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21 July 2017

Of course we have to pay daddy back

Family Law
Federal

Asked

Hello,

I have a s 79 property matter – acting for the husband. The wife states that her father is owed a large sum of money through payment of expenses relating to the wife’s business. Our client is largely removed from the business and was unaware of the debt to the father.

The father has now filed and served a statement of claim out of the Supreme Court in relation to the debt claiming there is a charge over the real property from which the business operates.

We are worried about two concurrent proceedings and seek your input as to what we should do next. Do we go to the Supreme Court or continue in Family Court, probably under Part VIIIAA Family Law Act 1975?

Any idea as to the best way to structure orders?

Kind regards

Answered

Thank you for the question.

We assume the wife is the defendant to the Supreme Court proceedings. The proceedings may be tactical – the wife may have been advised that it will be harder for your client to dispute the debt if there are proceedings on foot to enforce it. Whilst that’s not technically correct, Supreme Court proceedings do add a level of complexity to the family law matter.

The first step if not already done it is to request discovery of all documents in relation to the funds alleged to be a loan. This ought to include the filed court documents, bank statements evidencing the payment and receipt of the funds and the application of the funds, any loan agreement, balance sheets entries, documents in relation to the charge and any communications such as emails in relation to those payments, including any communications with the accountant and anyone else in the business who may have been aware of the loan.

What is sought is for them to disclose documents contemporaneous with the provision of the money, not just things that have been prepared after the fact to try and reduce the property settlement by reducing the value of the business. Just because there is documentation does not automatically mean that the court will accept the liability. See the below two cases in which a retrospective deed and a mortgage were not accepted by the court.

Bircher & Bircher and Anor [2016] FamCAFC 123

Liakos & Zervos and Anor [2011] FamCA 547

Once discovery is complete and the material provided has been assessed, it might be prudent to seek advice from the counsel who is briefed for the family law matter as to the best course of action to take. We suggest joining the father to the proceedings and seeking a declaration about the existence or non-existence of the debt and who should be responsible for its repayment is the action to take.

The above cases can also be useful as examples of orders which can be sought if instructed to join the third party father.

Regards

Mentor