Gill & Anor v Brar & Anor

Whether a payment towards a property purchase is a loan or satisfaction of an existing debt depends on the parties’ agreement, assessed from the contemporaneous documents, surrounding circumstances and credible evidence. Documents prepared to satisfy a mortgagee do not necessarily record the parties’ true bargain, particularly where their factual premise is known to be false. A purported set-off involving substantial or uncertain liabilities is less readily inferred where the alleged debts were corporate liabilities, investment contributions or amounts not yet due. The court may reject a set-off case where it is unsupported by a clear agreement, inconsistent with subsequent dealings and contradicted by the parties’ positions in related litigation.

The claimants contributed £477,552 towards the defendants’ purchase of Barford Grange. The claimants contended that the contribution was an unsecured loan which had to be repaid. The defendants contended that it represented the settlement or set-off of debts allegedly owed by the Gill family.

The dispute was tried as a conflict of evidence. The court considered the parties’ dealings before and after completion, documents produced for the prospective mortgagee, alleged business and corporate liabilities, subsequent refinancing discussions, and the defendants’ statements in possession and unfair prejudice proceedings.

1. Outcome. The defendants’ case was rejected. The claimants’ contribution of £477,552 towards the purchase of Barford Grange was an unsecured loan, and the claimants were entitled to its return.
2. The alleged set-off agreement was not established. The defendants’ schedule included alleged personal loans, business investments, corporate liabilities and sums said to be due from companies. Several liabilities were not personal liabilities of the Gill family, and the evidence did not establish any agreement by which the family assumed them.
3. The court found that the documentary evidence and witness testimony did not support an agreement to set off unspecified debts. Such an arrangement was inherently implausible given the amount involved, the uncertainty as to the debts said to be covered, and the defendants’ own practice of keeping records of sums allegedly owed.
4. The February acknowledgement, May affidavit and contractual addendum were not reliable evidence of a set-off agreement. Their factual premise was untrue and they were produced in the context of satisfying the prospective mortgagee about the source of the deposit. The contractual addendum was not signed by the claimants and did not record an agreement between the parties.
5. The parties’ subsequent conduct was inconsistent with the alleged set-off. The claimants continued to seek refinancing and a purchase of the property at a price taking account of their contribution. The defendants’ correspondence and related litigation treated significant alleged liabilities as remaining unpaid.
6. The court placed limited reliance on the defendants’ evidence, which was materially implausible and inconsistent. The evidence of Mr Banga and Mr Mander was accepted where relevant. The claimants’ evidence was treated with caution, but was more credible than the defendants’ account on the central issue.

Not stated in the judgment. The judgment refers to earlier possession proceedings and an unfair prejudice petition involving related parties, but this was a first-instance trial of the repayment claim.