The Bank of Mum and Dad: Loan or a resulting trust?

Thinking of giving money to your kids to assist in buying a property?

Think carefully and take legal advice.

In  Koprivnjak v Koprivnjak [2023] NSWCA 2, a father advanced $75,000 to his daughter to assist her in buying a property for $300,000.

The money advanced was secured by a second mortgage.

The father also made some subsequent payments towards renovations and maintenance repairs.

The property was sold in December 2020 in the context of Family Court proceedings between the father and his then-wife. By this time, there existed disagreement between the father and daughter as to the true beneficial ownership of the property. Whereas the father considered himself to be the beneficial owner, the daughter contended that her father merely assisted with her purchase of the property by providing a loan of $75,000. The proceeds of the sale were paid into a controlled monies account pending the determination of their competing claims.


Claim for a trust

On 8 February 2021, the father commenced proceedings claiming that the daughter held 25% of the property on resulting trust for him because he contributed to the purchase price. He also claimed that there was a common intention of a constructive trust as to the other 75% based on a common understanding between him and his daughter by reason of his contributions to the discharge of the mortgage in favour of the NAB and property maintenance. The father alternatively sought to enforce the covenants in the mortgage document between him and the daughter together with a sum of money for the improvements that he said he made to the property. The daughter agreed that her father was entitled to repayment of the loan secured by the mortgage document.

The primary judge rejected each of these claims, finding that the $75,000 advanced by the father to the daughter was a loan. Her Honour was critical of the father’s evidence and, where it conflicted with the daughter’s or the objective evidence, preferred the latter. Her Honour was also unpersuaded by the documentary evidence upon which the father relied, including text messages exchanged between him and the daughter, and the evidence of a solicitor, Mr. Mark Marando, who represented the daughter on the conveyance in 2011 to the effect that he informed her about the father’s intention that she holds the property on trust for him. Much of this documentary evidence post-dated the purchase by a number of years and did not shed light on the parties’ intention as at the time of purchase, did not constitute an admission by the daughter against interest as suggested by the father, did not support his case, or was equally consistent with the daughter’s case as it was with the father’s. Part of the proceeds of the sale was distributed to the father in satisfaction of the mortgage covenants while the remainder was released to the daughter.



The father/appellant appealed the decision, but his appeal was dismissed.

The documentary material upon which the appellant relied on the appeal, which was not raised in any substantive fashion in the proceeding below, did not assist his case. These documents were prepared sometime after the purchase of the property and did not contain admissions against interest on the respondent’s part. These documents were not determinative of the relevant issues, whether looked at in isolation or in conjunction with other relevant evidence.

There were several notable lacunae in the evidence. For example, the evidence did not include copies of primary documents relating to the first homeowner’s grant and stamp duty exemption received by the respondent, land tax, or copies of the settlement sheet and payment directions concerning the purchase of the property, such contemporaneous financial information presumably bearing directly upon the ultimate issue in the proceeding:

The text messages upon which the appellant relied did not assist his case. In particular, there were a number of ambiguities evident in those exchanges, notably as to whether the property being discussed was the subject of these proceedings. Additionally, the weight to be given to the text messages, which were exchanged in December 2016 or later, had to be considered in the context of the breakdown in the personal and family relationships at that time.  There was also no substance in the appellant’s complaint that the primary judge erred by not giving Mr. Marando’s evidence sufficient weight. It must be borne in mind that Mr. Marando was recollecting a conversation that he claimed to have had with the respondent years prior to giving evidence in circumstances where he kept no detailed file notes and could not recall having a file note about the conversation, and it was notable that the primary judge gave several separate reasons for the limited weight she gave to his evidence.


Central points for a resulting trust

In considering the principles to be applied to establishing a resulting trust, Griffith AJA summarising the key points(without reference to relevant authorities) as follows:

  1. Where two or more persons advance the purchase price of a property in different shares, it is presumed that the person or persons to whom the legal title is transferred hold the property upon resulting trust in favour of those who provided the purchase price in the shares in which they provided it;
  2. Once the primary fact giving rise to the presumption of a resulting trust is established, the burden falls on the party disputing the existence of a resulting trust to rebut the presumed fact on the balance of probabilities;
  3. Consequently, the presumption of resulting trust is the starting point of a factual inquiry about the intention of the party (or parties) who provided the funds for the relevant purchase;
  4. The search for the intention of the relevant party (or parties) is as to proof of a “definite”, and not “nebulous”, intention, as opposed to a subjective uncommunicated intention;
  5. The relevant intention is to be found as at the date of purchase (or immediately thereafter), although evidence of later acts and declarations is admissible as admissions against interest; and
  6. For the presumption of resulting trust to apply, the purchase price must have been provided by the purchaser in their capacity as purchaser and not, for example, by way of a loan.


Constructive trust-common intention?

The appellant also argued there was a common intention to establish trust. This was rejected, with Griffith AJA identifying as a correct statement of legal principles the following:

  1. Equity may intervene to prevent the unconscientious denial by the legal owner of another party’s rights where the parties agreed, or it was their common intention, that the claimant should have an interest in the property owned by the other, and the claimant acted to his or her detriment on the basis of that agreement or common intention;
  2. It is sufficient that the parties intend that the claimant should have a beneficial interest or some form of proprietary interest (as opposed to there being a common intention that the parties have a specific share of the property);
  3. A less stringent test applies to the requirement of detriment once the common intention has been established, citing Green v Green (1989) 17 NSWLR 343 at 357 per Gleeson CJ (with whom Priestley JA agreed); and
  4. A common intention constructive trust may arise after the acquisition of the relevant property if the evidence establishes that the relevant common intention was formed at some later time.

The end result was that the father/appellant was left with his rights and entitlement to the proceeds being determined according to the mortgage for the sum advanced rather than through an interest arising from a trust.


We can help.

The decision is a reminder that there is no substitute for seeking legal advice and assistance and explicitly documenting the intention of the parties and the character of monies advanced as either a loan or to establish a trust. A failure to do so may result in a costly trial and an undesirable finding.

If you are thinking of advancing monies to assist your children, we can assist you in advising and documenting the transaction and avoid costly and often bitter disputes later.

Contact RCR Lawyers today if you are faced with a similar issue of resulting trusts.

The blog published by Rostron Carlyle Rojas is intended as general information only and is not legal advice on any subject matter. By viewing the blog posts, the reader understands there is no solicitor-client relationship between the reader and the blog published. The blog should not be used as a substitute for legal advice from a legal practitioner, and readers are urged to consult RCR on any legal queries concerning a specific situation.

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