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March 2014

Children's Bank Accounts

In a recent High Court decision, on appeal from the District Court, a claim was brought by children against their father to recover monies deposited into their bank accounts, such accounts being controlled by the father.

The background

The two children (at the time of the District Court hearing being aged 18 years and 15 years respectively) had been employed by the maternal grandparents on weekends and school holidays doing “odd jobs”. The father and the mother (who subsequently died) set up the bank accounts for the children. The children’s wages together with a gift from the maternal grandparents of $1,000 each were paid into the accounts. The accounts were operated by the parents “in an unconventional manner”. The parents used the accounts “for their own purposes” including their own share trading.

After the mother’s death custody and care of the children was awarded by the Family Court to the maternal grandparents. The children later learnt that the accounts had been closed by their father and that he had retained the funds. The father claimed that he was under no obligation to account to his children for the monies. He said that “he would be happy to pay each [child] $1,500 when they were more mature. He said that would occur when they were twenty”.

The District Court Judge held that the evidence was overwhelming that the father “has knowingly retained wages and gifts paid to the [children] by their maternal grandparents and has justified his retention of those funds by stipulating an age at which he is prepared to return the money. Put simply it is not his money and now the time has come for him to return it to his rightful owners”.

The father appealed the judgement.

The decision

The High Court dismissed the appeal finding that there was an express trust. The Court held “that if the terms upon which the person receives the money are that he is bound to keep it separate, either in a bank or elsewhere, and to hand that money to be so kept as a separate fund to the person entitled to it, then he is a trustee of that money”. On that basis the High Court found that the father was in breach of trust in failing to account for the money and he was liable for the misapplied funds.

Even though he was a parent, the father had clear legal obligations towards his children that he could not avoid.