Leading gift and loan back case

Atia v Nusbaum: the leading case on gift and loan backs.

Other posts have dealt with various aspects of gift and loan back arrangements (see http://mwbmcr.blogspot.com.ar/2012/05/family-court-case-on-distinction.html and http://mwbmcr.blogspot.com.ar/2013/10/one-remedy-where-trust-distributions.html).

Arguably, the leading case in relation to gift and loan back arrangements is Atia v Nusbaum [2011] QSC044. As usual, a link to the full decision is as follows http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/qld/QSC/2011/44.html.

In summary the circumstances of this case were as follows:

1. Dr Atia (a cosmetic surgeon) entered into a gift and loan back style arrangement with his mother; 
2. when Dr Atia's mother subsequently called in the debt, Dr Atia argued that the loan and mortgage were not intended to be actually binding and were only a pretence to protect against situations where Dr Atia was sued professionally; 
3. in particular, Dr Atia argued that his mother was only calling in the debt secured by the mortgage because he had married his girlfriend against his mother's express wishes; 
4. the court found that all aspects of the legal documentation, including a deed of gift, loan agreement and registered mortgage, had been validly signed; and 
5. the court confirmed that the legal effect of the documentation signed was exactly as the parties intended it to be and there was no mistake or sham involved. This meant that Dr Atia's mother was allowed to enforce recoverability of the debt, and if necessary, exercise her rights under the registered mortgage. 

Until next week.