Tuesday, July 19, 2022

Real (love)** and Money (and sham transactions)

For those interested, following recent posts, the High Court further explored the issues in relation to shams, rejecting the argument that ‘real money’ must change hands before a loan is said to exist in the case of Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55.

In reaching this conclusion the court confirmed that the critical aspect was that there was no evidence to suggest that the parties to arrangements were not intending for any outcome other that what was documented.

This was despite the fact that what was essentially a round robin of transfers was evidenced with documentation only.

The decision also see the High Court provide a succinct definition of a ‘sham’, as ‘steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences’.

As explored in other recent posts therefore, in relation to a gift and loan back arrangement, properly drafted and validly signed promissory notes, loan and mortgage documents should therefore be legally effective.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** for the trainspotters, the title today is riffed from John Lennon song the surviving Beatles worked up during the Anthology project.

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