Family Fortune or Family Legacy? Court Declines to Treat Multi-Generational Trusts as Marital Property

📘 Introductory Paragraph:

In the high-profile family law case of Caldwell & Caldwell [2025] FedCFamC1F 506, the Federal Circuit and Family Court of Australia (Division 1) was tasked with deciding whether assets held in long-standing discretionary trusts should be considered "property" of a marriage under section 79 of the Family Law Act 1975 (Cth). Justice Carew's comprehensive judgment delves into decades of trust law and family law jurisprudence, ultimately dismissing the wife’s application to have trust assets included in the divisible marital property. The case is a significant reiteration of the principle that not all assets a party can control will be treated as their property in family law disputes—particularly when generational family wealth is involved.

📚 Facts & Issues:

Facts:

• Ms Caldwell and Mr Caldwell were married for approximately 30 years, divorcing in 2023.
• The Caldwell family business, established in the early 1900s, is held within several discretionary trusts.
• Mr Caldwell worked in the family business his entire life but did not create or significantly contribute to the assets held in the trusts.
• The trusts were created and controlled by Mr Caldwell's father, Mr K, who died in 2022.
• The husband inherited certain powers over the trusts post his father’s death.
• The wife, Ms Caldwell, sought a declaration that the trusts or their assets were property of the marriage for division under s 79 of the Family Law Act.

Key Legal Issues:

1. Does the Court have jurisdiction or power to declare the trusts/assets as property under s 79?
2. Does the husband have sufficient control over the trusts to render them his property?
3. If he has such control, can that control alone make the trust assets “property of the marriage”?
4. Are the trusts a financial resource or actual property?
5. What role do the historical origins and purpose of the trusts play?

📖 Rule (Legal Principles):

• Under s 79 of the Family Law Act 1975 (Cth), the Court may alter the interests of parties to a marriage in "property", but only if just and equitable.
• "Property" is broadly defined under s 4 of the Act to mean "property to which the parties are entitled".
• Control over a trust may result in the trust being treated as property, but each case depends on the factual matrix: Kennon v Spry (2008) 238 CLR 366.
• The proper purpose rule and fiduciary obligations limit the exercise of powers under a trust: Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285.
• The source of the trust assets and contributions by parties are key considerations: Davidson v Davidson (1991) FLC 92-197.
• Discretionary trusts may be financial resources even if not “property”: Goodwin & Goodwin (1991) FLC 92-192.

🧠 Application (IRAC Analysis):

Justice Carew accepted that while the husband had considerable powers within the trusts—including the power to remove other appointors and appoint new trustees—he had not exercised those powers, and had not used the trusts to benefit himself or the wife.

• The trusts excluded the wife as a beneficiary.
• The assets of the trusts were not accumulated from the efforts of the husband and wife during the marriage, but rather from four generations of family business activity.
• The husband inherited control only after his father's death, and there was no evidence he had misused that control or intended to.
• The court distinguished the case from Kennon v Spry because the trusts here were created by a third party (Mr K) for the benefit of direct lineal descendants, not for the benefit of the couple during the marriage.
• The fiduciary duties and the proper purpose rule made it impermissible for the husband to act for personal benefit to satisfy a s 79 order—doing so would violate the trust’s purpose.

Thus, while the husband may have control, that control was constrained legally and morally, and did not elevate the trust assets to property under s 79.

⚖️ Conclusion & Judicial Reasoning:

Justice Carew held that:

"None of the trusts and/or trust assets are property within the meaning of s 79 of the Act..."

Her Honour’s reasoning included:

• The trusts were not sham or alter egos of the husband.
• The wife was excluded from benefit.
• The trust assets were sourced from the husband's ancestors, not the couple's efforts.
• The husband’s powers were limited by fiduciary obligations and the purpose of the trust.
• There were sufficient assets outside the trusts ($16M–$22M) to effect a just property division.
• The “proper purpose” doctrine prohibited the husband from distributing trust assets for matrimonial purposes.
• Even if the trust powers were exercised, it would not create an existing proprietary interest, thus failing the test under s 78 or s 79.

📌 Take-Home Legal Lesson:

Not all control over a trust equates to ownership in family law. Even where a spouse may have the legal power to influence a trust, if that power is constrained by fiduciary duties, a clearly defined trust purpose, or exclusionary provisions, courts may decline to treat trust assets as matrimonial property under s 79. Control alone is not determinative—it must be considered within the full factual and legal context of the trust’s operation, purpose, and history.