Pasupathy v Zahim
[2023] NZHC 3415
•29 November 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-000576
[2023] NZHC 3415
BETWEEN AKILAKUMAR PASUPATHY
Applicant
AND
MOHAMMED ZAHIM
Respondent
Hearing: 30 October 2023 Appearances:
A Pasupathy, Applicant in Person
J T Burley and E Wijaya for the Respondent
Judgment:
29 November 2023
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 29 November 2023 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
McVeagh Fleming, Auckland
PASUPATHY v ZAHIM [2023] NZHC 3415 [29 November 2023]
Introduction
[1] Akilakumar Pasupathy applies for an order that a caveat registered against the interest of Mohammed Zahim in land at 56B Central Avenue, Papatoetoe, not lapse.1 Mr Zahim is one of the three joint tenants on the title for the property.
[2] The critical issue is whether Mr Pasupathy has a caveatable interest in the property pursuant to an alleged agreement to mortgage contained in a Deed of Acknowledgement of Debt dated 28 September 2010.
[3] Mr Zahim opposes the application on the grounds that he does not owe a debt to Mr Pasupathy, he did not sign the Deed of Acknowledgement of Debt, Mr Pasupathy is statute-barred from pursuing the underlying alleged debt in any case, and an agreement to mortgage does not constitute a caveatable interest in land.
Facts
[4]The facts relevant to this application are heavily disputed.
[5] Mr Pasupathy has filed affidavits dated 31 March 2023, 28 April 2023, and 17 July 2023 (in reply). In addition, he has filed affidavits from a Kushmangaran Nair,
Madhawan K Pillay and Imran Ali.2
[6] Mr Zahim has filed affidavits, one unaffirmed filed on 11 July 2023 and another affirmed filed on 17 August 2023 (in reply). He has also filed two affidavits from a handwriting expert, Linda Morrell.
[7] Mr Pasupathy claims that Mr Zahim owed him over $80,000 for rental for use of commercial premises owned by him and his wife; use of his machinery, electricity,
1 Caveat No 8604919.1 registered against Record of Title NA80A/182, Flat 2, Deposited Plan 135656, and Garage 2, Deposited Plan 135656.
2 Mr Zahim objects to Mr Ali’s affidavit being read because it is not properly in reply and was filed well past the time that the Court directed Mr Pasupathy to file any affidavits in reply. Mr Pasupathy responds that he was unable to file the affidavit earlier because he was suffering from health issues and his support person from the Community Law Centre was unavailable to help him. As I do not rely on Mr Ali’s affidavit, this issue is not resolved in this judgment.
and consumables; personal loans for payments of Mr Zahm’s personal expenses; funding of his business activities and house renovation; and use of stock.3
[8]Mr Pasupathy expands in his second affidavit:4
The Respondent had a property situated at 19 Arnwood Street, Manurewa, which he was renovating in 2010. He had asked for my help and to assist him with the financial cost to his business through my service. The Respondent did not have much money available to him to do everything he wanted to do, and to operate his business. At the time he proposed that I help him with his projects and the operation of his business, and he would refund all the money that I incurred from helping him, by selling his property in Manurewa.
I felt sorry for the Respondent, and agreed to help him on the basis that I would have my costs incurred and use of my factory repaid when he sold his property in Manurewa. The Respondent worked using my factory, my stock, my power and money. He received contract work to build and fit cabinets and fitting at this time for liquor stores, kitchen units, a counter for a dairy in Manurewa, and also for his own kitchen at his second property at 56B Central Avenue, Papatoetoe.
…
I also built a brand new kitchen and installed it for the Respondent, at a brand new house at 12A Carlton Street, Hillsborough. Even during this period, I paid wages for a couple of his workers.
I paid 4 labourers which had to do a major clean up at the Manurewa property, as it was in such a bad state and littered with trash. There was an unused swimming pool which had been filled with all sorts of rubbish, which we had to continue to fill and tidy up.
…
I also had to buy fencing timber and help the Respondent with the labourers to build a fence on the western boundary looking from the road.
[9] Mr Pasupathy says that in 2010, he and Mr Zahim “reconciled” their accounts and agreed to settle the debt of over $80,000 at $60,000. This arrangement was recorded in a Deed of Acknowledgement of Debt (the First Deed) signed by Mr Zahim on 27 July 2010 and witnessed by Mr Madhawan K Pillay. This Deed recorded that Mr Zahim owed Mr Pasupathy $60,000 for rental for use of Mr Pasupathy’s premises, use of his machinery and power, loans for Mr Zahim’s business activities and property renovations, and use of stock. Mr Zahim agreed in this deed to arrange with
3 Affidavit of Akilakumar Pasupathy in Support of Application, affirmed 31 March 2023 at [3].
4 Second Affidavit of Akilakumar Pasupathy in Support of Application, affirmed 28 April 2023 at [8]–[10].
Mr Pasupathy to repay the debt from the sale of any “immediate assets” or to repay the debt in instalments of $1,000 per month commencing on 7 September 2010.
[10] Mr Zahim concedes that Mr Pasupathy allowed him to use his factory, materials and machinery, and that Mr Pasupathy helped him with some small jobs, but only because he wanted to become a partner in Mr Zahim’s business, which Mr Zahim did not agree to. Mr Zahim denies there was any agreement that Mr Pasupathy was to be paid for that use or for his help.
[11] Mr Zahim accepts that he signed the First Deed. However, he says that he only did so to assist Mr Pasupathy. He says that he had been friends with Mr Pasupathy for a long time and he was persuaded by him to sign the First Deed to help him secure a personal bank loan.
[12] Mr Pasupathy deposes that Mr Zahim subsequently told him that he was unable to repay or reduce the alleged debt, before requesting to repay the debt in instalments over five years.
[13] Mr Pasupathy deposes that he agreed to Mr Zahim’s proposal, on the basis that Mr Zahim would pay interest of 12.5 per cent per annum and Mr Zahim would provide Mr Pasupathy with security. According to Mr Pasupathy, Mr Zahim offered the property at 56B Central Avenue, Papatoetoe, as security, and thereafter the parties entered into a second Deed of Acknowledgement of Debt (the Second Deed) dated 28 September 2010.
[14] Mr Pasupathy relies exclusively on the Second Deed in support of his claim of a caveatable interest over the property, as mortgagee. The Second Deed states:
MOHAMMED ZAHIM of 72 Kerwyn Avenue, East Tamaki (herein called the “Borrower”) ACKNOWLEDGES that I am indebted to AKILAKUMAR PASUPATHV of Bucklands Beach, Businessman (herein called the “Lender”) in the sum of SIXTY THOUSAND DOLLARS ($60,000.00).
1. On (date) the sum of SIXTY THOUSAND DOLLARS ($60,000.00) was advanced by the Lender to the Borrower.
2. The loan shall be subject to a fixed interest rate of 12.5% for a period of five years from 7 October 2010, payable monthly in arrears.
3. Interest only shall be paid on the loan provided that the Borrowers may repay the principal sum in amounts of ONE THOUSAND DOLLARS ($1,000.00).
4. The Borrower will at any time before repayment of the principal sum forthwith upon demand give and execute in favour of the Lender a good and registerable mortgage of the land at 56B Central Avenue, Papatoetoe (Lot 9 DP34031, NA 80A/182) to secure payment of the principal sum of SIXTY THOUSAND DOLLARS ($60,000.00) and any further sum advanced by the Lender to the Borrower and interest thereon and in the manner as set out above such mortgage to be in the appropriate Auckland District Law Society mortgage form then current.
5. The Borrower acknowledges that the Lender may caveat the title to the Borrower’s leasehold property at 56B Central Avenue, Papatoetoe.
6. The Borrower will meet the Lender’s reasonable costs of and incidental to this agreement.
[15] This Deed appears to have been signed by Mr Zahim and witnessed by Mr Pillay. Mr Pasupathy’s signature appears to have been witnessed by a Iese Miti Tata.
[16] Mr Pasupathy also claims that he verbally agreed with Mr Zahim that Mr Zahim would pay $1,000 per month in reduction of this debt, and that this agreement was witnessed by his daughter.
[17] Mr Zahim deposes that he did not sign the Second Deed, and that the purported signature on the document was not put there by him. His evidence is that he saw the Second Deed for the first time just before this proceeding was commenced. Mr Zahim says that he did become aware of the caveat 10 years ago when he called his bank to enquire if he could add his son and daughter onto the title of the property. However, he says that he did not do anything about the caveat at the time, because he could not afford to pay for a lawyer to remove the caveat, and there was no urgent need to do anything with the property as he and his family were living there.
[18] Mr Zahim arranged for Ms Morrell, a handwriting forensic analysis expert, to provide expert evidence on the authenticity of his apparent signature on the Second Deed. Ms Morrell, having reviewed the original signed copy of the Second Deed against samples of Mr Zahim’s handwriting, has given her opinion that Mr Zahim’s signature is genuine.
[19] Mr Pasupathy has provided evidence in the form of bank statements that Mr Zahim, through his company White Rose Cabinets Limited, paid Mr Pasupathy
$1,000 on 7 September 2010. Additionally, on 11 October 2010, Mr Zahim paid
$1,000 into his bank account, with the reference “Loan repayment”. However, the bank statement also shows that the following day this payment was reversed.
[20] Mr Zahim admits that he made deposits of $1,000 into Mr Pasupathy’s bank account on 7 September and 11 October. He also says there was another payment on 13 October 2010. However, he contends that he made these deposits at the request of Mr Pasupathy, and on each occasion, Mr Pasupathy had already given him the $1,000. He says that he was asked to make the deposits to demonstrate to the bank that Mr Pasupathy had a source of income (the loan recorded in the First Deed) so that the bank would give Mr Pasupathy a personal loan. Mr Zahim deposes that he agreed to Mr Pasupathy’s request, once again, to help Mr Pasupathy.
Legal principles
[21] An application to sustain a caveat is determined on summary basis in which the Court has regard to the following principles:5
(a)The applicant caveator bears the onus of demonstrating that they have an interest in the land sufficient to support a caveat. However, they need not establish that definitively. It is enough if they present a reasonably arguable case.
(b)The process by which these applications are determined is ill-suited to resolving disputed questions of fact. An order for a caveat’s lapse will only be made if it is patently clear it cannot be maintained — either because there was no valid ground for lodging it in the first place or, alternatively, that such ground has now ceased to exist. A conflict between affidavits will generally be resolved in the caveator’s
5 Botany Land Development Ltd v Auckland Council [2014] NZCA 61, (2014) 14 NZCPR 813; and see Philpott v Noble Investments Ltd [2015] NZCA 342.
favour.6 However, the Court is not bound to accept uncritically statements in an affidavit that are equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable.7
(c)Where the applicant has discharged its burden, the Court retains a residual discretion to remove the caveat. The Court will exercise this discretion cautiously and must be satisfied removal would not prejudice the caveator’s legitimate interest.8
Approach to this application
[22] Mr Pasupathy’s caveat is stated to be based on an equitable interest as mortgagee of the property under an agreement to mortgage dated 28 September 2010, contained in the Second Deed.
[23] The difficulty this Court faces is that there is a conflict in the evidence over the essential facts. Mr Zahim denies that he is indebted to Mr Pasupathy for any amount. He says that he signed the First Deed as a favour to Mr Pasupathy to enable him to obtain a bank loan. He denies signing or ever seeing the Second Deed. Yet Mr Pillay has filed an affidavit deposing that both the First and Second Deeds were executed by Mr Zahim in his presence.
[24] Mr Pasupathy deposes that in accordance with the First and Second Deeds, Mr Zahim made $1,000 repayments on 7 September and 11 October 2010, although the second payment did not clear. But Mr Zahim says that he made the $1,000 repayments using Mr Pasupathy’s money to corroborate that the First Deed was genuine, to assist Mr Pasupathy to obtain a bank loan.
6 Bethell v Rickard [2013] NZCA 68 at [22]; and see MacRae v Rapana HC Auckland M633/94, 17 June 1994.
7 Barrett v IBC International Ltd [1995] 3 NZLR 170 (CA) at 175, citing Eng Mee Yong v Letchumanan s/o Velayutham [1980] AC 331 (PC) at 341; and Xie v 126 Waimumu Ltd [2020] NZHC 1109 at [8].
8 Pacific Homes Limited (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.
[25] As I indicated at the hearing, I am unable to resolve this factual dispute in a summary hearing. That can only be done at a full hearing following direct evidence and cross examination of Mr Pasupathy, Mr Zahim and Mr Pillay.
[26] I assume for this caveat hearing only that Mr Pasupathy’s account is true, and the Second Deed is genuine and was signed by Mr Zahim.
[27] On that basis, that application falls to be determined by the two legal issues raised by Mr Zahim. I now consider each of these in turn.
Does the Second Deed give a caveatable interest?
[28] A personal loan or debt does not, in and of itself, give the creditor the right to lodge a caveat over the debtor’s property. The creditor has only personal rights against the debtor, and no right to lodge a caveat against a title to the debtor’s land.
[29] Therefore, even if Mr Zahim was and is indebted to Mr Pasupathy, this does not, in and of itself, give Mr Pasupathy the right to lodge, or sustain, a caveat over Mr Zahim’s interest in the Papatoetoe property.
[30] Mr Pasupathy relies on the following clause in the Second Deed as giving him the right to lodge a caveat over Mr Zahim’s interest in the Papatoetoe property:
The Borrower will at any time before repayment of the principal sum forthwith upon demand give and execute in favour of the Lender a good and registrable mortgage of the land at 56B Central Avenue, Papatoetoe.
(emphasis added)
[31] If the necessary requirements are met, an equitable mortgage of land transfer land confers on the mortgagee an equitable interest in the land that will support a caveat.9 An ‘agreement to mortgage’ is a form of equitable mortgage. An agreement to mortgage is a contract to grant a mortgage, and the mortgagee can obtain a registerable mortgage by enforcing the contract.10
9 Neil Campbell Campbell on Caveats (3rd ed, LexisNexis, Wellington, 2019) at [10.009].
10 At [10.009].
[32] But a security agreement in which a debtor merely agrees to provide a mortgage in the future if requested by the creditor is not, prior to the request, an agreement to mortgage and will not support a caveat.11 It is at best an agreement to provide a mortgage in the future if demanded, giving the creditor a mere right to request a mortgage. Only once the request to grant a mortgage has been made, is an equitable mortgage is created.12
[33] It is not disputed that Mr Pasupathy has not requested Mr Zahim to execute a registerable mortgage over the Papatoetoe land in his favour. Therefore, Mr Pasupathy has at most a right to request a mortgage. It follows that Mr Pasupathy does not have a present interest that is capable of supporting a caveat.
[34] That conclusion disposes of Mr Pasupathy’s application. As it may be helpful to the parties, I will proceed to consider the second legal issue raised.
Remedies statute barred?
[35] Mr Zahim submits that even if the Second Deed was an actionable agreement to mortgage, as opposed to a right to request a mortgage, Mr Pasupathy’s remedies are statute barred.
[36] Mr Zahim claims that under the Second Deed, the alleged loan was to be repaid over five years at a rate of $1,000 per month. If it is assumed that the repayment commencement date was the date of the Second Deed, the repayment end date would be September/October 2015.
[37] He contends that as Mr Pasupathy deposes that the last $1,000 payment Mr Zahim made was on 11 October 2010, he would have known from November 2010 that Mr Zahim had failed to make the next required repayment. As such, he submits, Mr Pasupathy does not have late knowledge of a claim. He is therefore statute barred under s 11(1) of the Limitation Act 2010 from making a claim for money secured by the alleged mortgage. Applying s 105(1) of the Land Transfer Act, the Court is then empowered to make an order that the equitable mortgage be discharged, and therefore
11 Philpott v NZI Bank Ltd (1989) 1 NZ Conv C 190,246 (CA).
12 At 190,249 per Cooke P.
any caveatable interest alleged to have arisen from the equitable mortgage is extinguished.
[38] Mr Pasupathy submits that the applicable legislation is the Limitation Act 1950, and not the Limitation Act 2010. The Second Deed was executed on 28 September 2010, before the 2010 Act came into force in January 2011, and s 59 states that the 1950 Act applies to acts or omissions before 1 January 2011. Mr Pasupathy submits that the wrongful act took place before 1 January 2011 and the long-stop period of 15 years applies under s 23B(1)(b). Consequently, Mr Pasupathy submits that this long-stop period does not expire until 28 September 2025, and he is not statute-barred from bringing a claim under the Second Deed.
[39] In response, Mr Zahim submits that if the applicable legislation is the Limitation Act 1950, Mr Pasupathy’s remedies in the substantive claim are still statute-barred. Under s 4(3) an action upon a deed cannot be brought after the expiration of 12 years from the date on which the cause of action accrued. Given that Mr Zahim never made any payment after the Second Deed was allegedly entered into, and assuming that the Deed was valid, then Mr Pasupathy’s cause of action under the Deed accrued on 29 September 2010. Therefore, the limitation period to bring a claim in reliance on the Deed expired in or around September 2022.
[40] I accept Mr Zahim’s submission that any claim Mr Pasupathy might have had under the Second Deed for the unpaid debt is statute-barred.
[41] Although the Second Deed is unclear on how and when the principal sum was to be repaid, the most favourable interpretation to Mr Pasupathy is that Mr Zahim was required to repay the principal sum over five years by repayments of $1,000 per month. On Mr Pasupathy’s evidence, Mr Zahim did not make any monthly repayments after the Deed was entered into. The one payment after that date, on 11 October 2010, was subsequently reversed. Therefore, from 12 October 2010, Mr Pasupathy knew that Mr Zahim had failed to make the agreed monthly repayments. The latest act or omission that occurred before 1 January 2011 (when the 2010 Act came into force) was Mr Zahim’s failure to pay the monthly repayment in December 2010. On that
basis, the limitation period to bring an action on the Deed expired 12 years later, in December 2022.13
[42] Mr Pasupathy has misunderstood the impact of the 15-year longstop period in the Limitation Act 1950. This is simply a maximum limitation period that will apply where the claimant has late knowledge of their claim (subject to the period beginning afresh because the creditor makes a part payment or acknowledges their liability in writing). Mr Pasupathy did not have late knowledge of his claim, because he was immediately aware of Mr Zahim’s breach when the October 2010 payment was reversed, and no further repayments were made.
[43] Arguably, every non-payment by Mr Zahim constituted a further breach of the agreement recorded in the Deed. Any breaches after 1 January 2011 fall to be considered under the 2010 Act. Again, taking the interpretation most favourable to Mr Pasupathy, Mr Zahim’s final act of default was in October 2015, five years after the first monthly payment was due in October 2010. The six-year primary period under s 11 of the Limitation Act 2010 applies, meaning that the primary period expired in October 2021.
[44] Mr Pasupathy has not commenced proceedings under the Second Deed. Mr Pasupathy’s right to bring a claim against Mr Zahim under the Second Deed for the unpaid debt, and any theoretical related remedy as mortgagee, is barred by the Limitation Act 1950, and/or the Limitation Act 2010.
Result
[45] There is no reasonably arguable basis for Mr Pasupathy to maintain his alleged caveatable interest in the Papatoetoe property.
[46] Mr Pasupathy’s application that caveat 8604919.1 in respect of Record of Title NA80A/182 not lapse is dismissed.
13 Limitation Act 1950, s 4(3).
[47] As the unsuccessful party, Mr Pasupathy should pay Mr Zahim’s costs and reasonable disbursements. Counsel for Mr Zahim indicated an intention to apply for indemnity costs. Mr Zahim should file any memorandum seeking indemnity costs, of no more than three pages, within 10 working days. Mr Pasupathy may file any memorandum in response, of no more than three pages, within a further five working days.
Associate Judge Gardiner
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