The Facts
Mother contributes to property purchase but living arrangements ambiguous
A case in New South Wales concerned a claim to part ownership of a property.
A woman obtained $147,000 by selling her home and gave the money to her daughter and son-in-law over the period between November 2012 and January 2013, for the purchase of a property in Casula, in south-western Sydney.
The daughter and son-in-law agreed the mother would live with them at the Casula property. The three had agreed that the mother would live in a separate part of the house.
However, another aspect of the arrangement was ambiguous. While the mother thought she would reside with her daughter and son-in-law forever, they thought she would stay with them long term, but not forever.
Mother evicted from property after sharing residence for three years
The mother, daughter and son-in-law lived together at the Casula property for three years, from January 2013 to January 2016.
During this time the mother contributed $18,314 to renovations of the house, while her daughter and son-in-law contributed at least $45,715 to the renovation of the property.
After sharing a residence for three years, the mother, daughter and son-in-law had a falling out and the mother was evicted from the property.
Daughter and son-in-law appeal after mother succeeds in legal action
The mother commenced proceedings in the Supreme Court of NSW to claim some charge over the property and be repaid the contributions she had made.
The mother was successful in her claim, but the daughter and son-in-law appealed to the Court of Appeal of the Supreme Court of NSW.
The primary question on appeal was whether the $147,000 from the mother was an absolute or conditional gift.
The secondary question on appeal was whether the $18,314 provided by the mother for renovations added to the capital value of the property.
Expert commentary on the court's decision
Court of Appeal rules in favour of mother
In Flourentzou v Spink [2019] NSWCA 315, the Court of Appeal upheld the initial decision and orders, finding that the payment of $147,000 by the mother, Rickie Spink, was a qualified and conditional gift.
The court also found that Mrs Spink’s payment of $18,314 did contribute to the capital value of the property.
The court dismissed the appeal and determined that the daughter and her husband, Dianne and Mario Flourentzou, were to pay Mrs Spink $165,314 in damages. This award represented the $147,000 and the $18,314 she had paid towards the property and renovations.
What is an absolute or unconditional gift?
The definition of an absolute gift is found in the case law; Luke v Waite [1905] HCA 5. It is a gift from a donor to a donee, where the donor does not have any ties to what the donee does with the funds.
Dianne and Mario Flourentzou argued that the $147,000 from Mrs Spink was an absolute gift and that they were invited to spend it on whatever they saw fit, including going away on holidays or buying lottery tickets.
However, instead of doing this they used the money on the purchase of property.
What is a qualified or conditional gift?
A conditional gift is set out in the case law; Lawrence v Branch [2002] WASCA 292. It is a gift where the donor provides a gift for a specific subject matter that the donee will perform.
The court found that Mrs Spink had intended the funds to be used for the purchase of the Casula property and that she had provided the money as a qualified or conditional gift for the purchase of the property.
The court also noted that Mrs Spink benefited from the property purchase.
What was the mother’s intention?
The court considered evidence from Mrs Spink’s bank transaction in determining her intention.
On 29 October 2012, Mrs Spink had made a statutory declaration and given it to the bank. It contained the following statement:
Did the renovation funds add to the capital value of the property?
Dianne and Mario Flourentzou argued that they contributed at least $45,715 or more to the renovation of the house, and that Mrs Spink’s contribution of $18,314 could not have added significantly to the capital value.
The Flourentzous also claimed that the $18,314 which went towards the renovations merely fixed what was broken, for example an electrical switchboard, without actually improving or adding to the value of the house.
However, the court found that the value of property was increased through such repairs, even if only to a small degree.
Lawyers for Mrs Spink drew on the case of Baumgartner v Baumgartner (1987) 164 CLR 137, arguing that it did not matter which specific aspects of the house were improved by Mrs Spink’s money, but that her funds did contribute to the improvements, regardless of their specific allocation.
The court agreed with this point of view.
Put your intentions in writing from the outset
When entering into agreements with family it is essential to make all intentions clear. A means of doing this is to put all intentions in writing from the outset of proceedings.
If unlawful dealings arise, written intentions are useful to refer to in preventing litigation. If you can prove your intentions, this reduces ambiguity and means there is no need for the courts to construe the terms of the agreement.
Legal action can be avoided if the necessary precautions are taken from the outset.
Family members, money and shared property
When transferring money to family members, clearly state in writing the purpose of the monetary transfer.
If family members reside in a shared property, ensure that the terms of this arrangement are clearly set out. An agreement for payment of rent, utilities and outgoings is imperative.
Finally, a timeline of how long family members will share a residence is necessary to ensure unlawful eviction does not take place.