Lewis v Condon

The dispute in *Lewis v Condon* concerned the validity of a trust and the ownership of property purportedly settled on that trust. The appellant, Ms Lewis, sought to have the property declared an asset of the Kenthurst Investments Trust, while the respondent, Mr Condon, argued the trust was a sham. The matter was heard in the Court of Appeal of New South Wales before McColl and Leeming JJA and Sackville AJA.

The primary legal issues before the Court of Appeal were whether the Kenthurst Investments Trust was a sham, and consequently whether the property in question was an asset of the trust or available to Mr Condon. Related issues included the effect of bankruptcy on the trust property and the powers of appointment, the standing of a beneficiary to bring proceedings, and whether a prior declaration in related caveat proceedings gave rise to *res judicata*.

The Court of Appeal reasoned that the mere fact that a trust was created for an improper purpose, such as to deceive a former husband or evade taxation, did not render the trust a sham. A trust is a sham if the parties to its creation did not intend to create the trust relationship, but rather intended to give the appearance of creating a trust. In this case, the discretionary trust was validly created, and any subsequent conduct inconsistent with the trust would constitute a breach of trust, not an "emerging sham". The Court allowed the appeal, setting aside the primary judge's orders and declaring the property to be an asset of the Kenthurst Investments Trust. The proceedings were remitted to the primary judge for consideration of further relief.