Often people who go through separations are concerned that the marital assets have been handled by their former partner, or that they do not have legal ownership of assets. This does not mean that the party to the marriage is not entitled to some share of the assets.
The case of Khalif & Khalif and Anor (2020) FamCA 39 explored the operation of constructive trusts in the context of property held in the name of a third party. In this case, Ms Khalif (‘wife’) submitted that her husband’s brother (‘brother’) held their matrimonial home (‘property’) by way of a constructive trust for Mr Khalif (‘husband’).
They key background facts of the case are as follows:
- In 2009, the couple moved into the property, which the brother purchased and funded.
- The husband informed the wife that the brother purchased the property, as “we can’t get the loan in our name, this is [the brother]’s way of paying me back for all of my help I gave him prior to him purchasing [one of his businesses].”
- Throughout the course of the marriage, the husband paid the brother $2500-$3000 per week for the property, which amounted to $892,500 in total.
- The husband and wife paid all utility fees and spent time and money undertaking renovations and improvements on the property.
- In 2016, the couple separated, the husband left the property and the brother issued a “Landlord’s termination notice to tenant” on the wife.
The brother asserted that the weekly payments he received from the husband was in fact rental income. The court rejected this assertion, considering, among other things, that the brother did not declare any rental income to the ATO, as well as text messages and written notes from the husband which made reference to “mortgage payments”.
The court therefore found that the payments were in “furtherance of the arrangement that the husband become the equitable beneficiary of the … property”. Hence, even if the brother had no real intention that the husband should be afforded a beneficial interest in the property, he led his brother to believe there was an intention to create a trust, which compelled the imposition of a constructive trust.
The court therefore afforded the husband a 61.25% interest in the home, which was the sums paid proportional to the purchase price. As a result, this meant that the house, upon the husband and wife’s divorce, could potentially form part of the divisible pool of assets.
If you are going through a separation or divorce and would like to know more about what proprietary interests you might have, contact our expert family lawyers today on (02) 9299 0112.
Important Disclaimer: The material contained in this publication is of general nature only and is based on the law as of the date of publication. It is not, nor is intended to be legal advice. If you require further information on the content of this publication, please contact our office on 9299 0112.