust funds for the benefit of future generations of the Caldwell family.
132 Lastly, the husband submits that if it be found that he has the requisite control, the control has derived from his father and only arose after his father’s death. Such control, the husband submits, would have much in common with an inheritance and the principles enunciated in Bonnici & Bonnici[37] should apply, namely, that if there are ample funds from which a just and equitable settlement can be achieved without including the inheritance in the asset pool available for division, that should occur, and the declaration refused.
[37] (1992) FLC 92-272.
THE TRUSTS’ SUBMISSIONS
133 The trusts largely adopt the submissions of the husband save for the husband’s submissions set out at paragraphs 72, 73 and 78(a) of his written outline filed on 23 May 2025 relating to the application of s 224 of the Corporations Act, and his submission that the Court does not have jurisdiction to determine the discrete issue.
134 As to the applicability of s 224 of the Corporations Act, the trusts no longer rely upon paragraph 56 of their written submissions filed on 23 May 2025. As to the question of jurisdiction, the trusts contend that the Court does have jurisdiction whether by dint of its implied power to control the processes of its own court or by reason of rr 10.10 (to make a decision on any issue) and 10.11 (to make an order to decide an issue) of the rules.
135 The trusts submit that while the husband may at his absolute discretion and without being required to give any reason, remove either or both Mr G and/or Mr H as appointors and nominate and appoint one or more replacements, under the terms of the relevant trust deeds he cannot be compelled to do so, and having regard to the terms of the trust deeds the husband ought not be compelled by the Court to do so.
136 If the husband were to be compelled by the Court to do so for the sole or ancillary purposes of subsequently:
(a) appointing an alternate trustee (a new trustee) to any of the [t]rusts:
(b)causing or directing a new trustee to distribute funds from one or more of the [t]rusts to himself as a beneficiary in order to increase the property of the parties to the marriage or either of them (thereby creating an ancillary benefit to the [w]ife), that exercise of power would:
a.amount to a breach of the husband’s fiduciary duty to the beneficiaries of the [t]rusts; and/or
b. be fraudulent; and/or
c. be for an improper purpose of the [t]rusts; and/or
d.impermissibly and adversely impact on the rights of the beneficiaries of the trusts to the due administration of the [t]rusts.
(Emphasis in original)
137 The trusts further argue that if the husband were to independently exercise such powers after the finalisation of the proceedings, he would be in breach of an agreement he entered into with Mr G and Mr H on [redacted] July 2024 (included in Exhibit 1). On that date, the C Trust provided a loan facility to the husband for up to $1,000,000 to assist him to pay legal and other related expenses associated with these proceedings. The loan is repayable with interest by 2032 in accordance with a schedule. On the same date the loan facility was provided, the husband, Mr G, and Mr H, reached a separate agreement, reduced to writing, in the following terms:
An agreement between all 3 parties was reached that the loan agreement will be signed by [Mr G] and [Mr H] on the condition that the clause to remove [Mr G] and [Mr H] as appointors from [B Trust] and all other entities is removed.
This clause is removed, however final determination of the settlement of divorce and the outstanding loans is gathered outside of this clause and to be handled separately.
138 The trusts submit that the principles emanating from Kennon v Spry, “ought not be slavishly applied to cases involving differing factual circumstances” and cite in support of their submission the comments made by the Full Court in Essex & Essex (“Essex”),[38] where the majority held that the principles in Kennon v Spry were of “no relevance” to the facts of that case, and Barrett & Winnie,[39] where the Full Court cautioned against “giving the principles adumbrated in [Kennon & Spry] … a legend beyond what were described as the ‘unusual circumstances’ of that case”.
[38] (2009) FLC 93-423 at 83,873 (‘Essex’).
[39] (2022) FLC 94-093 at 81,478.
139 Essex concerned an appeal against a primary decision that occurred prior to the decision in Kennon v Spry being handed down. The appeal challenged, among other things, the failure of the trial judge to treat two trusts in which the husband was a beneficiary, as financial resources. The appeal was upheld, and discretion re-exercised to increase the wife’s property settlement by reason of the “compelling inference that the husband will receive distributions”[40] from one of the trusts. There was no suggestion in that case that the trusts were property for the purposes of s 79 of the Act and accordingly it seems unremarkable that the majority expressed the view that Kennon & Spry was of no relevance in that case.
[40] Essex (fn 38) at 83,877.
140 In Barrett & Winnie, the wife was a potential beneficiary of a discretionary trust and prior to her separation from her husband she had been the appointor of the trust. The husband’s application to set aside the deed removing the wife as appointor and to have the assets of the trust included in the pool of assets available for distribution was dismissed. The trial judge nevertheless treated the trust assets as a “significant financial resource” of the wife. The husband appealed against the primary decision. In dismissing the appeal, the Full Court rejected the submission that the facts were analogous to those in Kennon v Spry. For example, the Full Court noted the trial judge’s findings in Barrett & Winnie that the husband had made no contribution of any significance to the assets of the trust and although the wife had made contributions, those contributions were significantly outweighed by the contributions of third parties not only during the marriage but in the years after the separation, with the trial judge finding that those third parties (also potential beneficiaries of the trust) had devoted their working lives to contributing property to the trust. Even if the deed removing the wife as appointor had been set aside, the Full Court said that any person the wife did appoint as trustee would be bound by their fiduciary duty owed to all other beneficiaries.
Except in the case of shams, and companies that are mere puppets of a party to the marriage, the Family Court must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it.
The articles of the company in that case gave to its directors a discretion to register or refuse to register a transfer of any shares in the company. The Family Court was found to have no power to direct them as to the manner in which their discretion should be exercised. Giving full effect to the generality of the passage quoted from the judgment of Gibbs J, the case does not stand against the proposition that s 79 would apply in the circumstances of this case where the only property interests are those of the trustee who is a party to the marriage, and where no other beneficiary has any legal or equitable interest apart from a right to due consideration and administration. That, of course, is a right which is a relevant consideration informing the exercise of the Court's discretion as is any indirect effect upon a third party's rights: R v Dovey; Ex parte Ross.
69The preceding conclusion does not involve some general extension of s 79 which would require that it be hedged about with protective discretions of uncertain application to prevent its intrusion into trust arrangements affecting assets foreign or extraneous to those acquired by the parties to the marriage in their own right. So if the husband were trustee of a charitable trust or executor of the will of a friend or client the mere legal title to the assets of such trusts, because of their origins and character, could not be regarded as part of the husband's property as a party to the marriage within the meaning of the Family Law Act. Importantly, in such a trust there could be no power of appointment to his wife and no corresponding equitable right enjoyed by her. The question of a trust involving a combination of purposes and family and extraneous assets does not arise.
195 The wife submits that in “every case in which trust property has been held to be ‘property’ for the purposes of s 79 there have been potential beneficiaries other than the husband and the wife and relevant trust powers that have been subject to fiduciary or other constraints such as the doctrine of ‘fraud on the power’”. The wife notes that the other parties have not cited a single decision where those factors have constrained the Court from treating trust property as property for the purposes of s 79.
196 The wife submits that the capacity to seize control and distribute capital to himself in the future is sufficient for the purposes of s 79 and as supported by the observations of Gummow and Hayne JJ in Kennon v Spry where their Honours said at [137]:
… [b]ecause, during the marriage, the husband could have appointed the whole of the Trust fund to the wife, the potential enjoyment of the whole of that fund was “property of the parties to the marriage or either of them”. Furthermore, because the relevant power permitted appointment of the whole of the Trust fund to the wife absolutely, the value of the property was the value of the assets of the Trust. …
197 The wife cites French CJ in Kennon v Spry at [68] (which is set out at paragraph 194 above) as authority for the proposition that “the existence of other beneficiaries and the obligations that may be owed to them is only relevant to the subsequent enquiry, namely whether the Court should make orders pursuant to s 79”. I do not regard the cited passage as authority for that proposition. Notwithstanding the proposition as put, the wife proceeds to submit that the trust deeds themselves “tell strongly against there being any constraints on power, be they fiduciary or otherwise, that would prevent the trust property being ‘property’ within the meaning of s 79 of the Act”.
198 The wife argues that the submissions by the husband as to the application of ss 224 and 232 of the Corporations Act are both misconceived and inapplicable. The wife submits that clause 8.30 of each trustee company’s constitution only applies “[w]here a general meeting is held to consider a matter the Corporations Act requires must be approved by a resolution at a general meeting with no votes being cast in favour of the resolution by any person who …” (emphasis in original) may gain a financial benefit. The wife argues that the husband has not identified a single provision of the Corporations Act where that would apply. Further, the wife submits that, contrary to the husband’s submission, clause 8.30 does not incorporate s 224 by reference. The section is not mentioned. Further, s 224 (which is set out at paragraph 124 above) only applies to public companies.
199 The wife further submits that even were the husband to use his casting vote in each trustee company to remove Mr G and Mr H as directors, that would not constitute a financial benefit as defined in s 229 of the Corporations Act. Merely casting a vote to remove his sons as directors does not result in the husband receiving anything. As the husband has the power to cast his vote under the trust deeds, it could not be argued that the exercise of that power was oppressive within the meaning of s 232 of the Corporations Act.
200 As to the loan agreement dated [redacted] July 2024 and the side agreement of the same date, the wife submits that the trusts have not pleaded in their Amended Points of Defence filed on 4 February 2025 that these agreements are relevant in any way to the proceedings. The wife contends that had they done so she would have amended the relief sought by her to include relief under s 106B to set aside the agreement/s. Further, the wife notes that Mr G and Mr H are not parties to the loan agreement, and neither are the trustee companies for the B Trust or the D Trust. The loan agreement itself states at clause 12.14 that it contains the entire agreement and as no consideration has passed between the husband and Mr G and Mr H they cannot enforce the side agreement. The side agreement is not, in any event, effective to amend the terms of any of the trusts. To the extent that there is any enforceable agreement it is only to remove the husband’s power to remove Mr G and Mr H after the determination of the family law dispute.
201 The wife submits that the origin of the trust funds is only relevant to the subsequent exercise of discretion under s 79 of the Act to make a just and equitable property order and by way of analogy, in support of the proposition, the wife notes that inheritances are considered property for the purposes of s 79.
202 I observe that in the case of inheritances (once received), the beneficiary has both the legal and equitable title, and in the case of yet to be received inheritances, whether they are even taken into account at all for the purposes of s 79 depends on the particular circumstances of the case.[72]
[72] White & Tulloch (1995) FLC 93-030.
203 The wife submits that the husband, and his father before him, had considered selling the business, so any so-called moral or other obligation to continue the business for future generations should be disregarded. If relevant, I observe that at best the evidence in relation to a possible sale is vague.
204 The wife submits that the so-called purpose of the trust to facilitate the intergenerational management of the Caldwell families’ [redacted] business for the benefit of future generations of the lineal descendants of Mr K is “too vague and ill-defined to qualify a power which was so clearly conferred in absolute terms by the trust deed” (emphasis in original). In support of that submission, the wife cites the Victorian Court of Appeal in Accurate Financial v Koko Black (“Accurate Financial”).[73]
[73] (2008) 66 ACSR 325 at [101]-[107].
205 Accurate Financial involved an appeal in which minority unit holders in a unit trust were seeking to restrain a trustee (controlled by the majority unit holders) from compulsorily acquiring the minority unit holders’ units after only three and a half years of the establishment of the trust. Although the trust deed conferred an unqualified power of compulsory redemption, the minority unit holders claimed the trustee had induced their investment representing it would be long-term. It was in this context that the trial judge found “the long term assumption too vague and ill-defined to qualify a power which was clearly conferred in absolute terms by the trust deed”.[74] The appellants nevertheless succeeded on an estoppel argument. While the Court of Appeal referred to the trial judge’s reasoning relating to the fraud on a power argument, it was not dispositive to the appeal, but it was nevertheless observed by the Court that “neither the authorities nor the relevant equitable principles prohibit the consideration, in an appropriate case, of parol and extraneous evidence in order to discern the purpose of a trust power …”.[75]
[74] Ibid at [104].
[75] Ibid at [105].
206 The wife submits that Ogden & Ogden (“Ogden”),[76] supports her proposition that no additional factor other than control and power to benefit is required for trust assets to be property for the purposes of s 79 of the Act. Ogden is a decision of the Federal Magistrates Court (as that court was then called). The case involved an inheritance for five adult siblings held in a trust. The federal magistrate (as then called) found that in accordance with the terms of the trust deed, the wife had the power to direct the trustee to settle upon a new trustee, that she could control, her one fifth share of the inheritance. As such, the federal magistrate said she would treat the one fifth share as property for the purposes of s 79 of the Act. In so concluding, the federal magistrate also noted that the wife’s one fifth share was treated as her property for the purposes of calculating her Centrelink entitlements. Notwithstanding the decision to include the wife’s one fifth interest in the trust as property, the federal magistrate also took into account the wife’s entitlement to distributions from the trust as a resource, which she noted would cease if the wife did exercise her power to set up a new trust. The federal magistrate also accepted the wife’s evidence that she would never exercise her power to set up a new trust. The federal magistrate calculated that the husband’s “entitlement” to the wife’s trust fund was 10 per cent of the one fifth share. The wife also submits that Ogden supports her contention that - “If [Mr K] had held the trust assets in his own name as opposed to a trust structure, when [the husband] came to receive his inheritance those assets would have been “unarguably property of the marriage absent subjection to the trust”, referencing French CJ (quoted at paragraph 109 above).
[76] (2010) 245 FLR 1.
207 Having regard to the numerous inconsistent findings in Ogden I do not regard it as persuasive on any point for which it is relied by the wife.
208 The wife contends that the husband’s submission that the assets of the trust were not referable to the labours of the parties to the marriage is “overstating matters”. The wife alleges that the husband worked in the business for most of his adult life in the context where Mr K promised that “one day all of this will be yours”. The wife concedes that she has not brought a claim for promissory or proprietary estoppel but says this is because, “[Mr K] has fulfilled his promise to [the husband] in giving him ultimate control over each of the trusts through the amendments made to the trust deeds on [redacted] April 2021”. The wife’s Amended Points of Claim make no mention of any promise, expectation, or representation that the husband acted upon to his detriment.
DISCUSSION
209 I take the view that the matter before me for determination is not relief by way of declaration pursuant to s 78 of the Act or any other section of the Act or the FCFCOA Act, but rather to make a decision on an issue in dispute as permitted by Pt 10.3 of the rules in the exercise of jurisdiction pursuant to s 79. It is necessary for the purposes of s 79 to first identify the property of the parties or either of them to determine what order, if any, is just and equitable pursuant to s 79. The term ‘property’ in s 79 has a wider meaning than at general law and is a matter of statutory interpretation.[77] It is apparent from the ubiquitous use of the terms “for the purposes of s 79” or “within the meaning of s 79” or “de facto ownership” in the authorities when describing ‘property’, that the term ‘property’ has an extended meaning within the statutory context of s 79.
[77] Kennon v Spry (fn 6) at 386 [48], 387 [51], [52], [54], 390 [64], 394 [79], per French CJ, 397 [89], [90], 398 [92] per Gummow, Hayne JJ; Dovgan (fn 59) at [268]-[274].
210 The determination of an issue in dispute was the basis upon which the matter was listed for hearing by consent on 8 November 2024, namely, pursuant to r 10.10. I do not consider it necessary for the wife to amend her application. However, I do not consider it necessary to express my decision on the issue in dispute as a ‘declaration,’ but if it were necessary to do so I am satisfied that the power can be found in r 10.11 of the rules. The heading above r 10.11 refers to the “orders that can be made under this Part” and references at r 10.11(1)(b) that the Court may “decide an issue”. Order is defined in r 1.05 and “includes: (a) a decree, decision, declaration and judgment”.
211 In my view, the consequence of the wife expressing the relief sought by her as a ‘declaration’ has been an unnecessary, although interesting, distraction.
212 If I am wrong in that conclusion: while I accept the husband’s submissions that reliance on s 78 of the Act for a declaration as sought by the wife is not open because s 78 is concerned with declaring existing title or rights at general law and does not extend to a declaration which requires the statutory interpretation of ‘property’ within the meaning of s 79, I consider the power to make the declaration as sought by the wife could be found in either s 9 or s 44 of the FCFCOA Act.
213 By s 9 of the FCFCOA Act, this Court is a superior court of law and equity and has power to make declarations, at least where the declaration is not the only relief sought.[78] In this case the wife seeks a declaration as to property within the meaning of s 79 of the Act and in furtherance of her s 79 claim.
[78] cf Federal Court of Australia Act 1976 (Cth) s 21, and FCFCOA Act s 141.
214 In addition, s 44 of the FCFCOA Act provides a general power ‘to make orders of such kinds as the Court considers appropriate’ and a section in very similar terms in the Federal Court of Australia Act (1976) (Cth) has been interpreted to include the power to make a declaration.[79]
[79] Ho v Grigor (fn 60) at [54].
215 Turning then to the real issue in dispute, namely, are any of the trusts and/or trust assets, property within the meaning of s 79 of the Act?
216 The purpose of the Act is to enable the Court to make a just and equitable order by way of settlement or alteration of property between parties to a marriage. Section 79 empowers the Court to look beyond the notion of property at general law and to lift the ‘corporate veil’ to achieve a just and equitable outcome. As observed by the High Court as long ago as 1979 (although in a more limited context) in R v Dovey:[80]
It is impossible to suppose that the Parliament intended that a husband might place the matrimonial home beyond the jurisdiction of the Family Court simply by vesting it in a private company which he himself controls: such a result would make it impossible for the Family Court properly to perform its functions in many cases.
[80] R v Dovey (fn 24) at 534.
217 Whether trust assets are property of a husband and/or wife within the meaning of s 79 depends on the circumstances of case.[81] In particular, it may depend on the terms of any trust deed, the purpose of the trust, the origin of the trust assets, whether a spouse-party has control of the trust, whether that party has the power to distribute capital to one or other of the spouse-parties, the history of any dealings of trust property, and whether but for the trust, the property would unquestionably be the property of the spouse-party or spouse-parties. However, without the control of the trustee, whether direct or indirect, and a power to benefit by distributions one or other of the spouse-parties, there is little prospect, if any, of successfully arguing the trust assets are property for the purposes of s 79.[82]
[81] Kennon v Spry (fn 6) at 389, [57] per French CJ, 409 [130] per Gummow, Hayne JJ.
[82] Harris & Dewell (fn 15). See also Kennon v Spry (fn 6) at [66], [126]-[134]; Harris & Harris (fn 62) at 78,706-78,708.
218 Statements relied upon by the wife from selective parts of Kennon v Spry, which she contends support her contention that all she has to establish is control and power to benefit, must be seen in the context of what was repeatedly described in that case as the “unusual circumstances”. Those unusual circumstances included the creation of a trust to which the spouse-parties had contributed throughout their long marriage, that its purpose was to provide a tax effective means of providing the living and other expenses of the spouses and their children, that the trust assets included the former matrimonial home, that the husband as the trustee held the legal title to the trust assets, that (after the setting aside of certain instruments) the husband had the power to distribute the whole of the trust assets to the wife which would not have been inconsistent with the purpose of the trust, that the trust assets (but for the trust) would unquestionably have been property of the parties or either of them. Such matters inform the determination of whether the trusts and/or trust assets are property within the meaning of s 79 and not, as submitted by the wife, matters to be considered only when exercising the discretion of what property order, if any, is just and equitable.
219 In contrast to Kennon v Spry, the Caldwell family have conducted a [redacted] business over four generations established initially in [the early 1900s]. The assets have grown since those early days but what exists in the trusts reflects the efforts of a long line of direct lineal descendants of the founder of the business, and in particular, Mr K.
220 It is uncontentious that the origin of the trusts’ assets does not reflect contributions made by the husband and/or the wife. The husband was well remunerated throughout his working life in the Caldwell family business and he and the wife have amassed significant assets outside the trusts.
221 Further, this is not a case where the wife points to a long history of the husband exercising control over trusts which have been established and utilised by the husband during a marriage for the benefit of the husband, wife, and their children. Indeed, the husband has not received any distributions from the trusts either during the marriage or since separation.
222 When the C Trust was established in 1982, it included in recital B that Mr K intended the trust be created “to ensure that sound financial provision is made for certain members of his family and for the future operation and administration of part of the [Caldwell] Family Business”. The ‘certain members’ therein referred to are the direct lineal descendants of Mr K. Clause 22 of the trust deed states that the trust was “established for the exclusive benefit of direct lineal descendants of [Mr K] and no person who is not a direct lineal descendent of [Mr K] shall be permitted by the Trustee to be a Beneficiary of the Trust Fund or to receive any benefit whether direct or indirect therefrom” and further, that “[n]otwithstanding the provisions of this Deed dealing with alterations or amendments no alteration or amendment shall be made which would have the effect of any person not being a direct lineal descendant of [Mr K] taking any benefit whether of income or capital and whether direct or indirect from the Trust Fund”.
223 When the trust deed was varied on [redacted] June 2019, a clause was inserted to exclude as potential beneficiaries not only any person who is not a direct lineal descendant of Mr K, but also any company in which all directors and shareholders are not direct lineal descendants of Mr K, and any trust in which all beneficiaries are not direct lineal descendants of Mr K. Only direct lineal descendants are entitled to receive any benefit, direct or indirect, from the trust.
224 The D Trust was established in 1993. It too excludes as potential beneficiaries not only any person who is not a direct lineal descendant of Mr K, but also any company in which all directors and shareholders are not direct lineal descendants of Mr K, and any trust in which all beneficiaries are not direct lineal descendants of Mr K. Only direct lineal descendants are entitled to receive any benefit, direct or indirect, from the trust.
225 The B Trust was established in 2016. It too excludes as potential beneficiaries not only any person who is not a direct lineal descendant of Mr K, but also any company in which all directors and shareholders are not direct lineal descendants of Mr K, and any trust in which all beneficiaries are not direct lineal descendants of Mr K. Only direct lineal descendants are entitled to receive any benefit, direct or indirect, from the trust.
226 If the husband, as sought by the wife, were to cause a distribution to be made from the trusts to himself to satisfy, in cash, a division equal to 35 per cent of the net value of the assets of the trusts, it would be in direct conflict with the unambiguous provisions in the trust deeds prohibiting a benefit whether direct or indirect to anyone other than the direct lineal descendants of Mr K.
227 Until his death, Mr Kwas the appointor of each trust and held the only voting class shares in each of the trustee companies. There is no suggestion that Mr Kwas acting as the puppet or alter ego of the husband.
228 If there were any doubt about the purpose of the trusts, the wishes of Mr Kas expressed in the second codicil to his Will emphasise the intention to keep the Caldwell business operating and to maintain the benefits emanating therefrom within the direct Caldwell family. Such a recent restatement of intention (although in a codicil) must, in my view, directly impact upon the exercise by the trustees of their powers as it confirms the narrow purpose of the trusts to only benefit direct lineal descendants of Mr K.
229 Since Mr K’sdeath, the husband has the voting power to remove Mr G and Mr H as directors of the trustee companies and the power to remove Mr G and Mr H as appointors without providing any reason. There is no evidence that the husband is likely to do so and indeed the side agreement’s only relevance for present purposes is that he has indicated an intention not to do so. I accept that to be the case.
230 It seems to be common ground that whether the powers of appointment are fiduciary in nature is open to argument. The question it raises in practical terms is whether a person with a power of appointment is bound to consider the interests of all potential beneficiaries before exercising the power and whether the power can only be exercised in furtherance of the purpose for which it was conferred.
231 I accept the husband’s submission that the purpose of the trusts is “to facilitate the intergenerational management of the [Caldwell] families’ [redacted] business for the benefit of future generations of the lineal descendants of [Mr K]” and I find that it is only in the pursuit of that purpose that the powers residing in the husband can be validly exercised.
232 This does not mean that the Court could not, in an appropriate case, enjoin the husband pursuant to s 114 of the Act to exercise his powers as sought by the wife. It would depend upon other relevant factors in the case, as earlier discussed. However, in Kennon v Spry, Gummow and Hayne JJ said that if it were necessary to meet a Family Court order from trust funds, then an application would need to be made to the court to authorise the payment as being just and equitable, even where the trust assets are treated as property for the purposes of s 79.[83] Their Honours made that statement even though in Kennon v Spry, the proper purpose of the trust was not offended: it was to benefit the husband, wife, and their children.
[83] Kennon v Spry (fn 6) at [138].
233 In my view, while the husband has very wide powers, and in that sense may be said to control the trusts, his primary duties are to act in good faith and in accordance with the purposes of the trusts and to give real and genuine consideration to the interests of all potential beneficiaries.[84] If the husband exercised his powers for the purpose of benefiting the wife whether directly or indirectly, even if not the dominant purpose, he would be in breach of the proper purpose rule.[85] To do so would diminish the trusts’ assets and while no potential beneficiary has a legal or equitable interest in the trusts’ assets, they each have a right to due consideration as an object of benefaction and a right to due administration of the trusts, and to enforce those rights.
[84] Mills v Mills (1938) 60 CLR 150 at 169, 185, 186; Owies (fn 42) at [95], [97], [112], [113]; Baba v Sheehan (fn 66) at [5], [6], [49].
[85] Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 at 294.
234 As to the husband’s alternative argument in relation to the constraints on the exercise of his powers: for the reasons articulated by the wife I am not persuaded that ss 224 or 232 of the Corporations Act have any application to the circumstances of this case.
CONCLUSION
235 In my view, none of the trusts and/or trust assets are property within the meaning of s 79 of the Act taking into account the following facts:
(a)The trusts were established at the instigation of Mr K, and he controlled the trusts until his death in 2022, which included the period during which any variations to the trusts were made;
(b)There is no evidence that Mr Kwas in any way acting as the puppet or alter ego of the husband;
(c)The trusts are not a sham or the alter ego of the husband;
(d)The husband did not assume a position of any real power within the trusts until after Mr K’s death in 2022;
(e)It is not suggested by the wife that the husband presently exercises, has taken steps to exercise, or has exercised in the past any control of the trusts (other than to the limited extent of his involvement in the variations to the trust deeds to include the clause granting him power to remove Mr G and Mr H);
(f)There is no evidence of his intention to control the trusts and indeed the side agreement indicates an intention to vary the trust deeds so as to remove the power of the husband to remove Mr G and Mr H after the conclusion of these proceedings;
(g)On a proper construction of the trust deeds as varied, and having regard to Mr K’s second codicil, the purpose of the trusts is to facilitate the intergenerational management of the Caldwell families’ [redacted] business, which has been in operation since [the early 1900s], for the benefit of future generations of the lineal descendants of Mr K, and to preclude anyone who is not a direct lineal descendent from benefiting either directly or indirectly;
(h)It is only in the pursuit of the purpose of the trusts that the powers residing in the husband can be validly exercised;
(i)The wife is an excluded beneficiary within all trusts and not entitled to benefit from the trusts either directly or indirectly;
(j)Neither the husband nor the wife (for the brief period that she was a potential beneficiary in the B Trust as the spouse of the husband) have ever received distributions from the trusts;
(k)The husband, his children, and other lineal descendants of Mr K, all have equitable choses in action in relation to the trusts being a right to proper administration of the trusts and a right to be given due consideration as an object of benefaction of the trusts and to enforce those rights;
(l)The assets of the trusts do not represent the labours or contributions of the husband and/or wife during their marriage but rather were built up by the Caldwell family over four generations;
(m)The husband was well remunerated for his efforts throughout his working life in the family business;
(n)The husband and wife have accumulated significant wealth outside the trusts from which a just and equitable property settlement may be achieved;
(o)The husband has not sought to divert assets that he and the wife had accumulated over their marriage;
(p)If the husband were compelled by Court order to seize control of the trusts and distribute capital to himself for the purposes of meeting a property settlement order in the wife’s favour, such actions would be in direct conflict with the purpose of each trust to benefit only direct lineal descendants of Mr K;
(q)Even if the most appropriate analogy were an inheritance: to find that the trusts and/or assets of the trust were property of the husband for the purposes of s 79 would arguably disenfranchise the other potential beneficiaries, in particular, Mr G and Mr H who would be bound by such a finding;
(r)It is conceded by the husband that the trusts’ assets are a financial resource for the purposes of s 79.
236 The wife’s application as set out in clause 2A will be dismissed.
I certify that the preceding two hundred and thirty-six (236) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Carew. Associate:
Dated: 30 July 2025
SCHEDULE OF PARTIES
BRC 2242 of 2024 Respondents
Fourth Respondent:
D PTY LTD AS TRUSTEE FOR D TRUST
Fifth Respondent:
E PTY LTD AS TRUSTEE FOR E TRUST
Sixth Respondent:
F PTY LTD
Seventh Respondent:
MR G CALDWELL
Eighth Respondent:
MR H CALDWELL
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