Legal Principles and Key Points
- In the case of Muschinski v Dodds  HCA 78, it was held that following the breakdown of a joint endeavour without attributable blame in circumstances not contemplated by the parties, a remedial constructive trust was the best means of providing relief.
Facts of the Case
- In February 1976, C and D (in a de facto relationship) entered into a contract to purchase a parcel of land as joint tenants in common. C paid the whole of the purchase price and other monies needed to complete the purchase.
- D and C separated in May 1980. D sought a declaration of sole ownership, while C cross claimed that the property should be sold and for the proceeds to be divided equally.
- At first instance the judge held C intended that D would have a beneficial one-half interest in the land in return for assurances that he would assist C in business endeavours relating to it.
- The judge held that this intention was not conditional on fulfilment of these assurances. He accordingly held that the presumption of a resulting trust was rebutted and there was no constructive trust in favour of C.
- It was maintained on appeal that C intended to give D an immediate and unconditional beneficial interest.
- What was C’s intention towards D regarding both parties having title in the property?
- How was ownership of the property to be settled where neither party is at blame for the breakdown of the joint endeavour?
- Would it be unconscionable for a joint owner to deny the beneficial interests of the other?
Held by the High Court of Australia
- Found in favour for C that the legal interests of the parties were to be subject to a constructive trust to repay any joint debts, repay each of their contributions to the endeavour and any residue was to be distributed in equal shares.
- Neither party has suggested that the other should be blamed for the breakdown of this endeavour. Furthermore, it was clear that their intention was to have equal status in the endeavour based on expectations of future financial contributions from D and the strengthening of their relationship.
- C has submitted that they were entitled to a declaration of constructive trust based on broad notions of fairness and unjust enrichment. Broad notions of fairness are not the basis for an equitable remedy.
- “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. 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…”
- If the agreement was merely commercial, D’s conduct in claiming half the beneficial interest when C had made significantly greater contributions compared to their own would be clearly unconscionable. The commercial and personal nature of this agreement does not change this finding of unconscionability because the land was not intended to serve as a mutual home after the endeavour broke down, and D has not provided consideration.