The appellant and her now deceased husband owned three properties on which they conducted farming operations. In 2010, one of those properties was transferred to their eldest adult son, the respondent. The other two properties were transferred to their two other children, but the respondent was allowed to rent the two properties for a term of 5 years without having to pay so that he could maintain the business.
The appellant gave her son $267,237 to enable him to discharge the overdraft liability he would have to take on in receiving the property. The liability was to the value of $220,000 so the remainder of the loan he could use as working capital.
The appellant contended this loan of $267,237 was repayable after 5 years and was made at an annual interest rate of 8%. The existence of this loan was the first point of contention in these proceedings.
Was there a loan?
The appellant commenced proceedings in 2018 seeking recovery of the principal and interest on the loan. She relied on evidence from her accountant who was present at the meeting in which the alleged loan was made, which outlined the terms of the loan, as being repayable in 5 years with an interest rate of 8%, consistent with the appellant’s plea of the oral agreement. These terms were accepted by the court on appeal as constituting the terms of the loan due to the corroboration by the accountant .
The respondent denied there was a loan made, partly on the basis that he did not understand what he was entering, as was held by the primary judge. On appeal it was found the primary judge perhaps incorrectly, in this context, considered the actual state of mind of the parties at the time of the negotiations resulting in the contract, rather than giving weight to the conduct of the parties. There was evidence including a letter sent out by Philip’s solicitors and his tax returns, conduct demonstrated Philip did understand the loan was being made. The appellate judges held Philip did understand the concept of a loan and overdraft based on his actions .
As can arise in many similar situations, a secondary issue in this case was whether the limitation period to bring this claim had expired, only at issue provided there was a loan agreement. The respondent contended the claim made had exceeded its limitation period, however the appellant had made repayments from the respondent which she contended constituted confirmations of the debt. The last of these payments was made in 2014. This had the effect of postponing the commencement of the limitation period of that action, meaning her claim was not outside its limitation period.
Ultimately, it was held there was a valid loan agreement between the two parties and a judgement was made for the appellant and the respondent was required to pay $250,000 plus interest at 8% from 2014, the last time a repayment, by the appellant, was made.