LAWS2705 Trusts and Equity II, Semester 2 2022

In March 2005, Jason is approached by his sister Chrishell. Chrishell wants to purchase a house to live in, but is in a difficult financial situation, and would be unable to obtain a loan. Chrishell instead suggests that Jason purchase a house using a loan in his name, and be registered as owner, but that Chrishell will live in the property and make payments to Jason each fortnight 'as "rent" to help with the loan repayments'. Jason agrees to this, saying 'I know it's important to both of us that family supports family'. Jason and Chrishell together look for a suitable house, and find one at Hollywood Hills, in Brisbane's northern suburbs. The purchase price is $300,000. Jason obtains a loan from ANZ and uses it to purchase the house, which is registered in Jason's name. Other incidental costs (stamp duty, registration fees, legal fees) totalling $15,000 are also paid by Jason using his own funds.

Chrishell then moves into the Hollywood Hills house with her two children. Several months later, she receives $100,000 from family law proceedings with her ex-husband, which she gives to Jason to put towards repayment of the ANZ loan. While living in the house (between March 2005 and the present), Chrishell, as promised, makes fortnightly payments to Jason of an amount similar to the loan repayments due to ANZ ($500 per fortnight). On some occasions the payments to Jason are less than the amount due. Jason makes up any shortfall (around $100 per month on average) using his own funds. Chrishell also pays for rates and insurance, as well as water and electricity for the property (each of which is around $100 per month). Chrishell does all the cooking, cleaning, and childcare for herself and her children. She also purchases around $5,000 worth of furniture, and pays for gardening and landscaping work at a cost of $10,000. Jason is a handy carpenter, and in his spare time undertakes many repairs and improvements to the house, to the value of $20,000. The value of the Hollywood Hills house is now $1 million.

Jason has also been married to Mary since 2005. Jason owns a house (registered in his sole name) at Bel Air in Brisbane, which is currently used as an investment property. The house was purchased in 2015. The deposit and incidental costs were paid by drawing down on an existing loan (from Westpac) in the joint names of Jason and Mary, secured by a mortgage of an investment property at Beverly Hills, Brisbane, that they own as joint tenants (purchased in 2009). The remainder of the purchase price was paid using a second loan (from Suncorp) in the joint names of Jason and Mary, secured by a mortgage of the Bel Air property. Jason and Mary moved into the Bel Air house immediately after the purchase.

In 2018, Jason and Mary go on a $25,000 round-the-world holiday, which is paid for by drawing down on the Suncorp loan. In 2019, Mary receives a legacy of $500,000 after the death of a family member, the entirety of which she puts towards repayment of the Suncorp loan. In 2022, Jason wins $2 million on the lotto, which he uses to purchase a luxurious house at West Hollywood, Brisbane, which is registered in Mary's name. Jason and Mary move into the West Hollywood house immediately. The Bel Air house is then used as an investment property. The rent derived from the property is put towards repayment of the Suncorp loan.

Jason becomes bankrupt. The trustee in bankruptcy argues that Jason is the sole beneficial owner of the Hollywood Hills, Bel Air, and West Hollywood houses, and half beneficial owner of the Beverly Hills house, and proposes to sell them to pay Jason's creditors. Mary challenges this, arguing that she has a beneficial interest in both the Bel Air and West Hollywood properties. Chrishell also argues that she has a beneficial interest in the Hollywood Hills property. Advise Mary and Chrishell.