Brasher v O’Hehir [2005] NSWSC 1194

This was a case in which the parents of a couple, the O’Hehirs, made two separate payments to their children during the marriage. After the marriage disintegrated the parents, the Brasher’s, sought to recover the payments made as loans. In this rather unique family arrangement, Mr Brasher was the father of Mrs O’Hehir and Mrs Brasher was the mother of Mr O’Hehir.

The Brashers said the payments were loans made to help the couple purchase a home and pay off a car loan. They claimed the first loan was secured by an equitable mortgage over the O’Hehir’s home. The issues raised were whether the payments were gifts or loans, who were the parties to the loan agreements, and whether the O’Hehir’s home was security for the first loan. 

Justice Brereton found it was beyond coincidence that the amount of the first payment corresponded almost exactly with a shortfall in the purchase monies for the house. The payment was made into the couple’s joint bank account. His Honour was clearly persuaded by the fact that at the time of making the payment Mr Brasher prepared a written schedule of repayments. Although their recollections differed in the details, both Mr Brasher and Mr O’Hehir recalled conversations they had at the time in which repayments were discussed. During those conversations Mr O’Hehir said that the house would not be sold without the money being repaid. The wife denied she was present at any of these conversations and denied knowledge of the loan. His Honour accepted her evidence in finding (at [33]) that she was not a party, even though she benefited from the loan.

The evidence when taken together convinced his Honour that the first payment was not a gift but a loan. His Honour concluded

The loan agreement included a term to the effect that repayment of the loan was to be secured against the O’Hehir’s house.  It was accepted that an oral agreement to give a mortgage may be enforced in equity and is not rendered void by the Conveyancing Act 1919 (NSW),  [Baloglow v Konstantinidis (2001), Khouri v Khoury [2004]. However, as Ms O’Hehir was not a party, the security only affects Mr O’Hehir’s interest. 

The second payment by the Brasher’s was used to discharge a pre-existing joint obligation to St George Partnership Finance in the form of a car hire purchase contract. The St George loan contract made clear that the O’Hehirs were joint debtors. The Brashers, by paying out the hire purchase contract, had relieved the O’Hehirs of their obligations to St George. His Honour set out the relevant principles of restitution, as follows

The payment of another’s debt is, for the purposes of the law of restitution and quasi-contract, an incontrovertible benefit only if it discharges the debt, which will be the case if the payment is made on account of the debt at the request of, or is adopted by, the debtor [Belshaw v Bush (1851) 11].  In those circumstances, an obligation by the debtor to reimburse the payer arises if the debtor has requested the payer to make the payment, but not otherwise (except where a payment is made under compulsion) [Owen v Tate [1976] QB 402].  This is because a promise to reimburse is implicit in the request to make the payment [Stokes v Lewis (1785) 1 Term Rep 20; 99 ER 949 (Lord Mansfield CJ); Birmingham & District Land Company v London & North Western Railway Company (1886) 34  (Cotton LJ), 274 (Bowen LJ)).  The law imputes, from the circumstances of a request to make a payment to the third party, the common intention of the requestor and the payer, that the payer be indemnified by the requesting party [Eastern Shipping Company Ltd v Quah Beng Kee [1924] AC 177 (Lord Westbury)].  For this purpose, it will be enough if the debtor requests or adopts the payment in circumstances that he or she knows that the payer was making the payment in the expectation of being repaid  [Falcke v Scottish Imperial Insurance Company (1886).

While a voluntary and unrequested payer of a debt has no common law restitutionary claim to reimbursement, equity recognises such a claim arising through subrogation to the creditor’s rights, if the debtor validly applies the money advanced to the discharge of its debt [Re Cleadon Trust Ltd [1939] If a debtor adopts the payment by the third party by applying it in discharge of the debt, then the debtor’s conscience is bound by the knowledge that the payer made the payment not as a gift, but with the intention of being repaid, even though unsupported by a promise express or implied, because adoption of the payment with knowledge of the payee’s intent creates an equity to reimbursement [Re Cleadon Trust Ltd, and see generally the discussion by IM Jackman in The Varieties of Restitution, Federation Press

His Honour found that there was an obligation to repay the loan, as follows

In this case there was a request, at least by Mr O’Hehir, to make the payment, accompanied by not only an implied but an express promise to reimburse.  From the conversation between Mr O’Hehir and Mr Brasher, it is plain that the motor vehicle advance was not intended to be a gift.  Ms O’Hehir knew that the obligation to St George was being discharged by the Brashers, because she provided details of the payout figure to Mrs Brasher.  Ms O’Hehir did not assert that she believed that this payment was a gift, and Mr Brasher’s version of their recent telephone conversation, in which she said that David had said that the loan was in respect of a car and a boat, but nothing about a house – suggests that she had some knowledge of a loan about a car.  Ms O’Hehir, as well as Mr O’Hehir, benefited from this advance, because it relieved her of her obligation jointly with Mr O’Hehir to St George.  Moreover, they both unquestionably adopted the payment and applied it to the debt: they did not thereafter maintain payments on their own account to St George, treating their obligation as having been discharged; and they traded in the motor vehicle, free of the hire purchase encumbrance to St George, and purchased a replacement, which replacement Ms O’Hehir retains to this day.

Restitution from the wife as well as the husband was available in equity if not common law, as a result of her having taken the benefit of the transaction with knowledge that it was not a gift (absent any evidence to the contrary).

As to costs, although the wife succeeded in proving she was not a party to the home loan she never conceded either that there was a loan to the husband or that it secured his interest in the house (which had a bearing on the pool of assets to which she could claim an entitlement in Family Court proceedings). As a result, his Honour found it would be unjust for the husband to bear the whole cost of proceedings and held that she share the costs to a maximum of $15,000, having regard to the relatively small amount recovered by the plaintiffs.

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