McBain v Parsons

In the case of McBain v Parsons, the dispute arose between the trustee in bankruptcy of two brothers, Peter and Geoffrey Parsons, and their respective wives, the respondents. The central issue was whether the wives had equitable interests in the matrimonial homes of their husbands that could defeat the trustee's claims under the Bankruptcy Act 1966 (Cth). The Court was required to determine whether a common intention constructive trust existed and if the equity of exoneration applied to the wives' interests.

The Court examined the principles of common intention constructive trusts as established in Baumgartner v Baumgartner and Green v Green, which recognise that contributions to the home purchase can create a beneficial interest for the contributor. However, the Court found that the wives' interests did not defeat the trustee's claims under sections 120 and 121 of the Bankruptcy Act, which allow the trustee to set aside certain property transfers made within two years prior to bankruptcy. The Court held that the constructive trust did not exist prior to the transfer of the properties to the wives, as there was no unconscionable conduct by the bankrupts at that time. Consequently, the trustee's claims were upheld, and the transfers were declared void.

The Court further determined that the equity of exoneration did not apply because each wife had obtained a tangible benefit from the loans secured by the properties, which negated the presumption that they intended to charge their property merely as a surety. The Court concluded that the wives must bear the burden of their husbands' indebtedness, aligning with the principle that an "innocent" spouse must share in both the benefits and burdens of the marital relationship.

The final orders declared the transfers of the properties to the respondents void, required the respondents to rectify the register of titles, and mandated that the respondents indemnify the trustee and pay the costs associated with the proceedings.