Which case won?

The case for the father and stepmother
  • We only transferred the property to preserve our pension. Our son knew this and agreed to hold it on trust for us.
  • We had several conversations with our son in 2004 where he agreed he would be "minding" the property for us.
  • The transfer documents were merely prepared by our lawyer. We didn't read them before signing them, as we trusted the lawyer.
  • The letter we signed from the lawyer stating we had no residual obligations wasn’t binding. We did not read it. There was an oral agreement between us that our son would hold the property on trust for us despite the letter prepared by the lawyer.
  • While my son claims he did considerable work on the property, in fact his involvement was minimal. I did most of the work myself with the assistance of neighbours.
  • We were not making an absolute gift of our home - we intended to retain control and keep living there, which we did.
  • We should receive the proceeds of the sale of the property, as we never intended that our son would keep the money when the property was sold.
The case for the son
  • My father and stepmother made an absolute gift of the property to me back in 2004. The transfer documents we all signed make this crystal clear.
  • I never agreed to any arrangement to hold the property on trust, or that my father and stepmother would retain control. This story is a recent invention.
  • Their solicitor's letter, which we all signed, unambiguously states there would be "no residual obligations" to my father and stepmother after the transfer.
  • If there was some agreement that I would hold the property on trust, it would have had to be in writing and signed by my father and stepmother. There is no such written agreement.
  • I did a huge amount of work to improve both the residence and the grounds, because I believed the property was mine.
  • My father and stepmother continued living on the property after the transfer based on an informal understanding, not due to any legal right.
  • Given that it was an absolute gift, the sale proceeds are legally mine. My father and stepmother have no claim to that money 13 years later.

So, which case won?

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Case B won. You were right!

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case a21%
case b79%

Expert commentary on the court's decision

“For any parent considering transferring property to their children, this case serves as a warning to know the difference between a gift and a trust, to obtain legal advice and to document all arrangements clearly.”
Supreme Court dismisses father and stepmother' claim that transfer of property was subject to a trust

In the case of Maxworthy v Maxworthy [2023] NSWSC 927, the Supreme Court of NSW found in favour of the son, Chris Maxworthy, ruling that the 2004 transfer of the rural property was an absolute gift to him.

The court rejected the claim of the father and stepmother, John and Eileen Maxworthy, that their son held the property and sale proceeds on trust for them.

No persuasive evidence of trust arrangement

While the father and stepmother gave evidence of conversations in 2004 where the son allegedly agreed to hold the property on trust, allowing them to retain control, the court did not find this evidence persuasive.

The son denied that any such conversations occurred. Importantly, on the day of the transfer, the father and stepmother signed a letter prepared by their solicitor confirming the son would have “no residual obligations” to them regarding the property after the transfer.

The court considered this solicitor’s letter was the most reliable evidence of the parties’ intentions at the time. It contradicted the father and stepmother’ claim of a trust arrangement, instead indicating a clear intention to transfer the property to the son absolutely.

Father and stepmother' evidence about solicitor discussions not accepted

The father gave evidence that he told his solicitor he wanted to “live in the house and still have control over it”, merely putting the property in his son’s name. He claims the solicitor advised him that this was fine and “many people do the same thing”.

However, the court doubted that an experienced solicitor would have failed to clarify the father and stepmother’ intentions if told this, given it conflicted with the “no residual obligations” letter the solicitor had prepared.

The solicitor was not called as a witness and the court inferred her evidence would not have assisted the father and stepmother’ case. The court concluded it was unlikely the father could accurately recall these discussions 18 years later.

Significance of son’s work on property

The court examined the conflicting version of events regarding the improvements which had been made to the property.

The court noted that while John claimed that he had undertaken the improvements himself, with the help of neighbours and others, those people were not called to give evidence to corroborate John’s version of events and their absence was not explained. This undermined John’s credibility.

In the view of the court, John chose to downplay and deny the work Chris had done on the property because it supported the evidence provided by Chris that he believed the property had been given to him as a gift and belonged to him.

Gift explained by family history and pension concerns

In considering whether the transfer was a gift, the court reviewed the history of the parties’ finances and relationship.

By 2004, the father and stepmother owned the rural property and a vacant block. They did not have significant wealth beyond this, reflected by them being on the aged pension.

However, the son had a close relationship with his father and stepmother. Over the years prior to the transfer, he had provided significant assistance by improving the rural property.

The court inferred that in 2004, the father and stepmother had “love and affection” for their son. This factor, combined with his contributions to the property and their wish to preserve their pension, could explain them gifting it to him.

There was likely an informal understanding that the father and stepmother could still reside there until they moved to the vacant block, but this fell short of any legal right to the property.

Document property transfers clearly and maintain communication within families

For any parent considering transferring property to their children, this case serves as a warning to know the difference between a gift and a trust, to obtain legal advice and to document all arrangements clearly.

It is important to maintain good communication within families regarding intentions and expectations, to prevent misunderstandings which can lead to legal action and destroy relationships.

The case also highlights the risks in transferring property to adult children in an attempt to get around Centrelink means testing. Trying to have your cake and eat it too – by giving away legal ownership but still retaining control – can backfire.

If you are considering your Centrelink entitlements and passing on property to the next generation, it is crucial first to get proper legal and financial advice. Then make sure any agreement is professionally documented to avoid disputes and heartache down the track.

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.

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