Hypothetical by Manny Wood Published in the Coffs Coast Advocate on 15 February 2020.
Ruth resides in a retirement village.
Ruth’s son, Matthew talks to his mother about his plans to buy a house. Matthew is concerned that he will not be able to obtain sufficient finance to pay the purchase price.
Matthew suggests that Ruth contributes to the purchase on the basis that she can reside with Matthew and his wife, Anne.
Ruth verbally agrees to pay $150,000 towards the purchase price and Matthew and Anne agree that Ruth can reside in a separate living area in the house for her lifetime.
The purchase proceeds and Ruth moves-in with her son and daughter-in-law.
Ruth spends a further $20,000 on renovations to the property.
Three years later, the relationship between the parties breaks-down and Ruth leaves the property.
Ruth now needs the $170,000 back so that she can fund accommodation elsewhere.
Ruth commences action in the Supreme Court of New South Wales.
Matthew says that he has no obligation to repay Ruth any money because the “presumption of advancement” applies and the $170,000 payments were gifts from mother to son.
The Court ultimately rules that Ruth’s payments were made with the intention of obtaining the right of residence and that this intention was inconsistent with the making of a gift.
The Court also rules that the $20,000 worth of renovations constitute a constructive trust whereby Matthew and Anne held the whole of this additional contribution on trust for Ruth’s benefit.
The Court orders that Ruth is entitled to the whole of the $170,000 that she contributed towards the purchase of the property and that her interest is to be protected by way of an equitable charge on the property pending its sale.
Matthew and Anne are also ordered to pay Ruth’s legal costs as well as their own.
If you would like Manny to address a particular legal issue, send your request to manny.wood@ticliblaxland.com.au or call him on (02) 6648 7487.
