When is a parent’s property included in the property settlement?


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When is a parent’s property included in the property settlement?

Earlier this year, the Federal Circuit Court of Australia was asked to determine a property matter between two spouses.

The Husband claimed that additional property in the name of the Wife’s parents ought to be included in the matrimonial pool for division. The Wife opposed the Husband’s claim that the property be included, on the basis that it was an asset belonging solely to her parents.

The property in question was the home of the Wife’s parents (Property B), which had been purchased some two (2) years prior to separation in the Wife’s parents’ names. It was uncontroversial between the parties that the Property B had been purchased from the proceeds of sale of an earlier property held in the Wife’s parents’ names (Property A).

Property A was occupied by the Wife from the date of purchase, and had been subject to a mortgage in the Wife’s name, which the Wife had serviced for many years.

The Wife claimed that the mortgage repayments made for almost a decade were rental payments to her parents and her position was supported by her parents, who asserted that the mortgage was only in the Wife’s name so that she would “learn to have a sense of responsibility”. The parents submitted there was never any agreement that the property would belong to the Wife.

It was clear on the evidence before the Court that the bulk of the equity in Property B had arisen as a result of the Wife’s earlier contributions to Property A, given Property A had been purchased for $610,000 with a mortgage of $500,000. When it was sold some nine (9) years later, the Wife had reduced the mortgage to $256,000, and the property achieved a sale price of $1,055,000.

The Wife’s parents went on to purchase Property B with the sale proceeds, and the Husband then claimed that Property B was held on constructive trust for the Wife, and to a lesser degree, the Husband himself.

The Husband sought a declaration that Property B was held on constructive trust for the Wife, for the following reasons:-

  1. The Wife had made principle and interest repayments on the mortgage and had contributed to the renovation costs of work undertaken on the property;
  2. The Husband had also made financial contributions to Property A and had worked on the property during the renovations; and
  3. It would be unconscionable for the Court to allow the parties’ contributions to be disregarded, simply because their names were not recorded on title.

The Husband submitted that the Wife had referred to Property B as her own and had reasoned that the property was only held in her parents’ name for asset protection, so as to minimise her exposure to any claims made against in her line of work. (The Wife’s profession was not disclosed in the anonymised version of the reported case.)

The Court found that the Husband had failed to establish that there was a common intention for a trust to form in favour of the Wife. The Court went on to confirm that a common intention will not be inferred, merely from acts such as occupation of a property, carrying out household duties, or doing repairs and renovations. The Court also considered that the Husband had failed to establish that he had acted to his detriment in making and supporting contributions to the property.

Having formed this view, the Court concluded that the Husband had no reasonable prospects of success in his claim and his claim against the Wife’s parents’ and their property was summarily dismissed.

As a separate issue, the Husband was criticised for not preparing fulsome Court documents sufficient to establish his claim to join the third party parents to the proceedings. This serves as an important lesson to ensure your case is appropriately prepared and where possible, to always see an Accredited Specialist in Family Law – particularly if your case is complex.