Naidu v Chandnaani
[2020] NZHC 1286
•10 June 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-001963
[2020] NZHC 1286
IN THE MATTER of an appeal against a decision of the District Court at Auckland dated 16 August 2019 BETWEEN
DEVENDRA MURTI NAIDU SUKHWINDER SINGH and JASPAL SINGH
Appellants
AND
BHARAT GUL CHANDNAANI
Respondent
Hearing: 19 May 2020 Counsel:
M Locke for appellants
N Scampion for respondent
Judgment:
10 June 2020
JUDGMENT OF KATZ J
This judgment was delivered by me on 10 June 2020 at 2:00pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors: Davenports West Lawyers, Auckland
Smith & Partners, Auckland
Counsel: M Locke, Barrister, Auckland
N Scampion, Shortland Chambers, Auckland
NAIDU v CHANDNAANI [2020] NZHC 1286 [10 June 2020]
Introduction
[1] This is an appeal from a decision of Judge G M Harrison granting summary judgment to the respondent, Bharat Chandnaani.
[2] Mr Chandnaani brought a claim in the District Court in which he alleged that the appellants, Devendra Naidu, Sukhwinder Singh, and Jaspal Singh, had agreed to purchase his shares in JAKS Investments (2014) Limited for $262,500 but had only paid him $200,000.
[3] The appellants accepted that they owed Mr Chandnaani a further $50,000 but disputed liability for the remaining $12,500. Judge Harrison granted summary judgment in the sum of $62,500. The appeal relates solely to the disputed balance of
$12,500.
Application for leave to appeal out of time
[4] An appeal must be brought within 20 working days after the decision appealed against is given, but the Court may extend the time to appeal.1
[5] Mr Chandnaani’s notice of appeal was accepted for filing two working days after the due date. It was served on the respondent two or three weeks later, after an unsuccessful attempt to effect service by email.
[6] The delay in effecting service was relatively short and the reasons for the delay have been adequately explained. No prejudice to the respondent would be caused by granting the extension sought and I am satisfied that granting an extension is in the overall interests of justice. I will therefore deal with the appeal on its merits.
Factual background
JAKS
[7] On 14 August 2014 the appellants incorporated JAKS. Mr Chandnaani subsequently purchased a quarter stake in the company on 9 December 2016, for
1 High Court Rules 2016 r 20.4.
$262,500. From that time Mr Chandnaani, Sukhwinder Singh, Jaspal Singh, and a company of which Mr Naidu was a director and shareholder each owned equal shares in JAKS.
[8] JAKS owned a property in Papatoetoe that it intended to develop. The company did not have sufficient funds to develop the property, however, and was under pressure from its financier, the Bank of New Zealand. Mr Chandnaani became frustrated with the lack of progress, and in late 2017 sought to exit the venture.
Agreement to buy Mr Chandnaani’s shares
[9] After some discussion, the appellants agreed to purchase Mr Chandnaani’s shares in JAKS.
[10] On 9 October 2017, Mr Naidu wrote an email to the company’s then lawyer, Dinesh Patel, with the subject line “Bharat Resignation.” The email was copied to his fellow shareholders. It explained that Mr Chandnaani wanted to exit the company and that the amount he had “put in to purchase share [i.e. $262,500] is the amount he will receive”. Mr Naidu further stated that the “profit & loss for the past 12 months is shared”. He enclosed what he described as a “full bank reconciliation” that listed the expenses up to that point and noted that everyone was obliged to contribute $12,000 to cover those expenses. Mr Naidu noted that while each of the others had each contributed their share of expenses up to that point, Jaspal Singh had not. Mr Naidu therefore calculated that Jaspal Singh “owes each one of us approx. $3.6K each”. Mr Naidu’s email further recorded that:
Once the contract is done Bharat will sign as director and he will neither pay any further cost nor share in any appreciation or profit until his share is purchased […]
[11] Mr Naidu was apparently overseas at the time he sent his email and was therefore unable to sign the proposed shareholders’ agreement in person. His email therefore concluded that:
If there is any negotiation of shares, I give full authority to Jaspal & Ajula to agree on the amount to pay Bharat. The date of the agreement will be final.
[12] Although the reconciliation schedule Mr Naidu attached to his email is not in evidence, a later version of it (which also includes additional expenses that post-dated
9 October 2017) is exhibited to his affidavit. That schedule shows that as at 29 September 2019 Mr Naidu, Mr Sukhwinder Singh and Mr Chandnaani had each contributed $12,800 for expenses incurred up to that date, but that Mr Jaspal Singh was short $11,000.
[13] Dinesh Patel prepared a draft shareholders’ agreement in accordance with Mr Naidu’s instructions. On 11 October 2017, he emailed that draft agreement to all four shareholders “to consider and if in order to sign today”. The Agreement was executed later that day between Mr Chandnaani as vendor and the three defendants as purchasers (“Agreement”). Jaspal Singh signed the agreement on behalf of Mr Naidu. Of particular note:
(a)The purchase price for Mr Chandnaani’s shares is stated as being
$262,500. That sum is stated as being payable six months after the date of the Agreement (on 11 April 2018), or sooner if the Property was sold earlier.
(b)In addition, the Agreement recorded that Mr Chandnaani would be liable for his share of the company’s expenses and losses up until 11 October 2017 (the date the Agreement was signed) but not subsequently. Clause 3(b) provided:
The vendor will be liable for his share of the payments for expenses or any losses suffered by the Company up to the date of signing of this agreement and vendor will not be entitled to any profit or advantage that the company may gain after the date of this agreement and at the same time the vendor will not be liable for any expense/losses Company may suffer after the date of this agreement.
[14] The following day, 12 October 2017, Mr Naidu emailed Dinesh Patel and asked him to send him a signed copy of the Agreement.
Events following the signing of the Agreement
[15] As well as needing to raise money to pay out Mr Chandnaani, JAKS was under pressure to refinance its BNZ loan. The appellants decided to refinance the property and sell it to Kan Developments Ltd, a company incorporated by Mr Naidu and Mr Sukhwinder Singh.
[16] On 13 December 2017, Mr Naidu sent an email to Radhe Nand of Patel Nand Legal, instructing him in relation to the refinancing and transfer of the property. In his email Mr Naidu noted that JAKS owed $520,000 plus interest and rates to the BNZ. He advised Radhe Nand that they would be borrowing $750,000 from Westpac to settle the BNZ debt and also pay out Mr Chandnaani. Mr Naidu advised Radhe Nand that:
Bharat ¼ share is $262,500 with an agreement that his money will be settled in 6 months’ time which will be sometime in April 2018…
The balance of settlement money to be paid to Bharat (once you send me the statement) there may still be balance left to pay Bharat so we are happy to make an agreement to pay the balance.
[17] On 19 December 2017, the appellants and Mr Chandnaani signed a shareholders’ resolution to effect the sale of the property. The resolution refers to each shareholder as having $250,000 “equity” in the company. It makes no reference to the Agreement. This is not surprising, however, given that the purpose of the resolution appears to have simply been to comply with Companies Act 1993 requirements, as the sale of the property to Kan Developments was a major transaction. Nothing turns on the resolution as neither party relied on it for the purposes of the appeal.2
[18] The refinancing of the BNZ loan and the associated transfer of the property to Kan Developments took place on 21 December 2017. On that date, JAKS’ solicitors transferred $200,000 to Mr Chandnaani with the reference “part share12 StationRdJaks” as part payment for his shares. The balance of the settlement funds following the refinancing was only $4,357.76. Hence, as Mr Naidu
2 Mr Locke, counsel for the appellants, said that “little turns on this document and indeed the parties themselves seem to place relatively little weight on it.” He noted that the resolution does not appear to vary the Agreement and “was likely entered into to comply with Companies Act requirements due to it being a major transaction.” Mr Scampion, counsel for Mr Chandnaani, shared Mr Locke’s view that the resolution was not relevant to the issues on appeal, describing it as background “noise”.
had anticipated in his 13 December 2017 email to Radhe Nand, the settlement funds were not sufficient to pay the balance owing to Mr Chandnaani and it was therefore necessary for the appellants to make other arrangements to pay the balance.
[19] A subsequent email from Radhe Nand to Mr Naidu’s solicitors on 22 November 2018 (after these proceedings had been commenced) confirmed their understanding that the sum of $200,000 had been paid to Mr Chandnaani from the settlement proceeds but “the parties were to deal between themselves for repayment of the $62,500.”
Request for payment of the balance
[20] On 10 April 2018, Mr Chandnaani sent an email to Mr Naidu stating he was expecting payment of the balance of $62,500 the next day, in accordance with the terms of the Agreement (which required that settlement take place six months after the Agreement was signed).
[21] Mr Naidu responded by email the same day, advising that Mr Chandnaani would not be receiving the money the next day because if the property was sold it would not fetch the price the parties had originally paid for it. He suggested that Mr Chandnaani wait for the property to appreciate to “fetch the money you invested” (i.e. $262,500). Mr Naidu advised that the appellants were simply not in a position to “buy back your shares at the cost price you paid in 2016” because they had borrowed the maximum they could from the BNZ. Mr Naidu proposed that Mr Chandnaani transfer only $200,000 worth of his shares to the appellants and hold the balance of his shares “until such time the price appreciates”. Mr Naidu concluded that “I don’t see any other way for you to exit fully and receive the amount you paid.”
[22] It is apparent from the repeated references in this email to Mr Chandnaani being paid back the amount he had originally invested that, as at April 2018, Mr Naidu accepted that the balance owing was $62,500. There was no suggestion of further sums owing for pre-Agreement expenses that should be set off against the purchase price. There was no dispute about the balance owing. The appellants were simply not in a position to pay it.
[23] A week later, on 17 April 2018, Mr Naidu emailed Mr Chandnaani again, noting that “they” (presumably the other two appellants) had agreed to make the payment by the end of June, and that he would see if they could settle sooner than that. Again, there was no suggestion that the balance owing was anything less than $62,500.
Settlement discussions
[24] Mr Chandnaani became increasingly frustrated about the delays in receiving payment of the balance. He sent a follow up email requesting payment on 11 June 2018. This prompted a meeting between Mr Naidu and Mr Chandnaani to try and resolve matters. Mr Chandnaani deposed that at that meeting Mr Naidu demanded that he contribute the sum of $12,000 for costs incurred by JAKS after the date of the Agreement. He said that Mr Naidu argued that this sum should be deducted from the
$62,500 still owing. Mr Chandnaani’s position was that he was not liable for those costs, but he was willing to make a contribution in order to get paid.
[25] Mr Naidu deposed that he showed Mr Chandnaani a schedule of the expenses that he wanted Mr Chandnaani to pay one-quarter of. A copy of that schedule is exhibited to Mr Naidu’s affidavit. It appears to be an updated version of the schedule that was apparently attached to Mr Naidu’s email of 9 October 2017. The schedule shows that Mr Chandnaani had paid $12,800 for his share of the expenses up to the date of the Agreement. The schedule also lists a number of expenses after the date of the Agreement. Mr Naidu requested Mr Chandnaani to pay one-quarter of those expenses. They included such things as interest costs on the BNZ loan, legal fees associated with the refinancing, valuation costs and so on. This is the first time (nine months after the Agreement was signed, and two months after the settlement date) that it was suggested that Mr Chandnaani was liable to pay additional expenses, over and above those included in Mr Naidu’s original reconciliation.
[26] As Mr Locke observed, it appears that the parties came “perilously close” to settling matters for $50,000. However, the appellants accepted on appeal (contrary to their position in the District Court) that no settlement was ultimately reached. Mr Chandnaani was willing, in principle, to settle for $50,000. However,
when he was asked, at the last minute, to also pay half the legal costs of the settlement he balked. No settlement was concluded.
[27] Subsequently, on 21 June 2018, Mr Naidu emailed his solicitors, Patel Nand, to request return of the $50,000 he had paid into their trust account in anticipation of settlement. In that email Mr Naidu repeated his view that Mr Chandnaani owed JAKS approximately $12,000 as his share of the expenses associated with incorporating Kan Developments and transferring the loan to another bank.
Proceedings are issued
[28] On 29 June 2018, Mr Chandnaani issued a settlement notice pursuant to the Agreement, demanding payment of the sum of $62,500 within 12 working days.
[29] Mr Naidu responded to Mr Chandnaani’s solicitors by letter dated 6 July 2018. In that letter, Mr Naidu asserted that $62,500 was not owing because:
(a)He had no knowledge of or involvement in the Agreement and would not have entered into an agreement to purchase Mr Chandnaani’s shares on the terms set out in the Agreement. He claimed that he only learned of the Agreement when he met with Mr Chandnaani to discuss settlement in June 2018. (For the reasons set out further below, this was patently untrue).
(b)Mr Chandnaani was liable to pay his share of “the full cost of settlement of loan to BNZ plus ongoing cost incurred as shareholder and Director”. Mr Naidu confirmed that an itemised list had been provided to Mr Chandnaani showing $48,000 owing, of which Mr Chandnaani was liable for $12,000.
[30] Mr Naidu concluded by asking to be removed from any further correspondence as “I was not a party to [Mr Chandnaani’s] share purchase scheme.”
[31] Mr Chandnaani subsequently issued summary judgment proceedings in the District Court. The appellants’ solicitors advised that the application would be
opposed, by letter dated 30 October 2018. The position taken in that letter was that although the initial agreement was for Mr Chandnaani to be paid $262,500 for his shareholding, the parties had subsequently negotiated for this to be reduced to $50,000 on the basis that $12,500 reflected Mr Chandnaani’s fair share of the costs incurred by JAKS, but that:
[Mr Chandnaani] then unilaterally terminated the settlement agreement purporting to revert to the terms of the share sale agreement which provided for $62,500 to be paid.
District Court Judgment
[32]Three key arguments were advanced by the appellants in the District Court:
(a)(In relation to Mr Naidu only), he did not sign the Agreement, did not agree with its contents, and was not bound by it.
(b)There was a binding settlement in the sum of $50,000 (the appellants accordingly consented to judgment being entered in that amount, leaving a balance of $12,500 in dispute).
(c)That pursuant to the shareholders’ resolution of 19 December 2017, the parties had agreed that Mr Chandnaani would receive only $250,000 instead of the $262,500 referred to in the Agreement.
[33] Judge Harrison found that none of these arguments/defences were tenable and awarded summary judgment in Mr Chandnaani’s favour, in the sum of $62,500.
Is there an arguable defence?
The defence advanced on appeal
[34]The error of law alleged in the notice of appeal is that the Judge erred in:
Finding that there was no or insufficient evidence for the appellants to discharge the onus of showing that there was a verbal agreement whereby [Mr Chandnaani] would accept $50,000 instead of $62,500.
The other grounds of appeal are all variations on this theme.
[35] Mr Locke advised that the allegation made in the District Court that Mr Naidu was not aware of (and had not agreed to) the terms of the Agreement was not pursued. This was an appropriate concession. Given the evidence I have summarised at [9] to
[14] above, any appeal on this basis would have been doomed to failure.
[36] Similarly, as I have noted at [17] above, any arguments based on the contents of the shareholders’ resolution were not pursued on appeal. Again, this was a sensible concession in light of the contemporaneous documents.
[37] The appellants’ written submissions focussed solely on the third argument advanced in the District Court, namely that Mr Chandnaani had entered into a binding agreement with Mr Naidu to accept $50,000 in full and final settlement.
[38] In Mr Scampion’s written submissions on behalf of Mr Chandnaani, filed in advance of the appeal hearing, he addressed this argument comprehensively. He explained, with reference to the contemporaneous documents and Mr Naidu’s own evidence, why it was not tenable. It has not been necessary for me to set out the evidence referred to by Mr Scampion in any detail in this judgment, as Mr Locke confirmed in his oral submissions that the appellants were no longer pursuing the argument that there was a binding settlement agreement in the sum of $50,000. Yet again, that was an appropriate concession in my view, in light of the contemporaneous evidence. The consequence of this concession, however, was that the appellants had, in effect, conceded that none of the defences that had been advanced in the District Court were tenable.
[39] Undeterred, Mr Locke advanced a new argument in his oral submissions at the appeal hearing. He accepted that the appellants (including Mr Naidu) are parties to the Agreement, that the share purchase price stated in the Agreement is $262,500, and that clause 3(b) of the Agreement means exactly what it says, namely:
The vendor [Mr Chandnaani] will be liable for his share of the payments for expenses or any losses suffered by the Company up to the date of signing of this agreement and vendor will not be entitled to any profit or advantage that the company may gain after the date of this agreement and at the same time the vendor will not be liable for any expense/losses Company may suffer after the date of this agreement.
[40] Mr Locke’s new argument, in effect, was that the appellants are entitled to set off any sums owing by Mr Chandnaani pursuant to clause 3(b) against the purchase price for the shares ($262,500). He submitted that it is at least arguable that Mr Chandnaani has not yet paid his share of the expenses or losses referred to in clause 3(b). In particular, he submitted that:
(a)it is arguable that Mr Chandnaani has not paid the $12,800 he claims to have paid for pre-Agreement expenses; and
(b)it is arguable that the expenses subsequently claimed by Mr Naidu in June 2018 could be characterised as pre-Agreement losses and expenses falling within the scope of clause 3(b).
[41] It is unfortunate that this new argument was only advanced for the first time at the appeal hearing, with no advance notice to the respondent or the Court, which led to some confusion. Mr Scampion, however, was able to deal with the new argument comprehensively in his oral submissions. Given that this is the only possible defence now advanced by the appellants, I will deal with it on its merits, albeit without the benefit of a decision from Judge Harrison on the topic.
Relevant legal principles
[42] The ordinary principles of summary judgment apply. The Court may give judgment if satisfied the defendant has no defence.3 The words “no defence” have been interpreted to mean “no bona fide defence, no reasonable ground of defence, no fairly arguable defence”.4 The summary judgment procedure exists to:5
…enable a plaintiff to obtain judgment where there is really no defence to the claim made so put an end to the spectacle of a worthless defence being raised and pursued for the purposes of delay … [it] is intended to prevent a man, clearly entitled to money, from being delayed when there is no fairly arguable defence to be brought forward.
3 High Court Rules 2016, r 12.2.
4 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 4.
5 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 4.
[43] The Court need not accept uncritically evidence that is inherently improbable or lacking in credibility, and assessment of the strength of evidence is a matter of judgment.6 The Court may take a robust and realistic approach and enter judgment even when there are differences on certain factual matters if the lack of a tenable defence is plain.7 As Lord Diplock put it in Eng Mee Yong v Letchumanan, it is not appropriate:8
to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.
[44] Affidavits must have an “aura of credibility”9 if they are to be given much weight. While the onus of proving that there is no real defence lies on the plaintiff, the discharge of that onus is not to be frustrated by the defendant raising baseless or hypothetical possibilities unsupported by any positive assertions or corroboration.10 The standard is not high but is equally not de minimis.
[45] In assessing whether the new defence now being advanced is bona fide and arguable it is relevant, in my view, that the appellants have previously advanced a number of other defences that are completely untenable and directly contradicted by the contemporaneous documents. They have now abandoned those defences. The general impression this leaves is that the appellants in general, and Mr Naidu in particular, are simply casting around for any defence, regardless of how weak it is, or whether it is genuine and bona fide. This procedural history warrants the Court taking a fairly robust and realistic approach to its assessment of the defence now being advanced, for the first time, on appeal. Nevertheless, if the new defence is reasonably arguable, the appeal must be allowed.
6 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26].
7 Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
8 Eng Mee Yong v Letchumanan [1980] AC 331 (HL) at 341 E; this position has been adopted in New Zealand in, among other cases, A-G v Rakiura Holdings Ltd (1986) 1 PRNZ 12 at 14; Pemberton v Chappell [1987] 1 NZLR 1; and S H Lock (NZ) Ltd v Oremland HC Auckland CP641/86, 19 August 1986.
9 Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
10 S H Lock (NZ) Ltd v Oremland HC Auckland CP641/86, 19 August 1986.
Is it reasonably arguable that Mr Chandnaani has not paid the $12,800 for pre-Agreement expenses that he claims to have paid?
[46] Mr Locke submitted that the evidence is unclear as to whether Mr Chandnaani has paid the $12,8000 for pre-Agreement expenses that he claims to have paid.
[47] Clause 3(b) provides that Mr Chandnaani is liable to pay his share of any losses or expenses incurred by JAKS up to the date the Agreement was signed, but not after that date. Equally, however, Mr Chandnaani was not entitled to share in any upside after the Agreement was signed, for example any increase in the value of the property.
[48] The reconciliation schedule Mr Naidu prepared clearly demarcates the expenses into two discrete time periods, one preceding the Agreement and the other post-dating the Agreement. Mr Naidu undertook a full reconciliation of the expenses incurred up to the date of the Agreement. The schedule records that Mr Chandnaani paid $12,800 as his share of expenses between January 2017 and September 2017. This is corroborated by Mr Chandnaani’s bank statements. Mr Naidu and Sukhwinder Singh are recorded as having contributed the same amount. Jaspal Singh, however, is recorded as still owing $11,000. Mr Naidu divides this sum by three and records in the schedule that Jaspal Singh owes each of his fellow shareholders $3,666.67.
[49] It appears likely that the first part of the Schedule (including expenses up to the end of September 2017) was the document attached to Mr Naidu’s email of 9 October 2017. That email confirmed that the “profit & loss for the past 12 months is shared” and that while Mr Naidu, Mr Chandnaani and Sukhwinder Singh had contributed their share of expenses up to that point, Jaspal Singh had not yet done so.
[50] Mr Chandnaani’s evidence that he paid $12,800 towards the pre-Agreement expenses and losses is uncontradicted and is supported by the contemporaneous documents. I am satisfied that there is no evidential basis for Mr Locke’s submission that it is arguable that Mr Chandnaani had not in fact contributed $12,800 for expenses as at the date the Agreement was signed.
Is it reasonably arguable that there has not yet been a final reconciliation of pre-Agreement expenses and losses?
[51] Mr Locke submitted that it is arguable that the costs subsequently claimed by Mr Naidu in June 2018 could be characterised as pre-Agreement losses and expenses falling within the scope of clause 3(b). If so, the appellants are entitled to set off those sums against the share purchase price of $262,500.
[52] The notice of opposition to the summary judgment application and a draft statement of defence both allege that the terms of the Agreement included that:
The [appellants] would pay to [Mr Chandnaani] the sum of $262,500 less one quarter share of the costs incurred in refinancing the loans secured against the property and transferring the property…to Kan Developments Limited.
[53] This appears to have been drafted in an attempt to bring the further costs claimed by Mr Naidu in June 2018 within the scope of the Agreement. However, these passages mis-state what the Agreement actually says, namely that Mr Chandnaani “will be liable for his share of the payments for expenses or any losses suffered by the Company up to the date of signing this agreement…”
[54] It was open to the appellants to identify further pre-Agreement expenses and seek to set these off against the share purchase price of $262,500. Obviously, however, they needed to quantify such expenses and seek Mr Chandnaani’s agreement regarding them, prior to the settlement date of 11 April 2018. They did not do so. Rather, Mr Naidu set out his views as to what was owing in the schedule he circulated on 9 October 2017. None of his fellow shareholders took issue with that schedule at any time prior to the settlement date. It showed that Mr Chandnaani had actually paid more than his share of the company’s losses and expenses up to the date of the Agreement. Mr Naidu’s calculation did not give rise to any right of set off.
[55] Ultimately, the purchase did not settle on the due date of 11 April 2018. There is no suggestion, however, that this was because there was a dispute about outstanding losses or expenses payable by Mr Chandnaani. Rather, the appellants simply had insufficient funds to settle.
[56] The second part of Mr Naidu’s schedule begins on 19 October 2017, after the Agreement has been signed. It records various further expenses incurred from that date until 12 December 2017, when the property was refinanced and transferred to Kan Developments. Mr Locke submitted (as I understood his argument) that it is at least arguable that those expenses could be characterised as relating to expenses and losses incurred prior to the Agreement being signed.
[57] I do not accept that submission. The further expenses Mr Naidu attempted to claim from Mr Chandnaani in June 2018 were incurred after the date of the Agreement and accordingly do not fall within the scope of clause 3(b). They related to such things as ongoing interest costs in respect the BNZ loan, legal fees incurred for the refinancing and transfer to Kan Developments, valuation costs and so on.
[58] The Agreement drew a clear demarcation line as at 11 October 2017 (the date it was signed). After that date Mr Chandnaani was no longer liable for any losses or expenses associated with the business of JAKS. On the other hand, he could not claim any upside, for example if the appellants had been able to sell the property for a profit after the date of the Agreement.
[59] There is no suggestion in any of the contemporaneous documents prior to June 2018 that the appellants believed that Mr Chandnaani was liable to meet the types of expense Mr Naidu subsequently demanded he pay, or that such expenses could be set off against the purchase price for the shares. For example:
(a)On 13 December 2017, Mr Naidu sent an email to his lawyer, Radhe Nand, advising that:
Bharat ¼ share is $262,500 with an agreement that his money will be settled in 6 months’ time which will be sometime in April 2018…
The balance of settlement money to be paid to Bharat (once you send me the statement) there may still be balance left to pay Bharat so we are happy to make an agreement to pay the balance.
(b)On 10 April 2018 (the day prior to the settlement date) Mr Naidu advised Mr Chandnaani that the appellants were not in a position to
repay him the full amount of the money he had invested (i.e. $262,500) and suggested he retain some of his shares until the value of the property increased. There was no suggestion that any sums remained owing in terms of clause 3(b) of the Agreement that could (or should) be set off against the purchase price for the shares.
(c)A week later, on 17 April 2018, Mr Naidu emailed Mr Chandnaani again, noting that “they” (presumably the other two appellants) had agreed to make the payment by the end of June, and that he would see if they could settle sooner than that. Again, there was no suggestion that the balance payable was anything less than $62,500.
[60] It was only when Mr Chandnaani was pressing for payment in June 2018 (some nine months after the Agreement was signed and two months after the settlement date) that Mr Naidu demanded that Mr Chandnaani contribute to the further expenses that had been incurred. Even then, however, he did not seek to characterise those expenses as pre-Agreement expenses or losses. Nor did the notice of opposition or the draft statement of defence characterise them in that way.
[61] Overall, it is not reasonably arguable that the Agreement can be interpreted as requiring Mr Chandnaani to pay a one-quarter share of expenses incurred in refinancing the loans secured against the property, transferring the property to Kan Developments, and so on. The Agreement clearly envisaged that those kinds of expenses were to be borne by the remaining three shareholders. This interpretation not only accords with the plain English meaning of the document but is supported by the contemporaneous documents.
[62] In conclusion, Judge Harrison was correct to find that the arguments/defences advanced before him were untenable, as reflected in the fact that none of those arguments were pursued on appeal. As for the proposed new defence that was advanced at the appeal hearing, it is equally untenable, for the reasons I have outlined.
Result
[63]The application for an extension of time to bring the appeal is granted.
[64]The appeal is dismissed.
[65] If costs cannot be resolved between counsel, any memorandum on behalf of the respondent is to be filed by 24 June 2020. Any memorandum in response from the appellants is to be filed by 1 July 2020.
Katz J
0
1