Successful Trial Result | Obligation to Repay Loan Upheld
A Trial has concluded with Kangs Solicitors successfully representing our client who seeks to recover a substantial sum of monies which he had loaned to his former son-in-law who denied that the monies had been paid to him by way of a loan.
Stuart Southall comments on the legal arguments raised and the successful outcome.
Our Client’s Case
Our client sought recovery of monies loaned by way of a series of bank transfers to his former son-in-law (‘the Defendant’) and based his claim upon the legal principle established by Seldon- v- Davidson, which was reaffirmed by the case of Volpi-v-Volpi.
Throughout the proceedings, the Defendant denied the indebtedness relying upon the following defences:
- ‘Presumption of Advancement’
- The monies were paid by way of a gift,
- He was merely a conduit receiving the monies for the benefit of another,
- The monies were simply transferred to reimburse ‘notional’ rent’ levied against his former wife, our client’s daughter,
- Our client had been creating a ‘phantom tax liability’.
Applicable Legal Principles
It is an established legal principle that where a person has advanced money to a non-immediate family member in circumstances where the payment is not clearly declared to be a ‘gift’, such payment should be treated as a loan repayable on demand.
In the absence of a written Formal Loan Agreement, the existence of which would clearly be beneficial, the law recognises that it is not always practical for such a written document to be properly concluded and will consider the circumstances upon which the money was advanced.
If the party advancing the money can show that:
- there had been a discussion between the Parties, and a specific representation made concerning, for example, the intended use of the funds,
- the monies were paid by the paying party to the other, and
- the payment was not by way of a Gift
then the evidential ‘Burden of Proof’ required by the Court falls upon the recipient of the funds to refute a Presumption that they were paid by way of a repayable loan.
Failure to rebut this Presumption will, more likely than not, result in any denial of liability failing.
However, in circumstances where the person from whom repayment is being sought is an immediate relative, such as a child, the ‘Common Law’ of England and Wales acknowledges that parents frequently offer financial support to a child(ren).
The fact that a ‘child’ may be an adult does not extinguish this presumption as decided in the decisions of Kelly -v- Kelly (2020) EWHC 3930 (QB) and Re: Karl Eric Watkin Wood and another (as the joint trustees in bankruptcy of Karl Eric Watkin) v Watkin (2019) EWHC 1311 (Ch).
In these circumstances, the burden would vest back with the lender of the monies to show that the transaction was indeed a loan, to which no presumption applied.
The Successful Outcome
As a part of the preparation for Trial, the parties disclosed the documents available pursuant to Part 31 CPR.
The documents produced by our client showed that:
- his bank statements evidenced monetary transfers to the Defendant,
- he had access to an account belonging to the Defendant which accorded with terms reached and representations made by the Defendant at the onset of the agreement,
- he took steps in accordance with the terms of the agreement reached with the Defendant, and nothing more.
Whilst, during the course of a Trial, the Court will consider oral evidence provided by witnesses, it will generally accept, on face value, the contemporaneous documentation disclosed.
The documentation produced by our client resulted in the Court accepting every element of his case, rendering his claim totally successful.
Additionally, as a sensible constructive step to try and avoid the need for a fully contested Trial, our client had proposed a Part 36 Settlement Offer which the Defendant had rejected.
This resulted in our client being entitled to a 10% mark up on the sum which he was seeking together with Indemnity Costs, meaning that his full costs outlay fell to be reimbursed to him, plus Indemnity Interest.
Naturally, our client was absolutely delighted with this highly successful result achieved by the team at Kangs Solicitors.
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