HUSBAND’S FORMER WIFE ASSERTS THAT THE MONEY GIVEN TO THEM BY THE HUSBAND’S PARENTS WERE GIFTS AND NOT LOANS
Belasco & Belasco & Anor [2020] FCCA 3078 (13 November 2020)
This case involves the husband and the husband’s mother asserting that funds advanced by the Applicant’s parents is a loan required to be repaid. The former wife on the other hand asserts that the amount received must be treated as gifts and not loans.
Facts:
The First Respondent is the Applicant’s former wife. The Second Respondent is the Applicant’s mother. The Second Respondent was added as a party to the proceeding pursuant to an Application in a Case filed by her. She seeks an order to reclaim, prior to any distribution to the parties, an amount of approximately $200,000 that she says she loaned to the Applicant.
The Applicant contends that various sums of money advanced to him and/or the parties by his parents should be treated as loans which he is obliged to repay. The Applicant’s mother, the Second Respondent, gave evidence in support of this contention, as did Mr Madafferi, a solicitor who was engaged to draft a written loan agreement between the Applicant and his parents.
The First Respondent disputes that the amounts advanced were loans. She submits that, to the extent monies were received, they should largely be treated as gifts to the parties.
The Applicant produced to the Court a document entitled ‘Loan Agreement’ made between the Applicant and his parents. The Loan Agreement discloses, among other things, that the lenders give to the borrower ‘(inclusive of the current advance, past advances and debts) the sum of TWO HUNDRED THOUSAND DOLLARS ($200,000) ’
Issue: Are the funds advanced by the Applicant’s parents to the applicant and first respondent be considered as loans?
Held:
The Loan Agreement is expressed to be a loan for $200,000 covering past advances, a current advance and future advances. The Applicant’s own evidence, however, is that he had already received, at the time of the execution of the Loan Agreement, sums in excess of $200,000 from his parents. The Loan Agreement is relied on as evidence of a genuine loan arrangement, yet it does not accurately record the amounts said to have been advanced as loan amounts at the time of its execution. Further, it purports to cover further unidentified advances notwithstanding the loan amount of $200,000 had already been exhausted, according to the Applicant, at the time it was executed. During the hearing, it was put that what was intended was that the Loan Agreement was to operate as a cap of $200,000 owing to the Second Respondent, irrespective of whether she advanced amounts in excess of that. The court considers it to be a convenient reconstruction of events. It is not a construction supported by the terms of the Loan Agreement. It also fails to take account of the fact that the Second Respondent in her affidavit asserted, at least initially, that advances she made between 2015 and 2018 were also required to be repaid.
In the court’s view, such vagueness and ambiguity around such a critical term as the amount loaned does not bespeak a genuine loan agreement.
Conclusion:The court finds that none of the amounts advanced by the Applicant’s parents to him were loans. Whatever was paid to the Applicant was not paid to him in the expectation that he would repay it.
