Muschinski v Dodds

[1985] HCA 78

HIGH COURT OF AUSTRALIA

Gibbs C.J., Mason, Brennan, Deane and Dawson JJ.

MUSCHINSKI v. DODDS

(1985) 160 CLR 583

6 December 1985

Trust

Trust—Resulting trust—Constructive trust—Unconscionable retention of benefit—Failure of joint venture—Purchase of land by unmarried persons—Joint and several liability under contract—Price paid by woman—Undertaking by man to pay for certain repairs and cost of prefabricated house—Separation without fulfilment of undertaking—Whether resulting trust in favour of woman—Whether rebutted—Failure of joint venture—Contribution—Effect of discharge of joint debt by woman—Gift on condition—Failure to fulfil condition—Effect—Whether forfeiture or right to compensation.

Decisions

GIBBS C.J.: The appellant, the plaintiff in proceedings brought in the Equity Division of the Supreme Court of New South Wales, claimed a declaration that she is the beneficial owner of a parcel of land at Picton which is held in the names of the appellant and the respondent as tenants in common and that the respondent's "joint interest" in the land is held in trust for her. She claimed also certain ancillary relief. The respondent, by a cross claim, sought an order for the sale of the land and the division of the net proceeds of sale equally between the appellant and the respondent. The matter was heard by Waddell J., who dismissed the appellant's claim and stood over the cross claim. The appellant appealed from this decision to the Court of Appeal which dismissed the appeal. She now appeals to this Court.

2. On 26 February 1976, the appellant and the respondent entered into a contract to purchase the land at Picton for a price of $20,000. The contract commences by describing the property at Picton, and then continues as follows:

"Agreement made the 26th day of February 1976 between (the vendor) of the one part and (the respondent and the appellant) (herein called the Purchaser) of the other part WHEREBY the Vendor agrees to sell and the Purchaser agrees to purchase, if more than one as JOINT TENANTS/ TENANTS IN COMMON IN THE FOLLOWING SHARES: with joint and several liability under this agreement, the property above described ... "

The contract provided that the purchaser should upon the signing of the agreement pay a deposit of $2,000 and that the balance of the purchase price should be paid in cash on completion. Settlement of the contract took place in May 1976. The appellant provided the whole of the purchase price and other moneys needed to complete the purchase. She had been the owner of a house at Ingleburn which she sold; completion of that sale took place at about the same time as the completion of the purchase of the Picton land, and she was able to use the proceeds of that sale to provide the purchase moneys for the land at Picton.

3. The parties had lived together in the appellant's house at Ingleburn since November 1972. The appellant was a divorced woman and had three children of her former marriage. The respondent was married but was separated from his wife. He was in irregular employment and had no assets but hoped to obtain $9,000 from a property settlement in divorce proceedings which were pending between his wife and himself. The appellant described their relationship as "a man and wife relationship" physically, but not in respect of the financial arrangements. She said that the respondent did not support her or the children; in fact he paid her only a modest contribution towards the cost of housekeeping.

4. The relationship between the appellant and the respondent seems to have been somewhat volatile, but in October 1975, when they first saw the Picton property, they were said to be very happy. There was on the land at Picton an old cottage in a bad state of repair. They planned to restore it and to use it in a crafts business which the appellant proposed to establish. They also planned to erect on the land a prefabricated house in which they would live together. They agreed that they would use the proceeds of the sale of the appellant's house at Ingleburn to provide the money to purchase the land at Picton, and that the respondent would use whatever moneys he obtained from his divorce settlement and had available as a result of his earnings to pay for the erection of the prefabricated house. Nevertheless, in about December 1975, they approached a bank, seeking to borrow $35,000 - $20,000 for the purchase of the Picton property and $15,000 the estimated cost of a prefabricated house. The bank treated the application as one for bridging finance of $20,000 and a subsequent housing loan of $15,000. A bridging loan to the parties was approved, but was not in fact used because the Ingleburn house was sold in time to provide the necessary money. Before the contract was signed they discussed whether the property should be put in the appellant's name, or in both names, and eventually saw a solicitor, Mr Marsden, who advised them to have the property put in their names as tenants in common. Although the contract does not show whether the parties purchased as joint tenants or tenants in common, when conveyance was effected it was to them as tenants in common. Subsequently, apparently as late as December 1977, a further loan to the parties of $14,000 was approved by the bank to assist in the construction of the house, but the local authority, the Wollondilly Shire Council, refused permission to erect a prefabricated house on the property; the loan was not used and no house was erected. The respondent received only $3,500 from his divorce settlement. With the acquiescence of the appellant, he spent part of that money in travelling to Germany to join her there while she was visiting her parents. He did some work on the old cottage in order to make it habitable. It is agreed that the respective contributions of the parties to the purchase and improvement of the property were $25,259.45 from the appellant and $2,549.77 from the respondent; those sums do not take their labour into account. After some temporary partings the parties finally separated in May 1980.

5. Both the learned primary judge and the Court of Appeal commenced with the assumption that since the appellant had provided the whole of the purchase price it was necessary for the respondent to rebut the presumption of a resulting trust in the appellant's favour. After an examination of the evidence it was held by the learned primary judge that it was the intention of the appellant that the respondent should have a beneficial one half interest in the land in return for his assurances that he would assist the appellant to set up a craft busines in the old cottage and that he would have a house built on the land and pay for it out of any moneys which might come to him from his divorce settlement and his earnings. A further reason for the appellant's intention to give the respondent a beneficial interest in the land was that she hoped that if she did so it would improve the quality of their relationship. The learned primary judge further held that there was no evidence that the appellant's intention was to confer on the respondent an interest conditional on the fulfilment of the purposes which the parties had in mind. He accordingly held that the presumption of a resulting trust was rebutted and that no constructive trust arose in favour of the appellant. The Court of Appeal agreed that the appellant intended to give the respondent a one half beneficial interest in the land and, to use the words of Hope J.A., that "this intention was based on the assurances which (the respondent) gave to her and not upon the fulfilment of those assurances". Their Honours held that the evidence pointed to an intention on the part of the appellant to give the respondent a beneficial interest which was immediate and unconditional. They accordingly agreed that the presumption of a resulting trust was rebutted and further held that the events that occurred after the property had been acquired did not give rise to a constructive trust in favour of the appellant.

6. The equitable rules relating to the creation of a resulting trust in a case such as the present were recently considered by this Court in Calverley v. Green (1984) 59 ALJR 111; 56 ALR 483. For present purposes, it is sufficient to state them as follows. Where, on a purchase, a property is conveyed to two persons, whether as joint tenants or as tenants in common, and one of those persons has provided the whole of the purchase money, the property is presumed to be held in trust for that person, to whom I shall, for convenience, refer as "the real purchaser". However a resulting trust will not arise if the relationship between the real purchaser and the other transferee is such as to raise a presumption that the transfer was intended as an advancement, or in other words a presumption that the transferee who had not contributed any of the purchase money was intended to take a beneficial interest. It was held in Calverley v. Green that no presumption of advancement arises where a man puts property into the name of a woman with whom he is living in what is commonly called a "de facto relationship" and, since it has been held that there is no presumption of advancement where a wife makes a purchase in the name of her lawful husband (Mercier v. Mercier (1903) 2 Ch 98), there is even stronger reason for holding that no such presumption arises where a woman puts property into the name of her "de facto husband". However the presumption that there is a resulting trust may be rebutted by evidence that in fact the real purchaser intended that the other transferee should take a beneficial interest. Where both transferees have contributed to the purchase money, the intentions of both are material, but where only one has provided the money it is his or her intention alone that has to be ascertained. The evidence admissible to establish the intention of the real purchaser will comprise "the acts and declarations of the parties before or at the time of the purchase ... or so immediately thereafter as to constitute a part of the transaction": Charles Marshall Pty. Ltd. v. Grimsley (1956) 95 CLR 353, at p 365; in addition, the purchaser may testify as to the intention which he or she had at the relevant time: Martin v. Martin (1959) 110 CLR 297, at p 304. Subsequent declarations will be admissible as evidence only against the party who made them and not in his or her favour: Charles Marshall Pty. Ltd. v. Grimsley, at p 365.

7. Mr Simos, for the respondent, submitted that in the present case there is no basis for this Court to depart from the concurrent findings of the Court of Appeal and the learned primary judge that it was the intention of the appellant (and, if it mattered, the common intention of both parties) that the respondent should have a beneficial half share in the property. Although there can be no doubt that where there have been concurrent findings of fact an appellant will have a difficult task in persuading this Court to set those findings aside (Baffsky v. Brewis (1976) 51 ALJR 170, at p 172; 12 ALR 435, at p 438; The Commonwealth v. Introvigne (1982) 150 CLR 258, at pp 262, 274), this Court has not adopted the rule of practice of the Judicial Committee, which will not review the evidence for a third time when there are concurrent findings of fact unless there has been some miscarriage of justice or violation of some principle of law or procedure. The origins and development of that rule are fully traced in the judgment of Lord Thankerton in Srimati Bibhabati Devi v. Kumar Ramendra Narayan Roy (1946) AC 508, at pp 513-522. The rule was first applied in appeals from India and was prompted by the fact that the judges in India were familiar with the customs and sentiments of the peoples of India, whereas their Lordships did not necessarily enjoy the same advantage. For a similar reason, the rule was later extended to appeals from all parts of the Empire. No similar reason existed for the adoption of any such rule in the House of Lords (cf. Montgomerie &Co. Ltd. v. Wallace-James (1904) AC 73) or in this Court. Where concurrent findings are challenged, it remains the duty of this Court to depart from them if it considers them to be erroneous.

8. However, an examination of the evidence has convinced me that the findings in the Supreme Court, so far as they go, are correct. It was, in my opinion, right to conclude that the appellant intended that the respondent should have a beneficial one half share in the property. The conversations to which I am about to refer must be viewed against the background provided by the relationship between the parties, and in the light of the fact that the parties were co-contractors for the property, each undertaking the obligation to pay the purchase price. Both intended to borrow jointly from the bank, if that became necessary, to finance the purchase. When the appellant first saw the Picton property, she wanted to put it in her own name because she expected to supply all the money. The respondent, however, told her that he would assist her financially and by his own physical work on the property, but only if his name was "on the title". The appellant in her evidence frequently spoke about "putting (the respondent's) name on the title". Mr Bennett, who appeared for the appellant, contended that this revealed an intention to give the respondent only a legal, and not an equitable, interest in the land. That argument attaches altogether too much significance to language used by lay persons who were unlikely to have appreciated the distinction between legal and beneficial interests, and the tenor of the discussions shows that the parties were concerned with the substance of the matter - with the beneficial interest and not the form of the legal title. The parties had frequent discussions about the matter; the appellant had doubts about putting the land in both names, but the respondent regarded it as unfair that he should have no interest in the property when he intended to contribute, roughly equally, to the total cost of obtaining the asset in its final form. The respondent gave evidence that he said to the appellant:

"I would like to have ownership in the property. I believe that if I am going to borrow $18,000, $20,000 and then spend a lot more money on the restoration of the cottage I should have a share in the ownership of the property ... That is why I have asked you to make the appointment with Mr Marsden, so that he can then advise us as to the best way to do it."

He said that she replied, "Yes, that's a good idea." According to the appellant she had agreed, by the time the parties saw Mr Marsden, that the land should be held in both names. Mr Marsden at first strongly opposed the suggestion, but changed his mind, apparently because he became satisfied with the arrangements proposed by the respondent. According to the respondent's evidence, Mr Marsden said:

"I have had a discussion with Mr Dodds and I have asked him to explain to me how he would like the deeds placed on the property, and I have advised him that the best way to do it would be through tenants in common, as he is going to put the time, the efforts, and funds as necessary to develop the property up ... my advice to you, both Mr Dodds and Mrs Muschinski, is to put the property through as tenants in common because if you don't, if it is placed in Mrs Muschinski's name only it would be unfair to Mr Dodds to have him probably put in in excess of $20,000 into the property over a short period of time, which may be two or three years, then have to alter the structure of the deeds, as he has put money in, because he will not feel right in putting money into a property in which he has no title."

The parties agreed to accept Mr Marsden's advice. The appellant was asked in cross examination:

"Providing Mr Dodds satisfied you that he was able to go ahead and put a contribution in towards building a house on the land and helping you develop the arts and crafts centre, you were anxious to go ahead with the joint purchase?"

She replied, "Yes, provided Mr Dodds was putting his contribution in, yes, I was quite happy to go ahead with the purchase." After the interview with Mr Marsden the parties continued to discuss the question - according to the appellant, they discussed it daily. She said that she told the respondent that some friends of hers had misgivings about the proposal to put his name on the title and that he replied: "Don't worry; I assure you I have moneys coming to me and they will be put in so my share will be paid as well and we will build the house."

9. Mr Bennett submitted that the proper inference to be drawn from the evidence is that the intention of the appellant (and indeed of both parties) was, not that the respondent should have an immediate beneficial one half interest in the land, but that he should have an interest which would correspond to his contributions from time to time - an interest that would grow in proportion as his contributions increased, until it culminated in a one half interest when the house which was to be built on the land was completed. We are concerned to discover the actual intention which the appellant had when the land was put in the names of the parties as tenants in common, and not to impute to her an intention which she did not possess but which we might regard as leading to a fair result. The appellant did not suggest in her evidence that she intended that the respondent should have a beneficial interest which depended on the extent of his contributions, and it is implausible to suggest that she entertained any such idea. The true conclusion was, as Hope J.A. said, that the appellant, having faith in the respondent, intended to give him "an immediate and unconditional beneficial interest in the property, and (did not intend) to limit it, to suspend it, or to make it conditional". The presumption of a resulting trust in favour of the appellant was rebutted by the evidence.

10. Mr Bennett submitted an alternative argument, that the respondent held his one half share on a constructive trust in favour of the appellant. He submitted that the respondent induced the appellant to place the property in both names by promising to expend a substantial sum on the property, and then failed to fulfil the promise. This argument was answered by Hope J.A. by saying that the evidence does not reveal any equitable fraud or any other conduct on the part of the respondent which, according to the principles of equity, would give rise to a constructive trust. Hope J.A. continued:

"The simple fact is that things did not turn out as the parties wanted them to. No question of fault on either side is suggested. The (respondent) set about the fulfilment of his assurances but had not been able to carry them out, except to a partial extent, when the relationship between the parties broke down and the whole 'joint venture' came to an end. Up to that time he had been fulfilling his assurances as best he could. In these circumstances I can see no occasion for concluding that any constructive trust arose in favour of the (appellant)."

11. Mr Bennett submitted that he did not need to rely on any breach of faith on the part of the respondent - it was not necessary for him to attempt to establish that the respondent intended, when he made the promises, not to keep them. He urged us to take the broad view and to accept that it is a general proposition that the Court can impose a constructive trust whenever the conduct of the legal owner makes it equitable to do so. The starting point of his argument was the well known statement in the judgment of Lord Diplock in Gissing v. Gissing (1971) AC 886, at p 905:

"A resulting, implied or constructive trust -
and it is unnecessary for present purposes to
distinguish between these three classes of trust - is created by a transaction between the trustee and the cestui que trust in connection with the acquisition by the trustee of a legal estate in land, whenever the trustee has so conducted himself that it would be inequitable to allow him to deny to the cestui que trust a beneficial interest in the land acquired. And he will be held so to have conducted himself if by his words or conduct he has induced the cestui que trust to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land."

It seems to me quite unlikely that Lord Diplock intended the first sentence in the passage quoted to be read in isolation, unaffected by the sentence which follows it. Read as a whole, the passage does not assist the appellant, who never believed that she was acquiring more than a one half beneficial interest in the land.

12. However, Lord Diplock's judgment has influenced a number of decisions in the English Court of Appeal commencing with Heseltine v. Heseltine (1971) 1 WLR 342; (1971) 1 All ER 952, in which that Court has applied the dictum to cases in which, when one party to a marriage or a de facto relationship has acquired in his or her own name a house property which has become the home in which the two parties have lived together, the other party has, after the breakdown of the relationship, claimed to be entitled to a beneficial interest in the house by reason of contributions either to the cost of acquiring the house or to the expenses of the household. Those cases are reviewed in the judgment of Glass J.A. in Allen v. Snyder (1977) 2 NSWLR 685, at pp 693-695 and in a more recent decision, Burns v. Burns (1984) Ch 317, but I need not discuss them in any detail because they are not concerned with the different situation that arises when the legal estate has been taken in joint names and they therefore do not directly assist the appellant. Some of the judgments in those cases, particularly those of Lord Denning M.R., support the view that a constructive trust is "imposed by law whenever justice and good conscience require it": Hussey v. Palmer (1972) 1 WLR 1286, at p 1290; (1972) 3 All ER 744, at p 747 (a case between mother-in-law and son-in-law). However the view that the court can disregard legal and equitable rights and simply do what is fair is not supported in England by the decisions of the House of Lords in Pettitt v. Pettitt (1970) AC 777 and Gissing v. Gissing (see per May L.J. in Burns v. Burns, at p 334) and it is contrary to established doctrine in Australia: Wirth v. Wirth (1956) 98 CLR 228, at pp 231-232, 247-248; Hepworth v. Hepworth (1963) 110 CLR 309, at pp 317-318; Bloch v. Bloch (1981) 55 ALJR 701, at p 705; 37 ALR 55, at p 63.

13. Mr Bennett further placed some reliance on the opinions expressed in Pettitt v. Pettitt by Lord Reid, at p 795, and by Lord Diplock, at p 823, that it is proper to base a constructive trust upon a common intention which the parties did not in fact form but which the court considers that they would, as reasonable persons, have formed if they had considered the possibility that the event which has in fact occurred might happen. That view was not shared by the majority of the House in Pettitt v. Pettitt and in Gissing v. Gissing Lord Diplock felt bound to accept that his statement on the point in Pettitt v. Pettitt was not the law: see at p 904. Nevertheless, in Hayward v. Giordani (1983) NZLR 140, Cooke J., speaking obiter, appears to have accepted that a constructive trust may be based upon a common intention imputed to the parties who had not in fact formed the intention. With the greatest respect I agree with Glass J.A. in Allen v. Snyder, at p 694, that the proposition that a constructive trust may be based upon a common intention which does not actually exist, but which is ascribed to the parties by operation of law, is contrary to principle and to authority: see also at p.690; see also per Samuels J.A., at p.701. The question does not call for elaborate discussion in the present case, because this is not a case in which the parties formed no intention at all - after lengthy discussions and consultation with a solicitor they formed the intention that they should hold the land as tenants in common. Notwithstanding the remarks of Lord Reid in Gissing v. Gissing, at p 897, I am unable to accept that the law can permit an intention to be imputed to parties when the evidence shows that they had in fact formed a different intention.

14. There is no need, in the present case, to attempt to chart further the ill-defined limits of the rules relating to constructive trusts. The arguments that the respondent held his legal one half interest on a constructive trust in favour of the appellant cannot be accepted. Before I pass from this aspect of the matter I should add that in the course of his argument Mr Bennett relied on the following passage in the judgment of May L.J. in Burns v. Burns, at p 344:

"Where the family home is taken in the joint names, then unless the facts are very unusual I think that both the man and the woman are entitled to a share in the beneficial interest. Where the house is bought outright and not on mortgage, then the extent of their respective shares will depend upon a more or less precise arithmetical calculation of the extent of their contributions to the purchase price. Where, on the other hand, and as is more usual nowadays, the house is bought with the aid of a mortgage, then the court has to assess each of the parties' respective contributions in a broad sense ..."

Although the distinction between resulting trusts and constructive trusts may have become somewhat blurred in some discussions in England, I consider that in that passage May L.J. was speaking of the effect of the rules which create a resulting trust and was not speaking of a constructive trust. For the reasons already given, no resulting trust arose in the present case.

15. For these reasons I consider that the learned judges in the Supreme Court were correct in concluding that the half interest of the respondent in the land was not subject to any trust in favour of the appellant. However, that is not the end of the matter. Upon the sale of the property, when the proceeds are distributed, there must be an equitable accounting between the parties. The question what will be the rights of the appellant on such an accounting was not raised or considered in the Supreme Court, although it directly arose, at least on the respondent's cross claim which sought an equal division of the proceeds of sale between the parties.

16. What appears to have been overlooked in the proceedings up to and including the argument in this Court is the fact that the appellant and the respondent were made by the contract jointly and severally liable to pay the price for the purchase of the Picton land. They were under a common obligation to pay the debt, and the case therefore fell within the general principle applicable both in law and equity which obliged them to bear the burden equally with the consequence that if one discharged more than his or her proper share he or she could call upon the other for contribution. The principle is stated succinctly in Chitty on Contracts (General Principles) 25th ed. (1983), par.1213, as follows:

"Joint and joint and several debtors have a
quasi-contractual right of contribution among
themselves: that is to say, if one has paid more than his share of the debt, he can recover the excess from the others in equal shares, subject to any agreement to the contrary."
(See also Halsbury's Laws of England 4th ed., vol.9, par.658; Albion Insurance Co. Ltd. v. Government Insurance Office (N.S.W.) (1969) 121 CLR 342, at pp 349-350 and Armstrong v. Commissioner of Stamp Duties (1967) 69 SR(NSW) 38, at pp 47-48.) It is unnecessary for present purposes to discuss whether the right is quasi-contractual or based on equitable principles. Prima facie, the appellant, having paid the debt in full, had a right to contribution against the respondent, i.e. a right to recover one half of the amount paid under the contract. It is often said that the right may be excluded by express or implied agreement: see Anson v. Anson (1953) 1 QB 636, at p 645 and Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 2nd ed. (1984), par.1022. However, in Coulls v. Bagot's Executor and Trustee Co. Ltd. (1967) 119 CLR 460, at p 488, Taylor and Owen JJ. said that "it seems that no such right (i.e., a right to an indemnity or to a contribution) will arise where such a result would clearly be contrary to the intentions of the parties at the time when the joint obligation was undertaken"; see also per Barwick C.J., at p.480. There are other authorities that support the view that a right to contribution may be excluded by the intention of the parties as well as by agreement (see Gadsden v. Commissioner of Probate Duties (1978) VR 653, at pp 660-661 and cases there cited), and I shall assume that this view is correct. The question in the present case then is whether, when the contractual obligation to buy the Picton land was undertaken, the parties had formed an intention that the respondent should not be liable to pay any of the purchase price. There is no direct evidence that they did. On the contrary, they applied jointly to the bank for finance and there is no suggestion in the evidence that if they had taken up the loan they intended that the appellant only should be responsible for repaying it. Indeed the respondent appears to have acknowledged that he would be responsible for the repayment of the bank loan when he referred to the fact that he was "going to borrow $18,000, $20,000". If they had borrowed jointly from the bank, they would have contributed equally to the payment of the purchase price: see Calverley v. Green, at pp 114, 117 of ALJR; pp 488, 493 of ALR When the sale of the appellant's house at Ingleburn was completed it became unnecessary for them to avail themselves of the bank finance, but that was some time after the contract had been signed. It is true that the parties intended that the purchase money should be paid wholly by the appellant if the sale of her Ingleburn house was completed in time and that in that event the respondent should contribute a similar amount towards the improvement of the property. No doubt it was intended that if the respondent fully contributed to the improvement of the property, he would be under no obligation to contribute to the common debt for the purchase price. However the parties did not in fact consider or discuss whether the appellant would have a right to contribution if she paid the purchase money in full and if the respondent did not contribute as much as he had promised to enable the prefabricated house to be erected. There was no evidence from which it could be inferred that at the time when the contract was signed the parties or either of them actually intended that the appellant should not have a right of contribution against the respondent if she paid the purchase price in full. No such intention should be imputed to the parties. Certainly, there was no agreement to that effect.

17. In these circumstances it appears that the appellant is entitled to contribution from the respondent to the extent to which she paid more than one half of the purchase moneys. Further, she would appear to be entitled to an equitable charge upon the respondent's half interest for such an amount: Ingram v. Ingram (1941) VLR 95; Calverley v. Green. In determining the amount of the equitable charge, the agreed figures as to the amounts respectively contributed by the parties might well serve as a basis.

18. The question of contribution was not argued either in the Supreme Court or in this Court, although during argument in this Court suggestions were made from the Bench that the appellant might be entitled to a charge. In the circumstances it is not possible finally to dispose of the matter and I would follow a course similar to that adopted in Calverley v. Green. I would stand the matter over to give the parties an opportunity to agree upon an order which might finally dispose of the issues outstanding between them. If no agreement were reached, it would be necessary to remit the matter to the Supreme Court of New South Wales to consider the question of contribution and what order should finally be made having regard to the determination of that issue. No order should be made as to costs.

19. Since writing the above, I have seen the judgments of the other members of the Court. In the circumstances I agree that the order to be made should be that proposed by my brother Deane.

MASON J:. The facts are sufficiently set forth in the reasons for judgment of Deane J. with whose conclusions I agree.

2. The evidence to which his Honour refers supports the finding that the common intention of the parties was that each should enjoy, from the time of purchase, an immediate and unconditional legal and beneficial one-half interest in the property. The suggestions that Mr Dodds' interest was conditional upon the actual making of his contributions or that his interest was to arise by stages as and when he made them has no foundation in that common intention. Accordingly, there is no scope for a resulting trust.

3. The failure of the projected development of the land, including its subdivision and the sale of part of the land, through no fault of the parties, provides a firm basis for declaring that the parties hold their respective interests in the property as tenants in common on a constructive trust, after payment of any debts incurred in the improvement of the property, to repay to each his or her respective contributions and as to the residue for them both in equal shares. The circumstances of the case, viewed in the light of the common intention that Mr Dodds was to take an immediate and unconditional interest in the property, did not make it inequitable that he should retain that interest, notwithstanding the failure of the projected development. But it would be inequitable for him to retain his interest without crediting to Mrs Muschinski the contributions which she made to the acquisition and improvement of the property. Although Mrs Muschinski intended that he should take an immediate and unconditional half interest, that intention was accompanied by an expectation, shared by Mr Dodds, that the projected development would take place for their mutual benefit and that Mr Dodds would be making substantial contributions to it. I agree with Deane J. that the general principle underlying the proportionate repayment of capital contributions to joint venturers on the failure of a joint venture is wide enough to support this aspect of the constructive trust.

4. I agree with the orders proposed by Deane J.

BRENNAN J.: Mrs Muschinski and Mr Dodds had been living together in Mrs Muschinski's house at Ingleburn since November 1972. They were not married. In 1975, they decided to buy a property at Picton. A dilapidated sandstone cottage stood on the property. They agreed that, after restoration, it would be suitable for use by Mrs Muschinski as an arts and crafts centre, an enterprise in which Mrs Muschinski had an especial interest. The grounds were in poor condition and a great deal of work would be needed to tidy them up. They proposed to purchase a prefabricated house and to erect it on another part of the property. That was to be their residence. Their financial resources were limited. Mrs Muschinski could sell her home at Ingleburn but Mr Dodds had no money to contribute immediately, though he expected to have $9,000 to contribute to the project when divorce proceedings between himself and his wife were completed. The purchase price of the property was $20,000. They applied to a bank for a bridging loan to finance the purchase and a subsequent housing loan to erect the prefabricated house, the bridging loan to be repaid from the proceeds of the sale of the Ingleburn home. The application for the bridging loan was approved.

2. The relationship between Mrs Muschinski and Mr Dodds was not always placid. After a dispute in December 1975, Mrs Muschinski became concerned about putting the title partly in Mr Dodds' name but, according to her evidence, Mr Dodds said he would have no part of the venture if the property was not put in both names. They consulted a solicitor, Mr Marsden, who had been retained by Mrs Muschinski to attend to the sale of the Ingleburn home. After some discussion in which Mr Marsden advised against a partnership agreement, Mr Marsden advised them to "have the deeds drawn up so that you are co-owners - as tenants in common in both names". He stated the reason for the advice that they be tenants in common:

" if you don't, if it is placed in Mrs. Muschinski's name only it would be unfair to Mr. Dodds to have him probably put in in excess of $20,000 into the property over a short period of time, which may be two or three years, then have to alter the structure of the deeds, as he has put money in, because he will not feel right in putting money into a property in which he has no title."

This advice was accepted. Contracts for the purchase and sale of the property were exchanged on 27 February 1976. Mr Dodds said that the counterpart of the printed form of contract, signed by Mrs Muschinski and himself as purchasers, described them as tenants in common. They jointly placed an order for a prefabricated house. The money expected from Mr Dodds' divorce proceedings was to be applied in part payment for the house but, in the meantime, Mrs Muschinski paid a deposit on the order. If Mr Dodds' expected $9,000 was not received in time to pay for the prefabricated house, they intended to obtain a bank loan which Mr Dodds was to pay off out of his earnings. Mrs Muschinski knew he had no money, but he had a good job with prospects.

3. The purchase was completed on 22 May 1976. Settlement was delayed until the completion of the sale of Mrs Muschinski's Ingleburn home. The proceeds of that sale were applied to complete the purchase of the Picton property. Mrs Muschinski provided the whole of the purchase price. The property was conveyed to Mrs Muschinski and Mr Dodds as tenants in common in equal shares. They failed to get approval to erect the prefabricated house on the property and the order for the house was cancelled. In the event, the bank loan was not taken up either for the purchase of the property or for the purchase and erection of a prefabricated house upon it. Mr Dodds worked on the grounds and did some work on the cottage after they bought the property, but during the first two years they did not live there. Occasionally they stayed overnight in a caravan on the site. Between 1976 and 1978, they separated from time to time. In 1978, Mr Dodds received his divorce settlement but the net figure was only $3,500. The major part of that sum was spent, with the approval of Mrs Muschinski, on travelling to Germany to join her there while she was visiting her parents. After they returned from the trip to Germany in 1978, they took up residence together in the Picton cottage. Although permission to erect the prefabricated house was ultimately obtained, the permission was subject to conditions (including its location on the property) which Mr Dodds found unacceptable and he thought it unwise to spend the amount which it would then have cost to erect the prefabricated house. Mr Dodds did not borrow any money to build a house or to make any other improvements to the property. Instead of erecting the prefabricated house Mr Dodds, with Mrs Muschinski's agreement, proposed to restore the cottage and to extend it for use as their residence. Mr Dodds made and paid for some fairly substantial improvements to the cottage. In May 1980, before any extensions to the cottage were effected, they separated permanently. Shortly afterwards, Mrs Muschinski commenced proceedings in the Supreme Court of New South Wales seeking declarations that she was the beneficial owner of the property and that Mr Dodds held his interest in trust for her. Leaving aside the labour which the parties respectively contributed to the improvement of the cottage and the grounds, the respective financial contributions of the parties to the purchase and improvement of the property were agreed to be:

Mrs Muschinski $25,259.45

Mr Dodds $ 2,549.77.

If Mr Dodds' assurances had been fulfilled, his total contribution would have been substantial, although the amount was not precisely quantified. As it turned out, Mr Dodds' contribution was comparatively small.

4. At the trial, Mrs Muschinski's case was put on alternative bases: she claimed to be entitled to the beneficial interest in the whole of the property either because Mr Dodds had not displaced the presumption of a resulting trust arising from her payment of the whole of the purchase price or because any beneficial interest in the property which she intended to confer on Mr Dodds was conditional on his assuming financial responsibility for and constructing a dwelling on the land, a condition which had not been fulfilled. On either of these bases, the critical question of fact was Mrs Muschinski's intention: had she intended to give Mr Dodds any beneficial interest in the property and, if so, was the interest given an absolute or conditional interest? She submitted then, and her submission was repeated on appeal to this Court, that the answers to these questions depended on her intention at the relevant time, which was said to be the occasion of the visit to Mr Marsden's office. More accurately, the time at which Mrs Muschinski's intention is to be ascertained is the time when the parties acquired the property (Calverley v. Green (1984) 59 ALJR 111, at p 118; 56 ALR 483, at p 496), that is, on completion of the purchase, but nothing turns on the difference.

5. Although Mrs Muschinski's payment of the purchase price discharged the joint and several liability which she and Mr Dodds had incurred under the contract, her claim to be entitled to the full beneficial interest in the property is necessarily based on the hypothesis that, as between herself and Mr Dodds, she made the payment as sole purchaser. Had she chosen to treat the payment of the price as a payment of a joint and several debt, she would have been constrained to admit (contrary to the relief which she sought) that he acquired a beneficial interest in the property by purchase, though she would have been entitled to contribution from him for his share of what she had outlaid on their behalf. On that hypothesis, Mr Dodds would have taken a beneficial interest not by gift but by purchase. Mrs Muschinski chose to frame her case in a different way, perhaps because the arrangement between the parties called for her alone to pay the whole of the purchase price. Contending that Mr Dodds could acquire no beneficial interest in the property except by her gift, her case was that she had not given Mr Dodds a beneficial interest or, alternatively, that she had given him only a conditional beneficial interest and the condition was unfulfilled. She made no alternative claim for contribution but she had no such claim if Mr Dodds took a beneficial interest by gift and not by purchase. The principal issues at the trial were whether he took a beneficial interest by gift and whether that interest was absolute or conditional. On those issues she failed.

6. Waddell J. found:

" that (Mrs Muschinski) intended (Mr Dodds) to have a beneficial one-half share as tenant-in-common in the property purchased in return for his assurances that he would assist her to set up a craft business in the old cottage and that he would have a cottage built on the land and pay for it out of any moneys which might come to him from his divorce settlement and from his earnings. She also intended him to have a beneficial interest in the property in the hope that it would improve the quality of their relationship. There is, I think, no evidence that (Mrs Muschinski's) intention was to confer any kind of conditional interest in the property on (Mr Dodds). He made it plain, in effect, that unless he had an interest in the property he would not assist her. She did not seek to attach any qualification to her acceptance of his demand."

His Honour held that the presumption of a resulting trust arising from Mrs Muschinski's payment of the purchase price was rebutted and that Mr Dodds had obtained a beneficial one-half interest in the property as tenant in common. The Court of Appeal came to the same conclusion. Hope J.A. said:

" Having regard to the evidence and particularly to what was said at Mr. Marsden's office, I agree with his Honour's conclusion that (Mrs Muschinski) intended to give (Mr Dodds) a one-half beneficial interest in the land, and that this intention was based on the assurances which (Mr Dodds) gave to her and not upon the fulfilment of those assurances."

Samuels and Mahoney JJ.A. agreed with this view. On appeal to this Court, Mrs Muschinski challenges the finding that her intention when the purchase was completed was that Mr Dodds should have a beneficial interest in the property. An appellant who challenges the concurrent findings of fact made by the courts below has a difficult task (see Baffsky v. Brewis (1976) 51 ALJR 170, at p 172; 12 ALR 435, at p 438), and the evidence in this case is more than sufficient to preclude a successful challenge to the finding that Mrs Muschinski intended Mr Dodds to have a beneficial interest in the property at the time when the contract of purchase was completed. (I leave aside for the moment the finding that the interest was not conditional.) Mr Dodds gave evidence that he had said to Mrs Muschinski, "I believe that if I am going to borrow $18,000, $20,000 and then spend a lot more money on the restoration of the cottage I should have a share in the ownership of the property". He said that she agreed to his request that an appointment be made with Mr Marsden "so that he can then advise us as to the best way to do it". There is no reason to think that the advice offered by Mr Marsden and accepted by the parties as to the taking of title in both names was understood by Mrs Muschinski as relating merely to a legal title rather than to a legal title with which the beneficial interest would be at home. If that were her understanding, her acceptance of Mr Marsden's advice that it would be necessary "to alter the structure of the deeds" if they were not in both names to start with suggests that she intended to give Mr Dodds a beneficial interest when the property was purchased. In the light of this evidence, it would be wrong to disturb the finding that Mrs Muschinski intended Mr Dodds to take not only the legal title conveyed to him but also the corresponding beneficial interest (although, for reasons presently to be mentioned, I would think she intended him to have that interest subject to an obligation). The particular circumstances of the case rebut the presumption of a resulting trust in favour of Mrs Muschinski arising from her payment of the purchase price: Russell v. Scott (1936) 55 CLR 440; Calverley v. Green. That is not to say that Mr Dodds took his beneficial interest free of any obligation on his part. It is necessary now to consider the nature of the obligation he assumed.

7. Mr Dodds was given his interest on his assurance that, at his own expense, he would assist in setting up the arts and crafts business and in getting the grounds in order, he would have the prefabricated house erected and he would pay off the debt incurred in its purchase and erection. Mrs Muschinski gave evidence that she was "quite happy" to go ahead with the purchase provided Mr Dodds "was putting his contribution in". When cross-examined about the $9,000 expected to come from his divorce settlement, Mrs Muschinski replied:

" I do not know why we centre around the $9,000 so strongly. Mr. Dodds was going to provide a home for me, no matter what. He was going to build a home and pay for it for the rest of his life. We were entering a partnership and whether it was $9,000 or $10,000 did not really matter at that stage. He was willing to provide whatever he had and whatever he was going to earn after; he was going to contribute to our future home and happiness."

8. Waddell J. was surely right in finding that Mr Dodds took his beneficial interest in the property "in return for his assurances that he would assist her to set up a craft business in the old cottage and that he would have a cottage built on the land and pay for it ...". In the Court of Appeal, Hope J.A. agreed that Mrs Muschinski's intention that Mr Dodds should have a beneficial interest was based "on the assurances which the defendant gave to her and not upon the fulfilment of those assurances". But on these findings, it is not right to hold that Mrs Muschinski was moved by disinterested generosity towards Mr Dodds in giving him his interest in the property. She did not give him his interest merely in the hope that his assurances would be fulfilled. She gave the interest "in return for his assurances", that is, on terms that he should be bound to fulfil his assurances. A gift in return for assurances, though not amounting to a contract, is a gift on terms and the terms of the assurances express the terms on which the donor intends to make the gift and the donee's understanding of the terms on which it is made. Subject to some few exceptions, a donor has a right to regulate the disposal of his gift: see Scot v. Haughton (1706) 2 Vern. 560 (23 ER 963); Gibson v. Dickie (1815) 3 M.&S.463 (105 ER 684). That principle is applicable as well to gifts inter vivos as to testamentary gifts, though the rules relating to the effect of a donor's regulation of the property given have found more frequent expression in cases involving testamentary gifts where the regulation is expressed in the dispositive provisions of the will.

9. An assurance by a donee that he will use or devote the property given or its income for a particular purpose, or will hold it for a particular object, or will do a particular thing when given "in return for" a gift may therefore take effect as if the donor made the gift upon the terms of the assurance. Accordingly, the donee may take the property given either as a trustee or beneficially and, if beneficially, he may take it subject to defeasance if the assurance should not be fulfilled or subject to a personal obligation to fulfil the assurance or subject to a charge securing fulfilment of the assurance (particularly if it involves the payment of money). In the present case, Mrs Muschinski intended to confer a beneficial interest in the property on Mr Dodds. Had she understood the options open to her, she may have preferred not to confer a beneficial interest in the property on Mr Dodds but to confer a mere legal interest on him to be held in trust for her until he should fulfil the assurances he had given. But, as we have seen, that may not have been suitable to Mr Dodds and, in the event, she gave him a beneficial interest on his assurances that he would improve the property. The fulfilment of the assurances was not charged on the interest given and perhaps its fulfilment could not have been charged on that interest. Nevertheless, the interest was given not merely in the hope that Mr Dodds would fulfil the assurances but on condition that he do so. A condition annexed to a gift may be of either of two kinds: a condition involving a forfeiture for non-fulfilment or a condition creating merely a personal obligation to fulfil it. A donee who takes a gift to which a condition of the latter kind is annexed incurs an equitable obligation to perform the condition (Countess of Bective v. Federal Commissioner of Taxation (1932) 47 CLR 417, at pp 418- 419). Lindley L.J. in In re Williams. Williams v. Williams (1897) 2 Ch 12, at p 19, said:

" ...there is no difficulty in disposing of one's own property upon condition express or implied that the person who takes it shall do something himself, e.g., shall dispose of his property in a particular way indicated by the owner of the property which he accepts. Moreover, a condition of this kind is enforceable in equity, and need not amount to a common law condition - i.e., a condition involving a forfeiture of the property taken subject to the condition - if that condition is not performed."

A condition which creates a personal obligation may be enforced in equity by an order for compensation or, where appropriate, by a decree of specific performance (Gill v. Gill (1921) 21 SR(NSW) 400, at p 407; Gregg v. Coates (1856) 23 Beav. 33 (53 ER 13); In re Hodge; Hodge v. Griffiths (1940) Ch 260).

10. Whether a condition is such that its non-fulfilment involves forfeiture of the property given depends upon the intention of the donor communicated to the donee at the time when the latter accepts the property, that is, the intention which the donee reasonably understands to be the donee's intention from what the donee has said or done (cf. Calverley v. Green, at pp 118-119; p 496). In this case, it is by no means easy to determine whether the condition was one which involved a forfeiture of Mr Dodds' interest if the condition were not fulfilled. If the condition did not involve forfeiture for non-fulfilment, Mrs Muschinski obtained no security for the fulfilment of the assurances save Mr Dodds' personal obligation; if the condition involved forfeiture for non-fulfilment, Mrs Muschinski could recover the beneficial interest given to Mr Dodds if he should fail substantially to fulfil the assurances. The question, depending on Mrs Muschinski's intention, must be answered as a matter of fact by reference to what the parties said and did when or before the property was purchased. The inference to be drawn from what the parties said and did is unaffected by the existence of equitable principles unknown to the parties at the time. Thus it would not be right to infer that the common understanding of the parties was that Mr Dodds' interest would be liable to forfeiture but his interests would be protected by the equitable jurisdiction to relieve against forfeiture if he should partially but not completely fulfil his assurances. The inference of fact must be drawn from the slender evidentiary material available.

11. The critical fact to my mind is that Mr Dodds was insisting on having an interest in the property before he would have any part of the venture, and that demand gave rise to a contest between his wishes and the wishes of Mrs Muschinski. He wished to have his beneficial interest before he started to fulfil the assurances and would not otherwise expend his money and his labour. Mrs Muschinski's concern about acceding to Mr Dodds' wishes arose because she was conscious of the risk of parting with an interest in the property without any security for the fulfilment of Mr Dodds' assurances. The advice given by Mr Marsden was, in essence, that Mr Dodds should be given immediately the interest which, if effect had been given to Mrs Muschinski's concern, he would have acquired only upon entire performance of his assurances. The inference to be drawn from these circumstances is that Mr Dodds' wishes prevailed and Mrs Muschinski parted with the interest on a condition which did not involve forfeiture for non-fulfilment. The lack of specificity as to the work to be done, the standard to which it was to be done and, particularly, the time within which it was to be done suggests that the condition was not intended to work a forfeiture of the beneficial interest given to Mr Dodds in the event of non-fulfilment of the assurances (cf. In re Brace, decd., Gurton v. Clements (1954) 1 WLR 955; Gill v. Gill). Although the proposal to erect the prefabricated house was abandoned, Mrs Muschinski agreed that Mr Dodds should undertake the major work of restoring the cottage and making it habitable. That was the work which consumed all or most of the $2,549.77 expended by him on the property. Her agreement to Mr Dodds' undertaking of that work and the expenditure involved in it after discussions in which, so far as the evidence goes, she did not suggest that his interest had become liable to forfeiture, is more consistent with a common understanding that he was then entitled to remain a part-owner of the property than with any other hypothesis. On balance, I would find that the condition annexed to the gift created only a personal obligation resting on Mr Dodds. Although a failure to fulfil the condition did not involve forfeiture of the beneficial interest given, partial non-fulfilment was not without remedy: Mrs Muschinski might have made a claim for compensation, but she did not do so. She asserted merely a proprietary right, and in that claim she fails.

12. This conclusion, to my mind, disposes of the case. However, it was submitted that, even if Mr Dodds took a beneficial interest as a tenant in common in the property when it was purchased, the purpose for which the parties made the arrangement - the establishing and maintenance of a common home and an arts and crafts centre - was discontinued when the parties separated in May 1980 and that Mr Dodds now holds his interest on a constructive trust for Mrs Muschinski. If that should be so, the supposed constructive trust does not arise from anything done or promised by Mr Dodds after he first acquired his interest in the property. The parties entered into no new relationship, contributed their property to no new venture, and formed no new purpose after the Picton property was purchased. The supposed constructive trust must have its origin in the arrangements pursuant to which Mr Dodds acquired his interest. In substance, the argument for a constructive trust must be that Mr Dodds' retention of the beneficial interest he was given is inconsistent with the understanding on which he took the interest, that is to say, inconsistent with the purpose for which the interest was given to him.

13. It would not be sufficient for Mrs Muschinski to show that it is unfair for Mr Dodds to retain the interest once the purpose is no longer pursued; she must show that it is unconscionable for him to retain it. A constructive trust does not arise and cannot be imposed on the ground of mere fairness. It may be fair - I do not say it is - that Mr Dodds should give back what he was given while he was cohabiting with Mrs Muschinski, but no trust can be impressed on Mr Dodds' interest in favour of Mrs Muschinski on that ground. There is no jurisdiction in an Australian court of equity to declare an owner of property to be a trustee of that property for another merely on the ground that, having regard to all the circumstances, it would be fair so to declare: Wirth v. Wirth (1956) 98 CLR 228, at p 232; Hepworth v. Hepworth (1963) 110 CLR 309, at p 318; Bloch v. Bloch (1981) 55 ALJR 701, at p 705; 37 ALR 55, at p 63. The flexible remedy of the constructive trust is not so formless as to place proprietary rights in the discretionary disposition of a court acting according to vague notions of what is fair. When property is freely given, I know of no equitable principle which might restrict the donee's proprietary interest in the gift beyond any restriction imposed expressly or impliedly by the donor. To say that Mr Dodds holds his interest now in trust for Mrs Muschinski because the parties have ceased to pursue the common purpose which they had in mind when Mrs Muschinski gave Mr Dodds his absolute beneficial interest is tantamount to saying that the interest he took was subject to a condition subsequent which, in the events that have happened, has operated to divest him of his beneficial interest. For reasons earlier stated, I would reject that view.

14. The argument for a constructive trust mistakes, I think, the true nature of the arrangement made and the true understanding of the parties to it. Although the arrangement was made in order that a common home and arts and crafts centre should be established and maintained, Mrs Muschinski's acquisition of the property and her disposition of an absolute beneficial interest in it to Mr Dodds were the means by which she hoped to win for herself domestic and emotional security as well as accommodation and assistance in a business enterprise. She said that she -

" expected the purchase of the Picton property to improve our relationship, to increase that happiness, because we had many arguments about the colour scheme of the house and it was always referred to, 'Yes, it is your house. I have nothing to say here' ... I thought this would restore our relationship to quite a happier one."

The better view of the arrangement is that the parties agreed, after much discussion and some contest of wishes, on the foundation on which they hoped to build their future relationship, and that that foundation included making Mr Dodds an independent owner of property which he might devote to their common purposes as a manifestation of his commitment to their relationship. Their omission to provide for the winding up of their relationship reflects their inability to see what course that relationship might follow, but does not suggest that the foundation of the relationship on which they had ultimately agreed should be changed if the relationship ceased. Once it appears that the condition that the assurances be fulfilled was not intended to work a forfeiture of the interest given in the event of non-fulfilment, how can it be unconscionable to retain the interest? His separation from Mrs Muschinski was in breach of no equitable obligation and it can make no difference that that event occurred before the work was complete. If Mr Dodds had fulfilled every assurance that he gave but, due to personal incompatibility, he subsequently left Mrs Muschinski, can it be thought that the court would then impose a constructive trust on his beneficial interest? (Indeed, could a constructive trust be imposed on and by reason of the cessation of cohabitation between unmarried persons? Cf. Zapletal v. Wright (1957) Tas.SR 211.) The argument for a constructive trust in the present case proves, on analysis, to be a plea for the return of the interest given on the grounds of fairness. That is not a basis sufficient to support a declaration of a constructive trust.

2. Such a condition, whilst not a condition of forfeiture and falling short of creating a trust or charge, may give rise to a personal equitable obligation analogous to a contractual obligation, enforceable by compensation or, in an appropriate case, by specific performance. The precise basis in principle of this doctrine may be debatable but it is firmly founded in precedent and affords a convenient means of reflecting the equity of the situation. See Messenger v. Andrews (1828) 4 Russ. 478 (38 ER 885); Gregg v. Coates (1856) 23 Beav 33 (53 ER 13); Rees v. Engelback (1871) LR 12 Eq 225; Gill v. Gill (1921) 21 SR(NSW) 400; In re Hodge; Hodge v. Griffiths (1940) Ch 260; Countess of Bective v. Federal Commissioner of Taxation (1932) 47 CLR 417, at pp 418-420 per Dixon J.

3. I further agree with Brennan J., for the reasons which he gives, that the remedy of the constructive trust has no application in this case.

4. I would dismiss the appeal.

Orders

Appeal allowed with costs.

Order that the judgment and order of the Court of Appeal of the Supreme Court of New South Wales be set aside, the appeal to that Court be allowed and the judgment and order of Waddell J. be set aside.

Further order that the respondent pay the costs of proceedings before Waddell J. and of the appeal to the Court of Appeal.

Stand the matter over until 11th February 1986.

Order that, if the parties do not apply on or before 11th February 1986 for an order by consent otherwise disposing of this appeal, the matter be remitted to the Supreme Court of New South Wales to proceed in accordance with the judgment and proposed orders of Deane J.