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The problem with oral agreements between family members

The importance of documenting agreements

Two recent cases in the Supreme Court of New South Wales reinforce the importance of properly documenting agreements between family members to avoid later disputes. If these parties had documented their intentions and agreement, court proceedings would have been avoided.

 

Case 1: Oral agreement between brother and sister

Nguyen v Nguyen [2019] NSWSC 131 concerned an oral agreement between a brother and sister. They agreed to buy a residential property in the brother’s sole name, with both as borrowers under the mortgage. The sister negotiated the sale price with the seller and paid the deposit to the estate agent, stamp duty and other costs of the purchase.

The sister lived at the property with her family for several years and paid for repairs and improvements to the property. A tenant moved in some years later. After the tenant left, the brother changed the locks and excluded his sister from the property.

In the court proceedings, the brother claimed he was the sole registered owner and that his sister had only ever been a tenant. The sister argued she and her brother were the joint owners of the property.

As there was no written agreement between the parties, the Court had to decide what sort of agreement had been made. The Court held that, while the property was registered solely in the brother’s name, 40% of the property was held on constructive trust for his sister.

The Court did not accept either party’s version of the agreement and decided that a blend of their two versions applied.

Case 2: Arrangements between mother and son

Henley v Bone [2019] NSWSC 254 concerned a real property which was in the name of Gregory Henley when he died intestate. Gregory’s mother sold her business in Victoria, intending to move to northern New South Wales to live near Gregory.

Gregory found a suitable property and his mother transferred funds to him for the deposit. Gregory signed the contract in his own name and completed the transaction with funds from his mother who had no contact with the seller, the agent or the conveyancer. The purchase was completed by Gregory in his own name.

After settlement, Gregory lived in the property briefly before his mother relocated to live in the property. When Gregory died, his mother claimed the property had been held in trust for her.

The Court disagreed and held that Gregory was the registered and beneficial owner of the property and that he had allowed his mother to treat the property as her own. The property remained an asset of Gregory’s estate but his mother was permitted to remain living in the property.

 

 

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Please note that this article has been prepared by Margaret Miller, partner of Bell Legal Group, for information purposes only. It is not legal advice nor should it be relied upon as such.