Richter v Huber
[2005] NZHC 1300
•17 March 2005
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV-2004-441-784
BETWEEN MARINA IDA BARBARA RICHTER OF 64 GILLIES CRESCENT, WAIMARAMA, NURSE, AND LOTHAR HERZOG AND ROSWINTHA GISELA HERZOG, BOTH OF 405 ST. GEORGES ROAD, HAVELOCK NORTH, METALLURGISTS
Plaintiffs
AND
BERND DIETER HUBER OF 399 TE APATE ROAD, WAIMARAMA, PROPERTY DEVELOPER
First Defendant
AND
UWE BALZAT, OF BROWNS BAY, AUCKLAND FINANCIAL ADVISER
Second Defendant
Hearing:
11 March 2005
Appearances: E.M. Bate for Plaintiffs
Second Defendant in person
No appearance for First Defendant Judgment: 17 March 2005
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
Introduction and Preliminary Matters
[1] The plaintiffs apply for summary judgment seeking orders for specific performance relating to certain obligations under a matrimonial property settlement and a trust arrangement reached between the parties in December 2000.
MARINA IDA BARBARA RICHTER OF 64 GILLIES CRESCENT, WAIMARAMA, NURSE, AND LOTHAR HERZOG AND ROSWINTHA GISELA HERZOG, BOTH OF 405 ST. GEORGES ROAD, HAVELOCK NORTH, METALLURGISTS V BERND DIETER HUBER OF 399 TE APATE ROAD, WAIMARAMA, PROPERTY DEVELOPER And Anor HC NAP CIV-2004-441-784 [17 March 2005]
[2] The application is opposed by both the first defendant (“Mr Huber”) and the second defendant (“Mr Balzat”).
[3] At the hearing of this application on 11 March 2005, Mr Huber was not present, nor was he represented. In a letter he faxed to the Court on 10 March 2005, Mr Huber indicated that he would be unable to attend the hearing scheduled for 11 March 2005 “due to a long term business project requiring my attendance in Australia”. He sought the leave of the Court to appoint Mr Balzat, the second defendant, to represent him in this matter. Mr Balzat is not a barrister or solicitor of the High Court of New Zealand, and in terms of s54 Law Practitioners Act 1982, he is not permitted to act in this role on behalf of Mr Huber.
[4] I ruled, therefore, that Mr Huber’s application for leave to have Mr Balzat represent him in this matter was refused.
[5] This decision was, it seems to me, anticipated by Mr Huber. In paragraphs 4- 20 inclusive of his 10 March 2005 letter to the Court, Mr Huber set out his “response to the allegations of the plaintiffs” with the request that “Failing the Court granting leave for Uwe Balzat to represent me in this matter” these might be taken into account at the hearing on 11 March 2005.
[6] I have carefully read those submissions made by Mr Huber and I have taken them into account in reaching my judgment in this matter.
[7] Mr Balzat, the second defendant, was present at the hearing on 11 March 2005, and made submissions on his own behalf.
Background Facts
[8] The first-named plaintiff Marina Ida Barbara Richter (“Ms Richter”) and Mr Huber were previously married. They obtained a dissolution of their marriage on 5 March 1996.
[9] On 14 December 2000 Ms Richter and Mr Huber entered into a Matrimonial Property Agreement (“the Agreement”) pursuant to s21 of the Property (Relationships) Act 1976.
[10] The Agreement made reference to an investment fund of $81,000.00 for the children of the marriage, and in this regard defined the “Investment Fund” and made certain other comments at paragraph E:
E. Bernd (Mr Huber) has invested for the children the sum of
$27,000.00 each with Five Star Finance Limited for a minimum period of seven years, but fixed for an initial two year term at 10.75% (the Investment Fund). Bernd has appointed Uwe Balzat of Gulf Brokers, Auckland, sole trustee of the investment fund.
[11] The three children of the marriage of Ms Richter and Mr Huber are [ ] aged 19, 17 and 13 respectively.
[12] Under the Agreement, Mr Huber agreed broadly to arrange for Ms Richter and the other two plaintiffs Mr and Mrs Herzog to be appointed trustees of this Investment Fund. This was provided for in paragraph 4.4 of the Agreement.
[13]That paragraph 4.4 states:
In order to settle all claims between the parties arising out of their relationship, and whether before, during or after the marriage, in between Marina and Biber Trust, Bernd is to arrange for further transfer to Marina of the trusteeship of the investment fund on the basis:
(a) Marina will be a trustee of the investment fund, in addition to two other trustees appointed by her, the two such trustees being Mr Lothar Herzog and his wife Roswintha Herzog.
(b) Marina is able to withdraw money from the investment fund within the seven year investment period, providing she has the consent of the other trustees, in the case of an emergency affecting any of the children and/or if she wishes to purchase a home for the children.
(c) In the event of Marina purchasing a home for the children, she will be required to hold the home on trust for them.
[14] Annexed to the Agreement is a copy of a document in the name of Five Star Finance Limited, described as a “Debenture Deposit Certificate”. This investment
certificate refers to the Investment Fund noted in paragraph [10] of this judgment and provides:
a) “Depositer: Gulf Brokers (Mr Balzat’s trading name)”
b) “Deposit: $81,000”
c)“Date of repayment 31 December 2002 and on 30 days written notice thereafter”
d)“Interest rate 10.75%”.
[15] In their summary judgment application the plaintiffs seek an order for specific performance by Mr Huber of the obligation in the Agreement to arrange the transfer of the trusteeship of the Investment Fund to the plaintiffs. Alternatively, the plaintiffs seek an order that if the fund has been dissipated or cannot be made available for housing the beneficiaries, then judgment in damages is sought against Mr Huber for $81,000.00, together with interest at 10.75% per annum from 30 November 2000.
[16] The Statement of Claim in addition pleads that Mr Balzat refused to be replaced as a trustee of the Investment Fund. Mr Balzat apparently is a business associate of Mr Huber. He trades in business as “Gulf Brokers”.
[17] The plaintiffs’ summary judgment application also seeks either an order removing Mr Balzat as trustee of the Investment Fund, and appointing the plaintiffs to be trustees of it in his place, or alternatively, an order that Mr Balzat transfer ownership of the Investment Fund to the plaintiffs.
[18] Mr Huber and Mr Balzat have filed a joint Notice of Opposition to the summary judgment application which sets out the following grounds of opposition:
1)The first defendant has in fact complied with his contractual obligations pursuant to the Matrimonial Property Agreement dated 14.12.2000.
2)The second defendant has on numerous occasions provided all necessary information to the plaintiffs and further does not act as a trustee as claimed by the plaintiffs at all, rather as one bound by contractual obligations that are clear to the Plaintiffs and have been made clear on numerous occasions both personally and to the first and second Plaintiffs and to the various representatives the first Plaintiff has frivolously instructed with the benefit of legal aid.
3)The second defendant is more than sympathetic with the intent of the Matrimonial Property Agreement, the objects of the trust and the interests of the beneficiaries as specified in the Statement of Defence and Affidavit in Support.
4)The second defendant has real concerns and fears that the Plaintiffs have every intention of thwarting the purposes of the trust, of appropriating any funds for their own private use and exposing the second defendant to claims from the beneficiaries as specified in the Statement of Defence and Affidavit in Support.
5)That in light of the foregoing grounds, the Plaintiffs are forcing the Defendants to unnecessary expense to answer their claim in a manner that is frivolous, wasteful, abusive of the legal aid system and abuses Court procedure with the full knowledge of her third legal counsel in this matter as specified in the Statement of Defence and Affidavit in Support of Uwe Balzat sworn and filed herein at needless cost to the Second Defendant.
6)That the plaintiffs deliberately timed serving documents on the First Defendant to coincide with the afternoon of the day that the First Defendant was leaving to travel out of the country for an extended period and would find it difficult to respond within the time frame required by such an action.
[19] I must now record a matter of some concern which arose at the conclusion of the hearing of this matter on 11 March 2005.
[20] At the conclusion of that hearing and after I had reserved my decision and retired, I was recalled to Court at the request of Mr Bate, counsel for the plaintiffs.
[21] Mr Bate stated that immediately following my retirement, Mr Balzat advised him of a matter Mr Bate considered to be of serious consequence - hence his request to the Registrar to reconvene the Court.
[22] The Court was reconvened. Right up to that point this matter had proceeded on the basis that the initial two year $81,000.00 investment with Five Star Finance Limited had been renewed on 31 December 2002 for a further five years and it could not be accessed until 2007. Mr Balzat certainly led the Court to believe that this was
the case. No issue was taken with Ms Richter’s unequivocal statement in paragraph
[2] of her 11 February 2005 affidavit that “I was not consulted about the second defendant’s apparent action in December 2002 to renew the investment with Five Star Finance until 2007”. At the reconvened hearing, however, Mr Balzat for the first time explained to me that so far as the Investment Fund was concerned, the deposit of $81,000.00 held with Five Star Finance Limited no longer existed.
[23] In response to my questioning, Mr Balzat stated that the $81,000.00 deposit with Five Star Finance Limited had been repaid, I understand, after the initial two year term. The repayment had gone into the Gulf Brokers bank account and now formed part of the broad Gulf Brokers fund.
[24] Surprisingly, Mr Balzat was unable to confirm whether this $81,000.00 could be identified as a particular investment made by Gulf Brokers with some other organisation or entity.
[25] He again repeated that Gulf Brokers was “effectively he, Mr Balzat, or his family trust trading as Gulf Brokers”. Gulf Brokers was not an incorporated company.
[26] Mr Balzat stated that in his view, the original $81,000.00 investment was with “Gulf Brokers”, and the obligation to repay the principal and interest of this investment remained with Gulf Brokers.
[27] Mr Balzat then went on to offer what he described as an “additional gesture” to the plaintiffs as trustees. He said that he would be prepared personally to grant a mortgage security over land which he held which was otherwise unencumbered as security for the $81,000.00 investment. In doing so, however, Mr Balzat suggested that the investment should perhaps be at a lower interest rate than the 10.75% originally agreed, bearing in mind that it would now be a secured loan.
[28] In response to these late revelations, Mr Bate for the plaintiff noted serious concerns on behalf of the plaintiffs over the existence and whereabouts of the Investment Fund. This was particularly the case, he said, given that the $81,000.00
investment originally with Five Star Finance Limited it seems has now been withdrawn and intermingled with Mr Balzat’s or Gulf Broker’s other monies. That research would be required to establish its whereabouts, as Mr Balzat had indicated, was also a matter of some concern.
[29] Mr Bate contended that the Court had clearly been misled, in particular with respect to the evidence provided to date, and the submissions of Mr Balzat as to the existence and renewal of the seven year investment with Five Star Finance Limited.
[30] Two matters of particular significance necessarily follow. First, these revelations must suggest that a breach of trust on the part of Mr Balzat has occurred, as he might well be seen effectively as a trustee or at least a constructive trustee of the funds in question. Secondly, it is difficult to escape the conclusion that this situation represents a significant deception and misleading upon the part of both Mr Huber and Mr Balzat, given the clear statements in the Agreement, and all the material put before this Court and advanced in submissions at the hearing.
[31] Further, Mr Bate raised a major concern that the $81,000.00 may well not be invested in a prudent manner, and he suggested that effectively, all that may presently remain is the personal liability for the debt now acknowledged by Mr Balzat.
[32] As I have noted above, these revelations came to light for the first time immediately after the conclusion of the hearing of this matter on 11 March 2005. That neither Mr Balzat nor Mr Huber saw fit to raise these significant matters at an earlier time must be a matter of serious concern.
[33] Moreover, so far as Mr Huber is concerned, in my view he would appear to be in some serious difficulty in this matter. I say this given that under the terms of the Agreement, he acknowledged that he had invested the $81,000.00 for the three children as the Investment Fund with Five Star Finance Limited, and in clause 4.4 he specifically agreed to “arrange forthwith the transfer to (the plaintiffs) of the trusteeship of this fund”. That of course is impossible now, bearing in mind Mr
Balzat’s revelation that the investment with Five Star Finance Limited no longer exists.
[34] All of this clearly has occurred without the knowledge or consent of the plaintiffs in any way.
[35]It must colour in a serious way the issues presently before the Court.
[36] I turn now to consider the arguments put before me with respect to the plaintiffs’ summary judgment application, and my decision.
Counsel’s Arguments and My Decision
[37] In seeking summary judgment here, the plaintiff relies upon Rule 136 High Court Rules which states:
The Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a claim in the statement of claim or to a particular part of any such claim.
[38] Under Rule 136 the onus is clearly on the plaintiff to satisfy the Court that the defendant has no defence to the claim.
[39]In Pemberton v Chappell [1987] 1 NZLR, Somers J said at p3:
At the end of the day Rule 136 requires that the plaintiff ‘satisfies the Court that a defendant has no defence’. In this context the words ‘no defence’ have reference to the absence of any real question to be tried. That notion has been expressed in a variety of ways, as for example, no bona fide defence, no reasonable ground of defence, no fairly arguable defence. See for example Wallingford v Mutual Society [1880] 5 App Cas 685, 693; and
Fancourt v Mercantile Credits Limited [1983] 154 CLR 87, 99; Orme v de Boyette [1981] 1 NZLR 576. On this the plaintiff is to satisfy the Court; he has the persuasive burden. Satisfaction here indicates that the Court is confident, sure convinced, is persuaded to the point of belief, is left without any real doubt or uncertainty.
And:
Where the defence raises questions of fact upon which the outcome of the case may turn it will not often be right to enter summary judgment. There may however be cases in which the Court can be confident – that is to say, satisfied – that the defendant’s statements as to matters of fact are baseless.
The need to scrutinise affidavits, to see that they pass the threshold of credibility, is referred to in Eng Mee Young v Letchumanan [1980] AC 331, 341 and in the judgment of Greig J in Attorney-General v Rakiura Holdings Ltd (Wellington, CP23/86, 8 April 1986).
[40] It is clear that the Court must be satisfied that there is no defence. In Towers v R & W Hellaby Limited [1987] 3 NZCLC, 100,064, Thorp J said that the crucial question under Rule 136 would generally be whether the Court is satisfied that the plaintiffs’ case is unanswerable and the Court will not reach that conclusion if it can see an arguable defence – see McGechan HR136.09.
[41] There is no dispute that Mr Huber and Ms Richter are parties to the Agreement.
[42] That Agreement in clause 4.4 required Mr Huber to arrange for transfer of the trusteeship of the Investment Fund to the plaintiffs “forthwith”. That transfer of trusteeship should have occurred soon after the Agreement was signed on 14 December 2000, but despite much correspondence between the parties exhorting Mr Huber to comply with the Agreement and have the plaintiffs appointed, he has not done so.
[43] Surprisingly, this is despite a confirmation in the letter dated 11 December 2000 from Mr Huber’s then lawyers, Carlile Dowling, to Ms Richter’s lawyers:
As soon as (the final Matrimonial Property Agreement is) executed by your client (Ms Richter) we will put in train the arrangements for transferring the trusteeship of the investment to your client and the Herzogs.
[44] I am satisfied that the procedure adopted by the plaintiffs in bringing the present proceeding in this Court and seeking summary judgment here, is appropriate. Section 21L Property (Relationships Act 1976) expressly preserves conventional contractual remedies for enforcement of agreements under Section 21: Fisher on Matrimonial and Relationship Property, chapter 5, para 5.15.
[45] The contractual arrangements between Ms Richter and Mr Huber are clear. Mr Huber has a contractual obligation to arrange transfer of the trusteeship of the Investment Fund to the plaintiffs.
[46] It follows that specific performance of this obligation must be available if it is possible for Mr Huber to perform it.
[47] In respect of the plaintiffs Mr and Mrs Herzog, their entitlement to specific performance is pursuant to the Contracts (Privity) Act 1952: NZ Guardian Trust Co Ltd v Peat Marwick 5 NZCLC 67 at 129.
[48] In the face of the 11 December 2000 Carlile Dowling letter and the clear obligation on Mr Huber to arrange the transfer of the trusteeship under clause 4.4 of the Agreement, there can be absolutely no doubt that the plaintiffs’ summary judgment application for an order for specific performance by Mr Huber of the obligation in the Agreement to arrange the transfer of the trusteeship of the Investment Fund to the plaintiffs must succeed. The plaintiffs’ case is unanswerable. An order to this effect will follow.
[49] Of great concern here, however, must be issues concerning the existence of the Investment Fund, its whereabouts, and questions as to whether it may have been dissipated.
[50] The Agreement is clear. The Investment Fund was defined as $81,000.00, being investments “for the children of the sum of $27,000.00 each with Five Star Finance Limited for a minimum period of seven years, but fixed for an initial two year term at 10.75%”.
[51] It is clear from Mr Balzat’s belated acknowledgement to the Court that this investment either upon his instructions, or upon Mr Huber’s instructions, has gone. Where the funds may now be is a matter of some concern.
[52] In the Agreement signed, after legal advice, by both Mr Huber and Ms Richter, specific provisions were included with regard to the Investment Fund, in paragraphs 4.4(b) and (c) which I now repeat in full:
(b) Marina is able to withdraw money from the investment fund within the seven year investment period, providing she has the consent of the other trustees, in the case of an emergency
affecting any of the children and/or if she wishes to purchase a home for the children.
(c) In the event of Marina purchasing a home for the children, she will be required to hold the home on trust for them.
[53] Decisions over requests by Ms Richter to withdraw money from the Investment Fund in case of an emergency affecting any of the children, or to purchase a home for the children were to be made with the consent of the other trustees, Mr and Mrs Herzog. As I see it, Mr Huber would have been fully aware throughout and no doubt advised by his lawyer when entering into the Agreement as to these aspects. He acknowledges this in paragraphs 17 and 18 of his letter of submissions to the Court received on 10 March 2005.
[54] What has happened since December 2000 has clearly frustrated and avoided any possibility of these provisions with respect to the Investment Fund being activated.
[55]This is quite unacceptable.
[56] As to Mr Balzat’s position here as an investment broker or trustee, the Agreement records in paragraph E that Mr Balzat is a trustee of the Investment Fund. Clearly he has taken it upon himself to do acts characteristic of being a trustee in terms of accepting, placing, controlling, and renewing the investment in his own name.
[57]I find, therefore, that Mr Balzat is a trustee of the Investment Fund.
[58] As such, Mr Balzat had the normal trustee’s obligations and duties to account, to hold and deal with the investment for the benefit of the beneficiaries, and to provide information.
[59] With the concerns I have noted above as to the possible dissipation of the Investment Fund, orders must now follow as to removal of Mr Balzat as a trustee of the Investment Fund, and appointment of the plaintiffs in his place, and in addition a
supplementary order that Mr Balzat transfer ownership of the Investment Fund to the plaintiffs.
[60] Further, urgent enquiries need to be made to ascertain whether or not the Investment Fund may have been dissipated, or invested in such a way as to deliberately obstruct the Agreement and particularly the operation of clauses 4.4.(b) or (c) of the Agreement. If it proves that this is to be the case, then as I see it, judgment must be entered against Mr Huber in damages for the $81,000.00 together with interest on the investment at the stated rate of 10.75%.
[61] Finally, the overall position of Mr Balzat in this matter requires some consideration.
[62] As I see matters, despite Mr Balzat’s protestation in his affidavit that he is concerned to protect the interests of all parties, including Ms Richter and the children of the marriage, it is apparent to me that throughout he has taken a position supporting Mr Huber and attacking Ms Richter and the plaintiffs and he has refused to disclose information of any kind with respect to the Investment Fund, and matters related to it.
[63] And, given what I see as the clear deception and obstruction which the plaintiffs have faced here for some time, it is difficult to escape the view that Mr Balzat’s hands are less than clean in this whole matter.
[64] That said, it is appropriate in my view for an order to be made now requiring Mr Balzat to provide full details of the $81,000.00 investment, its history, the interest earned and accumulated, and the current location and security (if any) of the fund.
[65]An order to this effect will follow.
[66] One last matter requires attention. In their Notice of Opposition to the plaintiffs’ application for summary judgment, Mr Huber and Mr Balzat also sought specific orders that:
(a) The plaintiff cease from frivolously returning to this matter and harassing the second defendant until the due date of the deposit being the 30th November 2007.
(b) The plaintiff immediately pay $1,000 or such sum and/or further relief as this Honourable Court deems just to cover the defendant’s needless requirement to file this Notice of Opposition and costs related to preparation of the same.
[67] I am regarding the application for these orders as some form of counterclaim with respect to the summary judgment application.
[68] These matters are quickly dealt with. For the sake of completeness, I do so now.
[69] Given the findings I have made above, and the fact that this summary judgment application by the plaintiffs against both Mr Huber and Mr Balzat is entirely successful, I find that these claims made by the defendants are wholly without substance and I reject them.
Conclusion
[70] It will be apparent from what I have said above that in terms of the summary judgment test outlined in Pemberton v Chappell I find that the plaintiffs’ case against both Mr Huber and Mr Balzat here is unanswerable.
[71]This summary judgment application therefore succeeds.
[72] The following orders are now made against the first and second defendants respectively:
(1)An order is made for specific performance by the first defendant Mr Huber of the obligation in the Agreement to arrange the transfer of the trusteeship of the Investment Fund to the plaintiffs. This transfer is to occur within 10 working days of the date of this judgment.
(2)An order is made that within 10 working days of the date of this judgment the first defendant Mr Huber and the second defendant Mr Balzat are to file and serve separate affidavits to satisfy the plaintiffs and this Court that the Investment Fund has not been dissipated, and that it can be made available now and in the future for the purposes specified in paragraphs 4.4(b) and (c) of the Agreement. In the event that either these affidavits are not filed and served within the 10 day period noted above, or the plaintiffs are not satisfied as to the existence and availability of the Investment Fund, then leave is reserved for the plaintiffs to apply to this Court for judgment against the first defendant Mr Huber personally in damages for the sum of
$81,000.00, together with interest from 30 November 2000.
(3)An order is made forthwith removing the second defendant Mr Balzat as a trustee of the Investment Fund, and appointing the plaintiffs to be trustees of the Investment Fund.
(4)An order is made that the second defendant Mr Balzat shall transfer ownership of the Investment Fund to the plaintiffs forthwith.
(5)An order is made that the second defendant Mr Balzat shall within a period of 10 working days from the date of this judgment provide to the plaintiffs and to this Court by way of a further affidavit full information about the Investment Fund, including details of the history of the $81,000.00 investment from 2000 to the present time, the interest earned and accumulated upon this Fund, the current location of the Investment Fund and accumulated interest, and the past and present security (if any) held for the Investment Fund.
[73] As to costs, the plaintiffs have succeeded in this application and are entitled to an order for costs. It appears to me that this may well be an appropriate matter for an award of indemnity costs or actual costs to be made in favour of the plaintiffs.
All parties are invited to file memoranda as to costs within 20 working days of the date of this judgment, and I shall then decide the issue of costs upon the papers filed.
Associate Judge D.I. Gendall
Delivered aton 17 March 2005.
Solicitors
Hansen & Bate, Hastings for Plaintiffs
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