Family Loans

The informality associated with loans between family members can lead to later disputes when different interpretations of the transaction emerge. Warin v Warin is a case in point. In that case $367,903.90 was advanced to the Warins’ daughter. The loan comprised:

  • $100,000 that was initially secured by mortgage in 1997
  • $141,749.70 that was loaned to meet the daughter’s GST liability and was to be repaid when the GST refund was received (repayment on this basis did not occur)

23 smaller loans totaling $126,154.20
There was no dispute about the amount owed. The Warins’ daughter did not allege any of the advances were gifts. Rather she argued that:

  • The loans were made by her parents’ trusts
  • The loans were not repayable on demand
  • If repayable no valid demand had been made

The daughter said repayment was contingent on her “situation”.
The court considered the circumstances of all of the loans and was satisfied that all advances were made by the Warins personally. The court also found the advances to be repayable on demand and that demand had been made; accordingly summary judgment was entered in respect of the total amounts advanced. As the loans were not documented there was no evidence regarding interest. Nevertheless, the court awarded interest at the Judicature Act rate of 5% from the date formal demand was made.
The case highlights the risks when loans are not recorded in writing and all loan terms agreed.

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