Hess v Hospenthal - [2014] NZHC 895

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

CIV-2013-443-315 [2014] NZHC 895

BETWEEN
MARTIN HESS

Plaintiff

AND

JOSEPH ZENO HOSPENTHAL Defendant

Hearing: 2 March 2014

Counsel:

A R H Laurenson for Plaintiff
R T Wilson for Defendant

Judgment:

2 May 2014

JUDGMENT OF GODDARD J

This judgment was delivered by me on 2 May 2014

at 3.30 pm, pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:
Govett Quilliam, New Plymouth for Plaintiff
Welsh McCarthy, Hawera for Defendant

HESS v HOSPENTHAL [2014] NZHC 895 [2 May 2014]

Introduction

[1] This hearing was concerned with two matters. The first is the plaintiff’s application for an interim injunction seeking to prevent the defendant from proceeding on a Property Law Act notice purporting to call up a mortgage held by the defendant over a farm owned by a family trust. The second is that, in response, the defendant opposes that application and in turn seeks summary judgment for the balance said to be owing to him and secured by the mortgage.

Background

[2] The facts need to be set out in some detail. The defendant owned what has been his family’s dairy farm at Kaponga in Taranaki . He is unmarried and childless; he had several siblings including a sister named Antoinette. In 1995 Antoinette married the plaintiff in Switzerland, where they lived and made their family home.

[3] It later became clear that the defendant was not in good health and in 2006, after discussion with him, the plaintiff and his family decided to move to New Zealand and to make a new life on the farm. This they did. In 2007 it was decided that the arrangements in regard to the farm were to be formalised, and a solicitor was consulted by both parties on possible courses of action.

[4] The outcome was that the defendant agreed to sell the farm to a family trust, styled the Roses Family Trust (the Trust). The trustees were the plaintiff, the defendant and Antoinette. The beneficiaries are the plaintiff and Antoinette and their children, but not the defendant. The purchase price was $1,820,564.72, funded by a loan from the defendant of $63,460 at 10% for a 10 year term, secured by a second mortgage and an interest-free loan of $1,757,104.72 from the defendant, repayable on demand and secured by a third mortgage. The Trust also raised $250,000 by external borrowing on a first mortgage. The defendant signed a will forgiving the amounts outstanding at his death under all loans to the Trust and bequeathing his stock, (which had been bailed to the trust), to the trust.

[5] So much is apparent on the face of the documentation; I will revert later in this judgment to the respective expectations.

[6] The plaintiff and his family lived in the farm homestead; part of the available cash was used to construct a cottage on the farm into which the defendant moved.

[7] The defendant made four gifts to the trust, each of…

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.

Continue reading Hess v Hospenthal

Details

AGLC: Hess v Hospenthal [2014] NZHC 895
Case: [2014] NZHC 895
Decision Date: 2 May 2014

CaseChat Overview and Summary

The case of Hess v Hospenthal involved a dispute between Martin Hess, the plaintiff, and Joseph Zeno Hospenthal, the defendant, before the High Court of New Zealand. The primary issue was whether the defendant could legally enforce a Property Law Act notice to call up a mortgage held over a farm owned by a family trust. This arose after the defendant's deteriorating relationship with his sister and brother-in-law, who were beneficiaries of the trust, led him to sign a notice calling up the balance of the mortgage. The plaintiff sought an interim injunction to prevent the defendant from proceeding with the notice, while the defendant opposed this application and sought summary judgment for the balance owed, secured by the mortgage.

The legal issues the court needed to decide included whether there was a binding contract between the defendant and the trust that prevented the defendant from calling up the mortgage, and if not, whether the defendant was equitably estopped from doing so. The plaintiff argued that the arrangement for repaying the mortgage, including the defendant's gifting and bequeathing of stock to the trust, amounted to a contractual agreement that the debt would not be called up during the defendant's lifetime. The defendant, on the other hand, claimed there was no serious issue to be tried and asked for summary judgment.

The court's reasoning, delivered by Goddard J, focused on the incomplete documentation and the understanding between the parties at the time of the agreement. While the court found that there was no formal contractual arrangement, it determined that there was an arguable defence based on equitable estoppel. The assurances given by the defendant that the debt would not be called up and that the wills would not be changed created an expectation on which the plaintiff could reasonably rely. Therefore, the court declined to grant summary judgment and issued an interim injunction to prevent the defendant from taking any action regarding the mortgage until further order of the court.

In conclusion, the court ruled that the equitable and/or contractual issues presented a serious question to be tried at a full hearing. The interim injunction remained in place, and the court also suggested that the defendant consider removing himself as a trustee of the Roses Family Trust, given his role as the mortgagee seeking to enforce the mortgage.

Orders