'The bluntest pencil is better than the sharpest mind' (Unknown)
The Festive Season is traditionally a time for giving and it seems a pity to have to mention the hard realities of the law right now. But, as a recent High Court dispute confirms, things can go horribly wrong if the people involved have different notions on whether what’s being given is a gift or a loan.
'Here’s R400k Ma' – But was it a loan or a gift?
The setting for this dispute is a small caravan park, with 13 caravan sites, nine flatlets and two chalets, in the resort town of Illovo Beach on KZN’s beautiful South Coast.
The two parties are:
A prospective mother-in-law, part owner of the park, who lives in one of the flatlets.
Her daughter’s fiancé. He and the daughter were living together in the daughter’s separate flatlet at the time.
The fiancé was badly injured in a motorcycle accident, which saw him hospitalized for two weeks and incapacitated for another several months. He was paid R1,8m by the Road Accident Fund.
He used part of his R1,8m to pay his future mother-in-law (he called her 'Ma') three amounts totalling R400 100. And that’s where the dispute arose, with the Ma and son-in-law disagreeing on the nature of the payments:
The fiancé claimed that it was a verbally-agreed loan for a long-term investment, repayable on demand.
His prospective mother-in-law claimed that it was a verbally-agreed donation.
She duly refused to repay the money to the fiancé when he demanded it and he sued her in the regional magistrate’s court. The onus, it was decided, was on her to prove her version that it was a gift rather than a loan.
She lost the case, largely it seems because she gave contradictory explanations for why the fiancé had given her such a gift. At first, she said it was as a token of appreciation for her not charging him to live in her daughter’s flatlet, for settling some of his medical expenses and for the care she’d taken of him during his recuperation. But later, she said it was for payment of her legal fees arising out of a dispute with her ex-husband and a gift, not to her, but to her daughter.
The magistrate accordingly held that she had received not a gift but a loan and ordered her to repay it. Her attempt to appeal to the High Court failed on the basis that she had filed her appeal late without giving good reasons for the delay. Critically, the Court described her prospects for success as 'poor' given the above facts.
While this particular case has been decided, the main point is that the whole sorry saga of dispute and litigation could have been very easily avoided...
Gift or loan? Avoid all doubt
There’s nothing like a misunderstanding over money to drive a wedge between friends and/or family. That’s why you should avoid all possibility of confusion and dispute with a written, signed agreement. Clearly state how much is involved and whether it’s a gift or a loan – and if it’s a loan, specify the arrangements for repayment. Of course, the more money involved, the more detailed and formal your agreement needs to be. It goes without saying that we are here to assist if you need any advice or help.