Choubey v Fivestar Properties Limited
[2021] NZHC 1461
•21 June 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-694
[2021] NZHC 1461
BETWEEN RICHA CHOUBEY
First Plaintiff
VINOD RATHORE
Second PlaintiffAND
FIVESTAR PROPERTIES LIMITED
First Defendant
MUHAMMAD ILYAS BHATTI
Second Defendant
Hearing: 8-11 June 2021 Appearances:
C T Patterson for Plaintiffs P R Rice for Defendants
Judgment:
21 June 2021
JUDGMENT OF LANG J
This judgment was delivered by me on 21 June 2021 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
Solicitors:
Hornabrook MacDonald Lawyers, Auckland Parshatom Lawyers, Auckland
Counsel:
C T Patterson, Auckland P R Rice, Auckland
CHOUBEY v FIVESTART PROPERTIES LTD [2021] NZHC 1461 [21 June 2021]
[1] This proceeding relates to a dispute regarding the purchase and beneficial ownership of a 35 acre rural property situated at 33 Monk Road, South Head.
[2] The property was purchased in March 2011 for the sum of $450,000. The manner in which the purchase was funded is not in dispute. The second plaintiff, Mr Vinod Rathore, contributed the sum of $57,000. The second defendant, Mr Mohammed Bhatti, contributed sums totalling $91,000. A deposit in the sum of
$10,000 had been paid by Mr Bhatti’s wife, Ms Jingting (Shirley) Shao before the plaintiffs became involved in the transaction. The balance of the purchase price was funded by a loan from the Westpac Banking Corporation.
[3] The property was purchased in the name of the first defendant, Fivestar Properties Limited (Fivestar). Ms Shao, who is an accountant, incorporated Fivestar for the express purpose of taking ownership of the Monk Road property. The first plaintiff, Ms Richa Choubey, was the sole director and shareholder of Fivestar from the date of its incorporation. She is also the sole guarantor of the loan Fivestar obtained from the Westpac Banking Corporation when it purchased the property. Ms Choubey was married to Mr Rathore in February 2012, approximately eleven months after Fivestar acquired the Monk Road property.
[4] The dispute between the parties relates both to the basis on which the property was acquired and to events that occurred after that date. The plaintiffs contend they entered into a partnership with Mr Bhatti to purchase the property. They say they agreed with Mr Bhatti that when the property was sold each partner would be repaid the amount of their initial contribution as well as any other financial contributions they made to the property. Any surplus then remaining was to be divided equally between the partners. This would result in Ms Choubey and Mr Rathore receiving one-half of any profit derived from the sale of the property whilst Mr Bhatti would receive the balance. They say this arrangement remains in effect to the present day.
[5] Mr Bhatti disputes the existence of any partnership. He says he has always been the beneficial owner of the property and that Mr Rathore advanced him the sum of $57,000 by way of an interest free loan when he purchased it. Mr Bhatti contends he subsequently repaid the loan by means of cash payments in the sum of $40,000 and
$17,000 that he made to Mr Rathore and Ms Choubey in May and November 2011 respectively.
[6]The proceeding therefore gives rise to two essential issues:
(a)Did Ms Choubey and Mr Rathore enter into a partnership with Mr Bhatti when the Monk Road property was purchased?
(b)Did Mr Bhatti make payments totalling $57,000 to Mr Rathore and Ms Choubey in May and November 2011?
[7] Allied to the second issue is a question relating to the authenticity of a power of attorney Mr Bhatti alleges Ms Choubey signed in his favour shortly after 18 November 2011. The power of attorney gave Mr Bhatti the ability to deal with the shares in Fivestar and to remove Ms Choubey as Fivestar’s director. It also contains an acknowledgement by Ms Choubey that she holds no beneficial interest in either the Monk Road property or Fivestar.
[8] Mr Bhatti says Ms Choubey signed the power of attorney when he paid Ms Choubey the sum of $17,000 in May 2011 in full and final repayment of the loan Mr Rathore made to him when he purchased the Monk Road property. Ms Choubey denies ever having signed a power of attorney in Mr Bhatti’s favour.
Legal principles
[9] There is no dispute regarding the principles to be applied in the present case. A partnership is the relationship that exists between persons carrying on business in common with a view to profit.1 In determining whether a partnership exists the Court is required to have regard to the factors set out in ss 12 to 15 of the Partnership Law Act 2019. These provide:
12Co-ownership of property
1 Partnership Law Act 2019, s 8(1). Although this Act did not come into force until 21 March 2020 Cl 1 of Schedule 1 to the Act provides that it is to apply to every partnership regardless of when it was formed.
(1)If 2 or more persons own or hold property as joint tenants, tenants in common, or joint or part owners, the ownership or holding of the property does not by itself create a partnership in relation to the property.
(2)This section applies whether or not the tenants or owners share any profits made by the use of the property.
13Sharing gross returns
(1)Sharing gross returns does not by itself create a partnership.
(2)This section applies whether or not the persons sharing the returns have a joint or common right or interest in a property from which, or from the use of which, the returns are derived.
14Effect of receiving share of profits
(1)If a person receives a share of the profits of a business it is presumed, in the absence of evidence to the contrary, that the person is a partner in the business.
(2)However, neither of the following by itself makes a person a partner in a business:
(a)the receipt by the person of a share of the profits of the business:
(b)the receipt by the person of a payment that is contingent on, or varies with, the profits of the business.
(3)See, in particular, section 15.
15Where receiving profits or payments does not make person partner or liable as partner
(1)None of the following by itself makes a person (A) a partner in a business or liable as a partner:
(a)A receives a payment of a debt or any other liquidated amount, by instalments or otherwise, out of the accruing profits of the business:
(b)A is an employee or agent of a person who is engaged in the business and A has a contract for remuneration by a share of the profits of the business:
(c)A is a relative of a deceased partner and receives by way of an annuity a share of the profits of the business in which the deceased person was a partner:
(d)A is a lender who advances money in the circumstances specified in subsection (3):
(e)A receives a share of the profits of the business by way of an annuity or otherwise in consideration of the sale by A of the goodwill of the business.
(2)In subsection (1)(c), relative, in relation to a deceased partner, means the widow, widower, surviving civil union partner, surviving de facto partner, or child of the deceased partner.
(3)For the purposes of subsection (1)(d), the circumstances are that—
(a)the money is or will be advanced as a loan under a contract to a person who is engaged or about to engage in the business; and
(b)under the contract, A will receive—
(i) a share of the profits arising from carrying on the business; or
(ii) a rate of interest that varies with those profits.
(4)For the purposes of subsection (1)(d), the contract referred to in subsection (3) must be in writing and signed by or on behalf of all the parties to the contract.
…
[10] In the present case the land in question was owned by a company and Ms Choubey was the only shareholder in that company. For that reason s 12 does not apply. Similarly, s 13 does not apply because, on the plaintiffs’ case, the partners were not to share in gross returns. Instead, the plaintiffs allege they and Mr Bhatti agreed to combine resources to purchase the Monk Road property with a view to selling it for a profit and sharing in that profit equally. Had the parties become co-owners of the land rather than having Fivestar as the owner, the fact that they were co-owners of the land would not of itself create a partnership.2 If, however, a person receives a share of the profits derived from a business it will be presumed, in the absence of evidence to the contrary, that the person is a partner in the business.3 The plaintiffs say they come within this provision. The exceptions to the presumption set out in s 15 have no application in the present case.
Issues relating to credibility
[11] It will already be obvious that issues of credibility loom large in this case. Many factual issues are in dispute and each party says the other is lying or mistaken in relation to critical events. The plaintiffs also allege Mr Bhatti has forged Ms Choubey’s signature on the power of attorney.
2 Section 12(1).
3 Section 14(1).
[12] The need to determine issues of credibility on important issues of disputed fact is made more difficult in the present case by the fact that the parties did not document their dealings with each other. Furthermore, all the witnesses who gave evidence on the critical issues either have an interest in the outcome of the proceeding or are closely connected to parties who have such an interest. None can truly be regarded as an impartial or independent witness. In addition, many of the explanations they have advanced on disputed factual issues are inherently improbable.
[13] Other than their vested interest in the outcome of the proceeding two other issues potentially affect the credibility of the plaintiffs. The first is that Mr Rathore resigned from his position as a mortgage advisor employed by a major bank in February 2011 and left New Zealand to live in Australia shortly thereafter. Other than a visit to his parents in India he has remained in Australia since that time. Following his departure from New Zealand several clients with whom he dealt whilst employed by the bank were prosecuted by the Serious Fraud Office and convicted for mortgage fraud. This has attracted significant publicity in the news media. Mr Bhatti contends Mr Rathore effectively fled New Zealand to avoid being prosecuted along with his clients.
[14] The second is that Mr Rathore and Ms Choubey did not have any contact with Mr Bhatti after the end of 2011. It was not until October 2018, after Mr Bhatti had unsuccessfully requested the bank to provide a discharge of the mortgage over the Monk Road property, that they had any further contact with him. Their complete lack of contact with Mr Bhatti over such a lengthy period obviously calls into question their claim that the partnership remained in existence throughout.
[15] Mr Bhatti also faces problems in relation to credibility. He candidly acknowledged he has registered properties in the names of his associates to protect his assets in the event of his bankruptcy. He also acknowledged in cross-examination that he omitted to include one of these properties as an asset in which he held a beneficial interest when he signed an affidavit prepared for use in relationship property proceedings with his former wife in the Family Court. Mr Bhatti gives the distinct impression of a person who will do whatever it takes to protect his material assets.
[16] Mr Bhatti’s wife, Ms Shao, was a convincing witness. It needs to be remembered, however, that she paid the initial deposit on the Monk Road property and she also provided Mr Bhatti with the sum of $51,000 that he contributed to the purchase price. She therefore has a very real interest in the outcome of the present proceeding.
[17] I consider the evidence of Mr Bhatti’s two other witnesses, Mr Deo Rajan and Mr Jawad Eqbal, must also be approached with considerable caution. Mr Rajan acknowledged he was nominally the owner of Mr Bhatti’s service station business during the period relevant to this proceeding because Mr Bhatti was facing financial problems during that period. Mr Rajan also said he had bought a property belonging to Mr Bhatti from Mr Bhatti’s mortgagee in 2009. He then sold the property back to Mr Bhatti in 2018 for the same price. This was approximately $600,000 less than the value of the property in 2018. Mr Rajan’s explanation that he did this to help Mr Bhatti as a friend was less than convincing. These issues demonstrate that Mr Rajan has very close ties to Mr Bhatti.
[18] Mr Rajan’s evidence about his relationship with Mr Rathore also changed markedly during the hearing. In his written brief of evidence he said he had been a close friend of Mr Rathore since 2009. During cross-examination, however, he said that Mr Rathore had betrayed him by inserting his name in an agreement for sale and purchase as the real estate agent involved in the sale when he had nothing to do with the transaction. It became clear during his evidence on this point that he harbours considerable resentment towards Mr Rathore as a result of this incident.
[19] Mr Eqbal is a car salesman and motor mechanic. He has known Mr Bhatti since 2003 and has shared an office with Mr Bhatti at Mr Bhatti’s service station since 2010. He said he provided Mr Bhatti with $10,000 in cash to assist Mr Bhatti to repay the sum of $40,000 to Mr Rathore in May 2011. Mr Eqbal said these funds came from the sale of a vehicle. He did not consider he would be able to find any records relating to the sale given the fact that ten years have now passed since the sale took place. When pressed on this issue Mr Eqbal became quite evasive and said that he had been fined over the incident because he had failed to renew his motor vehicle dealer’s licence when he sold the vehicle.
[20] When Mr Eqbal was asked to describe details of Ms Choubey’s visit to the service station to collect the sum of $17,000 in November 2011 he was extremely vague. He also said Mr Rathore had talked about having the property put in his fiancée’s name when he visited the service station earlier in May 2011. Mr Eqbal was clearly mistaken about this because by May 2011 Fivestar had already become the owner of the Monk Road property. The visit in May 2011 was allegedly so Mr Rathore could collect the sum of $40,000 in part repayment of the loan he had made to Mr Bhatti in the sum of $57,000. Overall I found Mr Eqbal a very unsatisfactory witness.
[21] The issues affecting the credibility of all the witnesses who gave evidence about disputed events mean it would not be safe to attempt to ascertain who is telling the truth by analysing their evidence about each of the factual issues in dispute. Instead it is necessary to reach conclusions based on those facts that are either not in dispute or that cannot reasonably be contradicted.
Did Mr Rathore and Ms Choubey enter into a partnership with Mr Bhatti?
[22] The agreement for the purchase of the Monk Road property originally showed the purchaser as being a Mr Takeyoshi Nagao or nominee. Mr Nagao is an associate of Mr Bhatti. Mr Bhatti explained that he had purchased other properties in Mr Nagao’s name in the past. He did so to protect those assets should he be adjudicated bankrupt. He also used the names of other friends to purchase properties. As I have already recorded, Ms Shao had already paid the deposit of $10,000 before Ms Choubey and Mr Rathore became involved in the transaction.
[23] There is a dispute as to the manner in which Ms Choubey and Mr Rathore became involved in the transaction. They say they became aware Mr Bhatti was unable to purchase the property in his own name and he asked them whether they would be prepared to become involved in purchasing the property with him. They say they agreed to enter into a partnership with Mr Bhatti under which the property would effectively be held in Ms Choubey’s name and she would guarantee any borrowings used to fund the purchase. The mortgage payments would be funded by rental received from persons to whom the property would be rented. Mr Bhatti would meet any
shortfall in those payments and would also handle the day to day administration of the property. When the property was sold the profits would be shared equally by the partners after they had been repaid their initial contributions together with any other financial contributions they had made.
[24] Mr Bhatti’s version of events is quite different. He says Mr Rathore suggested to him that he and Ms Choubey become involved in the transaction. He says Mr Rathore suggested that the property should be placed in the name of Ms Choubey because this would assist Ms Choubey and Mr Rathore to secure some form of immigration status for a relative who was planning to migrate to New Zealand from India.
[25] I do not accept Mr Bhatti’s version of events even though it is supported by other witnesses he has called. First, there is no evidence Ms Choubey or Mr Rathore ever sought to sponsor a relative to migrate to New Zealand from India. They deny this occurred and there is no independent evidence to suggest they have ever been involved in such activity. Mr Rathore said his brother and his parents have visited New Zealand on holiday but says all three returned to India at the end of their stay. Furthermore, neither he nor Ms Choubey has had any other relative come to New Zealand to live. I accept their evidence on this point because I consider it likely Mr Bhatti and his witnesses would have unearthed evidence to support their claim if in fact Mr Rathore or Ms Choubey had ever sponsored a relative to live in New Zealand.
[26] It is also difficult to see how the acquisition of a property in Ms Choubey’s name could be of any benefit to a relative who was seeking to migrate to New Zealand. There is no suggestion the property would provide employment opportunities for such a person because it is common ground that rental income derived from the property would be used to meet the mortgage payments. Furthermore, the purchase did not involve a capital contribution by the relative that he or she could rely upon for immigration purposes. Mr Bhatti, Ms Shao and Mr Rathore provided the equity for the investment. There is no therefore no logical reason why Ms Choubey and Mr Rathore would want to acquire an interest in the property for the purpose Mr Rathore is alleged to have told Mr Bhatti and his witnesses.
[27] Similarly, I do not accept Mr Bhatti’s evidence that Mr Rathore told him he had spare money he needed to get rid of and offered Mr Bhatti an interest free advance towards the purchase in the sum of $57,000. That was a relatively large sum of money in 2011. It was equivalent to Mr Rathore’s annual base salary as a mortgage adviser. There is no reason why he would seek to offer such a substantial sum to Mr Bhatti without seeking something in return.
[28] In closing the case for the defendants Mr Rice relied on the fact that in early 2011 Mr Rathore was the subject of an investigation by his employer in relation to potential irregularities it had discovered regarding loans he had recommended for clients. As I have already observed, the ensuing investigation by the Serious Fraud Office led to several of Mr Rathore’s clients being prosecuted and convicted for mortgage fraud. The sentencing remarks produced from one of these cases refers to evidence that Mr Rathore had received several payments in the sum of $5-6,000 for his role in approving and recommending loans for defendants in the criminal proceedings. Mr Rice submitted it is likely that Mr Rathore was seeking to conceal these earnings so they could not be seized by the authorities. A loan to Mr Bhatti suited Mr Rathore’s purposes from that perspective.
[29] The scenario Mr Rice points to may be correct but it does not detract from my conclusion that Mr Rathore would not have been prepared to advance Mr Bhatti such a large sum without receiving something in return. It seems far more likely to me that Mr Rathore and Ms Choubey contributed the funds to the purchase on the basis that they would share in any profit derived from the ultimate sale of the Monk Road property.
[30] This is supported by the fact that the parties agreed to purchase the property in the name of Fivestar, of which Ms Choubey was to be both the sole director and shareholder. Furthermore, Ms Choubey was the only person to provide a personal guarantee for the loan Fivestar obtained to complete the purchase of the property. I consider she would only have been prepared to assume the risks and responsibilities these roles created if she and Mr Rathore were to share in any profit the sale of the property ultimately produced.
[31] Mr Rice contended that in assuming these responsibilities Ms Choubey did not expose herself to any significant degree of risk. He submits that she and Mr Rathore would both have been aware Mr Bhatti was a man with significant financial backing both in his own right and through his ability to combine resources with Ms Shao. This has been borne out by the fact that they have met the mortgage payments and other outgoings on the property during periods when it was untenanted.
[32] Furthermore, Mr Bhatti assisted Ms Choubey to meet the mortgage payments on the property between April and September 2011 by making regular fortnightly payments in the sum of $669 into her bank account. Mr Bhatti referred to these as being “fake wages” that he paid to Ms Choubey to assist Fivestar in a bid to obtain additional funding from the bank later in 2011. Mr Rathore acknowledged receipt of these funds but said they were paid as a form of financial “backstop”, and to assist him to complete renovations on a property he had bought in Bucklands Beach.
[33] Mr Rice also pointed out that Ms Choubey was aware the property was being purchased for a good price and that Mr Bhatti had considerable equity in it. The risk that Ms Choubey would be called upon to honour her guarantee to meet any shortfall if the bank exercised its power of sale under the mortgage was therefore minimal.
[34] I accept that as matters have transpired Ms Choubey has not yet been placed in financial or any other kind of jeopardy by virtue of the responsibilities she has assumed as Fivestar’s director and as sole guarantor of the loan from the bank. At the time they entered into the transaction, however, neither Ms Choubey nor Mr Rathore had any detailed knowledge either of Mr Bhatti’s financial position or the extent to which he would be able to ensure the mortgage payments and other outgoings on the property would be maintained.
[35] Such evidence as there is, however, does not inspire confidence in relation to either of these issues. As I have already recorded, Mr Bhatti accepts that he purchased assets in the names of friends and associates so the assets would be protected from creditors in the event of his bankruptcy. This fact alone is sufficient to give rise to cause for concern about his financial position. Secondly, the bank statements Mr Bhatti has produced showing the income received by his service station business
in May 2011 do not demonstrate that the business held large credit balances in its account. Thirdly, there is no evidence to suggest Mr Bhatti had ready access to funds belonging to Ms Shao, most of which appear to have been remitted to her by relatives in China. Fourthly, I have already referred to the fact that Mr Rajan said he had bought a property belonging to Mr Bhatti at a mortgagee sale in 2009. In addition, Mr Rajan was nominally the owner of Mr Bhatti’s service station business at this time because he said Mr Bhatti had financial problems. All these matters suggest there were risks for Ms Choubey in entering into this arrangement in reliance on Mr Bhatti’s ability to ensure that the mortgage payments and other outgoings were kept up to date.
[36] I accept that, due in part to Mr Rathore’s contribution, Fivestar had considerable equity in the property when the purchase was completed in March 2011. Whether this remained the case thereafter obviously depended to a large extent on whether the property market continued to rise, a factor entirely outside Ms Choubey’s control. Taking all these factors into account I do not accept Mr Rice’s submission that Ms Choubey’s decision to act as Fivestar’s only officer and guarantor was devoid of financial risk.
[37] I am satisfied Ms Choubey and Mr Rathore made their respective contributions to the acquisition of the Monk Road property on the basis that they were to share in any profits produced by the ultimate sale of the Monk Road property. Mr Bhatti did the same. In doing so they entered into a partnership that had the objective of deriving profit from the ultimate sale of the property. Division of any such profit was to be equal after repayment of the respective financial contributions made by each partner to the partnership.
Did Mr Bhatti repay the sum of $57,000?
[38] Ms Choubey and Mr Rathore contend they have never been repaid any of the money Mr Rathore contributed to the purchase of the Monk Road property. Mr Bhatti disagrees. He says Mr Rathore approached him in May 2011 and said that he urgently needed the sum of $40,000 in cash to enable him to obtain a discharge of a caveat that a Mr Roy Stanton had registered over his property in Bucklands Beach. Mr Rathore
said he needed the funds the following day. Mr Bhatti said he initially told Mr Rathore that he could not raise such a large sum in cash overnight.
[39] Mr Bhatti says he ultimately succeeded in assembling the sum Mr Rathore required. He used $20,000 from cash receipts derived from his service station business. He then borrowed the sum of $10,000 from Mr Rajan and the same sum from Mr Eqbal. Ms Shao said she used a money counting machine to count out the required sum when Mr Rathore came to the service station the following day to collect the money. Mr Bhatti and Mr Eqbal said they were also present when this occurred. Despite the large sum involved and the fact that it was in cash Mr Bhatti did not ask Mr Rathore to sign any form of receipt to acknowledge he had been paid the sum of
$40,000. There is therefore no documentary evidence of this transaction.
[40] Mr Bhatti says he repaid the balance of the amount contributed by Mr Rathore to the purchase of the Monk Road property at the end of November 2011. This claim needs to be viewed in context.
[41] During the period between May and November 2011 Mr Bhatti says he had the opportunity to purchase the land and buildings in Hayr Road, Mt Roskill from which he conducted his service station business. He says he initially wished to sell the Monk Road property to obtain funds for this purpose, but Mr Rathore persuaded him the property should not be sold. Mr Bhatti says Mr Rathore encouraged him to obtain an increase, or top up, of the loan obtained from the bank to enable him to buy the Hayr Road property. Mr Bhatti says that during a telephone discussion in November 2011 Mr Rathore told him he had gone to live in Australia and that Ms Choubey would shortly be joining him there. For this reason Mr Rathore said it would not be possible for the loan secured over the Monk Road property to be increased. Mr Bhatti said he was furious when Mr Rathore told him this and it ultimately meant he was unable to buy the Hayr Road property.
[42] Mr Bhatti says that during the same conversation Mr Rathore told him he needed to be repaid the balance of the funds he had advanced to Mr Bhatti to enable him to purchase the Monk Road property. Mr Bhatti says that after a long discussion he agreed to repay the balance of the funds provided Ms Choubey provided him with
a power of attorney so he could deal with the property after she had gone to live in Australia. He says Mr Rathore agreed to this proposal. Mr Rathore denies any such conversation occurred.
[43] Mr Bhatti says he expected Ms Choubey to come into the service station to collect the funds on 18 November 2011, and he prepared a power of attorney bearing that date in anticipation of her visit. He says Ms Choubey did not come in on 18 November due to transport difficulties but within a week or two thereafter. He maintains that Ms Choubey uplifted the sum of $17,000 in cash on that visit and signed the power of attorney in Mr Bhatti’s favour. Again there is no receipt or other documentary record of this transaction. However, Mr Eqbal, Mr Rajan and Ms Shao all say they were present in the office of the service station with Mr Bhatti when this occurred.
[44] Ms Shao says she initially told Ms Choubey she was only willing to pay her the sum of $8,500 because Ms Choubey still owed her approximately $8,700 from the “fake wages” Ms Choubey had received between April and September 2011. Ms Shao says Ms Choubey told her Mr Rathore had instructed her not to sign the power of attorney unless she received the full sum of $17,000. Mr Bhatti then told Ms Shao to pay Ms Choubey that sum and she complied with his instruction. Ms Choubey then signed the power of attorney Mr Bhatti had prepared.
[45] Ordinarily the fact that no fewer than four persons say they witnessed an event might be sufficient to persuade a fact finder that the event in question occurred. In the present case, for the reasons already given, that is not the case. The issue of whether the funds were repaid must be determined on the basis of inferences to be drawn from undisputed, or indisputable, facts.
[46] In this context several factors become relevant. The first is that Mr Rathore and Ms Choubey had no contact with Mr Bhatti during the period between late 2011 and late 2018. This is obviously at odds with the proposition that they remained in some form of partnership with Mr Bhatti throughout that period. If the partnership had remained in existence during such a lengthy period one would expect there to be some degree of contact between the partners about matters affecting the partnership’s
affairs. This factor obviously supports Mr Bhatti’s claim that he had repaid Mr Rathore’s contribution to the purchase of the Monk Road property by the end of November 2011 and that any commercial relationship between them came to an end at that point.
[47] Secondly, there is some support for the defendants’ version of events about the alleged repayment in May 2011. The certificate of title to Mr Rathore’s property in Bucklands Beach shows that a transfer of the property from one William Roy Stanton to Mr Rathore was registered on 1 March 2011. Mr Stanton registered a caveat against the title on the same day. This suggests Mr Rathore may not have paid Mr Stanton the whole of the purchase price on settlement. A transfer of the property by Mr Rathore to a third party was then registered on 30 May 2011. A withdrawal of Mr Stanton’s caveat was registered on the same day. This provides support for Mr Bhatti’s claim that Mr Rathore approached him in May 2011 seeking funds to enable Mr Stanton’s caveat to be released.
[48] Thirdly, I attach some significance to the fact that Mr Rathore and Ms Choubey failed to respond to communications they received from Mr Bhatti on 26 and 27 October 2018. By this stage Mr Bhatti had unsuccessfully asked the bank to provide a discharge of the mortgage it held over the Monk Road property. The bank then contacted Ms Choubey and she refused to give her consent to the discharge being provided. On 26 October 2011 Mr Bhatti sent the following text message to Ms Choubey:
Richa Ge, could you call me please to sort out this situation? [Y]ou and Vinod trying to creat[e] unreasonable trouble for us about our property under Fivestar properties name. I still[s] request you to let us transfer the property back to us. Please don’t destroy our[s] friendship and trust. Ilyas
[49]On the same day Mr Bhatti sent the following email to Ms Choubey:
Rich ge,
It’s a shock[ed] for us to hear from you after a long time and disputing on something which doesn’t belongs to you.
I have just received a phone call and email from my lawyer about Fivestar Properties that you are disputing about the ownership of the “Fivestar Properties Limited” and the property under this company name. You know very well that its not your company and you do not own the property under
this company name. You were the director as trustee for us. You had authorised us before leaving the country to manage the company and change the directorship of the Fivestar Properties Limited when we are ready. As well as to operate the [W]estpack bank account associated with this company. Now its time for us to change over the ownership of both the company and the property.
Please I request you do not make things difficult for you and for us too. You know that you are not the real owner of the company and the owner of the property.
Please do not destroy our friendship and the trust we had on you. We had a close family friendship and trust.
If you are thinking that you and Vinod will try to take our property then please rethink very carefully. Going to police will open a new world for you and Vinod.
Please could you authorise the Westpac bank to discharge the mortgage. As we have to change the ownership of this property to our name.
Your once upon like a brother Ilyas
Please call me urgent [ ] same number
Mr Bhatti sent another email in similar terms to both Ms Choubey and Mr Rathore on the following day.
[50] Mr Bhatti said in evidence that he received no response to any of these communications from either Mr Rathore or Ms Choubey. I accept Mr Rice’s submission that, if Ms Choubey and Mr Rathore genuinely believed the partnership still remained in existence in October 2018, one would expect them to have responded to Mr Bhatti’s communications.
[51] Furthermore, after Mr Bhatti received no response to the communications sent on 26 and 27 October 2018, he and Ms Shao travelled to Melbourne to confront Ms Choubey and Mr Rathore on 29 October 2018. It is not necessary for present purposes to set out the competing versions of what the parties claim was said during the meeting that followed. The significance of this event lies not in what the parties claim was said, but in the fact that it occurred. Mr Bhatti and Ms Shao clearly felt sufficiently strongly about what had happened to go to the trouble and expense of travelling to Australia in an effort to resolve matters. I consider they would have been
less likely to go to those lengths if they knew Ms Choubey and Mr Rathore still had an interest in the Monk Road venture.
[52] All of these factors support the defendants’ argument that any interest Mr Rathore and Ms Choubey may have had in the Monk Road property ended in November 2011 with the repayment of their contribution to the purchase of the property.
[53] However, one aspect of the evidence relating to the events that occurred in October and November 2011 provides support for the plaintiffs’ assertion that the funds were not repaid as Mr Bhatti and his witnesses claim. This is to be found in emails that passed between Ms Choubey and Mr Rathore during those months. The emails were not copied to Mr Bhatti or to anybody else. Nor did Ms Choubey and Mr Rathore have any reason at that time to believe their communications would ever be disclosed to others. I therefore take the exchanges in the emails to be frank and honest discussions between Ms Choubey and Mr Rathore about the events that were occurring at the time.
[54] The emails were sent in the context of discussions between Mr Bhatti and Ms Choubey about the proposal that the bank loan be increased to provide further funds to Mr Bhatti. It appears that during October 2011 Mr Bhatti was becoming increasingly anxious to receive the additional funds from the bank so he could complete the purchase of the Hayr Road property.
[55] On 10 October 2011 Ms Choubey advised Mr Rathore that Mr Bhatti had been in contact with her to ask her to authorise the bank to release the funds. At the conclusion of the email thread Ms Choubey said to Mr Rathore “If it has to be than you better take your share out + interest so I can ask him to handover this loan”. Mr Rathore responded by telling Ms Choubey to tell Mr Bhatti she had emailed a person called Viv, the Westpac staff member dealing with the loan application. On the following day Mr Bhatti sent an email to Ms Choubey that began as follows:
Hope you are well, please email Viv. It is a very tough time, really appreciate. It’s very urgent now plz.plz. If you are not free by the afternoon, then I will deliver it by 2PM.
Mr Bhatti followed this up with a further email to Ms Choubey on 12 October 2011.
[56] On 13 October 2011 Ms Choubey sent two emails to Mr Rathore that suggest Ms Choubey was anxious to recoup the investment they had made in the Monk Road property. At 10.20 am she said:
Please talk to him on top priority otherwise I will speak to him tonight. Talk and finish it all. Why letting it hanging in the air? ….. it is only your money.
At 12.28 pm she sent a second email that began “See you still didn’t speak to him… Bobby (Ms Choubey’s nickname for Mr Rathore) these are the conversations making me angry. If you do not do your task first you will be left behind.”
[57] A series of emails then passed between Ms Choubey and Mr Rathore on 17 October 2011. These followed an initial email in which Ms Choubey asked the person called Vivian at the bank whether she could draw down the additional funds later that day. Vivian responded by saying there were some matters she needed to discuss with Ms Choubey before the advance could proceed. She suggested that Ms Choubey visit her at the bank later in the day. Ms Choubey forwarded this email to Mr Rathore and he said he would take care of it.
[58] Emails that then passed between Ms Choubey and Mr Rathore suggest that the increase in the bank loan would enable Mr Rathore to get his money out of the Monk Road property and that the parties were also considering a sale of the property. At
10.53 and 11.03 am Ms Choubey sent Mr Rathore the following messages:
Received Mr Ilya’s [Mr Bhatti’s] phone call. He is asking back for wages. What to do? I have not told him that I have taken 2600. You tell him that. He is talking about his money over and over again that its costing him for 162 daily.4 So, you too say that it is also costing you interest for credit card. What difficulty have we got into?
…
Mate that one has turned my mind into yoghurt. I will not give this money anymore and will top up and get your money and sell the property. Fuck him. Has been phoning for a week and the brain is wasted now. I told him that I have talked about Viv’s email because I have not done the deal and that you have the authority.
4 This was the penalty interest Mr Bhatti was incurring for failing to settle the purchase of the Hayr Road property on due date.
See Bobs worried about his 162 and not about your 60k. Learn something from this. …
(Emphasis added)
[59]At 11.09 am Mr Rathore responded as follows:
Don’t take tension madam. Why are you taking so much tension? The property is under your name, that’s it. Just take it easy. …
[60] At 2.42 pm the same day Mr Rathore asked Ms Choubey to read and then sign an agreement for sale and purchase. At 2.47 pm Ms Choubey responded by saying the “sale price should be such that your money does not get held up”.
[61] These communications relate to a blank agreement for the sale of the Monk Road property. It is unclear from the evidence what the purpose of this document was. Ms Choubey raised this issue some weeks later on 23 November 2011. At 12.07 pm on that date she sent the following email to Mr Rathore:
Yes, this is what’s done, mate last time when I agreed to sign on the uncompleted papers so in frustration that one [Mr Bhatti] started yelling at me. Why should I tolerate all this? I will never sign any papers without condition. I will write sale price anything below 4.90K is not acceptable and all the proceeding will go through my solicitor accounts and will advise him to transfer 65K to my Kiwi bank account and to release the funds to nominated bank account. What you say just to keep us safe and deduct the solicitor fee from balance amount. Not from 65K. What you say?
“M”
(Emphasis added)
[62]Mr Rathore responded as follows at 12.09 pm:
Yes, this is how we’ll do it …. He is calling me now … Will txt him to txt you or call u …
[63]These communications followed two emails sent a few minutes earlier. At
11.58 am, Ms Choubey had sent Mr Rathore the following message:
As if the land is his and the money is his, and only you will be the one left dangling. If that one [Mr Bhatti] speaks to you then say, speak yourself. Don’t put me in the middle.
[64]Mr Rathore responded at 12.02 pm as follows:
It does not happen like this madam? …. I will tell you.
Yes, so what you are saying is correct, that you both do direct deal. Why are you stressing me out in all this? Make that one [Mr Bhatti] aware that we are helping him and you are having to put up with your bank. Say it lovingly or diplomatically, ok.
[65] Mr Rice contended that these communications showed that Ms Choubey and Mr Rathore were treating the money they had contributed to the purchase of the Monk Road property as a loan to Mr Bhatti. I have already decided that issue in favour of Ms Choubey and Mr Rathore. However, I consider these communications are highly relevant to the issue of whether the alleged repayments occurred.
[66] If the evidence of Mr Bhatti and his witnesses is correct Ms Choubey knew in October 2011 that a significant proportion of the initial contribution of $57,000 had been repaid five months earlier. In that event there would have been no reason for her to refer to the sum of “60k” in her email sent at 11.03 am on 17 October 2011 or to the sum of “65k” in her email sent to Mr Rathore on 23 November 2011 at 12.07 pm. These references demonstrate that in October and November 2011 Ms Choubey was seeking to recover both the full amount of Mr Rathore’s initial contribution and a share of the profit to be made from any sale of the property for not less than $490,000. This plainly suggests no repayment occurred in May 2011 as Mr Bhatti and his witnesses contend.
[67] More importantly, the email exchange between Mr Rathore and Ms Choubey on 23 November 2011 occurred at a time when, according to Mr Bhatti, Mr Rathore had already agreed that Ms Choubey would sign the power of attorney in return for receiving the final payment of $17,000. Any such agreement must have been reached prior to 18 November 2011, the date on which Mr Bhatti says he anticipated Ms Choubey would call in to sign the document and pick up the sum of $17,000. Furthermore, on Mr Bhatti’s evidence Ms Choubey had by 23 November already missed the initial appointment to sign the power of attorney and pick up the money. She was in the process of arranging transport to enable her to come in and get the money. However, in the email exchange between Mr Rathore and Ms Choubey on 23 November 2011 there is no hint of any of those events occurring. Rather, the emails make it clear that the issues with Mr Bhatti were far from resolved and both
Ms Choubey and Mr Rathore were becoming exasperated at that fact. In my view this factor tells conclusively against the defendants’ case.
[68] It is also significant that Mr Bhatti’s solicitors received a letter from the solicitors acting for the vendor of the Hayr Road property on 18 November 2011 cancelling the agreement because Mr Bhatti had failed to meet his obligation to settle the purchase. It is therefore not surprising that Mr Bhatti was extremely anxious to secure the additional funds from the bank during the period leading up to and after that date. This ties in with the observations Ms Choubey made to Mr Rathore about Mr Bhatti’s attitude during that period.
[69] Finally, it is noteworthy that none of Mr Bhatti’s communications to Ms Choubey and Mr Rathore on 26 and 27 October 2018 referred either to the repayment of the sum of $57,000 or, explicitly at least, to his contention that Ms Choubey had signed a power of attorney in 2011.
[70] Taken together, these factors persuade me that Mr Bhatti and his witnesses are not telling the truth and that Mr Rathore was never repaid his initial contribution of
$57,000. It also means I accept Ms Choubey’s evidence that she never signed the power of attorney in favour of Mr Bhatti. It is unnecessary to say more about that issue other than that I find it surprising Mr Bhatti can no longer find the original of the document. His evidence that he may have given it to Ms Choubey is unconvincing given its obvious importance to him as the recipient of the power of attorney.
Conclusion
[71] Mr Rathore and Ms Choubey clearly played no active role in the partnership after Ms Choubey joined Mr Rathore in Australia at the end of 2011. However, they did not need to. The parties had agreed that Mr Bhatti would be responsible for the day to day administration of the Monk Road property and he would also be responsible for ensuring the mortgage and other outgoings on the property were kept up to date. For her part Ms Choubey remained the sole director and shareholder of Fivestar throughout and her guarantee remained in effect. Mr Rathore’s initial contribution also remained invested in the property.
[72] Importantly, neither Mr Rathore nor Ms Choubey ever communicated any abandonment of their interest in the partnership to Mr Bhatti and they did not commit any other act that would indicate an intention that the partnership be dissolved. For that reason I am satisfied it remained in effect notwithstanding the lack of contact between the partners between 2011 and 2018.
Relief
[73] It will now be for the parties to attempt to reach agreement on a way forward. The plaintiffs presently seek relief in the form of an order placing Fivestar in liquidation but that is unlikely to be a productive exercise given the inevitable expense that would be involved. The most practical way forward may be for the property to be sold and the net sale proceeds divided in accordance with the terms of the partnership as I have found them to be. Alternatively, Mr Bhatti may wish to purchase the plaintiffs’ interest in the partnership. Either way, it will be necessary for the parties to calculate the financial assistance Mr Bhatti has provided to Fivestar since it purchased the Monk Road property so that he can be reimbursed for this before any increase in the equity of the property is divided equally.
[74] The parties have leave to ask the Registrar to arrange a further hearing before me should they not be able to reach agreement regarding the final form of any relief to be ordered.
Costs
[75] The plaintiffs are the successful parties and as such are entitled to an order of costs and disbursements in their favour. Ordinarily costs would be calculated on a category 2B basis. Counsel have leave to file memoranda if they cannot reach agreement regarding the quantum of costs.
Lang J
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