Bankruptcy Trustee went after Trusts

Hi All

A bankruptcy trustee had a crack some trusts- unsuccessfully.

Fordyce v Ryan; Fordyce v Quinn [2016] QSC 307

http://archive.sclqld.org.au/qjudgment/2016/QSC16-307.pdf

Big call on their behalf to try and argue that a beneficiary had a proprietary interest in the trust because they also had effective control as a director.

They didn't get up.

Key parts

“It is difficult to accept as a principle of reasoning that a beneficiary’s legal or de facto control of the trustee of a discretionary trust alters the character of the interest of the beneficiary so that it will constitute property of the bankrupt if the beneficiary becomes a bankrupt. To the extent that Richstar might be thought to support such a principle, it has not been followed or applied subsequently and it has been criticised academically… In my view, there is no general principle of law of that kind.”

“A trust once validly constituted does not change in nature because the trustee and some of the beneficiaries subsequently choose no longer to abide by the obligations of the trust relationship. Such conduct may amount to a breach of trust, and may lead to the removal of the trustee, but does not destroy the proprietary and personal rights and obligations which came into existence when the trust was created.”