A $1.57 million debt arising from the transfer of a Manawatu family farm to the next generation was presumed forgiven, until son and daughter-in-law separated and the High Court was asked to rule on the debt’s status. Daughter-in-law Tania Booth said reviving the debt reduced the value of her relationship property claim.
A farm at Opiki, south of Palmerston North, has been in Booth family hands for three generations. Current owner, Jason Booth, assumed ownership from his parents in 2011. This deal saw Jason paying $4.2 million funded in part by a $1.57 million loan from his parents. This loan was repayable on demand and interest free, with a provision for interest if demanded to be payable at the current rate on government stock.
The High Court was told of family discussions signalling that the loan would never be called up; the debt did not appear in Opiki farm accounts. When Jason and Tania separated in 2016, there was a flurry of activity. Farm accounts were re-cast to now include as a liability the $1.57 million owed Jason’s parents.
Tania said forgiveness of the $1.57 million debt was part of a ‘nuptial settlement.’ It was intended to assist family finances, to the continuing benefit of Jason, Tania and their family. She asked the High Court to cancel the debt under the Family Proceedings Act. If it was a nuptial settlement, said Associate judge Johnston, any understanding that the $1.57 million loan would not be called up applied only whilst the marriage continued. The loan was enforceable once the marriage ended.
Booth v. Booth – High Court (25.09.19)
19.171