Kumar v Saily
[2019] NZHC 1682
•18 July 2019
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2017-470-0138
[2019] NZHC 1682
BETWEEN NAVDEEP KUMAR
Plaintiff
AND
NEERAJ SAILY
Defendant
Hearing: 1 May 2019 Counsel:
S A McKenna for plaintiff J Delaney for defendant
Judgment:
18 July 2019
JUDGMENT OF KATZ J
This judgment was delivered by me on 18 July 2019 at 4:30pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors: Grantham Law, Lawyers, Hamilton
Harris Tate Lawyers, Tauranga
Counsel: S A McKenna, Hamilton
J Delaney, Barrister, Tauranga
KUMAR v SAILY [2019] NZHC 1682 [18 July 2019]
Introduction
[1] Navdeep Kumar (“Navdeep”) and Neeraj Saily (“Neeraj”) are cousins. Navdeep’s father, Dharam Pal, is the brother of Neeraj’s mother, Rekha Rani. Both families belong to a tightknit community centred around the Hindu Temple in Tauranga.
[2] Over the years Navdeep and Neeraj have been involved in several joint business ventures. This proceeding relates to one such venture — the joint acquisition of a property at Lakes Boulevard, Tauranga (“the Lakes Property”). Navdeep claims that, at a family meeting in April 2016, Neeraj agreed to transfer his interest in the Lakes Property to him.
[3] Neeraj denies that any agreement was reached. He has filed a counterclaim in which he asserts that, at a meeting held at the Temple on 4 December 2016, he and Navdeep agreed to divide the equity in the property 65/35 in Navdeep’s favour, with Neeraj having the first option to purchase. That agreement was recorded in writing, signed by both Navdeep and Neeraj, and was witnessed by 15 or so community members (“the December Agreement”).
[4] Navdeep acknowledges that he and Neeraj both signed the December Agreement. He says, however, that he entered into it under pressure from the community member who was running the meeting. He also asserts that he was under significant cultural pressure at the time he signed the agreement, as to fail to accept it would have brought shame on his family in their close-knit community. As a result, he says, he signed the December Agreement under duress.
[5] Navdeep further argues that the terms of the December Agreement are unenforceable because he and Neeraj did not hold their interests in the property directly, but through a company, New Venture Capital Limited (“NVCL”). The December Agreement makes no reference to NVCL.
[6]The key issues I must determine are:
(a)Did Navdeep and Neeraj enter into a binding oral contract on 25 April 2016? If so, what were the terms of that oral contract?
(b)Did Navdeep sign the December Agreement under duress?
(c)If not, what are the terms of the December Agreement? Is the agreement enforceable given that it makes no mention of NVCL?
Key events from early 2015 to April 2016
The commencement of the property joint venture
[7] In early 2015, Navdeep and Neeraj agreed to look for a property to purchase together. In May 2015, Navdeep and Neeraj found a suitable property. It was a section in a new development on Lakes Boulevard, Tauranga, being developed by Highmark Homes Limited (“Highmark”). The section was available for purchase as a house and land package, on “builder’s terms”. This meant that Navdeep and Neeraj could take possession of the section on payment of a deposit and build a house on it. Payment of the balance of the purchase price for the land would be deferred until November 2015. The expected completion date for the construction of the house was 30 October 2015.
[8] The advantage of such an arrangement was that the upfront costs were lower. The disadvantage, however, was that Navdeep and Neeraj could not use the land to secure the loan required to fund the house construction. It was therefore necessary to provide some other form of security to the bank to raise a loan to fund the construction costs. After the house had been constructed, and the land paid for, that loan could then be refinanced and secured over the Lakes Property.
[9] Navdeep claims that they agreed that they would contribute equally to the costs of the purchase and to obtain the required funding by each obtaining a loan using their respective family homes as security. Navdeep denies that there was ever any such agreement.
The agreement to purchase the Lakes Property and the financing of the construction costs
[10] On 19 May 2015, the title to Navdeep’s family home on Amy Road (“the Amy Road property”) which was jointly owned (and lived in) by Navdeep and his parents, was transferred into Navdeep’s sole name. The following day, Navdeep and Neeraj signed a “proposal” to buy the Lakes Property. As part of the proposed arrangements, Highmark agreed to construct a house on the site and then lease it from Navdeep and Neeraj (or their nominated purchaser) for a period of one year, for use as a show home. On 17 June 2015, Navdeep and Neeraj signed various legal agreements implementing these arrangements.
[11] With the exception of $250, Navdeep paid the initial deposits and other payments required pursuant to the agreements. Neeraj alleges that Navdeep owed him
$10,800 at the time from their previous business dealings, and he therefore told Navdeep to use that money to make one of the payments. Navdeep disputes that.
[12] On 3 July 2015, the ANZ bank approved a $400,000 flexi-loan to Navdeep, secured over the Amy Road property. Interest on the loan was to be paid out of the loan account itself. The purpose of this loan was to fund the construction costs.
[13] Two independent contemporaneous file notes from mid-July 2015, one prepared by a lawyer (Anne Holloway) and the other prepared by Tony Barclay of the ANZ Bank, set out the agreed arrangements between Navdeep and Neeraj as at that time, namely:
(a)the construction costs would be funded by a loan secured against the Amy Road property;
(b)once construction of the house was completed, Navdeep and Neeraj would purchase the total property for $570,000;
(c)the ANZ loan would transfer to the new property in the sum of
$456,000 (being 80 per cent of the purchase price of the property); and
(d)Navdeep and Neeraj would contribute equally to the 20 per cent balance payable ($114,000).
[14] Hence, even if there had been an agreement at the outset that Navdeep and Neeraj would contribute equally to the construction costs (which Neeraj denies) that agreement had been superseded by mid-July 2015. That was only a month after Navdeep and Neeraj had entered into an agreement to purchase the Lakes Property.
[15] On 27 July 2015, Navdeep signed the ANZ flexi-loan documents and the loan was drawn down.
[16] Construction of the house commenced in October 2015. The first invoice for building costs was paid by Navdeep from his personal account (but later reimbursed). From that point onwards, all payments for the construction costs were made from the ANZ flexi-loan account, save for one payment which was made by NVCL.
Incorporation of NVCL and proposed refinancing of the ANZ loan
[17] NVCL was incorporated on 22 October 2015. Navdeep and Neeraj subsequently nominated NVCL to purchase the Lakes Property. They hoped that purchasing the property through a company would enable them to claim the GST back. They later learned, however, that this was not possible. Navdeep and Neeraj are equal shareholders in NVCL. They are also both directors of the company.
[18] On 29 October 2015, ANZ approved a loan to NVCL to enable it to purchase the land. ANZ’s internal file note in support of the loan application records the build price as $345,000 and the land price as $220,000 (total cost $565,000). It further records that:
Clients only need to fund the build price at this stage, from a loan under Navdeep Kumar’s name… On completion (late Oct 2015) they will be sold the land. The Bank will take a mortgage over the new property and lend 80% on it. Clients will have a registered valuation completed to confirm finished value.
[19]In November 2015 the ANZ loan to NVCL was drawn down, in the sum of
$240,000. Navdeep and Neeraj both provided personal guarantees for that loan.
$181,304 went towards the purchase of the land. The balance was earmarked for the remaining building costs.
[20] By March 2016, the construction of the show home on the Lakes Property was complete. After paying the final invoice, the ANZ flexi-loan account had a balance of
$318,932.55. By the end of the month the two loans (the ANZ flexi-loan and NVCL’s separate loan) totalled $558,000. The next stage was for NVCL to refinance, so that the ANZ flexi-loan could be transferred to NVCL and secured over the Lakes Property.
[21] A valuation was commissioned from Property Solutions Limited for the purposes of the refinancing. That valuation (dated 1 April 2016) assessed the value of the Lakes Property at $762,000. Due to the increase in value, it was no longer necessary for either Navdeep or Neeraj to contribute any of their own funds to meet the bank’s requirement for a 20 per cent deposit.
[22] Before the refinancing was completed, however, the relationship between Navdeep and Neeraj (and their respective families) broke down.
The 25 April 2016 meeting – was a binding agreement entered into?
The events leading up to the 25 April 2016 meeting
[23] On or about 24 April 2016, Dharam Pal went to the bank to take some money out of his joint account with Navdeep. He was not able to, however, as there were insufficient funds. While at the bank he discovered that a loan had been taken out against the Amy Road property, and that it was somehow tied up with a new property that Navdeep and Neeraj were purchasing. Dharam Pal’s evidence was that he was “very, very upset” to discover this. He asked Navdeep to explain why there was no money in the account and learned “the true story”. Navdeep explained to his father that he had taken a loan (secured on the Amy Road property) for a property development venture with Neeraj. He told his father, however, that Neeraj had agreed to contribute 50 per cent of the costs of the venture, but had failed to do so.
[24] Neeraj’s evidence was that Dharam Pal telephoned him on 24 April 2016, and asked him to go to his house. When Neeraj got there, Dharam Pal was very upset and
accused Neeraj of forging Dharam Pal’s signature in order to transfer the Amy Road property to Navdeep, so that Navdeep and Neeraj could obtain financing for their property venture. Neeraj strenuously denied any knowledge or involvement in the transfer of the Amy Road property. Neeraj says that he told Dharam Pal that he and Navdeep were about to refinance the loan in any event. This could be done as soon as the code compliance certificate came through. At that stage, Amy Place would no longer be needed as security for the construction loan.
[25] Dharam Pal denied that he had accused Neeraj and/or Navdeep of involvement in the transfer of the Amy Road property into Navdeep’s sole name. However, his claimed reasons for voluntarily transferring the Amy Road property to Navdeep on 19 May 2015 (the day before Navdeep and Neeraj signed the proposal document to purchase the Lakes Property) were vague and unconvincing.
[26] Dharam Pal’s deep sense of grievance and anger about the use (and possibly also the transfer) of his family home to facilitate the funding of Navdeep and Neeraj’s property venture provides the context for the meeting that took place the following day.
The 25 April 2016 meeting
[27] There were two family meetings at Neeraj’s family home (where he lived with his parents) on 25 April 2016.
[28] On the first occasion Dharam Pal and his wife Pawan Kumari went to Neeraj’s home without Navdeep. Dharam Pal said that he was very upset and went there to discuss with his sister, her husband, and Neeraj that what Navdeep and Neeraj had “done without his permission” was wrong.
[29] Rekha Rani’s evidence was that Dharam Pal was very angry when he arrived. He told her that Neeraj and Navdeep had cheated him out of his house, by arranging for Dharam Pal's house to be transferred into Navdeep's name so that Navdeep could take out a loan against it. He wanted Neeraj to pay him 19 per cent interest for the loan. Neeraj was told that he had to refinance the loan within two weeks, and he agreed to do so.
[30] The second meeting took place at about 5.30 pm, when Dharam Pal and Pawan Kumari returned to Rekha Rani’s house, this time with Navdeep. They met with Neeraj and his parents. Navdeep had with him the bank statements and loan documents showing that he had made significant contributions towards the construction costs and that Neeraj had not. Dharam Pal was angry and upset. Navdeep’s evidence was that at the conclusion of the meeting he and Neeraj reached the following oral agreement:
(a)Neeraj would transfer his shareholding in NVCL to Navdeep;
(b)Neeraj would be removed as a director of NVCL;
(c)Navdeep would refinance the property in order to remove Neeraj's personal guarantee; and
(d)Navdeep would not pursue Neeraj for the money he ought to have contributed to NVCL.
[31] Dharam Pal supported his son’s account. In his written brief of evidence, he stated that:
At the conclusion of this meeting Neeraj and Navdeep agreed that Navdeep would retain the property as his sole investment. To give effect to this Neeraj agreed to transfer his shares in New Venture Capital Limited (NVCL) to Navdeep and to retire as a director of NVCL. Navdeep in return agreed that he would not pursue Neeraj for the funds he had failed to contribute to NVCL.
[32] In cross-examination, however, Dharam Pal said that at the time of the meeting he did not know that a company owned the land. He later reiterated that evidence in the following exchange:
Q. Earlier on you gave evidence that you didn't know about the company until after the meeting on the 25th of April?
A. Yes I do not know when they started up the company.
Q. How can you give evidence that – sorry I'll rephrase. You say in your brief, that evidence in your statement that the outcome of the second meeting was that Neeraj agreed to transfer his shares in the company to Navdeep?
A. No I did not agree about this thing.
Q. Are you saying that your statement is not correct?
A. There's no talk as such and it’s nothing in there.
Q. Are you saying that there was no discussion at the meeting about the shares in the company?
A. There was no talk regarding the share in the company…
[33] Neeraj’s evidence was that Dharam Pal’s key concern, at both meetings, was to get “the security taken off his house.” He said that his uncle also said that Navdeep and Neeraj should pay him 19 per cent interest for using his house as security. Neeraj said that he told his uncle that he was already arranging the refinancing, as they had discussed the day before. Neeraj denied that he had agreed to hand over his 50 per cent shareholding “for nothing”. He says that he tried to explain that based on the recent (1 April 2016) $762,000 valuation of the property neither he nor Navdeep would have to put any of their own money in.
[34] Rekha Rani’s evidence was that Dharam Pal was angry and abusive at the second meeting. He kept saying that he had papers to show that Neeraj and Navdeep had “tied up his house by using it to get a loan for the company”. Dharam Pal insisted that Neeraj remove the loan from the Amy Road property. She said that, after saying “over and over again that he wanted the house [the Amy Road property] to be free from the debt, Dharam Pal got up to leave”.
Events following the 25 April 2016 meeting
[35] Navdeep’s evidence was that, following the meeting, he asked his accountant to prepare a share transfer form. However, despite repeated attempts, Neeraj refused to sign it. Neeraj denied that Navdeep tried to get him to sign a share transfer form. (The transfer form was not discovered, and the accountant who allegedly prepared it was not called to give evidence).
[36] At 7.53 am on 26 April 2016 (the day after the meeting) Neeraj emailed Blair Parlane at the ANZ as follows:
Neeraj here and I need an appointment with you today. I know you might be in Te Puke today. Please call or email me with time of appointment.
[37] Neeraj’s evidence was that he met with Mr Parlane later that day and told him to prepare the refinancing documents, as he had promised his uncle he would do the previous day. Mr Parlane told him that the paperwork should be completed by 29 April 2016. After speaking to Mr Parlane, Neeraj says that he contacted Navdeep and told him that the refinancing was underway.
[38] On 29 April 2016, Neeraj contacted Mr Parlane to check on progress with the refinancing. Mr Parlane told him that Navdeep had contacted him the day before and told him to stop, because they were going to sell the house. Navdeep confirmed this in his evidence. He said that he had told Mr Parlane to put the refinancing on hold as they might sell the house, because “we’re having a dispute with it”.
[39] Neeraj was surprised to discover that Navdeep had told Mr Blair to stop the refinancing and contacted Navdeep to ask what was going on. Neeraj’s evidence was that Navdeep told him that he had asked a real estate agent to value the property and the feedback was that they could get more than a million dollars for it. Neeraj said he was happy to let Navdeep try and find a buyer, instead of refinancing. The refinancing was accordingly put on hold.
[40] From Neeraj’s perspective it was business as usual during May, albeit there was relatively little contact between him and Navdeep. By this stage Highmark was renting the Lakes Property for use as a show home. In late May 2016, Neeraj emailed Navdeep to ask him for the ANZ flexi-loan account details so that he could transfer the rent payments being received from Highmark into that account. Navdeep did not reply. Also, in late May and June, Neeraj had some involvement in relation to GST issues involving NVCL, which involved dialogue and/or correspondence with Inland Revenue, Navdeep’s accountant, and his own accountant. An email from Neeraj to Navdeep on 31 May 2016 refers to the ongoing GST issues in relation to the purchase of the Lakes Property by NVCL.
[41] Matters came to a head on 28 June 2016, when Neeraj received a letter from Navdeep’s lawyers claiming that, as he had not contributed his share towards the construction of the Lakes Property, he had agreed at the meeting of 25 April 2016 to
transfer his interest in the property to Navdeep. Neeraj’s evidence was that this letter came as a complete surprise to him.
Was a binding agreement entered into at the 25 April 2016 meeting?
[42] Several witnesses gave evidence to the effect that Dharam Pal is a strong and forceful personality. That evidence aligned with my assessment of him when he gave evidence in Court. In April 2016, he was understandably upset to discover that a mortgage had been taken out over his family home, without his knowledge. Dharam Pal’s sense of grievance was intensified by his belief that Neeraj had reneged on an agreement with Navdeep that he would pay 50 per cent of the construction costs.
[43] There is a direct conflict of evidence between Navdeep and Dharam Pal on the one hand, and Neeraj and Rekha Rani on the other, as to whether an agreement was reached at the 25 April meeting on the terms alleged by Navdeep.
[44] Dharam Pal’s evidence was evasive, discursive and contradictory. It was clear that he is driven by a strong belief that it is unfair that Neeraj should be entitled to an interest in the Lakes Property when he did not contribute to the construction costs. Dharam Pal was not willing to accept the possibility that the agreement between Navdeep and Neeraj, from at least mid-July onwards, did not require Neeraj to contribute equally to the initial construction costs, despite independent evidence (ANZ bank and legal file notes) showing that to be so.
[45] My strong impression was that Dharam Pal was prepared to say whatever he believed would best advance Navdeep’s claim, and to avoid saying anything that might undermine it. This led to him contradicting himself repeatedly, as he was not always sure what evidence would best advance Navdeep’s position. I have set out one example at [31] to [32] above, where he denied any knowledge of NVCL in cross-examination, despite providing a detailed description in his written brief of an agreement having been reached at the 25 April meeting involving Neeraj transferring his shares in NVCL to Navdeep and then retiring as a director of the company.
[46] Dharam Pal’s evidence-in-chief (as set out in his written brief) regarding the alleged 25 April “settlement agreement” appears to have been carefully crafted to
match Navdeep’s evidence. However, given his subsequent denials of knowledge of NVCL at the relevant time, I can give Dharam Pal’s evidence on this issue minimal weight, and I reject it. This aspect of his evidence lacks credibility.
[47] As between Navdeep and Neeraj, I find Neeraj’s evidence (corroborated to some extent by the evidence of his mother) to be more credible than that of Navdeep. First, Neeraj’s evidence is more consistent with the wider context. It is implausible that Neeraj would agree to walk away from his valuable half interest in the Lakes Road Property because he had not paid half the construction costs, when his agreement with Navdeep (from at least mid-July 2015 onwards) did not require him to do so. There is no evidence that Navdeep expressed any unhappiness to Neeraj regarding their agreed financing arrangements, until after Dharam Pal became involved.
[48] The April meeting was prompted by Dharam Pal’s discovery of the loan over the Amy Road property. Given that context, Neeraj’s evidence that Dharam Pal’s key focus was to get that loan refinanced as soon as possible makes sense. Such a conclusion is also supported by Rekha Rani’s evidence that Dharam Pal was angry that Neeraj and Navdeep had “tied up his house by using it to get a loan for the company” and that Dharam Pal said “over and over again that he wanted the house [the Amy Road property] to be free from the debt”.
[49] Further, the events subsequent to the April meeting support Neeraj’s account of what was discussed. Neeraj took immediate steps, the morning after the meeting, to get the ANZ refinancing underway. There was no need for him to do this if he had agreed to transfer his interest in the Lakes Property to Navdeep the previous day. Neeraj also continued to deal with other matters relating to the property in May and June on a “business as usual” basis. This is not behaviour consistent with an agreement having been reached in April that Neeraj would transfer his interest in the Lakes Property to Navdeep.
[50] I also note that when Navdeep spoke to Mr Parlane in late April, only a few days after the 25 April meeting, he did not tell him that Neeraj had agreed to transfer his interest in the property to him. Rather, Navdeep’s evidence was that he told Mr Parlane to put the refinancing on hold as they might sell the house, because
“we’re having a dispute with it”. The reference to there being a “dispute” is inconsistent with Navdeep believing at that stage that a binding agreement had been reached at the 25 April meeting that Neeraj would transfer his interest in the property to him.
[51] Finally, when a meeting was held at the Temple, in December 2016, to attempt to resolve the differences between Navdeep and Neeraj, neither Navdeep nor Dharam Pal suggested at any stage that a binding agreement had already been reached in April 2016.
[52] Navdeep bears the onus of proving, on the balance of probabilities, that a binding agreement was entered into on 25 April 2016. For the reasons outlined, he has failed to discharge that onus. The evidence does not support a finding that a binding agreement was reached at the 25 April 2016 meeting, on the terms alleged by Navdeep. Navdeep’s claim against Neeraj accordingly fails.
[53] I now turn to consider Neeraj’s counterclaim against Navdeep, which is that a binding agreement was entered into at a meeting at the Temple on 4 December 2016. Navdeep acknowledged that he had signed the December Agreement, but advanced two broad reasons as to why it is unenforceable:
(a)he entered into it under duress; and
(b)it does not mention NVCL, the legal owner of the Lakes Property.
[54] Mr McKenna further submitted, on behalf of Navdeep that, if the December Agreement is valid and enforceable, then Neeraj has not validly exercised his option to purchase the Lakes Property.
Was the December Agreement entered into under duress?
Events leading up to the 4 December 2016 meeting
[55] Tensions between Navdeep’s and Neeraj’s families continued in the months following the April meeting and Rekha Rani complained to the police of an alleged
serious assault and ongoing threats made against her by her brother. (Dharam Pal denies any such assault or threats). These events caused difficulties and concerns in the close-knit Temple community to which they both belonged, and culminated in Rekha Rani obtaining a protection order against her brother.
[56] Navdeep and Neeraj attended a mediation in October 2016 but were unable to resolve their differences. In advance of that mediation they obtained an updated valuation from Property Solutions Limited. The updated market value was assessed as being $896,000.
The 4 December 2016 meeting
[57] Vikram Chhabra, Kuldip Kumar and Sanjeev Dewat are each members of the Temple community. They each attended the 4 December meeting and gave evidence of what had occurred at the meeting, to the best of their recollection. I found each witness to be honest and forthright in their evidence. They were fair and measured in their responses to questioning, with no obvious “agenda” to pursue. Each of them made concessions where appropriate. They had each attended the meeting with the genuine aim of helping the parties to resolve their differences. I will therefore first give an overview of the meeting from their perspectives, before turning to consider the specific allegations of duress made by Navdeep and Dharam Pal.
[58] Kuldip Kumar is one of the Temple trustees. His evidence was that the Temple trustees (not including Mr Pal, who at the time was the Chairman) discussed their concerns about the ongoing tensions between Dharam Pal and his sister at a meeting on 2 December 2016, after they had heard that the police had become involved. They decided to try and help Dharam Pal and Rekha Rani resolve the difficulties in their relationship.
[59] Kuldip Kumar telephoned both of the families involved, and other Temple members, to invite them to a meeting on 4 December. Shortly before the meeting, Navdeep's and Neeraj's cousin, Ram Pal, suggested that the meeting focus on resolving the property dispute between Navdeep and Neeraj. The general feeling was that the property dispute lay at the heart of the issues between Rekha Rani and Dharam Pal. Kuldip Kumar spoke privately to Navdeep and Dharam Pal about this suggestion.
Navdeep and Dharam Pal agreed to attend the meeting on that basis. Neeraj, however, was not given any advance warning that the property dispute would be discussed.
[60] Kuldip Kumar ran the meeting. Roman Saily (who had connections to both Navdeep and Neeraj’s families) was present and shared his thoughts but was not overly vocal. Vikram Chhabra started the discussion by asking some questions. The meeting was amicable, and the discussion continued for between one and two hours. Navdeep and Neeraj eventually agreed to a proposal that they split the property 65/35 with Navdeep getting the bigger share.
[61] Kuldip Kumar then suggested that Navdeep and Neeraj each leave the room with their support people, to discuss the proposed settlement separately, and in private. Navdeep, Dharam Pal and one or two other people left the room and went outside for about five or ten minutes. Neeraj did not leave the room. When Navdeep and his support people returned, they said that they agreed to the proposed settlement.
[62] Kuldip Kumar asked Vikram Chhabra (whose written English was better than Kuldip Kumar’s) to write down the points of agreement, so that there would be a clear record. The way that Mr Chhabra approached the task was to say out loud what he intended to write, get the agreement of everybody as to the form of words, and then write it down. He did that clause by clause. He said that Neeraj and Navdeep were consulted throughout this process “as we were very aware that this was their dispute”.
[63] During the discussion about the terms, there was a disagreement about who would buy the property from the other. Both Navdeep and Neeraj wanted to own it. Lots were drawn to decide who should have the first option to purchase. Dharam Pal, Navdeep and Neeraj all agreed to this process. Neeraj's name was drawn.
[64] Mr Chhabra recalled some mention of the house being owned by a company. His recollection, however is that the attendees were keen to simplify matters and keep the focus on the two people involved in the dispute, Navdeep and Neeraj.
[65] After the agreement was finalised, everybody signed it. No-one at the meeting expressed any unhappiness with the deal that had been reached. The December Agreement states as follows:
Agreement between
Mr. Navdeep Kumar c/o [address] & Mr. Neeraj Sally [sic] c/o [address] for profit share of the [Lakes Property].
Profit share between the above said partners will be on the basis of Neeraj Saily will have 35% of the profit and Navdeep Kumar will get 65%.
Terms:
1. Profit will be amount remaining after all expenses and paying the amount paid by Navdeep Kumar so far.
2. Valuation of the property will be done before 15th December 2016 and will be the basis for profit sharing.
3. Neeraj Saily will get the first chance to pay off 65% to Navdeep Kumar till 1st February 2017.
4. If Neeraj Sally is unable to pay the 65% profit to Navdeep Kumar, he will get the chance to pay off 35% to Neeraj Sally.
5. If both fail to do so, property will be sold and both will get the respective share.
[Signatures of parties and witnesses]
[66] The community members were in good spirits at the conclusion of the meeting as they believed they had helped resolve a significant dispute, which had been a big issue for members of the Temple.
[67] At 5.00 am the next morning, however, Dharam Pal phoned Kuldip Kumar. Kuldip Kumar’s evidence was that Dharam Pal told him that he and Navdeep had changed their minds. Dharam Pal was unhappy with the agreement and now did not want to go ahead. He spoke to Kuldip Kumar for about two and a half hours. There was no suggestion at that time, however, that the agreement had been signed under duress. The focus was on the perceived unfairness of the deal that had been reached.
Was the agreement signed under duress?
[68] Dharam Pal and Navdeep’s recollection of the meeting differed in significant respects from that of the other attendees. Navdeep’s evidence was that Roman Saily
(a Temple member who was connected to both families) “took it upon himself to run the meeting and dominated it from then onwards”. Navdeep said that at the commencement of the meeting his father tried to explain that Neeraj had not contributed his agreed share to the purchase of the property. Roman Saily, however, told Dharam Pal not to talk and did not let him speak for the remainder of the meeting. Navdeep said that it was Roman who suggested the 65/35 split and also decided on the “drawing lots” method of deciding who should have the first opportunity to purchase the property. Navdeep told Roman that it was not a fair process, but Roman ignored him.
[69] Navdeep said that after Vikram Chhabra wrote up the agreement Roman instructed everyone present to sign it. Navdeep told Roman that this was not fair, and he did not want to sign it. Roman “said that everyone had agreed that it was to be this way and told me I had no choice but to sign it”. Navdeep says that he felt compelled to sign it as all of his extended family were present and “I would have been deeply shamed to be the trouble maker especially when the dispute was with another family member”.
[70] Dharam Pal’s evidence largely mirrored Navdeep’s on the key issues. He said that Kuldip Kumar, who was a close friend of both families, asked him to attend the meeting. Roman Saily told him, however, not to talk, but to let Navdeep and Neeraj talk. He said that Roman decided on the 65/35 split and the drawing of lots. Navdeep protested that the process was unfair, but Roman ignored him. Vikram wrote up the agreement in English and Roman instructed everyone to sign it, which they did, including Dharam Pal. Navdeep was not happy with the agreement and told Dharam Pal that he did not want to sign it. However, Roman said to Navdeep that he had no choice “it had been decided that this is how it was going to be resolved and he had to sign it.”
[71] In cross-examination Dharam Pal denied signing the agreement (despite clearly acknowledging in his written brief that he had) and said that his signature on the document must have been forged. He acknowledged that he had telephoned Kuldip Kumar the day after the meeting and told him that he no longer agreed to the terms of the agreement, because he did not think they were fair.
[72] Neeraj’s evidence was broadly in accordance with the evidence of the three community member witnesses, as outlined above. He confirmed that everyone had a chance to speak at the meeting, and that Navdeep and Dharam Pal went outside to discuss the 65/35 split before returning to the room and agreeing with it. He said that he and Navdeep both agreed to the suggestion that they draw lots to decide who should have the first right to keep the property.
[73] Kuldip Kumar denied that Roman Saily dominated the meeting or prevented Dharam Pal from taking part. He said that he ran the meeting, and everyone got a fair chance to speak. (This was confirmed by the other witnesses who had attended the meeting). Kuldip Kumar said that he has known Dharam Pal for many years, and that he is a man who is not afraid to talk or give his opinion. During the meeting he interrupted the discussion many times and answered questions for Navdeep. Roman Saily did say at one stage something along the lines that Dharam Pal needed to let others have their say. Dharam Pal was, however, given every opportunity to have input. Kuldip Kumar rejected any suggestion that Dharam Pal could be intimidated or dominated by Roman Saily. His evidence was that:
Dharam Pal has seniority in our culture. Roman could not force Dharam Pal to do anything he did not want to do.
[74] Kuldip Kumar also denied that Navdeep had complained about the meeting being unfair. As for Navdeep feeling pressured to sign the agreement, Kuldip Kumar said:
Navdeep also says that he felt forced to sign the agreement or he would shame his family. I do not agree with this. Navdeep did not need to agree to the deal. His family and friends were at the meeting to support him. I asked him to go outside and think about his decision before he agreed so that he was not put under pressure. He took some time out of the room, then returned and agreed.
[75] Vikram Chhabra also denied that Navdeep was put under any pressure to sign the agreement. He said that at all times during the meeting and drawing up of the agreement Neeraj, Navdeep, and Dharam Pal were given the opportunity to have their input:
Navdeep never said that he was unhappy to sign or unhappy with the process, and no pressure was put on him.
[76] I found both Kuldip Kumar and Vikram Chhabra to be impressive witnesses. They were measured and careful in their answers to questions and freely acknowledged if they had not seen particular things or could not specifically recall matters. Although they did not remember precisely the same things (as is to be expected) there were no major inconsistencies or contradictions in their evidence on the key issues. Vikram Chhabra, who gave evidence that he knows both Navdeep and Neeraj and their families “very well” gave evidence pursuant to a subpoena (issued by Neeraj).
[77] I also found Rekha Rani to be a credible witness. Rather than trying to bolster her son’s case, she frankly acknowledged that she “could not remember much about what was said during the meeting”. Her only real recollection was that Neeraj sat on the floor and that “everyone was given a chance to have their say about what should happen”.
[78] Overall, I prefer the evidence of Kuldip Kumar, Vikram Chhabra, Sanjeev Dewat, Rekha Rani and Neeraj to that of Dharam Pal and Navdeep. Dharam Pal and Navdeep’s evidence relating to the alleged duress was inconsistent with the evidence of all of the other witnesses who were at the meeting.
[79] As I have previously noted, Kuldip Kumar’s evidence that Dharam Pal is a strong personality who is not afraid to talk or give his opinion is consistent with my impression of him in Court. He is forceful and speaks his mind, in no uncertain terms. He was a challenging witness to cross-examine and counsel for Neeraj often struggled to get a word in edgewise (or get answers to his questions). It was very clear that Dharam Pal is not a man who could be easily intimidated. He was a man of high status within the Temple community and, at the relevant time, was the Chair of the Temple trustees.
[80] Navdeep clearly defers to his father. He is, however, an experienced businessman in his own right. He was supported at the December meeting by his father and others. His claims of duress are simply not credible. I accept the overwhelming evidence of the meeting attendees that everyone was given a chance to contribute to the discussion, particularly Navdeep and Neeraj. Navdeep had the
opportunity to discuss the proposed settlement in private with his father and others. After he returned to the room, having discussed the matter with his father, he agreed to the 65/35 split. There was nothing to stop Navdeep and Dharam Pal rejecting the proposed settlement, or simply leaving the meeting at that stage (or indeed at any stage).
[81] For the reasons outlined, I reject the claim that the December Agreement was signed by Navdeep under duress.
Is the December Agreement invalid or unenforceable because it does not mention NVCL?
[82] Navdeep argued that the December Agreement is insufficiently certain and therefore unenforceable because, in essence, it makes no reference to NVCL, the legal owner of the Lakes Property. The agreement does not state, for example, that Navdeep and Neeraj are entering into it in their capacity as shareholders of NVCL.
Relevant legal principles – incomplete agreements/certainty of terms
[83] The requirement of certainty in the law of contract was summarised by the Court of Appeal in Wellington City Council v Body Corporate 51702 (Wellington) as follows:1
The essence of the common law theory of contract is consensus. It follows that for there to be an enforceable contract, the parties must have reached consensus on all essential terms; or at least upon objective means of sufficient certainty by which those terms may be determined.
[84] The primary issue is whether the parties have intended to enter an agreement with immediate effect to bind them. This will often be apparent from a review of the document itself, but the Court may also have regard to broader contextual matters. If the Court is satisfied that the parties did intend to enter into a binding contract, then the Court will do its best to give effect to their agreement.2 Courts may be especially
1 Wellington City Council v Body Corporate 51702 (Wellington) [2002] 3 NZLR 486 at [30].
2 The Laws of New Zealand Incomplete Agreements at [55], citing Queensland Electricity Generating Board v New Hope Collieries Pty Ltd 1 Lloyd’s Rep 205 (PC).
prepared to hold that an agreement has contractual force where it has been executed by one or both parties.3
[85] Wherever possible, the courts will endeavour to uphold the parties common contractual intention, as embodied in their agreement, despite the absence of provision as to some matters, or of ambiguous or uncertain wording, if the nature of the obligations intended to be assumed can be established and given effect.4 The key question is whether the essential terms are clear or can be ascertained.
Is the December Agreement unenforceable because it makes no reference to NVCL?
[86] At the time it was entered into, both Navdeep and Neeraj clearly intended the December Agreement to be binding and to provide a final resolution of their dispute in relation to the Lakes Property. Although Dharam Pal and Navdeep may have later regretted the agreement, and felt that it was unfair, I have found that Navdeep entered into it freely, without duress.
[87] Navdeep and Neeraj agreed to engage in an alternative dispute resolution process, supported and facilitated by members of their cultural/religious community, to try and resolve their differences. The process followed was fair. With the support of their community, Navdeep and Neeraj worked through their differences constructively and reached an agreement regarding the Lakes Property that they intended to be binding. In accordance with the authorities I have outlined above, the Court should, if at all possible, give effect to the parties’ common contractual intention.
[88] If I were to find that the December Agreement is void or unenforceable, then the outcome would be that Navdeep and Neeraj’s interests in the Lakes Property (through their shareholding in NVCL) would remain 50/50. There is accordingly some irony in the fact that it is Neeraj, not Navdeep, who is seeking to uphold the December Agreement (which awards him only a 35 per cent interest in the Lakes Property).
3 The Laws of New Zealand Incomplete Agreements at [55] citing Money v Ven-Lu-Ree Ltd [1988] 2 NZLR 414 (CA) (affirmed at [1988] 3 NZLR 129 (PC)) and other cases.
4 Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2001] 2 NZLR 219 at [34]-[38] (and the cases cited therein). See also Attorney-General v Barker Bros [1976] 2 NZLR 495 (CA) at 498-499.
[89] In my view it is not necessary for NVCL to be a party to the agreement in order for the agreement to be enforceable. Nor does the lack of reference to NVCL render the December Agreement void. I accept Mr Delaney’s submission that, correctly interpreted, the agreement is a shareholders’ agreement between Navdeep and Neeraj. At the time the December Agreement was entered into both Navdeep and Neeraj were fully aware that their interest in the property was held through NVCL and, accordingly, that they would need to implement the agreement in their capacity as NVCL shareholders. The lack of specific reference to NVCL, in this context, does not render the December Agreement void or unenforceable.
Has Neeraj validly exercised his option?
[90]Clause 2 of the December Agreement states:
Valuation of the property will be done before 15th December 2016 and will be the basis for profit sharing.
[91] Navdeep pleads that, if the December Agreement is valid and enforceable, Neeraj has not validly exercised his option. Mr McKenna submitted that it is implicit that the valuation anticipated by the agreement was to be a new valuation by a mutually appointed valuer and not a pre-existing valuation obtained prior to the signing of the December Agreement.
[92] On 13 December 2016, Neeraj’s lawyer wrote to Navdeep’s lawyer confirming Neeraj’s intention to exercise his rights under the December Agreement to purchase the Lakes Property. That letter confirmed that the September 2016 valuation that been obtained for the purposes of the mediation remained applicable. An email from the valuer (Property Solutions) was annexed, confirming this (on the basis that the market had “levelled off” over the previous three to four months).
[93] Mr McKenna submitted that a full new valuation should have been provided, even if it was (in effect) just a copy of the September valuation with the date changed.
[94] I reject the submission that Neeraj’s option has not been validly exercised. The 13 December 2016 letter from Neeraj’s lawyer, together with the annexed email from Property Solutions, was sufficient to meet the requirements of clause 2. Property
Solutions were the valuers previously chosen by Navdeep to value the Lakes Property. They were very familiar with the property, having previously provided full valuations in April 2016 and September 2016. Confirmation from them that the September valuation remained valid and appropriate was sufficient in the circumstances.
Implementation of the December Agreement
[95]There are two key aspects to the December Agreement:
(a)an agreed basis for sharing the “profit” of their investment (through NVCL) in the Lakes Property (preamble and clause 1); and
(b)an option for Neeraj to acquire Navdeep’s interest in the property (namely, his shares in NVCL) (clause 3).
[96] The key terms of the agreement, including a mechanism for determining price (a valuation done prior to 15 December 2016) were agreed and set out in the agreement. The agreement does not, however, include detailed provisions specifying precisely how the agreed settlement terms were to be implemented. That is not unusual in short form contracts drafted by laypeople. Given the lack of detail regarding implementation, and the intractable nature of the dispute between the parties, both counsel sought some guidance as to implementation of the agreement in the event that I found it to be valid and enforceable.
[97] The first aspect of the agreement, the agreed basis for “profit” sharing, is a fairly conventional formula for valuing the balance sheet equity i.e. the value of the company’s assets less its liabilities. As I understand it, NVCL’s only assets are a bank account and the Lakes Property. It is implicit that the “profit” will need to be calculated as at settlement date. The “amount paid by Navdeep Kumar”, interpreted in context, is clearly a reference to the ANZ flexi-loan that Navdeep obtained to fund the construction costs (and which is presumably reflected in the balance of Navdeep’s shareholder current account).
[98] As Neeraj validly exercised his option on 13 December 2016, Navdeep is required to transfer his shares in NVCL to Neeraj. The price for the shares is to be calculated as follows:
(a)Assets:5
(i)NVCL bank account as at the settlement date;
(ii)the value of the Lakes Property as per the September 2016 valuation ($896,000);
(b)Less liabilities:6
(i)NVCL’s bank loan as at the settlement date; plus
(ii)Navdeep’s current account as at the settlement date7; plus
(iii)any other outstanding expenses relating to the Lakes Property as at settlement date.
(c)Assets less liabilities equals “profit”. (Profit x 0.65 = share purchase price.)
[99] Finally, given that Navdeep failed to settle on the settlement date specified in the December Agreement, it is necessary for the Court to set a new settlement date. I direct that the new settlement date will be 22 August 2019 (or such other date as the parties may agree). Navdeep and Neeraj are required to cooperate and take all steps necessary to implement the December Agreement including ensuring that the actions of NVCL facilitate settlement of the agreement.
5 I am not aware of any other assets. Obviously, however, if there are any they will need to be included.
6 I am not aware of any other liabilities. Obviously, however, if there are any they will need to be included.
7 I assume that this reflects the borrowings in his name over the Amy Road property, which will need to be repaid on settlement.
Result
[100] The plaintiff’s (Navdeep’s) claims against the defendant (Neeraj) are dismissed.
[101] Neeraj has been successful in his counterclaim against Navdeep. I accordingly make an order for specific performance of the December Agreement on the basis set out at [98] and [99] above.
[102] My preliminary view is that Navdeep should pay costs to Neeraj on a 2B scale basis. I encourage the parties to resolve any cost issues on the basis of this indication, if possible. Given, however, that I have not heard submissions from counsel on costs, leave is reserved to file memoranda, if necessary. Any memorandum on behalf of Neeraj is to be filed by 9 August 2019. Any memorandum on behalf of Navdeep is to be filed by 16 August 2019.
Katz J
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