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Patel v Patel [2014] NZHC 2410 (2 October 2014)

Last Updated: 23 October 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-002593 [2014] NZHC 2410

_{Hearing: 10 and 11 September 2014}

PATEL v PATEL [2014] NZHC 2410 [2 October 2014]

_{JUDGMENT OF GENDALL J}

Introduction

Background and relevant procedural history

[1] The plaintiff Renuka Patel (Mrs Patel) and the first defendant, Narendra Patel (Mr Patel) were married in 1977 and separated in 2011. They are domiciled in Australia. They are estranged. Previously, Mrs Patel was living in the family home in Sydney with at least one child of the relationship. As I understand the position, she now lives in rented accommodation. Mrs Patel commenced proceedings in Australia under the Family Law Act 1975, an act of the Commonwealth of Australia, seeking orders for the division of property, spousal maintenance and child support (“the Australian proceedings”).

[2] The principal assets which are at issue in the proceedings before this Court include shares in New Zealand registered property-owning companies having a total value of some NZ$30 million. These shares appear notionally to be held by Praful Patel (Mr Praful Patel), the second defendant, who is Mr Patel’s brother. A further claim by Mrs Patel in this proceeding relates to shares in or assets owned by another New Zealand company, the 10^th defendant Apex Mega Centre Limited. Shares in that company appear to be held by a company incorporated in the United Arab Emirates (UAE) for the interests of a third party that Mrs Patel maintains is

implicated in this proceeding, Mr Muslim Dharamshi (Mr Dharamshi).

[3] So far as other property involved in the matrimonial claim made by Mrs Patel in the Australian proceedings is concerned, as I understand it this comprises one residential property in Sydney and the balance sale proceeds of the previous family

home, a commercial property in Sydney which operates a BP service station, various bank accounts in Switzerland and Singapore said to contain deposits equivalent to NZ$8 million, and other bank accounts in New Zealand, Australia, the Isle of Man and the United Kingdom, containing the equivalent of approximately NZ$450,000. There is also said to be other property valued at over $750,000 including motor vehicles and the shares in a partnership.

[4] At the heart of the proceeding before this Court are equitable claims by Mrs Patel asserting her entitlement to beneficial ownership of the shares in the New Zealand registered defendant companies and/or their assets. Alternatively, she alleges that these shares, notionally held by her brother-in-law Mr Praful Patel, (and in the case of Apex Mega Limited by Mr Dharamshi’s interests) are in fact shares held in trust for her former husband Mr Patel or his interests either solely or jointly with Mrs Patel, and which are susceptible to orders for the division of property in the Australian proceedings.

[5] In support of claims in respect of these shares and the assets of the various companies, Mrs Patel registered caveats in New Zealand against some of the properties owned by the companies and filed notices of her claims under s 42 of the (New Zealand) Property (Relationships) Act 1976 (the PRA).

[6] Four separate proceedings dealing with matters related to Mrs Patel’s claims

were commenced in this Court but they have now been consolidated.

Present applications

[7] There were nine interlocutory applications set down for hearing before this Court over the two day period 10 and 11 September 2014. These nine applications, all of which were opposed, were as follows:

(a) Application by Mr Patel, the first defendant, for a stay of the proceeding on the basis of non payment of an earlier costs award on the part of the plaintiff Mrs Patel.

(b) Application by the plaintiff Mrs Patel for a further order restraining the second defendant, Mr Praful Patel, from taking any further steps in this proceeding on the basis of an unpaid costs order owing by him to her.

(c) Application by the third to ninth defendants, the company defendants, for variation of various interim orders including a requirement for the plaintiff and her litigation funder to give undertakings as to damages.

(d) Application by the second defendant, Mr Praful Patel, for disclosure of the funding agreement held by Mrs Patel the plaintiff, and for a stay of these proceedings.

(e) Application by the second to ninth defendants Mr Praful Patel and the company defendants, seeking orders requiring the plaintiff to file and serve an amended affidavit of documents by way of discovery and seeking also costs.

(f) Application by the plaintiff, Mrs Patel, against the non-party Asset

Metro Limited for tailored discovery.

(g) Application by the 10^th defendant, Apex Mega Centre Limited, seeking summary judgment or alternatively security for costs against the plaintiff.

(h) Application by the plaintiff, Mrs Patel, for injunctive relief or a freezing order against the 10^th defendant Apex Mega Centre Limited.

(i) An amended application by the plaintiff Mrs Patel against the 10^th defendant, Apex Mega Centre Limited, for unless orders and tailored discovery.

[8] On 10 and 11 September 2014, despite this Court sitting for extended hours, there was time to consider only the five applications noted as [7](a), (b), (c), (f), and (i) above. Those applications noted at [7](d), (e), (g) and (h) were not reached and

obviously do not form part of this judgment. They were adjourned with the Registrar directed, so far as it was applicable, to allocate a new date to hear these applications. I now turn therefore to address each of the five applications noted at [7](a), (b), (c), (f) and (i) which I was able to consider.

Application by Mr Patel for a stay of the plaintiff ’s proceeding because of non- payment of an earlier costs award

[9] This is the first interlocutory application noted at para [7](a) above. On

19 June 2014 Toogood J in this Court made a costs order requiring Mrs Patel to pay to Mr Patel costs and disbursements totalling $24,521.14 with respect to certain interlocutory applications.

[10] Mr Patel now seeks an order staying the present proceedings against him, on the basis that, despite demands for payment from her, Mrs Patel has failed to pay this

$24,521.14 costs order.

[11] Rule 7.48 High Court Rules relevantly provides that:

1. If a party (the party in default) fails to comply with an interlocutory order or any requirement imposed by or under subpart 1 of part 7 (case management), a Judge may, subject to any express provision of these rules, make any order the Judge thinks just.

2. The Judge may, for example, order:

(c) ...That the proceeding be stayed in whole or in part ...”

[12] McGechan on Procedure at para HR7.48.01 notes that, r 7.48 encompasses failures to pay costs orders made on interlocutory applications – Kidd v Van Heeren.¹

In addressing r 7.48, McGechan on Procedure at para HR7.48.02 acknowledges however that New Zealand Courts traditionally have taken a benevolent approach to non-compliance with such interlocutory orders.

[13] Before me the parties appeared to accept that, in the present case, r 7.48 does apply to the failure of Mrs Patel to pay costs which were ordered against her on the

¹ Kidd v Van Heeren (HC) Auckland CIV-2004-404-6352, 16 November 2006.

interlocutory applications. From r 7.48, however, it is noted that an order for stay can only be made if the Court is of the view that the order is “just”.

[14] On these aspects, in Lees Trading Co NZ Ltd v Loveday² the High Court has said:

There is a problem matching the general demands of case management...with the provision of individual justice in each case, particularly given the aversion Judges have to dismissing claims otherwise than on their merits. For better or worse, the compromises the Courts have made are weighted very much in favour of the second of these two considerations.

[15] It seems clear also however that if non-compliance with an interlocutory order seriously prejudices the other party, this may lead to a proceeding being stayed or a defence struck out.

[16] In the present case, Mrs Patel’s position is that this is not a case of wilful refusal on her part to pay the costs in question – instead she says she has no available funds to meet the costs order immediately. She contends that in large measure this is because of tactical decisions her husband Mr Patel and his brother Mr Praful Patel have taken to deprive her of present access to assets and funds to which she is entitled. This aspect however is disputed by Mr Patel and is an issue that will only be properly resolved at substantive hearing.

[17] There is also a suggestion however that a sum in excess of $300,000 held in an Australian solicitor’s term deposit account and representing the net sale proceeds of Mr and Mrs Patel’s former home in Sydney would at least in part be available to Mrs Patel ultimately to meet the costs award. Mr Patel however raises issues over this particular investment, contending that it is subject to a repayment requirement for a loan said to be owing to a third party who I understand to be Mr Patel’s sister.

[18] Leaving all these matters on one side, what is clear from the results judgment of Toogood J dated 18 December 2013 are his preliminary findings at [18], [19] and

_{[27] that:}

² Lees Trading Co NZ Ltd v Loveday (HC) Christchurch CP70/96, 3 June 1998 at [11].

[18] I am satisfied that there is an arguable case that Mr Narendra Patel has a beneficial interest in such [UBS Swiss Bank] accounts, the details of which ought to be disclosed if they are relevant to any issue in the proceedings. The failure of Mr Narendra Patel to list documents related to such accounts and to provide inspection of them may amount to a breach of his obligations to the Court and Mrs Patel concerning discovery. Mrs Patel’s allegations are denied, however, and the Court is not in a position in these interlocutory proceedings to resolve the issue.

[19] Findings at trial, or in a substantive hearing at which the parties are subject to cross-examination and susceptible to credibility findings, that Mr Narendra Patel has given false or misleading evidence about Union Bank of Switzerland accounts or any other matter relating to the conduct of his financial affairs and his dealings with the assets of the marriage, are likely to result in adverse findings and the making of coercive orders against him.

...

[27] I am not persuaded that Mrs Patel has no arguable claim to an interest in the properties owned by the defendant companies such as to justify making an order, in these interlocutory proceedings, requiring removal of the caveats over the properties concerned. It is arguable, in my view, that if Mrs Patel can establish that the shares in the companies are held by the first and second defendants as constructive trustees for her, the closely held companies also hold the properties in trust for her.

[19] And, what is clearly apparent in this proceeding is that Mrs Patel has launched major claims against her husband, her brother-in-law and various companies. These claims allege that she has a significant interest in the shares of these substantial companies involving assets which it is said have a total value of approximately NZ$30 million. These are indeed major claims and in my view it would not be just under all the circumstances of this case to stay this proceeding simply because an interlocutory costs award is not able to be fully met at this stage.

[20] In addition, so far as that aspect is concerned, as will appear from paras [25] and [26] in this judgment, Mr Praful Patel clearly is himself indebted to his sister-in- law Mrs Patel for the sum of $10,935.80 as a costs and disbursements order made by Toogood J in her favour on 9 June 2014.

[21] From para [33](b) following in this judgment, it will also be clear that this

$10,935.80 is to be paid into Court and immediately passed on to Mr Patel in part payment of the costs owing by his wife Mrs Patel. This will leave a net amount owing for costs by Mrs Patel of $13,585.34.

[22] Under all the circumstances prevailing here, a benevolent approach to Mrs Patel’s partial non-compliance is required. I am satisfied that the justice of this case requires that Mr Patel’s present application for a stay of the proceeding on the basis of what will ultimately be non-payment of only part of the earlier costs award must fail. An order to this effect is now made.

[23] Instead, I order that:

(a) In exercise of the Court’s inherent jurisdiction, the $10,935.80 payment into Court to be made by Mr Praful Patel as ordered at [33](b) following, is to be paid immediately by the Registrar to Mr Patel the first defendant in part payment of the costs due from Mrs Patel.

(b) As to the balance of the costs and disbursements award due to Mr Patel totalling $13,585.34, this amount is to be deducted from any entitlement Mrs Patel has to available funds of the parties ordered in this proceeding before any ultimate division of property is to be made to her.

(c) Costs on this present application are reserved.

[24] That effectively disposes of the first application before me.

Application by Mrs Patel for an order restraining Mr Praful Patel the second defendant from taking any further steps in this proceeding on the basis of an unpaid costs order

[25] This is the second interlocutory application noted at [7](b) above. On 9 June

2014 the second defendant Mr Praful Patel was ordered by Toogood J to pay costs totalling $10,935.08 to the plaintiff Mrs Patel.

[26] Counsel for Mr Praful Patel has confirmed that he has paid this sum of

$10,935.80 into his solicitor’s trust account. Counsel advise further that Mr Praful Patel would now agree to this amount being paid by way of offset to Mrs Patel on the basis that it is then passed on immediately to the first defendant, her

husband Mr Patel, in part payment of the costs order made in his favour against his wife for the larger sum of $24,521.14 noted at [9] above.

[27] As I understand the position this suggestion has met with some favour by

Ms Chambers QC, counsel for Mrs Patel.

[28] I will return to this suggestion later but in the meantime address briefly the arguments concerning the particular debarring or restraining action which is before the Court.

[29] In support of this present application, Mrs Patel relies on r 7.48 High Court

Rules and the decision Kidd v Van Heeren.³ In my view however this reliance on r

7.48 is misplaced. Rule 7.48 enables enforcement of interlocutory (costs) orders only. The costs judgment of $10,935.80 at issue here is a final costs order in other proceedings, these relating to Mr Praful Patel’s withdrawal of a defamation claim he had initiated against Mrs Patel.

[30] And, in any event here, there is a reasonable argument as I see it that this

$10,935.80 costs judgment does not in fact relate to the present proceeding and thus given r 7.48 does not apply, the proper course is for the usual processes for enforcing a judgment as set out in r 17.3 High Court Rules or by other lawful means to be pursued.

[31] Notwithstanding these aspects, in any event the debarring order sought by Mrs Patel here would have the major consequence of potentially restraining the second defendant as a substantially affected party from further participation in this proceeding for a time. This is appropriate only in extreme cases – Stephens v Cribb.⁴

[32] I am satisfied therefore that the order Mrs Patel seeks here is disproportionate. But, in any event this issue can be simply met in my view in another more appropriate way. This is for the Court to require and order Mr Praful Patel to pay into Court $10,935.80 in settlement of the costs award in favour of Mrs

_{Patel. The Court would then immediately pay this $10,935.80 to the solicitors acting}

³ _{Above. n 1.}

⁴ Stephens v Cribb [1991] PRNZ 337 (CA).

for the first defendant Mr Patel in part payment of the $24,521.14 costs order made by this Court against Mrs Patel. If issues may arise concerning the jurisdiction of the Court to make such orders then I am satisfied that at the very least this Court has inherent jurisdiction in the interests of justice to act in this way.

[33] That said, the following orders are now made:

(a) The plaintiff’s application to restrain or debar the second defendant from taking further steps in this proceeding is dismissed on the following basis.

(b) The second defendant Mr Praful Patel is to pay into Court forthwith the sum of $10,935.08 in settlement of the costs order made against him in favour of the plaintiff Mrs Patel, and this sum at that point is to be held by the Court for the benefit of Mrs Patel subject to [33](c) below.

(c) Immediately the payment specified in [33](b) above is made, this Court on behalf of Mrs Patel is to pay and transfer this $10,935.08 sum to the solicitors for the first defendant Mr Patel in part payment of the $24,412.34 outstanding costs order dated 19 June 2014 made against Mrs Patel in favour of Mr Patel.

(d) Costs on this present application are also reserved.

Application by the third to ninth defendants (the company defendants) for variation of interim orders seeking a requirement that Mrs Patel and her litigation funder give undertakings as to damages

[34] This is the application noted at para [7](c) above.

[35] In this application the company defendants seek orders varying earlier interim orders made by this Court on 10 May 2012 and 10 September 2012. The varied orders sought are specified in the application itself and are to the following effect:

(a) Orders allowing for increasing bank borrowing and for the sale of certain properties owned by Chancery Property Investment No 2. Limited, Chancery Property Investment No. 4 Limited, and Viaduct Waterfront Investment Limited, as set out in Schedule 1 to this application; and

(b) An order making continued maintenance of the plaintiff’s caveats, Notices of Claim, and other interim orders conditional upon her and any third party funding her legal fees providing undertakings as to damages.

[36] The earlier interim orders had authorised the placement of caveats and Notices of Claim against the titles to various properties owned by the company defendants and in addition had provided certain ancillary orders related to those properties and future dealings.

[37] Before me however, given the limited hearing time which was available on

10 and 11 September 2014, the specific orders sought at [35](a) above were not pursued. Instead, counsel for the second to ninth defendants on 3 September 2014 had filed a memorandum in this Court along with what he described as an “urgent” Application to Remove All the Interim Orders and Caveats affecting the second to ninth defendants. In this memorandum he stated:

The present variation application that has been made has been overtaken by events that occurred over the weekend.

That new application had only just been filed and, in any event, time did not permit Mrs Patel to respond to the application or for full argument to be heard. Therefore, those matters were to be the subject of any later hearing in this Court that might have to be required. I did also understand that certain matters affecting some of the properties in question had been resolved by agreement between the parties and therefore the need for some of the orders sought had fallen away.

[38] That said, it was only the application noted at para [35](b) above seeking undertakings as to damages from Mrs Patel and her third party litigation funder which was the subject of some argument before me. I now turn to address that.

[39] The application before me under this head therefore was for orders requiring

Mrs Patel and her litigation funder (a New Zealand company with shareholding held

by a company incorporated in the British Virgin Islands) to provide comprehensive undertakings as to damages for those earlier interim orders Mrs Patel had obtained relating to the properties of the company defendants.

[40] Those interim orders were extensive. To an extent, they restrained the defendant companies’ operations and dealings with various properties during this proceeding. According to Mr Heard for the company defendants, the orders are akin to freezing order relief. He notes that Mrs Patel has provided undertakings as to damages in support of other applications for freezing orders (it seems these undertakings were dated 22 May 2012) but she has not provided undertakings to support her caveats. The defendant companies therefore seek orders from this Court requiring undertakings as to damages to be provided by both Mrs Patel and her litigation funder as a condition of the continued maintenance of the caveats and the interim orders.

[41] On these aspects, the defendant companies contend that their risk of loss as a result of the caveats and interim orders is real because:

(a) Property sales by the companies have been delayed and compromised by Mrs Patel’s involvement here. Previous sale offers have been unable to proceed and a market deterioration has allegedly occurred in the meantime;

(b) Because of the caveats and interim orders, the companies have been tied to the BNZ for funding and their ability to negotiate market interest rates and other favourable terms has been prejudiced by this and the present litigation instigated by Mrs Patel;

(c) The difficulty experienced by the defendant companies in grappling with the earlier orders made by this Court has meant that funding applications with the BNZ have also been delayed. In addition it is claimed relationships with tenants, suppliers, the body corporate of the Chancery development and other unit holders have all been

strained by the inability of the various companies to raise finance to

meet their debts caused by Mrs Patel’s actions here; and

(d) It is claimed Mrs Patel has used these Court orders tactically to block the defendant companies undertaking normal business and that she has only consented to transactions at the last minute and often several months late with consequent loss arising from the resulting delay.

[42] As to the suggestion by the company defendants that the undertaking as to damages sought from Mrs Patel should also be provided by her litigation funder here, the following arguments are advanced:

(a) The litigation funder, effectively a British Virgin Islands company, is supporting this proceeding for gain and the general rule which should be followed here is that third party litigation funders are liable for costs where they fund proceedings for their own benefit – Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No. 2).⁵

(b) It is suggested here that the litigation funder should give the same undertakings as are required from Mrs Patel. She resides out of New Zealand and where an applicant does reside out of the jurisdiction and there may be difficulty in enforcing an undertaking, additional security for that undertaking as to damages can be required to protect a defendant. On this, counsel referred me to Pop-A-Shot

Inc v Filtration and Pumping (Commercial) Limited,⁶ where this

occurred.

(c) Here, the company defendants contend that an undertaking as to damages from Mrs Patel is insufficient to provide the necessary protection against loss arising from the interim relief she has obtained and what they say is the unreasonable approach she has adopted in

_{this litigation. It is noted that the majority of Mrs Patel’s claimed}

⁵ _{Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No. 2) [2005] 1 NZLR 145 (PC) at [26].}

⁶ Pop-A-Shot Inc v Filtration and Pumping (Commercial) Ltd [1989] NZHC 15; [1989] 3 TCLR 225.

funds remain subject to the matrimonial property claim in Australia. These defendants contend that if she is unsuccessful in her present claims, it is likely she will have little assets to satisfy any award for damages.

(d) Finally, the company defendants contend that in the litigation funding agreement between Mrs Patel and the British Virgin Islands company, the funder agreed to provide a bank guarantee for security for costs if ordered and thus the undertaking sought from the funder here is appropriate.

[43] In response, Ms Chambers QC for Mrs Patel contended that, although Toogood J in previous decisions had reserved leave to come back to this Court for additional orders, on several occasions he had considered requests from the third to ninth defendants that Mrs Patel should give an undertaking as to damages here, but he rejected these. In particular at para [28] of his 18 December 2013 Results judgment and at para [41] of his 25 July 2014 Reasons judgment Toogood J effectively declined to rule that Mrs Patel give undertakings as to damages. The reason advanced for this conclusion he had reached would seem to include the broad proposition that at this early stage, the merits of this case seemed to fall in Mrs Patel’s favour to an extent such that undertakings as to damages were not appropriate.

[44] Next, r 7.45 High Court Rules which deals with undertaking as to damages required by an applicant for an interlocutory injunction was referred to me. Ms Chambers QC indicated that no authorities had been provided by the defendants where a litigation funder was required to provide an undertaking as to damages or security in a situation such as the present.

[45] Ms Chambers QC went on to contend that the funding agreement between the plaintiff and her litigation funder does not provide for the funder to provide an undertaking as to damages. She then suggested that the primary reason for the present application was simply to endeavour to stop the plaintiff from further

advancing her claim against the various defendants, a claim which Ms Chambers QC

argued was a strong one.

[46] Further, she said the refusal of Toogood J in his earlier decisions to require an undertaking as to damages from the plaintiff followed a careful balancing of the parties’ interests in this case. Ms Chambers QC was at pains to state that the orders which are in place in her view were working and that at a practical level, agreement had been reached in the past for release of caveats/claims to enable the sale of a number of properties held by the third to ninth defendants.

[47] Ms Chambers QC notes also that Toogood J was well aware that the plaintiff had a litigation funder who was involved in this proceeding. He mentioned the fact of a funding agreement in his 25 July 2014 Reasons judgment at [33] to [37].

[48] On balance and, under all the circumstances prevailing in this case, I concur with the preliminary view expressed by Toogood J in his decisions dated 18

December 2013 and 25 July 2014 that here, neither Mrs Patel nor the litigation funder should be required to provide an undertaking as to damages. The orders in question I note have been in place for some time. No substantial evidence has been provided to me that they have caused any real significant difficulty or resulted in actual loss to the defendants. Bald claims are hinted at but no specific evidence has been placed before the Court addressing this aspect. In addition, the defendants seek an early and urgent hearing for their just filed 3 September 2014 “Interlocutory Application on Notice for Removal of the Interim Orders and Caveats”. If that application ultimately proves to be successful, it would of course overtake this present application as well.

[49] But overall, there can be no question that Toogood J has a long history in dealing with this proceeding from the Court’s perspective, and I therefore defer to the preliminary view he has expressed. This is that the merits in this case indicate that the plaintiff has established a good arguable case against the defendants in a number of respects, such that undertakings as to damages are not required here.

[50] I conclude therefore that the application by the third to ninth defendants to vary the earlier orders to require undertakings as to damages to be provided by the plaintiff and her litigation funder must fail. That application is dismissed.

[51] Costs are also reserved with respect to that application.

Application by the plaintiff Mrs Patel against the non-party Asset Metro

Limited for tailored discovery

[52] This is the sixth interlocutory application noted at [7](f) above. Asset Metro Limited, the non-party, manages a significant commercial complex which is owned by the 10^th defendant Apex Mega Centre Limited. Some informal discovery by Asset Metro Limited I am told has already taken place in this proceeding.

[53] The opposed discovery application before me however was still initially the subject of considerable argument at the hearing between the parties.

[54] Lengthy discussions ensued first, as to what additional discovery and processes might be undertaken and secondly, as to questions over the logistics and costs of this.

[55] Finally, Ms Chambers QC for Mrs Patel sought leave to withdraw this non- party discovery application. In doing so, she indicated that the application for leave was advanced on the basis of likely ballooning costs for any further discovery which was to be undertaken and her suggestion that this whole matter had simply become quite out of proportion.

[56] In a ruling I made on 10 September 2014, I did grant leave to the plaintiff

Mrs Patel to withdraw the non-party discovery application. I now confirm this.

[57] An order however was made in that ruling that the reasonable costs of both the third party Asset Metro Limited and its counsel with respect to discovery matters which had taken place to date were to be met by the plaintiff Mrs Patel. I confirm that order.

[58] I also reserve leave for any party to come back to the Court on 48 hours notice if any issues arise with respect to the costs issues on this discovery question.

[59] Finally, a further order was made in that ruling that the 28 pages of hard copy documents which to date had been discovered informally by Asset Metro Limited and were held by the plaintiff were to be returned forthwith to Mr Cogswell by the plaintiff. If copies of these 28 pages were held by any other party then similarly they were to be returned forthwith to Mr Cogswell. That order is also confirmed.

[60] That effectively disposed of the plaintiff’s application for non-party discovery.

[61] Costs, if any, on that matter are also reserved.

Apex Mega Centre Limited application for defendant’s summary judgment or

alternatively security for costs against the plaintiff Mrs Patel

[62] This is the seventh interlocutory application noted at para [7](g) above.

[63] In this application the 10^th defendant Apex Mega Centre Limited seeks summary judgment against Mrs Patel or, in the alternative, an order for security for costs. The application is opposed by Mrs Patel.

[64] The 10^th defendant owns a substantial shopping centre in Mount Wellington, Auckland (the Apex Mega Centre). The 10^th defendant is a company which was incorporated in New Zealand for the purpose of purchasing the Apex Mega Centre. The director of the company is Mr Muslim Dharamshi (Mr Dharamshi), a resident of Dubai in the UAE. The sole shareholder of the 10^th defendant is Murzah International FZE, a company incorporated in UAE of which Mr Dharamshi is the

sole shareholder and director.

[65] The Apex Mega Centre is valued at approximately $60 million. Mrs Patel in this proceeding seeks orders vesting ownership of either the Apex Mega Centre itself, or alternatively the shares in the 10^th defendant, in her and/or her husband Mr Patel on the basis of an express or constructive trust or as a first alternative, under a

pleading involving unjust enrichment or, as a second alternative, under a pleading to

“pierce the corporate veil”.

Background details

[66] In 2010 the original developer of the Apex Mega Centre agreed to sell it and signed a conditional contract for the sale at a price of $53 million with the first defendant Mr Patel as purchaser.

[67] Subsequently, Mr Patel assigned the purchase agreement to the third defendant Viaduct Waterfront Investment Limited (Viaduct), a company in which he and his brother Mr Praful Patel owned all the shares.

[68] Around 24 December 2010 the purchase agreement for the Apex Mega Centre became unconditional and Viaduct paid a deposit of $6 million. Settlement was to take place late in 2011.

[69] It seems from material which is before the Court that around 14 October 2011 the BNZ made a loan offer to Viaduct of $53 million with a specified purpose for the loan described as “to fund the purchase of the Apex Mega Centre in Mount Wellington, Auckland”.

[70] This $53 million loan advance was also to restructure certain current loan facilities which the BNZ at that time had with the third to ninth defendants. A specific condition of the loan offer was that the new advance was to be guaranteed by Mr Patel the second defendant and by Mrs Patel the plaintiff (although it seems her guarantee may have been for a limited amount).

[71] As I have noted above, around October or November 2011 Mr and Mrs Patel separated in what I understand was then and up to recent times has been a rather acrimonious fashion.

[72] As a result, both Mr Patel and Mr Praful Patel depose now that a decision was taken for Viaduct not to proceed with the purchase of the Apex Mega Centre. It is said that this was because of specific difficulties that arose following Mr Patel’s

separation from Mrs Patel. This was perhaps caused also at least in part by the

BNZ’s requirement for her to provide a new guarantee on the bank loan facility of

$53 million required to complete the purchase.

[73] Mr Patel and Mr Praful Patel say it was at that point that they introduced a friend of theirs, Mr Dharamshi to the opportunity to buy the Apex Mega Centre. They depose that Mr Dharamshi conducted due diligence, agreed the Apex Mega Centre was a good investment and decided to proceed with the purchase. Mr Patel and Mr Praful Patel say that the arrangement for Mr Dharamshi’s interests to take over the purchase contract of the Apex Mega Centre was entirely necessary because otherwise Viaduct and Mr Patel would have defaulted under the purchase contract, given what they say are actions Mrs Patel took with the BNZ, and their added inability to meet the BNZ mortgage conditions, including perhaps, difficulties they would have experienced in obtaining the new bank guarantee from Mrs Patel.

[74] As a result, Mr Dharamshi incorporated New Zealand Apex Mega Centre Limited as the purchasing vehicle and an agreement assigning all interest in the purchase to this new company was entered into. The BNZ had agreed to lend Apex Mega Centre Limited $43.5 million to complete the purchase subject to a mortgage over the property and a guarantee from Mr Dharamshi which was provided.

[75] An arrangement was entered into between Viaduct, Apex Mega Centre Limited and Mr Dharamshi whereby Viaduct would effectively forfeit the $6 million deposit it had originally paid, this forming part of the purchase price for the Apex Mega Centre property. It is said that $3 million was contributed towards the purchase as equity by Mr Dharamshi’s UAE company Murzah International by way of advance to Apex Mega Centre Limited and a $5 million loan was provided to the company from Mr Dharamshi’s cousin (who was also a friend of Mr Patel and Mr Praful Patel), Dr Mumtaz Kassim (Dr Kassim). Dr Kassim is the Deputy Ugandan Ambassador to London and is herself a lawyer.

[76] So far as the $5 million loan from Dr Kassim is concerned, the parties say that this represented an amount which had been repaid to her at the time by either Mr Praful Patel or by Viaduct on his behalf. This loan it is said had been made

earlier (in 2001) by Dr Kassim to Mr Praful Patel personally and a formal Deed of Acknowledgment of Debt to record the terms of the loan is before the Court. This Deed of Acknowledgment of Debt purporting to be signed by both Mr Praful Patel and Dr Kassim records that a loan of £1.4 million was advanced to Mr Praful Patel in

2001 repayable upon demand or at the latest in 15 years time from that date with interest in the meantime at 8% per annum. Dr Kassim has deposed that a $5 million part repayment of the loan was made by Mr Praful Patel to her in late 2011 and she had decided then to invest and advance this sum to her cousin Mr Dharamshi through his company Apex Mega Centre Limited as an investment in the commercial property it was purchasing.

[77] Despite what appears to be signed commercial documentation to record all of this which is before the Court, amongst other things Mrs Patel disputes the authenticity of the £1.4 million loan from Dr Kassim to Mr Praful Patel and the $5 million part repayment noted above. But, there is nothing by way of documentary or other evidence before the Court to substantiate these complaints from Mrs Patel as to the authenticity of this loan and its repayment arrangement.

[78] The balance of the funds to purchase the Apex Mega Centre Limited were provided by the $43.5 million loan from BNZ to Apex Mega Centre Limited.

[79] It is Mrs Patel’s position that the $6 million deposit paid (and now forfeited) by Viaduct and the further $5 million representing the loan from Dr Kassim all originated from the company Viaduct. Indeed Mrs Patel contends that Viaduct itself was the source of the $5 million funds to repay the alleged loan owing by Mr Praful Patel to Dr Kassim.

[80] The position of the 10^th defendant however is that, so far as it was concerned, all of these arrangements were completed on a proper commercial basis and they are not open to attack in any sense. Certainly before the Court there is a completed Deed of Assignment of the agreement for sale and purchase of the Apex Mega Centre Limited and other documentation which does seem to set out the general arrangements. Viaduct indeed required something from the 10^th defendant to compensate it for the loss of its forfeited $6 million deposit. On 5 December 2011

the 10^th defendant therefore agreed to provide Viaduct with a right of first refusal in perpetuity to purchase the Apex Mega Centre Limited at market value less the $6 million deposit Viaduct had already paid. On this the 10^th defendant agreed that Viaduct’s interest under this right of first refusal could be registered on the titles to the Apex Mega Centre Limited, a fact which is somewhat unusual in itself. All this constituted an overt arrangement which would seem to have some commercial sense. If Viaduct was subsequently to purchase the Apex Mega Centre Limited property under its right of first refusal then it would get back its $6 million original deposit.

Summary judgment application

[81] The 10^th defendant’s summary judgment application is brought pursuant to r 12.2(2) High Court Rules. For a summary judgment application brought by a defendant to succeed, the defendant has to show that the plaintiff cannot succeed in its claim. Summary judgment is only appropriate where there is a clear answer which cannot be contradicted and which is a complete defence to all a plaintiff’s causes of action. It must be shown that none of the pleaded causes of action can succeed.

[82] Summary judgment is also not appropriate if there are factual disputes on which the Court’s decision may turn. However there must be a threshold met of inherent credibility in a situation where there may be a real dispute on material facts

– Bernard v Space 2000 Limited,⁷ Westpac Banking Corporation v M M Kembler NZ

Ltd⁸ and A-G v Jones.⁹

The parties’ arguments

[83] Mrs Patel advances a number of complaints about the purchase of the Apex Mega Centre Limited by the 10^th defendant. These complaints, which appear to be based very much on unparticularised allegations of fraud or improper dealing, are

_{expressed in her pleadings as follows:}

⁷ _{Bernard v Space 2000 Ltd [2001] NZCA 214; [2001] 15 PRNZ 338 (CA).}

⁸ _{Westpac Banking Corporation v M M Kembler NZ Ltd [2000] NZCA 319; [2001] 2 NZLR 298.}

⁹ Westpac Banking Corporation v M M Kembler NZ Ltd [2003] 16 PRNZ 715 (PC).

(a) Her first cause of action contends that the net assets of the third to ninth defendants are held on trust for Mr Patel and her and that in some way these assets include an interest in the 10^th defendant and/or the Apex Mega Centre Limited. Similar claims seem to be made in the second and third causes of action although these causes of action do not appear to be directed against the 10^th defendant.

(b) Mrs Patel in her seventh cause of action claims that the “assets and liabilities or the shares of Apex Mega Centre Limited” are held on express trust for Mr Patel and/or the third to ninth defendant companies either individually or together and that they in turn hold that interest on trust for Mr Patel and herself. As an initial observation on this aspect, any claim by Mrs Patel to the shares in the

10^th defendant company would need to be brought against that

company’s shareholder Murzah International the UAE company which has not been named as a party in this proceeding. In response to this, Ms Chambers QC for Mrs Patel indicated that amended pleadings could be filed to deal with this aspect. At this point I leave this aspect on one side however.

(c) The eight cause of action advanced by Mrs Patel contends for a constructive trust on the basis of her “reasonable expectation” that by advancing money to the third to ninth defendant companies Mrs Patel would become a beneficial owner of their assets. That pleading however does not seem to explain how or why this means Mrs Patel

also has an interest in or owns the shares in the 10^th defendant or the

Apex Mega Centre property.

(d) In her ninth and 10^th causes of action Mrs Patel pleads “unjust enrichment” and “piercing the corporate veil”. These contentions seem to be broadly based on allegations of fraud or improper dealing which on my initial view appear to lack any substantiation. There are significant transactional documents produced however which the 10^th defendant says show that it is a legitimate company that has itself

purchased the Apex Mega Centre and incurred substantial debt personally guaranteed by Mr Dharamshi to enable it to do so. In response, Mrs Patel seems to be saying that this Court should disregard all those transactional documents on the basis that they are a fiction or a sham.

[84] As I see the position, Mrs Patel’s real complaint in this area is that Viaduct decided to forego what she now perceives was a valuable commercial opportunity when a decision was taken not to proceed with the purchase of the Apex Mega Centre. On this aspect, and given Mrs Patel’s suggested conspiracy theory regarding the purchase, Mr Dharamshi, Mr Patel and Mr Praful Patel have all sworn affidavits confirming that the 10^th defendant is the true owner of the shopping centre and that there is no “side deal” as alleged by Mrs Patel. Mr Dharamshi has indeed gone further to confirm that no trust or arrangement of any kind exists and that there are

no documents to the contrary.

[85] In response, Mrs Patel appears simply to make bald allegations and insinuates that, given she says all parties to the Apex Mega Centre are “connected” in some way, the purchase of the property by Mr Dharamshi’s company is truly a sham and the property or shares therefore are held in trust for the interests of she and her husband.

[86] Certainly before this Court is an affidavit of Chhaya Prasad the daughter of Mr Patel and Mrs Patel dated 12 April 2012 which Mrs Patel points to in support of her argument here. In April 2012 Ms Chhaya Prasad was aged 34 and was then a merchant banker, having previously been a qualified lawyer working in practice in both Sydney and London. As the eldest daughter of Mr Patel and Mrs Patel she deposes at para 8 and 9 of her affidavit:

8. In April 2011, I was in Auckland, New Zealand, to visit my husband’s family. My father organised to be there at the time, saying to me:

“I want to take you on a tour of the properties I own in New

Zealand.”

9. Whilst in New Zealand I met my father, along with Tony Alsop from

Colliers and his wife Leanne Alsop (who introduced herself as “your

father’s property manager”). We visited together a number of properties including...the Apex development (opposite Sylvia Park, just south of Auckland City)...To get access to the Apex development, we had to sign in at the construction company’s office and get hard hats – when my father introduced himself to office staff as “the owner”. I also met a person my father introduced to me as his lawyer, John Brown, and also his banker from BNZ.

[87] Those comments as I see it however, do no more than simply confirm that in April 2011, Mr Patel having signed the purchase contract for the Apex Mega Centre and then assigned the contract to his company Viaduct (which paid the $6 million deposit at that point), did intend that this property would form part of the family’s property empire. At that point in April 2011, Mr Patel and Mrs Patel had not separated. I have little doubt that the situation and intentions changed once the separation had occurred when it is said potential difficulties in completing the purchase and the BNZ funding arrangements for the purchase arose. It was only then that Mr Dharamshi and his interests were introduced to the property.

[88] Leaving on one side for a moment the evidence of Mr Patel and Mr Praful Patel relating to the 10^th defendant’s purchase of the Apex Mega Centre, it is important at this point to set out in some detail the direct evidence relating to the Apex Mega Centre purchase provided by Mr Dharamshi. As I have already noted he is the company’s sole director and effectively through his UAE company its sole shareholder. Relevantly, in Mr Dharamshi’s detailed affidavit sworn 6 May 2014 he deposes:

[6] As I explain in this affidavit, the allegations against Apex (by Mrs Patel that my company Apex owns the Apex Mega Centre on trust for her and her husband) have no basis and cannot succeed.

...

[13] I am on good terms with Mumtaz (my cousin Dr Mumtaz Kassim). I

have a number of business interests with her and my brother...

[14] Mumtaz is a good friend of Praful Patel. They know each other from the United Kingdom.

...

[19] Prior to my introduction to the Apex Mega Centre, I had never been involved in any business dealings with Praful or Narendra. As far as I am aware, the only business dealings that have occurred involving Praful and Narendra and my family are the loans taken out by Praful from Mumtaz.

[20] I first became aware of the “Apex Mega Centre” at Mount Wellington in Auckland at some point in, I think, mid or late 2011. My recollection is not perfect due to the passage of time, but I believe I received a telephone call or calls from Praful, Narendra and Mumtaz telling me about a business opportunity in New Zealand. They explained that they were facing a situation created by Renuka, Narendra’s wife, filing for divorce.

...

[24] I understood from Mumtaz that Praful had invited her to participate in the transaction. Both saw this as a possible way of paying off Praful’s outstanding loan due to Mumtaz. However Mumtaz told me she was not interested in this as she was too busy with her role as a Deputy Ambassador of Uganda to become involved in a shopping centre. Certainly this made sense to me. However, she had mentioned my name to Praful as someone who might be interested in taking over the transaction. I had sufficient financial standing to take on such a contract.

...

[27] (In December 2011) I nevertheless agreed to travel to New Zealand to discuss the matter further, as I was being told that this was a significant opportunity, and I sensed that Praful was desperate to find another buyer...I was aware that both Praful and Narendra were anxious to find another party to take over the transaction and that the situation could be turned to my advantage.

...

[39] I arranged for the incorporation of Apex Mega Centre Limited on

7 December 2011. I am the sole director of Apex Mega Centre Limited and the sole shareholder is Murzah. I in turn am the sole shareholder of Murzah. There is nothing “covert” about any of this. It was quite clear that I was the director of Murzah, and I made full disclosure to the bank (BNZ) as to its ownership structure. They were satisfied with this.

[40] I again confirm that I own the shares in Murzah for myself and not on behalf of anyone else. I confirm that I manage the company for my own benefit and not for anyone else...

[41] BNZ agreed to extend credit facilities to Apex Mega Centre Limited on the basis that I enter into a personal guarantee in favour of BNZ. I agreed. The guarantee was for a significant sum. There was no “side deal” or unwritten “understanding” with anyone else in relation to this guarantee. It is a personal guarantee, and the liability is mine. I have therefore accepted very considerable personal financial responsibility and risk in entering into this contract.

[42] On 16 December 2011, Apex Mega Centre Limited took an assignment from Viaduct of the benefit of the contract...This Deed of Assignment was entered into for the benefit of Apex Mega Centre Limited. The suggestion that Apex Mega Centre Limited entered into the Deed as trustee for Narendra or Praful, or indeed for the claimant, is untrue. Why on earth would I fly to New Zealand and provide a substantial personal

guarantee and then inject significant capital into the company, if it was

entirely for someone else’s benefit?

[43] Thereafter Apex Mega Centre Limited completed the sale contract and paid the instalments due under it. The total purchase price was approximately $59 million, which was funded by:

(a) $6 million from the (forfeited) deposit; (b) $3 million from Murzah in Dubai;

(c) $5 million from the repayment of a loan to Mumtaz from

Viaduct which was received by Apex; and

(d) The balance from BNZ.

...

[45] The suggestion made by the claimant that all the monies to pay for the shopping centre have come from Narendra is ridiculous and has no factual basis at all. In fact, I have personally guaranteed some $45 million of lending and advanced $3 million of my own money.

...

[50] The suggestion that I or Murzah or Apex Mega Centre Limited are in some way holding the shopping centre as trustee or nominee for Narendra or his wife is absurd. I completely reject this suggestion.

...

[53] Mrs Patel has brought a speculative and spurious claim. There is no evidential basis for the allegations which she advances against me and my companies. These allegations include serious allegations of fraud and involve large sums of money. There is no documentary or oral evidence that might support Mrs Patel’s speculations. I have no documents in my possession that might support her claim. There is no “trust”. There are no emails referring to anything like this. Rather the emails show that I did my best to negotiate as good a deal as I could, that I took advice from appropriate professionals in New Zealand, and that I then assumed a very significant personal guarantee to support borrowings from a well-known New Zealand bank. I have no relationship with Mrs Patel whatsoever and only a weak connection to her husband’s brother, via my cousin Mumtaz.

[54] I am aghast and distressed that allegations as serious as this can be made against someone, with no evidence to support them. The only “evidence” is a clumsy attempt to portray me to the New Zealand courts as a “dodgy” Indian businessman from Africa, who uses “shady” companies from “shady” jurisdictions to conceal real ownership structures.

[55] These suggestions are offensive...In this case the bank conducted a careful due diligence on me and was satisfied that I was a legitimate purchaser with the means to carry out and implement this transaction. That is exactly what happened. There is no façade. There are no “contributions”. There is no “understanding”. There is no undisclosed trust.

[89] These sworn statements in Mr Dharamshi’s affidavit amongst others are detailed and emphatic. His evidence is clear that Apex Mega Centre is owned legally and beneficially by his company and the shares in that company are held effectively for him. Any suggestion of a trust or some other arrangement regarding the Apex Mega Centre property are categorically denied.

[90] It is quite clear to me that this evidence is effectively uncontradicted here. There is no independent or other evidence before the Court of any kind to question these clear statements by Mr Dharamshi. Mrs Patel has endeavoured to make a number of allegations about the Apex Mega Centre and its ownership including serious suggestions of conspiracy and fraud, but these are entirely unsupported by any evidence. She has put nothing before the Court to question in any real way the sworn evidence of Mr Dharamshi regarding the Apex Mega Centre. At best her position is one where she simply makes unsubstantiated claims, As I see it, these are met and answered alone by the undisputed evidence of Mr Dharamshi.

[91] And it is clear too that all the documentation before the Court, makes clear commercial sense and entirely supports the position that Mr Dharamshi’s interests and the 10^th defendant took over for themselves and completed the Apex Mega Centre purchase. Certainly it was Mr Dharamshi’s loan application to the BNZ which was finally approved and proceeded and it is only Mr Dharamshi who has personally guaranteed the multi-million dollar loan debt secured by his company from the bank. Finally, I am satisfied that all Mrs Patel’s causes of action against the

₁₀^th _{defendant, including her express and constructive trust claims and the ninth and}

10^th causes of action pleading “unjust enrichment” and “piercing the corporate veil” are unsupported here by any documentary evidence or in any other way. Indeed, as I have already noted, they are also entirely contrary to the commercial documents produced by the 10^th defendant and others including the BNZ which in my view must comprehensively refute Mrs Patel’s claim here.

[92] Again as I have noted above, these causes of action are predicated on Mrs Patel’s bare claims that all transactions with the 10^th defendant are a sham and that this company is in fact owned and/or controlled by her husband and/or the third to ninth defendant companies and that Mr Dharamshi is a director in name only. All

these claims are roundly refuted by Mr Dharamshi in his uncontradicted evidence. I repeat that none of the claims are supported by any documentation or independent evidence of any kind. Certainly as I see it there is no evidence of sham or improper purpose in the transactions surrounding the purchase of the Apex Mega Centre.

[93] Finally, for completeness, I need to refer to the issue of “piercing the corporate veil” which Ms Chambers QC raised. On this she referred me to the recent Supreme Court of England decision in Prest v Petrodel Resources Ltd.¹⁰ This decision however related to a simple family relationship property claim between a husband and wife. I am satisfied therefore that this decision differs from the present situation. The only basis for Prest to apply in this case and in theory the corporate veil be pierced would be if the properties in question in fact belonged beneficially to the husband, Mr Patel. At best here even on Mrs Patel’s contention, the Apex Mega

Centre interest might belong to Viaduct and not otherwise.

[94] Also from Prest as I understand the discussion concerning “piercing the corporate veil”, the Supreme Court at paras [35] – [37] of the decision found that as a matter of general legal principle there is no justification for “piercing the corporate veil”.

[95] Lastly, I need to repeat here that I am satisfied there is nothing of substance before the Court to suggest that the true transaction for the purchase of the Apex Mega Centre is anything other than that represented by Mr Dharamshi and others – that is that the 10^th defendant is the purchaser and beneficial owner of the property with a first mortgage loan from the BNZ and additional loans of $5000 from Dr Mumtaz and $3000 as a shareholder loan.

[96] So far as future dealings with the Apex Mega Centre property are concerned, it may well be that in time Mrs Patel may be seen to have a justifiable claim with respect to the shares or assets of the other company Viaduct which could include the

_following:

¹⁰ Prest v Petrodel Resources Ltd [2013] UKSC 34.

(a) The company’s interest in the Apex Mega Centre property under its right of first refusal (in the event that the 10^th defendant might at any time wish to sell) whereupon its $6 million “forfeited deposit” would be recoverable; and

(b) Its interest in the $5 million fund which it may well have advanced to Mr Praful Patel to repay his outstanding loan to Dr Kassim noted at para [79] above.

Those will be matters for the future however.

[97] But, for all of the reasons I have noted above I am satisfied that none of the causes of action advanced by Mrs Patel against the 10^th defendant can succeed and therefore, the present summary judgment application should be granted.

[98] The 10^th defendant here has a clear answer to Mrs Patel’s claim against it which on all the evidence before the Court simply cannot be contradicted – Westpac Banking Corporation v M M Kembla NZ Limited.¹¹ None of Mrs Patel’s causes of action against the 10^th defendant can succeed here, and in my view no amendment to her pleadings against the 10^th defendant would assist.

[99] It is for these reasons that the summary judgment application before me must succeed.

[100] Given that result, there is no need for me to consider the security for costs application advanced by the 10^th defendant as an alternative. Nevertheless, my preliminary view on that application should be recorded at this point. If I am wrong on the summary judgment application advanced by the 10^th defendant, then I am of the view that the security for costs application would be likely to succeed. I leave on

_{one side however the quantum of security to be ordered.}

¹¹ Westpac Banking Corporation v M M Kembla NZ Ltd [2000] NZCA 319; [2001] 2 NZLR 298.

Conclusion

[101] My conclusion on this final application by the 10^th defendant as noted above is that its summary judgment application must succeed. An order is made therefore granting summary judgment to the 10^th defendant against the plaintiff with respect to all of Mrs Patel’s claims against the 10^th defendant.

[102] As to costs on that application, I heard no argument from counsel with respect to costs. Costs are therefore reserved. If counsel are unable to agree on the issue of costs between them, then they may file memoranda sequentially which are to be referred to me and, in the absence of either party indicating they wish to be heard on the question of costs, I will decide that issue based upon the material then before the Court.

...................................................

Gendall J

Solicitors:

Deborah Chambers Ltd, Auckland

Ewan Eggleston, Auckland

Holland Beckett, Tauranga

Cook Morris Quinn, Auckland

Lee Salmon Long, Auckland

Josh McBride, Auckland

Cogswell Law, Auckland