Lending Money to Friends? Don't Act Without Professional Advice

29th November 2021 By

The emotional element involved in lending money to friends and loved ones makes it all the more necessary to first seek independent professional advice. A case on point concerned a businessman who lent a small fortune to a close friend but had to launch High Court proceedings to get part of his money back.

Over some years, the businessman lent substantial sums to his friend, who had encountered financial difficulties. A loan agreement was eventually signed by which the friend agreed that a consolidated debt of £705,000 should be secured by way of a second charge against a residential property he owned.

The debt was repayable on demand and subject to interest at a rate of 1.5 per cent a month. The property was later sold and, after a mortgage debt to a bank was repaid, the net proceeds, which came to £426,608, were paid into court. The businessman claimed entitlement to that sum, plus accrued interest.

In resisting the claim, the friend asserted, amongst other things, that he had been tricked into signing the agreement. He claimed that he had only been given the final page of the agreement to sign and that he had been massively naïve in executing a commercial document without first carefully checking its contents.

Rejecting those contentions, however, the Court found that he had the opportunity to view the agreement and other documents before signing them in the presence of a solicitor. Copies of the documents were later emailed to him and they accurately represented the accord that the two men had reached. The friend was thus bound by the agreement and the charge over his property.

The Court was not in a position to calculate the precise sum owed by the friend but was satisfied that it exceeded the amount of the net proceeds of sale and accrued interest. It therefore ordered the money in court to be paid out to the businessman.

Source: Concious

Latest News

Award That Requires Borrowing Made Into Court Order

17th May, 2024 By

Disagreements between separating couples all too often result in litigation that substantially reduces the assets available to them, as was illustrated by a case that recently reached the High Court. At issue was whether awards made by arbitrators in financial remedy proceedings can be made into court orders even if that would require one of the parties to borrow money. The couple had previously had a relationship lasting a few years before resuming their relationship in 2015. They had two children before separating again in 2019. Following their separation, the...

Inheritance Disputes – Costs Risks Can Be Reduced

15th May, 2024 By

Arguments about what someone promised before their death can lead to significant legal costs. However, if faced with a claim against the estate, there may be steps the beneficiaries or executors can take to reduce the risks, as a recent High Court case illustrated. A man had left a farmhouse and agricultural land in Cornwall to his wife, with whom he had also jointly owned a neighbouring area of land. After his death, one of the couple's daughters and her husband claimed that he had told them he wanted them...

Share Rounding Error Does Not Prevent CGT Relief

13th May, 2024 By

There are often very specific rules that must be complied with in order to claim tax reliefs, but if a small mistake arises, the courts may be able to provide assistance. In a recent case, the First-tier Tribunal (FTT) found that an investor was entitled to Entrepreneurs' Relief on the disposal of his shares in a company, despite owning one share fewer than he needed to qualify for it. The investor had agreed to purchase 5 per cent of the shares in the company for £500,000. He wished to own...

Wife Entitled to Maintenance Until Sale of Family Home

10th May, 2024 By

When divorcing couples disagree on how assets should be divided, the courts will seek to arrive at a fair outcome for both parties. In deciding how the proceeds of sale of a former couple's home should be apportioned, the Family Court agreed with the wife that she should receive maintenance payments until the sale took place. The couple had married in 2006. Following a brief separation, they had reconciled for two years before finally separating in 2022. The husband and wife both contended that they should be entitled to about...