Bhargav v First Trust Limited

[2024] NZHC 1174

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1260

[2024] NZHC 1174

BETWEEN

AMEET BHARGAV and RENU KHAJURIA
Plaintiffs

AND

FIRST TRUST LIMITED

First Defendant

DAVINDER SINGH RAHAL
Second Defendant

(continued next page)

Hearing:	On the papers
Counsel:	S E Wroe and G R Grant for Plaintiffs
Judgment:	13 May 2024

JUDGMENT OF O’GORMAN J

[Granting Interim Charging Order]

This judgment was delivered by me on 13 May 2024 at 9 am pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

…………………………………

Solicitors:
Grant & Co, Auckland

BHARGAV v FIRST TRUST LIMITED [2024] NZHC 1174 [13 May 2024]

(continued)

METSONS (NZ) LIMITED (Discontinued) Third Defendant

VINAY MEHTA (Discontinued) Fourth Defendant

LOCAL REALTY LIMITED (Discontinued) Fifth Defendant

GURBIR SINGH BAL (Discontinued) Sixth Defendant

VIVEK PUNJ (Discontinued) First Third Party

HOVERD & CO LIMITED (Discontinued) Second Third Party

SAMAR CONSTRUCTION LIMITED
(Discontinued)
Third Third Party

MANPRIT SINGH (Discontinued) Fourth Third Party

Introduction

[1]    In this proceeding, a without notice interlocutory application for interim charging orders has been referred to me as Duty Judge. The plaintiffs seek interim charging orders in circumstances where Hinton J granted judgment on the substantive claim on 2 May 2024.1

Substantive judgment

[2]    In May 2020, the plaintiffs purchased a property at 1/5 Ribbonwood Crescent, Goodwood Heights, Auckland (the Property). The first defendant, First Trust Ltd (FTL), sold the property to the plaintiffs. The second defendant, Mr Rahal, was a director and shareholder of FTL, along with his wife.

[3]    The plaintiffs brought claims against the first defendant for breach of contractual warranty (that any work on the property requiring building consent had received the required consent) and against the first and second defendants for misleading and deceptive conduct in breach of s 9 of the Fair Trading Act 1986. The various claims against the defendants and third parties were discontinued prior to the substantive fixture.

[4]    After a six-day hearing during November 2023 (and following a delay while FTL was restored to the Companies Office register), Hinton J granted judgment on   2 May 2024:

(a)against FTL for breach of contractual warranty; and

(b)against FTL and Mr Rahal jointly and severally, for breach of s 9 of the Fair Trading Act.

[5]    Both defendants were found liable, and some amounts were quantified by way of damages awarded, but the costs of repair and consequential losses still need to be calculated in light of the Judge’s findings. Accordingly, the plaintiffs are not yet in a position to seal a judgment for the full amount of the quantum awarded.

1      Bhargav v First Trust Limited [2023] NZHC 1054.

Charging orders

[6]    The High Court Rules provide for both “pre-judgment” and “post-judgment” charging orders.

[7]    Under r 17.53, a charging order may charge all proper personal property, including:

(a)a debt or sum of money due or accruing due to the liable party;

(b)shares held by the liable party and any New Zealand company; and

(c)the estate, right, or interest in possession, remainder, reversion, or expectancy (whether vested or contingent) in any land.

[8]    Rule 17.54 provides that a charging order under r 17.53 is a limited charging order (called an “interim charging order”) until the court discharges or finalises it in accordance with the rules. An interim charging order must be served on the person it is intended to affect. If it is over an interest in land, the interim charging order may also be registered against the land, or a caveat lodged in respect of it.

[9]    Ordinarily, upon a substantive judgment being issued, the plaintiffs would be entitled to seal the judgment and then obtain a post-judgment charging order over the defendants’ property, under r 17.42 of the High Court Rules.

[10]   In the present case, they are unable to take those steps while the quantum is still to be finalised. The plaintiffs are concerned that the defendants will divest their assets in the meantime, or otherwise take steps to defeat the plaintiffs’ enforcement of the judgment:

(a)Bath and Tile Ltd, a business which the plaintiffs understood to  be Mr Rahal’s primary source of income, was recently put into liquidation on 22 March 2024. The liquidator’s first report states there is unlikely to be a return to creditors given tax liabilities.

(b)The only property owned by FTL at 609–611 Great South Road, Papatoetoe, is partly “under contract”.

(c)The only property owned by Mr Rahal and his wife at 736 Great South Road, Manukau, is presently being advertised for sale by real estate agents, with a deadline private treaty closing on 15 May 2024.

(d)Simpson Western, a law firm, has issued a statutory demand to FTL for unpaid legal fees, which FTL did not respond to. That matter is listed in the liquidation list for mid-June 2024.

(e)Mr Rahal gave evidence at trial that if the judgment went against him, he would have to leave the country as it would ruin his credibility.

[11]   Until the quantum of the substantive judgment has been finalised, the plaintiffs accept that it is appropriate for an interim charging order to be granted, rather than a final charging order. This is to protect their position pending finalisation of the quantum aspects of the judgment. However, on the facts, the plaintiffs are in a much stronger position than pre-judgment.

[12]   In this hybrid situation, the plaintiffs seek leave (if needed) to issue a charging order under r 17.41. When such leave is granted before judgment, it may only be granted on proof that the liable party, with intent to defeat either his or her creditors or the entitled party or both, is removing, concealing or disposing of the liable party’s property, or is absent from or about to leave New Zealand. I accept those requirements are satisfied on the facts, and that leave is appropriate (if needed).

[13]   I have reviewed the affidavit in support of the application for interim charging orders, and I have considered the effect of the Court’s judgment issued on 2 May 2024. I am satisfied that it is appropriate to grant the application for interim charging orders. The plaintiffs have explained in their evidence the amount that they seek to use in the interim charging orders. These sums have been used at a level that is considered conservative, considered against the level of liability that will be imposed in terms of

the  judgment  that  has   already  issued.     For example, that judgment states the following:2

The parties will need to confer and file a memorandum as to the sum reached for cost of repairs based on the above findings, which will fall in the range of

$600,000 to $700,000.

Result

[14]   Accordingly, I grant the application  in  terms  of  the  orders  sought  in  paras 1(a)-(d) of the application.

O’Gorman J

2      Bhargav v First Trust Limited [2023] NZHC 1054 at [120].