A Cairns cosmetic therapist who devised a scheme to assist her brother get a home of his own has been ordered to account to him for the capital gain realised on its sale seven years later.

Karen Fister and her partner Christopher Hall acquired the fixer upper in Tills Street, Cairns in October 2011 with funds they borrowed from Westpac and a deposit supplied by Karen’s brother Andrew via a loan from their mother.

Andrew and wife Jodi took up occupation, took care of the monthly repayments and outgoings and made some improvements to the property.

The arrangement was undocumented and the parties fell into dispute when Karen and Christopher realised that the arrangement was hindering their borrowing capacity because Andrew and Jodi had failed to take out a loan of their own – as had been intended – to replace the Westpac loan.

That loan was only discharged when the home was sold in February 2018 by which time the parties had vastly different views as to how the $64k surplus sale proceeds should be distributed.

Those funds were paid into a trust account pending a court determination as to their relative entitlements.

Accountant Ken Hastings who examined the loan account transactions at Andrew and Jodi’s request identified drawdowns of $38k that were unrelated to the property.

They claimed a proprietary interest in the whole of the $64k surplus pursuant to either a common intention constructive trust or a failed joint-venture constructive trust. They also claimed the $38k as equitable damages.

Judge Tracy Fantin found in the District Court at Cairns that the objective of the arrangement was the acquisition of the property as a residence for Andrew and his family that would ultimately be wholly owned in law and equity by he and Jodi.

She concluded that Karen and Christopher therefore held the $64k surplus on trust for them but ruled they were not entitled to equitable damages because the accountant’s calculation did not take into account any disproportionate contributions.

On appeal by both parties, Justice Peter Davis in delivering the lead judgement observed that the basis of a common intention constructive trust “is a detrimental reliance by the claimant of the trust upon an actual or inferred common intention as to the claimant’s beneficial interest in property” where it would be an equitable fraud on the claimant to deny its interest in the property.

He also noted that a failed joint endeavour constructive trust is a remedial constructive trust – where property has been purchased and financial contributions have been made but the venture has failed – such that “equity will not permit a party to assert or retain the benefit of the relevant property to the extent it ought be unconscionable for him so to do”.

Because the arrangement did not provide for an immediate beneficial interest being conferred upon the occupants – as opposed to them being able to later acquire it later if they raised sufficient funds to pay out the mortgage – Justice Davis concluded that the trial judge erred in finding that a common intention constructive trust had been made out.

On the other hand – because Karen and Christopher only acquired title to the property as a result of Andrew and Jodie’s contributions of the deposit, monthly mortgage payments and outgoings.

The mutual venture having failed, a failed joint-venture constructive trust arose over the sale proceeds.

He also found the primary judge had erred by awarding the whole of the surplus proceeds to the occupants because in so doing, she ignored the contributions from Karen and Christopher.

“The finding that the respondents made no significant positive contribution was erroneous,” Justice Davis ruled. “They paid 90 per cent of the purchase price by borrowing the money and being personally liable to the bank for almost seven years”.

Reasoning that all contributions – both monetary or otherwise – to the acquisition and maintenance had to be taken into account, he assessed the trust interest of Karen and Christopher at 20 percent.

By Justice Davis’ analysis the sum of $38k was subject to the same failed joint endeavour constructive trust as the $64k. By application of the 80/20 division, Andrew and Jodi should receive $81k and Karen and Christopher, $20k.

Given that Karen and Christopher had drawn the $38k, they must pay $18k of that sum over and above their entitlement, with interest, to Andrew and Jodi.

King & Anor v Fister & Anor [2022] QCA 47 Sofronoff P and Mazza AJA and Davis J, 5 April 2022


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