Is it possible to save
family home from the Trustee in Bankruptcy?
Can the Trustee in Bankruptcy claim an interest in the
family home because the bankrupt is living there, even if
the bankrupt is not registered on the title as an owner?
The short answer is yes: if the Trustee can prove a
common intention constructive trust.
But Trustees do not always succeed: In Silvia (Trustee) v
Williams  FCAFC 194 (14 November 2018) the Federal
Court of Australia – Full Court (Perram, Barker and
Derrington JJ, jointly) held, on appeal, that the Trial
Judge was correct to dismiss the Trustee’s claim that Mr
Williams (as sole owner) held 50% of his interest in the
family home on trust for Mrs Williams’ bankrupt estate.
This is an analysis of the decision.
The Facts: Why the family
home was purchased in Mr William’s sole name
On 24 January 2012, Mr & Mrs Williams settled the sale of
their home in Blake Street, Dover Heights, which had been
jointly owned. The sale price was $3.35 million. The net
proceeds were $1.56 million.
Mrs Williams had extensively renovated the home before it
was sold, but the work was defective. Shortly after the
settlement of the sale, a claim was made by the purchasers
for repairs. In subsequent legal proceedings, Mrs Williams
was ordered to pay the purchasers more than $1 million in
damages (Pisano v Dandris  NSWSC 1070). Not
long afterwards, Mrs Williams presented a debtor’s petition
and was made bankrupt.
Mr Williams was also sued by the purchasers, but on appeal,
he was found to be not liable (Williams v Pisano
 NSWCA 177).
On 4 May 2012, Mr Williams exchanged contracts in his name
alone for the purchase of the property in Military Road,
Dover Heights (not far from Bondi Beach), the subject of the
current proceedings. This was long before Mrs Williams’
bankruptcy on 7 October 2014.
The purchase price was $2.09 million, which was funded by a
deposit paid of $209,000 and an equity contribution of
$500,000 (both paid by Mr Williams), and a bank loan for the
The Military Road property was purchased as their
matrimonial home. They live there with their daughter.
The Law: The common intention
A court of equity will intervene to declare the existence of
a proprietary interest in a family home on the part of a
spouse or de facto partner … when … it would be
unconscionable on the part of the person against whom the
claim is brought to refuse to recognise the existence of the
equitable interest: Baumgartner v Baumgartner 
HCA 59. [quoted at paragraph 13]
One common example is where a spouse or partner makes a
financial contribution towards the cost of acquiring,
improving or maintaining a property held in the other’s
name. In such cases, it is accepted that the party asserting
the trust must prove, first, that the spouses held a
common intention that they would own the property together;
and secondly, that the party asserting the trust
acted upon that common intention by making contributions
[which] may include not only the costs of acquisition, but
also the costs of any improvements or costs relating to
maintenance. [paragraph 14]
The reasons why the Trustee’s
The Trustee did not fully articulate the common intention
trust case until in his oral final submissions. The trust
was not pleaded, and the Trustee did not seek leave to amend
the pleadings. The Court concluded that:
[Mr Williams] was genuinely prejudiced and the common
intention constructive trust claim should not have been
entertained. [paragraph 54]
This is sufficient to dismiss the appeal. For the
reasons which follow, however, even though the trust
case should not have been entertained, the trial judge
was correct in concluding that the claim should fail.
The Court reviewed the deposit paid of $209,000. The deposit
was drawn by cheque from one of Mr Williams’ accounts. The
day after the cheque cleared, Mrs Williams transferred
$209,000 from one of her accounts into that account. On its
face that transfer of $209,000 appeared to be an indirect
contribution referrable to the deposit.
However, the Trustee failed to prove the first requirement
that the contribution was made under a ‘common intention’
that Mr & Mrs Williams would own the property together
- The Trustee made no real attempt … to trace any of
the proceeds of sale of the Blake Street property into
the money used … to acquire the Military Road property;
- Mrs Williams had not been examined on what she
intended by that payment, and the evidence did not
establish the purpose of that payment (was it a gift, a
loan, an equity investment, an adjustment?);
- Mr Williams gave evidence that the decision to
purchase in his name alone was for tax reasons, because
if the possibility they could reside overseas for work
eventuated, then he could rent out the home and take
advantage of negative gearing in relation to the rent
For these reasons, the Court rejected the Trustee’s argument
that the payment led to an ‘inexorable’ inference that there
was a ‘common intention’ that Mrs Williams would have a
beneficial interest in the Military Road property.
Had a ‘common intention’ been proved, the Court would have
concluded that payment was sufficient detriment /
contribution for the purposes of establishing a trust.
- The Trustee bears the onus of proof of establishing
the existence of a common intention constructive trust.
The Trustee must provide evidence of a contribution and
the purpose for which it was made.
In this case, the Trustee simply asserted there was a
trust in oral submissions, without providing proof. The
Trustee failed to even plead the existence of a trust,
let alone adduce evidence to prove it
- Mr & Mrs Williams took the sensible precaution of
purchasing their new home in the name of Mr Williams
alone because he was less exposed to the threatened
litigation than Mrs Williams.
Not that he could admit that was the reason. His
explanation that the house was purchased in his name
alone for tax purposes, in the event it was rented out,
was a good reason and helped negate the ‘common
- Most conveyancing transactions in which a new family
home is purchased to replace an old family home, are
‘back to back’. That is, the settlement of the sale take
place simultaneously with the settlement of the
purchase, and the proceeds of sale are applied to the
purchase price directly.
This transaction was different because of the time gap
between the sale and the purchase. The purchase contract
for the Military Road home was not entered into until
four months after the settlement of the sale of the
Blake Street home.
The Trustee admitted that during this period “some of
the sale proceeds may have been intermingled with the
other household funds”. The Trustee failed to provide
forensic evidence to ‘trace’ the sale proceeds to the
deposit (or other money) paid for the Military Road home
And so the Williams’ family home was saved from the Trustee