Trust documents and claims against trusts: A chicken-and-egg problem
Family lawyers are no strangers to complex trust structures. It is common, especially in large asset pools, for assets to be held in trusts in order to achieve a variety of goals including tax planning, asset protection and intergenerational wealth transfer.
When seeking orders for a property settlement on behalf of a client, we take careful instructions about the assets that sit within trust structures and those that are held personally. If there are insufficient personal assets to satisfy a party's claim for a property settlement, joinder of trustees may be required to achieve a just and equitable transfer of property. But what happens if you don't know what's in the trusts? How can you say what orders you need against a trustee if you're not being provided with sufficient documents?
A recent decision, Rigby & Kingston & Ors, saw a husband in this scenario join 30 corporate entities on the basis that his claim for 35% of the asset pool could not be satisfied from personal assets alone. The corporate entities argued, and the husband agreed, that the claim against each entity needed to be stated precisely. But when the time came to do so, the husband argued that until he had full disclosure from the trusts, he couldn't state what orders he sought against each of them. In turn, the entities argued that until precise orders were sought against them, they should not be put to the cost of being joined to the proceedings.
Parties to family law proceedings have wide-reaching obligations to make full and frank disclosure under the Family Law Rules but joining a party for the sole purpose of obtaining disclosure is improper, if not vexatious. Given that the husband could not identify any other basis on which the entities had been made parties, the entities were ultimately successful in their application to be released from the proceedings. The husband was ordered to pay $25,000 towards their legal costs which, at the time of hearing, were almost $100,000.
The case highlights the need for targeted subpoenas and careful litigation strategy (including an assessment of the appropriate time at which to join corporate entities) to overcome the chicken-and-egg problem of needing relevant documents to make successful claims against trusts.
The Family and Relationship Law team at Lander & Rogers has extensive experience in complex litigation involving family trusts, acting both for and against corporate groups.
All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.