Common intention and family property disputes

When informal family arrangements intersect with substantial financial contributions and property ownership, disputes can often arise following the unexpected death of a family member. The Khoury family case, recently dealt with by the Supreme Court of New South Wales, provides a detailed analysis of such a situation where two brothers informally agreed to build a duplex, only for ownership and trust issues to arise years later.

This case dealt with common intention construction trusts and the importance of documenting contributions and agreements, even among family.

Khoury v Khoury [2025] NSWSC 760

Khoury v Khoury (No 2) [2025] NSWSC 1193

Jason and Tony Khoury were brothers and long-time business partners. Over the years, they worked together in the family fruit shop business and eventually co-owned a new venture through Fresh N Full Pty Ltd.

In June 2002, Tony purchased a property in Holt Road, Taren Point, for $457,000. This property was solely in Tony’s name and was initially rented out. In 2013, Jason and Tony entered into an informal arrangement to construct duplex homes on the property – each intending to reside in one of the dwellings upon completion.

Construction was financed through a joint loan from Westpac of $730,000. While the property title remained in Tony’s name, both brothers contributed to the project. Jason was largely responsible for the construction loan repayments, and Tony contributed the land and an agreed $100,000 of the construction loan. On completion, Jason and his family moved into 162 Holt Road, while Tony and his family took residence in 162A Holt Road.

The relationship between the two families deteriorated from 2016. When Tony died intestate in December 2023, his wife, Karisa, became the administrator of his estate. In 2024, she transmitted title to both properties to herself as legal personal representative. Jason then commenced proceedings, seeking a declaration that 162 Holt Road was held on trust for him.

Key Legal Issues

The primary question for the Court was whether 162 Holt Road was held on trust for Jason based on a common intention constructive trust arising from the agreement between the brothers.

The specific issues considered by Ball JA included:

• Whether there was a mutual agreement or common intention between Tony and Jason for Jason to acquire ownership of 162 Holt Road;

• Whether Jason had acted to his detriment in reliance on that agreement;

• The impact of informal financial arrangements and absence of written agreement;

• Whether liabilities such as capital gains tax and stamp duty should be shared;

• What equitable remedies and final orders were appropriate, including liens and indemnities?

Judicial Findings

Establishment of the Constructive Trust

The Court found that a common intention constructive trust had arisen on 16 June 2013 – being the date on which the brothers jointly accepted the construction loan offer and entered into the building contract. By this time, the arrangement was sufficiently concrete, and both parties had committed financially to the project.

Ball JA noted:

“It appears to be common ground that Tony and Jason agreed that Jason should have a half interest in the Property corresponding to 162 Holt Road... the terms on which Tony was to hold an interest in the Property for Jason had been agreed.”

Despite the lack of written documentation, the Court accepted Jason’s account of their arrangement. His oral evidence was supported by corroborative testimony from a finance broker and the parties’ longstanding relationship.

Detrimental Reliance

Karisa argued that Jason had not suffered any detriment, as he had lived rent-free at 162 Holt Road for years. However, the Court rejected this submission, clarifying that detriment in equity is not measured by net financial gain or loss but by whether the claimant acted to their detriment on the basis of the common intention.

In applying Grant v Edwards [1986] Ch 638, Ball JA held:

“Detriment in this context is not to be assessed by undertaking some counterfactual comparison... Rather, the question is whether the party claiming an equitable interest has taken some step – most often the expenditure of money or the provision of some service – on the basis of the agreement or common intention.”

Jason’s liability under the construction loan and his contributions to the development satisfied the requirement for detriment.

Authorities Relied Upon

Ball JA relied on several key decisions to support the establishment of the constructive trust:

• Galati v Deans [2023] NSWCA 13 – clarified the test for common intention constructive trusts.

• Grant v Edwards [1986] Ch 638 – detailed the concept of detriment and reliance in trust and estoppel claims.

• Green v Green (1989) 17 NSWLR 343 – dealt with equitable principles in family property arrangements.

• Marchese v Marchese [2021] WASC 385 – referred to when considering liens in trust cases.

• Secretary, Department of Social Services v Hulett [2025] FCA 23 – affirmed that equity focuses on the conduct and reliance of parties, not strict formalities.

Final Orders and Declaration of Trust

In the second hearing, the Court formalised the following:

• Declared that the defendant holds 162 Holt Road on trust for Jason from 16 June 2013.

• Allocated liability under the construction loan: 86.3% to Jason, 13.7% to the estate.

• Declared mutual indemnities and imposed equitable liens on each party’s property interest to secure repayment obligations.

• Ordered that neither party may increase the joint loan principal.

• Declared that capital gains tax and stamp duty liabilities arising from the creation of the trust and any future sale of 162A Holt Road must be shared equally.

The Court refrained from ordering an immediate transfer of 162 Holt Road due to the complexities of existing mortgages and third-party rights (notably Westpac’s interest). Liberty to apply was granted should the parties reach further agreements or require assistance implementing the orders.

Costs Decision

Although Jason was ultimately successful in establishing the trust, he did not succeed on all aspects of the relief sought. For example, he had proposed immediate transfer of title without addressing how that would be achieved in light of Westpac’s mortgage.

Karisa, while unsuccessful in denying Jason’s beneficial interest, succeeded on secondary matters, including:

• The need to indemnify each party for their share of the joint loan;

• Confirmation that stamp duty and capital gains tax would be shared;

• Avoidance of an order for immediate transfer of title.

As such, the Court ordered that Karisa pay 50% of Jason’s legal costs, striking a balance between Jason’s substantive success and Karisa’s success on ancillary points.

Key Takeaways for Co-ownership and Property Law

This decision underscores several important lessons for co-owners and family members undertaking joint property developments:

• Document arrangements early – Even among family, clear written agreements can prevent disputes.

• Constructive trusts do not require formal documentation – The Court will infer a trust from conduct, intention and contribution.

• Detriment includes financial liabilities and contributions – Not just outright losses, but any action taken based on mutual intention.

• Tax and duty consequences matter – Costs such as capital gains tax and stamp duty can be considered part of joint contributions in equity.

• Equity will impose liens to protect contributions – Where a party carries more than their share of financial burden, equitable liens may be imposed to secure repayment.

Conclusion

Khoury v Khoury is a significant example of how the Supreme Court of NSW addresses informal arrangements in family property developments through the lens of equitable principles. It is a cautionary tale for anyone entering into joint property projects, particularly where title, loans, and contributions are not clearly formalised.

As this case shows, relying solely on trust and familial goodwill can lead to complex legal proceedings when relationships break down or a party passes away. Clear documentation, proper structuring of contributions, and timely advice are essential in such situations.