Case Note: Intra-family loans — advance and security not always enough

Case: Han & Han [2026] FedCFamC1A 54

This decision is a useful reminder that in famiyl law property proceedings, the real issue is not whether an intra-family loan exists. The real issue is whether it should actually reduce the pool available for division. Key to this is whether the quantum of the loan can be determined and whether there is a real likelihood of it being enforced.

The husband contended that he owed about $4.66 million to his parents and related entities. The advances were said to date back to 2003 and 2004 and were later documented, secured, and ultimately called up after separation. On one view, that looks like a conventional debt. However, the difficulty for the husband was not establishing that money had once been advanced. The difficulty was proving the amount said to be owing and, more importantly, that the debt was likely to be enforced in any meaningful way.

That distinction drove the result against the husband.

At [23], Austin J emphasised that the Court must take account of ‘the nature and circumstances of any liabilities’. That is the critical guiding point. The exercise is not a mechanical one. The Court is not required to give full balance sheet effect to every asserted debt merely because some form of obligation can be shown to exist. The Court is concerned with the practical reality of the liability and whether it is just for one party’s entitlement to be reduced by it.

In Han, the primary judge accepted that a liability existed, but was not satisfied as to the husband’s asserted quantum or the likelihood of enforcement. Austin J upheld that approach on appeal. His Honour agreed that, given the uncertainty as to quantum and the unlikelihood of enforcement, the debt ‘should not feature on the joint balance sheet’, because otherwise the wife would effectively share responsibility for it: [23].

The husband argued that, once the liability was accepted as real, it had to be included in the balance sheet and then adjusted out later. That submission was rejected. At [24], Austin J described that approach as a ‘pointless contrivance’. The Court is not required to go through an artificial accounting exercise if, on the facts, the better view is that the liability should not diminish the pool in the first place.

The later part of the judgment is where the practical guidance sits. At [34]–[36], Austin J rejected the proposition that the existence of security is determinative. Security will often point towards enforcement, but not always. The significant factual question remains the likelihood of enforcement. That, in turn, depends on the surrounding circumstances, including the identity of the creditor, the nature of the relationship, the form of the security and the history of any demand or recovery steps. These are useful factors to keep in mind. For example, a debt to a commercial lender secured by a conventional mortgage is one thing - while a debt to a close family member supported by less orthodox security is another. The Court will most certainly recognise the difference and assess the liability accordingly.

The above is consistent with the earlier authorities. At [32], Austin J referred to Biltoft as recognising that liabilities may be disregarded or discounted where they are vague, uncertain, unlikely to be enforced, or unreasonably incurred. At [37], his Honour referred to Af Petersens, where a debt to a parent was discounted despite some security because, although it was an obligation, it was not likely to have to be met. Those cases reinforce the same point: there is no rigid rule requiring all liabilities to be brought in at full value. Everything turns on the facts.

The brief discussion of Shinohara at [25] should be read in the above context. Austin J made clear that Shinohara concerned the impermissible addback of exhausted property, whereas Han concerned the treatment of an existing purported liability. It did not alter the orthodox approach. NB: for Western Australian readers, the future application of Shinohara will be interesting to observe, particularly given that Western Australia has not yet implemented all recent federal legislative changes the applied in Shinohara.

The overall takeaway is straightforward. A party seeking to rely on an intra-family loan needs more than documentation and a headline figure. They need to prove the amount and demonstrate that repayment is likely to be insisted on. Regular documented repayments over time would also go a long way in my view. Han serves as an excellent reminder of this.