Family Trust: Forgan v. Lee

 

Named as residual beneficiary, together with her brother, in two family trusts set up by their father, Rebecca Forgan discovered brother Arthur Lee had improperly mortgaged trust assets as security for his struggling clothing company, cutting her adrift.  She had the High Court remove her brother and her mother as trustees, with her legal costs of $126,500 paid out of trust assets.

The court was told there looks to be a net cash balance left of some $800,000 after trust assets were sold off to avert two mortgagee sales, repaying loans made to Mr Lee’s business.  A property on Blackwood Bay in the Marlborough Sounds is a further trust asset.

Arthur Lee owns Christchurch clothing company Thermatech Ltd.

The High Court was told of sister Rebecca being kept in the dark about trust activities.

Their father set up the Blackwood Trust in 1973.  It came to own a Christchurch property on Wai-iti Terrace, where their parents lived, plus another property on Fendalton Road occupied by Arthur and his family.

A second family trust was established in 2016.

With their father diagnosed as having early onset dementia, the two trusts came to be controlled by Arthur and their mother Robyn.

Evidence was given that Rebecca belatedly learnt that trust assets were being used to prop up Arthur’s Thermatech.  Trust cash was used to pay company debts.  Trust assets were mortgaged as security for company loans.

Court orders for full disclosure of trust transactions were ignored.

Failure to make disclosure led the High Court to bar the two trustees from defending legal action taken to remove them.  After a formal proof hearing, Arthur and his mother were replaced by professional trustee, Covisory Trust Services.

The court was told both trust properties were sold at auction ahead of threatened mortgagee sales: Wai-iti Terrace for $1.1 million; Fendalton Road for $2.8 million.

Rebecca can likely lay claim to final cash balances eventually held by both trusts.

Terms of the family trusts state that on final distribution assets are to be held equally for Rebecca and her brother ‘on a hotchpot basis;’ meaning final distribution must take into account any financial benefit each has previously received from trust assets.

Forgan v. Lee – High Court (6.08.25 & 24.10.25)

25.223

Charitable Gift: re application by William Herbison

 

Christchurch private school St Margaret’s College received a handsome bequest on the 2024 death of former pupil Amber Gazzard, but a gift of $567,000 specified for ‘general upkeep and preservation of school archives’ well exceeded school needs.  A High Court order was needed to amend terms of this gift, allowing funds to be used in part for general school purposes.  

Charities law is zealous in ensuring gifts for a charitable purpose are in fact used for their stated purpose.

For St Margaret’s College, it became an embarrassment of riches if Amber Gazzard’s bequest had to be used solely for upkeep of school archives.  The High Court was told about $90,000 would be used to upgrade College archives: installing new shelving and display cabinets, upgrading lighting and technology, plus repainting.

It sought approval for the balance to be transferred to the College Foundation’s endowment fund, for general use within the College.

Charitable Trusts Act allows trust assets to be re-allocated, with court approval.

Courts are very sparing.  Wishes of the original donor are to be respected.

As a guide, judges follow an ancient common law legal principle, known as the cy-pres doctrine: the proposed new purpose must fit as close as possible to the original purpose specified by the donor.

In the High Court, Justice Boldt ruled transfer of a $470,000 surplus to the College endowment fund would provide a benefit to the school, analogous to wording of her bequest.

The court was told Ms Gazzard was devoted to the school.  She had for many years volunteered, maintaining school archives.

The $567,000 she gifted was the balance of her estate, after payment of several specific bequests.

re application by William Herbison for variation of Gazzard Charitable Trust – High Court (24.10.25)

25.222

Relationship Property: Paul v. Mead

 

After a Supreme Court ruling that Property (Relationship) Act also covers polyamorous relationships, the Family Court divided assets equally between Fiona, Lilach and Brett who had lived together on a rural Auckland property at Kumeu for fifteen years.

Fiona Mead claimed she was entitled to the greater share.  She financed the Kumeu purchase and it was her money that maintained their ‘commune-like’ lifestyle, she said.

Greater financial contributions by one party to a relationship are common, Judge Muir said.  Parties should not be ‘hypnotised’ by unequal cash contributions when dividing relationship property, he said.

Fiona was ordered to pay Lilach Paul $624,400; Brett Paul $618,100.  

The Family Court was told the three formed a polyamorous relationship in 2002.

Fiona had trained as a vet, later developing a business practising holistic animal medicine.

Lilach was raised on a kibbutz in Israel.  She is a sculptor.

Paul spent time in the Auckland Centrepoint community.  He ran a lawnmowing business.

The court was told all three had a common interest in a US-based esoteric teaching organisation called Builders of the Adytum.

When their triangular relationship ended in 2017, the major relationship asset was a rural property held in Fiona’s name on Trotting Course Drive at Kumeu, agreed to be now worth $1.8 million.    

Fiona said she is entitled to fifty per cent of relationship property, with Lilach and Paul to receive twenty-five per cent each.

Judge Muir ruled there was a high degree of financial interdependence between the three with each contributing in different ways.  Net assets are to be split equally, he ruled, with adjustments made for post-separation revenue and expenses covering the eight year period since separation.

Paul v. Mead – Family Court (17.10.25)

25.221

Tax: Inland Revenue v. Garnham

 

Clearly frustrated with his continued tax defaults, Inland Revenue was outmanoeuvred by Wellington lawyer Mike Garnham who had the High Court approve an Insolvency Act part-payment scheme, forcing Inland Revenue to accept less in full payment than offered previously and rejected.

The High Court was told of Mr Garnham’s thirty year history of tax non-compliance which has seen legal action taken against him multiple times, various settlement offers negotiated, and significant tax write-offs agreed.

Over the last two decades, Inland Revenue commenced legal action on five separate occasions to recover tax arrears.

In 2023, Inland Revenue took steps to bankrupt Mr Garnham on tax debts then amounting to $737,000.  Further penalties have since accrued.

This was not the first time bankruptcy has been threatened by Inland Revenue.

He applied for Tax Administration Act financial relief on hardship grounds, blaming non-payment variously on his spouse’s ill health, the incompetence of his former office manager and the later illness of a newly employed accountant.

Inland Revenue did not agree to yet another tax write-off benefitting Mr Garnham.  Multiple write-offs threaten the integrity of the tax system, challenging conscientious taxpayers who pay tax when due, it said.

Refused any tax relief, Mr Garnham set up an Insolvency Act part-payment scheme.

If approved by a majority of creditors who between them hold seventy five per cent of affected debt, the proposal is binding on all creditors, following court approval.

Associate judge Skelton approved a proposal which saw a family trust providing $380,000 to part-pay Mr Garnham’s unsecured creditors an estimated ten to fifteen cents in the dollar.  The exact payout depends on how much of the $380,000 is used to pay costs of getting court approval and then administering the proposal.

Inland Revenue voted against; owed $300,000 as a preferential creditor for unpaid GST and about $600,000 as an unsecured creditor.

Mr Garnham’s proposal offers full payment to creditors owed less than $5000; part-payment to creditors owed above $5000.

Inland Revenue complained that included as unsecured creditor votes in favour were a family trust and family companies; owed $4.3 million by Mr Garnham.  They should be excluded from the vote, Inland Revenue said.  His proposal specifically deferred any payment going to these related party creditors.

Excluding the $4.3 million owed related party creditors from the vote would see Inland Revenue in control, defeating the proposal by voting against with a now re-calculated ninety per cent of unsecured debt.

Judge Skelton left in the related party votes; meaning seventy-five per cent of debt by value remained in favour.

Family finances are funding the proposal, he said.  Creditors would receive less on bankruptcy.

Separately, Inland Revenue argued it is not bound by Insolvency Act part-payment proposals; it has its own bespoke procedure in the Tax Administration Act for negotiating hardship concessions with tax defaulters.

Tax Administration work-outs are a bilateral process between Inland Revenue and individual taxpayers, Judge Skelton said.  Where there are multiple creditors affected by a part-payment proposal, Insolvency Act rules apply and Inland Revenue is bound by these rules, he said.

Approving Mr Garnham’s part-payment proposal, Judge Skelton required proposal wording be amended to make it clear that Inland Revenue’s preferential claim for $300,000 takes priority, and is to be paid in full, before any part-payment to unsecured creditors.

Inland Revenue v. Garnham – High Court (17.10.25)

25.220

Bankruptcy: BNZ v. Gollan

 

Bankrupted on guarantee of a bank loan to her software start-up The Work Shop, Melissa Gollan argued the debt was not hers alone, liability should lie also with an intending investor who later backed out.

The $350,000 debt was hers alone, the High Court ruled.  She signed the guarantee.  There was no evidence of the intended new investor becoming liable for her business debts.

Wellington-based Melissa Linda Gollan attracted media attention with Work Shop, offering software to manage business expenses.

In 2024, she guaranteed Work Shop’s lending facility with Bank of New Zealand.

She later claimed the Bank facility was intended as a bridging loan, with a one million equity investment expected from a Bay of Plenty Charitable Trust managed by Ricki Gage: Te Runanga o Te Whanau.

She told the High Court that BNZ was aware that she held a ‘signed post-dated share transfer’ for Te Whanau’s expected investment.

This investment never came through.

When BNZ took action to bankrupt Ms Gollan on her guarantee of Workshop’s unpaid $350,000 debt, she said this was not solely her debt; Te Whanau ‘shared’ liability, she claimed.

There was no evidence of any arrangement between BNZ and Te Whanau having Te Whanau provide security for Work Shop’s overdraft, Associate Judge Skelton said.

Ms Gollan, as sole guarantor, was liable for the full amount.

BNZ was justified in refusing Ms Gollan’s offer to make repayments by instalments, he said.  She had made no repayments since notice of default in July 2024, and had provided no evidence of her current personal financial position.

BNZ v. Gollan – High Court (15.10.25)

25.219

Estate: Matene v. Estate Joe Matene

 

Winding up estates of two brothers was left to drift, reaching the stage where Izak Matene as the five per cent owner of a Massey property in Auckland refused to allow estate beneficiaries any access to their inherited property while he lived there with his family.  The High Court ordered a Property Law Act sale, with Izak given six weeks to shift out.

A 2014 family arrangement saw the Kopi Place property purchased collectively by several relatives: Izac taking a five per cent share; his father Joe taking a seventy per cent share; and Joe’s brother Isaac a twenty-five per cent share.

Part of the price was paid with a $296,000 bank loan, having all three liable as signatories.  It is claimed Izak put in no cash.

At time of this purchase, Izak’s uncle Isaac had limited mental capacity, the result of a head injury twenty years previously.  Isak’s father Joe was one of Isaac’s court-appointed property managers, authorised to handle his financial affairs.

Isaac died three months after Joe signed him into his purchase of a twenty-five per cent share of Kopi Place.

Isaac left no will.  No steps were taken to deal with his twenty-five per cent share.

Nearly ten years after Isaac’s death, son Daniel became administrator of his late father’s estate and started asking questions.  Initially, family were unaware that Isaac was part-owner of Kopi Place.

The High Court was told Daniel was refused access to Kopi Place and physically threatened when he questioned ownership rights.

By this time, Izak’s father Joe (who held a seventy per cent share of Kopi Place) had died.

He also left no will.  Again, no steps were taken to deal with his estate.

When ownership issues were raised eventually in the High Court, Izak and his family were living at Kopi Place, having no interest in sorting out ownership rights to ninety-five per cent of the property Izak did not own.  This ninety-five per cent share is expected to pass under default rules in the Administration Act to descendants of his father Joe and his uncle Isaac.

Izak himself is a beneficiary under his late father’s intestacy, together with his two sisters.

With Izak refusing access for co-owners, Justice MacGillivray ordered a Property Law Act forced sale of Kopi Place.

Net proceeds of sale are to be held by a law firm while Administration Act inheritance rights are identified.

Izak was ordered to pay an occupation rent for his use of Kopi Place since 2014, with a calculation of market rents over this period, less an allowance for Izak’s payment of rates and mortgage interest.

In addition to receiving five per cent of the net proceeds from Kopi Place as part-owner, Izak will receive an Administration Act inheritance out of the seventy per cent share payable to his late father’s estate.

Matene v. Estate of Joe Matene – High Court (10.10.25)

25.217

Asset Freeze: Belvedere Residential v. Li

 

Accused of wrongly taking $900,000 out of an Auckland property development she had just sold, Sifen Li claims it was a loan repayment made with the knowledge of Belvedere Residential Ltd’s new owner, Richard Lee.

The High Court imposed a freezing order over Ms Li’s assets, pending a full hearing.

The property development had its genesis in a 2021 agreement to buy a site on Belvedere Place in Warkworth for eleven million dollars.

Over the next twelve months, a deposit of $1.5 million was paid in three equal instalments, funded from various sources associated with Ms Li.

By early 2024, Ms Li was in sole control of Belvedere Residential Ltd and its Warkworth development, other investors having since departed.  Seven months later, she sold out to Richard Lee, who then took control of Belvedere.

The High Court was told Ms Li continued to have access to Belvedere’s bank account with Mr Lee’s consent and had authority to make payments on Belvedere’s behalf.

A $900,000 April 2025 transfer of Belvedere funds to Ms Li’s personal bank account proved contentious.

This was repayment of funds previously lent to Belvedere, used to pay the $1.5 million deposit, she says.

The deposit was an equity contribution put in by Ms Li, Mr Lee says.

If so, this equity contribution was taken into account when calculating the price paid by Mr Lee when buying Belvedere.

In the High Court, Justice Gardiner said that limited evidence before the court indicated funds for the deposit could have been either a loan or an equity contribution.

A full hearing is needed to decide.

In the interim, Justice Gardiner imposed a freeze prohibiting sale of a property owned by Ms Li on Clonbern Road in Auckland suburb Remuera and a similar freeze over shareholdings in four separate companies she owns plus a freeze over her personal bank accounts.

The amount frozen is limited to one million dollars.  Ms Li is permitted to draw down on her personal bank accounts to pay ordinary living expenses and her company bank accounts to pay business expenses.   

Justice Gardiner said a wide freezing order is necessary because of her apparent practice of mixing personal and business assets.

The court was told Mr Lee’s Belvedere Residential is in financial difficulty, with evidence of Belvedere’s property listed for mortgagee sale.

Belvedere Residential Ltd v. Li – High Court (10.10.25)

25.218

Unit Title: Body Corporate 49407 v. Donovan

 

Amended Unit Title powers enabled a Tauranga body corporate to assume ownership of an apartment, forcing a sale after the bankrupt owner squatted there for more than a decade without paying council rates, body corporate fees or contributing towards his $242,000 share of building remediation costs.

The High Court was told Michael Philip Donovan was bankrupted in 2009.

Insolvency Service disclaimed rights to his inner city Willow Street apartment; the amount secured by mortgages registered against the apartment meant it was valueless as an asset in Mr Donovan’s bankruptcy.

Land disclaimed in a bankruptcy defaults to crown ownership; a relic of feudal law from England.  Land tenure is derived ultimately from crown ownership.

Mr Donovan remained living in his apartment as if nothing had happened.

Known as Strata Views, the building has seven apartments; six operating as business premises.  Mr Donovan’s is the only one occupied as a residence.

Strata Views body corporate told the High Court it had received little co-operation from Mr Donovan.  He refused to leave.  Body corporate levies due following his bankruptcy mounted up, unpaid.  Council rates were not paid.

Attempts by Tauranga Council to force a Rating Act sale for non-payment of rates foundered.  No agreement could be reached with the first mortgagee over setting an auction reserve price.

By late 2024, unpaid arrears totalled $604,000: rates, insurance, body corporate levies and Mr Donovan’s unpaid share of weathertightness remediation costs.  Fellow apartment owners were covering his costs.

The High Court allowed the body corporate to assume ownership of Mr Donovan’s apartment.

Since 2010, the Unit Titles Act has allowed bodies corporate to exercise powers of a ‘natural person.’

Strata Views, like any natural person, was entitled to make an Insolvency Act application for the disclaimed apartment to be registered in its name.  It had ‘suffered loss,’ incurring body corporate expenses covering Mr Donovan’s apartment, Justice Andrew ruled.

Once registered as owner by court order, Strata Views body corporate is entitled to have current mortgages removed, clearing the title, enabling sale of Mr Donovan’s apartment, Justice Andrew said.

Two of the mortgages secure debts which fell due for repayment in July 2008 and July 2009.  No action has been taken to force repayment.

Limtation Act rules state recovery of a mortgage debt is time-barred if no steps are taken for twelve years from repayment date.  Both these mortgages are now ‘stale;’ time-barred and not enforceable, Justice Andrew ruled.

The remaining mortgage secured debts owed by Mr Donovan to the body corporate.  Strata Views right to recover this debt is achieved by assuming ownership of the apartment.

The court was told the body corporate intends to clean up the apartment, then sell.

Mr Donovan’s claim to instead have ownership of the disclaimed apartment returned to him was dismissed by both the High Court and the Court of Appeal.

Mr Donovan has no realistic ability to pay arrears, now well overdue, the court said.  Vesting ownership in Mr Donovan would perpetuate the body corporate’s current impasse attempting to deal with him.

Ownership passes to Strata Views’ body corporate, holding title on behalf of all the other apartment owners, who have been paying Mr Donovan’s share of outgoings.

Body Corporate 49407 v. Donovan – High Court (16.12.24) & Court of Appeal (8.10.25)

25.216

Mutton Bird: re Succession to Phyliss Harmon

 

Ten years on from Polly Harmon’s death, disputes over inheritance rights saw the Maori Land Court rule Polly validly skipped a generation, gifting her customary Maori land holdings to granddaughter Nicki Rimene.  But Nicki’s inherited rights to take mutton bird at Stewart Island must be approved separately through the Rakiura Titi Committee, which oversees harvesting rights, the court said.

Ngai Tahu’s Treaty settlement led to special rules governing ancestral rights to collect mutton bird from 36 small islands surrounding Stewart Island.

These rights are tightly held.  On half these islands, only certain families can harvest mutton bird.  Management of harvest rights on other islands is overseen by the Rakiura Titi Committee.  Who is entitled to the resource is closely controlled.

On Polly Harmon’s death at Masterton in 2014, she left by will all she owned to granddaughter Nicki, leaving nothing to her ten children.

Polly raised Nicki from childhood in a whangai adoption, with Nicki living with her at time of her death.

Rules in the Maori Purposes Act prohibit mutton bird harvesting rights being passed on by will.

Terms of Polly’s will supposedly gifting her mutton birding rights to Nicki are invalid.

In the Maori Land Court, Judge Stone offered Nicky an opportunity to disclaim this part of her inheritance.  If so, these ancestral rights pass directly to Polly’s ten children.  If not, evidence is required from the Rakiura Titi Committee whether granddaughters raised as whangai can directly inherit a grandparent’s rights.

Also in the Maori Land Court, Polly’s ten children challenged their mother’s choice of leaving all to Nicki as being unfair.

Te Ture Whenua Maori Act allows interests in ancestral land to be transferred by will to one or more blood relatives, overriding the customary rule that ancestral land is simply divided on death equally between direct descendants.

Polly’s will validly passed this land to Nicki, Judge Stone ruled.

It was too late for Polly’s children to bring a Family Protection Act claim against her estate ten years after their mother died; the Act imposes a twelve month deadline.

And back in 2015, all ten children signed a letter acknowledging they would not challenge their mother’s will.  This effectively barred any Te Ture Whenua challenge to the will, Judge Stone ruled. 

He dismissed claims this letter was signed without fully understanding its effect; terms of the letter were clear, he said.

The court was told Nicki intends to place her bequest of ancestral land holdings into a trust for the benefit of all Polly’s descendants.

re Succession to Phyliss Harmon – Maori Land Court (3.10.25)

25.214

Corporate Opportunity: Drycarbon GP One Ltd v. Leckie

 

Investment bankers Will Leckie and Chris Morrison were ordered to pay $12.1 million buying out Drylandcarbon joint venture partners Anthony and Wendy Beverley after a High Court ruling they misused company information diverting for their own benefit Drylandcarbon’s business plan and business opportunities.

Ant Beverley was the driving force behind an investment scheme exploiting carbon credits created by the Climate Change Response Act.

His 2017 business venture with Wellington-based Leckie and Morrison later fell apart with Beverley accused of not spending enough time on day-to-day management and Beverley accusing them of stealing his ideas.

The High Court was told Drylandcarbon grew out of work started by Mr Beverley back in 2007 to create investment opportunities out of the then proposed emissions trading scheme.   

Whilst purporting to impose a tax on carbon emissions, the trading scheme created a ‘licence to pollute’ with free credits parcelled out to some industries and others required to purchase carbon credits as compensation for their greenhouse gas emissions.

Early implementation was blighted by an avalanche of carbon credits, printed like monopoly money by countries in eastern Europe, sold dirt cheap to New Zealand companies.

What qualified as a carbon credit was tightened up.

New Zealand’s forested land immediately became more valuable.  Trees sequester carbon from the atmosphere.  This sequestration creates a carbon credit attached to the forest, a credit available for sale to industries required to purchase offsetting carbon credits.  

The beauty of Mr Beverley’s investment proposal was to stand as middleman in this process: attracting investment capital to buy forested land and then arranging transfer of carbon credits subsequently derived; all of which earns base fees on capital employed plus ongoing management fees.

He joined forces with Messrs Leckie and Morrison to exploit his proposal.  They set up a management structure called DC One H1 Ltd.

DC One was to prove pivotal in their later estrangement and subsequent litigation.

The High Court was told their relationship fell apart irretrievably within months of setting up the first Drylandcarbon investment fund.

No final agreement could be reached on terms of employment for Mr Beverley.  He wanted to see salaried staff doing much of the work Messrs Leckie and Morrison expected him to be doing.

Hiring a human resources consultant to undertake a review proved an unmitigated disaster; each side’s position became even more entrenched.

A 2021 mediation saw agreement that Messrs Leckie and Morrison would buy out the Beverleys’ half share in DC One.  Ultimately, no price could be agreed.

Negotiations over a formal shareholders’ agreement were never finally resolved.

Evidence was given of Messrs Leckie and Morrison deciding during this period to go it alone, cutting out Mr Beverley when setting up a second investment fund modelled on the successful Drylandcarbon fund.  This second investment scheme came to be called Lewis Tucker Forest Partners Ltd.

Mr Beverley was furious.  He sued.

Messrs Leckie and Morrison argued the first deal with Mr Beverley was a one-off generic business deal.  It was ‘one and done.’  They were free to subsequently pursue similar business opportunities, they claimed.

Justice Radich ruled their business relationship was governed by their joint participation in DC One H1 Ltd.

As directors in this company, Messrs Leckie and Morrison owed duties of good faith and were not permitted to divert company information and corporate opportunities to their own benefit.

They had breached these duties by setting up Forest Partners, profiting personally from a business opportunity which more properly belonged to DC One, he ruled.

Evidence was given of Forest Partners using spreadsheets copied from the initial Drylandcarbon investment proposal, incorporating formatting errors and formula errors which had sneaked through undetected in the original proposal.  Flyers and information sheets for Forest Partners were copied from the Drylandcarbon project.

Staff initially employed by Drylandcarbon were transferred across to Forest Partners.

Forest Partners used the same approach, same structure, same modelling and the same staff (except for Mr Beverley) as the earlier Drylandcarbon fund.

Justice Radich ruled profits from Forest Partners belonged to DC One, less a fifteen per cent allowance for the time expended by Leckie and Morrison setting up and managing their new Forest Partners scheme.

DC One as a joint venture was always intended to involve multiple funds, should the first prove successful, he said.

He ruled that Messrs Leckie and Morrison are to buy out the Beverleys’ half interest in DC One, with a valuation of DC One to include profits made by Forest Partners.

Valuation proved difficult.

The Beverleys said DC One is worth $93.1 million; Messrs Leckie and Morrison said $26.4 million.

The complicating variable was assessing future value of carbon credits.

Forests sequester carbon over time.  The value of carbon credits vary over time.

One expert said that possible future political intervention in the carbon credit market created such uncertainty that future carbon prices cannot be estimated at all.

Justice Radich ruled DC One is worth $24.2 million, based on recent market transactions where investors had sold their part interests in Forest Partners.  Details of these transactions were supressed.

Messrs Leckie and Morrison were ordered to pay $12.1 million, buying out the Beverleys’ half interest.

Litigation costs will run into millions, with court hearings having run for a month and a panoply of expensive commercial barristers arguing the case for each side.  The court record lists eight barristers appearing.  Add to these costs: solicitors’ costs preparing for trial, plus fees for expert witnesses called for each side arguing business valuations.

The Court of Appeal ruled at a preliminary hearing that litigation costs are to be paid by DC One; in effect paid by Messrs Leckie and Morrison who now come to own one hundred per cent of DC One.

Drylandcarbon GP One Ltd v. Leckie – High Court (3.10.25)

25.213

Property: Schmidt v. Garrity

 

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

Cryptopia: Sharma v. Cryptopia Ltd

 

Claiming to have lost Bitcoin currently worth $108 million in the 2019 heist which saw Christchurch-based Cryptopia hacked and some thirty million dollars in cryptocurrency stolen, customer Vihang Sharma failed in a High Court bid to halt any payout by Cryptopia liquidators.  Suspicious of Dr Sharma’s bona fides, the High Court required he provide verifiable details of his claimed loss.

Liquidators from Grant Thornton are working to a court-ordered plan to identify and pay Cryptopia customers a pro-rata distribution of assets remaining.

The High Court was told of ongoing discussions between the liquidators and Dr Sharma.  Since Cryptopia required a unique email address for each customer account, the liquidators require proof from Dr Sharma of the email addresses used for each of his customer accounts so they can verify his claimed holdings.

Liquidators say they can find no account balances matching those claimed by Dr Sharma.

Dr Sharma claims he held up to 471 separate customer accounts with Cryptopia, all operated without an email identifier.

These accounts were operated solely through use of an API, an application programming interface, he claims.  This provided sufficient client authentication to access his Cryptopia accounts and undertake trades, he says.

The liquidators say that even if these accounts were operated with an API key, Cryptopia protocols still required registration of an email address when setting up accounts.  They refused to investigate his claim without evidence of account registration emails.

Days before the court-ordered September cut-off date for customer claims, Dr Sharma asked for a High Court order blocking liquidators from making any distributions until his claim was finalised.

Justice Isac refused.

Dr Sharma left it to the last minute in his attempt to block payouts, Justice Isac said.  Later payment on any valid claim by Dr Sharma can form part of a court-supervised final wash-up, he ruled.

An unverified claim to be owed $108 million is not grounds for an immediate injunction, he ruled.  Dr Sharma must come back to court with further evidence.

Justice Isac said the court also wants to hear about the probable connection between the Dr Vihang Sharma now seeking a court injunction to block payouts and the Dr Vihang Sharma who earlier in the year sought to bribe a court registry official to get information off the court file while falsely claiming Justice Isac was conducting ‘secret teleconferences.’

Dr Sharma is based overseas.

Sharma v. Cryptopia Ltd – High Court (2.10.25)

25.212

Charitable Trust: re Estate Thomas Burke

 

It was a touching gesture for Thomas Burke to provide for his sister and another friend, but leaving the residue of his estate for use ‘as relax for religious as nuns’ in his partly handwritten will led to multiple court cases after his 1987 death, having his estate holding $60,500 cash nearly four decades later and yet another court case needed to decide who is entitled to this money.

Mr Burke’s major asset was a house on Mt Pleasant Road, in Christchurch.  This house and its contents were sold shortly after his death, with the High Court then asked to rule on interpretation of his will.

His sister, a nun with the Sisters of St Joseph of the Sacred Heart, was a beneficiary.  Known as Sister Leo, she was entitled to all estate income during her lifetime.

Mr Burke’s will then stated that on his sister’s death, all estate income would go to his friend Bridie Meagher.  His estate could not be finalised until after her death.

She died in Christchurch in 2022, aged 94.

Back in 1994, the High Court decided a vague reference in Mr Burke’s will of leaving the bulk of estate ‘as relax for religious as nuns’ was valid as a charitable gift.  Capital of the estate had to be kept intact.  Left open was the question: how would this capital be used to benefit nuns generally, on death of Bridie Meagher as the last surviving income beneficiary?

Thirty years later, Justice Gendall answered this question.

The late Mr Burke’s charitable intention of providing a haven for nuns was best achieved by giving all the money to the late Sister Leo’s catholic order: St Joseph of the Sacred Heart.  The current head of the order told the High Court how this money would be used for the benefit of nuns.

It was impracticable to continue any ongoing charitable trust for nuns in general, given the relatively small sum of money involved, Justice Gendall said.

Sacred Heart will be receiving less than the estate’s current balance of $65,000.  Some $12,000 is to be deducted for legal costs arising from this latest court application, the court ruled.

re Estate of Thomas Cyril Burke – High Court (1.10.25)

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