Family Trusts Under Pressure: Lessons for Mining Executives, Directors and Business Owners

“Everything sits in the family trust, so it is protected.”

We hear that sentence often, and it is almost always said with genuine confidence. The trust was set up years ago on good advice, it has run quietly ever since, and the logic seems sound. If the assets are not in your own name, surely they are beyond reach.

For many mining and resources professionals, that assumption may be correct. For others, it may not be. Much depends on who is trying to get behind the trust and for what purpose and on what legal basis. The risks that test it are the ordinary ones of a career in this sector: directorships, personal guarantees, consulting entities and business interests held alongside an executive role.

The difficulty is that a trust is never tested in the abstract. It is tested by a person who has a vested interest in going behind the trust. That person may be a creditor, the Australian Taxation Office, a bankruptcy trustee, or liquidator or even a former spouse. Each asks different questions with different tactics and a structure that answers one well may answer another quite differently. Two recent Court decisions show what that means, reaching opposite conclusions on strikingly similar facts.

When a Bankruptcy Trustee Comes Looking

For people in the resources sector who have a potential legal liability associated with their work or employment (site senior executives, directors and senior leaders), this is the scenario worth thinking about. These are ordinary commercial risks and, unlike a relationship breakdown, they are rarely a surprise.

Fordyce v Ryan; Fordyce v Quinn [2016] QSC 307, in the Supreme Court of Queensland, shows what happens when a trust is tested this way.

The arrangement will look familiar. Three trusts were involved. The bankrupt was a general beneficiary of a discretionary trust, a director of the trustee company, and the only beneficiary who had ever received a distribution. On any practical view, he ran the trust and he benefited from it. His bankruptcy trustee argued that this interest, and the control that came with it, was “property” under the Bankruptcy Act, and could be used to pay creditors.

The argument failed. The Court held that it was “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”. A second argument advanced by the Bankruptcy Trustee, that the trust was a sham because distributions had gone to the bankrupt while he controlled the trustee, also failed.

A properly constituted trust, run in line with its own terms, did what it was designed to do. Control alone did not hand the assets to creditors.

Where Trusts Do Come Under Pressure

That is a reassuring result, but not a guarantee. Control was not the weak point in Fordyce. Elsewhere, the weak points are usually these.

Timing. The Bankruptcy Act, and other similar legislation, allows some transfers of property to be unwound, including transfers made to defeat creditors. Moving assets into a structure once trouble is on the horizon is very different from setting it up years earlier for ordinary commercial reasons.

Paperwork that does not match reality. A trust that exists on paper but is not run as a trust invites the argument that it is a sham. Records created after the fact may be a liability, not protection. That argument failed in Fordyce, but it succeeds where the documents and the conduct do not line up or it is proven that such document or acts were done for the wrong purpose.

An individual as trustee. Where a person rather than a company is trustee, their own position and the trust’s position and interest can be harder to separate. Corporate trustees exist largely to contain that risk. But again, care needs to be taken with Corporate Trustee particularly if they are de-registered by cooperation of law or oversight.

Visibility. A trust does not make assets invisible, particularly given recent disclosure reforms. Often especially after the current budget, trusts can draw more attention to themselves.

The Same Facts, A Different Answer

Family law asks a different question and is utilised for a different purpose than bankruptcy or liquidation law, and that changes the picture.

When a marriage or de facto relationship ends, the treatment of trust assets has been shaped for years by the High Court’s decision in Kennon v Spry 2008. Courts look at two issues: who controls the trust, and who can benefit from it. Where someone effectively controls a trust, through a trustee role, an appointor role or another mechanism, and can also benefit from it, the trust assets may become relevant to a property settlement.

The Full Court’s recent decision in Caldwell & Caldwell 2026 demonstrates the way in which Courts applying the Family Law Act deals with these matters. The case concerned three discretionary trusts set up by the husband’s father as part of an intergenerational family business, intended to preserve wealth for direct descendants. The wife was not a beneficiary. At first instance the trusts were treated as financial resources rather than property available for division. The Full Court disagreed, holding that the primary judge had run together two separate questions: whether the trusts were property under the Family Law Act, and whether it would be just and equitable to make orders affecting that property. Those are distinct stages.

The majority of the Appeal Court focused on the husband’s control. He held voting rights in the trustee companies, influence over the appointment and removal of trustees, and powers affecting other appointors. He could also benefit from the trusts.

The Husband argued that many of those powers had never been used. The Court gave that little weight. The question was whether he had the capacity to exercise control, not whether he had done so before. Unused control was still control.

The matter has been sent back for further determination, so the final treatment of the assets is yet to be decided by the Court. But the Full Court’s comments on control were important and at least under the Family Law Act it appears that actual and potential control of a Trust will be a vital test.

Capacity Matters More Than History

Two decisions, three trusts each, a person who controlled them and could benefit from them, and two very different answers depending on who was asking and why the questions were being asked.

Restraint in using a power does not determine the question. What matters is not what you did five years ago, but what the Trust Deed allows you to do tomorrow.

Take a mining executive who set up a family trust for tax efficiency. They remain the appointor, their spouse and children are beneficiaries, and distributions have been made across the family group. Nothing unusual in that. But the features that make a trust flexible are the same ones that matter when control is questioned.

Three Things Worth Checking

Most people can tell you what their trust assets are worth. Far fewer can tell you who controls them.

Identify the appointor

Find out who holds the appointor role, and who takes it over on death or incapacity. The appointor, sometimes called the principal or guardian, can usually appoint and remove trustees. The appointer is often the most significant position in the trust structure.

Review the beneficiaries and powers

Consider who can benefit, and whether distributions have actually been made to those beneficiaries. Then look past day-to-day operations to the powers the deed creates. Unused powers still count.

Examine the administration

Trusts are easier to defend when decisions are documented. Minutes, resolutions and records show that a trust has been run in line with its terms. This is where every type of claim converges: informal arrangements, and paperwork that does not match the conduct, cause difficulty in any forum.

The ATO will often require such evidence as well.

If your circumstances have changed since the trust was set up, through re-partnering, succession planning or business growth, revisit the assumptions behind it.

The Conversation Worth Having

Neither decision suggests family trusts no longer work. Fordyce is a reminder that a properly constituted trust can hold up under real pressure. The lesson is that labels do not provide protection. Control matters, and so does who is asking.

Trusts are usually scrutinised once something has already gone wrong. Don’t wait until then as the options are largely fixed by the wording of the Deed. Our role is to help clients understand how their structures will work before they are tested, not after.

The starting point is a simple question: who actually controls your trust?

Need help reviewing your trust structure? Our legal advisers at Resources Unearthed are here to guide you. To arrange a time to meet with Robert Lamb please call 61 (0) 7 3007 2000 or email contact@resourcesunearthed.com.au.

To learn more about Robert Lamb, visit this link.

Further Reading

Trust Structures Every Mining and Resources Professional Should Know
The Promotion Nobody Talks About: Leadership Liability and Asset Protection for Mining Executives
Estate Planning for Blended Families: Hidden Risks for Mining and Resources Professionals

Resources Unearthed is a solutions hub that provides integrated financial, legal, property, accounting and business advisory services for executives, professionals and business owners in the mining and resources sectors.

Disclaimer: This information is general in nature and does not take into account an individual’s personal situation. Each person’s situation is unique and each person needs to consider whether the information is appropriate to their needs, and where appropriate, seek professional advice from us, an accountant and a financial adviser.

Cases Referred To