Discretionary trusts and public examinations

The outer limits of what constitute a company’s examinable affairs under Part 5.9 of the Corporations Act 2001 are not clearly defined.  In Pleash; in re Equititrust Ltd (in liq) No 3 [2017] FCA 1074, Justice Reeves of the Federal Court had to consider whether the assets of discretionary trusts associated with a company director were part of the company’s examinable affairs.

It was uncontroversial that the director had control over the corporate trustees of the discretionary trusts.  The liquidators argued that because of that control, the assets of the trusts would be likely to be available to satisfy a judgment and, for that reason, should be considered part of the company’s examinable affairs.

In rejecting that argument, his Honour cited the decision of Jackson J in Fordyce v Ryan [2016] QSC 307 for the proposition that the beneficiary of a discretionary trust has no property interest in the trust property, and held that the fact that the beneficiary had control over the trust did not alter the nature of his interest in the trust.

It followed, in his Honour’s view, that the affairs of the discretionary trusts did not come within the definition of examinable affairs.

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