Permanent Custodians v Petrovska [2015] VSC 42

A mother took out a loan to benefit her son and daughter-in-law’s father. The loan went into default and the lender sought possession. Possession proceedings were then settled on terms which gave the lender the benefit of a judgment for possession if the sum agreed to discharge the mortgage was not paid by a certain date. The borrower then sought to be indemnified in respect of her liabilities to the lender and in respect of her legal costs by her son (to the extent of 20%) and daughter in law’s father (to the extent of 80%), accordingly to their respective shares of the loan proceeds and default judgment was entered. The borrower asked the court for her judgment against her family to be enforced prior to the lender’s judgment against her.

The court noted that the lender’s position was unaffected by whether the court granted leave to the borrower to enforce her third party judgments because settlement between the lender and borrower was not conditional on the borrower enforcing any judgment and was independent from all dealings between the borrower and the third parties. The court also noted that best advantage could be taken of the settlement reached with the lender if the borrower had the opportunity to recover the debt from the third parties in order to pay out the lender under the deed of settlement and gave leave for this to happen. 

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