This is a case note of a family law matter involving a family trusts and property. Kennon v Spry; Spry v Kennon  HCA 56 (“Spry”) is a particularly noteworthy. The case is Kennon and Spry. In it, the husband sets up a series of trusts for the benefit of the children of the marriage. It was the ability of the Family Court to. The decision of the High Court in Kennon v Spry () CLR ; ALR ; 83 ALJR ;. 40 Fam LR 1;  FLC ;  HCA 56 is one of.
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The beneficiaries were himself and his siblings, his and their issue, and the spouses of all of them. There were four children of the marriage:. He appointed his wife to be trustee on his death or resignation and his daughter Elizabeth to succeed her upon her death or resignation.
On 30 October he and his wife separated. Subsequently she applied to dissolve the marriage. The application relevant to these proceedings was a second amended version of that application. His Honour set aside the Instrument. He did not execute the instrument then because of the stamp duty that would be applicable to it. It was eventually signed and stamped in October It was not in dispute that the Instrument was not a deed.
He could appoint any other person as an additional trustee and could remove any such person as he saw fit. The class would extend to their further issue and any persons married to them, as well as the Attorney-General as parens patriae.
This contraction of the class to exclude himself and his wife followed upon the Deed and the Instrument which are discussed below. Dr Spry said that he suggested to his wife in that she become a trustee sprry his death or resignation until one or more of the children was old enough to take over.
It included provisions to the following effect:. Each trust related to one of his four daughters. It is sufficient to refer to the terms of the Elizabeth Spry Trust. By the trust deed he appointed himself as trustee. On his death, he was to be succeeded by a person or persons specified in his will and, absent such specification, by Helen Spry. Elizabeth Spry was to become a trustee upon her attaining 32 years.
The age at which Elizabeth Spry would become a further trustee was reduced to 25 years.
Family Law & Family Trusts – Case note for Kennon v Spry; Spry v Kennon  HCA 56
The learned primary judge made extensive findings of fact and law. Key findings for present purposes are summarised in the following paragraphs. As to the effect of the Deed, his Honour held:. Clause 2 was not a f of the terms jennon the Trust. Clause 3 was invalid to the extent it attempted to vary the power of variation. Dr Spry made the Instrument knowing the marriage was in trouble and that an order dealing with the property of the parties, including the assets of the Trust, was likely.
He wanted to remove the assets of the Trust kennn the reach of the Family Court and considered the instrument would achieve that result. He was looking to defeat an anticipated order for property settlement. The crucial step was the transfer of assets to those trusts.
His Honour did not accept that submission. The instrument and dispositions were made with the intention of defeating an anticipated order and should not be allowed to stand.
The current value of the shares should be notionally added to the pool of assets for distribution between the parties. He then summarised the basis upon which he proposed to proceed as follows:. Ancillary orders were also made. This would not involve a variation of the Trust. Her Honour held that once it was spryy that the effect of the Spru could be reversed, the case became one like any other where assets were held in a discretionary trust and the husband had control of them as trustee and was capable of having the capital and income distributed to him as a beneficiary.
Control of the Trust was not sufficient for that purpose. Earlier authorities in the Family Court, relied upon by the trial judge, involved a spouse who also had some capacity to benefit from the trust.
Because of the divorce, she could no longer be a beneficiary. The notices of appeal raised the same issues. Amended notices of contention and applications for special leave to cross-appeal. An amendment to those notices was required. To the extent that a new order was sought, in each matter an application was required for special leave to cross-appeal and a draft notice of cross-appeal to be filed. Directions were given to allow amended notices of contention to be filed and served together with applications for special keennon to cross-appeal.
Directions were also made as to written submissions. Draft notices of cross-appeal in both matters were also filed by Mrs Spry after the hearing along with submissions in support of the grant of special leave. The single ground stated in each draft notice was:. Dr Spry created the Trust.
He was the settlor. He appointed himself as trustee.
Kennon v Spry; Spry v Kennon  HCA 56
He assumed the power to appoint and remove further trustees. He did so, according to the terms of the Instrument, in his personal capacity. That power was not constrained by fiduciary duties. It was, however, limited so as not to authorise an increase in his rights to the beneficial enjoyment of the fund.
It extended to the spouses from time to time of the issue of Charles Chambers Fowell Spry and further issue of that issue, including persons unborn when the Trust was created, and their spouses from time to time. He was the only person entitled in possession to the assets. His power as trustee to apply the income or capital under the terms of the Trust was not a species of property according to the general law but his legal title was. Absent 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.
There did not need to be. The Privy Council, in similar vein, pointed out in Commissioner of Stamp Duties Q v Livingston that the law does not require for all purposes and at every moment in time, the separate existence of two different kinds of estate or interest in property, the legal and the equitable.
It is subject to the limitation that it validly applies only with respect to a claim based on circumstances arising out of the marriage relationship. In the Full Court of the Family Court said:. In Kelly No 2 the Full Court of the Family Court did not think the word wide enough to cover the assets of a trust in which the relevant party to the marriage was neither settlor nor appointor nor beneficiary and over which he or she had no control.
That was a case in which the husband had neither a legal nor a beneficial interest.
Family Law and Family Trusts
In Ashton a husband who had been the trustee of a family trust replaced himself as trustee with a company but continued as sspry appointor. He was not a beneficiary but received income from the trust. The evidence made clear that he applied the assets and income from them as he wished and for his own benefit.
In that case the husband had the sole power of appointment of the trustee which was a creature under his control and he was a beneficiary to whom the trustee could make payments exclusive of other beneficiaries as the husband lennon fit.
Although a settlor is taken to transfer to the trustee the property in respect of which he or she creates a trust, there may be retained a right to take a benefit under it. This left him, however, in possession of the kkennon, with the legal title to them and to the income which they generated unless and until he should decide to apply any of the capital or income to any of the continuing beneficiaries.
On that basis the Family Court had the slry to make the order it did. No object in the Trust had any fixed or vested entitlement. None had a vested interest subject to divestiture.
A policy question was said to be raised. The Family Court, it was said, must take kenonn property of a party to the marriage iennon it finds it. It cannot ignore the interests of third parties nor the existence of conditions or covenants limiting the rights of the party who owns the property.
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. The term describes a legal title divorced from any powers or duties. Under the general law such a title could not be treated as property of the trustee.
But where a statute is involved the matter is one of interpretation. It is lennon be read widely and conformably with the purposes of the Family Law Act.
In the case of a non-exhaustive discretionary trust with an open class of beneficiaries, there is no obligation to apply the assets or income of the trust to anyone. Their application may serve a wide range of purposes. The assets would have been unarguably property of the marriage absent subjection to the Sry.
As to the position of the other beneficiaries, it has long been accepted that in some circumstances the Family Court has power to make an order which will indirectly affect the position of a third party. That case concerned the validity of an order in favour of a wife made by the Family Court requiring directors of a company not completely controlled by the husband to register a transfer of shares into her name.
The Family Court cannot s;ry the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the sprt 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 kkennon company. The Family Court was found to have no power to direct them as to the manner in which their discretion should be exercised.
R v Dovey; Ex parte Ross. 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 dpry not arise. It is supported by his spyr title to the assets, the origins of their greater part as kwnnon 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 kennpn to take upon a default distribution at the distribution date.
As their Honours point out, the Family Court, when it is just and equitable to do so, can make orders in property settlement proceedings as if changes to property rights otherwise effected by the divorce had not occurred. It is desirable to say something further specifically about that. Each of the beneficiaries had the right to compel the trustee to consider whether or not to make spfy distribution to him or her and a right to the proper administration of the Trust.
The rights to consideration and to due administration are in the nature of equitable choses in action.