Kipke

[2017] NZHC 1361

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

CIV-2017-425-47 [2017] NZHC 1361

UNDER	section 83 Property Law Act 2007
IN THE MATTER	of an application for an order for redemption
BETWEEN	BARBARA GRUEHL KIPKE Applicant

Hearing:	On the Papers
Counsel:	V Robb for Applicant
Judgment:	20 June 2017

JUDGMENT OF FOGARTY J

This judgment was delivered by Justice Fogarty on

20 June 2017 at 4.30 p.m., pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Solicitors:

Anderson Lloyd, Queenstown

IN RE KIPKE [2017] NZHC 1361 [20 June 2017]

[1]      The applicant in these proceedings is the daughter of Friedrich and Rosemary Gruehl and the sister of Friedrich Gruehl and Gertraude Koch.  Friedrich, loaned his daughter Barbara, NZ$650,000 secured against two properties in New Zealand, Certificates of Title OT11C/1284 and OT11C/1282.   Friedrich, her father, died in

1998.   The mortgage was transferred from his estate to, Rosemary on 8 October

1999.  On 11 December 2013, in Ontario, Rosemary released her daughter Barbara by way of a deed forgiving, by way of gift, the debt owed by Barbara to her (the Ontario deed).   At that time the value of the debt was the total sum of NZ$1,701,167.40.

[2]      The Ontario deed of release does not record the presence of the mortgage or

Rosemary’s status as the mortgagee.

[3]      The mortgage instrument number is 757487.7 (the mortgage) and by that time was in respect of the properties contained in Certificates of Title OT19A/560; OT19A/561;   OT19A/562;   and OT19A/564 (the titles), the property having been further subdivided.

[4]      I am fully satisfied from the affidavits filed in these proceedings that all debt secured by the mortgage against the titles was forgiven by Rosemary, the creditor and the mortgagee, by the Ontario deed.

[5]      Although the Ontario deed does not refer to the mortgage, I rely on the affidavit of Mr Donald Bennett of Queenstown, Chartered Accountant, who connects the release of this debt to any remaining liability under the mortgage over the titles.

[6]      The only potential complication is that the Ontario discharge was not done by way of an instrument stating expressly that Rosemary, the mortgagee, discharges the properties from the mortgage wholly or in part.

[7]      The reason the application is made to the Court is that there is no section in the Property Law Act 2007 which expressly addresses this situation where a debt secured by mortgage is discharged but the mortgage is not discharged at the same time.

[8]      This application relies upon the standard “or words to that effect” in s 83 of the Property Law Act 2007:

83       Discharge of mortgage

(1)      A  mortgage  over  property  may  be  wholly  or  partially discharged by an instrument that—

(a)       is   endorsed   on,   or   attached   to,   the   mortgage instrument, or the existence of which is recorded on or with the mortgage instrument; and

(b)       is executed by the mortgagee in the same manner as a deed is required to be executed; and

(c)       states  that  the  mortgagee  discharges  the  property from the mortgage wholly or in part, or words to that effect.

(Emphasis added.)

[9]      I am satisfied that the Ontario deed of release of debt by way of gift was intended to fully release the debt so that its prior existence had no continuing effect on the ability to deal with the land. The relevant phrasing in the deed reads:

1.In consideration of the natural love and affection that the Lender bears to the Borrower, the Lender HEREBY RELEASES AND FORGIVES1  by way of gift the repayment by the Borrower of the Debt,  in  full  satisfaction  of  the  Debt,  formerly  owing  by  the Borrower to the Lender, recorded in Background clause A above.

2.        The Borrower accepts this release and forgiveness as a gift from the

Lender, and acknowledge that the Debt has been released in full.

[10]     I am satisfied, that the ultimate standard in  s 83(1)(c) applies.  I am satisfied that by the above clauses 1 and 2 Rosemary, the lender and the mortgagee, intended to release Barbara absolutely.  Any subsequent use of the mortgage against Barbara would be a dishonest abuse of the mortgage instrument.  It follows that the words in clauses 1 and 2 are in substance also discharging the property from the mortgage the purpose of which was only to secure the debt.  Therefore, the release of debt falls within the scope of s 83(1)(c) by being “words to that effect”.

[11]     Accordingly, the order of this Court is as follows:

1      Capitals in the original deed.

ON application made pursuant to section 110 of the Property Law Act 2007, this High Court at Christchurch has today made orders that:

1    all amounts secured by the mortgage contained in instrument 757487.7 and recorded against the properties contained in Certificates of Title OT19A/560;   OT19A/561;  OT19A/562;   and OT19A/564 have been paid in full;

2    this order permits a discharge of the mortgage instrument pursuant to section 83 of the Property Law Act 2007.