Trust companies in Singapore, Hong Kong, Labuan, the BVI and Jersey increasingly administer trusts for families with an Australian connection. A beneficiary has migrated to Sydney, or the protector lives in Melbourne. When that person separates, dies or becomes insolvent, an Australian court may take an interest in the trust.
The question is rarely whether an Australian order binds the foreign trustee directly. More useful questions are how Australian courts reach trust wealth indirectly, where the governing law and firewall legislation push back, and how the trustee preserves its independence. This article outlines those issues for trust officers, private bankers and family office advisers.
Family law: property, financial resources and control
In a property settlement under the Family Law Act 1975 (Cth), the court looks at substance rather than legal title. Depending on the facts, a trust interest may be treated as property of a party who effectively controls the trust and can benefit from it, or as a financial resource of a party who does not control it but may realistically expect to benefit. Kennon v Spry in the High Court is the usual starting point. We discuss domestic family trusts on separation in a separate article; the focus here is the foreign trustee.
For an offshore trust, courts may examine who can remove the trustee, whether the protector is a party or their nominee, the letter of wishes, the distribution history, and whether the trustee has in practice acted on one party’s requests.
Orders binding third parties: Part VIIIAA
Part VIIIAA (ss 90AA–90AF) allows the court, in property and injunction proceedings between spouses, to make orders directed to a third party or altering a third party’s rights. Section 90AC gives the Part effect despite anything to the contrary in other laws, trust deeds and instruments. Before making such an order the court must be satisfied of several matters which, in general terms, include that the order is reasonably necessary or appropriate to divide the property, that the third party has had procedural fairness, that the order is just and equitable, and that the third party’s capacity to comply has been considered. Section 90TA applies equivalent provisions to de facto relationships.
A trustee can be a third party, but whether an order would be made against a foreign trustee, and have effect abroad, depends on the facts. Separately, s 106B allows the court to set aside transactions made to defeat a claim, which can affect recent settlements or distributions.
Pressure on the Australian-resident party
Australian courts mainly act on the parties before them. A party who is appointor, protector or a settlor with reserved powers may be ordered to exercise, or refrain from exercising, those powers. The trustee may then receive requests framed as “the family’s wishes” that are in substance driven by Australian litigation.
Estates: family provision and NSW notional estate
Every Australian state and territory allows eligible people to claim provision from a deceased estate. Offshore discretionary trust assets are usually not part of the estate, though rights the deceased held, such as a loan account owed by the trust, may be, and applicants may seek the trustee’s documents.
New South Wales goes further. Under the Succession Act 2006 (NSW), the Supreme Court may designate property outside the estate as notional estate where the deceased entered into a relevant property transaction, which can include transfers for less than full value and failures to exercise a power that could have benefited the deceased, within time windows the Act sets. A settlor’s transfers to an offshore trust may fall within these rules depending on timing and facts. Whether a designation over property held by a foreign trustee could be given effect abroad is a separate question.
Bankruptcy and cross-border insolvency
If a settlor becomes bankrupt in Australia, the trustee in bankruptcy may examine earlier transfers into the trust as undervalued transactions (s 120) or transfers to defeat creditors (s 121) under the Bankruptcy Act 1966 (Cth). We discuss these in a separate article on trusts and creditors.
The Cross-Border Insolvency Act 2008 (Cth) gives the UNCITRAL Model Law on Cross-Border Insolvency the force of law in Australia (s 6), including for Bankruptcy Act proceedings. Whether an Australian trustee in bankruptcy can obtain recognition or assistance in the trust’s jurisdiction depends on that jurisdiction’s own law.
Recognition of trusts: the Hague Trusts Convention
Australia is a party to the Hague Convention on the Law Applicable to Trusts and on their Recognition, given force of law by the Trusts (Hague Convention) Act 1991 (Cth). The Convention broadly respects the chosen governing law, but Article 15 preserves the forum’s mandatory rules in areas including the effects of marriage, succession rights and creditor protection in insolvency, and Article 18 allows the governing law to be disregarded where its application would be manifestly incompatible with public policy.
Firewall legislation and the tension with Australian orders
Many trust jurisdictions insulate locally governed trusts from foreign law and judgments. In general terms:
- Jersey. Article 9 of the Trusts (Jersey) Law 1984 requires listed questions to be determined under Jersey law, and a foreign judgment is not enforced or given effect to the extent it is inconsistent with the Article.
- BVI. Section 83A of the Trustee Act, strengthened in 2021, protects BVI trusts from foreign rules based on personal relationships and treats inconsistent foreign judgments as unenforceable.
- Cayman Islands. The Trusts Act has comparable provisions on governing law and foreign judgments.
- Labuan. The Labuan Trusts Act 1996 provides that certain foreign claims, including those based on marriage and succession, are not recognised against a Labuan trust, with qualifications for Malaysian-resident settlors.
- Singapore. Section 90 of the Trustees Act 1967 is narrower: it addresses foreign inheritance and succession rules affecting the validity of a qualifying trust, rather than being a general shield against foreign matrimonial or insolvency orders.
An Australian court may therefore make orders that the trustee’s home law says cannot be enforced. Firewalls do not, however, prevent a trustee from exercising its own discretion in the beneficiaries’ interests. In In the matter of the R Trust [2015] JRC 267A, the Royal Court of Jersey approved a trustee’s decision to take steps an English divorce order also contemplated, because the trustee had decided independently that they benefited the beneficiaries rather than simply enforcing the foreign order. Australian courts may view comparable situations differently.
When the foreign trustee does not comply
If a foreign trustee does not act on an Australian order, the court does not usually lose its ability to do justice between the parties. It may treat the trust as a financial resource, make orders against the Australian party personally, and adjust the division from Australian assets. Consider a hypothetical: a Hong Kong trustee holds a portfolio for a family whose Melbourne-based son is protector. On his separation the court looks to his Australian property instead, and he asks the trustee to fund the settlement. Whether the trustee could or should respond depended on facts that needed advice in both jurisdictions.
Enforcing Australian judgments overseas
The Foreign Judgments Act 1991 (Cth) works by reciprocity, providing for registration in Australia of judgments from courts listed in the regulations, including the superior courts of Singapore and Hong Kong. Enforcing an Australian judgment abroad depends on the other country’s regime. Singapore’s Reciprocal Enforcement of Foreign Judgments Act has covered Australia since 1 March 2023, and Hong Kong’s Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap 319) lists Australia, but both are largely confined to final money judgments of designated courts. Non-money orders such as property adjustment orders generally face greater difficulty.
Issues for foreign trustees to discuss with counsel
- Subpoenas and notices. Whether an Australian subpoena has any compulsive force abroad, whether it was validly served, and what confidentiality and home-law duties apply.
- Home court directions. Whether to seek directions or a blessing in the home court before responding to Australian orders or requests.
- Neutrality. How to avoid taking sides between spouses, siblings or estate claimants who may all be beneficiaries.
- Documenting independence. Whether minutes show that discretions were exercised on the trustee’s own consideration, not at one family member’s direction.
- Instructions from the Australian party. How to treat requests from a settlor, protector or beneficiary who is a party to Australian litigation.
Frequently asked questions
Can an Australian court make orders against an offshore trust?
It can make Part VIIIAA orders directed to a third party, which may include a trustee, if strict conditions are met. More often it acts on the Australian parties and their powers.
Does firewall legislation protect a trust from Australian family law?
It may prevent enforcement in the trust’s jurisdiction. It does not stop an Australian court taking the trust into account against the parties or adjusting the division of Australian assets.
Is Australia a party to the Hague Trusts Convention?
Yes, through the Trusts (Hague Convention) Act 1991 (Cth). The Convention preserves mandatory rules on marriage, succession and insolvency.
Every family’s situation is different, and the answer often turns on details. Book a consultation so we can review your documents and circumstances before you act.
How Chua Tan Associates can help
Chua Tan Associates acts as Australian counsel to private banks, trust companies and family offices whose clients have Australian connections, and works with lawyers in Asia. We advise foreign trustees on Australian family law, estate and insolvency proceedings that touch their trusts. Justin Chua trained in accounting (Bachelor of Commerce, accounting major), is an affiliate member of STEP (the Society of Trust and Estate Practitioners), and advises on the legal and tax structure of family wealth together. He is a Nationally Accredited Mediator and an Accredited Family Business Advisor. We work with registered tax agents and advise in English, Mandarin and Cantonese.
Important: This article is general information only and must not be relied on. It is not legal, tax or financial advice, does not take your circumstances into account, and may not reflect changes in the law after publication. Laws of other countries may also apply. Do not act or refrain from acting on the basis of this article. Reading it or contacting us does not create a lawyer–client relationship. Please book a consultation for advice on your situation.
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Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
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