A common problem has always been that when someone pays something for someone else, does the money have to be repaid. The simple answer is...it depends. It depends on whether there was an agreement between both parties. It also depends on the relationship between them. Generally speaking, if there is no agreement documented or otherwise provable, the whole issue can sometimes come down to the relationship between the people involved.
At law, there is what's known as the "presumption of advancement". It operates "on the hypothesis that, because a certain relationship exists between two parties, a benefit provided by one party to the other at the cost of the first was intended to be provided by way of "advancement"; absent evidence to the contrary, the relationship supplies a reason for why a gift was intended."
The classic relationship which gives rise to the presumption of advancement is that of parent and child. So, if a parent pays for something like a deposit on the purchase of a property where the child is the actual purchaser, absent some agreement to the contrary, the law presumes that the payment was by way of gift to the child. It would be up to the parent claiming that it was a loan or that the money was to purchase a portion of the property in trust for the parent, to prove that was the case. If in the very same situation, the two parties were at arm's length and had no such familial relationship, the onus shifts to the purchaser to show that it wasn't meant to be a loan or a trust relationship.
These issues are well settled law but have recently been discussed and argued again in the NSW Court of Appeal judgment of Koprivnjak v Koprivnjak handed down on 2 February 2023.
It's a timely reminder of the importance of seeing your lawyer to document transactions between, not only strangers with separate commercial interests, but also between family members who are used to treating each other with trust and informality.
