The trust's structure and fiduciary constraints protected its assets from classification as property
The Supreme Court ruled that powers held within a family trust, constrained by fiduciary duties and structural safeguards, did not constitute "property" under the Property (Relationships) Act, affirming the trust’s protection against claims of effective ownership in a relationship property dispute.
The case arose from a dispute between former partners regarding the classification of trust assets in the division of relationship property.
At issue was whether the powers associated with a family trust gave one party such control that the assets should be deemed relationship property. The individual in question held various roles in the trust, including discretionary beneficiary and former trustee, with powers to appoint or remove trustees and influence asset management.
The trust in question was created from the distribution of assets from a preceding family trust and included farmland and business interests. During the relationship, the trust operated a farm and other ventures. Following the separation, one partner argued that contributions to the operations of the trust and farm entitled a share in the trust’s assets.
The Supreme Court examined the scope of powers under the trust deed, focusing on whether these powers were akin to ownership. The court emphasised that powers to constitute property under the Property (Relationships) Act must provide effective control over the assets comparable to a general power of appointment. Such powers, the court reasoned, must be assessed in light of any constraints imposed by the trust deed or by fiduciary duties.
The court found that the trust deed imposed significant restrictions. The requirement for at least two trustees acting unanimously limited unilateral control. Trustees were bound by fiduciary obligations, including the duty to act in good faith and for the benefit of all beneficiaries. The terms of the trust also safeguarded the interests of other beneficiaries, ensuring that the individual in question could not freely appropriate the trust assets.
The decision distinguished this case from earlier precedents in which a trust deed conferred sweeping control over trust assets, enabling classification as property. In this instance, the powers were constrained by fiduciary duties and structural safeguards, preventing the individual from treating the trust assets as personal property.
The court concluded that the powers held under the trust did not constitute property under the Property (Relationships) Act. The appeal to include trust assets in the relationship property pool was dismissed, affirming that the trust structure effectively shielded its assets.
