Do unit holders in unit trusts have a proprietary interest in trust property?

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This much discussed topic has been the subject of numerous authorities over the years, many of them well established.

Yet navigating a way through them is a nuanced task, especially since the main High Court authority on point, CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98 (“CPT”) provides critical analysis of previous trust cases without establishing clear new principles which a practitioner can readily apply.

Caveats are lodged all the time claiming a caveatable interest in unit trust property by unit holders and trust beneficiaries. This may be because the terms of the trust deed are unclear or even silent on the question, the authorities are nuanced, or perhaps the relevant practitioner was simply unclear on the law. A lack of clarity on the law is dangerous given the number of indemnity costs orders against parties and practitioners for lodging and maintaining unmeritorious caveats.

In this article, I’ll take you through CPT as well as the key state-based authorities which set out the main principles. Whether you’re applying to remove a caveat or resisting a removal application, there are good arguments both ways. I’ve set out this article to offer something for each position.

The question is sometimes alternatively phrased as:

·      “Do unit holders in a trust have proprietary interests capable of maintaining a caveat?”

·      “Do unit holders of a unit trust have a proprietary interest in trust property?”; or

·      “Do beneficiaries have an interest in unit trust property?”

This article only considers unit trusts. Not discretionary, equitable or other trusts.

The full article (3507 words) considers:

  • Applying to remove a caveat (general considerations)

  • Terms of the trust deed - what to look for

  • Analysis of CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98

  • Analysis of Costa & Duppe Properties Pty Ltd v Duppe [1986] VR 90

  • Analysis of other relevant authorities which grapple with the same issue

  • Helpful academic articles

My general article ‘How to remove a caveat’ is here.