Grefeld & Grefeld and Anor 2010 FamCA 504

Resulting and Constructive Trusts

In the case of Grefeld & Grefeld and Anor [2010] FamCA 504, the Trial Judge dealt with the following fact situation.

The husband held a power of attorney for his sister.  He applied money from her bank account to buy a house in the wife’s name. The wife didn’t know the source of the funds and the sister didn’t know about the transaction at all for many years.

Eventually, the Trial Judge determined that the property should be provided to the sister and the wife appealed.

The appeal was unsuccessful.  The Trial Judge had said at paragraphs 122 and 123 of his Reasons, a discussion about the nature of the trust, whether it was resulting or constructive.

A resulting trust was described in this way from pages 660 to 661 in chapter 26 of Equity & Trusts in Australia:

“Where A makes a voluntary payment to B or pays wholly or in part for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions.  It is important to stress that this is only a presumption which presumption is easily rebutted either by the counter presumption of advancement or by direct evidence of A’s intention to make an outright transfer…

(b)        Where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole of the benefit interest….”

Both types of resulting trust are traditionally regarded as examples of trust giving effect to the common intention of the parties. A resulting trust is not imposed by law against the intentions of the trustee (as is constructive trust) but gives affect to his presumed intention.

At chapter 38 of the same text, His Honour records:

“The constructive trust is a means adopted by courts of equity to make persons accountable in certain circumstances where to do so is consistent with equitable principle. In line with equitable principle generally, what drives equitable intervention here is the departure from conscionable dealing, a point captured in the remark that “˜the basis of a constructive trust is that there is some factor in the circumstances which ought to act on the conscience of the person holding the funds or property the subject of the action’ that the notion of good conscience is “˜an infinitely variable concept upon which reasonable men and women and therefore reasonable judges may have widely divergent opinions’ does not, it is said, mean that intervention via a constructive trust is grounded simply on judicial whim of what is fair in any given case. Courts have recognised circumstances that raise the prospect of constructive trustee and outside those circumstances have searched for an equitable principle that aims to subscribe unbridled judicial discretion without unduly impinging flexibility.”

The Trial Judge made clear, still quoting from chapter 38:

“The main distinction between constructive trusts whether institutional or remedial and express and resulting trusts is that the constructive trust is imposed by the court on grounds ostensibly independent of the parties’ actual inferred or presumed intention (except regarding an anomalous line of authority recognising constructive trust pursuant to the common intention of contributors to property).”


The wife argued that she was an innocent recipient of title untainted by knowledge about the sister being the source of the funds.

The Full Court, in their Judgment in the same matter, [2012] FamCAFC 71, discussed the concept of agency. At paragraph 74 they said:

“No formality is needed to establish an agency relationship. If the facts fairly disclose that one party is acting for another by the other’s authority, the agency exists. The creation of agency does not depend upon the principal’s conscious intention to confer authority upon the agent.”

The wife’s argument that she didn’t have any knowledge was dealt with in this way at paragraph 76:

“As against a third party, the law imputes to a principal knowledge gained by his/her agent in the course of, and which is material to, a transaction in which the agent is employed on behalf of the principal, under such circumstances that it is the duty of the agent to communicate it to the principal. The principal is precluded from relying upon personal ignorance of that knowledge.”

The Full Court considered resulting trust, the presumption of advancement, and constructive trust.

At paragraph 97, they said:

“A constructive trust differs from a resulting trust in that it is created by operation of law without reference to the parties’ intentions. The inquiry is not as to the actual or presumed intention of the parties but rather as to whether, according to principles of equity, it would be unconscionable to allow a legal owner of property to enjoy sole beneficial ownership of that property.”

In this case, the wife, “the principal becomes liable to the extent of the benefit received”.