SKNThe Family Law Act 1975 deals with adjusting the assets and liabilities of separated married and de-facto couples. A property settlement is not a “right”, but rather the court must consider if it is fair and reasonable in all the circumstances for a property settlement to take place at all.

If a property settlement is necessary, the court must consider what actually constitutes the assets and liabilities of the parties. Often the issue of liabilities becomes a vexed issue.  For instance, is money provided by parents a gift or a loan which must be repaid?  If it is deemed to be a gift was it made to one or both parties?  If the money is a loan, is the loan secured or unsecured? Ultimately was the payment of money an asset or a debt which should be included in the asset pool?

The 2010 case of Sulo & Colpetti concerned an 18 year marriage and a net asset pool of almost $1million.  The parties had 3 children.

There were a number of debts which were disputed. In particular the husband asserted that two sums of money advanced to him from his father during the marriage were actually debts owed to his father. The loans exceeded $380,000 in total.  The sum of $150,000 was used to purchase property in joint names.  The remaining money was applied by the husband to discharge mortgage debt on properties he owned.

The wife argued that the moneys from the father were gifts and should be factored into the asset pool.

The court agreed and determined that the moneys were not loans. The husband’s arguments failed for the following reasons:

  1. The husband’s father never actively sought for the loans to be repaid by the husband;
  2. The second loan agreement did not seek any interest to be repaid on the moneys and no moneys had been repaid by the husband;
  3. The statute of limitations applied at the time of the property settlement and the father was out of time in demanding his son to repay the moneys even if he wanted to;
  4. The son has signed an acknowledgement of debt after the statute of limitation period had expired.

It is imperative that loans are documented in such a way that they show the existence of an enforceable debt. This case highlights that you should seek the advice of a solicitor in regard to preparing documents such as a mortgage or a loan agreement whenever there is an advancement of significant moneys to family members particularly if you wish to try and protect that money from a marriage or de-facto relationship breakdown in the future.

Although a loan to a husband or wife, usually from a parent, may create a legally enforceable debt, if the obligation is not enforced and not likely to have been met, it may not be deemed a loan for family law purposes.

At Everingham Solomons we have the expertise and experience to assist you with all property matters because Helping You is Our Business.

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