• Property & conveyancing
  • Business legal services
  • Building & construction
  • Legal Counsel Packages
  • Wills and estates

Stay in touch with how the law affects you! Subscribe to our

Subscribe to Forum Law News

* indicates required

Protecting loans you make to your children

Property Law News | October 2016

What is the law governing advances from parents to their children?

In the case of Ambrose (as Trustee of the bankrupt estate of Athanasas) v. Athanasas [2016] SASC 63 the Supreme Court of South Australia explored this question in the context of a bankrupt son who owned a share in a property. The parents were the owners of the other share. Under the South Australian law, trustee in bankruptcy can apply to a court to order the sale of a property in which the bankrupt owns a share.

The onus was on the parents to show the court why the court could not make the orders sought by the trustee. The parents sought to establish that the son held his share of the property on trust for them.

Nothing in writing –  was it a "constructive trust"?

The parents had paid the full purchase price for the whole of the property when it was purchased in their joint names and in their son’s name. There was no written trust deed or document evidencing the parent’s assertion that the son held his share of the property on trust for the parents. The parents asserted that the “agreement” regarding the son’s share was to be held on trust for the parents, comprised an “understanding” based on discussions to the effect that the son was not to deal with his interest in the property. The statutory provisions regarding land in SA (and in NSW) provide that an interest in land, including a declaration of trust, must be evidenced in writing at the time of the disposition and signed by the person who is able to declare such trust. However a “resulting trust” or “constructive trust” may arise in some circumstances.

The court cited Justice Aicken, in Napier v. Public Trustee (1980) 82 ALR 153 at155 to the effect that where a purchaser pays a vendor for land and directs the vendor to transfer a share of the land into a third person’s (transferee’s) name without that third person having paid for that land, there is a presumption that the transferee holds the land on trust for the payer. However this proposition does not apply where the payer is a parent (or someone who stands in place of a parent) or husband who pays for the land and the vendor transfers the title to the child or the wife (or as the case may be). In such a case the “presumption of advancement” applies and “legal title” passes to the child or wife (as transferee). The parents attempted to submit evidence to rebut this presumption of advancement.

No mention of a trust in any subsequent dealings

The court looked at the conduct of the parties since the purchase of the property. There did not appear to have been any evidence that the son held his share of the property on trust for his parents before the Trustee commenced the court proceedings. In fact the son had asserted his ownership of the share of the property in recent Family Court proceedings – with no mention of a trust in favour of his parents. The solicitor who acted on the purchase of the property wrote to the son and the parents after the purchase and stated that the parties held their respective shares – without mention of any trust.

Conclusion: no trust existed

Further evidence was examined by the court which led to the conclusion in this case that the son’s share was not held on trust for the parents. The trustee in bankruptcy was entitled to seek orders for the sale of the property and apportion the proceeds of sale between himself and the parents.

Forum Law Solicitors, property and commercial lawyers in Sydney’s inner west suburb of Leichhardt can advise and assist you with protecting your assets and ensure that you take the appropriate steps to achieve your desired outcomes. Call us for a free 30-minute conversation on (02) 9560 3388 or in our friendly office in Leichhardt where parking for clients is free.

Forum Law is an active member of several reputable law and industry associations. We have recently obtained ISO9001 accreditation.