Khan Enterprises (Australasia) Pty Ltd as Trustee for Khan Family Trust v Business Mantra Pty Ltd t/as Business Mantra
[2024] WADC 66
•28 AUGUST 2024
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: KHAN ENTERPRISES (AUSTRALASIA) PTY LTD as Trustee for KHAN FAMILY TRUST -v- BUSINESS MANTRA PTY LTD t/as BUSINESS MANTRA [2024] WADC 66
CORAM: SHEPHERD DCJ
HEARD: 21-24 MARCH 2023, 6 APRIL 2023 (WRITTEN SUBMISSIONS, DEFENDANT BY COUNTERCLAIM), 17 JULY 2023 (WRITTEN SUBMISSIONS, PLAINTIFFS BY COUNTERCLAIM) & 15 SEPTEMBER 2023
DELIVERED : 28 AUGUST 2024
FILE NO/S: CIV 1354 of 2017
BETWEEN: KHAN ENTERPRISES (AUSTRALASIA) PTY LTD as Trustee for KHAN FAMILY TRUST
First Plaintiff
AKHTAR HAMEED KHAN
Second Plaintiff
AND
BUSINESS MANTRA PTY LTD t/as BUSINESS MANTRA
First Defendant
ANAND KUMAR GUPTA
Second Defendant
DEEPA GUPTA
Third Defendant
AND
BUSINESS MANTRA PTY LTD t/as BUSINESS MANTRA
First plaintiff by counterclaim
ANAND KUMAR GUPTA
Second plaintiff by counterclaim
DEEPA GUPTA
Third plaintiff by counterclaim
AND
KHAN ENTERPRISES (AUSTRALASIA) PTY LTD as Trustee for KHAN FAMILY TRUST
First defendant by counterclaim
AKHTAR HAMEED KHAN
Second defendant by counterclaim
Catchwords:
Loans - Agreements made entirely orally - Agreements made partly orally, partly in writing and partly by conduct - Subsequent conduct of the parties - Validity of agreement signed by another - Principles of agency - Whether ratified by conduct - Burden and standard of proof - More than one hypothesis open on the evidence
Legislation:
Supreme Court Act 1935 (WA), s 32(1)
Result:
Judgment for the second and third plaintiffs by counterclaim, in part
Representation:
Original Action
Counsel:
| First Plaintiff | : | In person |
| Second Plaintiff | : | In person |
| First Defendant | : | No appearance |
| Second Defendant | : | No appearance |
| Third Defendant | : | No appearance |
Solicitors:
| First Plaintiff | : | Not applicable |
| Second Plaintiff | : | Not applicable |
| First Defendant | : | Pragma Lawyers |
| Second Defendant | : | Pragma Lawyers |
| Third Defendant | : | Pragma Lawyers |
Counterclaim
Counsel:
| First plaintiff by counterclaim | : | Mr J S Slack-Smith |
| Second plaintiff by counterclaim | : | Mr J S Slack-Smith |
| Third plaintiff by counterclaim | : | Mr J S Slack-Smith |
| First defendant by counterclaim | : | No appearance |
| Second defendant by counterclaim | : | Mr A J J Gomes |
Solicitors:
| First plaintiff by counterclaim | : | Pragma Lawyers |
| Second plaintiff by counterclaim | : | Pragma Lawyers |
| Third plaintiff by counterclaim | : | Pragma Lawyers |
| First defendant by counterclaim | : | Not applicable |
| Second defendant by counterclaim | : | Gomes Legal |
Case(s) referred to in decision(s):
Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101
Axon v Axon (1937) 59 CLR 395
Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336
Brown v New South Wales Trustee and Guardian [2012] NSWCA 431
Chou v AWAP SGT 26 Investment Ltd [No 3] [2018] WASC 383
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193
Dodds v Kennedy (No 2) (2011) 42 WAR 16
Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Fazio v Fazio [2012] WASCA 72
Fitzgerald v Masters (1956) 95 CLR 420
George 218 Pty Ltd v Bank of Queensland Ltd [No 2] [2016] WASCA 182
Huntingdale Village Pty Ltd (ACN 085 048 531) (Receivers and Managers Appointed) v Corrs Chambers Westgarth [2018] WASCA 90; (2018) 128 ACSR 168
John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451
Kazal v Thunder Studios Inc (California) [2023] FCAFC 174
King v Adams [2016] NSWSC 1798
Kuligoswki v Metrobus [2004] HCA 34; (2004) 220 CLR 363
La Mela v Franklexis Pty Ltd [2020] WASCA 83
Lehrmann v Network Ten Pty Ltd (Trial Judgment) [2024] FCA 369
Leybourne v Permanent Custodians Ltd [2010] NSWCA 78
Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23; (2008) 35 WAR 520
Mark Anthony Conlan (as Liquidator of Oakleigh Acquisitions Pty Ltd) v Registrar of Titles [No 3] [2001] WASC 201
Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; (2009) 261 ALR 382
NOM v Director of Public Prosecutions [2012] VSCA 198 [124]; (2012) 38 VR 618
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) CLR 451; (2004) 208 ALR 213
Palmanova Pty Ltd v Commonwealth of Australia [2023] FCA 1391
Quarante Pty Ltd v The Owners Strata Plan No 67212 [2008] NSWCA 258
Realestate.com.au Pty Ltd v Hardingham [2022] HCA 39; (2022) 406 ALR 678
Rhesa Shipping Co SA v Edmunds [1985] 1 WLR 948
Thorby v Goldberg (1964) 112 CLR 597
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522
Table of Contents
1. Introduction
2. Background and initial dealings with Dr Khan
3. The events of 3 December 2012
4. The events between 4 December 2012 and 10 December 2012
5. The first and second payments
6. The third and fourth payments
6.1 The 3 January 2013 email and telephone call
6.2 The tax invoice from Old Shanghai
6.3 The third and fourth payments
7. The January 2013 Agreement
7.1 The background
7.2 The express terms
7.3 The ambit
8. The fifth payment
9. The sixth payment
10. The March 2013 Agreement
10.1 The background
10.2 The express terms
10.3 Mr Gupta's evidence about the signing
10.4 Mr Gupta's evidence about the ambit of the March 2013 Agreement
10.4.1 The first component of the 'Loan'
10.4.2 The second component of the 'Loan'
11. Khan Dhaba, the wider dealings
11.1 Mr Gupta's oral evidence in examination-in-chief
11.2 Mr Gupta's oral evidence - 'the clarifying questions'
11.3 Mr Gupta's oral evidence - 'Re‑examination'
11.4 The objective evidence regarding Indian Food Caterers
12. Mrs Gupta's evidence
12.1 Her knowledge about the first to the sixth payments
12.2 Her knowledge of the 5 March 2013 Agreement
13. Other conduct between Business Mantra and Khan Dhaba
13.1 February 2013
13.2 Payments March to April 2013
13.3 Communication after the signing of the March 2013 Agreement
13.3.1 March 2013
13.3.2 May 2013
13.3.3 August 2013
14. My approach to aspects of the trial
14.1 My approach to the assessment of Mr Gupta's evidence generally
14.2 My approach to the hypotheses raised on the evidence and onus
15. My assessment of Mr Gupta as a witness
15.1 Conduct at odds with a person acting honestly
15.2 Inconsistency between written documents and Mr Gupta's oral evidence
15.3 Inaccuracy of contemporaneous notations
15.4 The wider business dealings with Dr Khan/Khan Dhaba
15.5 Conclusions on my approach to Mr Gupta's oral evidence
16. My assessment of Mrs Gupta as a witness
17. Findings of fact
17.1 Background
17.2 Where there was no evidence at trial
17.3 The first and second payments
17.4 The third and fourth payments
17.5 The January 2013 Agreement
17.6 The fifth payment
17.7 The sixth payment
17.8 The March 2013 Agreement
17.9 Analysis and findings of fact from Mrs Gupta's evidence
17.9.1 The conflict between Mr and Mrs Gupta's evidence
17.9.2 Mrs Gupta's knowledge of the March 2013 Agreement
17.9.3 Conclusions on Mrs Gupta's evidence
17.10 Other conduct - January/February 2013 onwards
18. The loan agreements
18.1 The threshold issues
18.2 The composition of the loan agreements
18.3 My approach to what Dr Khan told Mr Gupta
19. The principles of law
19.1 Loans
19.2 General principles governing agreements of law
19.3 Determining the composition of an agreement
19.4 Agreements in writing
19.5 Agreements made orally or by conduct (or both)
19.6 Ratification
20. Analysis
20.1 The first and second payments
20.2 The January 2013 Agreement
20.3 The third and fourth payments
20.3.1 Analysis
20.3.2 The wider dealings analysis
20.3.3 Conclusions on the third and fourth payments
20.4 The fifth payment
20.5 The sixth payment
20.6 The other conduct and its relevance to Hypothesis Two
20.7 March 2013 Agreement
20.8 Subsequent demands for repayment
21. Conclusions and final orders
SHEPHERD DCJ:
Introduction
On six separate occasions between 11 December 2012 and 2 February 2013 Anand Gupta,[1] a qualified chartered accountant, transferred various sums of money to, or to the benefit of, Akhtar Hameed Khan[2] ('Dr Khan') totalling $53,380.58 ('the sum').
[1] The second defendant to the substantive action; together with Deepa Gupta, the first and second plaintiffs to the counterclaim ('the plaintiffs').
[2] The second plaintiff to the substantive action; the second defendant to the counterclaim ('the defendant').
Those payments comprised:
(i)$10,000 on 11 December 2012 (the first payment);
(ii)$10,000 on 12 December 2012 (the second payment);
(iii)$15,000 on 3 January 2013 (the third payment);
(iv)$3,380.58 on 3 January 2013 (the fourth payment);
(v)$10,000 on 14 January 2013 (the fifth payment); and
(vi)$5,000 on 2 February 2013 (the sixth payment).
Mr Gupta asserts that each payment was a loan to, or to the benefit of, Dr Khan that is now repayable. Dr Khan's pleaded position is that he denies that any of the payments were loans[3] and he accordingly denies being under any obligation to repay the sum.[4]
[3] Defence to Counterclaim filed 31 March 2021, pars 3 ‑ 4.
[4] Defence to Counterclaim filed 31 March 2021, par 4.
Prior to 14 January 2013 there was no formal agreement in place in writing between Mr Gupta and Dr Khan as to the nature of the payments that had been made to that date.
On 14 January 2013 Mr Gupta and Dr Khan entered into an agreement that Mr Gupta claims was a loan agreement intended to encompass, and document, the first to the fifth payments (inclusive) made from Mr Gupta to, or on behalf of, Dr Khan ('the January 2013 Agreement').
Mr Gupta transferred the sixth payment to Dr Khan on 2 February 2013.
The evidence led at trial demonstrated that from a date in January 2013, Mr Gupta and Dr Khan became increasingly involved in arrangements for the ongoing management and/or sale of Dr Khan's Indian takeaway food business, Khan Dhaba.
The ambit of Mr Gupta's involvement in and around those dealings was not something that was immediately clear at trial. However, the picture that emerged from the entirety of the evidence was that from an unknown date in January 2013 onwards, there were dealings between Dr Khan and third parties, introduced to Dr Khan by Mr Gupta, for the assignment of the lease agreement for Khan Dhaba. Further, that on 26 February 2013 Mr Gupta became a one-third shareholder in Indian Food Caterers Pty Ltd ('Indian Food Caterers'), a company set up specifically in respect of the ongoing management and/or sale of Khan Dhaba to the third parties.
Whilst the evidence was sufficient for that picture to crystallise, the extent of Mr Gupta's involvement with Dr Khan in the wider dealings relating to Khan Dhaba and its ongoing management and/or sale was, and remains, murky.
On 5 March 2013 a further written agreement was drafted and, on Mr Gupta's evidence, entered into between Mr Gupta's wife, Deepa Gupta, and Dr Khan ('the March 2013 Agreement').
Mr Gupta signed his wife's name on the March 2013 Agreement as the Lender.
Mr Gupta's evidence was that the ambit of the March 2013 Agreement was such that it encapsulated, as loans, all six payments which Mr Gupta had, by that stage, made to, or to the benefit of, Dr Khan. Further, that the March 2013 Agreement was intended to replace the January 2013 Agreement.
Mr Gupta's oral evidence was that the March 2013 Agreement was also to document as part of the defined loan figure, an amount of $50,000. Mr Gupta asserted that that amount was promised to him by Dr Khan upon the successful performance of a condition; namely that Mr Gupta guarantee the assignment of the lease agreement for Khan Dhaba from Dr Khan to the third parties.
There are significant issues with the ambit of both the January 2013 Agreement and the March 2013 Agreement.
Mr Gupta's oral evidence about the ambit of each of those Agreements was not consistent with the express terms of each Agreement. Those issues are analysed in detail later in these reasons.[5] The interpretation of both Agreements in the manner for which Mr Gupta contends relies upon the court's acceptance of Mr Gupta's oral evidence as being honest, accurate and reliable. I return to this on a number of occasions in these reasons, particularly in section 15.
[5] See sections 20.2 and 20.7.
In respect of the March 2013 Agreement, further issues arise regarding its overall validity as a loan agreement, it having been signed by Mr Gupta in his wife's name as the Lender in circumstances where she was not told beforehand that this was to occur. Further, for the reasons I set out later in this decision, I am not satisfied that Mrs Gupta saw the March 2013 Agreement at any time proximate to its signing. Frankly, she had no idea about its content.
Whilst both the 2013 Agreements, together with other documentary evidence, were tendered into evidence at trial, none of those documents either alone or in combination capture the entirety of the interactions, dealings and agreements between Mr Gupta and Dr Khan. Nor do the documents explain why Mr Gupta engaged in certain physical conduct, particularly after January 2013. Nor do they explain what else was occurring as between Mr Gupta and Dr Khan, or any entity owned or operated by Dr Khan, at a time proximate to when the third, fourth, fifth and sixth payments were made.
Whilst both Mr Gupta and Mrs Gupta gave evidence at trial, it was clear having seen and heard Mrs Gupta give evidence that she had little to no involvement in, nor knowledge of, the dealings between her husband and Dr Khan. Her evidence does not assist the plaintiffs in proving its case.
Proof of the plaintiffs' case therefore relies heavily on the court's acceptance of the oral evidence given by Mr Gupta to explain the documents, the agreement(s) between the parties and other aspects that bear on the correct characterisation to ascribe to each of the six payments.
Dr Khan did not appear at court to give evidence, nor to adduce any evidence in defence of the plaintiffs' claim. Neither was there any cross‑examination on his behalf. In short there was no contradictor present at trial.
Dr Khan's decision not to participate in the trial should not, and does not, adversely affect the claim brought by the Guptas. It does not follow, however, that the plaintiffs' claim is thereby satisfied. Nor does it follow that the plaintiffs are relieved of their obligations of proving on the balance of probabilities that the sum (or any component part) was a loan to, on behalf of, Dr Khan and remained a loan.
The plaintiffs' claim that any of the six payments were loans to, or to the benefit of, Dr Khan did not rely on any evidence regarding Mr Gupta's involvement in respect of Khan Dhaba, nor the precise arrangements that the parties entered into in respect of that entity.
However, the totality of the evidence as it unfolded, including the concurrent dealings of the parties in respect of Khan Dhaba, is relevant to my determination of the issues before the court.
That is because the evidence in its totality gives rise to two competing hypotheses. The first hypothesis is that contended for by the Guptas, namely that the six payments were, and remained, loans from Mr Gupta (or from Mr and Mrs Gupta or from Mrs Gupta alone) to, or to the benefit of, Dr Khan (Hypothesis One).
The second hypothesis that arises from the totality of the evidence is that the six payments (or any of them) were treated by the parties as some sort of payment by Mr Gupta towards a financial interest in Khan Dhaba (Hypothesis Two).
I test the plaintiffs' claim that each of the six payments is consistent with Hypothesis One against the evidence that suggests that at least some of those payments were consistent with Hypothesis Two.
In so doing, I bear in mind that the plaintiffs bear the onus of proving on the balance of probabilities that the sum (or any component part thereof) is (and remained) properly characterised as a loan.
The Guptas' claim will not succeed unless the whole of the evidence establishes a reasonable satisfaction on the preponderance of probabilities such as to sustain the relevant issue.[6] When the law requires proof of any fact I must feel an actual persuasion of its occurrence or existence before it can be found.[7]
[6] Axon v Axon (1937) 59 CLR 395, 403; Lehrmann v Network Ten Pty Ltd (Trial Judgment) [2024] FCA 369 [98] (Lehrmann).
[7] Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336, 361; Lehrmann [98].
Apposite to the matter before me, when deciding the facts I bear in mind not just what the probabilities are on the limited material which the court has, but also whether that limited material is an appropriate basis on which to reach a reasonable decision.[8] Further, a mere mechanical comparison of probabilities independent of a reasonable satisfaction will not justify a finding of fact.[9]
[8] Lehrmann [99] and the authorities cited therein.
[9] NOM v Director of Public Prosecutions [2012] VSCA 198 [124]; (2012) 38 VR 618, 655; Brown v New South Wales Trustee and Guardian [2012] NSWCA 431 [51]; Lehrmann [100].
Finally, in respect of the two hypotheses against which I test the evidence, I must be satisfied on the balance on probabilities that Hypothesis One is more likely than Hypothesis Two. Insofar as I am not persuaded on the balance of probabilities which hypothesis is more likely, it follows that the plaintiffs will not have discharged the onus of proof in respect of those payments.
Given the paucity of contemporaneous documents available to objectively prove the characterisation of the six payments, to a large extent the plaintiffs' claim relies upon my acceptance of Mr Gupta's oral evidence that each of the six payments were loans at the time they were made and, further, that the subsequent conduct of the parties did not alter the characterisation of any of the six payments.
Mr Gupta was less than impressive as a witness. His evidence was, broadly speaking, chaotic, difficult to follow, at times evasive, at times lacking in candour and at times economical with the truth. Parts of his evidence obfuscated, or ignored completely, facts which are material to the issues before the court.
I formed the impression that Mr Gupta was coy about fully and transparently disclosing to the court his wider dealings and conduct with Dr Khan in respect of Khan Dhaba. That probably understates the position.
Those dealings, the timings of the dealings which commenced on an unknown date in January 2013 through to the end of February 2013, and beyond, the subject of those dealings and other conduct entered into by Mr Gupta from late January 2013 onwards, clearly give rise to an evidential basis which points away from Hypothesis One and which supports Hypothesis Two.
There are a number of reasons why I reach the conclusion that I cannot rely on Mr Gupta's oral evidence in its entirety as being honest, accurate and reliable. I set them out in detail in section 15 below.
It suffices to say at this juncture that there were parts of Mr Gupta's evidence which were loosely connected with the truth, there were parts of his evidence that appeared to be unconnected with the truth. There was evidence about Mr Gupta's wider conduct which cast a long shadow over his overall credibility. That included his willingness to sign his wife's name on the March 2013 Agreement without her prior knowledge nor agreement.
That other conduct also demonstrated that Mr Gupta was not adverse to providing written references in his position as a chartered accountant for Dr Khan (and in respect of Khan Dhaba specifically) which were either recklessly indifferent as to the truth or which plainly regarded the truth as an unnecessary appendage.
In light of these observations, it would be simple to wield a wholly blunt instrument to all of Mr Gupta's oral evidence and to simply reject it in its entirety. However, the position is more nuanced than that.
I ultimately reject considerable parts of Mr Gupta's evidence.[10] My rejection of parts of Mr Gupta's evidence does mean that I must (nor that I do) reject the entirety of his evidence. I weigh Mr Gupta's evidence with care and I scrutinise it carefully. I accept it where there is some other independent corroboration of his evidence or where the preponderance of the evidence satisfies me that there is no alternative explanation open on the evidence other than the explanation contended for by Mr Gupta.
[10] See section 15.
Ultimately, I am satisfied on the balance of probabilities that the first and second payments were loans. They were made in December 2012 at a time before the evidence establishes any concurrent dealings between Mr Gupta and Dr Khan regarding Khan Dhaba.
There is nothing about the later dealings between the parties that suggests that either the first or second payment (or both) were subsequently treated by the parties in any other way. There is no evidence suggesting that Mr Gupta had any interest in, or was to acquire any interest in, Khan Dhaba prior to January 2013.
There is no other inference open on the evidence to explain the first and the second payments other than that they were loans, and remained loans, to Dr Khan personally.
Whilst I am persuaded on the balance of probabilities in respect of the first and second payments as being loans, the position in respect of the third, fourth, fifth and sixth payments is far from clear.
The events that occurred from January 2013 onwards in respect of Khan Dhaba, detailed in detail later in this decision, clearly point to the existence of ongoing business dealings between Mr Gupta and Dr Khan in respect of Khan Dhaba to a point in early April 2013.
Ultimately the combination of that evidence, together with all of the evidence adduced at trial, leaves me with considerable doubt as to whether any of the third, fourth, fifth or sixth payments were loans at the time they were made. Alternatively, if they were loans at the time the monies were transferred, that they remained loans given the evolving and emerging financial interest of Mr Gupta in Khan Dhaba (and with Dr Khan generally).
It may be in respect of those payments (the third to the sixth payments) that Mr Gupta was naïve, trusting and ultimately taken advantage of by Dr Khan. It may be that Mr Gupta was too willing to trust an older father figure who portrayed himself as successful, rich and a person of influence. It may well be that Mr Gupta was led down the garden path.
It may also be that Mr Gupta, as a qualified chartered accountant, financial planner and businessman, was in fact making payments towards a financial interest in a business opportunity with Khan Dhaba which ultimately did not work out.
I am not here to speculate nor to wrestle with the elusive beast that is the truth. Ultimately, applying the burden and standard of proof, I am not satisfied on the balance of probabilities that the third to the sixth payments inclusive were, and remained, loans as between the parties.
It follows that I reject the plaintiffs' claim in respect of the third, fourth, fifth and sixth payments as loans.
Background and initial dealings with Dr Khan
As at December 2010 Mr Gupta was practising as a qualified chartered accountant and financial planner[11] through Business Mantra (Business Mantra).
[11] ts 95.
As at December 2010 Dr Khan was the sole director and major shareholder[12] of Khan Enterprises (Australasia) Pty Ltd ('Khan Enterprises'). Khan Enterprises acted as trustee for the Khan Family Trust through which Dr Khan operated a takeaway restaurant in Fremantle by the name of Khan Dhaba.[13]
[12] Exhibit 44.
[13] ts 101.
Mr Gupta was introduced to Dr Khan by a mutual friend in December 2010. At that time Dr Khan requested Mr Gupta's assistance to bring his tax returns up to date.
On 14 December 2010 Khan Enterprises engaged Business Mantra to provide accountancy services.[14] By letter of that date, Mr Gupta as director of Business Mantra, set out the terms of the engagement between Business Mantra and 'Dr Akhtar Hameed Khan, Director, Khan Enterprises (Australasia) Pty Ltd as trustee for the Khan Family Trust trading as Khan Dhaba'.[15]
[14] Exhibit 2, page 62.
[15] Exhibit 2, pages 62 - 70.
The scope of the engagement included that Business Mantra would provide the following services in respect of Dr Khan's business entities: to maintain ongoing bookkeeping, to prepare and lodge Business Activity Statements (BAS returns), annual income tax returns and Fringe Benefit Tax (FBT returns), to prepare the annual financial statements, and to prepare and lodge the superannuation returns for Dr Khan's superannuation fund.
From December 2010 to at least December 2012, Business Mantra provided those professional services to Khan Enterprises, specifically in respect of Khan Dhaba, including bookkeeping, lodging BAS[16] and preparing a business plan. All of the invoices for those services were addressed to Khan Dhaba.[17]
[16] Exhibit 3 - Exhibit 20; ts 103.
[17] Exhibit 3 - Exhibit 20.
In March 2012 Mr Gupta compiled a business plan for Khan Dhaba and invoiced Khan Dhaba for that service by invoice dated 29 March 2012.[18]
[18] Exhibit 23.
In March 2012 Dr Khan requested that Mr Gupta provide a letter to be submitted to the Immigration Department in support of Dr Khan's proposed sponsorship of a family member. Dr Khan instructed Mr Gupta to say that Khan Dhaba is 'continuing and upgrading'.[19]
[19] ts 111.
On 30 March 2012[20] Mr Gupta produced a letter in the following terms:
[20] Exhibit 22, page 99.
To whom it may concern,
RE: letter of support for nomination application by Khan Dhaba.
I refer to the abovementioned sponsorship application and supply the following information in support of this application.
I confirm that to the best of my knowledge and based on the information supplied to me by Mr A Khan, as director of Khan Dhaba (Khan Enterprises Pty Ltd ATF Khan Family Trust) that his trading entity, Khan Dhaba, is currently trading and is solvent and in my opinion, there are reasonable grounds to believe that his trading entity is able to meet its ongoing debts in a timely manner and when they become due and payable.
Based on my experience, Mr Khan seems to be a competent business manager and is liked by his employees and is in compliance with the Australian Taxation Office.
Based on the business plan and discussions with Mr Khan, the business should be able to hire the employees and meet all of their financial obligations.
Should you require any further information, please do not hesitate to contact me.
Yours sincerely,
Anand K Gupta, Director, Business Mantra
On the same day Mr Gupta emailed Dr Khan attaching the letter for his review and 'approval'.[21] Mr Gupta stated further that he would endeavour to have the first draft set of financial statements to Dr Khan in a week or so.[22]
[21] Exhibit 22; ts 97.
[22] Exhibit 22.
Business Mantra invoiced Khan Dhaba on 30 March 2012 for the provision of that letter.[23]
[23] Exhibit 21
Business Mantra continued to supply Khan Dhaba with the services outlined, with Business Mantra invoicing Khan Dhaba for those services for (at least) the two-year period December 2010 to December 2012.[24]
[24] Exhibit 3 ‑ Exhibit 21.
The events of 3 December 2012
On 3 December 2012 Dr Khan telephoned Mr Gupta telling him that he needed to see Mr Gupta urgently.[25] Mr Gupta met Dr Khan on 3 December 2012 at Mr Gupta's office.[26] During that meeting three interrelated matters were discussed. Firstly, the financial state of Khan Dhaba. Secondly, Dr Khan requested a letter of reference from Mr Gupta for a loan application. Thirdly, Dr Khan requested a personal loan from Mr Gupta. I deal with those not necessarily in the order in which Mr Gupta gave his evidence.
[25] ts 113.
[26] ts 114.
In respect of the first matter, Dr Khan told Mr Gupta a number of things about the financial state of Khan Dhaba. They can be summarised as follows:
(a)that Khan Dhaba was suffering because no one was looking after it;
(b)that Dr Khan's nephew was not interested in the business and it was just him (Dr Khan) and his son running Khan Dhaba;[27]
(c)that the business was running at a loss;
(d)that Dr Khan was behind in his rent payments;[28]
(e)that Dr Khan signed a lease for six years for Khan Dhaba, however, Dr Khan only wanted it for a year;[29]
(f)that Dr Khan had just undergone bypass surgery;
(g)that Dr Khan had been trying to sell the business Khan Dhaba for a while,[30] including that he had advertised in a few places including on Gumtree,[31] and that he had spoken to a few people but nothing had materialised;[32] and
(h)that Dr Khan had just mentioned that he was trying to 'sort out a few things' and that he needed a loan in order to reach an in‑principle agreement with Khan Dhaba's landlord.[33]
[27] ts 114.
[28] ts 115.
[29] ts 115.
[30] ts 114.
[31] ts 114.
[32] ts 114.
[33] ts 116.
In respect of the second matter, Dr Khan told Mr Gupta that he needed a letter for a finance application Dr Khan intended to make for a loan in respect of Khan Dhaba.[34]
[34] ts 113.
In respect of the letter for a finance application for Khan Dhaba, Dr Khan told Mr Gupta:
(a)that Dr Khan needed a letter from Mr Gupta to give to the bank in order to secure a loan for around $300,000;[35]
(b)that Dr Khan was in negotiations with the landlord to terminate the lease early;[36]
(c)that Dr Khan could not discuss the issue with the landlord unless his accounts were up to date;[37]
(d)to include in the letter of reference all the liabilities of the business (Khan Dhaba), except for the arrears of rent owed to the landlord;[38]
(e)that the bank was 'already aware' of the fact that Dr Khan was behind in his rent and that the bank 'would factor that in' when it came to assess the application;[39] and
(f)to include any foreseeable expenses in the next three to four months.[40]
[35] ts 115.
[36] ts 114 - ts 115.
[37] ts 117.
[38] ts 116 (my emphasis).
[39] ts 116 (my emphasis).
[40] ts 116.
Mr Gupta did not know to which bank the letter was to be submitted,[41] however Mr Gupta knew that the letter was intended to be used by Dr Khan for a loan application in respect of Khan Dhaba.[42]
[41] ts 116.
[42] ts 116.
In respect of the third matter, Dr Khan's request for a personal loan from Mr Gupta, Dr Khan:
(a)told Mr Gupta that he needed money 'short-term';
(b)asked Mr Gupta if he could 'arrange some funds';[43]
(c)told Mr Gupta that he would repay it in a 'couple of weeks' time';[44]
(d)did not mention a specific amount, although later said 'maybe 5 to $10,000 would help me';[45]
(e)explained to Mr Gupta that he does not have money and that he is unable to travel to Pakistan which is where he normally gets his money from;
(f)explained to Mr Gupta that he was unable to travel to Pakistan because of his health;
(g)explained to Mr Gupta that he could not transfer any money from Pakistan whilst in Australia because the government had implemented some restrictions on because of recent terrorist activity;[46]
(h)said that he did not want to go to friends because it would be embarrassing for him;
(i)said that he is known as quite a successful and rich person;[47] and
(j)said that he urgently needed the letter to satisfy the landlord to keep 'progressing the discussion' and that Dr Khan needed some 'short-term funds' to pay immediately.[48]
[43] ts 117.
[44] ts 117.
[45] ts 120.
[46] ts 116.
[47] ts 117 - ts 118.
[48] ts 118.
Mr Gupta replied:[49]
okay let me arrange.
[49] ts 118.
Mr Gupta said that he was more than willing to just help him out, maybe because he was about Mr Gupta's father's age and Mr Gupta looked up to him in a respectful way.[50]
[50] ts 118.
The following day, 4 December 2012, Mr Gupta provided a letter on Business Mantra letterhead which he knew Dr Khan intended to provide to the bank.[51]
[51] ts 119.
That letter provided:[52]
To whom it may concern.
Based on the information/representation provided by Dr A Khan as director of Khan Enterprises Pty Ltd ATF for Khan Family Trust TA Khan Dhaba and after review of completed accounts as at 30/09/2012, I can confirm that Khan Dhaba has the following liabilities only as at 4 December 2012 and has no other present or future liabilities or commitments towards anyone to the best of directors knowledge.
Business check account (overdraft facility $40,000) current balance $37,890.24 OD.
Business credit card (limit of $25,000) $24,784.69 OD.
Other creditors (Business Mantra accounts) $7,000.
If you need any further information in this regard, the [sic] please feel free to contact my office or me.
Yours sincerely,
Anand K Gupta CA Director
[52] Exhibit 24.
On the same day, namely 4 December 2012, Mr Gupta sent an email to Dr Khan which was in the following terms:[53]
Dear Dr Khan please find attached letter as requested, please let me know if any changes, please note for our accounts I just used an estimate so that you can get some more funds so please do not think that we are charging you $7000. Please feel free to contact me may you require anything further.
Thanks Anand Gupta CA, MPA Director
[53] Exhibit 26.
Mr Gupta's evidence about his email of 4 December 2012 was oblique. When asked about the attached letter (referred to in the email) Mr Gupta said: 'The letter was support to argue the return'.[54]
[54] ts 122.
The events between 4 December 2012 and 10 December 2012
Mr Gupta gave evidence that a few days after sending the 4December 2012 email and letter, Dr Khan contacted Mr Gupta by telephone about needing money.
In that phone call Dr Khan told Mr Gupta the following:
(a)that Dr Khan estimated that the arrears he owed were then over $5,000;[55]
(b)that Dr Khan needed to pay the landlord for the rent arrears and 'some fee to go towards the landlord's lawyer for some document preparation';[56]
(c)that Dr Khan asked if Mr Gupta could 'lend him something in the vicinity of 10 or $20,000';[57]
(d)that Dr Khan was 'arranging funds'; and
(e)that it would be more likely that Dr Khan would repay Mr Gupta in two weeks' time.[58]
[55] ts 119.
[56] ts 120.
[57] ts 120.
[58] ts 120.
The first and second payments
Dr Khan then telephoned Mr Gupta 'quite frequently' and on or around 10 or 11 December 2012, Dr Khan asked Mr Gupta to transfer the money, specifically $20,000.[59]
[59] ts 121.
Mr Gupta's bank had a daily limit of $10,000. He therefore told Dr Khan that the payments would be split over two days.[60]
[60] ts 121.
Mr Gupta then made two transfers of $10,000 each on 11 December 2012 (the first payment) and again on 12 December 2012 (the second payment). Both of those payments were made from the ANZ joint account Mr Gupta had with his wife Deepa Gupta.[61]
[61] ts 121; Exhibit 25.
The bank statements for Mr and Mrs Gupta's joint account in respect of each of those payments contain the reference 'transfer to Akhtar Hammeed Kh'.[62]
[62] ts 121; Exhibit 25.
Both payments were made to Dr Khan's personal bank account. Dr Khan's bank statement[63] reflects the receipt of the first and second payments. The narration alongside each payment on Dr Khan's statements provides: 'Loan from AKG Loan to Dr Khan'.[64]
[63] Exhibit 27, page 918.
[64] Exhibit 27, page 918.
Other than the narration that appears on Dr Khan's bank statements, there are no contemporaneous notes for the first and second payments.
The third and fourth payments
6.1 The 3 January 2013 email and telephone call
On 3 January 2013[65] Dr Khan forwarded Mr Gupta an email (purportedly) from a 'John Flottman' ('[email protected]') on behalf of 'Old Shanghai' ('the John Flottman email').
[65] Exhibit 28.
That email message reads:
Dr
Once again your rent and outgoings remain unpaid.
You are in default of the terms of your sub lease.
If payment of $15380.58 is not received by close of business today, we will call upon the securities provided.
Yours truly
JKFlottman
The John Flottman email to Dr Khan was sent at 7.07 am on 3 January 2013. Dr Khan then forwarded that email to Mr Gupta at 9.27 am the same day.
Dr Khan did not write any message under the forwarded email to Mr Gupta.
Mr Gupta's evidence was that he believed that Old Shanghai was the 'landlord's agent Khan Dhaba'.[66] However, it appears that Mr Gupta in fact meant that he understood that Old Shanghai was Khan Dhaba's landlord (not agent).
[66] ts 129.
Mr Gupta gave evidence that having forwarded the John Flottman email, Dr Khan then rang Mr Gupta and said the following:
(a)that he (Dr Khan) was 'very close to ending his funds';
(b)that he just needed 'last help' because if his securities were called in, the bank would not lend him any money;[67]
(c)that he just wanted to 'get out of the situation' as soon as possible;
(d)that he was 'very close to finalising some arrangement';[68]
(e)that Mr Gupta was 'like his son',
(f)that Mr Gupta should 'not worry';
(g)that Dr Khan would repay Mr Gupta; and
(h)that in the future, Dr Khan would 'remember this help and help you in [the] future'.[69]
[67] ts 126.
[68] ts 126.
[69] ts 126.
Mr Gupta's evidence was initially non-specific about what Dr Khan had asked for in terms of the monetary amount. Mr Gupta's evidence was that Dr Khan had:
(a)asked Mr Gupta to 'pay this invoice or give me money to pay this invoice';[70]
(b)asked Mr Gupta if he could just lend him more money to pay towards the landlord;[71] and
(c)told Mr Gupta over the phone that he was close to finalising his affairs and that he would be the first person Dr Khan would pay back.[72]
[70] ts 126.
[71] ts 126.
[72] ts 131 - ts 132.
Mr Gupta said that Dr Khan did not go into specifics as to when and how the money would be repaid. Dr Khan would either get (the) loan[73] or he would get the money from somewhere.[74]
[73] ts 132 (a reference I take to be the loan to the bank discussed in December 2012).
[74] ts 132.
In terms of what Dr Khan asked for in the telephone call, Mr Gupta said Dr Khan's forwarded email had an attachment. Mr Gupta said:[75]
I think he mentioned an amount of, you know - he mentioned two amounts. One was for some legal fee to be paid towards the landlord the other one was for the rent itself.
[75] ts 126.
Mr Gupta later clarified that Dr Khan mentioned an extra amount needing to be paid to the landlord's lawyer, being a further $3,000, and that the invoice should be paid to the landlord directly.[76] Mr Gupta's evidence was:[77]
He sent me the email and said this is the amount I need, plus $3,000 to pay the legal fee that was to go to the landlord's agent to add in some documentation on behalf of Dr Khan and that invoice was sent to me by email.
[76] ts 127.
[77] ts 130.
Mr Gupta's evidence was that he was told by Dr Khan to pay two separate amounts, the initial $15,380.58 (in the email from 3 January 2013 for $15,380.58)[78] and an extra $3,000 during the phone call.[79]
6.2 The tax invoice from Old Shanghai
[78] Exhibit 28.
[79] ts 130.
At trial a tax invoice[80] was tendered with the heading from Fremantle‑Old Shanghai Markets 4‑6 Henderson St Fremantle WA 6060 to Khan Enterprises (Australasia) Pty Ltd T/C Khan Dhaba - Indian Cuisine Shop 6, Old Shanghai 4‑6 Henderson St WA.
[80] Exhibit 29.
The invoice was for two amounts totalling $12,577.42 plus tax of $1,257.74 totalling $13,835.16. The two amounts are referenced as 'rent January 2013 $5958.41' plus 'variable Outg January 2013 $6619.01'. The invoice contains a handwritten reference 'Ram + 3050 fee for lawyer'.
There was no evidence given at trial about who wrote that handwritten reference. That invoice was not attached to the 3 January 2013 email from Dr Khan to Mr Gupta.[81] However, Mr Gupta's evidence was that the amounts contained in that invoice were the amounts that he was asked to pay by Dr Khan.[82]
[81] Exhibit 28.
[82] ts 128.
Mr Gupta said that the tax invoice was sent to him by email but he was not sure whether it was part of the same email or if it was around the same time.[83]
6.3 The third and fourth payments
[83] Exhibit 28; ts 130.
On 3 January 2013 Mr Gupta transferred two amounts of money for $15,000 (the third payment) and $3,380.58 (the fourth payment) respectively.
Mr Gupta said that two payments were made because the Commonwealth Bank had a $15,000 daily limit on transfers.[84] Mr Gupta says the two different transfers were again due to his daily limit on the accounts.[85]
[84] ts 132 - ts 133.
[85] ts 130, ts 132.
The $15,000 (the third payment) was made from the Business Transaction Account of Business Mantra directly to 'Old Shanghai Fremantle'.[86]
[86] Exhibit 28.
On the Business Mantra reference for that payment Mr Gupta recorded next to 'your transfer description' 'LoantoDrkhan' and next to the 'to account description' 'DrKhanRentplusothe'.[87]
[87] Exhibit 28, page 180.
The $3,380.58 (the fourth payment) was transferred by Mr Gupta from the Business Bonus Account of Business Mantra directly to 'Old Shanghai Fremantle' with the reference as 'RentplusothDrKhan'.[88]
[88] Exhibit 28, page 181.
Whilst Mr Gupta wrote or entered the narration on his bank statements, or the statements of Business Mantra, his evidence at trial in respect of the narration for the fourth payment was that he 'did not really care too much whatever I was writing there'.[89]
[89] ts 132.
When asked why Mr Gupta made the transfers to Old Shanghai Fremantle directly, Mr Gupta said that Dr Khan had asked him to do so because:[90]
his landlord was pressing him and he had two deadlines coming. That's what he was mentioning. He … just said he needed money immediately to repay to the landlord.
[90] ts 132.
At 10.04 am on 3 January 2013 Mr Gupta emailed Dr Khan stating:[91]
Please find receipts of deposits made towards your landlord's account as you requested. I have made two separate payments of $15,000 and $3380.58 giving you a total of $18,380.58. Please forward it to him for his info. Please feel free to contact me if you require anything further.
[91] Exhibit 28.
At 10.21 am on 3 January 2013 an email was sent from Akhtar Hameed Khan to Mr Gupta stating:[92]
Thanks Anand I will come to you for discussion on return of loan tomorrow thanks.
[92] Exhibit 30.
The January 2013 Agreement
7.1 The background
On 14 January 2013 Dr Khan requested a further sum of $20,000 from Mr Gupta. Mr Gupta told Dr Khan that he 'does not have that sort of funds' but nonetheless agreed to lend Dr Khan another $10,000.[93]
[93] ts 138.
Prior to 14 January 2013 there was no written agreement to reflect that any of the four payments that had been made by Mr Gupta to, or on behalf of, Dr Khan were loans.
Mr Gupta's evidence was that, having spoken to a friend who was a lawyer, he realised that he was exposed to the risk of Dr Khan not repaying any of the money owed in the absence of a loan agreement.
Mr Gupta explained to Dr Khan that he wanted to document the loan through a lawyer. Dr Khan told Mr Gupta that Mr Gupta was 'like his son', not to worry about the money and that Dr Khan would repay him.[94] Further, that Dr Khan was just happy to sign a document 'to that effect', but that they did not need to go through a lawyer.[95]
[94] ts 136.
[95] ts 136.
Following that conversation, on 14 January 2013 Mr Gupta met with Dr Khan at Mr Gupta's office of Business Mantra.[96] Mr Gupta's evidence was that he obtained a template for a Loan Deed from Law Mantra, a law firm unrelated to Business Mantra, but one that Mr Gupta had used for other clients.
[96] ts 134 - ts 135.
Whilst Dr Khan was physically present with Mr Gupta at his office, Mr Gupta filled in the template which became the January 2013 Agreement.[97]
[97] Exhibit 31.
Mr Gupta's oral evidence was that the purpose of preparing the January 2013 Agreement was to document the payments made to date, together with the further transfer of $10,000 Mr Gupta made to Dr Khan later on 14 January 2013.[98]
[98] ts 136.
The January 2013 Agreement was then signed by both Mr Gupta and by Dr Khan on 14 January 2013.[99]
7.2 The express terms[100]
[99] ts 137.
[100] Exhibit 31.
The Agreement is said to be a 'Loan Deed' entered into on 14 January 2013 between Mr Gupta (as the Lender) and Dr Khan (as the Borrower).
Whilst the Borrower in that Agreement is named as Dr Khan (personally), Dr Khan's signature appears on that document in his capacity as Director of Khan Dhaba.[101]
[101] Exhibit 31, page 192.
The document then provides (recitals):
A.Whereas the Borrower has approached the Lender for a secured Loan of $50,000 ('the Loan').[102]
[102] My emphasis.
B.The Borrower has agreed to repay the Loan to the Lender along with interest of 10% per annum as detailed below.
C.The Lender and the Borrower wish to reduce the terms of the agreement to writing in this deed ('Deed').
Now this Agreement witnesses that:
1.Loan facility
1.1The lender shall lend to the borrower the loan on 1 January 2013[103] which shall be transferred into the account of the borrower/borrower's business accounts/borrower's creditors or as directed by the borrower.
[103] My emphasis.
1.2The borrower shall repay the loan in full along with any accrued interest to a repayment of the loan with interest (the 'due date').
1.3The borrower shall pay interest on the outstanding amounts of the loan at the rate of 10% per annum calculated on the total balance on the principal amount of $50,000 as per calculation shown in Schedule A[104] to this deed.
[104] No Schedule A was attached to this document at trial.
1.4The loan along with the interest accrued thereon shall be repayable in full … on 15 February 2013 as per Schedule A[105] to this deed …
…
1.7The loan shall be secured by a charge/lien over the assets of the borrower ('assets').
2Provision of Security:
2.1The Borrower hereby grants to the lender a charge over the assets to secure the obligations of the borrower which will be secured under the Personal Property Securities Act 2009.
7.3 The ambit
[105] No Schedule A was attached to this document at trial.
Whilst the express terms of the January 2013 Agreement provide that $50,000 shall be lent to the Borrower on 1 January 2013, Mr Gupta's oral evidence was that the January 2013 Agreement was intended to capture all of the payments that had been made by Mr Gupta to or on behalf of Dr Khan to date. That is, that the ambit of the Agreement extended to cover the first and second payments made in December 2012.
Mr Gupta's oral evidence was that the January 2013 Agreement was also intended to cover the $10,000 payment made by Mr Gupta to Dr Khan on 14 January 2013 (the fifth payment).[106]
[106] ts 174.
The fifth payment
Having signed the January 2013 Agreement Mr Gupta then (and on the same day) transferred $10,000 from the joint account he held with his wife to Dr Khan's personal account (the fifth payment).[107]
[107] ts 138.
The transfer reference made by Mr Gupta on his joint bank statement in respect of that transfer is: 'transfer to Akhtar Hameed Kh'.[108]
[108] Exhibit 32, page 164.
The reference on Dr Khan's bank statement alongside the receipt on 14 January 2013 of the $10,000 reads: 'Loan from Anand. Loan to Dr Khan'.[109]
[109] Exhibit 27, page 924; ts 139.
The sixth payment
On 2 February 2013 Mr Gupta made a further payment to Dr Khan for $5000 from his Business Mantra transaction account which Mr Gupta says was a further loan to Dr Khan ('the sixth payment').
The narration on the Business Mantra bank statement for the debit of $5,000 on 2 February 2013 reads 'Loan to Dr Khan'.[110]
[110] Exhibit 33, page 195; ts 140.
Aside from Dr Khan asking for the funds, Mr Gupta could not recall at trial how he came to make the sixth payment.[111]
[111] ts 140.
Mr Gupta said that he made this transfer and 'this payment was made to Dr Khan to satisfy his obligation …' and then 'I do not remember particularly what - why I did this transfer'.[112] Mr Gupta said he believed Dr Khan had to pay his lawyer and that Dr Khan had requested funds so Mr Gupta was 'just transferring him as a loan'.[113]
[112] ts 140.
[113] ts 140.
There is no corresponding entry on Dr Khan's bank statement for the receipt of the sixth payment for $5,000.[114]
[114] Exhibit 27, page 926.
The March 2013 Agreement
10.1 The background
Mr Gupta's oral evidence was that by 5 March 2013 Dr Khan had offered Mr Gupta $50,000 in respect of the wider business dealings regarding Khan Dhaba and the assignment of the lease for that business.[115]
[115] ts 184 - ts 185.
It was in that context that Mr Gupta told Dr Khan:[116]
'Mr Khan, you borrow money and then you not pay that. And now you're promising money in future as well'.
And he said, 'I'm happy to just sign another document'.
And in my mind it was maybe I could just formalise this document properly because the first document, you know, may not be a very good one because you know I prepared. And I just want him to take it to a - to a – to a lawyer to get it done properly. So- so I said, 'okay, then can we include that in a loan agreement?' And he said yes.
[116] ts 185.
Mr Gupta then approached Mr Sanjiv Sethi, a lawyer from Law Mantra and asked him to prepare a loan agreement.
Mr Gupta did not have any involvement in Law Mantra but Mr Gupta knew Mr Sethi through professional circles.[117] Law Mantra was already engaged at that time by Dr Khan in respect of the lease negotiations for Khan Dhaba.[118]
[117] ts 171.
[118] ts 171.
Mr Gupta provided the instructions for Mr Sethi to draft the March 2013 Agreement. Mr Gupta told Mr Sethi:
(a)that he had 'extended some amounts'[119] to Dr Khan already;[120]
(b)that the few transactions he had done should come roughly to $50,000 - $60,000;[121]
(c)that Dr Khan was promising further payments and he wanted those covered in the same loan agreement;[122]
(d)about the January 2013 Agreement that Mr Gupta had drafted;[123] and
(e)further that:[124]
I said that I prepared a draft loan agreement which was signed, and then I wanted to formalise this one properly through - through a lawyer. And I told him the money went from the - some - from personal account and some from the company account. The money from the company account was taken from my personal account.
(f)that whilst the money came from his joint account with Mrs Gupta Mr Gupta considered that 'it is essentially Deepa's money';[125] she was working at the time and Mr Gupta's means were very limited;[126] and
(g)all of the money came from his joint account with his wife.[127]
[119] ts 162.
[120] ts 160.
[121] ts 160.
[122] ts 163.
[123] ts 161.
[124] ts 161.
[125] ts 162.
[126] ts 162, ts 187.
[127] ts 187.
Mr Gupta's oral evidence was that Mr Sethi then advised him that the Lender for the March 2013 Agreement should be under Mrs Gupta's name.
With respect to the payments that were made from the Business Mantra account to Dr Khan's landlord (the third and fourth payments), rather than from his personal account or from the joint account he held with Mrs Gupta, Mr Gupta said:[128]
I did not think too much. Either I may not have money, sufficient money in there or it would have been easier for me to just transfer …
[128] ts 189.
Mr Gupta said that as an accountant he appreciates that a business or a company is different to a person.[129]
[129] ts 188.
In late 2012, early 2013, Mr Gupta confirmed that he transferred money between his Business Mantra account and his personal account and he would borrow money from his personal account to run the company.[130] In the first few years 'it was a bit loose' between the personal account and the business account.[131]
[130] ts 188.
[131] ts 189.
When asked why he did not transfer the money from the business account to the personal account and then to the landlord Mr Gupta answered:[132]
When I was fairly new in business and I was using both accounts interchangeably … as I needed funds and based on my convenience.
[132] ts 189.
Once the March 2013 document had been drafted by Mr Sethi, Mr Gupta emailed the Agreement to Dr Khan on 28 February 2013.[133]
10.2 The express terms[134]
[133] Exhibit 34; ts 148.
[134] Exhibit 40.
The key express terms of the March 2013 Agreement are:
(a)Deepa Gupta named as the Lender; Akhtar Hamed Khan is named as the Borrower;
(b)'The Borrower had approached the Lender for a loan of $110,000 (the Loan)';[135]
[135] In the recitals.
(c)'The Lender lent to the Borrower the Loan on 1 January 2013 for a period of 74 days, repayable with interest on 15 March 2013';[136]
(d)the interest rate is 10% per annum;
(e)this Deed constitutes the entire agreement and full understanding between the Parties pertaining or relating to the subject matter of the Deed;[137]
(f)this Deed shall only be amended or varied by agreement in writing and signed by all the Parties;[138]
(g)this Deed superseded all agreements, understandings, negotiations and discussions whether oral or written, between the Parties that existed prior to this Deed;[139] and
(h)this Deed shall replace any/all previous communications, discussions and/or agreements (oral or written) between the Parties and the Parties agree that any such previous communications, discussions and/or agreements (oral or written) shall have no further effect.[140]
10.3 Mr Gupta's evidence about the signing
[136] Clause 1.1 under Loan facility (my emphasis added).
[137] Clause 11.1.
[138] Clause 11.2 (repeated in different words in clause 12.18).
[139] Clause 11.3.
[140] Clause 11.4.
On 28 February 2013 Mr Gupta received the loan agreement from Mr Sethi, following which Mr Gupta forwarded the loan agreement to Dr Khan for his review and asked Dr Khan once satisfied to sign it and return to Mr Gupta.[141]
[141] Exhibit 34.
Dr Khan replied by email on 1 March 2013 that Mr Gupta should print the loan agreement and that Dr Khan would attend Mr Gupta's office to sign it.[142]
[142] Exhibit 34.
Mr Gupta printed copies and Dr Khan came to sign them on 5 March 2013. The signing took place in the Business Mantra office boardroom.[143] Present at the signing was Dr Khan, Mr Gupta and one of Business Mantra's receptionists.
[143] ts 150.
On the agreement there is a signature above the name Deepa Gupta. Mrs Gupta was not present at the time.[144]
[144] ts 149.
Mr Gupta signed his wife's name because she was pregnant at the time and she was aware of the money dealings.[145]
[145] ts 150.
Mr Gupta told Dr Khan that he was signing on behalf of his wife and apparently Dr Khan said 'okay'.[146]
[146] ts 150.
Mr Gupta's evidence at trial was that he did not consult with Mrs Gupta before signing the document in her name, however, he did tell her afterwards that he signed her name.[147]
[147] ts 151.
Mr Gupta did not remember how long after the document was signed that he told Deepa that he had signed in her name. He believed that he told her on the same day, in the evening.[148]
[148] ts 169.
Mr Gupta told her that the loan agreement had been finalised through a lawyer and the loan agreement was made under her name.[149]
[149] ts 169.
Mr Gupta did not discuss 'at length' with his wife who the Lender was (on the March 2013 Agreement), but then said in his evidence that he told Mrs Gupta that 'there was now a formal loan agreement in place with Dr Khan and Deepa'.[150]
[150] ts 169.
I return to other evidence relevant to the March 2013 Agreement and my findings of fact later in these reasons.
10.4 Mr Gupta's evidence about the ambit of the March 2013 Agreement
'The Loan' in the March 2013 Agreement, defined to be $110,000, comprises two parts.
Mr Gupta's evidence was that part of the loan agreement was to cover the $58,000 already paid to Dr Khan. For ease of reference, I will refer to this as 'the first component' of the March 2013 Agreement.
Mr Gupta's evidence was that the loan agreement was also to cover 'the additional $50,000 forthcoming'.[151] I will refer to this as 'the second component' of the March 2013 Agreement.
10.4.1 The first component of the 'Loan'
[151] ts 163.
Mr Gupta's evidence was that the first component comprised each of the six payments made to date $10,000 (11 December 2012), $10,000 (12 December 2012), $15,000 (3 January 2013 to Old Shanghai), $3,380 (3 January 2013 to Old Shanghai), $10,000 (14 January 2013) and $5,000 on (2 February 2013).[152]
[152] ts 185.
Mr Gupta said that that the first component was approximately $58,000:[153]
So my amount which I have lent to him would have you know in the vicinity of $58,000 something, I just round it to 60 and then I added 50 onto this.
[153] ts 187.
When challenged that the amount Mr Gupta had, on his evidence, transferred to Dr Khan in fact amounted to $53,380, the total of the six payments, Mr Gupta said there was another payment of $5,000 which he was not able to trace so he did not include that one.[154]
[154] ts 185, ts 187. A reference to not including the $5,000 in the Statement of Claim prepared later.
I take Mr Gupta's evidence to be that the amount he had transferred to Dr Khan (or paid on Dr Khan's behalf) as at 5 March 2013 was $53,380, but that there was a further $5,000 that he could not find (totalling $58,380) and then he 'rounded it up' to $60,000 as the monies comprising the first component of the Loan amount.[155]
[155] ts 184 - ts 185.
Mr Gupta's evidence as to why the specific amounts were not set out in the March 2013 Agreement was not clear.[156]
10.4.2 The second component of the 'Loan'
[156] ts 186.
In respect of the second component, Mr Gupta said that the $110,000 was to include a promise made by Dr Khan on or around 26 February 2013[157] to pay Mr Gupta $50,000.[158]
[157] ts 163.
[158] ts 163.
That was conditional upon Mr Gupta standing as guarantor for the assignment of Khan Dhaba's lease to Ram Tamang, Anita Tamang and Keshab Chehhtri ('the third parties').[159]
[159] ts 171.
That is, the $50,000 was in respect of a future payment that Mr Gupta had been promised by Dr Khan.[160] Mr Gupta said that the $50,000 was promised to him from Dr Khan because Dr Khan wanted Mr Gupta to be a guarantor in the lease assignment for Khan Dhaba.[161]
[160] ts 172.
[161] ts 164.
Whilst the evidence given at trial about the lease assignment for Khan Dhaba did not appear to be of any consequence at first blush, ultimately that evidence is relevant and it is important to the issues to be determined in this trial in two respects.
Firstly, it is relevant to the analysis of the ambit of the March 2013 Agreement. Secondly, the evidence of the wider dealings between Mr Gupta and Dr Khan in respect of Khan Dhaba, the assignment of the lease, the arrangements for the ongoing running of Khan Dhaba and the extent of Mr Gupta's involvement in Khan Dhaba, collectively, and in combination with other evidence, gives rise to the alternative hypothesis (Hypothesis Two).
Those events therefore need to be summarised here. For ease of reference I will refer to the events as 'Khan Dhaba, the wider dealings'.
Khan Dhaba, the wider dealings
11.1 Mr Gupta's oral evidence in examination-in-chief
Mr Gupta gave evidence that he occasionally gets clients who are looking to sell or buy a business.[162]
[162] ts 141.
On an unknown occasion prior to 7 January 2013, Dr Khan asked Mr Gupta if he knew of anyone who would be interested in buying Khan Dhaba.
Mr Gupta then passed the contact details of Ram Tamang, an existing client of Business Mantra, to Dr Khan.[163] Mr Gupta also identified Anita Tamang and Keshab Chettri. Mr Gupta also passed Dr Khan's details to Ram Tamang.
[163] ts 142.
The Tamangs and Mr Chettri were willing to buy Dr Khan's business and would be running the business through a management agreement until the lease was assigned to them.[164]
[164] ts 143 - ts 144.
On 7 January 2013 Mr Gupta met with Ram and Anita Tamang, Keshab Chettri and Dr Khan at Mr Gupta's office.[165] On that date Dr Khan asked Mr Gupta to provide the third parties with the business financials for Khan Dhaba.[166]
[165] ts 143.
[166] ts 144.
Earlier in his evidence‑in‑chief, Mr Gupta was asked a question about whether Dr Khan asked him to do anything in relation to the transfer of the lease to the third parties. Mr Gupta's response was that Dr Khan 'asked me if I know a lawyer' and that Mr Gupta then provided Dr Khan with the name of a lawyer.[167]
[167] ts 146.
Mr Gupta was then asked a further question as to whether Dr Khan asked him to do anything else[168] in relation to the transfer of the lease (for Khan Dhaba to those third parties). Mr Gupta said no.[169]
[168] My summary, my emphasis.
[169] ts 146.
Mr Gupta's evidence at that point in his examination‑in‑chief was that other than giving Dr Khan the name of a lawyer, there was nothing else that Dr Khan asked of him in relation to the transfer of the lease.
The following exchange occurred:[170]
Okay. Anything else in relation to the transfer of the lease? Did he ask anything of you?---Sorry, can't remember.
[170] ts 146.
Mr Gupta's evidence later in his evidence‑in‑chief was that Dr Khan wanted Mr Gupta to become a guarantor in the lease assignment for Khan Dhaba to Ram Tamang.
Mr Gupta's evidence was that he was not 'very sure' 'what is a guarantee',[171] that he told Dr Khan that he did not know how to run the business and that he would 'prefer not to be a guarantor'.
[171] ts 164.
Dr Khan then became angry, said Mr Gupta, and Dr Khan told Mr Gupta to 'forget about the money you've given to me, you'll never get your money back'.[172] That was a reference to the money Mr Gupta had lent to Dr Khan, 'about $58,000'.[173]
[172] ts 164.
[173] ts 164 - ts 165.
It is instructive to set the entirety of Mr Gupta's evidence at this point. Mr Gupta said the following:[174]
[174] ts 164 - ts 165.
Okay. So he - he wanted you to guarantee that assignment?---Yes.
Okay. And what did you say to that?---I wasn't very sure what is a guarantee. And I said ‑ ‑ ‑
Yes, what did you say?---I said that you know I do not really know how to run this business. And I prefer not to be a guarantor.
Okay?---And he got angry.
Yes? What did he say?---He said, 'You know, forget about your money you've given to me. You'll never get your money back'.
And - and just to be clear, what money was he talking about there?---The - the money I loaned to him, about $58,000.
Okay. So after he said, 'Forget about the money' what happened next?---I was reluctant and scared what to do in this situation. I was just trying to get out of this situation. You know somehow recover my money. So I said, 'Okay, I'll - and try and be guarantor'.
Okay, so you said to - you said that to Dr Khan?---Yeah. Prior to that ‑ ‑ ‑
Okay, okay, just - just go a bit slower I think. Did Dr Khan offer you anything to become a guarantor?---Yes, to the potential buyers he was offering $50,000 each to take over the lease ‑ ‑ ‑
That's what Dr Khan said to you?---So Dr - Dr Khan said that, 'You know I'm giving 50,000 each to these two buyers. I'll give you' ‑ ‑ ‑
And which - which buyers was he talking about?---Ram Temang and Keshab.
Yes?---So Ram and Anita is one unit and Keshab as the second unit. And he said you come as a guarantor, I'll give you $50,000 for being a guarantor.
Okay. And did you end up becoming a guarantor?---So I provided my details.
Did you end up becoming a guarantor?---No, the lease was never assigned.
Okay.
11.2 Mr Gupta's oral evidence - 'the clarifying questions'
I have already set out that Dr Khan did not appear at trial.
At the conclusion of Mr Gupta's evidence‑in‑chief, and in the absence of a contradictor, I asked a number of clarifying questions that arose from the evidence‑in‑chief Mr Gupta had given to that point, and from other documentary evidence that had been tendered.
Specifically, I asked Mr Gupta what the March 2013 Agreement was intended to cover in respect of the second component, the $50,000 that Dr Khan had promised to pay in the future.[175]
[175] ts 171.
Mr Gupta said that Dr Khan was pressuring him into being a guarantor for the lease assignment. And that was his threat that if the lease assignment fails that 'I could forget about my money'.[176]
[176] ts 172.
When asked what Mr Gupta was guaranteeing he replied, 'the assignment of the lease', meaning the remaining period of the lease which he believed was five years.[177]
[177] ts 172.
Mr Gupta was not given an amount that he was to guarantee.[178]
[178] ts 172.
Mr Gupta was told that for the lease to be transferred, the landlord 'was looking at a guarantor who has got some property or equity in the property'.[179]
[179] ts 172.
I then asked Mr Gupta the following question:[180]
Did you have any interest in - so any financial interest in Khan Dhaba at all?---So I was one‑third shareholder in - in the entity which was going to take over the lease and the business. That happened on 26 February.[181]
[180] ts 179 - ts 180.
[181] ts 179.
This was the first time in his evidence that Mr Gupta had disclosed that he had or was to acquire any financial interest in Khan Dhaba.
Mr Gupta said he became a one-third shareholder in the entity that was going to take over the lease of Khan Dhaba, Indian Food Caterers.[182] The other shareholders were Ram and Keshab.[183]
[182] ts 179.
[183] ts 179.
Mr Gupta then said:[184]
then … Khan … just said that you know the landlord wants a corporation not a partnership. So then there were [sic] company formed on 26 February.
[184] ts 180.
Mr Gupta's oral evidence that followed (although not in this order) was:
(a)as at January 2013 there was a management contract in place between Khan and Ram and Anita and Keshab in respect of Khan Dhaba;[185]
[185] ts 180.
(b)Mr Gupta was not a part of the management contract;[186]
[186] ts 180.
(c)Mr Gupta was not involved in the business (Khan Dhaba) and had no intention of becoming involved in the business;[187]
[187] ts 180.
(d)Mr Gupta became aware of the existence of that management contract on either 7 January or 10 January 2013 when the Tamangs, Mr Chhettri and Dr Khan came to Mr Gupta's office;[188]
[188] ts 179 - ts 180.
(e)that the parties (Anita, Ram, Keshab and Dr Khan) had come into his office because he was managing the bookkeeping and accounting records;[189]
[189] ts 181.
'it is quite common' if someone takes over the lease to introduce them to the accountant who manages the books for them.
(f)Dr Khan threatened Mr Gupta to become a guarantor;
(g)the threats by Dr Khan were to forget about Mr Gupta's money if the lease assignment fails so do exactly as Dr Khan says;[190]
(h)Mr Gupta estimated that the threats by Dr Khan to become a guarantor and threatening non-payment of the monies commenced in early February 2013;[191]
(i)that it was Dr Khan's idea[192] to incorporate Indian Food Caterers on 26 February 2013;[193]
(j)on the same day namely 26 February 2013, Dr Khan told Mr Gupta to be a guarantor:[194]
because the (indistinct) of Ram and Keshab was not very strong from the landlord's perspective. Both of them were the directors. I was not a director of that entity. And I became a shareholder only on the insistence of Mr Khan to be able to provide the guarantee.
(k)whilst Mr Gupta became a shareholder of Indian Food Caterers on 26 February 2013, he had nothing to do with the profits of that company.[195]
[190] ts 181.
[191] ts 181.
[192] ts 181.
[193] ts 179 - ts 180, ts 181.
[194] ts 180.
[195] ts 181.
Mr Gutpa's oral evidence about the lease assignment was that:
(a)he had no involvement in the lease assignment at all;[196]
(b)Mr Gupta was told by Dr Khan that the lease assignment negotiations with the landlord were not progressing;[197]
(c)Mr Gupta said:[198]
In January when Khan come with these potential buyers we approached Law Mantra, appointed Law Mantra to do the lease negotiations with the landlord which is Old Shanghai Food Co. And they were not getting successful with ... these … negotiations. So they had a couple of plans. And every time the landlord would say I'm withholding consent and we'll give them a list of reasons.
(d)Mr Gupta was not at any of those meeting and agreed that he had found out these matters from Dr Khan;[199]
(e)Mr Gupta denied having any involvement in the dealings between Dr Khan and Ram around this time;[200] and
(f)Mr Gupta believed that Ram who was managing the shop by himself was not happy about the lease negotiation failing and failing and he finally said no.[201]
[196] ts 182.
[197] ts 182.
[198] ts 182.
[199] ts 182.
[200] ts 183.
[201] ts 183.
Mr Gutpa's oral evidence about his intention in entering into the March 2013 Agreement was as follows:[202]
By that time, I think around 5 March or around end of February, Mr Khan had good control over me. And his calls and demands were very frequent. And again that always came with the threat that you know you do this otherwise forget about your money. So when he came with this guarantee clause, that you become a shareholder and you just now provide personal guarantee for these two people, I spoke to my friend who works in the law profession and she said you know giving guarantee is not a very good idea. It's they free to take the money you will be in serious trouble if they do not meet these obligations now or in the future. So I was trying my level best not to be a guarantor in this deal. But Mr Khan would just insist, you know, that is very imperative for this lease assignment and 'your money I can only pay if the lease assignment works'. And he said, I don't know to maybe to pacify me he offered that okay, 'I'm giving $50,000 to these two people. How, if I give you another 50,000 on top of the you know 100,000 they're getting? So each of you get $50,000'. And then I said, 'Mr Khan, you borrow money and then you not pay that. And now you're promising money in future as well'. And he said, 'I'm happy to just sign another document'. And in my mind it was maybe I could just formalise this document properly because the first document, you know, may not be a very good one because you know I prepared. And I just want him to take it to a - to a - to a lawyer to get it done properly. So - so I said, 'Okay, then can we include that in a loan agreement?' And he said yes. And from day one of this claim you'll see I'm only asking for the money I paid him. I never asked for this 50,000.
[202] ts 184 - ts 185.
Dr Khan then offered Mr Gupta $50,000 'on top' for Mr Gupta which was the sum that Dr Khan was offering the third parties.[203]
11.3 Mr Gupta's oral evidence - 'Re‑examination'
[203] ts 185.
I allowed counsel for the Guptas to ask any further questions that arose following the court's questions about whether Mr Gupta had ever acquired a financial interest in Khan Dhaba. Whilst it is not 're‑examination' in the strict sense, for ease of reference I will refer to the further aspects of Mr Gutpa's evidence‑in‑chief in those terms.
The further details that emerged from the re‑examination were as follows.
Mr Gupta was in a meeting with Ram, Keshab and Dr Khan and, at that meeting, Mr Gupta said he would become a guarantor. Ram then said that the landlord would not accept a guarantor who was not a part of the business.[204]
[204] ts 195.
Mr Gupta said he wanted to hold the shares for the benefit of Ram Tamang and Anita and Keshab and during the meeting Mr Gupta told them that he would just hold the shares on their behalf.[205] Mr Gupta's evidence was that Dr Khan was 'instructing all of us what to do'.[206]
[205] ts 196.
[206] ts 196.
Following that meeting,[207] Mr Gupta said he was looking for a mechanism whereby he could provide the guarantee but without being involved in the business or holding shares.
[207] ts 196.
He thought of (creating) a family trust for Ram Tamang, Anita and Keshab where Mr Gupta would be able to hold the shares. Mr Gupta contacted 'trustdeed.com.au' which is an online firm to provide the trust deed.[208]
[208] ts 196.
The advice he received was that he could not create a family trust with four people from different families and that it had to be from one family.[209]
[209] ts 197.
Mr Gupta then thought that instead of personally holding the shares he might hold the shares in the trust and once the lease was assigned he would transfer the shares to Ram and Keshab.[210]
11.4 The objective evidence regarding Indian Food Caterers
[210] ts 197.
The ASIC report for Indian Food Caterers was tendered into evidence at trial.[211] That document shows the following:
(a)that an application for registration as a proprietary company was processed and effective on 26 February 2013;
(b)under share/interest holding, the report lists holding members as Anita Tamang (34/100), Keshab Chhetri (33/100) and Anand Gupta (33/100);
(c)there is a reference next to Anita Tamang and Keshab Chhetri as 'yes' to the reference 'beneficially owned'; and
(d)the reference alongside Mr Gupta's name and the reference 'beneficially owned' is no.[212]
[211] Exhibit 43.
[212] Exhibit 43, page 5.
Mrs Gupta's evidence
12.1 Her knowledge about the first to the sixth payments
Mrs Gupta did not see the bank statements for the first and second payments at the time as she did not check her statements that often. However, she did see these transfers later, she does not know how much later.[213]
[213] ts 200.
When Mrs Gupta checked her account balance online, she noticed the transactions because her bank balance was low.[214]
[214] ts 200.
Mr Gupta told her that he had given a loan to Dr Khan and that they would get the money back.[215]
[215] ts 200.
After finding out about the loan, Mrs Gupta did not say much to her husband as he took care of all their finances.
Mrs Gupta gave evidence that this was not the first time it has happened. She gives money to her family and Mr Gupta gives money to his family to help. Sometimes they borrow money from their family.
Mrs Gupta's evidence was that her husband treated Dr Khan like family and therefore she was okay with whatever decisions her husband made.
Mrs Gupta confirmed that she saw the transaction for the fourth payment but only after it had been made. She spoke to Mr Gupta about it and told him, 'as long as we are getting the money back before when we need it, it is okay' because she had complete trust in him, and he was the one making the money and taking care of everything.
When Mrs Gupta was asked what she meant by 'taking care of everything', she replied that Mr Gupta was taking care of them and their finances.
In March 2013 Mrs Gupta was pregnant and the baby was due in or around July of that year. Mrs Gupta was stressed about having money for the baby's arrival, for when she would stop working and have no income. Their savings was for that purpose.
Mr Gupta told her: 'Don't worry. We'll get it back'.[216]
[216] ts 201.
Mrs Gupta said that Mr Gupta took money from their joint bank account for the purpose of his business and that is why she was not too concerned about the other transactions: 'At the end of the day, as long as we are happy'. Mrs Gupta trusted that Mr Gupta would take care of their bills and finances.[217]
12.2 Her knowledge of the 5 March 2013 Agreement
[217] ts 202.
Mrs Gupta's evidence was that she became aware of the March 2013 Agreement only after it was signed.[218]
[218] ts 202.
Mr Gupta told her about the document because Mrs Gupta was asking him about the money.[219]
[219] ts 202.
Mr Gupta said to her 'Don't worry, we are - we are going to formalise it'. After signing the loan agreement Mr Gupta said to her 'Don't worry, we will have the money back'.[220]
[220] ts 201.
It was only after Mr Gupta had signed the loan agreement that he told her that he had signed on her behalf, that she was the lender.[221]
[221] ts 203.
Mr Gupta had told Mrs Gupta that he lent $50,000 'or something' to Dr Khan. She did not do any further calculations on the exact amount. In her statements she could see that it was about $50,000 'something'.[222]
[222] ts 203.
When asked about what Mrs Gupta said to Mr Gupta after he told her about the document, she did not really say anything to him as it was 'okay' for her.[223]
[223] ts 203.
The following exchange then occurred:[224]
'Sorry did you say it was okay or did you not say anything?'----Yeah. It's like when he said, you know, after we get back from work, we just discuss what happened, you know, each day'.
Mm hmm?---So he said, 'Today we signed the agreement and I had to sign on your behalf - I mean, it's you but I had to sign as you'. So I said 'okay, no problems'.
So you - you said okay, no problems?---well, I can't really tell you exactly, but I - because this is what my reaction is always, you know, when he says we've done this, because of anywhere - I, you know, say okay, okay, I'm doing this school application for my child and you sign this otherwise, I'll sign it, but don't get no problems. So it was just like that'.
[224] ts 203 - ts 204.
Mrs Gupta's evidence was that she did not disagree with Mr Gupta about him signing the document.[225]
[225] ts 203 - ts 204.
Mrs Gupta was asked when exactly she became aware of the March 2013 Agreement. Mrs Gupta replied that it was definitely after it was signed, but she could not remember how long afterwards. She thought it was 'soon' or not too long afterwards.[226]
[226] ts 202.
Mrs Gupta said that she did not see the document when Mr Gupta signed it, but he told her that he had signed the document. However, the document was not in front of her so she did not physically look at the document: 'Like it was only after'.[227]
[227] ts 204.
Mrs Gupta was asked if Mr Gupta ever showed her the March 2013 Agreement. Initially her evidence was yes, after he had signed it.[228]
[228] ts 204.
I asked her specifically whether Mr Gupta ever showed her the actual agreement. She said the following:
He showed me this document. I guess he email it to me or- I don't really remember when but I - I remember having a look at this document. I'm not sure whether I've answered.
I then asked Mrs Gupta if her evidence was that she did see the document, that it was emailed to her sometime after (it was signed). Mrs Gutpa then said the following:
I'm-I'm-I have to remember how I looked at that document. Or maybe I just looked at it-I think it's-okay. So this was signed. He told me that he signed the document and I did not ask him to show me the document. I guess I - I look at the actual document I guess when I started helping him with all these proceedings maybe …
Mrs Gupta's evidence ultimately was that she said she guessed that Mr Gupta emailed it to her, she does not remember when but she remembers having a look at this document.[229] Mrs Gupta could not remember when exactly, but ultimately her evidence ended up as follows:[230]
I guess I looked at the actual document I guess when I started helping him with all of these proceedings maybe …
[229] ts 204.
[230] ts 205.
I set out my findings of fact arising from Mrs Gupta's evidence in section 17.9.
Other conduct between Business Mantra and Khan Dhaba
There was other evidence tendered at trial that suggested ongoing or other transactions and conduct between Mr Gupta, through Business Mantra, and Khan Dhaba from the end of February into April 2013.
Even supposing that the third and fourth payments were loans from Mr Gupta to, or to the benefit of Dr Khan, at the time that they were made (which I do not accept), I am not satisfied from the entirety of the evidence led at trial that any such characterisation remained.
That is because a consideration of all of the evidence demonstrates the emergence, if not a convergence, of financial interest by Mr Gupta in Khan Dhaba from a point in January 2013 onwards.
That is for a combination of the following reasons.
Firstly, the third and fourth payments were made directly by Mr Gupta to a third party (Old Shanghai) in respect of Khan Dhaba, specifically Khan Dhaba's rent and legal or other related fees.
Secondly, whilst the stated Borrower on the January 2013 Agreement is Dr Khan (personally), the signature page provides that that Agreement is signed by Dr Khan in his capacity as Director of Khan Dhaba.[363] It is very odd that Mr Gupta who drafted this document (albeit using a template) specifically inserted that Dr Khan was signing the Agreement as Borrower 'by authority of its directors and pursuant to section 127 of the Corporations Law', specifically in respect of Khan Dhaba,[364] if that Agreement had nothing to do with Khan Dhaba.
[363] Exhibit 31, page 7.
[364] Exhibit 31, page 7.
Thirdly, as at the time of the drafting and the signing of the January 2013 Agreement, namely 14 January 2013, the wider dealings between Mr Gupta and Dr Khan in respect of Khan Dhaba were, if not on foot, at least emerging.
By that stage I am satisfied from the evidence given at trial:
(a)that Mr Gupta had introduced the third parties to Dr Khan with a view to taking over the lease assignment for Khan Dhaba;
(b)that Mr Gupta had attended at least one meeting between Dr Khan and the third parties; and
(c)that Mr Gupta was aware that a management contract was in existence between the third parties and Dr Khan for the ongoing running of Khan Dhaba, even if Mr Gupta was not a party to that agreement.[365] On Mr Gupta's evidence that occurred on or around 10 January 2013, before the January 2013 Agreement was drafted and signed.
[365] ts 179 - ts 181.
Whilst the dates upon which Mr Gupta and Dr Khan had discussions about Mr Gupta guaranteeing the lease assignment for Khan Dhaba are not clear, what is clear is that there must have been a number of discussions between the parties regarding Mr Gupta's role in the lease assignment and/or sale of Khan Dhaba from a point in January 2013 towards 26 February 2013.
That is because, on Mr Gupta's own evidence, the following events unfolded:
(a)firstly, that on an unknown date Dr Khan told Mr Gupta that he 'had to' guarantee the lease assignment;
(b)then, that Mr Gupta was told that the landlord would not accept a guarantor who was not part of the business;
(c)then, that Mr Gupta's lawyer friend told him that becoming a guarantor was 'not a good idea';
(d)then, that Mr Gupta began to look for a mechanism where he could provide the guarantee without being involved in the business or holding shares;
(e)then, that Mr Gupta took steps to investigate setting up a family trust for the third parties where Mr Gupta would hold the shares for the third parties; and
(f)then, to Mr Gupta becoming a one-third shareholder in Indian Food Caterers on 26 February 2013, established specifically in respect of the ongoing dealings or operation of Khan Dhaba.
In combination, what that body of evidence, and the totality of the evidence, supports is that from January 2013 the dealings between Mr Gupta and Dr Khan were alive and developing in respect of Khan Dhaba.
I reject the oral evidence given by Mr Gupta that he engaged in all of those actions, and conduct subsequent to February 2013, because he was threatened by Dr Khan with non-repayment of the monies he had transferred to, or on behalf of, Dr Khan.
I outline my reasons for my rejection of the evidence Mr Gupta gave at trial as to why he engaged in that conduct (globally, in January 2013, February 2013 and subsequent to February 2013) in section 20.6 below.
20.3.3 Conclusions on the third and fourth payments
It is not for me to determine positively that the third and fourth payments were in fact payments by Mr Gupta towards the acquisition of a financial interest in Khan Dhaba.
It is for the Guptas to satisfy me on the balance of probabilities that the payments (here the third and the fourth payments) were loans and remained loans. I am not so satisfied.
The totality of the evidence at trial establishes the competing hypothesis, namely that the third and fourth payments were payments treated by the parties, certainly subsequent to 3 January 2013, as payments made by Mr Gupta towards a financial interest in Khan Dhaba.
Whilst Mr Gupta also relies upon the March 2013 Agreement as a valid loan agreement, and an agreement capturing, here, the third and fourth payments as loans to Dr Khan, for the reasons I set out below in my analysis of the March 2013 Agreement, I reject that submission: see section 20.7.
There is nothing that arises from the March 2013 Agreement which alters my findings in respect of the third and fourth payments.
In conclusion, I am not persuaded on the balance of probabilities that the third and fourth payments as at 3 January 2013 were in fact loans or, if they were, that they remained loans as opposed to being treated by the parties as payments towards Mr Gupta's financial interest in Khan Dhaba.
I dismiss the plaintiffs' claim in respect of the third and fourth payments.
20.4 The fifth payment
The evidence that might support that the fifth payment was a loan to Dr Khan comprises (if accepted) Mr Gupta's oral evidence, the contemporaneous narration in respect of the fifth payment, the validity of the January 2013 Agreement and Mr Gupta's oral evidence about that Agreement. Further, Mr Gupta relies upon the March 2013 Agreement, subject to that Agreement being held to be validly executed, and Mr Gupta's oral evidence about that Agreement.
In the event that the March 2013 Agreement is not held to be a validly executed document and not binding, Mr Gupta relies upon the January 2013 Agreement as documenting the fifth payment as a loan to Dr Khan.
For the reasons that follow in section 20.7, I am not satisfied that the March 2013 Agreement was ever ratified by Mrs Gupta by her conduct. I reject that the March 2013 Agreement was a binding Agreement between the Parties and I put it to one side.
I turn to the contemporaneous narration alongside the fifth payment. That reference is the only objective contemporaneous evidence about the characterisation of that payment. That reference, made by Mr Gupta on the payee's (Dr Khan's) statement, reads 'loan from Anand loan to Dr Khan'.[366]
[366] Exhibit 27, page 924.
I do not accept that the contemporaneous narration alongside the fifth payment is a narration that I accept as honest, accurate and reliable so as to comprise a piece of evidence that corroborates Mr Gupta's oral evidence about the characterisation of the fifth payment as a loan.
As noted earlier, I am unable to take as a piece of evidence the contemporaneous reference made by Mr Gupta alongside the fifth payment as being a loan to Dr Khan given the following circumstances:
(a)firstly, where Dr Khan did not see or have the capacity at the time to challenge the accuracy of that reference;
(b)secondly, in circumstances where I have serious doubts about the accuracy of the narrations made by Mr Gupta at the time, especially given his own admission, in respect of the fourth payment, that he 'did not care too much' what he was writing.[367]
There was no evidence given by Mr Gupta at trial as to why the narration on the fifth payment was reliable and careful where the narration on the fourth payment was not; and
(c)thirdly, in circumstances where I not able to accept the entirety of Mr Gupta's evidence as being honest, accurate and reliable without careful and close scrutiny: see section 15; and
(d)given the totality of the evidence about the wider dealings that were on foot between Mr Gupta and Khan Dhaba at the time.
[367] ts 132.
I turn now to address the Guptas' argument that, in the event of a finding that the March 2013 Agreement was not validly executed, the January 2013 Agreement remained valid.
The argument for that position is that the January 2013 Agreement expressly covers payments made from 1 January 2013 to, or on behalf of, Dr Khan; that includes the fifth payment. That is further consistent with Mr Gupta's oral evidence. The fifth payment was made directly to Dr Khan personally. To that extent it was not made directly in respect of Khan Dhaba as were the third and fourth payments.
However, in my view, there are a number of arguments which weigh against the fifth payment comprising a loan to Dr Khan, even if the January 2013 Agreement remains valid. Those arguments are the same observations I have made earlier in section 20.2, together with the fact that the January 2013 Agreement was signed by Dr Khan in his capacity as Director of Khan Dhaba. That lends weight to the conclusion that payments incorporated in the January 2013 Agreement were in respect of Khan Dhaba as opposed to Dr Khan personally.
Additionally, the same issues arise in respect of the timing of the signing of the January 2013 Agreement when viewed alongside the totality of the evidence about the wider dealings with respect to Khan Dhaba: see section 20.3.2.
I further conclude that I cannot properly view the fact of the fifth payment being made to Dr Khan personally in isolation from all of the relevant evidence adduced at trial.
The totality of all of the evidence and the findings made at sections 20.2 and 20.3.2 lead me to conclude that the fifth payment was not a loan to Dr Khan when it was made on 14 January 2013, as opposed to a payment by Mr Gupta towards a financial interest in Khan Dhaba at the time.
If I am wrong about that, I am not persuaded on the balance of probabilities that the fifth payment was not subsequently treated by the Parties as a payment by Mr Gupta towards a financial interest in Khan Dhaba. The totality of all of the evidence in my view supports Hypothesis Two.
In conclusion, I am not persuaded on the balance of probabilities that the fifth payment was (or remained) a loan.
Mr Gupta's claim in respect of the fifth payment therefore fails.
20.5 The sixth payment
On 2 February 2013 Mr Gupta transferred $5,000 to Dr Khan. The fact of this payment is an admitted fact in the pleadings.
The only contemporaneous notes or correspondence between Mr Gupta and Dr Khan in respect of the sixth payment is 'Loan to Dr Khan'.[368] This payment is not reflected in Dr Khan's bank statement.
[368] Exhibit 33.
As noted earlier, these references are references made by Mr Gupta and not positively adopted by Dr Khan, so as to provide evidence of a mutually agreed fact. However, they do provide, if accepted as honest, accurate and reliable, a piece of evidence to corroborate Mr Gupta's oral evidence regarding this payment.
I am not satisfied on the balance of probabilities that the contemporaneous reference made by Mr Gupta alongside the sixth payment was an honest, accurate or reliable reflection of its mutual characterisation by the parties. The same reasons apply as for my rejection of the narration alongside the fifth payment: see section 20.4.
I reject Mr Gupta's oral evidence about the characterisation of the sixth payment as being a loan at the time it was made as being honest, accurate nor reliable.
Mr Gupta also relies on the March 2013 Agreement as evidence that the sixth payment was (also) a loan to Dr Khan.
For the reasons I detail below at section 20.7 I conclude that that March 2013 Agreement does not lend support for Mr Gupta's claim that the sixth payment (or any of the six payments) were loans to Dr Khan.
The same reasons that I outline above in respect of the third, fourth and fifth payments about the emergence of Mr Gupta's financial interest in Khan Dhaba apply to the sixth payment.
I am therefore not satisfied on the balance of probabilities that the sixth payment was a loan to Dr Khan at the time it was made.
If I am wrong about this, the totality of the evidence about Mr Gupta's emerging financial interest in Khan Dhaba leads me to conclude that the sixth payment did not remain a loan, if it ever was a loan.
In my view, the totality of the evidence points towards a finding that that payment was subsumed or taken as a payment by Mr Gupta towards a financial interest in Khan Dhaba. That is, that the totality of the evidence supports Hypothesis Two as the likely inference.
Said differently, I am not satisfied on the balance of probabilities that the sixth payment was ever, or that it subsequently remained, a loan. I therefore reject Mr Gupta's claim that the sixth payment was, or remained, a loan to Dr Khan.
Before turning to the analysis of the March 2013 Agreement it is timely here to refer to the other conduct and its relevance to Hypothesis Two. This flows from the wider dealings between Mr Gupta and Dr Khan: see also sections 17.10 and 20.3.2.
20.6 The other conduct and its relevance to Hypothesis Two
The evidence disclosed a number of actions taken by Mr Gupta from January 2013 onwards which were, on their face, inconsistent with the actions of a person who was concerned about recovering monies paid to, or on behalf of, Dr Khan.
That conduct included the following: Mr Gupta's agreement to guarantee the lease assignment for Khan Dhaba, his acquisition of a one-third shareholding interest in the company established to take over the sale/ongoing business of Khan Dhaba and the ongoing payments made from Business Mantra to or on behalf of Khan Dhaba. It is necessary to make the following brief observations about these actions.
In respect of Mr Gupta's agreement to become a guarantor for the lease assignment for Khan Dhaba to third parties, Mr Gupta gave in effect two reasons as to why he was to guarantee the lease. The first relates to the demands by Khan Dhaba's landlord; the second relates to threats made by Dr Khan for non‑repayment of the 'loan' if Mr Gupta did not become guarantor.
In respect of the first reason, the effect of Mr Gupta's evidence was that he was told by Dr Khan, and Mr Gupta appeared to subsequently accept, that Khan Dhaba's landlord demanded that the guarantor for the lease assignment be someone who had property, and then that that person have an interest in the business.
There was no evidence that Mr Gupta undertook any of his own enquiries about, for example, Dr Khan's assertions that the guarantor for the lease assignment had to be someone who had property, or an interest in the business.
There was no evidence that Mr Gupta made his own enquiries with Khan Dhaba's landlord about other aspects. For example, the threat to 'call in' any securities for the lease, or those sorts of enquiries that a reasonable person (let alone a chartered accountant) might be expected to undertake.
In short there was no evidence led at trial that Mr Gupta had checked the veracity of those representations made to him by Dr Khan. It is difficult to see why that was not done.
Mr Gupta's agreement to become a guarantor does not make logical sense. The effect of any such guarantee would be to increase his financial exposure to Dr Khan/in respect of Khan Dhaba. It is at odds with a person who is concerned with recovering alleged debts owed or a person who is concerned with decreasing his financial exposure to Dr Khan.
Mr Gupta's evidence that he was threatened by Dr Khan with non‑payment of the 'loan' amount if he did not become guarantor also does not make logical sense. Again, the practical effect of guaranteeing the assignment of the lease would be to increase his exposure to Dr Khan/in respect of Khan Dhaba's debts of which Mr Gupta had to be aware: he was Khan Dhaba's accountant.
Mr Gupta's evidence that he did not understand the nature of a guarantee and that he did not know the amount that he was to guarantee does not sit comfortably with Mr Gupta holding himself out to be a chartered accountant and financial planner.
Mr Gupta's evidence as to reason why he engaged in the other conduct, namely that he was threatened by Dr Khan, or pressured to do so, is not plausible in my view.
The evidence suggests ongoing dealings over months between the two men or entities in which they were involved. Further, the evidence of Mr Gupta's conduct following January 2013 was such that it gave rise to an inference reasonably open on the evidence that there was an ongoing business relationship between him and Dr Khan, certainly in respect of Khan Dhaba.
The documents evidencing ongoing payments from Business Mantra to Law Mantra in respect of Khan Dhaba and legal fees suggest that there was some ongoing business relationship between Mr Gupta/Business Mantra and Khan Dhaba. Those transactions persist until early April 2013.
At a time after Mr Gupta said that he was being threatened by Dr Khan in respect of guaranteeing the lease assignment for Khan Dhaba, and the very day after Mr Gupta became a one-third shareholder in Indian Food Caterers, Mr Gupta was still doing business with Dr Khan in respect of Khan Dhaba. That is the only inference that properly arises from the invoice raised by Business Mantra in respect of the 'business sale' for Khan Dhaba[369] on 27 February 2013.
[369] Exhibit 41.
This was, on Mr Gupta's evidence, after Dr Khan's threats had started, and after, on Mr Gupta's evidence, the threats to force Mr Gupta to become a guarantor for the lease assignment came to fruition.
The evidence of other conduct between Business Mantra and Khan Dhaba as outlined in section 13 demonstrates ongoing payments from Business Mantra to Law Mantra in respect of Khan Dhaba until 2 April 2013.[370]
[370] See section 13.
I reject Mr Gupta's evidence that he continued dealing with Dr Khan as the evidence suggests, or that he became a one-third shareholder of Indian Food Caterers and that he took steps to guarantee the lease assignment (even if that did not eventuate) because of the threats he was under from Dr Khan. I set out those reasons shortly.
Before doing so, I deal with the ASIC registration for Indian Food Caterers. Whilst the ASIC registration for Indian Food Caterers provides some support for Mr Gupta's oral assertion that he was to not to hold the shares beneficially for himself, that is a single piece of evidence only which might be capable of corroborating Mr Gupta's evidence that he was not to financially benefit from that shareholding.
I note that the ASIC register is a reflection of what ASIC has been informed by the party who lodged the documentation. That is, it is what Mr Gupta has informed ASIC.
Given my findings about Mr Gupta's wider credibility as a witness, and the evidence demonstrating that he had on other occasions provided documentation that was either reckless as to the truth or plainly dishonest, I do not put any weight on the ticked box on the ASIC register as being truthful. Alone, it does not persuade me that Mr Gupta's oral evidence about his intended shareholding in Indian Food Caterers was honest, accurate or reliable.
The combination of the following evidence leads me to reject Mr Gupta's oral evidence that any dealings he had in respect of Khan Dhaba and Dr Khan in January 2013 (through February 2013 and beyond) were the result of threats made to him by Dr Khan:
(a)the length of the ongoing dealings between the two men in respect of Khan Dhaba from when Mr Gupta asserts Dr Khan began threatening him is not insignificant: it is a period of approximately three months. During that time, even on Mr Gupta's evidence, Mr Gupta was taking many steps towards what ultimately was his one third shareholding in Indian Food Caterers;
(b)Mr Gupta's oral evidence that he acquired a financial interest in Khan Dhaba;
(c)the many steps Mr Gupta took towards guaranteeing the lease assignment;
(d)the objective evidence that Business Mantra invoiced Khan Dhaba the day after Indian Food Caterers was incorporated for services provided in respect of the 'business sale' for Khan Dhaba;
(e)the evidence that Business Mantra continued to make payments in respect of Khan Dhaba until early April 2013; and
(f)the fracture in the relationship between Dr Khan and Mr Gupta appears to have arisen at a time after the lease assignment for Khan Dhaba (or the plans for the ongoing operation of Khan Dhaba) had broken down.
In summary, it is difficult to reconcile the other physical conduct and actions taken by Mr Gupta as outlined, which had the effect of increasing Mr Gupta/Business Mantra's financial exposure to, or in connection with, Dr Khan/Khan Dhaba, with Mr Gupta's evidence that he only took those steps because he was threatened by Dr Khan.
That conduct is at odds with the conclusions that Mr Gupta is asking the court to draw.
It follows that I reject Mr Gupta's evidence in this regard.
20.7 March 2013 Agreement
Mr Gupta relied at trial on the March 2013 Agreement as evidence supporting his claims that the first to the sixth payments were all loans to or on behalf of Dr Khan. I reject that assertion and set out my reasons here.
The March 2013 Agreement was intended to supersede the January 2013 Agreement.[371] That was the effect of Mr Gupta's oral evidence,[372] and it is consistent with clause 11.4 of the March 2013 Agreement which specifically provides the following:
This Deed shall replace any/all previous communications, discussions and/or agreements (oral or written) between the Parties and the Parties agree that any such previous communications, discussion and/or agreements (oral and/or written) shall have no further effect.
[371] From a combination of Mr Gupta's oral evidence at ts 185, his pleaded position at par 25.5 of the Defence and Counterclaim and clause 11.4 of the March 2013 Agreement.
[372] ts 185.
The differences between the January 2013 Agreement and the March 2013 Agreement are outlined below.
Firstly, the March 2013 Agreement defines the Loan in the context of it having been lent to the Borrower on 1 January 2013.[373]
[373] Exhibit 40, clause 1.1.
As with the January 2013 Agreement, it is difficult to see why, if the Loan was intended (objectively) to comprise payments made prior to 1 January 2013, the express term of each Agreement would not say as much. Mr Gupta drafted the January 2013 Agreement, albeit using a template. Mr Sethi on Mr Gupta's instructions drafted the March 2013 Agreement.
If, as Mr Gupta asserted in his oral evidence, each Agreement was to cover payments made prior to 1 January 2013, Mr Gupta has erred not once but twice in what were supposed to be formal Loan Deeds.
I reject Mr Gupta's oral evidence that either the January 2013 Agreement or the March 2013 Agreement was intended to, or did, cover payments made prior to 1 January 2013.
The March 2013 Agreement, signed on 5 March 2013 by Mr Gupta in his wife's name, was said by Mr Gupta to cover the sixth payment (made on 2 February 2013) which had not been made by the time that the January 2013 Agreement had come into existence.
I find that the March 2013 Agreement was intended to reflect and to take account (on Mr Gupta's oral evidence) of the emerging dealings between the Parties in respect of Khan Dhaba.
On Mr Gupta's oral evidence, the March 2013 Agreement was intended to comprise the promise of $50,000 which arose in respect of the wider dealings between Dr Khan and Mr Gupta, particularly from February 2013 onwards (likely earlier) leading up to Mr Gupta becoming a one‑third shareholder in Indian Food Caterers.
In conclusion, any agreement reached on 14 January 2013 was expressly intended by the Parties to be replaced by the March 2013 Agreement.
I make the following additional points in relation to the March 2013 Agreement.
Firstly, it was entered into after Mr Gupta acquired a one‑third financial interest in Indian Food Caterers.
Secondly, the precise ambit of the March 2013 Agreement is not specified in its terms. The interpretation of the precise ambit of the Loan sum on the March 2013 Agreement relies upon a combination of the interpretation of the express words of the Agreement and the court's acceptance of Mr Gupta's oral evidence about the Loan sum.
On Mr Gupta's oral evidence, the ambit of the March 2013 Agreement and the Loan amount of $110,000 was in two parts. The first component of $60,000 on Mr Gupta's oral evidence comprised all six payments made by Mr Gupta to or on behalf of Dr Khan as at 5 March 2013.
The second component of the Loan amount comprised a promise made by Dr Khan to Mr Gupta upon the satisfactory completion of a condition (to guarantee the lease assignment for Khan Dhaba). That amount was not therefore a 'loan' as known at law.
I note that Mr Gupta did not assert that the second component comprises part of the sum that he claims is owed to him. However, the fact that the second component of the Loan amount is in fact not a loan, but a promise for future payment upon the performance, and successful performance, of a condition, and that it is said to be part of the 'Loan' amount in a binding loan agreement, leads me to doubt that the express terms of that Agreement as a whole can be accepted on face value as being accurate.
In respect of the first component of the Loan, Mr Gupta relies on the first component of the Loan amount ($60,000 of the $110,000) as comprising (roughly) the six payments he made to or on behalf of Dr Khan.
It is difficult to understand why the individual payments that comprised part of the 'Loan' amount were not specified in the Agreement. What flows from that is that I have to be satisfied from Mr Gupta's oral evidence on the balance of probabilities that it comprised the six payments he had made to Dr Khan.
Mr Gupta's oral evidence about the breakdown of the $60,000 was imprecise, vague, unimpressive and unconvincing. I conclude that I cannot rely upon his oral evidence about the breakdown of the Loan amount and I reject it. My reasons are these.
Firstly, Mr Gupta's oral evidence that that component comprised the first and second payments (made in December 2012) is in conflict with the express terms of the Loan amount.
The express provision of the Loan amount ($110,000) provides that the Loan was paid to Dr Khan as the Borrower on 1 January 2013. The express term of the Loan (taking this to mean the first component only) excludes the first and second payments (made on 10 and 11 December 2012).
Secondly, the figure of $60,000 is an imprecise figure. On Mr Gupta's oral evidence it was a 'rounded up' figure. On Mr Gupta's oral evidence the first component of the Loan (the six payments) totalled approximately $58,000 which he then 'rounded up' to $60,000.
Thirdly, it is an easy exercise (even for me) to calculate the specific amount of the six payments made to or on behalf of Dr Khan alleged to be the first component of the 'Loan' amount. Those six payments amounted to $53,380.58. That was not the $58,000 that Mr Gupta asserted the payments came to initially that he then 'rounded up' to $60,000.
Fourthly, Mr Gupta's explanation that he could not later trace a further $5,000 that would have brought the figure closer to $60,000 (but still not $60,000) is difficult to understand. Mr Gupta is an accountant, and the March 2013 Agreement was prepared by a lawyer specifically to ensure that it withstood scrutiny later.
Fifthly, that $60,000 comprised the third and fourth payments totalling $18,381 said to reflect the invoice at Exhibit 29. However, the third and fourth payments in total do not amount to the total of the invoice at Exhibit 29.
Sixthly, Mr Gupta provided the instructions to Mr Sethi to draft the March 2013 Agreement. It is difficult to understand in those circumstances why, if Mr Gupta's oral evidence is correct, namely that the first and second payments were part of the first component of the March 2013 Agreement, that the Loan amount was not drafted to capture payments prior to 1 January 2013.
On this analysis, Mr Gupta has made this mistake twice: the first when he drafted the January 2013 Agreement and the second when he gave the instructions for Mr Sethi to draft the March 2013 Agreement.
Finally, the circumstances of the signing of the March 2013 Agreement are less than satisfactory, if not positively underwhelming.
For the reasons outlined earlier, I am not satisfied that Mrs Gupta saw the March 2013 Agreement at any time prior to when she came to assist Mr Gupta prepare for trial. Neither am I satisfied that she was told the material aspects of the March 2013 Agreement at any time proximate to its signing such that she can be said to have had full knowledge of it. She plainly did not.
It is relevant to deal with the admitted fact that subsequently Mr Gupta and Mrs Gupta made demands of Dr Khan for the six payments. Those demands were made on 6 October 2014, some 19 months after the March 2013 Agreement was signed.[374]
[374] Exhibit 39.
A demand for repayment 19 months later is insufficient to establish ratification of the Agreement. I reject that submission.
It follows that I find that at no stage did Mrs Gupta ratify the March 2013 Agreement at any stage by her conduct.
I reject the submission that the March 2013 Agreement was validly entered into by Mrs Gupta. That is fatal to Mr Gupta's claim that the March 2013 Agreement is binding.
I am further (or alternatively) not satisfied that the March 2013 Agreement is evidence which supports Mr Gupta's assertion that any of the third to the sixth payments were loans at the time that they were made. Nor, as was his primary position, that it evidences that all six payments were loans.
Nor do I accept that there is anything arising from the March 2013 Agreement that persuades me that the position between the Parties as at 5 March 2013 was not in fact that payments made from 1 January 2013 onwards (the third to the sixth payments) were treated by the Parties as payments by Mr Gupta towards a financial interest in Khan Dhaba.
In simple terms, the Guptas have failed to discharge the burden of proving that the third, fourth, fifth and sixth payments were loans.
20.8 Subsequent demands for repayment
Finally, whilst it ought to be plain from section 20.7, for the sake of clarity I note the following.
There is nothing in Mr Gupta's messages to Dr Khan in August 2013 that is reliable evidence that any of the six payments were a loan. In those messages, sent some months later, and after the dealings in respect of Khan Dhaba had broken down, Mr Gupta indicated an 'appreciation' of receiving 'funds' prior to leaving.[375] Mr Gupta's phraseology is vague, non‑specific and underwhelming.
[375] Exhibit 38.
Given my findings that there were clearly other business dealings between the two men, any reference by Dr Khan to 'settling with loan' does not assist Mr Gupta in proving his claim.[376]
[376] Exhibit 38.
Conclusions and final orders
I therefore conclude:
(a)I am satisfied on the balance of probabilities that the first payment made on 11 December 2012 in the amount of $10,000 was a loan from Mr and Mrs Gupta to Dr Khan;
(b)I am satisfied on the balance of probabilities that the second payment made on 12 December 2012 in the amount of $10,000 was a loan from Mr and Mrs Gupta to Dr Khan;
(c)I am not satisfied on the balance of probabilities that the third payment on 3 January 2013 in the amount of $15,000 was a loan;
(d)I am not satisfied on the balance of probabilities that the fourth payment made on 3 January 2013 in the amount of $3,380.58 was a loan;
(e)I am not satisfied on the balance of probabilities that the fifth payment made on 14 January 2013 in the amount of $10,000 was a loan; and
(f)I am not satisfied on the balance of probabilities that the sixth payment made on 2 February 2013 in the amount of $5,000 was a loan.
I enter judgment in favour of the plaintiffs by counterclaim, Anand Kumar Gupta and Deepa Gupta, for $20,000 against the second defendant by counterclaim, Akhtar Hameed Khan.[377]
[377] See section 17.2.
I order that interest be repayable on the judgment amount pursuant to s 32(1) of the Supreme Court Act 1935 (WA).
Interest be repayable at 6% per annum.
Interest be repayable on the judgment amount of $20,000 from 7 days of the date of the letter of demand dated 6 October 2014,[378] namely from 14 October 2014.
[378] Exhibit 39.
I have entered a substantive judgment against the second defendant by counterclaim (Akhtar Hameed Khan) in favour of the first and second plaintiffs by counterclaim (Anand Kumar Gupta and Deepa Gupta). My preliminary view is that the second defendant by counterclaim (Akhtar Hameed Khan) pay the costs of the plaintiffs by counterclaim (Anand Kumar Gupta and Deepa Gupta) to be taxed if not agreed.
I will hear the Parties as to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
KT
Associate to Judge Shepherd
28 AUGUST 2024
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