Two cases fought out in the Supreme Court of New South Wales this year have highlighted the tangles that family members can get into when they invest together but do not document their plans.
Brother and sister, Anh Tuan Nguyen and Thi Anh Thuy Nguyen, agreed to buy a residential property together. The 2001 purchase of a property in Terrigal, on the central coast of New South Wales, was in the brother’s name but they were both borrowers under the mortgage.
The sister negotiated the sale price with the vendor and paid the deposit to the estate agent, stamp duty and other fees in the transaction.
The sister lived in the property with her family for several years, making repairs and improvements to the property using her own funds. In 2009, she vacated the property and a tenant moved in.
After the tenant vacated the property the brother changed the locks.
There was a dispute over ownership, which went to the Supreme Court of New South Wales (Nguyen v Nguyen).
The brother claimed he was the sole registered owner and that his sister only ever occupied the property as his tenant. The sister argued that she and her brother were the joint owners.
There was no written agreement between brother and sister, so the court had to infer the agreement they had reached when the property was purchased.
It decided that the property was registered solely in the brother’s name but he held 40 per cent of the property “on constructive trust” for his sister.
In a note to clients, law firm Cooper Grace Ward says: “Interestingly, the outcome was that neither of them was correct in their understanding of their agreement and the court decided on a mix of their two positions.”
In the second case, Gregory Henley’s mother sold her business in Victoria and planned to relocate to northern New South Wales to live near her son.
Gregory found her a property to purchase and she transferred funds to him to pay the deposit. Gregory signed the contract in his own name and completed the transaction with money provided by his mother.
Gregory’s mother had no contact with the vendor, the vendor’s agent or the conveyancer. Gregory completed all communication and signed all documents.
Gregory later died, without a will, and his mother claimed the property was held by Gregory in trust for her.
In Henly v Bone, the Supreme Court of New South Wales found that no trust for the mother existed. After the proceedings, the matter remained unresolved. The property remained an asset of Gregory’s estate but his mother was allowed to occupy it.
Cooper Grace Ward says: “Both these cases involve proceedings that could have been avoided of the intentions of the parties had been clearly documented from the outset.
“Putting an agreement in writing is a good opportunity for the parties to think about all the things that might be relevant to a proposed arrangement and consider an exit strategy from the arrangement.”