The parents transferred their two thirds interest in a property to their son for two thirds of its value, the son granted a mortgage in their favour and later, when this was removed at his request, acknowledged his debt and the charge to secure it by way of a deed. The loan was expressed to be repayable upon six months’ notice.
The son died and his parents sought to have the deed declared valid and two thirds of the value of the property paid to them by his widow. The widow disputed the claim on the basis that the deed was a sham and the true intention of the parties was that the loan was forgiven, since the parents’ plan was to divest themselves of their assets to receive social security benefits. The widow claimed that even if the deed was enforceable, notice of repayment had not been given.
The court believed the father and rejected that the transfer was part of a plan to divest himself of his assets to obtain benefits or to defraud the government. Further the court found that the amount owed was not forgiven and the deed was not a sham. The court found that the parent’s intention to only call for repayment if the deceased divorced or died was is not in any way inconsistent with the deed having effect. In any case, there was no shamming intent. The court found that the parents entered into the deed as a means to remove the mortgage over the property whilst preserving the loan and securing it in another way. However the court found the notice of demand ineffective because less than six months’ notice had been given and said that fresh notice would need to be given.
The court declared the deed valid and enforceable and also gave the parents their costs because the widow only won on the notice issue, which occupied a very small proportion of the trial.