Case Summary:
Russell and Dunphy v Dunphy [2023] NSWSC 282 – Issues that can arise with undocumented loans
The recent case of Russell and Dunphy v Dunphy [2023] NSWSC 282 illustrates what can happen if financial dealing between family members doesn’t go to plan.
In this case, Michelle and Brent (brother and sister) the appointed executors of their late mother’s estate, alleged that their mother had given loans to their brother Adam totalling $126,913 over the period of about 8 years. The three siblings were entitled to the estate in equal shares under their mother’s will.
Michelle and Brent brought proceedings seeking declarations that the advances constituted a loan and should be offset against Adam’s interest under the estate.
The Evidence
Michelle and Brent tendered handwritten post-it notes written by the deceased as evidence of the loan which recorded some amounts and dates, as well as evidence of a conversations prior to the deceased’s death whereby he had mentioned that Adam owed her ‘quite a bit of money’. The post it notes recorded amounts advanced and the purpose, and also recorded various repayments made.
It was not disputed that Adam had received this money from his mother, but the issue which the Court had to determine was whether or not the evidence established loans which were legally enforceable between the deceased and Adam which required Adam to repay the monies advanced.
The Decision
The Court found that it was not enough to show that the money was advanced by the deceased and received by Adam. The plaintiffs had to prove offer and acceptance in the formation of the alleged loan contract, and some outward behaviour that viewed objectively would establish a contract let alone a loan.
The written post-it notes were found merely to be written recordings of the deceased’s which had never been communicated to Adam, created only for the deceased’s purposes of record keeping but went no further to rebut the presumption that the advances were a gift.
The proceedings failed .
In our experience, it is quite common for parents to loan monies to children, sometimes significant amounts to assist them in purchasing property, renovating or building. It is important that any money advanced which is intended to be repaid is documented in a formal loan agreement so as to minimise disputes between the beneficiaries on the death of a parent. Any loan should also be referred to and provided for in the will so as to make clear that the loan is to be accounted for.
Similarly, it is not uncommon for children to loan their parents money, and the parents will want this to be accounted for in their estate so that any amount owing can be repaid from the estate.
