Terry Schwass Company Ltd v Marsh - [2017] NZHC 1382

IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY

CIV-2014-406-52 [2017] NZHC 1382

BETWEEN
TERRY SCHWASS COMPANY LTD

AND JILL SCHWASS COMPANY LTD Plaintiffs

AND

DONNA LEE MARSH AND ANDREW TERENCE SCHWASS

First Defendants

AND

DONNA LEE MARSH AND ANDREW TERENCE SCHWASS AS TRUSTEES OF THE DEER PARK TRUST

Second Defendants

AND

DONNA LEE MARSH Counterclaim Plaintiff

AND

MICHAEL HARDY-JONES, CHRISTOPHER CLARK, ANDREW FINCH AND STEPHANIE GINDERS Third Parties

Hearing: 3 and 4 April 2017

Appearances:

D M Lester for Plaintiffs
S J Zindel and A Goodison for Defendants
J M Morrison for Third Parties

Judgment:

22 June 2017

JUDGMENT OF CULL J

TERRY SCHWASS COMPANY LTD AND JILL SCHWASS COMPANY LTD v DONNA LEE MARSH AND ANDREW TERENCE SCHWASS [2017] NZHC 1382 [22 June 2017]

Table of contents

The Issues ........................................................................................................................................... [5] The parties and their positions ......................................................................................................... [6] The plaintiffs................................................................................................................................... [6] The defendants................................................................................................................................ [8]
1. Was the advance a loan or a gift? ............................................................................................. [12] Gifts .............................................................................................................................................. [13] Presumption of Advancement ....................................................................................................... [16] The parties’ positions on the loan/gift issue ................................................................................. [22] Plaintiffs ....................................................................................................................................... [22] Donna’s defence ........................................................................................................................... [23] The evidence of the transaction .................................................................................................... [27] Chronology of events .................................................................................................................... [28] Allegations of a gift ...................................................................................................................... [43] The documentary evidence ........................................................................................................... [47] The Accountant’s evidence............................................................................................................ [48] Analysis ........................................................................................................................................ [67] Lawyer as agent............................................................................................................................ [76]
2. Enforceability of the loan .......................................................................................................... [81] Are the plaintiffs estopped from asserting their entitlement to repayment of the loan?................ [83] Is the oral loan agreement enforceable? ...................................................................................... [89] Property Law Act provisions ........................................................................................................ [92] Part performance of the agreement .............................................................................................. [95] Analysis ...................................................................................................................................... [102] Is interest payable and enforceable in this case? ....................................................................... [107]
Conclusion 1....................................................................................................................................... 1.1
Conclusion 2....................................................................................................................................... 2.1
Result ...............................................................................................................................................[117]

[1] The plaintiffs’ parents advanced money to their son and his partner to purchase a property. They seek a determination on whether the advance by the Schwass Family Trust of $910,000, made six years ago, was a gift or a loan.

[2] The monies were advanced by the Schwass Family Trust to enable the first defendants, Andrew Schwass (Andrew), and Donna Marsh (Donna), Andrew’s partner, to purchase a property (the Koromiko property). Andrew and Donna were in a de facto relationship of approximately 11 years and had one child during that relationship. Following Andrew and Donna’s separation on 17 October 2013, Relationship Property proceedings were issued and await determination in the Family Court.

[3] The plaintiffs issued these proceedings to resolve whether the Schwass Family Trust’s advance is a loan or a gift, as a separate and discrete issue for determination by this Court. All parties were in agreement that the High Court should determine the loan/gift issue to assist resolution of the outstanding property relationship issues.

[4] I propose to identify the issues and describe the legal status of each of the parties. Under each of the substantive issues, I will set out the relevant legal principles, detail the facts applicable, and reach conclusions following the analysis of the facts and law.

The Issues

[5] The following are the issues…

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: [2017] NZHC 1382
Decision Date: 22 June 2017

CaseChat Overview and Summary

In the case of Terry Schwass Company Ltd v Marsh, the High Court of New Zealand was tasked with determining whether a $910,000 advance by the Schwass Family Trust to Andrew Schwass and Donna Marsh was a loan or a gift. The plaintiffs, Terry Schwass Company Ltd and Jill Schwass Company Ltd, sought a determination of this issue to assist in resolving ongoing property relationship issues between Andrew and Donna, who were in a de facto relationship but have since separated. The court was also required to decide if the plaintiffs were estopped from asserting their entitlement to repayment of the loan, if the oral loan agreement was enforceable, and if interest was payable and enforceable.

The court found that the $910,000 advance was a loan, not a gift. The evidence, including oral discussions and documentation, demonstrated a clear intention by the plaintiffs to provide the funds as a loan for the purchase of the Koromiko property. The absence of gift statements and the recording of the advance as a loan in the company accounts further supported this conclusion. The court also found that the advance was not subsequently gifted, as the plaintiffs were seeking to resolve the outstanding loan liability with Donna and Andrew.

Regarding the enforceability of the loan, the court determined that the plaintiffs were not estopped from asserting their entitlement to repayment of the loan. The court found that Donna's belief that the Koromiko property was owned by the Deer Park Trust on an unencumbered basis could not be upheld, as the evidence supported the finding that the advance was a loan, not a gift. The court also held that the oral loan agreement was enforceable, by virtue of the Property Law Act 2007 and the equitable doctrine of part performance.

Finally, the court concluded that interest was not payable or enforceable on the loan advance, as the parties never concluded any agreements on whether interest should be payable, the applicable interest rate, or the basis of repayment.

As a result, the plaintiffs' claim succeeded in part, with the court determining that the $910,000 advance from the plaintiffs to the defendants was a loan, not a gift, and no interest on the loan was payable or enforceable.

Orders