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Acknowledgement of Debt, Gifting

Having the last word

Family financial arrangements are commonly not recorded in writing. For this reason questions as to whether a prior advance was a loan or a gift are not uncommon. Comins v Public Trust represents an unsuccessful application for a declaration that a sum of $50,000 was a gift, in circumstances where the deceased’s will provided that the loan of $50,000 was to be offset from the daughter’s share of the residuary estate.

In refusing to make the declaration of gift that was sought Mallon J considered the chronology of events and the circumstances of the parties at the time the loan was made. The lack of writing regarding the terms of the loan was not fatal.

The decision also provides a useful up date regarding the presumption of advancement (such as it is) noting at [26] that:

[26] Whether that traditional position remains appropriate in view of the law of evidence as it has now developed is questionable. Rather, the preferable approach may be to treat subsequent conduct as admissible with its probative weight a matter for the Court to assess. That seems to me to be the preferable approach given that in other areas of the law subsequent conduct can provide relevant evidence of a person’s intention at an earlier time. The Court will of course be alive to the possibility that a person may have meant something at one time and changed their mind later, but this can go to weight rather than admissibility.

The key takeaway, is that whenever money is advanced, whether in a family or otherwise, recording the terms of the advance while all parties are alive is essential to avoid later disparity of views regarding what was previously agreed.

References:

  • Comins v The Public Trust [2021] NZHC 1172
  • James Brightwell “Good riddance to the presumption of advancement?” (2010) 16(8) Trusts and Trustees 627 at 632. Cited with approval by Juliet Chevalier-Watts in “The Presumption of Advancement: Is it time to relegate this doctrine to the annals of history?” (2016-2017) 2(1) Lakehead LJ 15

Discussion

2 thoughts on “Having the last word

  1. This is a hard question, and made harder because common law countries have diverged.

    Last year I had a matter (not involving a family) where we had to characterise a payment by one company to another company.

    There was EWCA authority (Selden v Davidson) that evidence of such a payment essentially was evidence of a loan, unless there was more to be said (eg in the absence of the presumption of advancement).

    The EWCA was followed in NZ (Re Matthews, 1993), but decidedly not followed in Australia (eg Alexiadis v Zirpiadis).

    In the result, I have got the footnote in Chitty on Contract changed to refer to this divergence between Australia, and NZ/England. Chitty 32ed, 2nd supplement, para 39-264 fn 1608.

    Posted by davidwmarks | May 31, 2021, 7:41 pm
  2. Thank you very much for highlighting these inter-jurisdictional differences.

    Posted by vickiammundsen | May 31, 2021, 7:56 pm

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