Importance of Establishing Intention for a Trust to Exist

In Sweeney v He [2022] NSWSC 655, the NSW Supreme Court considered a dispute regarding whether there was an intention for the property in question to be held on constructive trust.

Kevin was the registered proprietor and mortgagor of a property in Bomaderry, NSW. Ying was Kevin’s mother, who resided in the property with her partner, Michael. Throughout their occupancy, Ying made regular fortnightly payments to Kevin. Once their relationship broke down in May 2017, Ying vacated the property, but Michael continued to reside there. After orders were made to enforce his removal from the property, Michael then commenced proceedings and claimed the property was held on trust by Kevin for himself and Ying in equal half shares in accordance with the oral agreement that took place at the time of purchase. Michael also claimed there was no tenancy agreement and the payments made to Kevin constituted mortgage repayments, not rent.

The issue for the Court to consider was whether there was an agreement at the time of purchase for the property to be held on trust for Michael and Ying. The subsequent issue was whether the regular payments made by Ying to Kevin were for the purpose of rent or repayment of the mortgage.?

The Court was not satisfied that an agreement existed that the property would be held on trust for Michael and Ying. Given the agreement was never recorded in writing, despite qualified solicitors allegedly being aware of the arrangement, the Court found that it was so unlikely that there was such an arrangement. All costs associated with the purchase were borne by Kevin, including the deposit, stamp duty and solicitors’ fees. Although Michael paid for some utilities and made some alterations, he did not contribute to the council rates or home insurance. Thus, the Court found the property was always intended to belong to Kevin and it was purchased as an investment, so Kevin held the legal and beneficial interest absolutely. The Court also found that Ying’s payments were for the purpose of rent, as it demonstrates a common situation whereby an owner of property applies rental payments received by tenants to meet their mortgage obligations.

This case reiterates the requirements for establishing a trust, as it emphasises there must be evidence of intention for the trust to exist.??