This recent case is just one in a long line of many where it is essential that the parties put their intentions and obligations down in writing prior to purchasing property.
Two siblings verbally agreed to buy a residential investment property in Terrigal in 2001 for a purchase price of $440,000. However, only the brother, Dr Nguyen, was recorded as the sole registered proprietor. Completion of the contract took place in February 2002.
The Court accepted that the brother could only obtain a loan up to $250,000 and was therefore unable to acquire the investment property by himself.
Accordingly, both brother and sister Ms Thi Nguyen, became co-borrowers on a loan from the CBA in the sum of $335,000. A mortgage was taken over the property. It was accepted that the sister paid $90,000 to the CBA to reduce the amount of her and Dr Nguyen’s liability on the loan in the 15 months following completion.
The sister paid the 10% deposit and stamp duty.
Between 2003 and 2006, the sister and her partner moved into the Terrigal property and rented out their former residence in Sydney. The brother argued that he rented the property to his sister and that she held no beneficial interest in the property. However, there was no evidence that she paid any rent to the brother during this period – other than the mortgage repayments which the brother contended was the rent payable to him for that period.
The brother occasionally stayed at the property and the sister and her husband accommodated him by moving out of the premises during those times. Further, in 2006 bathroom and kitchen renovations were undertaken to the property paid for exclusively by the sister. These circumstances did not lend to a landlord-tenant relationship.
In 2007, the sister moved out of the property.
Between 2010 and 2014, the property was tenanted to third parties. The rent was directed to the sister’s partner during that period. The rent was unaccounted for and was not dealt with in these proceedings.
From 2014, the brother rented out the property. That rent was unaccounted for again and was not dealt with in these proceedings.
The sister sought a declaration that her brother held part of the property on trust for her. The Court made orders that the brother held 40% of the Terrigal property on constructive trust for his sister on the basis it would be unconscionable for her brother to deny she had an equitable interest in the property.
The Court did not examine whether there was a resulting trust because there was on going joint venture between the two siblings, that is, an inferred agreement between the two siblings that they wanted to jointly invest in an investment property.
Had there not been any joint venture between the brother and sister, then the Court would need to examine the sister’s alternative resulting trust argument, which would have been strong because she contributed to a substantial portion of the purchase price in any event.
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