Common Intention Constructive Trusts in the Context of Property Disputes Between Parents and Children

In family relationships, particularly between parents and children, promises regarding property are not uncommon. A parent might assure a child that they will receive a particular property or asset, either during the parent’s lifetime or through their will. However, when such promises are not fulfilled, disputes can arise. In Victoria, these disputes are often addressed through the legal doctrine of common intention constructive trusts (CICTs). This article explains how this doctrine applies in situations involving family promises about property.

What is a Common Intention Constructive Trust?

A constructive trust is an equitable remedy imposed by the courts to prevent unjust enrichment. Unlike express trusts (which are explicitly declared by the parties), constructive trusts are imposed by the law when certain circumstances make it inequitable for a legal owner of property to retain full ownership.

A common intention constructive trust arises when:

• Two or more parties have an actual or inferred common intention or understanding as to their beneficial interest in a property; and
• The party claiming the interest (typically the child in parent-child disputes) has acted to their detriment in reliance on that understanding or promise; and
• It would be an equitable fraud on the claimant to deny their beneficial interest in the property.

If these elements are satisfied, the court may impose a constructive trust, recognising the claimant’s equitable interest in the property even if the legal title remains with the other party.

Family Promises and Detrimental Reliance

In the context of promises made by parents to children, the key issue is often whether the child acted to their detriment based on a reasonable reliance on the parent’s promise. Courts will examine the evidence to determine whether:

• The parent made a clear and unambiguous promise or assurance that the child would receive an interest in the property.
• The child relied on that promise in a significant way, often by making financial contributions, providing unpaid labour or altering their lifestyle.
• The reliance resulted in detriment to the child, making it inequitable for the parent (or their estate) to deny the child’s interest.

For example, if a parent promises a child that they will inherit the family home and the child subsequently invests time, money and labour into renovating or maintaining the property, the child may have a claim under a common intention constructive trust if the promise is not honoured. Other alternative claims, such as proprietary estoppel or a joint endeavour constructive trust, may also apply.

In parent-child disputes, courts have recognised that familial relationships add a layer of complexity. Promises may be informal or made in emotionally charged contexts, so courts require clear evidence of the common intention and detrimental reliance.

How to Prove a Common Intention Constructive Trust

To succeed in a claim involving a common intention constructive trust, a child (or claimant) must demonstrate:

1. Existence of a Promise or Agreement: There must be evidence of a clear understanding that the child would receive an interest in the property. This could be verbal, written or inferred from conduct.
2. Detrimental Reliance: The child must show that they acted to their detriment in reliance on the promise. Detriment may include:

• Financial contributions (e.g. mortgage payments, renovations).
• Providing unpaid labour or services to the property or parent.
• Sacrificing opportunities, such as career prospects or housing options.

3. Unconscionability: The court will consider whether it would be unconscionable for the parent (or their estate) to retain full ownership of the property given the child’s reliance and detriment.

Practical Considerations for Clients

For parents, it is essential to:

• Be clear and consistent when making promises about property to avoid misunderstandings.
• Consider formalising agreements through written documents or wills.

For children who rely on such promises, keeping records of contributions and communications is critical. If disputes arise, prompt legal advice is essential to protect their interests.

Conclusion

Common intention constructive trusts provide a legal pathway for children to enforce promises made by their parents when those promises are not fulfilled. In Victoria, courts will carefully examine the evidence of a common intention, detrimental reliance and unconscionability before imposing a trust. Given the complexity of these cases, legal advice is crucial for both parents and children navigating family property disputes.

This information is general in nature and not a substitute for legal advice based on your individual circumstances. For tailored advice about your situation, speak with our senior property lawyer Pinar Acay on (03) 8621 1000 or (03) 9331 1144.