The Court dismissed the appeal on the evidence, holding that the evidence of the parties’ intentions clearly displaced the presumption of a resulting trust without recourse to the presumption of advancement. The decision follows several recent New Zealand decisions drifting from the traditional English common law position, which the Court of Appeal has now reaffirmed. In reaching that conclusion, the Court weighed the orthodox English common law position against the diverging Canadian approach in Pecore v Pecore, which it considered but declined to follow.

The resulting trust principles are well settled. Where a person makes a voluntary payment to another, or advances the purchase price of property registered in another's name, equity presumes the transferor intended to retain the beneficial interest: Westdeutsche Landesbank Girozentrale v Islington London Borough Council. That presumption is easily rebutted either by the counter-presumption of advancement or by direct evidence of an intention to make an outright transfer (see the New Zealand authority of Potter v Potter  [2003]).

The presumption of advancement operates as a counter-presumption. In certain relationships, historically husband and wife, or parent and child, it is presumed that the transferor intended to make a gift, displacing the resulting trust. Historically, the presumption rested on two notions: the obligation to support the other person, and the natural love and affection presumed to arise from the relationship. Over time it was extended to anyone standing in the position of a parent.

In England and Australia, the presumption of advancement between parent and child remains part of the law, even if its strength has been questioned. In Laskar v Laskar, the English Court of Appeal confirmed that the presumption still exists between parent and child, though it described it as relatively weak, and weaker still where the child was over 18 and managed their own affairs. The Privy Council reaffirmed its relevance in Enal v Singh, holding that, although much criticised as based on outdated assumptions, the presumption continues to form a relevant part of the Court’s inquiry into what the parties intended.

The High Court of Australia took a similar line in Nelson v Nelson  (1995), accepting that the presumption applies to adult children, though its practical importance may be limited where the evidence allows a positive finding of actual intention.

The Canadian Supreme Court took a different approach in Pecore v Pecore. The majority held the presumption should not apply to transfers from parents to adult children, for three reasons(per Rothestein J):

1. the parental obligation to support does not extend to independent adults;
2. the common Canadian practice of ageing parents placing assets in adult children's names for financial management warranted a rebuttable presumption that the child holds the property on trust; and
3. making dependency the threshold would create unacceptable uncertainty, given the variety of circumstances in which an adult child might be viewed as dependent.

The majority also rejected parental affection as a basis, observing that affection arises in other familial relationships, such as between siblings, where the presumption has never been applied.

Abella J, in dissent, took a fundamentally different view. Her Honour's examination of the historical authorities demonstrated that resting the presumption on obligation alone narrowed and somewhat contradicted the historical rationale. Parental affection, no less than parental obligation, had always grounded the presumption. What distinguishes the parent-child relationship from other bonds of affection is not financial dependency, stated Abella J, but the "uniqueness of the parental relationship" and the "protective emotional ties" flowing from it – ties that do not "atrophy with age".

In New Zealand, the presumption of advancement as it applies to adult children had continued to be recognised, and in 2019 the Law Commission, in its review of the Property (Relationships) Act 1976, recommended that it continue to apply, describing it as “a well-established principle that provides the court with an appropriate starting point when classifying family advances”. Supportive analysis also appeared in Woolf v Kaye, where Gordon J undertook an extensive review of the authorities, including Pecore, preferred the reasoning of Abella J, and concluded that the presumption should extend to adult children, whether dependent or independent, because the traditional rationale rested on both parental obligation and parental affection.

Despite this, several recent New Zealand decisions had shown signs of sympathy for the Canadian approach and a shift away from the orthodox English position. In Reid v Castleton-Reid, the Court of Appeal commented that it was “difficult to see any rationale” for the presumption where an adult child was well established in life. More recently, in MacKay v Blair, the Court shared the reservations expressed by Fitzgerald J in TN v AK  about the weight of the presumption in transfers to adult children, with her Honour going so far as to see “merit in the approach adopted by the Canadian Supreme Court”. As the Court of Appeal in Liao  was careful to point out, however, those remarks were obiter and of peripheral relevance to the decisions in which they appeared, and were made without the benefit of the Law Commission’s 2019 recommendation.

Turning to the facts of the present case: in 2012, Ms Liao, then 30 years old, purchased a residential investment property in Glen Innes, Auckland. Her parents, Mr and Mrs Liao, contributed NZD$52,050 (approximately US$29,397), representing approximately 10 per cent of the purchase price; NZD$20,000 of that sum had in fact come from Ms Liao’s brother, Jimmy, and was repaid to him in 2014 at Mrs Liao’s request, so that the trial judge ultimately treated the gift as being $32,050. Ms Liao funded the remaining 10 per cent equity from her own savings and financed the balance of 80 per cent by way of a bank loan secured over both the Glen Innes property and another property that she already owned. The Glen Innes property was registered in Ms Liao's name alone.

Ms Liao's case was that she had asked her parents for help with the deposit, that her mother had agreed to give her the money, and that the property was purchased as her own investment.

Mr and Mrs Liao, placing considerable reliance on the decision in Pecore, contended that it was they who had decided to purchase the property, that Ms Liao's involvement was limited to taking out the mortgage to improve her credit rating, and that the property was to be registered in their names. Some years later, Mr and Mrs Liao asked Ms Liao to transfer the Glen Innes property to them (in 2019) and later to her brother (in 2020); Ms Liao refused, and Mr and Mrs Liao brought proceedings alleging that she held the property on a resulting trust.

In the High Court, Woolford J held that the presumption of advancement applied and, by a slim margin, had not been displaced, so that the parents’ contribution was properly treated as a gift and Ms Liao was the beneficial owner of the Glen Innes property. The Judge reached that conclusion against a background of what he described as a “paucity of contemporaneous evidence” as to the parties’ intentions at the time of purchase, having turned to the presumption only after finding the direct evidence inconclusive. Mr and Mrs Liao appealed.

The appeal raised two issues to be determined:

1. whether the presumption of advancement applies to adult children under New Zealand law, or whether the Court should adopt the Pecore  approach; and
2. whether, on the facts, the presumption of a resulting trust had been displaced by direct evidence of intention or by the counter-presumption of advancement.

The Court of Appeal in Liao v Liao  expressly preferred the reasoning of Abella J and declined to adopt the majority position in Pecore. Delivering the judgment of the Court, Courtney J gave two principal reasons.

First, the Court agreed that the historical rationale is not limited to an obligation of support: it reflects the unique relationship between parent and child and the fact that the emotional ties underpinning that relationship endure regardless of age. While the parent-child relationship involves moral and legal obligations, it is not reducible to them; it is the uniqueness of the relationship that justifies the presumption that parents who advance money to their children can be assumed, absent contrary evidence, to have intended to make a gift. The Court further noted that if particular cultural considerations were relevant, evidence could be adduced to rebut the presumption. However, in this case neither party sought to present cultural evidence.

Secondly, the Court was not prepared to assume that the Canadian practice of ageing parents placing assets in their adult children's names, which had featured prominently in the Pecore  majority's reasoning, applied in New Zealand, where the common practice is instead to use enduring powers of attorney.

On that basis, the Court concluded that, despite the reservations expressed in earlier decisions, the presumption of advancement remains part of the law of equity in New Zealand and applies to adult children, whether dependent or independent. It saw no basis for departing from that longstanding recognition by adopting the Pecore  approach.

Liao v Liao  confirms, on a considered review of the English, Australian, and New Zealand authorities, that the presumption of advancement remains part of the law of equity in New Zealand and applies to gratuitous transfers from parents to children, irrespective of age or financial independence.

It should be noted, however, that because the Court ultimately decided the case on the evidence and without recourse to the presumption, its endorsement of the presumption for adult children, while authoritative and the product of careful analysis, was arguably not strictly necessary to the result. Nonetheless, for practitioners in jurisdictions sharing the English equitable tradition, including the Cayman Islands, it is helpful to see this issue resolved at appellate level in a manner that aligns with the English and Privy Council position in Enal v Singh.

The Harneys Private Wealth team regularly acts for trustees, beneficiaries, protectors, and other interest holders across a wide variety of trust and estate matters.