Gift claim rejected: court orders son-in-law to repay R800,000 loan to mother-in-law

A Durban High Court ruling has ordered a son-in-law to repay R800,000 to his estranged mother-in-law, rejecting his claim that the funds were a gift rather than a loan.

In a recent judgment, Acting Judge Warren Shapiro ruled in favour of the woman finding that the R800,000 paid to her son-in-law in November 2021 was a loan repayable on demand.

The mother-in-law testified that she advanced the money to assist her son-in-law during financial difficulties as he established his own accounting practice. According to her evidence, the parties agreed verbally that the amount would be repaid on demand and would not attract interest.

The son-in-law admitted receiving the funds but argued that the payment was a donation - either to him alone or jointly to him and his then-wife, IOL reported.

He further claimed that if the court found it to be a loan, his wife should bear 50% responsibility.

The marriage has since broken down, and divorce proceedings are under way.

A key aspect of the defence was the assertion that the transaction had been deliberately labelled a “loan” to avoid donations tax, and that it was in truth a gift.

However, the court found no credible evidence of any simulated transaction. Judge Shapiro held that the defendant’s (son-in-law) version was inconsistent with documentary evidence, including the proof of payment referencing a “loan,” and with the family’s established pattern of advancing repayable loans rather than outright gifts.

The court also noted that the man who acted as his mother-in-law’s tax practitioner, did not declare the alleged donation in her tax returns — a factor that weighed against his version.

In his judgment, Judge Shapiro found that the defendant’s explanation was “not credible or reliable and improbable,” concluding that the mother-in-law had discharged the onus of proving the existence of a loan agreement.

Addressing allegations that the repayment demand was made to financially pressure the son-in-law amid the marital breakdown, the court emphasised that the central issue was the nature of the 2021 transaction — not the circumstances of the later divorce.

“If a loan was advanced in 2021, which was repayable on demand, the [plaintiffs] were entitled to demand repayment,” the judge stated, declining to criticise the timing of the demand.

The court further rejected the argument that the loan was made jointly to both spouses. Although the funds were later used to reduce the couple’s mortgage bond, the judge held that this did not alter the identity of the debtor.

Evidence showed that previous financial assistance from the mother to her daughter had similarly taken the form of loans repayable by the recipient individually.

The son-in-law was ordered to pay R800,000 with an interest of 11.75% per annum from 24 November 2023 until date of final payment.

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