Patel v Patel

[2019] NZHC 2705

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2018-404-000601

[2019] NZHC 2705

BETWEEN

PARESHKUMAR PATEL

Plaintiff

AND

PRAKASHKUMAR PATEL

Defendant

Hearing:

26-28 August & 30 August 2019

Appearances:

P Cogswell for the Plaintiff

A Kashyap and S C R Raju for the Defendant

Judgment:

22 October 2019

JUDGMENT OF GWYN J

This judgment was delivered by me on 22 October 2019 at 2.00pm Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

Solicitors:

Duggan & Murphy, Auckland Cogswell Law, Auckland

A Kashyap, Barrister, Auckland

PATEL v PATEL [2019] NZHC 2705 [22 October 2019]

Background and issues

[1]        This case concerns a dispute over the distribution of the proceeds of a development project, located at 20 Ashgrove Road, Mangere, Auckland, undertaken between the plaintiff and the defendant.

[2]        The plaintiff, Mr Pareshkumar Patel, who I will refer to as Paresh, is a real estate agent and has been for over sixteen years. The defendant, Mr Prakashkumar Patel, who I will refer to as Prakash, is a courier driver. Paresh and Prakash are not related but have been acquaintances for many years.

[3]        In early 2014 Prakash was looking for a property development opportunity and Paresh assisted him to locate a property. Paresh showed Prakash several possible properties, including 20 Ashgrove Road, Mangere, Auckland which was listed with the real estate agency which engaged or employed Paresh.1 20 Ashgrove Road was a residential property with an existing dwelling on the site, the land area was 1323sqm and both Paresh and Prakash thought that another dwelling could potentially be located on a vacant portion of the site and the property could then be sub-divided into two lots.

[4]        On 4 May 2014 Prakash, together with his wife Jaini Patel, purchased 20 Ashgrove Road. The property was registered in their names. The purchase price  was

$465,000 which Prakash borrowed from his bank on the security of their existing family home at 73 Kinross Street, Blockhouse Bay, Auckland.

[5]        Sometime in early to mid-May 2014, the plaintiff and the defendant agreed that they would jointly develop the Ashgrove Road property. It is unclear from the evidence who approached whom: Paresh says that Prakash approached him to assist in developing the property because he (Prakash) did not have and could not borrow sufficient further funds to complete the development after he had bought the property and because his job as a courier driver would make it difficult for him to deal with the day to day aspects of the development. Prakash says that Paresh approached him, offering his experience in property developments and as a land agent to assist the

1      The evidence did not cover whether Pareshkumar Patel was an employee of or contractor to the real estate agency, but his employment status is not material to the matters in issue.

development and that he (Prakash) felt obliged to consider Paresh’s involvement. In any event, both parties agree that as of early to mid-May 2014, they had entered into an oral agreement to jointly develop the Ashgrove Road property.

[6]        The terms of that agreement are largely a matter of oral evidence, given the almost complete lack of formality around the arrangement between the parties. The uncontested elements of the agreement were:

(a)Prakash would provide the funds for the initial purchase price of the property ($465,000) which he did by borrowing the full amount, as noted at [4] above;

(b)Paresh would advance the sum of $100,000 to the development and would also manage the development project;

(c)the existing dwelling on the property would be relocated and two further dwellings then located onto the property, it having become clear to the parties early on that the property could be subdivided into three, rather than two, lots;

(d)a sub-division would be undertaken so that three new titles could be issued, then all three properties would be sold;

(e)Prakash would be refunded the initial purchase price from these sales;

(f)Both Paresh and Prakash would be refunded any advances they made for the purposes of the joint development;

(g)The remaining profits or losses would be shared between them. (The basis on which the sharing would take place is a matter of dispute).

[7]        Paresh owned a separate property at 41 Wakefield Road, Mangere, Auckland, which was not far from 20 Ashgrove Road. There was a dwelling on the Wakefield Road property which, by agreement, was relocated to 20 Ashgrove Road. Although it was agreed between Paresh and Prakash that the Wakefield Road property would be

relocated to 20 Ashgrove Road, there is a dispute between them as to whether Paresh was to be paid for the Wakefield Road dwelling, and if so, how much. I consider that question at [50] below.

[8]Paresh’s evidence was that in managing the development he was to:

(a)Make available the 41 Wakefield Road house;

(b)Arrange an architect and planner to prepare the necessary plans to create the subdivision;

(c)Arrange and liaise with all contractors used on the development;

(d)Liaise with Auckland Council in all respects regarding the development including the subdivision and relocation of the dwellings; and

(e)Pay all contractors from Prakash’s bank account, to which he was given access by Prakash for that purpose.

[9]        Subject to the specific question about payment for the Wakefield Road house there was broad agreement from Prakash about what was entailed in Paresh’s role in managing the project. In cross-examination he accepted that Paresh ran everything related to the development on a day to day basis.

[10]      The development took place from May 2014 until around the end of 2015. On or about 11 December 2015 the original title to the Ashgrove Road property was cancelled and three new titles created, as follows:

(a)20A Ashgrove Road - title reference 703970 (North Auckland Registry);

(b)20B Ashgrove Road – title reference 703971 (North Auckland Registry);

(c)20C Ashgrove Road – title reference 703972 (North Auckland Registry).

[11]The new titles were all issued in the names of Prakash and Jaini Patel.

[12]      Once the subdivision had occurred in December 2014 the parties obtained a valuation of the property as a whole. In March 2015, on the basis of this revaluation, Prakash was able to borrow further funds of $300,000. That amount was used to pay some of the costs of the development.

[13]      By October 2015, work on the development project was complete and the three properties created by the development were sold, as follows:

Property	Settlement Date	Price
20A Ashgrove Road (the house     from    Wakefield Road)	29 January 2016	$485,000.00
20B Ashgrove Road	03 February 2016	$505,000.00
20C Ashgrove Road (the original dwelling)	15 January 2016	$495,000.00

[14]      Following the settlement of the sales, Paresh contacted Prakash to arrange for repayment of his advances and his share of the profit from the sales. Prakash declined to pay any funds to Paresh.

[15]      Paresh approached a friend of Prakash, Mr Rohan Patel, to invoke his assistance to resolve the dispute. Rohan Patel had a discussion with Prakash and then all three men met, but the meeting did not result in any agreement to pay Paresh.

Rohan Patel gave evidence that at the meeting of all three men, Prakash agreed that he and Paresh did the development as a partnership, but Prakash and Paresh could not agree how much money Paresh was entitled to arising from the development.

Issues

[16]This case gives rise to a number of issues:

(a)Did the oral agreement between Paresh and Prakash amount to a partnership or a joint venture? If yes, what obligations followed?

(b)What was the scope of the partnership business, and in particular, was the partnership project to develop all three subdivided sections on the 20 Ashgrove Road property (as Paresh contends), or only two of the three (as Prakash contends)?

(c)What were the parties’ respective financial contributions to the development project?

(d)Was the Wakefield Road house to be counted as part of Paresh’s financial contribution and, if so, what value was to be put on it?

(e)How were the profits or losses of the development to be divided?

(f)What was the actual profit or loss on the development?

Witnesses

[17]      Both Paresh and Prakash gave evidence to the Court. On many issues their evidence was broadly consistent, but on some important issues there was a conflict in their evidence and/or an absence of evidence from Prakash. I note however that where Prakash asserted a different position, he took that position only after settlement of the sale of the redeveloped property; he did not raise his different views during the course of the development. I consider this point further below in relation to specific aspects of the dispute between the parties.

[18]      As the evidence unfolded at the hearing, it was apparent that Prakash had become upset with Paresh when the latter unilaterally withdrew $70,000 from Prakash’s bank account, in repayment of part of his financial advances, in about March 2015. Paresh subsequently redeposited $50,000 in June 2015 and $75,000 in August 2015, but clearly this event had an impact on the subsequent relationship between the two men.

[19]      At the hearing Prakash attempted to cast doubt on Paresh’s credibility by suggesting that he was in breach of his duty to disclose a personal interest to both the real estate agency which employed/contracted him and the vendor of 20 Ashgrove Road. There was insufficient evidence before the Court on which I could have reached a conclusion on this assertion. Any issue of non-disclosure is more properly a matter to be pursued by way of a complaint under the Real Estate Agents Act 2008. It does not provide the defendant with a defence to the plaintiff’s claim.

[20]      The other witnesses were Mr Rohan Patel and Mr Navin Hira. Their evidence is canvassed below.

Partnership (or joint venture) and fiduciary obligations

[21]      The first question is whether there was a partnership between Paresh and Prakash. Both parties assert that there was a partnership, nevertheless there is a legal question to be determined by the Court on the basis of what the parties actually said and did.

[22]      The Partnership Act 1908 defines a partnership as the relation that subsists between persons carrying on a business in common with a view to profit.2 There are no formal requirements for the creation of a partnership and arrangements may include a formal documented agreement, or an informal oral arrangement.3 In determining whether a partnership is in existence the focus is on the nature of the relationship; the label given to the relationship by the parties will not be determinative.4 It will remain

2      Section 4(1).

3      Clark v Libra Developments [2007] NZSC 16, [2007] 2 NZLR 709 (CA) at [155] per Williams and Gendall JJ.

4      Commissioner of Inland Revenue v Williamson (1928) 14 TC 335 (IH) approved in Woodcock v Woodcock [2018] NZHC 470, [2019] NZCCLR 10 at [79].

open to the Court to conclude that no such relationship came into existence, even where one is asserted by both parties. Whether there is a partnership is not for a witness to assert but is a “legal question to be determined by the Court on the basis of what the parties said and did”.5

[23]For a partnership to be evident the partners must be able to show that they:6

(a)carried on business;

(b)in common; and

(c)with a view to profit.

[24]      For the purposes of the Partnership Act 1908, a business includes “every trade, occupation, or profession”7 and the parties will be deemed to be ‘carrying on’ a business if they actively engage in that trade, occupation or profession. The requirement that the parties ‘carry on’ a business tends to imply an element of continuity and suggests that a single or isolated transaction shall not be sufficient. However, it appears little weight is given to the requirement of continuity as this element does not prevent a partnership from arising where the business involves a single adventure or undertaking, so long as the features of a partnership are made out.8

[25]      The scope of the partnership business should be defined. That is especially important where it is a short-term or single venture partnership.9

[26]      The requirement that the business be carried on in ‘common’ means that there must be an element of joint participation, and this may manifest by way of shared rights or obligations.10

5      Clark v Libra Developments Ltd, above n 3, at [51].

6      Partnership Act 1908, s 4(1).

7      Section 2, definition of “business”.

8      Partnership Act 1908, s 35(1)(b) provides that a partnership to carry out a specific undertaking will dissolve when that undertaking is terminated. See also Mann v D’Arcy [1968] 1 WLR 893 (Ch); United Dominions Corporation Ltd v Brian Pty Ltd [1985] HCA 49, (1985) 157 CLR 1 at [15].

9 Keith L Fletcher, The Law of Partnership in Australia and New Zealand (8th ed, Lawbook Company, Sydney) at 116.

10 Checker TaxicabCo Ltd v Stone [1930] NZLR 169 (SC).

[27]      The final requirement, that the business be carried on with a view to profit, does not actually require the business to make a profit, but merely that the partners intended to operate for profit.11

Application to this case

[28]      There was no written partnership agreement between the parties. Indeed, there was no written confirmation of their intention to carry out a joint development project other than the working documents which were developed during the course of the project and which I discuss later. The oral agreement between the plaintiff and the defendant to develop the Ashgrove Road property was that the defendant would purchase the property, the plaintiff would contribute a sum toward the development and manage the day-to-day development, and that once the development of the three lots was completed and sold, they would share in the profit (see paragraphs [6] to [8] above).

[29]      On the face of it, these facts satisfy the necessary requirements of a partnership. Property development falls within the bounds of a trade, the trade has been carried out in common, and the object of the agreement was to procure a profit. Accordingly, I conclude that the relationship between the plaintiff and the defendant in undertaking the development of the Ashgrove Road property is governed by the Partnership Act 1908. In light of that finding I do not go on to consider whether the relationship constituted a joint venture.

Consequences of identifying the relationship as a partnership

[30]      Where a partnership relationship arises, it is presumed to be fiduciary in nature, with an equal balance of power (unlike some other fiduciary relationships). The fiduciary duties imposed are the duties of good faith and honesty, to provide full accounts of all information and assets in one’s possession or control, to preserve confidence, to avoid conflicts of interest and to avoid profiting personally from partnership opportunities and information, as well as the obligation to account for benefits obtained in breach of these duties to the extent that those benefits relate to the

11     Minter v Minter [2000] NSWSC 100, (2000) 10 BPR 18,133 at [92].

partnership. All form part of the implied obligations of a partner, unless varied by agreement.12 These rights and obligations exist following the dissolution of the partnership, as may be necessary to wind up the affairs of the partnership.13

Distribution on dissolution

[31]      Where a partnership is entered into for the purposes of a single adventure or undertaking, it will be dissolved by the termination of that adventure or undertaking.14 Upon the dissolution of the partnership, each partner is entitled to have the property of the partnership applied to the debts of the firm, and to have the remaining surplus shared among the partners.15 Section 47 of the Partnership Act 1908, prescribes the rules for distribution once the partnership has been dissolved. First debts and liabilities of the firm are to be paid, followed by advances (as distinguished from capital) made by each partner, then their respective capital, and lastly, if any residue remains it is to be shared among the partners in the appropriate proportions.

[32]      The Courts are generally prepared to find that if a partner made unequal capital contributions, it can be inferred that the intention was that the capital would not be shared equally on a dissolution but would, instead, be returned to those partners who contributed it.16

Sharing of profits and losses

[33]      The provision in the Partnership Act for equal sharing of profits and losses is declaratory of the common law. 17 Partners are entitled to share equally any profits and must contribute equally to make up for losses unless there is a contrary agreement. In the absence of such an agreement, it is not relevant that one partner may have contributed more capital to the partnership, or that one partner may have worked harder or longer. It will be assumed that they intended to share equally.18

12     The Partnership Act incorporates this body of rules by implication for the most part but details the principles that are likely to have the most considerable impact on the partnership relationship: s 3.

13     Partnership Act 1908, s 41.

14     Section 35.

15     Section 42.

16     Stephen Graw, An outline of the Law of Partnership (5th ed, Lawbook Company, Australia, 2018) at [16.20].

17     Partnership Act 1908, s 27(a).

18     Stephen Graw, An outline of the Law of Partnership, above n 16, at [6.40].

[34]      Here, the partnership was for the purposes of a single adventure, namely the development of the Ashgrove Road property. Once each of the three lots on the property were sold, the arrangement was terminated, and the partnership dissolved. As at that date, the plaintiff was entitled to have the accounts of the firm settled, and to have the monies applied in accordance with the hierarchy prescribed in s 47.

[35]      In this case Prakash argues that the standard arrangement should be varied and that the profits should be divided as between him and Paresh in respect of two lots only, or if the profits are divided on the basis of three lots, then the division of profits should be in proportion to the parties’ respective contributions.

Scope of the partnership - two lots or three?

[36]      I therefore turn to the question whether the development agreement related to the development of two of the sections developed (20A and 20B Ashgrove Road) or all three of the sections developed. While this question goes to the scope of the partnership business, it obviously affected how the net profits of the development were to be shared.

[37]      Prakash’s evidence was that it was always his understanding that the development agreement was limited to two lots. In support of that understanding, he noted that when he purchased the property at 20 Ashgrove Road it included the existing dwelling and that the work involved in respect of that dwelling (which became 20C) was relatively minor – relocation to make way for the other two houses and reconnection of services. In the course of cross-examination, he acknowledged that he did not raise the question of whether the development related to two or three lots in any of his discussions with Paresh about the development accounts and that it was only after settlement of the sale of the three lots that the question was discussed with Paresh.

[38]I did not find Prakash’s assertion credible:

(a)There is no documentary record of his position that the development agreement related to only two sections;

(b)There is no mention of it in the various text exchanges between the parties over the relevant period;

(c)Paresh’s role in project managing the development involved relocation and connection of services to all three dwellings;

(d)The various contractors’ invoices made no distinction between a two or three lot development;

(e)The conveyancing process whereby new titles were issued for each of the three lots and subsequently sold makes no distinction;

(f)The existing dwelling and the land on which it was situated was never separately valued; and

(g)Interest was paid by the partnership to Prakash on the borrowing in respect of all three lots, without any distinction or reservation.

[39]      In conclusion, I do not accept that the development agreement related to only two lots. I conclude that the scope of the partnership business covered the development and sale of all three lots at 20 Ashgrove Road and that the sharing of the profits of the project development relates to all three lots.

[40]      Nor was there any other evidence of an intention by the parties to displace the presumption of equal sharing.

The parties’ financial contributions

[41]      The partnership development was facilitated through Prakash’s bank account. The undisputed evidence was that Prakash gave Paresh access to operate his bank account, including his PIN number, so that Paresh could pay contractors as and when needed. It appears that this arrangement stemmed from the fact that Prakash and his wife Jaini were the registered proprietors of 20 Ashgrove Road.

[42]      Evidence before the Court included a line by line summary of the sums advanced by each of the parties to the development; the costs incurred in the development and paid to contractors and others; any amounts withdrawn by or paid out to either party; interest accruing and/or paid to the parties. These records were referred to as the development accounts and were maintained by Paresh during the course of the development.

[43]      Also, before the Court were the plaintiff’s bank statements and the defendant’s bank statements for the periods:

(a)For the plaintiff – 30 April 2014 – 6 August 2015

(b)For the defendant – 28 March 2014- 9 December 2015

[44]      Paresh’s evidence was that from time to time during the course of the property development he sat down with Prakash in person, or they talked by telephone, discussing the development accounts. Paresh says that at no time did Prakash identify any transaction that was incorrectly recorded or dispute any aspect of the development accounts.

[45]      Prakash acknowledged in his evidence in chief that “[Paresh] also maintained a spreadsheet recording various incomings and outgoings.” Under cross-examination he acknowledged that he saw the accounts, at the latest, by October 2015, four months before settlement. He agreed with Paresh’s evidence that when they met during the course of the development they looked at “spreadsheets, bank statements, and cheque stubs”, recording the progress of the development. He also confirmed that he and Paresh discussed the project as it went on and that he knew at all times what the position was financially. Notwithstanding that, at the end of the project, he chose to reject the accuracy of the accounts and refused to make any payment to Paresh following settlement of the sale of the three Ashgrove Road lots.

[46]      Mr Navin Hira, who is an accountant and tax consultant, gave evidence that he had reviewed the development accounts at the request of Paresh. He was not asked to review the individual entries in the accounts (that is, he accepted the narration for any

particular entry as correct on its face) but rather to confirm the arithmetical correctness of the calculations. He identified one error in the first column of the accounts but noted this did not affect the calculation of the profit for the project at $390,651.08.

[47]      I accept Mr Hira’s evidence as to the arithmetical correctness of the development accounts but in light of my subsequent finding at [60] that the plaintiff has adequately made out only part of the sum claimed by way of cash payments, Mr Hira’s conclusions as to the correctness of the calculations of Paresh’s introduced funds, the net profit figure and the interest payable are no longer relevant.

The defendant’s contributions

[48]      During the course of the hearing it became plain that Prakash’s contributions were not in dispute. In addition to the capital advance of $465,000 (the purchase price which he and his wife borrowed to purchase Ashgrove Road), Prakash contributed a further $311,535.94, which comprised the further advance from the defendant’s bank on revaluation of the subdivided property and his interest entitlement.

The plaintiff’s contributions

[49]Prakash acknowledged that Paresh had made capital advances totalling

$175,000, but he disputed two further elements of Paresh’s contribution: the value (if any) to be attributed to the Wakefield Road house and the so-called “cash contributions”. In addition, the defendant now disputes the payment of interest on Paresh’s advances (and indeed on his own advances).

Wakefield Road house

[50]      As to the first of these, in essence, Prakash’s position was that he was doing Paresh a favour by allowing him to move the Wakefield Road house onto Ashgrove Road. He variously asserted that Paresh was “looking to get rid of” the dwelling and “desperate to relocate it,” so that in fact he [Prakash] was doing him a favour by allowing the relocation of the house. Prakash’s evidence was also that Paresh’s rush to relocate the Wakefield Road house meant that it occurred before all appropriate

Council consents were in place and resulted in some delay in consents being issued. I accept that may have been the case, but ultimately nothing turns on it.

[51]      Prakash said he never agreed that the Wakefield house should be counted as part of Paresh’s financial contribution and most certainly did not agree to it being valued at $55,000. In support of that argument, he put forward a comparison of costs for the Wakefield Road house and its relocation (it ultimately became 20A Ashgrove Road) and the other two houses (20B and 20C Ashgrove). He also relied on the ultimate sale prices realised by each of the three lots, noting that 20A sold for the lowest price of the three lots and, by inference, it could not be valued at $55,000.

[52]      Prakash’s understanding that the Wakefield Road house was free to the partnership is not consistent with the overall evidence. On 15 May 2014 (11 days after Prakash and Jaini purchased Ashgrove Road, but before settlement of the purchase on 26 June 2014), Paresh told Prakash by text message that they needed to finalise the price for the Wakefield Road house and make payment for it. Prakash’s only recorded response was “that point is not now”.

[53]      The development accounts include an apportionment of $55,000 to the Wakefield House as at 15 February 2015. Despite Prakash having seen the detailed development accounts, at the latest, by October 2015 (four months before settlement of the sale of the three subdivided lots) he did not raise with Paresh his view that the Wakefield Road house was to be “free”. He did not raise that point until after settlement.

[54]      Paresh’s evidence was that he was not desperate to move the Wakefield Road house to Ashgrove Road; he could have moved it onto another property he owned or used it elsewhere. It was a valuable asset and it was superior to the other two houses at 20 Ashgrove Road, having been re-clad with weatherboards, with new paint, new carpet, and insulation in the walls and a new bathroom. In his view it was superior to the other two houses.

[55]        Despite his assertion about the value, Prakash did not any point seek to have the Wakefield Road house valued. Prakash’s argument that 20A Ashgrove Road sold

for the lowest price of the three lots and that, by inference, it could not be worth the

$55,000 Paresh has claimed for it, is unconvincing. There was no evidence before the Court as to the relative value of the land in the three lots, or of particular factors that may have made one or other of them more attractive to potential purchasers.

[56]      There was evidence before the Court of the price range for other relocatable houses that the parties considered. At the top end, they were $58,000 or $60,000, including both the house itself and the cost of relocation. Here, the quote obtained by the parties on 20 May 2014 to relocate the Wakefield Road house was $14,750 (plus GST), making a total cost for the house and its relocation of approximately $69,750. While that is somewhat higher than the other houses considered, I am satisfied that the price of $55,000 for the Wakefield Road house is appropriate, given its condition and the lack of any evidence brought by Prakash to the contrary.

[57]      I find that $55,000 for the Wakefield Road house should be included as part of Paresh’s financial contribution to the partnership.

Plaintiff’s cash contributions; interest

[58]      The two further amounts outstanding – and disputed by Prakash - are cash payments totalling $43,220.40 and interest on advances, in the sum of $16,645.00.

[59]      The alleged cash payments are set out in the development accounts. Some of the payments are cross-referenced with Paresh’s contemporaneous hand-written notes and are identified in the defendant’s bank statements. Some of the amounts relate to cash payments which Paresh says he made to contractors or suppliers (without invoices). $22,160 of that total is to some extent supported by the documentation (the development accounts, bank statements) which Prakash agrees he saw and took no issue with at the time.

[60]      I am prepared to accept that sum ($22,160) was contributed by Paresh and should be repaid to him. Given the lack of supporting evidence I am not prepared to accept that the balance of the amount claimed by Paresh is payable.

[61]      Counsel for the plaintiff invited me to direct an account of profits under Part 16 of the High Court Rules if I was not persuaded that some or all of the cash contributions had in fact been made by his client. I have considered recourse to an account taker under Part 16 in respect of the remaining $21,060.40 but the problem if I were to adopt that course, is that the account taker would have no more documentary evidence before him or her than is before the Court and I have found that evidence insufficient to establish that the amounts in question were in fact paid by Paresh. For that reason I decline to appoint an account taker.

[62]      As to the interest payments, Prakash now disputes the payment of interest on both Paresh’s and his own advances for the development project. However, there was no evidence before the Court to suggest that the parties had agreed to vary the standard arrangement arising in the context of a partnership. In fact, Prakash admitted under cross-examination that he and Paresh agreed at the outset that interest would be paid at the rate of 6 per cent on any respective advances.

[63]      The development accounts record the calculation of interest on the parties’ respective contributions, calculated by reference to the amounts in the account at the relevant time.

[64]The development accounts record Prakash being credited for interest of

$41,631, recorded in two tranches: $11,616 on 20 August 2015 and $30,015 on 8 January 2016. He asserts that he earned only $11,616, but that is not borne out by the documentary evidence.

Division of profits

[65]      The default position (that profits should be shared equally) is disputed by Prakash. He argues that the standard arrangement should be varied and that the profits should be divided as between him as Paresh in respect of only two lots or, if the profits are divided on the basis of three lots, then the division of profits should be in proportion to the parties’ respective contribution.

[66]      I have addressed the first question (two lots or three) above. As to the second contention, the Partnership Act provides that the default position is equal sharing; this

is not displaced simply because there were unequal capital contributions or one partner contributed more in a non-monetary sense (see paragraphs [34] and [35] above). Here, there is no evidence of any agreement to the contrary which would allow for an unequal split of profits. I note in any event that even if there had been an agreement to split the profits on the basis of each partner’s contribution, it would not necessarily have resulted in a division favourable to Prakash: Paresh’s non-financial contribution by way of project managing the development was significant.

[67]      I conclude that any profit arising from the partnership development should be shared equally between Paresh and Prakash.

Actual profit or loss

[68] This figure depends upon a recalculation having regard to my finding at paragraph [60].

Tax

[69]      Prakash argues that Paresh’s share of the profits should be calculated on the total profit, net of tax. He made no submission to the Court as to how he would account for the amount deducted for tax.

[70]      I reject this proposition. As plaintiff’s counsel submitted, this is not a limited partnership; rather it is a partnership where each partner has his own tax arrangements. The amount of tax payable by each will depend upon their own specific circumstances. The profit earned by the partnership is to be divided without any nominal deduction for tax.

Conclusion

[71]      I have concluded that the development agreement between the plaintiff and the defendant amounted to a partnership in terms of the Partnership Act 1908. Each partner owed the other the fiduciary obligations inherent in that relationship. Each was entitled, at the conclusion of the development project, to return of their capital contributions (if any) and to the return of their advances and interest thereon. Any remaining profit was to be split equally between them.

[72]      In breach of those obligations and the requirements of the Partnership Act, since completion and settlement of the sale of the three subdivided lots at 20 Ashgrove Road (the last of which settled on 3 February 2016) Prakash has knowingly failed or refused to account to Paresh for his financial contributions to the development project, his half share of the profit derived from the development and interest on those monies.

[73]I have found that:

(a)The original purchase price of the Ashgrove Road property was

$465,000. This was contributed by Prakash;

(b)Prakash contributed a further $311,535.94, by way of further borrowing (and interest thereon), after a revaluation of 20 Ashgrove Road in March 2015;

(c)Paresh contributed:

(i)$175,000 by way of direct advances;

(ii)The Wakefield Road house which I accept should be valued at

$55,000;

(iii)Further cash contributions by way of payments to contractors or cash advances, recorded in the development accounts. I accept that $22,160.00 of the amount claimed is payable to Paresh.

[74]I therefore order that:

(a)Prakash make immediate payment to Paresh of $175,000 + $55,000 +

$22,160 = $252,160.

(b)Having regard to the amounts I have found proven and payable to Paresh, counsel should confer and if possible reach agreement as to the consequent calculation of:

(i)interest payable to Paresh on his advances; and

(ii)the total partnership profit to be distributed equally between the parties.

(c)Failing agreement, the plaintiff shall file a memorandum setting out his calculations by 18 November 2019 and the defendant shall file any memorandum in response by 29 November 2019.

[72]Leave is reserved to any party to apply for further directions if required.

Costs

[73]  Costs are reserved until final disposition of this matter.

Gwyn J