In a recent case handled by our firm, Phoebus, Christos Clerides & Associates LLC, we successfully defended a claim involving an alleged personal loan between two individuals who shared a close familial bond. While the transfer of funds was not disputed, the core legal question was whether the money constituted a repayable loan — or a non-repayable gift.
Legal Principles: Presumption of Repayment vs. Presumption of Advancement
The law recognizes that whether a transaction qualifies as a loan depends not only on the transfer of money, but also on the nature of the transaction, the relationship of the parties, and the surrounding circumstances. As held in Donald McArthy Trading Pte Ltd v. Pankaj [2007] 2 SLR 321, this is fundamentally a factual inquiry.
In general, when a person gives money to another, the legal starting point is that the money is repayable, unless there is evidence of a different intention. This principle is confirmed in Chitty on Contracts (27th ed., Vol. II, para. 36-207):
"If money is proved, or admitted, to have been paid by A to B, then in the absence of any circumstances suggesting a presumption of advancement, there is prima facie an obligation to repay the money; accordingly, if B claims that the money was intended as a gift, the onus is on him to prove this fact."
This was also reaffirmed in the case of Seldon v. Davidson [1968] 2 All ER 755, where the Court found that in the absence of special circumstances (such as a family or spousal relationship), money paid is presumed to be repayable on demand.
However, where such a close relationship does exist — for example, between parent and child, or other close relatives — the law may apply a presumption of advancement, meaning the money is presumed to have been a gift, not a loan. In these cases, the burden shifts to the person alleging a loan to rebut this presumption.
Our Case: Rebutting the Claim of a Loan
In the case we recently handled, the Plaintiff claimed to have lent money to a now-deceased relative of our client. Although there was documentary evidence that money was transferred (through bank statements), there was no written loan agreement or other indication of a contractual obligation to repay.
We argued that:
- The Plaintiff and the deceased shared a close familial relationship, giving rise to the presumption that the payment was a gift;
- The Plaintiff failed to present sufficient evidence to rebut that presumption;
- Even without applying the presumption of advancement, the surrounding facts supported our client's position that the money was not repayable.
The Court agreed, holding that the Plaintiff had not met the necessary standard of proof to establish a loan. Moreover, the Court found that our client had shown — on the balance of probabilities — that the money was intended as a gift, not a loan.
"Even in the absence of the presumption of advancement, the Defendant has proved that the amounts were not repayable, but rather constituted a gift."
The claim was therefore dismissed in its entirety, with legal costs awarded in favor of our client.
Key Takeaways
This case illustrates the legal complexities that can arise in informal lending scenarios — especially within families. It reinforces the importance of documenting transactions clearly and understanding the legal presumptions that may apply based on the parties' relationship.
At Phoebus, Christos Clerides & Associates LLC, we regularly advise individuals and families on financial transactions and personal disputes, offering clear, strategic guidance to protect our clients' legal and financial interests.
If you are involved in a dispute over a personal loan, or wish to safeguard future transfers of money between family members, don't leave things to chance — get in touch with a legal team that understands both the law and the relationships that shape it.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
