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WIFE ACCUSES HUSBAND OF MINIMIZING THE POOL ASSET

Alcorta & Badami [2020] FCCA 3427 (16 December 2020)

This is a property proceeding where the court determines if funds advanced to the husband by his father before the relationship should be treated as a loan or a gift which minimizes the pool asset of the parties.

Facts:

The husband says that his father loaned him $312,000 in 2007 to assist him to finance the purchase of the former matrimonial home at C Street, Suburb D (“the C Street, Suburb D property”). The husband annexes the loan agreement between him and his father that was signed in 2007.

The husband says that on or around 23 July 2013 his father demanded that he repay part of the loan, the demand being made orally and in person, and that as a result he withdrew two sums from his Westpac Rocket Deposit account being $3077.18 and $1,000.

The husband’s father has advanced other sums to the husband by way of gift. He gifted approximately $41,000 to the husband towards the purchase of the G Street, Suburb H property. He gifted another $40,000 shortly before the husband moved into the C Street, Suburb D property which the husband used to purchase household items and pay for minor renovations.

The husband says that he is obliged to repay the loan to his father as his father is now 74 and the business has been significantly affected by COVID-19. The business has only been able to trade for a few months of the year due to the lockdown and restrictions in place in Melbourne for several months.

The wife challenged the legitimacy of the loan executed in 2007. The wife submits that she believes the husband has asserted this loan exists in order to minimise the pool and any payment to her. Her argument is that the husband’s father does not require the husband to repay the sum and is only saying he will for the purposes of the proceedings.

Issue: Should the loan be treated as a gift?

Law:

Analysis:

The court accepts the evidence of the husband’s father that he gifted the amounts of $40,000 and $41,000 respectively as he could afford those sums at the time. However, the court also accepts the husband’s father’s evidence that he was not prepared to advance the larger sum without a loan agreement reflecting the fact that he wanted to be able to call on that loan if he needed to.

It is credible that in a family arrangement parents may decide to gift some sums of money to an adult child to buy property and to require some of the money to be repayable if the need arises. The $312,000 sum was indeed a loan, not a gift and that the husband’s father now wants it repaid. This is particularly so considering the fact that the husband’s parents run a small family business, which like many businesses, has been adversely affected by COVID-19 and also considering the husband’s father is of an age where he could retire.

Conclusion: The Court orders that the sum of $307,922 be repaid from the proceeds of the sale of the matrimonial home.

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