The liability of a mortgage is probably one of the most significant liabilities a couple will share. Whilst many times it’s a fairly equal distribution of that liability when everything is held jointly, it’s not always the case in circumstances of second/later relationships or a singular income earner and home maker.

The recent decision of Young v Martin [2020] WASC 442 highlights just how difficult this issue can become. The deceased was survived by a defacto spouse (the plaintiff) and two minor children (16 and 14) from a previous relationship. The estate was worth approximately $250,000, with liabilities of approximately $160,000.

In this case, the surviving defacto of the deceased made a few claims against her late partner’s estate, including a family provision claim, claim for repayment of a loan and a claim in contract for the value of the mortgage left over the property they held as joint tenants.

By way of background, the deceased and his partner had been together for 5 years and kept many of their finances separate. Importantly, when it came to their jointly owned property, one of them would pay for one utility and the other for the other utilities accounts. When they purchased the property, the deceased contributed half the purchase price by obtaining a bank loan and his partner contributed her half with proceeds from her earlier divorce. A joint application for the bank loan was made and the mortgage secured over the jointly held property. It was allegedly agreed between the deceased and his partner that the deceased would service the loan solely.

When the deceased passed away, the defacto received the property by right of survivorship, as the surviving joint tenant, and continued to pay the loan whilst the matter was disputed with the executor and subsequently the Courts.

The defacto sought orders from the Court that there was a contract between her and the deceased regarding the payment of the mortgage and that the mortgage debt should be paid by the deceased’s estate. The Court dismissed the claim.

In dismissing the claim, the Court explained that it was not sastified that there was any express or implied contract as there was no intention to create a legal relationship.

The Court noted that the same evidence that displaced any express contract finding also resulted displaced any implied contract finding. The Court noted that the couple had split expenses, including major expenses such as rent from their separtely owned investment properties and did not pool income from their employment or pool their property.

In considering equitable principles, the Court said:

In my opinion, equitable principles would not require the estate to discharge the obligation of Mr Jones to pay the mortgage where it relates to property which is not part of the estate.  It might have been different were the estate claiming a benefit from the payments made by Ms Young (for example, had the parties held the Warnbro Property as tenants in common).  In that case, contribution would prevent the injustice that would otherwise flow to Ms Young by the estate being enriched at her expense, where she and Mr Jones had a common obligation to meet the liability which she alone now must meet.[40]

Para 93.

The Court also dismissed the family provision claim by the deceased’s defacto on the basis that she received $175,000 from the deceased’s superannuation benefits and that provision was not necessary from the deceased’s estate, which the Court noted was an estimated a very modest $100,000.

You can read the full judgement here.

A huge thanks to one of my lovely students in the College of Law’s Masters of Applied Law (Wills & Estates) post graduate specialisation program that brought this case to my attention. Maree, you’re a gem!

2 replies on “Leave ’em a loan: Liability to pay mortgage left with joint tenant

  1. oh no – there seems to be a glitch with your blog, when I clink on the link it says “coming soon”…. Libby Skipworth

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