Constructive Trust/Family Provision claims

Clayton v Clayton [2023] NSWSC 399

Justice Meek dismissed a plaintiff’s family provision claim and also dismissed a defendant’s cross-claim seeking a declaration that the property in question was held on trust for the Defendant.

The Deceased in this matter made several different wills throughout her lifetime. The Deceased had no spouse and two children. In her final will before she passed away, the Deceased gave the entirety of her estate to her daughter (Defendant) on trust to be sold, with the exception of 10% of her life insurance policy, which she left for her son (Plaintiff). This meant that the Defendant was set to receive approximately $860,000 and the Plaintiff was to receive approximately $36,000.

Initially, the Plaintiff made a family provision claim, as he was eligible under the Succession Act 2006, due to him being the son of the Deceased. The Plaintiff filed a cross-claim against this, submitting that the house in Murwillumbah (a property that comprised most of the estate) was held under a constructive trust for her. If successful, this property would be removed from the asset pool of the Deceased’s estate for the purposes of the Plaintiff’s family provision claim. This claim was also made in recognition of the fact that the Deceased left the Defendant the property in her final will.

Constructive Trust

The basis of the Defendant’s claim for a constructive trust to be declared is that she lived with the Deceased for 20 years prior to her death, she had contributed to the payments to the property and the pair of them managed their finances as though they were shared. The Defendant substantiated this claim by providing that the Deceased had free access to all of the Defendant’s bank accounts and that their finances for the past 20 years had been comingled.[1]

The Court analysed whether a constructive trust existed over the Murwillumbah property. A constructive trust is a unique category of trust imposed by a Court. A Court tends to decide whether a constructive trust exists over a property in instances where it would be unconscionable for the property to remain in the name of its legal owner, resulting in trust being declared for the party seeking the declaration.

The Defendant claimed that the Deceased orally represented to the Defendant that if she were to pay all of her income to the Deceased and shared the payment of the expenses, the Deceased would leave all of her real property when she passed away.[2] This included the Defendant paying a sum of $25,000 into the Deceased’s bank account, which the Defendant did.

The Defendant claimed that she relied on this promise to her own detriment. The Court assessed whether this was actually the case, or if she was merely contributing to the upkeep of the property that she lived in for almost 20 years.

The Family Provision Claim

The Plaintiff provided that his claim for Family Provision was based on his financial need. The Plaintiff failed to produce a number of documents and records relating to his financial status.

The Court found that the Plaintiff had lived independently from the Deceased for a period of over 20 years. The Plaintiff’s also had a fund of at least $100,000 available to him as a form of contingency fund to cover unforeseen expenses. The Plaintiff’s submissions of mental health issues were found by the Court to not affect his employment status or his ability to seek further employment.

Conclusion

The Court held that both the claim for the declaration of a constructive trust and that of the family provision claim were to be dismissed. The Court considered the inconsistency in the Plaintiff’s statements[3] and his lack of evidence on critical matters[4] when assessing his financial status and health regarding his need for the family provision claim.

This case highlights the need for both plaintiffs and defendants to provide ample evidence to substantiate their claims. Justice Meek provided that this case was, “in many respects very sad,”[5] as both parties had limited financial recourses and could not reach a resolution prior to commencing litigation.


[1] Clayton v Clayton [2023] NSWSC 399 [356].

[2] Ibid [73].

[3] Ibid [191].

[4] Ibid [192].

[5] Ibid [4].

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