A constructive trust is an important equitable remedy for preventing unfair outcomes where the strict legal ownership of property no longer reflects the justice of the parties’ relationship. While registered title under the Real Property Act 1900 generally provides indefeasible ownership, courts retain the ability to recognise equitable interests where it would be unconscionable for a legal owner to insist upon their strict legal rights.
In the context of family relationships, domestic partnerships and other joint ventures, Australian courts have developed the doctrine of the failed joint endeavour constructive trust The principle recognises that people frequently contribute money, labour or other resources towards a shared objective without documenting every possible outcome When that shared enterprise later collapses in circumstances not contemplated by the parties, equity may intervene to prevent one party receiving an unintended windfall at the expense of the other.
Case Law
Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78 and Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59 established that a constructive trust arises by operation of law where parties contribute to a joint endeavour that subsequently fails, and where allowing one party to retain the resulting benefit would be unconscionable. Importantly, the remedy does not depend upon proving an express agreement or a common intention to create a trust. Instead, it reflects equity’s concern with preventing unjust retention of benefits after the foundation of the parties’ relationship or enterprise has disappeared.
Makaritis v Makaritis (No 2) [2022] NSWSC 1690, affirmed on appeal in Hellenic Property Holdings Pty Ltd v Makaritis [2025] NSWCA 13, Parker J emphasised that a joint endeavour requires some understanding between parties. However, this understanding can evolve and doesn’t need the precision of a contract. The failed joint endeavour doctrine addresses situations not covered by contracts, such as unexpected gains from an endeavour’s failure. A principle supported in Woods v McKinlay (No 2) [2021] NSWSC 1510 and Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460.
In Joudo v Joudo (2024) 115 NSWLR 607; [2024] NSWCA 258, the Court rejected the idea that a constructive trust can only be imposed when parties haven’t considered property outcomes if the joint endeavour’s basis is removed, as this would limit the flexibility of equitable remedies The doctrine functions restitutively, with equity making retrospective adjustments to ensure fairness when unforeseen contingencies arise, as seen in Woods v McKinlay (No 2) [2021] NSWSC 1510.
Courts assess unconscionability by examining the entirety of the parties’ conduct, both before and after the acquisition of property. Contributions to mortgage repayments, maintenance, improvements, and financial support, as well as the evolving nature of the parties’ relationship, may all be relevant. The inquiry is undertaken at the time of the hearing, recognising that beneficial interests may change over the course of a relationship.
Background
Cunningham by her Tutor Cunningham v Peterson [2026] NSWSC 774 arose from a family dispute between an elderly mother and her daughter over the ownership of a jointly purchased home (the property) at Gillieston Heights, New South Wales. The property was acquired in October 2024 registered as tenants in common in equal shares.
June Margaret Cunningham, by her tutor, Dean Robert Cunningham (the Plaintiff), aged 89 and legally blind, commenced proceedings through her son, who acted as her tutor and attorney under an enduring power of attorney. Although Kelly Therese Peterson (the Defendant) was served with the proceedings, she took no active part in the litigation.
Real Property
The evidence showed that the parties agreed to purchase the property together as their shared home, with the property registered in the parties’ names as tenants in common in equal shares; the parties understood that the defendant would reimburse the Plaintiff for the Plaintiff’s share of the purchase price due to insufficient funds. Richmond J accepted that the plaintiff’s financial assistance was never intended to be a gift.
The Plaintiff sold her previous home and used the proceeds to cover almost the entire cost of the acquisition. A bridging loan secured against the plaintiff’s former property and a joint mortgage over the new property enabled settlement to proceed before the sale of the earlier home. Once the sale was completed, almost $786,000 of the plaintiff’s sale proceeds were used to repay the bridging loan, and further sale proceeds were paid into the joint mortgage account. By contrast, the defendant’s total contributions to the mortgage account amounted to less than $12,000.
Refundable Accommodation Deposit
Mortgage repayments were to be paid from a joint Westpac account established by the parties. However, after suffering a fall in March 2025, the retirement village refundable accommodation deposit (RAD) required payment of almost $700,000; it became necessary to sell the jointly owned property, and the relationship between the plaintiff and the defendant deteriorated. The plaintiff did not return to the Property after 1 March 2025, and from that time until around March or April 2026 the defendant remained in sole occupation and did not pay any rent or occupation fee to the Plaintiff.
On 7 March 2025, $74,000 was withdrawn from the Westpac Joint Account without the Plaintiff’s knowledge or approval, reducing the balance to $1,618.83. No subsequent deposits have been made to the account, and since 11 March 2026 it has had a nil balance. Richmond J inferred that, as the only other signatory to the account at that time, the defendant made this withdrawal.
Power of Attorney
On 12 March 2025, the Plaintiff signed a revocation of the Power of Attorney and appointed her son as her attorney (and his wife, as substitute attorney) under a new enduring power of attorney signed that day. The Plaintiff served notice of the revocation of the Power of Attorney on the defendant on 24 March 2025. The letters sent by the Plaintiff’s solicitor to the defendant in April and June 2025 notified the defendant that the Plaintiff’s solicitor must sell the property to pay the RAD, and sought the defendant’s co-operation in the sale process.
66G of the Conveyancing Act 1919 (NSW)
Section 66G of the Conveyancing Act 1919 (NSW) allows courts to resolve co-ownership disputes when owners can’t agree on the sale or management of real property. The court can appoint trustees, who hold the property interest to sell it. Orders often request vacant possession for sale. Trustees then sell the property and distribute proceeds per court orders.
The Plaintiff’s solicitor informed the defendant that, absent a reply, the Plaintiff would commence proceedings for an order under s 66G of the Conveyancing Act 1919 (NSW) for the appointment of trustees for sale. No substantive response was received from the defendant to that correspondence.
Assessing Unconscionability in Failed Joint Endeavour Cases
A central question in a failed joint endeavour constructive trust is whether it would be unconscionable for the legal owner to insist on their strict legal title Courts emphasise that this assessment is not based on a subjective sense of fairness, but on established equitable principles developed through case law.
The Proceedings
The Plaintiff commenced proceedings in December 2025 seeking both the sale of the jointly owned Property and equitable relief arising from the defendant’s conduct. Seeking declarations that the defendant held a registered half interest in the Property on trust for the Plaintiff, together with compensation reflecting the Plaintiff’s substantially greater financial contributions to the purchase of the property.
The proceedings also alleged that the defendant had breached her fiduciary duties while acting as the Plaintiff’s attorney under an enduring power of attorney. In particular, the Plaintiff claimed that the defendant had wrongfully withdrawn $74,000 from the parties’ joint mortgage account without authority and was required to repay those funds or account for them as trustee.
In March 2026, the Supreme Court Appointed independent trustees for sale under s 66G of the Conveyancing Act 1919 (NSW). The trustees were authorised to take possession of the property, arrange its sale, pay all secured debts and sale expenses, and hold thedefendant’ss share of the net proceeds pending determination of the parties’ competing equitable claims.
Despite being personally served with the proceedings, repeatedly notified of court dates, and provided with copies of theCourt’ss orders, the defendant neither filed a defence nor appeared at any stage of the litigation.
The Court was satisfied that she had been given every opportunity to participate and therefore proceeded with the hearing in her absence under the Uniform Civil Procedure Rules 2005 (NSW).
Although the defendant did not appear, the Plaintiff was still required to prove her case on the evidence. The Court emphasised that default judgment does not relieve a plaintiff of the burden of establishing entitlement to the relief sought, particularly when seeking declarations affecting property rights.
The Matter
In Cunningham by her tutor Cunningham v Peterson [2026] NSWSC 774, the Plaintiff relied primarily on the doctrine of a failed joint endeavour constructive trust, arguing that her overwhelming financial contributions to Refundable Accommodation Depositrty’s acquisition made it unconscionable for the defendant to retain a one-half beneficial interes . The remaining substantive issue concerned recovery of the unauthorised $74,000 withdrawn from the joint account.
Importantly, unconscionability is not restricted to the circumstances existing when the parties acquired the propert . Later events—such as changes in theparties’’ relationship, financial contributions, or unforeseen developments—may also make it inequitable for one party to retain the full benefit of legal ownership.
The New South Wales Court of Appeal in McKinlay v Woods [2024] NSWCA 122 confirmed that courts must examine the parties’ conduct as a whole, including mortgage repayments, payment of outgoings, improvements to the property, and other contributions made throughout the relationship. The relevant question is whether the assertion of legal title is unconscionable at the time of the hearing, not simply when the property was purchased.
The courts have also recognised that a joint endeavour does not require the certainty or precision of a contractual agreement. As explained in Makaritis v Makaritis (No 2) [2022] NSWSC 1690 it is sufficient that the parties shared a common understanding or purpose, even if that understanding developed over time. The doctrine exists precisely because parties often fail to anticipate what should happen if their shared enterprise later breaks down.
Similarly, the Court of Appeal in Joudo v Joudo (2024) 115 NSWLR 607; [2024] NSWCA 258 rejected the suggestion that a constructive trust can only arise where the parties never considered what would happen if the joint endeavour failed. Imposing such a limitation would undermine the flexibility that is fundamental to equitable relief.
Ultimately, the failed joint endeavour doctrine is restitutive rather than punitive. When an unforeseen event causes the common enterprise to collapse, equity retrospectively adjusts the parties’ rights to prevent one party from receiving an unintended windfall and to achieve a result that fairly reflects their respective contributions.
Failed Joint Endeavour Constructive Trust: Court Awards Entire Property Interest to Plaintiff
The Court held that thPlaintiffff had established all three elements necessary to obtain a constructive trust arising from a failed joint endeavour.
Contributions to a joint endeavour
The first requirement was satisfied because the parties embarked on a joint enterprise to purchase and live together in the Gillieston Heights property, financed by a bridging loan and a joint mortgage. The Plaintiff contributed almost all of the funds required to acquire the property, including the deposit, repayment of the bridging loan from the sale of her previous home, and substantial payments towards the joint mortgage. In contrast, the defendant’s financial contribution was minimal. After accounting for the reduction of the mortgage principal, the Plaintiff contributed approximately $790,500 towards acquiring the beneficial interest in the property, while the defendant contributed only about $1,640. There were no significant non-financial contributions requiring adjustment.
Failure of the joint endeavour
The joint endeavour failed because the Plaintiff, due to advanced age and declining health, was forced to move into residential aged care and required the proceeds of sale of the property to fund her accommodation and ongoing care. The Court found that the joint endeavour failure occurred through circumstances beyond the Plaintiff’s control and without any fault on her part.
Unconscionability
The Court concluded that it would be unconscionable for the defendant to retain her registered half interest in the property. The disparity in financial contributions, along with the benefit of the defendant living rent-free in the property, meant that allowing her to retain a 50% ownership interest would result in an unjust windfall.
Appropriate equitable relief
While constructive trust cases commonly require repayment of each party’s contributions before dividing any remaining surplus equally, the Court found that this case justified a different outcome. The likely sale proceeds would not even cover the plaintiff’s contributions after repayment of the mortgage and sale expenses. In addition, the defendant had effectively withdrawn the value of her own contributions by removing $74,000 from the parties’ joint account. Accordingly, the Court declared that the defendant held her entire registered half-interest on trust for the Plaintiff, thereby entitling the Plaintiff to receive all net proceeds of sale.
Unauthorised withdrawal from the joint account
The Court also found that the defendant had improperly withdrawn $74,000 from the parties’ joint mortgage account without the plaintiff’s authority. Although the defendant was authorised to operate the account as a signatory, her authority was limited to making payments associated with the mortgage or to recovering her own contribution. Because the defendant also acted under the plaintiff’s enduring power of attorney, she owed fiduciary obligations and could not appropriate funds that had largely been contributed by the Plaintiff.
The Court held that the withdrawn funds were primarily beneficially owned by the Plaintiff. The presumption that a parent intends to benefit an adult child was displaced because the funds had been deposited solely to service the mortgage, not as a gift . After crediting the defendant with her own deposits, she was ordered to repay $62,170.52, together with interest.
Orders
The Court made the following orders:
- declared that the defendant holds her half interest in the property on constructive trust for the Plaintiff;
- ordered the defendant to repay $62,170.52 plus statutory interest;
- directed that the entire net proceeds of sale of the property be paid to the Plaintiff;
- ordered the defendant to pay the plaintiff’s legal costs; and
- granted liberty to apply for any further consequential orders necessary to implement the judgment.
Cunningham by her Tutor Cunningham v Peterson [2026] NSWSC 774 demonstrates the flexibility of equitable remedies in matters involving failed joint endeavours. Where one party has overwhelmingly funded the acquisition of property and the common purpose later fails through no fault of that party, equity intervenes to prevent an unconscionable windfall by adjusting beneficial ownership to reflect the parties’ true contributions.
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