Chiarieri v Morphett

Case [2025] SASC 162

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

CHIARIERI & ANOR v MORPHETT

[2025] SASC 162

Judgment of the Honourable Justice Stein  

EQUITY - TRUSTS AND TRUSTEES - IMPLIED TRUSTS - CONSTRUCTIVE TRUSTS

EQUITY - TRUSTS AND TRUSTEES - IMPLIED TRUSTS - RESULTING TRUSTS - REBUTTAL OF IMPLICATION

REAL PROPERTY - PARTITION OF LAND - PARTITION OR SALE IN PARTITION ACTIONS - COMPENSATION FOR IMPROVEMENTS

REAL PROPERTY - PARTITION OF LAND - PARTITION OR SALE IN PARTITION ACTIONS - SALE IN LIEU OF PARTITION

The applicants, a husband and wife, who have since separated, each hold a one-tenth share in the wife’s family home, majority-owned by the wife’s mother, the respondent. The applicants seek a declaration that the respondent holds part of her registered an eight-tenths share in the family home on implied trust either as a constructive trust or a resulting trust.

The applicants assert a common intention that the applicants were to assist the respondent in obtaining finance to maintain the respondent’s ownership of the home following the settlement of the respondent’s divorce proceedings on which basis the applicants would be registered on the certificate of title in equal one-third interests along with the respondent. The respondent admitted she promised that the applicants would be registered on the title. However, the extent of this promise and its effect on the applicants and their interest in the family home were at issue during trial. The applicants, in the alternative, asserted the respondent holds part of her registered interest on a resulting trust in accordance with their financial contribution.

In addition to the declaratory relief, the applicants seek an increase to their interest in equity on the basis of the applicants’ contribution to improvements made to the family home during its joint occupation.

Held:

1.The presumptions of advancement and resulting trust are excluded by the facts as found;

2.The applicants are entitled to a declaration in their favour that the respondent holds a 21.5 percent share of the family home on trust for the applicants in equal shares of 10.75 percent in addition to the applicants’ pre-existing registered legal interest of one-tenth each;

3.The applicants are not entitled to a further increase to their proprietary interest on the basis of their contributions to improvements;

4.The true beneficial interests of the parties at law and in equity are 20.75 percent to each of the applicants and 58.5 percent to the respondent;

5.As the applicants’ joint interest is short of one moiety, they are not entitled to seek a sale under the Law of Property Act 1936 (SA) s 70. The Court will hear further from the parties in relation to the applicants’ application for sale instead of partition pursuant to the Law of Property Act 1936 (SA) s 69.

Law of Property Act 1936 (SA) ss 69, 70, referred to.

Baumgartner v Baumgartner (1987) 164 CLR 137; Giumelli v Giumelli (1999) 196 CLR 101; Soulos v Pagones (2023) 416 ALR 181, discussed.

Browne v Dunn (1893) 6 R 67; Brickwood…

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AGLC
Chiarieri v Morphett [2025] SASC 162
Case
[2025] SASC 162
Decision Date

CaseChat Overview and Summary

The case of Chiarieri v Morphett involves a dispute between Barbara Morphett and Daniel and Laura Chiarieri regarding the ownership of a property. The property was originally purchased by Barbara and her then-husband, Bruce Morphett, and later became the subject of a claim by Daniel and Laura Chiarieri, who argued that they had an interest in the property based on a common intention with Barbara that they would share ownership equally. Daniel and Laura sought a declaration that Barbara held their share of the property on constructive trust and an order for the sale of the property. Barbara, on the other hand, sought to dismiss the claim and obtain a declaration that she owns 100 percent of the property.

The central legal issue in this case was whether Daniel and Laura had established a constructive trust over part of the property based on a common intention with Barbara that they would share ownership equally. The court had to consider the evidence presented by both parties and determine if there was a common intention that Daniel and Laura would be registered as joint owners with Barbara, and if so, whether the court should grant a declaration of constructive trust and order a sale of the property.

The court found that while there was evidence of a common intention that Daniel and Laura would be registered as joint owners with Barbara, there was insufficient evidence to conclude that the common intention was for Daniel and Laura to be registered as equal one-third owners. The court also noted that the circumstances leading to the creation of the trust were not clear and that the evidence did not establish the basis for a constructive trust based on proprietary estoppel. However, the court did find that Daniel and Laura were entitled to a declaration that Barbara held 10.75 percent of her 80 percent registered interest in the property on constructive trust for each of them, totaling 21.5 percent of her registered interest. The court declined to make any further orders regarding the disposition of the property at that time, indicating that it would hear further from the parties before making any further orders.

This case highlights the complexity of establishing a constructive trust based on common intention and the importance of clear evidence in such cases. The court's decision underscores the need for parties to clearly articulate and document their intentions regarding shared ownership to avoid future disputes.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Barbara asked the Court to dismiss Daniel and Laura’s claim in its entirety, refuse to make the orders sought and grant declaratory relief by way of a determination that Barbara owns 100 percent of the Property. Background I commence by setting out in narrative form the matters which were not in contention. The Property was purchased in 1993 by Barbara and her then husband, Bruce Morphett. Laura is the daughter of Barbara and Bruce and she resided at the Property until October 2015 when she moved out in consequence of issues with her father. Thereafter, Bruce and Barbara separated and Bruce moved out of the Property. In September 2016, after Bruce had departed, Laura returned to the Property. Daniel and Laura commenced a relationship in December 2016 and subsequently started living together at the Guerin Road property which was purchased by Daniel in 2016. They married in December 2019 and together have three children born in January 2018, December 2020 and August 2022. In December 2017, Daniel and Laura moved to the Property for a short time during the final stages of Laura’s first pregnancy and stayed there until February 2018 when they returned to the Guerin Road property. An affidavit was sworn by Laura (“matrimonial proceedings affidavit”) and filed in matrimonial proceedings between Barbara and Bruce (“matrimonial proceedings”) in April 2018. That affidavit assumed some significance in the trial because it did not strictly reflect the claim made by Daniel and Laura in these proceedings. I return to address the matrimonial proceedings affidavit below. On 19 April 2018, orders were made by the Federal Circuit Court of Australia. The effect of the orders was, among other things, that Bruce was to transfer to Barbara, at her expense, all of his interest in the Property. Barbara was obliged to discharge, at her sole cost, a joint Adelaide Bank home loan which was secured against the Property and to obtain from Bruce a complete release. Barbara also had to pay to Bruce the sum of $44,500. Barbara had to discharge other mortgages. Barbara retained for her sole use and benefit, free from any claim of Bruce, the Property and a 50 percent interest in another property in Currency Creek, together with personal property. In May 2018, Daniel and Laura leased out the Guerin Road property and moved to the Property. On 9 November 2018, Ms Burke, Barbara’s broker, sent to Australian Finance Group Home Loans (“AFG”) a loan application form with a covering memorandum which referred to the fact that Barbara was fully aware that “Daniel and Laura will be going on the Title”. The loan application form recorded as applicants for the loan each of Barbara, Laura and Daniel with the Property offered as security for the loan. The Guerin Road property was not included as security for the loan. The memorandum recorded a recent valuation verifying the value of the Property at $840,000. In November 2018, Barbara, Laura and Daniel, together signed an application to AFG for finance in the amount of $522,860.

Evidence

Evidence Before The Court

The Property remains subject to the joint mortgage with the Commonwealth Bank. Applicants’ lay evidence Daniel Nino Chiarieri Affidavit Examination in chief was elicited by way of affidavit.[2] [2] Affidavit dated 15 August 2024 was tendered as Exhibit A2. Daniel is married to Laura, but they are now separated. In April 2016, Daniel purchased and commenced living at the Guerin Road property which is a five bedroom and two bathroom home. In December 2016, Daniel commenced a relationship with Laura. Daniel deposed to being aware Laura was experiencing difficulties living at the Property following her parents’ separation particularly when her father would visit and cause conflicts. Daniel described the Property as comprised of a large home and a very large farm shed with horse stables, a hay shed and a workshop, as well as a granny flat partitioned off from the rest of the shed building. The granny flat was set up with two bedrooms, a lounge, kitchen and a combined bathroom and laundry, it was semi complete with doors, skirting boards and some carpet. In mid-December 2017, Daniel and Laura moved in with Barbara during the latter stages of Laura’s pregnancy so that Barbara could provide some support as they were new parents. Daniel said he helped around the Property including by chopping up wood for Barbara. At some time after Christmas 2017, but before New Years Day 2018, during a lunch, Barbara talked of fear of losing the Property in the matrimonial proceedings and stated she would kill herself if that eventuated. Daniel said that Barbara told them she was unable to retain the Property without financial help as she was only able to borrow $300,000 but needed $500,000. He recalled that Barbara was crying and Laura appeared concerned. Daniel said he offered to help financially. Barbara appeared relieved and he heard both Laura and Barbara say it sounded like a good idea if he and Laura were to buy the Property with Barbara to own it equally. Daniel proposed that they rent out the Guerin Road property to better position the parties to obtain finance given Daniel’s existing mortgage on the Guerin Road property. Daniel said that he had always expected the Guerin Road property to be his “forever home” for his family, but he said to Barbara that he was willing to help and to move to the Property on the basis he would be buying the Property with Barbara and Laura as equal owners. Daniel said Laura agreed. Daniel stated that he would not have gone on the mortgage or invested in the Property without Barbara’s clear representation that he and Laura would be equal owners with Barbara. Daniel said he heard Laura express concern about not having enough space if they were living in the same house if Daniel’s and Laura’s family grew. He heard Barbara say she would move into the granny flat if their family grew larger and the granny flat was completed, but he could not say when this was said. Daniel stated that this representation made him more confident with moving ahead with the agreement.

Decision

Reasons for decision

Given the relevant factors, I must take into account under s 69 of the LP Act, my inability to form a view on the economic consequences of a partition relative to sale, the state of the relationships between the parties and Barbara’s considerable attachment to the Property as her family home, I have concluded that before making any orders to give effect to my reasons, I should hear further from the parties. I have determined that any orders I may make should allow Barbara time to make enquiries to determine whether she is in a position to raise funds to purchase Daniel and Laura’s share of the Property. I will hear from the parties before making any further order regarding disposition of the Property. Conclusion and orders Daniel and Laura are entitled to a declaration in their favour that Barbara holds 10.75 percent of her 80 percent registered interest in the Property on constructive trust for each of them. They are not entitled to any further increase to their interest. Accordingly, I declare that the respondent holds on constructive trust 10.75 percent for each of the applicants, totalling 21.5 percent of her 80 percent registered interest in the Property. I will hear the parties in relation to further orders to give effect to my reasons.

Ratio Decidendi

Legal Principle Established

The power under s 69 is discretionary.[80] The onus lies on the party requesting the sale.[81] It is not simply the applicant who must be considered; all those interested in the property must be considered.[82] What is “beneficial” primarily focusses on economic benefit, but emotional and other considerations might be relevant to the exercise of the discretion.[83] In Francis v Francis,[84] in forming a view about partition or sale, Bleby J took into account evidence that there would be a significant increase in value to the parties if the land could be partitioned and subdivided rather than sold as a whole.[85] He also considered the fact that sale would mean ejecting the defendants from their home of 20 years, concluding that if possible they ought to be allowed to remain in their home and the property they had developed until ready to leave.[86] The fact that the plaintiff had a house and that a sale would leave the defendant without a home was a relevant consideration both in Francis v Francis and in BM v AM.[87]Consideration [80] BM v AM [2003] IEHC 170. [81] Nevin v Beneficiaries of the Peppermint Beach Estate Trust [2002] WASC 300 at [97] citing Mitchell v Cullington [1997] ANZ ConvR 342, 343; Perman v Maloney [1939] VLR 376 at 380-381.[82] BM v AM [2003] IEHC 170.[83] Justice Roberts-Smith concluded that a court’s need to consider non-economic benefits will turn on the construction of the relevant statute: Nevin v Beneficiaries of the Peppermint Beach Estate Trust [2002] WASC 300 at [98]-[104] citing Pannizutti v Trask (1987) 10 NSWLR 531 at 540 (Kirby P, McHugh JA agreeing at 541, Needham AJA dissenting on this point at 541); Pembertonv Barnes (1871) LR 6 Ch App 685, 693. [84] [2009] SASC 363. [85] [2009] SASC 363 at [73].[86] [2009] SASC 363 at [75].[87] [2003] IEHC 170. While the decision was made pursuant to the equivalent of s 70, Peart J concluded that even if the appropriate section were the equivalent of s 69(2), the Court ought not to order a sale. Constructive trust In Laura’s and Daniel’s written opening, they expressed their asserted constructive trust as founded on Barbara, Laura and Daniel having formed a common intention they would share ownership of the Property equally based on Barbara’s representation. It was submitted that Daniel and Laura acted to their detriment in reliance on the common intention and it would be a fraud for Barbara now to claim they do not have a beneficial interest in the Property. In light of Galati v Deans[88] and the authorities referred to in it, I proceed on the basis that a constructive trust founded on common intention remains a distinct species of constructive trust. In any event, if there were any doubt, I conclude further below that the evidence establishes the basis for a constructive trust based on proprietary estoppel.[88] [2023] NSWCA 13. I accept that the common intention of Barbara, Laura and Daniel was that Daniel and Laura would be registered on the title with Barbara. However, in light of the findings I have made, I cannot find on the balance of probabilities that there was a common intention between all three of them to register Daniel and Laura as to one-third interest each. I also cannot find on the balance of probabilities that the common intention of all three was that Daniel and Laura would be registered as “equal” owners on the title to Barbara.