First Mortgage Custodians Limited v Herbert - [2022] NZHC 507

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2021-441-38

[2022] NZHC 507

BETWEEN
FIRST MORTGAGE CUSTODIANS LIMITED
First plaintiff

FIRST MORTGAGE MANAGERS LIMITED
Second Plaintiff

AND

ANTHONY JAMES HERBERT and

STEPHEN PETER LUNN as trustees of the Thackery Trust

First Defendants

ANTHONY JAMES HERBERT and ELIZABETH LILLIAN HERBERT as

trustees of the Herbert Pukawa Trust Second Defendants

ANTHONY JAMES HERBERT, FIONA HERBERT and

STEPHEN PETER LUNN as trustees of the A J and F Herbert Family Trust

Third Defendants

MALCOLM HERBERT and

STEPHEN PETER LUNN as trustees of Avenue Road Trust

Fourth Defendants

ANTHONY JAMES HERBERT and

STEPHEN PETER LUNN as trustees of Charles Street Trust

Fifth Defendants

MALCOLM HERBERT
Sixth Defendant

ANTHONY JAMES HERBERT

Seventh Defendant

FIRST MORTGAGE CUSTODIANS LIMITED v HERBERT [2022] NZHC 507 [22 March 2022]

MAH ENTERPRISES (FIJI) LIMITED
Eighth Defendant

MALCOLM HERBERT and
STEPHEN PETER LUNN as trustees of Thorn Place Trust
Ninth Defendants

CIV-2021-441-43

BETWEEN

FIRST MORTGAGE CUSTODIANS LIMITED
First Plaintiff

FIRST MORTGAGE MANAGERS LIMITED

Second Plaintiff

AND

ANTHONY JAMES HERBERT and FIONA HERBERT and

STEPHEN PETER LUNN as trustees of the AJ and F Herbert Family Trust Defendants

Hearing: 6 December 2021

Appearances:

D M Fraundorfer for plaintiffs in both proceedings

D J O’Connor for defendants in all proceedings other than for Fiona Herbert
G Richards for Fiona Herbert

Judgment:

22 March 2022

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

Introduction and background

[1]These are summary judgment applications.

[2] The plaintiffs in both proceedings are First Mortgage Custodians Ltd, the trustee of an investment fund, and First Mortgage Managers Ltd, the manager of the fund. It is common ground that, between them, they have standing to sue in relation

to contractual arrangements with the defendants. In the balance of this judgment First Mortgage Custodians and First Mortgage Managers are referred to collectively as “the plaintiffs” or “First Mortgage”. The defendants are or were all connected to the Herbert family, members of which have been involved in a significant property development venture in Napier.

[3] At the heart of both proceedings are loan arrangements entered into in May 2018 to replace pre-existing arrangements between another financier and the first defendant trustees, pursuant to which the plaintiffs lent the first defendant trustees approximately $9m in order to finance the completion of the development. The plaintiffs say that the obligations of the first defendant trustees were originally guaranteed by the second to eighth defendants. They say that these arrangements were varied in September 2019 (at which point the ninth defendants became involved as additional guarantors), and that a dispute between the parties as to their respective rights and obligations under the varied arrangements was settled in December 2020.

[4] They say that an amount is now overdue for payment by the first defendant trustees, and therefore that the obligations of the guarantors in relation to this outstanding balance have also been triggered. In the first proceeding (the 38 proceeding), the plaintiffs seek summary judgment against the first defendant trustees…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] NZHC 507
Decision Date: 22 March 2022

CaseChat Overview and Summary

The case of First Mortgage Custodians Limited v Herbert involves two proceedings brought by First Mortgage Custodians Limited and First Mortgage Managers Limited against various defendants connected with the Herbert family, who were involved in a property development venture in Napier. The plaintiffs sought summary judgment against the first defendant trustees and others as guarantors for an outstanding loan balance, as well as the right to foreclose on a mortgage provided by the third defendant trustees. The defendants contested the claims, arguing various defences including duress or undue influence, material variation of the loan agreement, and discharge by settlement. Associate Judge Johnston dismissed the applications for summary judgment, finding that the defendants had arguable defences that warranted a trial. Notably, the judge concluded that there was an arguable case that Fiona Herbert, one of the third defendant trustees, signed the guarantee and mortgage documentation under duress or undue influence, which could vitiate the transaction if proven. The court also found that there were arguable defences relating to material variation and discharge by settlement. As a result, the applications for summary judgment were dismissed, and the proceedings were referred for trial.

Orders