A recent decision of the Chancery Division highlights the evidential hurdles faced by family members who claim that money given informally to a relative was held on trust rather than as a gift or loan. The case arose from competing claims over funds allegedly entrusted to the late Terence Morgan and demonstrates how courts approach oral trusts, cash payments and credibility in family disputes.
Given that the law on trusts is relatively settled, this case turned almost entirely on facts and proof.
Background: a family dispute after an intestate death
Terence Morgan died intestate in April 2022 at the age of 41. Under the rules of intestacy, his estate passed equally to his two children. Letters of Administration were later granted to his daughter, Miss Morgan-Seivwright, and his partner, Miss Fraser, who acted on behalf of Terence’s son.
Two close family members, Terence’s mother (Mrs Morgan) and sister (Miss Msomi), brought claims alleging that money held in Terence’s bank account at the time of his death was not part of his estate, but was held on trust for a specific purpose: the purchase of a home for Mrs Morgan.
The competing claims
The claimants alleged that:
- Mrs Morgan had given Terence £20,000 in cash in October 2021;
- Miss Msomi had given Terence £10,000 in cash in August 2021;
- The money was entrusted to Terence solely to buy a property for Mrs Morgan to live in; and
- It was never intended as a gift or loan and Terence had no beneficial entitlement to the funds.
The defendants denied this, contending that:
- The money belonged to Terence;
- The claimants could not prove the source of the cash; and
- Terence ultimately decided not to proceed with purchasing a property.
The evidence: bank records and text messages
The documentary evidence was central:
- On 15 October 2021, Terence deposited £20,000 and £9,800 in cash into a Santander account;
- The following day, he opened a First Direct account, transferring funds with references such as “house deposit”;
- The account remained largely untouched until his death; and
- Text messages showed active discussions about buying a property for Mrs Morgan, including messages sent just days before Terence died.
The key dispute was not what Terence intended, but whose money it was.
The law: oral trusts and the burden of proof
The court reaffirmed several well-established principles:
- A trust of money can be created orally, no written document is required;
- No special wording is needed, what matters is common intention;
- The burden of proof lies on the person asserting beneficial ownership; and
- The court must be satisfied, on the balance of probabilities, that the money was not the recipient’s to use freely.
Why Mrs Morgan’s claim failed
Although the court accepted that £20,000 in cash physically came from Mrs Morgan that was not enough.
The court found her explanation that she had accumulated the cash over many years from family gifts implausible, given:
- Her financial circumstances;
- The absence of supporting evidence; and
- Terence’s role as the family’s financial mainstay, with stable income and other sources of funds.
The court concluded it was more likely than not that the £20,000 was Terence’s own money, despite having passed through Mrs Morgan’s hands. As a result, Mrs Morgan failed to establish beneficial ownership and her claim was dismissed.
Why Miss Msomi’s claim succeeded (in part)
Miss Msomi’s claim stood on a different footing.
She was able to produce clear banking evidence showing withdrawals from her daughter Khaya’s account in early September 2021, closely matching the £9,800 cash deposit made by Terence weeks later.
On that basis, the court was satisfied that:
- £9,800 originated from Miss Msomi (via Khaya);
- It was paid to Terence on the shared understanding that it would be used only to purchase a property for Mrs Morgan; and
- Terence therefore held that money on trust.
The court further held that any recovered money would be held by Miss Msomi on trust for Khaya, reflecting the true source of the funds.
Key takeaways
This case offers several important lessons:
- Intention alone is not enough: even clear evidence of purpose will not establish a trust without proof of beneficial ownership;
- Cash is risky: where large sums of cash are involved, courts expect compelling evidence of source;
- Family arrangements are scrutinised closely: informality does not excuse lack of proof; and
- Oral trusts are valid but hard to prove: success depends on credibility, consistency and documentation.
How can we help?
Amrik Basra is an Associate in our Private Litigation team.
At Nelsons, our team specialises in these types of disputes and includes members of The Association of Contentious Trust and Probate Specialists (ACTAPS). The team is also recommended by the independently researched publication, The Legal 500, as one of the top teams of specialists in the country.
If you have concerns about the above subject, don’t hesitate to get in touch with Amrik or a member of our expert Dispute Resolution team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form.
Contact usIf this article relates to a specific case/cases, please note that the facts of this case/cases are correct at the time of writing.