When relationships end, dividing property and assets can quickly become complicated, especially if the contributions of each partner aren’t reflected in legal ownership. One legal tool the Australian courts use to address this issue is constructive trust.
A constructive trust is a type of trust imposed by the court to prevent unjust enrichment — that is when someone unfairly benefits from property that rightfully belongs to another person.
Unlike other types of trusts, a constructive trust does not need a written agreement or any formal paperwork. Instead, it arises from the circumstances and behaviour of the parties involved.
What Is a Constructive Trust in Australian Family Law?
In family law, a constructive trust can apply when a couple separates, and one person claims a right to property that is legally owned by the other partner.
If one person made significant financial or non-financial contributions to that property, the court may recognise their interest through a constructive trust, even if their name isn’t on the title.
Example
Imagine a couple, John and Lisa, who have lived together for ten years. The home they live in is legally owned by John, but Lisa has contributed significant amounts of money towards the mortgage and has spent time renovating the property.
If they separate, Lisa could argue that she has an interest in the home, even though her name is not on the title. The court may decide that a constructive trust exists, giving Lisa a share of the property based on her contributions.
When Can a Constructive Trust Arise in Property Disputes?
A constructive trust can arise in many situations, particularly when there has been a joint effort or shared financial commitment. In family law, this often happens when:
- One partner contributes financially (e.g., paying part of the mortgage) but isn’t listed on the property title.
- One partner contributes through non-financial means (e.g., renovating the property or taking care of the home and children).
- There is a common intention or understanding that both parties would share the property, even if only one name appears on the title.
Key Factors the Court Considers
When deciding whether a constructive trust exists, the court will look at several key factors, including:
Financial Contributions: Did one partner make significant payments towards the mortgage, renovations, or other property expenses?
Non-Financial Contributions: Did one partner provide valuable work, such as managing the household or taking care of children, that supported the relationship?
Intention and Conduct: Was there an understanding or agreement, even if not in writing, that both partners would share the property?
Example
Consider Emma and Mark, who bought a house together. The title is in Mark’s name, but Emma paid for the renovations and helped with significant household expenses. If they split up, Emma might claim a constructive trust because her contributions increased the property’s value. The court may agree, giving her a share of the property’s equity.
Also Read: What Happens to Family Trusts on Divorce
How Does a Constructive Trust Differ From Other Trusts?
In Australian law, there are various types of trusts, such as express trusts, resulting trusts, and constructive trusts. While all trusts involve holding property for someone else’s benefit, constructive trusts are unique because they do not require a formal agreement.
Key Differences
Express Trusts: These are created intentionally with a clear agreement and legal documents. The person creating the trust (the settlor) decides who benefits (the beneficiary) and who manages the property (the trustee).
Resulting Trusts: These arise when there is an implied intention, usually because someone provided the purchase money but is not named on the title. It’s based on the idea that the person contributing the funds intended to own a share of the property.
Constructive Trusts: These are imposed by the court to prevent unfair outcomes. Unlike express or resulting trusts, they don’t depend on the intentions of the parties but rather on fairness and equity.
Example
If Tim and Sarah purchase a property together but only Tim’s name is on the title, an express trust might exist if there was a written agreement stating they both own it equally. If there was no agreement, but Sarah paid part of the purchase price, a resulting trust might apply.
If the court believes it would be unfair for Tim to keep the entire property after a breakup because of Sarah’s contributions, a constructive trust might be imposed.
Also Read: Family Trust vs Prenup: Which Offers Better Asset Protection?
Can a Constructive Trust Affect Property Settlements in Divorce?
Yes, a constructive trust can have a significant impact on property settlements during a divorce or separation. In Australia, family courts aim to divide property fairly based on each partner’s contributions, needs, and the future welfare of any children involved.
A constructive trust claim can alter the way the court views property ownership and affect the final settlement.
Impact on Property Settlements
If the court recognises a constructive trust, it can change the ownership status of the property. For example, even if one partner is the legal owner, the court might decide that both partners have an interest due to the constructive trust.
This means the property could be included in the pool of assets to be divided, potentially giving the non-owner partner a share.
Example
Consider a couple, Alex and Taylor, who lived together for 15 years. The family home is in Alex’s name, but Taylor contributed a large sum of money to the renovations and helped pay household bills. If they divorce,
Taylor might claim a constructive trust over the property. If successful, Taylor’s contributions will be recognised, and the property may be divided as part of the settlement, rather than being treated as solely Alex’s asset.
What Evidence Is Needed to Establish a Constructive Trust Claim?
To succeed in a constructive trust claim, the person making the claim must provide strong evidence to prove that they made significant contributions and that it would be unjust for the other party to keep the full benefit of the property.
The court requires clear proof to establish the claim, as these cases often involve complex facts.
Types of Evidence
Financial Records: Bank statements, receipts, and transaction records showing payments made towards the mortgage, renovations, or household expenses.
Testimonies: Statements from the parties involved, as well as witnesses who can confirm the contributions and the understanding between the partners.
Written Communication: Emails, text messages, or letters that show a shared intention to treat the property as joint ownership.
Non-Financial Contributions: Evidence of time and effort put into improving the property, such as photographs of renovations or documents showing home maintenance.
Example
If Jane is claiming a constructive trust over her partner’s property, she might present bank statements showing her payments towards the mortgage and testimonies from friends confirming her contributions to renovations.
This evidence can help prove her case and demonstrate that it would be unfair for her partner to keep the entire property.
Need Help With Your Family Law Case?
Understanding what a constructive trust is and how it applies to family law disputes can help you protect your rights and interests, especially during a separation.
Constructive trusts are designed to ensure fairness when dividing property, even when one partner’s name isn’t on the title. By recognising both financial and non-financial contributions, the court aims to achieve a just outcome for both parties.
If you believe a constructive trust might apply in your situation, or if you have questions about property settlements, contact Justice Family Lawyers today. Our experienced team can guide you through your case with compassion and expertise, helping you get the fair outcome you deserve.
Reach out now for a consultation and get tailored legal advice for your family law needs.
