A question of coherence? Property in discretionary trusts for the purposes of family law in Australia

Abstract

Abstract Discretionary trusts are popular in Australia for tax and succession planning, and asset protection, yet they are a legal construct that is difficult to grasp. It is not therefore surprising to learn that family law judges have found them challenging to deal with in property settlement proceedings under the Family Law Act 1975 (Cth) ('FLA'). What is surprising is that judges have relied upon diverse and apparently incompatible lines of reasoning to justify decisions that interests under discretionary trusts are or are not 'property' over which courts have jurisdiction in property settlement proceedings. The question asked by this thesis is which of the various justifications best meets the standards of coherence required by the modern practice of statutory interpretation in Australia. This question relates to an internal aspect of family law and practice. To answer it, the thesis undertakes a doctrinal analysis of 74 property settlement cases involving spousal interests under discretionary trusts. This analysis delineates and categorises the different bases upon which decisions were justified. Once organised into discrete categories, the justifications are evaluated against the standards of coherence required by the modern Australian approach to statutory interpretation. As the thesis explains, the modern approach to statutory interpretation insists that the justification to be preferred is the justification which offers the best explanation of 'property' in the FLA, reconciled to the statutory text, the objective purposes of the statute and the weight of authorities construing the statute. In other words, the best justification is the justification which has the strongest coherence with a worked-out explanatory theory of the statute and of the role that 'property' serves in the statute. To that end, the thesis embarks on a deeply reflective analysis of the FLA - its history, the statutory scheme, the statutory text, and the interpretive practice. Having identified that the statutory scheme institutes a scheme of commutative justice which is best realised if 'property' means 'property as wealth', the thesis develops an analytic framework for deciding if particular interests qualify as 'property as wealth'. That framework is used to evaluate the judicial justifications in the discretionary trust cases. The thesis concludes that the only judicial justification which meets the required standards of coherence is the line of reasoning which says equitable choses in action held by potential beneficiaries of discretionary trusts are property because they are presently existing rights, with a legal foundation and economic value. Show more