Adam Jonathan Durrani & Anor v Charlotte Justine Coe & Anor

Where money is transferred in circumstances said to constitute a loan or gift, the court determines the parties’ intention from all the evidence on the balance of probabilities. A reversal of the evidential burden has practical significance only where the competing explanations are equally probable.

A loan may be enforceable on terms inferred from the parties’ communications and conduct, even where no written agreement exists. The court may infer repayment dates and interest terms, but will not infer a binding obligation to grant security over property without sufficiently clear agreement. Separate legal personality prevents a company’s loan to one individual from imposing liability on another absent evidence of agreement.

The claimants sought repayment of various sums transferred to Charlotte Coe and Andrew McCourt. The transfers were said to comprise loans, while some payments were said by Ms Coe to be gifts. A payment was also made by Sound & Vision Limited, a company controlled by Mr Durrani, directly to Mr McCourt.

Mr McCourt had become bankrupt and did not participate in the trial. The court considered whether the proceedings should be stayed, whether the burden of proof shifted where receipt was admitted but a gift was alleged, whether any loan was affected by Law of Property (Miscellaneous Provisions) Act 1989, and the terms and recipients of the alleged loans.

1. Proceeding despite bankruptcy. The court declined to stay the claims against Mr McCourt. The Defence adequately identified his position, the trustee in bankruptcy had not applied for a stay, and determining the claims would promote the overriding objective and avoid duplication. The power under section 285 of the Insolvency Act 1986 was discretionary.
2. Burden of proof. The court accepted the principle in Seldon v Davidson that, where receipt of money is admitted and a gift is alleged, the burden may shift to the recipient. That issue had no practical effect here because the evidence did not make the competing explanations equally probable.
3. Loan terms. The £150,000 transfer and the later transfers were loans jointly made to Ms Coe and Mr McCourt. The agreed terms were repayment on the earliest of a favourable litigation settlement or 12 months after the loan, and in any event on sale of the property. Interest was payable at 12 per cent per annum, subject to waiver. The loans were not repayable on demand and were not secured by a binding agreement over identified property.
4. Characterisation of payments. The £6,000 cash payment, if made, was a gift towards a family holiday. The £11,449.21 transferred in 2020 was also intended as gifts. The £50,000 paid by Sound & Vision was a loan solely to Mr McCourt. Ms Coe was not liable because there was no evidence that she had contracted with, or agreed liability to, the company.
5. Ms Coe and Mr McCourt were jointly liable for £150,000 and £135,245.03 in respect of the 2017/2018 transfers. Mr McCourt was liable to Sound & Vision for £50,000. The parties were invited to agree the consequential order, costs and ancillary matters.