The recent case of Harris & Dewell saw the Full Court of the Family Court of Australia hearing an appeal from a judgment of a Family Court Judge.
The parties, Mr Harris and Ms Dewell had been married for 24 years. There was a substantial property pool of $24,578,992 with liabilities of $10,945,825 making a net pool of $16,785,202.
The issue before the court was that the wife asserted that units in E Unit trust (“EUT”) should be included as property of the parties. The husband asserted it should be excluded.
The EUT was established in 1981, 5 years before the commencement of the parties’ relationship. The trustee of EUT was F Pty Ltd (“FPL”). There were 60 units in EUT, initially owned 30 by the father of the husband (the “father”) and 30 by two third parties. The third parties subsequently sold their units to the father.
The husband had never held any units in EUT. The husband and father had previously both been directors of FPL but the husband resigned as director in 2011.
At the time of the trial, FPL was said to have one director, namely the father. This caused some issue as the Company Constitution required two directors. A letter from FPL’s accountants to the husband 16 August 2012 asserted that the husband remained a director on the basis that the Memorandum and Articles of Association of the company required a minimum of two directors and individual shareholders.
There were two shareholders of FPL with the husband owning two ordinary shares and the father four ordinary shares. As such the father owned 67% and the husband 33%.
As the sole unit holder the father had the power to remove the trustee and appoint a new trustee. FPL as trustee had the power to create units and increase the number of units in issue and also redeem units by resolution including all the units.
It was agreed that during the marriage, the husband had acted in ways where he had treated the EUT as his own property. This included:
- The husband causing one lot of property to be acquired in the name of FPL using funds of $1,251,818.50 provided by the husband, yet the property was never included in the accounts of the EUT;
- Despite the husband not being a director of FPL, he executed a contract and other relevant documents on its behalf;
- That these transactions were done without the knowledge of the father;
- The husband will on the death of the father inherit the EUT units;
- document signed by the husband in 2010 in support of a loan application to the ANZ Bank declared the husband owned the units in the EUT;
- In an application for finance the husband included in his statement of assets real estate in Queensland valued at $7,000,000 with a mortgage of $2,000,000 despite the fact that EUT owned the property; and
- In July 2011 a statutory declaration by the husband declared that he and his father were the beneficiaries of EUT.
The Trial Judge found that despite the control exhibited by the husband in respect of dealings with EUT they were not satisfied that EUT was an alter ego or device used by the husband for his sole benefit. The Trial Judge found that the legal and beneficial owner of the units in the EUT was the husband’s father.