CASE NOTE: Australian Securities and Investments Commission in the Matter of Richstar Enterprises Pty Ltd (CAN 099 071 968) v Carey (No 6) [2006] FCA 814

Court: Federal Court of Australia

Judge: French J

This case commonly referred to as the Richstar decision was a significant decision in Australian corporate law and has also become a seminal case in trust law. The interest of the beneficiary of a trust was elevated to that of their own property because the trust was held to effectively being the alter ego of the beneficiary. This pierced the veil of the trust.

Key Points of the Case:

1. Background: The case involved the Australian Securities and Investments Commission (ASIC) seeking to freeze the assets of a beneficiary of a trust (Mr. Carey), who was involved in a series of companies and trusts. ASIC argued that the assets held in these structures were effectively under Mr. Carey's control and should be available to satisfy any liability of Mr Carey.
2. Piercing the Corporate Veil: The Federal Court considered whether the corporate veil could be pierced to treat the assets of the companies and trusts as Mr. Carey's personal assets. The Court found that in certain circumstances, where an individual exercises control over a trust, the assets of the trust can be treated as their own.
3. Discretionary Trusts: The Court examined the nature of discretionary trusts and the extent to which a beneficiary's interest in such a trust could be considered the property of the beneficiary of the trust. The Court determined that if a person has effective control over a trust, the assets may be considered part of their personal estate.
4. Outcome: The Court granted ASIC's application to freeze the assets of the companies and trusts.  This decision highlighted the importance of substance over form in determining the true ownership and control of assets.

Whilst later cases have somewhat distinguished the Richstar decision it is often cited in discussions about asset protection and the limits of using corporate and trust structures to shield assets from creditors.

Resources

Australian Securities and Investments Commission in the Matter of Richstar Enterprises Pty Ltd (ACN 099 071 968) v Carey (No 6) [2006] FCA 814

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