Hypotheticals by Manny Wood Published in the Coffs Coast Advocate on 16 March 2019.

Brothers, Raymond, Donald and Eric establish a company together known as Brown Laundry Pty Limited.

The brothers look-into purchasing a property from which to run the business.

The brothers find a suitable property and their company pays the deposit.

To finance the balance of the purchase price, loan and mortgage documents are signed by the brothers.

However, Raymond had previously been in financial difficulties and Eric was facing an imminent divorce. The brothers therefore decide to register the property in Donald’s sole name.

Over the next 20 years, the brothers operate the family business on the property.

Brown Laundry Pty Limited makes many of the mortgage repayments and Eric also makes many of the repayments himself.

When the brothers decide to close the business and sell the property, a dispute arises regarding who is entitled to a share of the proceeds of sale.

Unfortunately, the brothers cannot resolve the dispute amongst themselves and proceedings are commenced in the Supreme Court of New South Wales, although Raymond does not participate.

Brown Laundry Pty Limited claims that Donald holds a share of the property on “resulting” trust for the benefit of the company due to the payment of the deposit and mortgage repayments.

Eric also claims that Donald holds a share of the property for him on the basis that he also made mortgage repayments.

Ultimately, the court is only willing to find that Brown Laundry is entitled to 10% of the proceeds of sale, based on its payment of the initial 10% deposit. The court rejected that the company’s claim that its mortgage repayments should result in an entitlement.

However, the court found that because Eric was a party to the loan agreement and because he made some repayments, he was entitled to an order in his favour, amounting to 31% of the net proceeds.

If you would like Manny to address a particular legal issue, send your request to manny.wood@ticliblaxland.com.au or call him on (02) 6648 7487.