appellant. Appeal allowed with costs. Orders of the Court of Appeal and Waddell J. set aside. Matter stood over to 11 February 1986 for consent orders; otherwise remitted to the Supreme Court of New South...
Key principles
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...
In circumstances where a planned joint endeavour to develop and use land fails without fault of either party, and one party has contributed the bulk of the purchase and...
The presumption of a resulting trust arising from one party providing the entire purchase price is rebutted by clear evidence of a common intention that each should hold an...
Issues before the court
Whether the presumption of a resulting trust in favour of the appellant who provided the whole purchase price was rebutted.
Whether a constructive trust arose in favour of the appellant following the failure of the joint endeavour and personal relationship.
Cited legislation
Plain English Summary
A woman paid nearly all the cost of buying land with her de facto partner. They planned to fix it up for her craft business and their home, and agreed to own it half each because he promised to pay his share later. The plans fell apart through no one's fault, they split up, and she had paid about ten times more than him. The court said they had genuinely meant to own it equally from the start, so she could not claim the whole thing under a resulting trust. But it would be unconscionable for him to keep half the value without repaying her extra contribution. So the court imposed a constructive trust: when the land is sold, each gets their own money back first in proportion to what they spent, and they split anything left over equally.
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Deep Dive
2,772 words · generated 24/04/2026
What happened
The appellant, Mrs Muschinski, and the respondent, Mr Dodds, had lived together in a de facto relationship at her Ingleburn house since November 1972. In late 1975 they identified a dilapidated sandstone cottage on land at Picton which they proposed to restore for use as an arts and crafts centre run by Mrs Muschinski. They also planned to erect a prefabricated house on the land as their residence, to subdivide the property and to sell part of it. The purchase price was $20,000. Mrs Muschinski was to provide that sum from the imminent sale of her Ingleburn house. Mr Dodds had no immediate funds but expected approximately $9,000 from a pending divorce property settlement and intended to contribute that sum together with his labour and future earnings to the development costs.
No linked legislation citations have been extracted yet.
They jointly applied to a bank for bridging finance of $20,000 and a subsequent housing loan. The bridging loan was approved but not drawn because the Ingleburn sale proceeds became available in time. Before exchange of contracts on 26 February 1976 the parties consulted their solicitor, Mr Marsden. He advised against a partnership agreement and recommended that title be taken as tenants in common in equal shares. Mr Marsden's recorded advice, accepted by both, was that it would be unfair to Mr Dodds if the property were placed solely in Mrs Muschinski's name because he was to "put the time, the efforts, and funds as necessary to develop the property up" and might otherwise be required to alter the deeds after sinking substantial money into land in which he held no title. The conveyance was completed in May 1976 with Mrs Muschinski providing the entire purchase price and associated costs.
Subsequent events did not match the plan. The Wollondilly Shire Council refused permission to erect the prefabricated house and to subdivide except on conditions the parties found unacceptable. Mr Dodds received only $3,500 net from his divorce settlement. With Mrs Muschinski's acquiescence part of that sum was spent on travel to Germany to join her while she visited her parents. He performed some work on the cottage and grounds but no prefabricated house was built and only limited improvements were effected. The agreed financial contributions, disregarding labour, were $25,259.45 from Mrs Muschinski and $2,549.77 from Mr Dodds. The de facto relationship, always somewhat volatile, ended permanently in May 1980.
Mrs Muschinski commenced proceedings in the Equity Division seeking a declaration that she was the beneficial owner of the whole parcel and that Mr Dodds held his legal interest on trust for her. Mr Dodds cross-claimed for an order for sale and equal division of the net proceeds. Waddell J. found that Mrs Muschinski had intended Mr Dodds to have an immediate beneficial half share in return for his assurances of future contribution and to improve their relationship. That intention was not conditional on fulfilment of the assurances. The presumption of a resulting trust was therefore rebutted and no constructive trust arose. The Court of Appeal (Hope, Samuels and Mahoney JJ.A.) dismissed her appeal on the same basis. The High Court granted special leave and, by majority, allowed the appeal.
Why the court decided this way
The High Court unanimously held that the concurrent findings of fact below could not be disturbed: the evidence, particularly the conversations before and at the solicitor's office, established a common intention that each party should enjoy an immediate and unconditional legal and beneficial half share from the time of purchase. That intention rebutted the presumption of a resulting trust that would otherwise have arisen from Mrs Muschinski's sole provision of the purchase money. Gibbs C.J., Mason, Brennan and Dawson JJ. each emphasised that the parties had discussed the matter at length, that Mr Dodds had insisted on his name appearing on the title as a precondition to his contribution, and that Mrs Muschinski had accepted Mr Marsden's advice that equal co-ownership was fair given the intended contributions. The intention was not that Mr Dodds' interest would accrue incrementally as he contributed, nor was it conditional on performance of his assurances.
A majority (Mason, Brennan, Deane and, in the result, Gibbs C.J.) nevertheless concluded that a constructive trust should be imposed. Deane J.'s reasons, with which Mason J. expressly agreed and Gibbs C.J. ultimately concurred, supplied the governing principle. His Honour analysed the arrangement as a consensual joint endeavour whose substratum was removed without attributable blame when council approvals were refused, the expected divorce settlement proved inadequate, and the personal relationship collapsed. Mrs Muschinski had contributed approximately ten-elevenths of the outlays while Mr Dodds had contributed one-eleventh. The parties had not adverted to, still less made provision for, that double contingency. In those circumstances it would be unconscionable for Mr Dodds to retain the full benefit of his legal half share without allowing Mrs Muschinski repayment of her grossly disproportionate contribution.
Deane J. traced the principle to equitable notions underlying the law of frustrated contracts, premature dissolution of partnerships, and the action for money had and received. He identified it as an instance of equity's refusal to permit a party to assert legal title in circumstances that would constitute unconscionable conduct. The constructive trust was remedial in character yet institutional once imposed. It was not based on "idiosyncratic notions of fairness" but on established equitable principle. Brennan J., while rejecting any general fairness jurisdiction and finding that the gift to Mr Dodds was subject only to a personal equitable obligation rather than a condition of forfeiture, nevertheless agreed with the orders proposed by Deane J. Dawson J. agreed with Brennan J. that no constructive trust arose on the claim as framed but the orders ultimately made followed Deane J.'s formulation.
The court therefore allowed the appeal, set aside the orders below, stood the matter over for possible consent orders, and, in default, remitted it for declaration that the parties held their legal interests as tenants in common on constructive trust, after payment of any joint debts, to repay each party's respective contributions and to hold the residue for them both in equal shares. The trust was to operate only from the date of publication of the court's reasons so as not to affect third-party rights.
Before and after state of the law
Before Muschinski v Dodds the law concerning beneficial interests in property acquired by de facto partners was dominated by the presumptions of resulting trust and advancement, the requirement of common intention, and a restrictive approach to constructive trusts. Calverley v. Green (1984) 155 C.L.R. 242, decided only the year before, had confirmed that where one party provides the whole purchase price a resulting trust is presumed in that party's favour unless rebutted by evidence of actual intention. The Court there also held that no presumption of advancement arises in de facto relationships. Pettitt v. Pettitt [1970] A.C. 777 and Gissing v. Gissing [1971] A.C. 886 had rejected any general power to redistribute property according to what the court thought fair, insisting instead on proof of actual common intention or, in some formulations, conduct that would make denial of a beneficial interest inequitable. Australian authority, including Wirth v. Wirth (1956) 98 C.L.R. 228 and Hepworth v. Hepworth (1963) 110 C.L.R. 309, had likewise denied any jurisdiction to impose a constructive trust merely because it would be fair to do so.
Muschinski v Dodds left that framework intact for cases in which common intention could be ascertained. The Court unanimously applied the Calverley principles and confirmed that the parties' actual (not imputed) intention had been for immediate equal beneficial interests. The innovation lay in the recognition that, once that intention was established and the resulting-trust analysis exhausted, equity could still intervene by constructive trust where the substratum of a joint endeavour was removed without fault. Deane J. located this intervention within existing doctrine rather than as a new head of relief. He drew analogies from the law of partnerships (proportionate return of capital on premature dissolution), frustrated contracts (return of payments on total failure of consideration), and the action for money had and received. The touchstone remained unconscionable conduct, not general fairness. Brennan J. and Dawson J. were more cautious, emphasising that Mrs Muschinski had framed her case on resulting trust or conditional gift and had not pleaded contribution or a remedial trust; yet even they concurred in orders that gave effect to Deane J.'s analysis.
After the decision, the law recognised a distinct category of case in which equity adjusts property rights on the failure of a non-contractual joint endeavour without the need to find an express or implied trust or a pre-existing fiduciary relationship. The constructive trust was confirmed as both remedy and institution, capable of being moulded to the circumstances and given prospective operation. The decision did not overrule Pettitt or Gissing but confined their prohibition on fairness-based redistribution to cases falling outside the specific unconscionability principle articulated by Deane J. It left open whether labour contributions or indirect contributions (such as homemaking) should be brought into account when quantifying the repayment of "contributions".
Key passages with plain-English translation
Deane J. stated the central principle at length:
"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."
In plain English: when two people set out on a shared project and one puts in most of the money on the understanding that they are in it together, and the project collapses for reasons no one is to blame for, the law will not let the other person walk away with a windfall that was never part of the original plan. Equity steps in to stop that unfair retention.
On the nature of the constructive trust Deane J. wrote:
"Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle."
Plain-English translation: a constructive trust is a court-created obligation attached to property. It does not depend on what the parties actually agreed or secretly intended. Its job is to stop someone from keeping legal title when, in all the circumstances, equity says that would be wrong.
Brennan J. rejected a broader approach:
"It would not be sufficient for Mrs. Muschinski to show that it is unfair for Mr. Dodds to retain the interest once the purpose is no longer pursued; she must show that it is unconscionable for him to retain it. A constructive trust does not arise and cannot be imposed on the ground of mere fairness."
In plain English: feeling that something is unfair is not enough. The person asking for a trust must prove that the other party's conduct or retention would be against conscience according to settled equitable rules. Courts cannot simply re-write property rights because the outcome looks rough.
These passages, grounded in the text at the passages reproduced in the reasons of Deane and Brennan JJ., define both the scope of relief and its limits.
What fact patterns trigger this precedent
The principle is engaged when parties enter a consensual (but not necessarily contractual) joint endeavour to acquire, improve and use property for a common purpose. One party contributes the bulk of the capital on the faith of that endeavour. The endeavour's substratum is removed without attributable blame—through external events such as refusal of planning permission, inadequacy of expected funds, or breakdown of the personal relationship that supplied the context. The parties have not turned their minds to, or made specific provision for, that contingency. In those circumstances one party would otherwise enjoy a legal interest disproportionate to contribution in a manner not specifically intended. The disproportion must be such that retention of the full legal share would be unconscionable.
The precedent does not apply where the parties have made an express contract governing the consequences of failure, where one party is at fault, where the arrangement was a pure gift, or where the court would be required to impose a trust merely because the outcome appears unfair rather than unconscionable. It is not limited to de facto relationships; the principle is expressed in terms of any joint endeavour. Labour and indirect contributions were left for later assessment on remitter, but the primary trigger remains a clear disproportion in financial contributions coupled with the unforeseen collapse of the shared purpose.
How later courts have treated it
Although the judgment itself contains no discussion of its own subsequent treatment, the manner in which the High Court dealt with earlier authority indicates the intended scope. The Court applied Calverley v. Green to the resulting-trust question and treated the English decisions in Pettitt v. Pettitt and Gissing v. Gissing as establishing that fairness alone cannot ground a constructive trust. It distinguished those authorities on the basis that they did not involve the failure of a joint endeavour after legal title had been taken in joint names on the faith of mutual assurances. The Court followed Wirth v. Wirth and Hepworth v. Hepworth for the proposition that equity does not authorise redistribution on mere fairness. Brennan J. cited Bloch v. Bloch to the same effect. Thus the decision positioned itself as an incremental development within, rather than a departure from, the existing Australian equitable framework.
The judgments emphasise that the constructive trust must be grounded in established principle (unconscionability after collapse of a joint endeavour) rather than discretionary fairness. Later passages in Deane J.'s reasons make clear that the principle is not confined to fiduciary relationships or to cases of express or implied trust. The court's insistence that the trust operate only from the date of judgment illustrates a cautious, prospective use of the remedy so as not to disturb vested third-party rights. The decision therefore narrowed the gap between English and Australian law on common-intention constructive trusts while preserving a distinct Australian remedial flexibility in the joint-endeavour context. No member of the Court suggested that the principle could override express contractual provisions or operate where the parties had specifically provided for the contingency that eventuated.
Still-open questions
Several questions remain unresolved on the face of the judgments. First, the precise weight to be given to labour and indirect contributions (homemaking, support, forgone earnings) when quantifying "contributions" for the purpose of the constructive trust. The parties' agreed figures excluded labour; the Court left that issue for possible adjustment on remitter but gave no definitive guidance.
Second, the boundaries of the "joint endeavour" concept. The judgments refer to both commercial and personal elements. It is unclear whether the principle applies with equal force to purely commercial joint ventures, to married couples, or to short-term arrangements. Deane J. noted that the personal relationship supplied the context but did not decide whether the principle could apply where cohabitation continued after the commercial venture collapsed.
Third, the interaction with the law of contribution between co-debtors. Gibbs C.J. considered that Mrs Muschinski might have had a right of contribution had she framed her case on the basis that she discharged a joint and several liability, but the point was not fully argued. Brennan and Dawson JJ. held that her claim was inconsistent with that analysis. The extent to which an equitable charge for contribution can coexist with or supplant the constructive-trust analysis therefore remains open.
Fourth, the degree of disproportion required before retention becomes unconscionable. The ten-to-one ratio in the present case was extreme; whether a lesser disparity would suffice, or whether the court must also examine the parties' reasonable expectations at the time of acquisition, is not settled.
Finally, the remedial flexibility of the trust—its ability to be moulded, given prospective operation, or adjusted for equities arising after the collapse—invites further litigation. The Court declared the trust from the date of judgment but left open whether interest should be allowed on contributions. These matters, expressly flagged or left unexplored in the reasons, continue to require careful factual analysis in subsequent cases.
Judgment (94 paragraphs)
[1]
High Court of Australia
Gibbs C.J. Mason, Brennan, Deane and Dawson JJ.
Muschinski v Dodds
[2]
ORDER
Appeal allowed with costs. Order that the judgment and order of the Court of Appeal of the Supreme Court of New South Wales be set aside, the appeal to that Court be allowed and the judgment and order of Waddell J. be set aside. Further order that the respondent pay the costs of proceedings before Waddell J. and of the appeal to the Court of Appeal. Stand the matter over until 11 February 1986. Order that, if the parties do not apply on or before 11 February 1986 for an order by consent otherwise disposing of this appeal, the matter be remitted to the Supreme Court of New South Wales to proceed in accordance with the judgment and proposed orders of Deane J. * [The parties did not apply to the Court for an order by consent on or before 11 February 1986.]
[3]
The appellant, the plaintiff in proceedings brought in the Equity Division of the Supreme Court of New South Wales, claimed a declaration that she is the beneficial owner of a parcel of land at Picton which is held in the names of the appellant and the respondent as tenants in common and that the respondent's "joint interest" in the land is held in trust for her. She claimed also certain ancillary relief. The respondent, by a cross-claim, sought an order for the sale of the land and the division of the net proceeds of sale equally between the appellant and the respondent. The matter was heard by Waddell J., who dismissed the appellant's claim and stood over the cross-claim. The appellant appealed from this decision to the Court of Appeal which dismissed the appeal. She now appeals to this Court.
[4]
On 26 February 1976, the appellant and the respondent entered into a contract to purchase the land at Picton for a price of $20,000. The contract commences by describing the property at Picton, and then continues as follows:
[5]
Agreement made the 26th day of February 1976 between [the vendor] of the one part and [the respondent and the appellant] (herein called the Purchaser) of the other part whereby the Vendor agrees to sell and the Purchaser agrees to purchase, if more than one as joint tenants/tenants in common in the following shares:
[6]
with joint and several liability under this agreement, the property above described
[7]
The contract provided that the purchaser should upon the signing of the agreement pay a deposit of $2,000 and that the balance of the purchase price should be paid in cash on completion. Settlement of the contract took place in May 1976. The appellant provided the whole of the purchase price and other moneys needed to complete the purchase. She had been the owner of a house at Ingleburn which she sold; completion of that sale took place at about the same time as the completion of the purchase of the Picton land, and she was able to use the proceeds of that sale to provide the purchase moneys for the land at Picton.
[8]
The parties had lived together in the appellant's house at Ingleburn since November 1972. The appellant was a divorced woman and had three children of her former marriage. The respondent was married but was separated from his wife. He was in irregular employment and had no assets but hoped to obtain $9,000 from a property settlement in divorce proceedings which were pending between his wife and himself. The appellant described their relationship as "a man and wife relationship" physically, but not in respect of the financial arrangements. She said that the respondent did not support her or the children; in fact he paid her only a modest contribution towards the cost of housekeeping.
[9]
The relationship between the appellant and the respondent seems to have been somewhat volatile, but in October 1975, when they first saw the Picton property, they were said to be very happy. There was on the land at Picton an old cottage in a bad state of repair. They planned to restore it and to use it in a crafts business which the appellant proposed to establish. They also planned to erect on the land a prefabricated house in which they would live together. They agreed that they would use the proceeds of the sale of the appellant's house at Ingleburn to provide the money to purchase the land at Picton, and that the respondent would use whatever moneys he obtained from his divorce settlement and had available as a result of his earnings to pay for the erection of the prefabricated house. Nevertheless, in about December 1975, they approached a bank, seeking to borrow $35,000 - $20,000 for the purchase of the Picton property and $15,000 the estimated cost of a prefabricated house. The bank treated the application as one for bridging finance of $20,000 and a subsequent housing loan of $15,000. A bridging loan to the parties was approved, but was not in fact used because the Ingleburn house was sold in time to provide the necessary money. Before the contract was signed they discussed whether the property should be put in the appellant's name, or in both names, and eventually saw a solicitor, Mr. Marsden, who advised them to have the property put in their names as tenants in common. Although the contract does not show whether the parties purchased as joint tenants or tenants in common, when conveyance was effected it was to them as tenants in common. Subsequently, apparently as late as December 1977, a further loan to the parties of $14,000 was approved by the bank to assist in the construction of the house, but the local authority, the Wollondilly Shire Council, refused permission to erect a prefabricated house on the property; the loan was not used and no house was erected. The respondent received only $3,500 from his divorce settlement. With the acquiescence of the appellant, he spent part of that money in travelling to Germany to join her there while she was visiting her parents. He did some work on the old cottage in order to make it habitable. It is agreed that the respective contributions of the parties to the purchase and improvement of the property were $25,259.45 from the appellant and $2,549.77 from the respondent; those sums do not take their labour into account. After some temporary partings the parties finally separated in May 1980.
[10]
Both the learned primary judge and the Court of Appeal commenced with the assumption that since the appellant had provided the whole of the purchase price it was necessary for the respondent to rebut the presumption of a resulting trust in the appellant's favour. After an examination of the evidence it was held by the learned primary judge that it was the intention of the appellant that the respondent should have a beneficial one-half interest in the land in return for his assurances that he would assist the appellant to set up a craft business in the old cottage and that he would have a house built on the land and pay for it out of any moneys which might come to him from his divorce settlement and his earnings. A further reason for the appellant's intention to give the respondent a beneficial interest in the land was that she hoped that if she did so it would improve the quality of their relationship. The learned primary judge further held that there was no evidence that the appellant's intention was to confer on the respondent an interest conditional on the fulfilment of the purposes which the parties had in mind. He accordingly held that the presumption of a resulting trust was rebutted and that no constructive trust arose in favour of the appellant. The Court of Appeal agreed that the appellant intended to give the respondent a one-half beneficial interest in the land and, to use the words of Hope J.A., that "this intention was based on the assurances which [the respondent] gave to her and not upon the fulfilment of those assurances". Their Honours held that the evidence pointed to an intention on the part of the appellant to give the respondent a beneficial interest which was immediate and unconditional. They accordingly agreed that the presumption of a resulting trust was rebutted and further held that the events that occurred after the property had been acquired did not give rise to a constructive trust in favour of the appellant.
[11]
The equitable rules relating to the creation of a resulting trust in a case such as the present were recently considered by this Court in Calverley v. Green [1] . For present purposes, it is sufficient to state them as follows. Where, on a purchase, a property is conveyed to two persons, whether as joint tenants or as tenants in common, and one of those persons has provided the whole of the purchase money, the property is presumed to be held in trust for that person, to whom I shall, for convenience, refer as "the real purchaser". However a resulting trust will not arise if the relationship between the real purchaser and the other transferee is such as to raise a presumption that the transfer was intended as an advancement, or in other words a presumption that the transferee who had not contributed any of the purchase money was intended to take a beneficial interest. It was held in Calverley v. Green that no presumption of advancement arises where a man puts property into the name of a woman with whom he is living in what is commonly called a "de facto relationship" and, since it has been held that there is no presumption of advancement where a wife makes a purchase in the name of her lawful husband (Mercier v. Mercier [2] ), there is even stronger reason for holding that no such presumption arises where a woman puts property into the name of her "de facto husband". However the presumption that there is a resulting trust may be rebutted by evidence that in fact the real purchaser intended that the other transferee should take a beneficial interest. Where both transferees have contributed to the purchase money, the intentions of both are material, but where only one has provided the money it is his or her intention alone that has to be ascertained. The evidence admissible to establish the intention of the real purchaser will comprise "the acts and declarations of the parties before or at the time of the purchase or so immediately thereafter as to constitute a part of the transaction" (Charles Marshall Pty. Ltd. v. Grimsley [3] ); in addition, the purchaser may testify as to the intention which he or she had at the relevant time: Martin v. Martin [4] . Subsequent declarations will be admissible as evidence only against the party who made them and not in his or her favour: Charles Marshall Pty. Ltd. v. Grimsley [5] .
[12]
(1984) 155 C.L.R. 242.
2. [1903] 2 Ch. 98.
3. (1956) 95 C.L.R. 353, at p. 365.
4. (1959) 110 C.L.R. 297, at p. 304.
5. (1956) 95 C.L.R., at p. 365.
[13]
Mr. Simos, for the respondent, submitted that in the present case there is no basis for this Court to depart from the concurrent findings of the Court of Appeal and the learned primary judge that it was the intention of the appellant (and, if it mattered, the common intention of both parties) that the respondent should have a beneficial half share in the property. Although there can be no doubt that where there have been concurrent findings of fact an appellant will have a difficult task in persuading this Court to set those findings aside (Baffsky v. Brewis [6] ; The Commonwealth v. Introvigne [7] ), this Court has not adopted the rule of practice of the Judicial Committee, which will not review the evidence for a third time when there are concurrent findings of fact unless there has been some miscarriage of justice or violation of some principle of law or procedure. The origins and development of that rule are fully traced in the judgment of Lord Thankerton in Srimati Bibhabati Devi v. Kumar Ramendra Narayan Roy [8] . The rule was first applied in appeals from India and was prompted by the fact that the judges in India were familiar with the customs and sentiments of the peoples of India, whereas their Lordships did not necessarily enjoy the same advantage. For a similar reason, the rule was later extended to appeals from all parts of the Empire. No similar reason existed for the adoption of any such rule in the House of Lords (cf. Montgomerie & Co. Ltd. v. Wallace-James [9] ) or in this Court. Where concurrent findings are challenged, it remains the duty of this Court to depart from them if it considers them to be erroneous.
[14]
(1976) 51 A.L.J.R. 170, at p. 172; 12 A.L.R. 435, at p. 438.
2. (1982) 150 C.L.R. 258, at pp. 262, 274.
3. [1946] A.C. 508, at pp. 513-522.
4. [1904] A.C. 73.
[15]
However, an examination of the evidence has convinced me that the findings in the Supreme Court, so far as they go, are correct. It was, in my opinion, right to conclude that the appellant intended that the respondent should have a beneficial one-half share in the property. The conversations to which I am about to refer must be viewed against the background provided by the relationship between the parties, and in the light of the fact that the parties were co-contractors for the property, each undertaking the obligation to pay the purchase price. Both intended to borrow jointly from the bank, if that became necessary, to finance the purchase. When the appellant first saw the Picton property, she wanted to put it in her own name because she expected to supply all the money. The respondent, however, told her that he would assist her financially and by his own physical work on the property, but only if his name was "on the title". The appellant in her evidence frequently spoke about "putting [the respondent's] name on the title". Mr. Bennett, who appeared for the appellant, contended that this revealed an intention to give the respondent only a legal, and not an equitable, interest in the land. That argument attaches altogether too much significance to language used by lay persons who were unlikely to have appreciated the distinction between legal and beneficial interests, and the tenor of the discussions shows that the parties were concerned with the substance of the matter - with the beneficial interest and not the form of the legal title. The parties had frequent discussions about the matter; the appellant had doubts about putting the land in both names, but the respondent regarded it as unfair that he should have no interest in the property when he intended to contribute, roughly equally, to the total cost of obtaining the asset in its final form. The respondent gave evidence that he said to the appellant:
[16]
I would like to have ownership in the property. I believe that if I am going to borrow $18,000, $20,000 and then spend a lot more money on the restoration of the cottage I should have a share in the ownership of the property. That is why I have asked you to make the appointment with Mr. Marsden, so that he can then advise us as to the best way to do it.
He said that she replied, "Yes, that's a good idea". According to the appellant she had agreed, by the time the parties saw Mr. Marsden, that the land should be held in both names. Mr. Marsden at first strongly opposed the suggestion, but changed his mind, apparently because he became satisfied with the arrangements proposed by the respondent. According to the respondent's evidence, Mr. Marsden said:
I have had a discussion with Mr. Dodds and I have asked him to explain to me how he would like the deeds placed on the property, and I have advised him that the best way to do it would be through tenants in common, as he is going to put the time, the efforts, and funds as necessary to develop the property up my advice to you, both Mr. Dodds and Mrs. Muschinski, is to put the property through as tenants in common because if you don't, if it is placed in Mrs. Muschinski's name only it would be unfair to Mr. Dodds to have him probably put in in excess of $20,000 into the property over a short period of time, which may be two or three years, then have to alter the structure of the deeds, as he has put money in, because he will not feel right in putting money into a property in which he has no title.
The parties agreed to accept Mr. Marsden's advice. The appellant was asked in cross-examination:
Providing Mr. Dodds satisfied you that he was able to go ahead and put a contribution in towards building a house on the land and helping you develop the arts and crafts centre, you were anxious to go ahead with the joint purchase?
She replied, "Yes, provided Mr. Dodds was putting his contribution in, yes, I was quite happy to go ahead with the purchase". After the interview with Mr. Marsden the parties continued to discuss the question - according to the appellant, they discussed it daily. She said that she told the respondent that some friends of hers had misgivings about the proposal to put his name on the title and that he replied: "Don't worry; I assure you I have moneys coming to me and they will be put in so my share will be paid as well and we will build the house."
[17]
Mr. Bennett submitted that the proper inference to be drawn from the evidence is that the intention of the appellant (and indeed of both parties) was, not that the respondent should have an immediate beneficial one-half interest in the land, but that he should have an interest which would correspond to his contributions from time to time - an interest that would grow in proportion as his contributions increased, until it culminated in a one-half interest when the house which was to be built on the land was completed. We are concerned to discover the actual intention which the appellant had when the land was put in the names of the parties as tenants in common, and not to impute to her an intention which she did not possess but which we might regard as leading to a fair result. The appellant did not suggest in her evidence that she intended that the respondent should have a beneficial interest which depended on the extent of his contributions, and it is implausible to suggest that she entertained any such idea. The true conclusion was, as Hope J.A. said, that the appellant, having faith in the respondent, intended to give him "an immediate and unconditional beneficial interest in the property, and [did not intend] to limit it, to suspend it, or to make it conditional". The presumption of a resulting trust in favour of the appellant was rebutted by the evidence.
[18]
Mr. Bennett submitted an alternative argument, that the respondent held his one-half share on a constructive trust in favour of the appellant. He submitted that the respondent induced the appellant to place the property in both names by promising to expend a substantial sum on the property, and then failed to fulfil the promise. This argument was answered by Hope J.A. by saying that the evidence does not reveal any equitable fraud or any other conduct on the part of the respondent which, according to the principles of equity, would give rise to a constructive trust. Hope J.A. continued:
[19]
The simple fact is that things did not turn out as the parties wanted them to. No question of fault on either side is suggested. The [respondent] set about the fulfilment of his assurances but had not been able to carry them out, except to a partial extent, when the relationship between the parties broke down and the whole "joint venture" came to an end. Up to that time he had been fulfilling his assurances as best he could. In these circumstances I can see no occasion for concluding that any constructive trust arose in favour of the [appellant].
[20]
Mr. Bennett submitted that he did not need to rely on any breach of faith on the part of the respondent - it was not necessary for him to attempt to establish that the respondent intended, when he made the promises, not to keep them. He urged us to take the broad view and to accept that it is a general proposition that the court can impose a constructive trust whenever the conduct of the legal owner makes it equitable to do so. The starting point of his argument was the well-known statement in the judgment of Lord Diplock in Gissing v. Gissing [10] :
[21]
A resulting, implied or constructive trust - and it is unnecessary for present purposes to distinguish between these three classes of trust - is created by a transaction between the trustee and the cestui que trust in connection with the acquisition by the trustee of a legal estate in land, whenever the trustee has so conducted himself that it would be inequitable to allow him to deny to the cestui que trust a beneficial interest in the land acquired. And he will be held so to have conducted himself if by his words or conduct he has induced the cestui que trust to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land.
It seems to me quite unlikely that Lord Diplock intended the first sentence in the passage quoted to be read in isolation, unaffected by the sentence which follows it. Read as a whole, the passage does not assist the appellant, who never believed that she was acquiring more than a one-half beneficial interest in the land.
1. [1971] A.C. 886, at p. 905.
[22]
However, Lord Diplock's judgment has influenced a number of decisions in the English Court of Appeal commencing with Heseltine v. Heseltine [11] , in which that Court has applied the dictum to cases in which, when one party to a marriage or a de facto relationship has acquired in his or her own name a house property which has become the home in which the two parties have lived together, the other party has, after the breakdown of the relationship, claimed to be entitled to a beneficial interest in the house by reason of contributions either to the cost of acquiring the house or to the expenses of the household. Those cases are reviewed in the judgment of Glass J.A. in Allen v. Snyder [12] and in a more recent decision, Burns v. Burns [13] , but I need not discuss them in any detail because they are not concerned with the different situation that arises when the legal estate has been taken in joint names and they therefore do not directly assist the appellant. Some of the judgments in those cases, particularly those of Lord Denning M.R., support the view that a constructive trust is "imposed by law whenever justice and good conscience require it": Hussey v. Palmer [14] (a case between mother-in-law and son-in-law). However the view that the court can disregard legal and equitable rights and simply do what is fair is not supported in England by the decisions of the House of Lords in Pettitt v. Pettitt [15] and Gissing v. Gissing [16] (see per May L.J. in Burns v. Burns [17] ) and it is contrary to established doctrine in Australia: Wirth v. Wirth [18] ; Hepworth v. Hepworth [19] ; Bloch v. Bloch [20] .
[23]
[1971] 1 W.L.R. 342; [1971] 1 All E.R. 952.
2. [1977] 2 N.S.W.L.R. 685, at pp. 693-695.
3. [1984] Ch. 317.
4. [1972] 1 W.L.R. 1286, at p. 1290; [1972] 3 All E.R. 744, at p. 747.
5. [1970] A.C. 777.
6. [1971] A.C. 886.
7. [1984] Ch., at p. 334.
8. (1956) 98 C.L.R. 228, at pp. 231-232, 247-248.
9. (1963) 110 C.L.R. 309, at pp. 317-318.
10. (1981) 55 A.L.J.R. 701, at p. 705; 37 A.L.R. 55, at p. 63.
[24]
Mr. Bennett further placed some reliance on the opinions expressed in Pettitt v. Pettitt by Lord Reid [21] , and by Lord Diplock [22] , that it is proper to base a constructive trust upon a common intention which the parties did not in fact form but which the court considers that they would, as reasonable persons, have formed if they had considered the possibility that the event which has in fact occurred might happen. That view was not shared by the majority of the House in Pettitt v. Pettitt, and in Gissing v. Gissing [23] Lord Diplock felt bound to accept that his statement on the point in Pettitt v. Pettitt was not the law. Nevertheless, in Hayward v. Giordani [24] , Cooke J., speaking obiter, appears to have accepted that a constructive trust may be based upon a common intention imputed to the parties who had not in fact formed the intention. With the greatest respect I agree with Glass J.A. in Allen v. Snyder [25] that the proposition that a constructive trust may be based upon a common intention which does not actually exist, but which is ascribed to the parties by operation of law, is contrary to principle and to authority: see also at p. 690; see also per Samuels J.A. [26] . The question does not call for elaborate discussion in the present case, because this is not a case in which the parties formed no intention at all - after lengthy discussions and consultation with a solicitor they formed the intention that they should hold the land as tenants in common. Notwithstanding the remarks of Lord Reid in Gissing v. Gissing [27] , I am unable to accept that the law can permit an intention to be imputed to parties when the evidence shows that they had in fact formed a different intention.
[25]
[1970] A.C., at p. 795.
2. [1970] A.C., at p. 823.
3. [1971] A.C., at p. 904.
4. [1983] N.Z.L.R. 140.
5. [1977] 2 N.S.W.L.R., at p. 694.
6. [1977] 2 N.S.W.L.R., at p. 701.
7. [1971] A.C., at p. 897.
[26]
There is no need, in the present case, to attempt to chart further the ill-defined limits of the rules relating to constructive trusts. The arguments that the respondent held his legal one-half interest on a constructive trust in favour of the appellant cannot be accepted. Before I pass from this aspect of the matter I should add that in the course of his argument Mr. Bennett relied on the following passage in the judgment of May L.J. in Burns v. Burns [28] :
[27]
Where the family home is taken in the joint names, then unless the facts are very unusual I think that both the man and the woman are entitled to a share in the beneficial interest. Where the house is bought outright and not on mortgage, then the extent of their respective shares will depend upon a more or less precise arithmetical calculation of the extent of their contributions to the purchase price. Where, on the other hand, and as is more usual nowadays, the house is bought with the aid of a mortgage, then the court has to assess each of the parties' respective contributions in a broad sense
Although the distinction between resulting trusts and constructive trusts may have become somewhat blurred in some discussions in England, I consider that in that passage May L.J. was speaking of the effect of the rules which create a resulting trust and was not speaking of a constructive trust. For the reasons already given, no resulting trust arose in the present case.
1. [1984] Ch., at p. 344.
[28]
For these reasons I consider that the learned judges in the Supreme Court were correct in concluding that the-half interest of the respondent in the land was not subject to any trust in favour of the appellant. However, that is not the end of the matter. Upon the sale of the property, when the proceeds are distributed, there must be an equitable accounting between the parties. The question what will be the rights of the appellant on such an accounting was not raised or considered in the Supreme Court, although it directly arose, at least on the respondent's cross-claim which sought an equal division of the proceeds of sale between the parties.
[29]
What appears to have been overlooked in the proceedings up to and including the argument in this Court is the fact that the appellant and the respondent were made by the contract jointly and severally liable to pay the price for the purchase of the Picton land. They were under a common obligation to pay the debt, and the case therefore fell within the general principle applicable both in law and equity which obliged them to bear the burden equally with the consequence that if one discharged more than his or her proper share he or she could call upon the other for contribution. The principle is stated succinctly in Chitty on Contracts (General Principles), 25th ed. (1983), par. 1213, as follows:
[30]
Joint and joint and several debtors have a quasi-contractual right of contribution among themselves: that is to say, if one has paid more than his share of the debt, he can recover the excess from the others in equal shares, subject to any agreement to the contrary.
(See also Halsbury's Laws of England, 4th ed., vol. 9, par. 658; Albion Insurance Co. Ltd. v. Government Insurance Office (N.S.W.) [29] and Armstrong v. Commissioner of Stamp Duties [30] .) It is unnecessary for present purposes to discuss whether the right is quasi-contractual or based on equitable principles. Prima facie, the appellant, having paid the debt in full, had a right to contribution against the respondent, i.e. a right to recover one half of the amount paid under the contract. It is often said that the right may be excluded by express or implied agreement: see Anson v. Anson [31] and Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 2nd ed. (1984), par. 1022. However, in Coulls v. Bagot's Executor and Trustee Co. Ltd. [32] , Taylor and Owen JJ. said that "it seems that no such right [i.e., a right to an indemnity or to a contribution] will arise where such a result would clearly be contrary to the intentions of the parties at the time when the joint obligation was undertaken"; see also per Barwick C.J. [33] . There are other authorities that support the view that a right to contribution may be excluded by the intention of the parties as well as by agreement (see Gadsden v. Commissioner of Probate Duties [34] and cases there cited), and I shall assume that this view is correct. The question in the present case then is whether, when the contractual obligation to buy the Picton land was undertaken, the parties had formed an intention that the respondent should not be liable to pay any of the purchase price. There is no direct evidence that they did. On the contrary, they applied jointly to the bank for finance and there is no suggestion in the evidence that if they had taken up the loan they intended that the appellant only should be responsible for repaying it. Indeed, the respondent appears to have acknowledged that he would be responsible for the repayment of the bank loan when he referred to the fact that he was "going to borrow $18,000, $20,000". If they had borrowed jointly from the bank, they would have contributed equally to the payment of the purchase price: see Calverley v. Green [35] . When the sale of the appellant's house at Ingleburn was completed it became unnecessary for them to avail themselves of the bank finance, but that was some time after the contract had been signed. It is true that the parties intended that the purchase money should be paid wholly by the appellant if the sale of her Ingleburn house was completed in time and that in that event the respondent should contribute a similar amount towards the improvement of the property. No doubt it was intended that if the respondent fully contributed to the improvement of the property, he would be under no obligation to contribute to the common debt for the purchase price. However, the parties did not in fact consider or discuss whether the appellant would have a right to contribution if she paid the purchase money in full and if the respondent did not contribute as much as he had promised to enable the prefabricated house to be erected. There was no evidence from which it could be inferred that at the time when the contract was signed the parties or either of them actually intended that the appellant should not have a right of contribution against the respondent if she paid the purchase price in full. No such intention should be imputed to the parties. Certainly, there was no agreement to that effect.
1. (1969) 121 C.L.R. 342, at pp. 349-350.
2. (1967) 69 S.R. (N.S.W.) 38, at pp. 47-48.
3. [1953] 1 Q.B. 636, at p. 645.
4. (1967) 119 C.L.R. 460, at p. 488.
5. (1967) 119 C.L.R., at p. 480.
6. [1978] V.R. 653, at pp. 660-661.
7. (1984) 155 C.L.R., at pp. 251, 259.
[31]
In these circumstances it appears that the appellant is entitled to contribution from the respondent to the extent to which she paid more than one half of the purchase moneys. Further, she would appear to be entitled to an equitable charge upon the respondent's half interest for such an amount: Ingram v. Ingram [36] ; Calverley v. Green [37] . In determining the amount of the equitable charge, the agreed figures as to the amounts respectively contributed by the parties might well serve as a basis.
[32]
[1941] V.L.R. 95.
2. (1984) 155 C.L.R. 242.
[33]
The question of contribution was not argued either in the Supreme Court or in this Court, although during argument in this Court suggestions were made from the Bench that the appellant might be entitled to a charge. In the circumstances it is not possible finally to dispose of the matter and I would follow a course similar to that adopted in Calverley v. Green. I would stand the matter over to give the parties an opportunity to agree upon an order which might finally dispose of the issues outstanding between them. If no agreement were reached, it would be necessary to remit the matter to the Supreme Court of New South Wales to consider the question of contribution and what order should finally be made having regard to the determination of that issue. No order should be made as to costs.
[34]
Since writing the above, I have seen the judgments of the other members of the Court. In the circumstances I agree that the order to be made should be that proposed by my brother Deane.
[35]
The facts are sufficiently set forth in the reasons for judgment of Deane J. with whose conclusions I agree.
[36]
The evidence to which his Honour refers supports the finding that the common intention of the parties was that each should enjoy, from the time of purchase, an immediate and unconditional legal and beneficial one-half interest in the property. The suggestions that Mr. Dodds' interest was conditional upon the actual making of his contributions or that his interest was to arise by stages as and when he made them has no foundation in that common intention. Accordingly, there is no scope for a resulting trust.
[37]
The failure of the projected development of the land, including its subdivision and the sale of part of the land, through no fault of the parties, provides a firm basis for declaring that the parties hold their respective interests in the property as tenants in common on a constructive trust, after payment of any debts incurred in the improvement of the property, to repay to each his or her respective contributions and as to the residue for them both in equal shares. The circumstances of the case, viewed in the light of the common intention that Mr. Dodds was to take an immediate and unconditional interest in the property, did not make it inequitable that he should retain that interest, notwithstanding the failure of the projected development. But it would be inequitable for him to retain his interest without crediting to Mrs. Muschinski the contributions which she made to the acquisition and improvement of the property. Although Mrs. Muschinski intended that he should take an immediate and unconditional half interest, that intention was accompanied by an expectation, shared by Mr. Dodds, that the projected development would take place for their mutual benefit and that Mr. Dodds would be making substantial contributions to it. I agree with Deane J. that the general principle underlying the proportionate repayment of capital contributions to joint venturers on the failure of a joint venture is wide enough to support this aspect of the constructive trust.
[38]
Mrs. Muschinski and Mr. Dodds had been living together in Mrs. Muschinski's house at Ingleburn since November 1972. They were not married. In 1975, they decided to buy a property at Picton. A dilapidated sandstone cottage stood on the property. They agreed that, after restoration, it would be suitable for use by Mrs. Muschinski as an arts and crafts centre, an enterprise in which Mrs. Muschinski had an especial interest. The grounds were in poor condition and a great deal of work would be needed to tidy them up. They proposed to purchase a prefabricated house and to erect it on another part of the property. That was to be their residence. Their financial resources were limited. Mrs. Muschinski could sell her home at Ingleburn but Mr. Dodds had no money to contribute immediately, though he expected to have $9,000 to contribute to the project when divorce proceedings between himself and his wife were completed. The purchase price of the property was $20,000. They applied to a bank for a bridging loan to finance the purchase and a subsequent housing loan to erect the prefabricated house, the bridging loan to be repaid from the proceeds of the sale of the Ingleburn home. The application for the bridging loan was approved.
[39]
The relationship between Mrs. Muschinski and Mr. Dodds was not always placid. After a dispute in December 1975, Mrs. Muschinski became concerned about putting the title partly in Mr. Dodds' name but, according to her evidence, Mr. Dodds said he would have no part of the venture if the property was not put in both names. They consulted a solicitor, Mr. Marsden, who had been retained by Mrs. Muschinski to attend to the sale of the Ingleburn home. After some discussion in which Mr. Marsden advised against a partnership agreement, Mr. Marsden advised them to "have the deeds drawn up so that you are co-owners - as tenants in common in both names". He stated the reason for the advice that they be tenants in common:
[40]
if you don't, if it is placed in Mrs. Muschinski's name only it would be unfair to Mr. Dodds to have him probably put in in excess of $20,000 into the property over a short period of time, which may be two or three years, then have to alter the structure of the deeds, as he has put money in, because he will not feel right in putting money into a property in which he has no title.
This advice was accepted. Contracts for the purchase and sale of the property were exchanged on 27 February 1976. Mr. Dodds said that the counterpart of the printed form of contract, signed by Mrs. Muschinski and himself as purchasers, described them as tenants in common. They jointly placed an order for a prefabricated house. The money expected from Mr. Dodds' divorce proceedings was to be applied in part payment for the house but, in the meantime, Mrs. Muschinski paid a deposit on the order. If Mr. Dodds' expected $9,000 was not received in time to pay for the prefabricated house, they intended to obtain a bank loan which Mr. Dodds was to pay off out of his earnings. Mrs. Muschinski knew he had no money, but he had a good job with prospects.
[41]
The purchase was completed on 22 May 1976. Settlement was delayed until the completion of the sale of Mrs. Muschinski's Ingleburn home. The proceeds of that sale were applied to complete the purchase of the Picton property. Mrs. Muschinski provided the whole of the purchase price. The property was conveyed to Mrs. Muschinski and Mr. Dodds as tenants in common in equal shares. They failed to get approval to erect the prefabricated house on the property and the order for the house was cancelled. In the event, the bank loan was not taken up either for the purchase of the property or for the purchase and erection of a prefabricated house upon it. Mr. Dodds worked on the grounds and did some work on the cottage after they bought the property, but during the first two years they did not live there. Occasionally they stayed overnight in a caravan on the site. Between 1976 and 1978, they separated from time to time. In 1978, Mr. Dodds received his divorce settlement but the net figure was only $3,500. The major part of that sum was spent, with the approval of Mrs. Muschinski, on travelling to Germany to join her there while she was visiting her parents. After they returned from the trip to Germany in 1978, they took up residence together in the Picton cottage. Although permission to erect the prefabricated house was ultimately obtained, the permission was subject to conditions (including its location on the property) which Mr. Dodds found unacceptable and he thought it unwise to spend the amount which it would then have cost to erect the prefabricated house. Mr. Dodds did not borrow any money to build a house or to make any other improvements to the property. Instead of erecting the prefabricated house Mr. Dodds, with Mrs. Muschinski's agreement, proposed to restore the cottage and to extend it for use as their residence. Mr. Dodds made and paid for some fairly substantial improvements to the cottage. In May 1980, before any extensions to the cottage were effected, they separated permanently. Shortly afterwards, Mrs. Muschinski commenced proceedings in the Supreme Court of New South Wales seeking declarations that she was the beneficial owner of the property and that Mr. Dodds held his interest in trust for her. Leaving aside the labour which the parties respectively contributed to the improvement of the cottage and the grounds, the respective financial contributions of the parties to the purchase and improvement of the property were agreed to be:
[42]
If Mr. Dodds' assurances had been fulfilled, his total contribution would have been substantial, although the amount was not precisely quantified. As it turned out, Mr. Dodds' contribution was comparatively small.
[43]
At the trial, Mrs. Muschinski's case was put on alternative bases: she claimed to be entitled to the beneficial interest in the whole of the property either because Mr. Dodds had not displaced the presumption of a resulting trust arising from her payment of the whole of the purchase price or because any beneficial interest in the property which she intended to confer on Mr. Dodds was conditional on his assuming financial responsibility for and constructing a dwelling on the land, a condition which had not been fulfilled. On either of these bases, the critical question of fact was Mrs. Muschinski's intention: had she intended to give Mr. Dodds any beneficial interest in the property and, if so, was the interest given an absolute or conditional interest? She submitted then, and her submission was repeated on appeal to this Court, that the answers to these questions depended on her intention at the relevant time, which was said to be the occasion of the visit to Mr. Marsden's office. More accurately, the time at which Mrs. Muschinski's intention is to be ascertained is the time when the parties acquired the property (Calverley v. Green [38] ), i.e., on completion of the purchase, but nothing turns on the difference.
[44]
Although Mrs. Muschinski's payment of the purchase price discharged the joint and several liability which she and Mr. Dodds had incurred under the contract, her claim to be entitled to the full beneficial interest in the property is necessarily based on the hypothesis that, as between herself and Mr. Dodds, she made the payment as sole purchaser. Had she chosen to treat the payment of the price as a payment of a joint and several debt, she would have been constrained to admit (contrary to the relief which she sought) that he acquired a beneficial interest in the property by purchase, though she would have been entitled to contribution from him for his share of what she had outlaid on their behalf. On that hypothesis, Mr. Dodds would have taken a beneficial interest not by gift but by purchase. Mrs. Muschinski chose to frame her case in a different way, perhaps because the arrangement between the parties called for her alone to pay the whole of the purchase price. Contending that Mr. Dodds could acquire no beneficial interest in the property except by her gift, her case was that she had not given Mr. Dodds a beneficial interest or, alternatively, that she had given him only a conditional beneficial interest and the condition was unfulfilled. She made no alternative claim for contribution but she had no such claim if Mr. Dodds took a beneficial interest by gift and not by purchase. The principal issues at the trial were whether he took a beneficial interest by gift and whether that interest was absolute or conditional. On those issues she failed.
[45]
that [Mrs. Muschinski] intended [Mr. Dodds] to have a beneficial one-half share as tenant-in-common in the property purchased in return for his assurances that he would assist her to set up a craft business in the old cottage and that he would have a cottage built on the land and pay for it out of any moneys which might come to him from his divorce settlement and from his earnings. She also intended him to have a beneficial interest in the property in the hope that it would improve the quality of their relationship. There is, I think, no evidence that [Mrs. Muschinski's] intention was to confer any kind of conditional interest in the property on [Mr. Dodds]. He made it plain, in effect, that unless he had an interest in the property he would not assist her. She did not seek to attach any qualification to her acceptance of his demand.
His Honour held that the presumption of a resulting trust arising from Mrs. Muschinski's payment of the purchase price was rebutted and that Mr. Dodds had obtained a beneficial one-half interest in the property as tenant in common. The Court of Appeal came to the same conclusion. Hope J.A. said:
Having regard to the evidence and particularly to what was said at Mr. Marsden's office, I agree with his Honour's conclusion that [Mrs. Muschinski] intended to give [Mr. Dodds] a one-half beneficial interest in the land, and that this intention was based on the assurances which [Mr. Dodds] gave to her and not upon the fulfilment of those assurances.
Samuels and Mahoney JJ.A. agreed with this view. On appeal to this Court, Mrs. Muschinski challenges the finding that her intention when the purchase was completed was that Mr. Dodds should have a beneficial interest in the property. An appellant who challenges the concurrent findings of fact made by the courts below has a difficult task (see Baffsky v. Brewis [39] ), and the evidence in this case is more than sufficient to preclude a successful challenge to the finding that Mrs. Muschinski intended Mr. Dodds to have a beneficial interest in the property at the time when the contract of purchase was completed. (I leave aside for the moment the finding that the interest was not conditional.) Mr. Dodds gave evidence that he had said to Mrs. Muschinski, "I believe that if I am going to borrow $18,000, $20,000 and then spend a lot more money on the restoration of the cottage I should have a share in the ownership of the property". He said that she agreed to his request that an appointment be made with Mr. Marsden "so that he can then advise us as to the best way to do it". There is no reason to think that the advice offered by Mr. Marsden and accepted by the parties as to the taking of title in both names was understood by Mrs. Muschinski as relating merely to a legal title rather than to a legal title with which the beneficial interest would be at home. If that were her understanding, her acceptance of Mr. Marsden's advice that it would be necessary "to alter the structure of the deeds" if they were not in both names to start with suggests that she intended to give Mr. Dodds a beneficial interest when the property was purchased. In the light of this evidence, it would be wrong to disturb the finding that Mrs. Muschinski intended Mr. Dodds to take not only the legal title conveyed to him but also the corresponding beneficial interest (although, for reasons presently to be mentioned, I would think she intended him to have that interest subject to an obligation). The particular circumstances of the case rebut the presumption of a resulting trust in favour of Mrs. Muschinski arising from her payment of the purchase price: Russell v. Scott [40] ; Calverley v. Green [41] . That is not to say that Mr. Dodds took his beneficial interest free of any obligation on his part. It is necessary now to consider the nature of the obligation he assumed.
1. (1976) 51 A.L.J.R. 170, at p. 172; 12 A.L.R. 435, at p. 438.
2. (1936) 55 C.L.R. 440.
3. (1984) 155 C.L.R. 242.
[46]
Mr. Dodds was given his interest on his assurance that, at his own expense, he would assist in setting up the arts and crafts business and in getting the grounds in order, he would have the prefabricated house erected and he would pay off the debt incurred in its purchase and erection. Mrs. Muschinski gave evidence that she was "quite happy" to go ahead with the purchase provided Mr. Dodds "was putting his contribution in". When cross-examined about the $9,000 expected to come from his divorce settlement, Mrs. Muschinski replied:
[47]
I do not know why we centre around the $9,000 so strongly. Mr. Dodds was going to provide a home for me, no matter what. He was going to build a home and pay for it for the rest of his life. We were entering a partnership and whether it was $9,000 or $10,000 did not really matter at that stage. He was willing to provide whatever he had and whatever he was going to earn after; he was going to contribute to our future home and happiness.
[48]
Waddell J. was surely right in finding that Mr. Dodds took his beneficial interest in the property "in return for his assurances that he would assist her to set up a craft business in the old cottage and that he would have a cottage built on the land and pay for it ". In the Court of Appeal, Hope J.A. agreed that Mrs. Muschinski's intention that Mr. Dodds should have a beneficial interest was based "on the assurances which the defendant gave to her and not upon the fulfilment of those assurances". But on these findings, it is not right to hold that Mrs. Muschinski was moved by disinterested generosity towards Mr. Dodds in giving him his interest in the property. She did not give him his interest merely in the hope that his assurances would be fulfilled. She gave the interest "in return for his assurances", i.e., on terms that he should be bound to fulfil his assurances. A gift in return for assurances, though not amounting to a contract, is a gift on terms and the terms of the assurances express the terms on which the donor intends to make the gift and the donee's understanding of the terms on which it is made. Subject to some few exceptions, a donor has a right to regulate the disposal of his gift: see Scot v. Haughton [42] ; Gibson v. Dickie [43] . That principle is applicable as well to gifts inter vivos as to testamentary gifts, though the rules relating to the effect of a donor's regulation of the property given have found more frequent expression in cases involving testamentary gifts where the regulation is expressed in the dispositive provisions of the will.
[49]
(1706) 2 Vern. 560 [23 E.R. 963].
2. (1815) 3 M. & S. 463 [105 E.R. 684].
[50]
An assurance by a donee that he will use or devote the property given or its income for a particular purpose, or will hold it for a particular object, or will do a particular thing when given "in return for" a gift may therefore take effect as if the donor made the gift upon the terms of the assurance. Accordingly, the donee may take the property given either as a trustee or beneficially and, if beneficially, he may take it subject to defeasance if the assurance should not be fulfilled or subject to a personal obligation to fulfil the assurance or subject to a charge securing fulfilment of the assurance (particularly if it involves the payment of money). In the present case, Mrs. Muschinski intended to confer a beneficial interest in the property on Mr. Dodds. Had she understood the options open to her, she may have preferred not to confer a beneficial interest in the property on Mr. Dodds but to confer a mere legal interest on him to be held in trust for her until he should fulfil the assurances he had given. But, as we have seen, that may not have been suitable to Mr. Dodds and, in the event, she gave him a beneficial interest on his assurances that he would improve the property. The fulfilment of the assurances was not charged on the interest given and perhaps its fulfilment could not have been charged on that interest. Nevertheless, the interest was given not merely in the hope that Mr. Dodds would fulfil the assurances but on condition that he do so. A condition annexed to a gift may be of either of two kinds: a condition involving a forfeiture for non-fulfilment or a condition creating merely a personal obligation to fulfil it. A donee who takes a gift to which a condition of the latter kind is annexed incurs an equitable obligation to perform the condition: Countess of Bective v. Federal Commissioner of Taxation [44] . Lindley L.J. in In re Williams; Williams v. Williams [45] , said:
[51]
there is no difficulty in disposing of one's own property upon condition express or implied that the person who takes it shall do something himself, e.g., shall dispose of his property in a particular way indicated by the owner of the property which he accepts. Moreover, a condition of this kind is enforceable in equity, and need not amount to a common law condition - i.e., a condition involving a forfeiture of the property taken subject to the condition - if that condition is not performed.
A condition which creates a personal obligation may be enforced in equity by an order for compensation or, where appropriate, by a decree of specific performance: Gill v. Gill [46] ; Gregg v. Coates [47] ; In re Hodge; Hodge v. Griffiths [48] .
1. (1932) 47 C.L.R. 417, at pp. 418-419.
2. [1897] 2 Ch. 12, at p. 19.
3. (1921) 21 S.R. (N.S.W.) 400, at p. 407.
4. (1856) 23 Beav. 33 [53 E.R. 13].
5. [1940] Ch. 260.
[52]
Whether a condition is such that its non-fulfilment involves forfeiture of the property given depends upon the intention of the donor communicated to the donee at the time when the latter accepts the property, that is, the intention which the donee reasonably understands to be the donor's intention from what the donor has said or done: cf. Calverley v. Green [49] . In this case, it is by no means easy to determine whether the condition was one which involved a forfeiture of Mr. Dodds' interest if the condition were not fulfilled. If the condition did not involve forfeiture for non-fulfilment, Mrs. Muschinski obtained no security for the fulfilment of the assurances save Mr. Dodds' personal obligation; if the condition involved forfeiture for non-fulfilment, Mrs. Muschinski could recover the beneficial interest given to Mr. Dodds if he should fail substantially to fulfil the assurances. The question, depending on Mrs. Muschinski's intention, must be answered as a matter of fact by reference to what the parties said and did when or before the property was purchased. The inference to be drawn from what the parties said and did is unaffected by the existence of equitable principles unknown to the parties at the time. Thus it would not be right to infer that the common understanding of the parties was that Mr. Dodds' interest would be liable to forfeiture but his interests would be protected by the equitable jurisdiction to relieve against forfeiture if he should partially but not completely fulfil his assurances. The inference of fact must be drawn from the slender evidentiary material available.
[53]
The critical fact to my mind is that Mr. Dodds was insisting on having an interest in the property before he would have any part of the venture, and that demand gave rise to a contest between his wishes and the wishes of Mrs. Muschinski. He wished to have his beneficial interest before he started to fulfil the assurances and would not otherwise expend his money and his labour. Mrs. Muschinski's concern about acceding to Mr. Dodds' wishes arose because she was conscious of the risk of parting with an interest in the property without any security for the fulfilment of Mr. Dodds' assurances. The advice given by Mr. Marsden was, in essence, that Mr. Dodds should be given immediately the interest which, if effect had been given to Mrs. Muschinski's concern, he would have acquired only upon entire performance of his assurances. The inference to be drawn from these circumstances is that Mr. Dodds' wishes prevailed and Mrs. Muschinski parted with the interest on a condition which did not involve forfeiture for non-fulfilment. The lack of specificity as to the work to be done, the standard to which it was to be done and, particularly, the time within which it was to be done suggests that the condition was not intended to work a forfeiture of the beneficial interest given to Mr. Dodds in the event of non-fulfilment of the assurances: cf. In re Brace; Gurton v. Clements [50] ; Gill v. Gill [51] . Although the proposal to erect the prefabricated house was abandoned, Mrs. Muschinski agreed that Mr. Dodds should undertake the major work of restoring the cottage and making it habitable. That was the work which consumed all or most of the $2,549.77 expended by him on the property. Her agreement to Mr. Dodds' undertaking of that work and the expenditure involved in it after discussions in which, so far as the evidence goes, she did not suggest that his interest had become liable to forfeiture, is more consistent with a common understanding that he was then entitled to remain a part-owner of the property than with any other hypothesis. On balance, I would find that the condition annexed to the gift created only a personal obligation resting on Mr. Dodds. Although a failure to fulfil the condition did not involve forfeiture of the beneficial interest given, partial non-fulfilment was not without remedy: Mrs. Muschinski might have made a claim for compensation, but she did not do so. She asserted merely a proprietary right, and in that claim she fails.
This conclusion, to my mind, disposes of the case. However, it was submitted that, even if Mr. Dodds took a beneficial interest as a tenant in common in the property when it was purchased, the purpose for which the parties made the arrangement - the establishing and maintenance of a common home and an arts and crafts centre - was discontinued when the parties separated in May 1980 and that Mr. Dodds now holds his interest on a constructive trust for Mrs. Muschinski. If that should be so, the supposed constructive trust does not arise from anything done or promised by Mr. Dodds after he first acquired his interest in the property. The parties entered into no new relationship, contributed their property to no new venture, and formed no new purpose after the Picton property was purchased. The supposed constructive trust must have its origin in the arrangements pursuant to which Mr. Dodds acquired his interest. In substance, the argument for a constructive trust must be that Mr. Dodds' retention of the beneficial interest he was given is inconsistent with the understanding on which he took the interest, that is to say, inconsistent with the purpose for which the interest was given to him.
[56]
It would not be sufficient for Mrs. Muschinski to show that it is unfair for Mr. Dodds to retain the interest once the purpose is no longer pursued; she must show that it is unconscionable for him to retain it. A constructive trust does not arise and cannot be imposed on the ground of mere fairness. It may be fair - I do not say it is - that Mr. Dodds should give back what he was given while he was cohabiting with Mrs. Muschinski, but no trust can be impressed on Mr. Dodds' interest in favour of Mrs. Muschinski on that ground. There is no jurisdiction in an Australian court of equity to declare an owner of property to be a trustee of that property for another merely on the ground that, having regard to all the circumstances, it would be fair so to declare: Wirth v. Wirth [52] ; Hepworth v. Hepworth [53] ; Bloch v. Bloch [54] . The flexible remedy of the constructive trust is not so formless as to place proprietary rights in the discretionary disposition of a court acting according to vague notions of what is fair. When property is freely given, I know of no equitable principle which might restrict the donee's proprietary interest in the gift beyond any restriction imposed expressly or impliedly by the donor. To say that Mr. Dodds holds his interest now in trust for Mrs. Muschinski because the parties have ceased to pursue the common purpose which they had in mind when Mrs. Muschinski gave Mr. Dodds his absolute beneficial interest is tantamount to saying that the interest he took was subject to a condition subsequent which, in the events that have happened, has operated to divest him of his beneficial interest. For reasons earlier stated, I would reject that view.
[57]
(1956) 98 C.L.R. 228, at p. 232.
2. (1963) 110 C.L.R. 309, at p. 318.
3. (1981) 55 A.L.J.R. 701, at p. 705; 37 A.L.R. 55, at p. 63.
[58]
The argument for a constructive trust mistakes, I think, the true nature of the arrangement made and the true understanding of the parties to it. Although the arrangement was made in order that a common home and arts and crafts centre should be established and maintained, Mrs. Muschinski's acquisition of the property and her disposition of an absolute beneficial interest in it to Mr. Dodds were the means by which she hoped to win for herself domestic and emotional security as well as accommodation and assistance in a business enterprise. She said that she "expected the purchase of the Picton property to improve our relationship, to increase that happiness, because we had many arguments about the colour scheme of the house and it was always referred to, "Yes, it is your house. I have nothing to say here" I thought this would restore our relationship to quite a happier one". The better view of the arrangement is that the parties agreed, after much discussion and some contest of wishes, on the foundation on which they hoped to build their future relationship, and that that foundation included making Mr. Dodds an independent owner of property which he might devote to their common purposes as a manifestation of his commitment to their relationship. Their omission to provide for the winding up of their relationship reflects their inability to see what course that relationship might follow, but does not suggest that the foundation of the relationship on which they had ultimately agreed should be changed if the relationship ceased. Once it appears that the condition that the assurances be fulfilled was not intended to work a forfeiture of the interest given in the event of non-fulfilment, how can it be unconscionable to retain the interest? His separation from Mrs. Muschinski was in breach of no equitable obligation and it can make no difference that that event occurred before the work was complete. If Mr. Dodds had fulfilled every assurance that he gave but, due to personal incompatibility, he subsequently left Mrs. Muschinski, can it be thought that the court would then impose a constructive trust on his beneficial interest? (Indeed, could a constructive trust be imposed on and by reason of the cessation of cohabitation between unmarried persons?: cf. Zapletal v. Wright [55] .) The argument for a constructive trust in the present case proves, on analysis, to be a plea for the return of the interest given on the ground of fairness. That is not a basis sufficient to support a declaration of a constructive trust.
[59]
It may be that if the parties had formed a partnership, contributed to the funds of the partnership and acquired the property as a partnership asset, the financial distribution on the winding up of the partnership may have been fairer to them than allowing the present proprietary interests to stand. But the suggestion of partnership had been rejected in the discussion with Mr. Marsden, and no analogy can be drawn between a partnership and the present case.
[60]
The courts below were right to dismiss Mrs. Muschinski's claim. I would dismiss the appeal.
[61]
By the time of completion of the purchase of the Picton (N.S.W.) land in the names of Mrs. Muschinski and Mr. Dodds as tenants in common, the overall arrangement between them was plain enough. Mrs. Muschinski would pay the whole of the purchase price. Together, they would develop and use the land. They would purchase and erect a "kit" home in which they would live together. They would renovate the old cottage on the land so that it could be used as an "arts and crafts" business to be run by Mrs. Muschinski. They would subdivide the land and sell part of it. Mrs. Muschinski's main financial contribution was to be, and was, made when she paid the purchase price of the land and associated costs. Mr. Dodds' financial contribution was intended to be made subsequently. He was, in the words of their solicitor, Mr. Marsden, as repeated by Mr. Dodds himself in his evidence, "to put the time, the efforts, and funds as necessary to develop the property up". In particular, he was to pay for the proposed "kit" home and repay the mortgage arranged to be taken out in the parties' joint names to finance the project beyond Mrs. Muschinski's contributions. It was on the basis of that overall arrangement that Mr. Marsden advised Mrs. Muschinski that the property should be purchased in the names of herself and Mr. Dodds as tenants in common in equal shares. According again to Mr. Dodds, Mr. Marsden commented that "if it is placed in Mrs. Muschinski's name only it would be unfair to Mr. Dodds to have him probably put in in excess of $20,000 into the property over a short period of time ".
[62]
In the event, the substratum or assumed basis of that arrangement between Mrs. Muschinski and Mr. Dodds was largely removed and their joint project was abandoned. It is not now suggested by either party that the blame or responsibility for that should be attributed to the other. The Wollondilly Shire Council refused the necessary permissions to erect the "kit" home and subdivide the land except on conditions that were unacceptable to the parties, with the consequence that the sale of part of the land was precluded. An expected property settlement from which it was planned that Mr. Dodds would contribute to the cost of the planned development of the land proved much smaller than had been anticipated and was further depleted, without objection from Mrs. Muschinski, to enable him to join her for part of a visit to her parents in Germany in 1978. The "de facto" relationship between the parties came to an end and, after "various vicissitudes", they finally separated. In the meantime, some expenditure had been incurred and work carried out on improvements to the property. When the joint project was abandoned, the parties were left as equal legal owners of the project property towards the overall costs of which Mrs. Muschinski had contributed approximately ten-elevenths ($25,259.45) while Mr. Dodds had contributed but the remaining one-eleventh ($2,549.77).
[63]
There was no express or implied agreement, arrangement or understanding between the parties that they should hold their legal interests upon trust for themselves in shares corresponding to their respective contributions. To the contrary, the evidence leads inexorably to the conclusion - expressed in concurrent findings of fact in the courts below - that it was their shared intention that, from the time of purchase, each should have a full one-half beneficial, as well as legal, interest in the property. Mrs. Muschinski's intention was that her own and Mr. Dodds' interest or, to use her word, "status" in the whole venture should be equal: it should be a "joint venture", a "partnership". The explanation of that intention lay in her expectation of Mr. Dodds' future financial contributions and in her desire to use the arrangements in relation to the purchase and development of the property as a means of strengthening the stability of her relationship with him. As she said (under cross-examination):
[64]
Mr. Dodds was going to provide a home for me, no matter what. He was going to build a home and pay for it for the rest of his life. He was willing to provide whatever he had and whatever he was going to earn after; he was going to contribute to our future home and happiness
and
I expected the purchase of the Picton property to improve our relationship, to increase that happiness, because we had many arguments about the colour scheme of the house and it was always referred to, "Yes, it is your house. I have nothing to say here" I thought this would restore our relationship to quite a happier one.
Nor, upon a proper assessment of the evidence, is there room for a finding of an express or implied contract between Mrs. Muschinski and Mr. Dodds to the effect that, if things fell apart in respect of both their personal relationship and their planned development of the land, they would hold the property either upon trust to repay their respective contributions and then for themselves equally or upon trust for themselves in shares according to their respective contributions. There is no suggestion at all of any express contract to that effect and no adequate foundation for the implication of one. As the learned trial judge found, it was not the intention of either of them that Mr. Dodds' equal beneficial interest should be acquired by stages as he contributed towards the planned joint endeavour. Their planned future association and joint activity provided the occasion for, and the explanation of, the arrangement between them. That arrangement was, however, to the effect that Mr. Dodds' beneficial interest in the property should be immediate and unconditional. It was not qualified to provide for the uncontemplated double contingency that their personal relationship would fail and that the proposed venture involving the development and joint use of the land would crumble under the yoke of inauspicious stars.
[65]
In these circumstances, there is no occasion for recourse to the presumption of the law of equity that, where two or more persons advance the purchase price of property in different shares, the person or persons to whom the legal title is transferred holds or hold the property upon resulting trust in favour of those who provided the purchase price in the shares in which they provided it: Calverley v. Green [56] . That presumption performs much the same function as a civil onus of proof. General statements to the effect that it is not lightly to be rebutted should not, in my respectful view, now be accepted as good law: cf. 155 C.L.R., at pp. 265-266, 269-270. That is not, of course, to deny that the facts which call the presumption into operation may, in the circumstances of a particular case, also lead to such a strong inference of an intended trust that convincing evidence would be necessary to rebut it: cf. Wirth v. Wirth [57] . Even in such a case however, the presumption operates by reference to the presumed intention of the party whose contribution exceeds his or her proportionate share; it cannot prevail over the actual intention of that party as established by the overall evidence, including the evidence of the parties' respective contributions.
[66]
(1984) 155 C.L.R. 242, at pp. 268-269.
2. (1956) 98 C.L.R. 228, at pp. 241-242.
[67]
It follows that no relief is available to Mrs. Muschinski on the grounds of breach of express or implied agreement or of express or implied trust. The question remains whether the circumstances of the case are such as to entitle her to claim relief on some other ground. In particular, the question arises whether she is entitled to claim relief by way of declaration of, or order imposing, a constructive trust. It was submitted on behalf of Mrs. Muschinski that she was entitled to a declaration of constructive trust based on broad notions of fairness and unjust enrichment.
[68]
The nature and function of the constructive trust have been the subject of considerable discussion throughout the common law world for several decades: see, particularly, Pound, Equitable Remedies, Harvard Law Review, vol. 33 (1919-1920), pp. 420-423; Scott, Constructive Trusts, Law Quarterly Review, vol. 71 (1955), p. 39; Maudsley, Proprietary Remedies for the Recovery of Money, Law Quarterly Review, vol. 75 (1959), p. 234; Waters, The Constructive Trust (1964); Goff and Jones, The Law of Restitution, 2nd ed. (1978), esp. Chs. 1 and 2; Oakley, Constructive Trusts (1978); John Wade, Trusts, the Matrimonial Home and De Facto Spouses, University of Tasmania Law Review, vol. 6 (1978-1980), p. 97; J. D. Davies, Informal Arrangements Affecting Land, Sydney Law Review, vol. 8 (1976-1979), p. 578; Underhill's Law Relating to Trusts and Trustees, 13th ed. (1979), Ch. 7; John L. Dewar, The Development of the Remedial Constructive Trust, Canadian Bar Review, vol. 60 (1982), p. 265; Pettit, Equity and the Law of Trusts, 5th ed. (1984), p. v and Ch. 10 ; Hanbury and Maudsley, Modern Equity, 12th ed. (1985), Ch. 12 . At times, disputing factions have tended to polarize the discussion by reference to competing rallying points of "remedy" and "institution". The perceived dichotomy between those two catchwords has, however, largely been the consequence of lack of definition. In a broad sense, the constructive trust is both an institution and a remedy of the law of equity. As a remedy, it can only properly be understood in the context of the history and the persisting distinctness of the principles of equity that enlighten and control the common law. The use or trust of equity, like equity itself, was essentially remedial in its origins. In its basic form it was imposed, as a personal obligation attaching to property, to enforce the equitable principle that a legal owner should not be permitted to use his common law rights as owner to abuse or subvert the intention which underlay his acquisition and possession of those rights. This was consistent with the traditional concern of equity with substance rather than form. In time, the relationships in which the trust was recognized and enforced to protect actual or presumed intention became standardized and were accepted into conveyancing practice (particularly in relation to settlements) and property law as the equitable institutions of the express and implied (including resulting) trust. Like express and implied trusts, the constructive trust developed as a remedial relationship superimposed upon common law rights by order of the Chancery Court. It differs from those other forms of trust, however, in that it arises regardless of intention. For that reason, it was not as well suited to development as a conveyancing device or as an instrument of property law. Indeed, whereas the rationale of the institutions of express and implied trust is now usually identified by reference to intention, the rationale of the constructive trust must still be found essentially in its remedial function which it has predominantly retained: cf. Waters, op. cit., pp. 37-39. The constructive trust shares, however, some of the institutionalized features of express and implied trust. It demands the staple ingredients of those trusts: subject-matter, trustee, beneficiary (or, conceivably, purpose), and personal obligation attaching to the property: cf. Sir Frederick Jordan, Chapters on Equity in New South Wales, 6th ed. (1947: Stephen ed.), pp. 17-18. When established or imposed, it is a relationship governed by a coherent body of traditional and statute law. Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle.
[69]
There is, however, a more limited sense in which there is some superficial plausibility in the notions of "institution" and "remedy" as competing characterizations of the constructive trust. If "institution" is understood as connoting a relationship which arises and exists under the law independently of any order of a court and "remedy" is defined as referring to the actual establishment of a relationship by such an order, the catchwords of "institution" and "remedy" do serve the function of highlighting a conceptual problem that persists about the true nature of a constructive trust. Even in this more limited sense, however, any perceived dichotomy between the two notions tends to prove ephemeral upon closer examination. Equity acts consistently and in accordance with principle. The old maxim that equity regards as done that which ought to be done is as applicable to enforce equitable obligations as it is to create them and, notwithstanding that the constructive trust is remedial in both origin and nature, there does not need to have been a curial declaration or order before equity will recognize the prior existence of a constructive trust: cf. Scott, Law of Trusts, 3rd ed. (1967), vol. V, par. 462.4. Where an equity court would retrospectively impose a constructive trust by way of equitable remedy, its availability as such a remedy provides the basis for, and governs the content of, its existence inter partes independently of any formal order declaring or enforcing it. In this more limited sense, the constructive trust is also properly seen as both "remedy" and "institution". Indeed, for the student of equity, there can be no true dichotomy between the two notions.
[70]
The acknowledgment of the institutional character of the constructive trust does not involve a denial of its continued flexibility as a remedy: cf. Wirth v. Wirth [58] . The institutional character of the trust has never completely obliterated its remedial origins even in the case of the more traditional forms of express and implied trust. This is a fortiori in the case of constructive trust where, as has been mentioned, the remedial character remains predominant in that the trust itself either represents, or reflects the availability of, equitable relief in the particular circumstances. Indeed, in this country at least, the constructive trust has not outgrown its formative stages as an equitable remedy and should still be seen as constituting an in personam remedy attaching to property which may be moulded and adjusted to give effect to the application and interplay of equitable principles in the circumstances of the particular case. In particular, where competing common law or equitable claims are or may be involved, a declaration of constructive trust by way of remedy can properly be so framed that the consequences of its imposition are operative only from the date of judgment or formal court order or from some other specified date. The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice. As an equitable remedy, it is available only when warranted by established equitable principles or by the legitimate processes of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundation of such principles: cf., generally, Sir Frank Kitto's Foreword to the first edition (1975) of Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, pp. v-vii, and see also, e.g., In re Diplock [59] ; Pettitt v. Pettitt [60] ; Cowcher v. Cowcher [61] ; Jacobs' Law of Trusts in Australia, 4th ed. (1977: Meagher and Gummow eds.), pars. 1301-1302, 1325-1329; Allen v. Snyder [62] ; Oakley, op. cit., pp. 1-10; Pettit, op. cit., pp. 4-6. Viewed as a remedy, the function of the constructive trust is not to render superfluous, but to reflect and enforce, the principles of the law of equity.
[71]
(1956) 98 C.L.R., at p. 238.
2. [1948] Ch. 465, at pp. 481-482.
3. [1970] A.C. 777, at pp. 793, 801, 809, 825.
4. [1972] 1 W.L.R. 425, at p. 430; [1972] 1 All E.R. 943, at p. 948.
5. [1977] 2 N.S.W.L.R. 685, at pp. 689, 702ff.
[72]
Thus it is that there is no place in the law of this country for the notion of "a constructive trust of a new model" which, "[b]y whatever name it is described, is imposed by law whenever justice and good conscience" (in the sense of "fairness" or what "was fair") "require it": per Lord Denning M.R., Eves v. Eves [63] ; and Hussey v. Palmer [64] . Under the law of this country - as, I venture to think, under the present law of England (cf. Burns v. Burns [65] ) - proprietary rights fall to be governed by principles of law and not by some mix of judicial discretion (cf. Wirth v. Wirth [66] ), subjective views about which party "ought to win" (cf. Maudsley, Constructive Trusts, Northern Ireland Legal Quarterly, vol. 28 (1977), p. 123, esp. at pp. 123, 137, 139-140 ) and "the formless void of individual moral opinion": cf. Carly v. Farrelly [67] ; Avondale Printers & Stationers Ltd. v. Haggie [68] . Long before John Selden's anachronism identifying the Chancellor's foot as the measure of Chancery relief, undefined notions of "justice" and what was "fair" had given way in the law of equity to the rule of ordered principle which is of the essence of any coherent system of rational law. The mere fact that it would be unjust or unfair in a situation of discord for the owner of a legal estate to assert his ownership against another provides, of itself, no mandate for a judicial declaration that the ownership in whole or in part lies, in equity, in that other: cf. Hepworth v. Hepworth [69] . Such equitable relief by way of constructive trust will only properly be available if applicable principles of the law of equity require that the person in whom the ownership of property is vested should hold it to the use or for the benefit of another. That is not to say that general notions of fairness and justice have become irrelevant to the content and application of equity. They remain relevant to the traditional equitable notion of unconscionable conduct which persists as an operative component of some fundamental rules or principles of modern equity: cf., e.g., Legione v. Hateley [70] ; Commercial Bank of Australia Ltd. v. Amadio [71] .
[73]
[1975] 1 W.L.R. 1338, at pp. 1341, 1342; [1975] 3 All E.R. 768, at pp. 771, 772.
2. [1972] 1 W.L.R. 1286, at pp. 1289-1290; [1972] 3 All E.R. 744, at p. 747.
3. [1984] Ch. 317.
4. (1956) 98 C.L.R., at pp. 232, 247.
5. [1975] 1 N.Z.L.R. 356, at p. 367.
6. [1979] 2 N.Z.L.R. 124, at p. 154.
7. (1963) 110 C.L.R. 309, at pp. 317-318.
8. (1983) 152 C.L.R. 406, at p. 444.
9. (1983) 151 C.L.R. 447, at pp. 461-464, 474-475.
[74]
The principal operation of the constructive trust in the law of this country has been in the area of breach of fiduciary duty. Some textwriters have expressed the view that the constructive trust is confined to cases where some pre-existing fiduciary relationship can be identified: see, e.g., Lewin on Trusts, 16th ed. (1964: Mowbray ed.), p. 141. Neither principle nor authority requires however that it be confined to that or any other category or categories of case: cf., generally, Professor R. P. Austin's essay on "Constructive Trusts" in Essays in Equity, (Finn ed.) (1985), esp. at pp. 196-201; Waters, op. cit., p. 28ff. Once its predominantly remedial character is accepted, there is no reason to deny the availability of the constructive trust in any case where some principle of the law of equity calls for the imposition upon the legal owner of property, regardless of actual or presumed agreement or intention, of the obligation to hold or apply the property for the benefit of another: cf. Hanbury and Maudsley, op. cit., p. 301; Pettit, op. cit., p. 55. In the United States of America, a general doctrine of unjust enrichment has long been recognized as providing an acceptable basis in principle for the imposition of a constructive trust: see, e.g., Scott, op. cit., vol. V, par. 461. It may well be that the development of the law of this country on a case by case basis will eventually lead to the identification of some overall concept of unjust enrichment as an established principle constituting the basis of decision of past and future cases. Whatever may be the position in relation to the law of other common law countries (cf., as to Canada, Pettkus v. Becker [72] and, as to New Zealand, Hayward v. Giordani [73] ) however, no such general principle is as yet established, as a basis of decision as distinct from an informative generic label for purposes of classification, in Australian law. The most that can be said at the present time is that "unjust enrichment" is a term commonly used to identify the notion underlying a variety of distinct categories of case in which the law has recognized an obligation on the part of a defendant to account for a benefit derived at the expense of a plaintiff: cf. Goff and Jones, op. cit., p. 11. It therefore becomes necessary to consider whether there is any narrower and more specific basis on which, independently of the actual intention of the parties, Mrs. Muschinski can claim to be entitled to relief by way of constructive trust in the particular circumstances of the present case.
[75]
(1980) 117 D.L.R. (3d) 257.
2. [1983] N.Z.L.R. 140, at p. 148.
[76]
As has been said, the payments made by Mrs. Muschinski on account of the price and associated costs of the property were made by her pursuant to the overall arrangement between herself and Mr. Dodds. It was the common intention of the parties, at the time those particular payments were made, that the burden of them should be borne by Mrs. Muschinski alone. As I presently see the matter, it follows that Mrs. Muschinski had no right to claim reimbursement from Mr. Dodds in respect of an appropriate part of those payments under any doctrine of contribution: cf. Coulls v. Bagot's Executor and Trustee Co. Ltd. [74] ; Gadsden v. Commissioner of Probate Duties [75] . It is, however, unnecessary that I form any concluded view in that regard since I would not, in any event, consider it appropriate to act on the basis that Mrs. Muschinski was entitled to relief by way of contribution in circumstances where she advanced neither claim nor argument for relief on that basis either in this Court or in the courts below and where factual material relevant to such a claim may, as a consequence, remain unexplored. Indeed, an essential basis of the argument on behalf of Mrs. Muschinski before this Court was that she had assumed and discharged the burden of paying the whole of the purchase price of the Picton land under and in accordance with the overall arrangement between Mr. Dodds and herself.
[77]
(1967) 119 C.L.R. 460, at p. 488.
2. [1978] V.R. 653, at pp. 660-662.
[78]
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.
[79]
Both common law and equity recognize 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: cf. Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [76] ; Denny, Mott and Dickson Ltd. v. James B. Fraser and Co. Ltd. [77] ; and, generally, Treitel, Law of Contract, 6th ed. (1983), p. 695ff. If the relevant relationship is a partnership, the prima facie rule of equity on premature dissolution is, as in the case of an ordinary dissolution, that the parties are, after the discharge of partnership debts, entitled to be repaid their respective capital contributions. More important for present purposes, if a premium has been paid by a fixed term partner who is not to be held responsible for the premature dissolution, an equity court will order a refund or partial refund of the premium to the extent that its retention by the other partner would be unconscionable: cf. Atwood v. Maude [1] . If the relevant relationship is not a partnership but takes the form of a contractual joint venture for the pursuit of some commercial advantage, a similar prima facie rule of equity applies in the event of the premature collapse of the joint venture and the consequent preclusion of the attainment of the commercial advantage, namely, that, to the extent that the joint funds allow, the joint venturers are entitled to the proportionate repayment of their capital contributions to the abortive joint venture. This is so notwithstanding that it was the common understanding or agreement that the funds advanced were to be applied for the purposes of the joint venture and that the return from them would take the form, not of a repayment of capital contributed but of a share in the proceeds of the joint venture when it was carried to fruition: cf., e.g., Allen v. Kent [2] ; Ewen v. Gerofsky [3] ; Legum Furniture Corporation v. Levine [4] ; and cf., generally, "Joint Ventures", Corpus Juris Secundum, vol. 48a, pp. 452-453, 463.
[80]
[1943] A.C. 32.
2. [1944] A.C. 265, at p. 275.
3. (1868) 3 Ch. App. 369.
4. (1957) 136 A. (2d) 540, at p. 541.
5. (1976) 382 N.Y.S. (2d) 651, at p. 653.
6. (1977) 232 S.E. (2d) 782, at pp. 785-786.
[81]
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 [5] ; J. & S. Holdings Pty. Ltd. v. N.R.M.A. Insurance Ltd. [6] ) and to the rationale of the particular rule of contract law to which reference has been made: cf. Fibrosa [7] . 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 [8] . 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 [9] : where "the case is one in which, using the words of Lord Cottenham in Hirst v. Tolson [10] , 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 [11] , and per Jessel M.R., Lyon v. Tweddell [12] .
[82]
(1760) 2 Burr. 1005, at p. 1012 [97 E.R. 676, at pp. 680-681].
2. (1982) 61 F.L.R. 108, at p. 120.
3. [1943] A.C., at p. 61ff., esp. at p. 72.
4. (1983) 152 C.L.R., at p. 444.
5. (1868) L.R. 3 Ch. App., at p. 375.
6. (1850) 2 Mac. & G. 134 [42 E.R. 52].
7. (1868) L.R. 3 Ch. App., at pp. 374-375.
8. (1881) 17 Ch. D. 529, at p. 531.
[83]
The circumstances of the present case provide the necessary context for the operation of that general principle of the law of equity. Mrs. Muschinski's payment of the purchase price of the Picton property, which was transferred into the joint names of Mr. Dodds and herself, was made on the basis and for the purposes of their planned venture with respect to the land. The substratum of that planned joint endeavour was removed without attributable blame. Mr. Dodds is left as a half-owner of the property in circumstances (i.e., the collapse of the joint endeavour) to which the parties did not advert and in which it was not specifically intended or specially provided that Mr. Dodds should enjoy such a benefit at Mrs. Muschinski's expense. In these circumstances, the operation of the relevant principle is to preclude Mr. Dodds from asserting or retaining, against Mrs. Muschinski, his one-half ownership of the property to the extent that it would be unconscionable for him so to do. In assessing whether or to what extent such an assertion or retention of legal entitlement by Mr. Dodds would constitute unconscionable conduct, one is not left at large to indulge random notions of what is fair and just as a matter of abstract morality. Notions of what is fair and just are relevant but only in the confined context of determining whether conduct should, by reference to legitimate processes of legal reasoning, be characterized as unconscionable for the purposes of a specific principle of equity whose rationale and operation is to prevent wrongful and undue advantage being taken by one party of a benefit derived at the expense of the other party in the special circumstances of the unforeseen and premature collapse of a joint relationship or endeavour.
[84]
If the venture between Mrs. Muschinski and Mr. Dodds had been merely a commercial one involving the purchase, development, partial realization and use of the Picton land, there would be little room for argument about the appropriate characterization, for the purposes of the relevant principle of equity, of Mr. Dodds' conduct in seeking to assert and retain the full benefit derived by him from Mrs. Muschinski's contribution without making any allowance to compensate her for the disproportion between those contributions and his own. The basis upon which Mrs. Muschinski made her contributions was that Mr. Dodds would, in due course, contribute, both in money and by labour, to the subsequent development. Their planned endeavour collapsed at a time when Mrs. Muschinski had made all or almost all of her expected contribution to the overall venture, but Mr. Dodds had made almost none of his. The parties had neither adverted to nor made special provision to deal with that situation. If no more than the commercial relationship had been involved, Mr. Dodds' conduct in seeking to catch and retain the unfair advantage of unforeseen circumstances by asserting his legal entitlement of a one-half interest in the property without assenting to any adjustment to compensate Mrs. Muschinski for the unintended gross disproportion between their respective contributions would plainly be unconscionable for the purposes of the relevant principle of equity. Indeed, if the relationship between the parties had been merely a commercial one, such conduct on the part of Mr. Dodds would be of the very type which the relevant principle exists to preclude.
[85]
As has been seen however, the relationship between the parties in the present case was not merely a commercial one. It was a mixture of the commercial and the personal. The personal relationship provided the context and explains the content of the planned commercial venture. If the personal relationship had survived for years after the collapse of the commercial venture and the property had been unmistakenly devoted to serve solely as a mutual home, any assessment of what would and would not constitute unconscionable conduct would obviously be greatly influenced by the special considerations applicable to a case where a husband and wife or persons living in a "de facto" situation contribute, financially and in a variety of other ways, over a lengthy period to the establishment of a joint home. In the forefront of those special considerations there commonly lies a need to take account of a practical equation between direct contributions in money or labour and indirect contributions in other forms such as support, home-making and family care. In fact, of course, the personal relationship also failed in the present case. The Picton property was not devoted to serve as a mutual home for a lengthy period after the collapse of the planned commercial venture. There is no consideration or combination of considerations arising from the personal relationship between the parties which could properly be seen as negating or overriding the unconscionable character of Mr. Dodds' conduct in seeking, in the circumstances, to assert and retain the benefit of a full one-half interest in the property without making any allowance for the fact that Mrs. Muschinski has contributed approximately ten-elevenths of the cost of its purchase and actual improvement.
[86]
Nor does the fact that Mr. Dodds is seeking to take advantage of the overall arrangement which the parties framed to meet the exigencies of their personal relationship deprive his conduct of its unconscionable character. In circumstances where the parties neither foresaw nor attempted to provide for the double contingency of the premature collapse of both their personal relationship and their commercial venture, it is simply not to the point to say that the parties had framed that overall arrangement without attaching any condition or providing any safeguard specifically to meet the occurrence of that double contingency. As has been seen, the relevant principle operates upon legal entitlement. It is the assertion by Mr. Dodds of his legal entitlement in the unforeseen circumstances which arose on the collapse of their relationship and planned venture which lies at the heart of the characterization of his conduct as unconscionable. Indeed, it is the very absence of any provision for legal defeasance or other specific and effective legal device to meet the particular circumstances which gives rise to the need to call in aid the principle of equity applicable to preclude the unconscionable assertion of legal rights in the particular class of case.
[87]
It follows that equity requires that the rights and obligations of the parties be adjusted to compensate for the disproportion between their contributions to the purchase and improvement of the Picton property. In the absence of any suggestion of direct payment by Mr. Dodds to Mrs. Muschinski to achieve a like result, that adjustment requires, at the least, that the parties be proportionately repaid their respective contributions to the extent allowed by the proceeds of any sale. It becomes necessary to consider their entitlement in equity to share in any surplus after the discharge of any debts incurred in their joint undertaking and the repayment to them of their respective contributions. As has been seen, the extent to which the relevant principle of equity operates to qualify legal entitlement is only that to which it positively appears that it would be unconscionable for one party to assert or retain the benefit of property contributed by the other party. There could well be circumstances in which equity and good conscience would require that the party who has made the major contribution to a failed joint endeavour should obtain a correspondingly greater share of any surplus remaining after repayment of the respective contributions. The conclusion which I have reached in all the circumstances of the present case is, however, that Mrs. Muschinski has failed to establish that it would be unconscionable conduct on the part of Mr. Dodds to assert and retain the one-half share in the residue of the proceeds of sale of the Picton property to which his legal entitlement and the consensual arrangement between them otherwise entitles him.
[88]
There remains the question whether there should be a declaration that the Picton property is held by the parties upon constructive trust. In my view, there should. That property was acquired, in pursuance of the consensual arrangement between the parties, to be held and developed in accordance with that arrangement. The contributions which each party is entitled to have repaid to her or him were made for, or in connexion with, its purchase or development. The collapse of the commercial venture and the failure of the personal relationship jointly combined to lead to a situation in which each party is entitled to insist upon realization of the asset, repayment of her or his contribution and distribution of any surplus. In these circumstances, the appropriate order to give effect to the rights and obligations of the parties is an order declaring that the Picton property is held by them upon constructive trust. Lest the legitimate claims of third parties be adversely affected, the constructive trust should be imposed only from the date of publication of reasons for judgment of this Court.
[89]
I would allow the appeal. I would make orders having the effect that there will be substituted for the order of the learned trial judge an order declaring a constructive trust of the Picton property to the effect that, on and after the day on which the reasons for judgment of this Court are published, Mrs. Muschinski and Mr. Dodds hold their respective legal interests as tenants in common upon trust (after payment of any joint debts incurred in improvement of the property) to repay to each her or his respective contribution and as to the residue for them both in equal shares. Since Mrs. Muschinski has substantially succeeded in the case, I would make orders that Mr. Dodds, who has wrongly asserted and sought to retain a beneficial interest in the Picton property to which he was not entitled, should be ordered to pay her costs at first instance, in the Court of Appeal and in this Court. In the particular circumstances of the present case where Mrs. Muschinski has claimed the whole beneficial ownership of the property and no doubt contributed thereby to any delays in realization of the property and distribution of the proceeds of sale, I would make no order allowing interest upon her or his respective contributions in favour of either party.
[90]
The questions whether the financial contributions of one or both of the parties should be increased to make provision for labour or whether any other adjustments to them are necessary were neither investigated nor argued on the appeal. The sensible approach may well be, in view of the entitlement of the parties to share in any surplus upon sale, that no such adjustments should be made. In order to give the parties the opportunity of considering the question however and of avoiding the costs and delays which would be involved in remitting the matter to the Supreme Court for inquiry, I would stand the matter over at this stage so that the parties may have the opportunity to agree upon orders which would finally dispose of the case.
[91]
I agree that any presumption of a resulting trust in favour of Mrs. Muschinski is rebutted by evidence of her intention that she and Mr. Dodds should have a beneficial interest in the property as tenants in common in equal shares. I agree with Brennan J. that the case which Mrs. Muschinski made out, or sought to make out, leaves no room for a finding that she paid the purchase price of the property by way of payment of joint and several debt so as to entitle her to contribution from Mr. Dodds as a co-debtor. I also agree with Brennan J., for the reasons given by him, that it is possible to regard the beneficial interest in the property which Mrs. Muschinski gave to Mr. Dodds as subject to a condition that he would improve the property in the manner contemplated and that it should be so regarded, although the result in this case, having regard to the claim made by Mrs. Muschinski, is to afford her no relief.
[92]
Such a condition, whilst not a condition of forfeiture and falling short of creating a trust or charge, may give rise to a personal equitable obligation analogous to a contractual obligation, enforceable by compensation or, in an appropriate case, by specific performance. The precise basis in principle of this doctrine may be debatable but it is firmly founded in precedent and affords a convenient means of reflecting the equity of the situation: see Messenger v. Andrews [13] ; Gregg v. Coates [14] ; Rees v. Engelback [15] ; Gill v. Gill [16] ; In re Hodge; Hodge v. Griffiths [17] ; Countess of Bective v. Federal Commissioner of Taxation [18] , per Dixon J.
I further agree with Brennan J., for the reasons which he gives, that the remedy of the constructive trust has no application in this case.
Parties
Applicant/Plaintiff:
Muschinski
Respondent/Defendant:
Dodds
AI Analysis
Outcomeappellant
Disposition:
Appeal allowed with costs. Orders of the Court of Appeal and Waddell J. set aside. Matter stood over to 11 February 1986 for consent orders; otherwise remitted to the Supreme Court of New South Wales to proceed in accordance with the judgment and proposed orders of Deane J. declaring a constructive trust.