The Law
19 The principles upon which the plaintiff seeks relief by way of a charge relate in part to the circumstances in which the Court may impose a constructive trust. In Muschinski v Dodds (1985) 160 CLR 583 His Honour Mr Justice Dean stated the principle in the passage between pages 612 to 620. Of importance is the following which occurs at page 618:-
Nor has it been suggested that there was a true partnership or contractual joint venture between the parties. The case has been approached and argued on the basis that they were not partners and that the overall arrangement between them, while consensual, was a non-contractual one. That does not mean, however, that particular rules applicable to regulate the rights and duties of the parties to a failed partnership or contractual joint venture might not be relevant in the search for some more general or analogous principle applicable in the circumstances of the collapse of the consensual commercial venture and personal relationship in the present case.
Both common law and equity recognise that, where money or other property is paid or applied on the basis of some consensual joint relationship or endeavour which fails without attributable blame, it will often be inappropriate simply to draw a line leaving assets and liabilities to be owned and borne according to where they may prima facie lie, as a matter of law, at the time of the failure. Where there are express or implied contractual provisions specially dealing with the consequences of failure of the joint relationship or endeavour, they will ordinarily apply in law and equity to regulate the rights and duties of the parties between themselves and the prima facie legal position will accordingly prevail. Where, however, there are no applicable contractual provisions or the only applicable provisions were not framed to meet the contingency of premature failure of the enterprise or relationship, other rules or principles will commonly be called into play. If, in the last-mentioned case, the relevant relationship is merely contractual and the contract has been frustrated without fault on either side, the present tendency of the common law is that contributions made should be refunded at least if there has been a complete failure of consideration in performance……
The prima facie rules respectively entitling a fixed term partner to a proportionate refund of his or her premium and a contractual joint venturer to a proportionate repayment of his or her capital contribution on the premature dissolution of the partnership or collapse of the joint venture are properly to be seen as instances of a more general principle of equity. That more general principle of equity can also be readily related to the general equitable notions which find expression in the common law count for money had and received (cf. Moses v. Macferlan 101 (1760) 2 Burr. 1005, at p. 1012 [97 E.R. 676, at pp. 680-681].; J. & S. Holdings Pty. Ltd. v. N.R.M.A. Insurance Ltd. 102 (1982) 61 FLR 108, at p. 120.) and to the rationale of the particular rule of contract law to which reference has been made: cf. Fibrosa 103 [1943] A.C., at p. 61ff, esp. at p. 72.. Like most of the traditional doctrines of equity, it operates upon legal entitlement to prevent a person from asserting or exercising a legal right in circumstances where the particular assertion or exercise of it would constitute unconscionable conduct: cf. Story, Commentaries on Equity Jurisprudence, 12th ed. (1877: Perry ed.), vol. 2, par. 1316; Legione v. Hateley 104 (1983) 152 C.L.R., at p. 444.. The circumstances giving rise to the operation of the principle were broadly identified by Lord Cairns L.C., speaking for the Court of Appeal in Chancery, in Atwood v. Maude 105 (1868) L.R. 3 Ch. App., at p. 375.: where "the case is one in which, using the words of Lord Cottenham in Hirst v. Tolson 106 (1850) 2 Mac. & G. 134 [42 E.R. 521., a payment has been made by anticipation of something afterwards to be enjoyed [and] where ... circumstances arise so that future enjoyment is denied". Those circumstances can be more precisely defined by saying that the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf. Atwood v. Maude 107 (1868) L.R. 3 Ch. App., at pp. 374-375., and per Jessel M.R., Lyon v. Tweddell 108 (1881) 17 Ch. D. 529, at p. 531.
20 This passage was accepted in Baumgartner v Baumgartner (1987) 164 CLR 137 at 147-8.
21 It is apparent that the present proceedings require a determination of whether there was a joint endeavour the sub-stratum of which was removed without attributable blame and whether the benefit of the money contributed by the plaintiff on the basis and for the purpose of the endeavour would otherwise by enjoyed by the defendants in circumstances in which it was not specifically intended or specially provided that the defendants should so enjoy it. As was said by His Honour Mr Justice Bryson in Bennett v Horgan (3 June 1994):-
"Prima facie the plaintiff's entitlement is to a proportionate repayment of their capital contribution on the premature collapse of the venture, but the true remedy is such order as would prevent the defendants from retaining the benefit of the property to the extent that it would unconscionable for them to retain it."
22 The principles for devising an appropriate adjustment were considered by McLelland J as he then was in Morris v Morris (1982) 1 NSWLR 61 a case which is universally applied in this jurisdiction. In that case His Honour, being then bound by Allen v Snyder (1977) 2 NSWLR 685 held that there was no express or implied trust but went on to hold that there was a proprietary estoppel in favour of the plaintiff which should be satisfied by an equitable charge over the property to secure his investment which he spent in the expectation, induced or encouraged by the defendants that he would be able to live there indefinitely as a member of that family. It was a typical example of what Professor Cope in "Constructive Trusts" 1992 describes as the "expectation principle" at p 643-662. Those principles are also applicable in this case.