In jail and under financial pressure with properties at Mangatawhiri and Mangatangi south of Auckland at risk of mortgagee sales, the Schmidts agreed to sell these two properties to a company controlled by family friend Brian Garrity, leading later to a decades long argument over what was agreed, obfuscated by deliberately false documentation.
With the Court of Appeal commenting that while both Anthony Schmidt and Mr Garrity had a flexible approach to the truth in their dealings with lenders and Inland Revenue, the court preferred to concentrate on contemporary written evidence of the disputed sale when ruling no trust relationship existed; Mr Garrity was not in breach of trust by failing to later transfer the two properties back to the Schmidts.
In July 2005, Anthony Schmidt and then spouse Taylor Schmidt were sentenced to two and a half year’s imprisonment on conviction for failing to provide the necessities of life, following death of their two year old daughter.
With imprisonment looming, they gave powers of attorney to lawyer Mr Garrity, enabling him to deal with their property whilst in prison. At that time, Mr Garrity was an in-house solicitor working for ASB Bank.
In jail, and with no current source of income to service their bank loans, mortgagee sales were threatened for the Schmidts’ Bell Road and Kaiaua Road properties.
They sold the two properties to a company controlled by Mr Garrity: Ebada Property Investments Ltd.
There were some curious elements.
A substantial part of the net sale proceeds on each transaction was paid to Mr Garrity personally, supposedly in reduction of a debt owed. It was to later come out in evidence that deeds of forgiveness of debt supporting these payments were a fiction; designed to hide cash otherwise attributable to the Schmidts, the Court of Appeal suggested.
Mr Garrity later mortgaged the two properties now owned by Ebada Property, using some of these funds to make a relationship property payout to his then spouse.
Once out of jail, Mr Schmidt looked to regain ownership of both Bell Road and Kaiaua Road. Increasingly intemperate emails saw Mr Schmidt haranguing Mr Garrity for lack of progress in signing agreements to re-transfer the properties.
Mr Garrity’s Ebada Property sold Bell Road in 2008, at a time when the Schmidts were out of prison, released on parole. Four years later, Mr Schmidt unsuccessfully attempted to have this sale overturned, claiming the Bell Road buyer was party to a fraud, alleging the buyer knew this sale was made by Ebada Property in breach of trust. There was no evidence to support this allegation.
Kaiaua Road was sold by mortgagee sale in 2013.
Years later, in 2019, Mr Schmidt sued Mr Garrity in the High Court alleging breach of trust, seeking to recover benefits received by Mr Garrity through Ebada Property’s ownership of the since sold properties.
Produced as evidence that a trust existed was an unsigned deed of trust stating Ebada Property held the two properties in trust for the Schmidts. The claim failed.
The trial judge ruled this trust deed was a fiction, fabricated by the Schmidts to bolster their claim in court.
Parallel claims that Mr Garrity owed a fiduciary duty to the Schmidts, or exercised undue influence over them, were dismissed.
The original documentation was consistent with an outright sale of the Schmidts’ two properties to Mr Garrity’s Ebada Property, the Court of Appeal said. Subsequent secured borrowing by Ebada was personally guaranteed by Mr Garrity; an indicator that Mr Garrity’s Ebada Property Ltd was the true owner, not merely holding the properties as trustee for the Schmidts, the court said.
Schmidt v. Garrity – Court of Appeal (17.04.25) & Supreme Court (2.10.25)
25.215