By Farid Assaf SC -
Snapshot
- Since the High Court’s 2008 decision in Kennon v Spry, the courts have been cautious in seeking to extend the concept of ‘property’ within the meaning of Family Law Act 1975 s 79 – particularly in the context of characterising the bare equitable rights of a spouse as beneficiary under a discretionary trust.
- The 2022 decision of Woodcock v Woodcock (No 2) expanded the scope of the concept of property contrary to previous decisions, including a WA Court of Appeal decision.
- Significant uncertainty remains as to when a court will find that a spouse’s bare rights under a discretionary trust are capable of constituting property for the purposes of s 79 and how such rights, if considered property, are to be valued.
In the law of trusts, it is well established that beneficiaries of a discretionary trust do not have equitable interests in the assets of the trust. Rather, given the trust’s discretionary nature, the rights of beneficiaries are restricted to due consideration and due administration of the trust which shall be referred to in this article as ‘core rights.’ At law, such rights are not recognised as ‘property.’ However, in a series of cases, and most notably since the landmark High Court decision of Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366, the courts have found that such rights can constitute property ‘of the parties to the marriage’ within the meaning of Family Law Act 1975 s 79 (‘the Act’). Section 79 confers a wide discretionary power on the court to vary the legal interests in any ‘property of the parties to a marriage, or either of them’, and to make orders for settlement of property in substitution for any interest in the property. The focus of this article is on the features the courts look for in determining whether such rights constitute property for the purposes of s 79. Despite a number of appellate and first instance decisions, there remains uncertainty as to when a court will find a discretionary beneficiary’s core rights comprise such property.
