Ruling good as father’s word

Catchwords: Equity, constructive trust, verbal promises of land good, valid, common intention constructive trust, acts to detriment, unconscionable to deny interest in land, Dyke, Rasmussen, good faith

Can a farmer, who owns the farm, be held solely to his word, in verbally promising it before he dies to a farming son, daughter or family member? This requires nothing in writing here signed by the farmer, purely a promise made in the hay shed during a conversation. The answer is yes, in certain situations.

Generally, the rule is that any transfer of land to be effective has to be in writing signed by the registered proprietor. But there is an exception to this rule, that of the constructive trust. Section 23C(2) Conveyancing Act.

A “common intention” constructive trust in property can arise if one party acts to his or her detriment on the faith of a common intention. The detriment suffered is regarded by the Equity Courts as like the consideration of a contract. Equity can intervene when it would be unconscionable to deny the creation of an interest in property.

The Victorian Supreme Court, in the case of Dyke, held in favour of a farming son who had been verbally promised half the main farm, stock and equipment by his father, during a conversation in a hayshed many years before. This was to take place when the father was financially able to affect it, thought to be when the son was about 35 years old. The father later in Court denied this conversation. So it was his word against the son’s word.

However, the son took his dad at his word, took a minimum wage, worked very hard on the farm and dairy for many years, virtually as a farm labourer, and bought other land around the father’s farm. He developed his dad’s farm not his land all to his detriment. He relied on his dad’s word and the expectation of the interest promised to him.

The father and the family later closed ranks on the son. The father changed his mind. However, while the father was still alive, the Court found that there was a common intention proved and declared the son a half owner in the farm, stock and equipment by virtue of the constructive trust. This was all based on that verbal conversation in the hayshed years before, nothing in writing, and the son’s faith in taking his dad at his word.

While this case, and the case of Rasmussen, also a Victorian farming case, have not been considered in any New South Wales decisions, as far as I can see, there is no reason why the principle of the common intention constructive trust could not be applied here over a farm. So dad, you better watch what you say when family take you at your word.

Jonathan de Vere Tyndall

Article updated 7 February 2015, originally published in The Land 18 June 2001

Editors note: The articles published contain comment only and not legal advice, for which you should retain a solicitor. No responsibility is accepted for the accuracy of the contents.