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Acknowledgement of Debt, Gifting

One swallow does not a summer make

The expression “One swallow does not a summer make, nor one fine day; similarly one day or brief time of happiness does not make a person entirely happy” is attributed to Aristotle (384 – 322 BC).

This proverb is perhaps apposite in the case of D v T.

D (age 72) and T (age 59) met on a dating site. Neither was entirely truthful in their dating site profile. D’s profile described his age as 59. T’s gave her age as 53. In initial communications D says T, who owned a massage parlour, told D she was a beautician.

Around the time of their first meeting (there was conflicting evidence whether it was before or after) T settled a trust of which T and her son are beneficiaries.  Property owned by T was gifted to the trust.

Soon after D transferred his life savings to T. T maintained the transfers were gifts or consideration for sexual intimacy. D’s view was that the two largest advances totalling $268,000 (for which recovery was sought) were loans or a conditional payment to demonstrate D’s commitment to the relationship.

Application of the law

The first matter for the court to decide was whether the presumption of advancement applies, in which case the funds transferred are presumed to be a gift.  Where the presumption is not satisfied the funds are presumed to be a loan.

The presumption of advancement has been considered in cases where money changes hands between parties in circumstances outside a traditional familial or commercial relationship.

The presumption of advancement was discussed in Seldon v Davidson by the Court of Appeal of England and Wales in the context of a payment made to an employee.  In that case Willmer LJ stated:

“Payment of the money having been admitted, prima facie that payment imported an obligation to repay in the absence of any circumstances tending to show anything in the nature of a presumption of advancement.  This is not a case of father and child, or husband and wife, or any other such blood relationship which could have given rise to a presumption of advancement.”

“There being no blood relationship, no husband-and-wife, no father-and-child, no adoptive-parent and adopted-child relationship between then, Mr Sears was forced to concede that, in those circumstances, which gave rise to no presumption of advancement, the house must, prima facie, be regarded as being held by the defendant by way of a resulting trust for the benefit of the plaintiff.”

Seldon v Davidson has been applied in New Zealand.  See, for example, Smith v Jones where Mr Smith met Ms Jones at a massage parlour and then paid sums of money to her to help her leave the massage parlour.    In that case Andrews J found that the principle of advancement did not apply, noting at [32] that:

“Even allowing for the possibility that the courts may in 2014 recognise a close familial relationship in somewhat broader circumstances than those indicated in Seldon v Davidson, the evidence in this case does not support a conclusion that a sufficiently close familial relationship existed.  Mr Murray’s submission that the relationship was “akin to” a close familial relationship which was “overall one of shared life and emotional commitment” is inconsistent with Ms Jones’ denials in response to a notice to admit facts, and in her evidence that she and Mr Smith ever discussed living in a house together, or that they shared an intention to share their life together.  Her references to Mr Smith as her partner cannot therefore be taken as references to him as her “life partner”.

Relevantly, in D v T the court found that at the time the funds were advanced there was no relationship that “even came close to being equivalent to that of a “blood-relationship”.  This indicates a temporal aspect to the qualitative analysis of the relationship.

Where the presumption of advancement is not made out it is necessary for the recipient of the funds to prove:

  • an intention from the donor that funds will be the donee’s property. Cogent evidence or “the clearest of evidence” is required
  • that the gift was accepted, and
  • delivery of the money.

Unsurprisingly there was no contemporaneous documentary evidence as to Mr D’s intention at the time of the fund transfer.  However, the court did, finding that Mr D’s evidence was preferred, note that “Notwithstanding what appears to have been a significant degree of infatuation of Mr D which seems to have affected his judgment, it is inconceivable that, even in the circumstances whereby he was hoping to embark upon a committed long-term relationship, he would have made a gift to her of effectively his life savings.”

In forming the view that the advances between Mr D and Ms T were not a gift the court also referenced Milne v Armijo where Hardie Boys J said:

“The law is that where there is not the kind of relationship in which the presumption of advancement arises, … the payment of money by one person to another prima facie gives rise to an obligation to repay within a reasonable time of making demand but if the borrower repudiates the loans and asserts that the payments were gifts that repudiation renders the moneys immediately repayable.”

The result was that Ms T is liable to repay Mr D the sum of $268,000.

The case highlights the problems that can arise where the terms on which funds are transferred from one party to another.  While this case can be limited to its salacious facts, the principles relied upon invite consideration in the application of family and close relationships where the presumption of advancement may be more difficult to displace, notwithstanding circumstances where a gift is clearly not intended.
References

  • D v T [2017] NZHC 1919
  • Milne v Armijo HC Christchurch CP7/88, 25 August 1989
  • Seldon v Davidson [1968] 1 WLR 1083
  • Smith v Jones [2014] NZHC 2674
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