Gifts and Loan

12 July 2023


Current at June 2023

It is not unusual for family members to give money to their children or to enter into informal loans with them.  However, when that child separates from their partner, the characterisation of those funds can have a major impact on the asset division.

Phe & Leng2 is a 2019 authority on the interpretation of Section 131 of the Evidence Act 1995 (Cth) regarding the admissibility of statements made during negotiations. However, it is also a reminder as to the Court’s wide discretion when scrutinising the advancement of funds between spouses and their family members.

In this case, the wife acknowledged funds advanced from the husband’s father in a text message stating “Please tell father and mother as long as [child] can come back to Sydney, I’m willing to give up everything in Taiwan and return the NT$3 million they have put in the Suburb F property to show my sincerity.”

There was no documentation of the loan and the funds had been transferred from an account in the husband’s name, which was held jointly with his father.

The Court found the wife’s acknowledgement sufficient and the challenge on appeal dismissed.

In Vardisanis and Anor,2 the Full Court of the Family Court of Australia considered the impact of limitation periods on the recovery of loans.

In this case, the husband’s mother intervened seeking a declaration that the husband and wife were indebted to her as a consequence of various transactions occurring prior to and during the marriage. The Court made distinctions between loans which were payable on demand and payable
on the expiration of three months’ notice.

The cause of action for the former accrues immediately and so the clock starts ticking immediately. If six years from the date of the contract has passed, the intervener would be statute barred from enforcing the loan and be unsuccessful in obtaining a declaration. The cause of action for the latter, however, only accrues on the expiration of the three-month notice.

In this case, a Notice of Demand was made, and the Court proceedings occurred within the six-year limitation period. Accordingly, the Intervener was successful in obtaining the declaration.

Each State and Territory has different limitation periods, but it is important to ensure that effective contract drafting at the front end will make a significant difference in the event of a separation. And for parties tempted to “backdate” contracts—beware: there are single expert witnesses who can date ink.


1 (2019) FLC 93-887.

2 [2014] FamCAFC 97.

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Family law matters can be difficult and complex. If you require any assistance with a family law dispute, always contact a legal practitioner who will be able to help.

O’Sullivan Davies has practitioners experienced in assisting couples with property settlement. More information about our services can be found at our About Us page here.


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