When family decides to develop property together

In the ever-evolving landscape of Australian property law, few cases illustrate the practical application of equitable principles in co-ownership disputes better than Parkas v Shankar [2025] NSWSC 1140. This New South Wales Supreme Court decision explores a long-standing family property dispute that unravels complex issues around co-ownership, contributions, personal effort vs financial input, and the equitable distribution of net sale proceeds.

In a world where joint property ownership among family members or friends is common, understanding the key takeaways from this judgment could help you avoid legal pitfalls and protect your interests.

The Background: When Good Intentions Go Awry

In 2010, two families - Mrs. Sneh Lalas Parkas and her sister, Mrs. Kiran Shankar (alongside her husband, Mr. Nand Kishore Shankar) - entered into a joint property investment. They purchased vacant land in Blacktown, NSW, with the vision of constructing a duplex to be rented out.

The ownership structure was clear:

• 50% interest held by Mrs. Parkas
• 50% interest jointly held by Mr. and Mrs. Shankar

The purchase was funded via:

• $24,500 from each party
• $196,000 mortgage from BOQ, with all three as joint borrowers

Development was undertaken collaboratively, at least at the start. However, years later, disputes emerged over expenditure, rental income, and unapproved transactions, leading Mrs. Parkas to file proceedings under Section 66G of the Conveyancing Act 1919 (NSW) to appoint trustees for sale and account for all contributions and disbursements.

Legal Questions Before the Court

The Court was asked to resolve several interwoven issues:

1. How should net sale proceeds be divided?
2. Can personal time and effort in construction be financially compensated?
3. How should unaccounted rental income and unauthorised payments be treated?
4. What costs orders are appropriate given the conduct of the parties?

These questions required deep engagement with equitable accounting principles, not just contractual or partnership obligations.

Key Legal Principles and Takeaways

1. Equitable Contribution vs Legal Ownership

The starting point in co-ownership disputes is legal title. Since both parties owned the property equally, they were entitled to equal shares unless equity dictated otherwise.

Equity allows for adjustments when one party contributes more (e.g. mortgage payments, construction costs), provided those contributions enhance the property's value. The Court emphasized that contribution must be monetary, not just effort or labour.

“The personal time and effort of a co-owner is not expenditure by him" (Richmond J)

Thus, Mr. Shankar’s unpaid labour and management services were not reimbursable, despite his claim of over 750 hours of work.

2. Only Expenditure That Increases Value Counts

The Court reiterated the principle from Maio v Sacco: only financial outlays that add capital value to the land qualify for contribution.

Mr. and Mrs. Shankar were credited for documented payments made directly to Lotus Constructions amounting to $94,642.31. But their other claims of over $96,000 in additional costs were not allowed, primarily due to:

• Poor record-keeping
• Lack of evidence that expenses added value
• Prior reimbursements already received

This sends a strong message: co-owners must retain clear documentation to support claims for contribution during an equitable accounting process.

3. Unilateral Withdrawals = Breach of Trust

The turning point in the dispute came when Mr. Shankar’s company, ETP Projects, withdrew $15,004 from the shared bank account without Mrs. Parkas' knowledge or consent. This breached the trust upon which joint ownership relies.

The Court ruled this payment invalid, directing that 50% of the amount be returned to Mrs. Parkas. Similar rulings followed for other unsubstantiated withdrawals made into the Shankars’ private account.

In practical terms, this means that joint account funds must be used transparently and in mutual agreement.

4. Rental Income Must Be Equitably Shared

From 2013, the duplex was leased to tenants, with net rental income distributed 50/50 for years until the relationship soured in 2021. Post-2022, the Shankars' company took over management, but Mrs Parkas received no rental share.

The Court awarded her 50% of all rental income received, deducting legitimate expenses and mortgage repayments. This reinforced the principle that equity demands ongoing income be shared in proportion to ownership, regardless of who manages the property.

5. Costs and the “Usual Order” in s 66G Applications

Under s 66G proceedings, costs are usually paid from sale proceeds, split according to each party’s interest. The Court declined to penalize Mr. Shankar despite some questionable conduct because:

• There was no clear evidence of unreasonable legal conduct
• Both sides had partial success in their claims

Thus, each party bore their own legal costs, aside from Mr. Shankar’s earlier penalty regarding obstruction of the sale.

Practical Lessons for Property Co-Owners

Whether you’re planning a property investment with family, friends, or business partners, this case offers powerful guidance:

🔹 Document everything - From contributions to invoices and agreements.

🔹 Agree on roles - Define who manages finances, construction, rentals, etc.

🔹 Use contracts, not just trust - Verbal family agreements may fall apart years later.

🔹 Keep bank accounts transparent - Shared property should use shared financial tools.

🔹 Labour ≠ equity - Your sweat equity is not legally equivalent to financial investment unless explicitly agreed.

Conclusion: Equity Balances the Scales

Parkas v Shankar is more than a family feud.  It’s a roadmap for how the law intervenes when co-owners clash. The Court’s meticulous approach demonstrates how equity aims to achieve fairness, not just strict legality, particularly when relationships deteriorate.