Perera v Singh
[2019] NZHC 2246
•6 September 2019
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2015-485-730
[2019] NZHC 2246
BETWEEN MANTHI SRILAL PERERA
Plaintiff
AND
AVNINDERPAL SINGH
First Defendant
AND
CHAMALI SUPRIYA SINGH
Second Defendant
Hearing: 4 – 14 February 2019
22 February 2019 – submissions from defendants 1 March 2019 - reply submissions from plaintiff
Appearances:
A J Romanos for the Plaintiff
K Lakshman for the Defendants
Judgment:
6 September 2019
JUDGMENT OF CULL J
TABLE OF CONTENTS
Factual background 3
Events in 2000 10
The June 2000 email 12
Mr Perera’s claim 21
Mr and Mrs Singh’s position 25
Issues 30
Issue One: What was the nature of the Agency Agreement? 31
Conclusion 43
Issue Two: Did the Agency Agreement give rise to any fiduciary or contractual obligations between the parties? 46
Fiduciary obligations 48
Contractual obligations and the Limitation Act 1950 55Conclusion 61
Issue Three: Whether the Power of Attorney Deed gave rise to any fiduciary duties, owing from the first defendant to the plaintiff 62
PERERA v SINGH [2019] NZHC 2246 [6 September 2019]
Conclusion 66
Issue Four: Whether Mr and/or Mrs Singh breached their fiduciary duties 67
Findings on credibility 70
(a)Mr Singh 70
(b)Mrs Singh 85
(c)Mr Perera 90
Breach of fiduciary duties under the Agency Agreement 101
(a)Failing to account for and pay over to Mr Perera the Northland Property
income 104
(b) Making the Transactions and failing to use the proceeds for Mr Perera’s benefit 105
(c) Failing to notify Mr Perera about the cash withdrawal on the Insurance Policy 116
(d)Failing to make payments towards the Insurance Policy 119
(e)Failing to inform Mr Perera that he continued to hold the Insurance Policy
122
(f)Allowing Mr Perera’s bank accounts to incur the Bank Charges and Fees 125
Breach of fiduciary duties in respect of the Deed and the Power of Attorney 126
Conclusion 135
Issue Five: What loss, if any, has Mr Perera suffered? 138
Ms Kelly 142
(a)The rental income 147
(b)The expenses 148
(c)The Insurance Policy 149
Mr Corke 153
(a)The rental income 156
(b)The expenses and Insurance Policy 157
Analysis 161
Issue Six: Is the plaintiff entitled to general and/or exemplary damages? 176
General damages 176
Exemplary damages 181
Issue Seven: Does the Limitation Act 1950 assist Mr and Mrs Singh? 186
Issue Eight: Does the equitable defence of acquiescence apply to any of the Transactions? 190
Interim Result 198
Costs 201
[1] This is a claim by a brother against his sister and her husband for breach of fiduciary duty. Mr Perera (the plaintiff) claims that his sister and her husband, Mr and Mrs Singh (the first and second defendants) misappropriated considerable sums of money from him over 24 years, from 1991 to 2015, when he left them in charge of his rental property, his bank account, and the responsibility for meeting his life insurance policy premiums. During that time, several hundred thousand dollars of debt was secured against Mr Perera’s rental property.
[2] I have upheld most of Mr Perera’s claims. I am issuing this judgment on an interim basis, however, to allow the parties to address the issue of interest on the loan of monies from 1992 and to clarify an issue relating to Mr Perera’s insurance policy. I will then issue a final judgment.
Factual background
[3] In 1985, Mr Perera purchased a property in Orangi Kaupapa Road, Northland (the Northland Property), on which he built a two-flat residence: an upstairs three- bedroom flat, and a downstairs one-bedroom flat. Mr Perera was in a relationship with his then-partner, Ms Lachmi, who acquired, in her own name, a rental property in Krull Street, Newtown (the Krull Street Property).
[4] In 1991, Mr Perera and Ms Lachmi left Wellington to live and work in Melbourne. Prior to leaving for Melbourne, Mr Perera says he appointed Mr and Mrs Singh as his agents to manage the Northland Property for him. This occurred at a social family dinner. At the same time, Mr and Mrs Singh were also asked to manage the Krull Street Property. Mr Perera says that he arranged with Mr and Mrs Singh to manage his Northland Property only, for a management fee of eight per cent of the gross rentals received. He says that Ms Lachmi must have entered into her own arrangement with Mr and Mrs Singh in respect of her Krull Street Property, with a management fee of six per cent.
[5] Mr and Mrs Singh disagree. They both say that Mr Perera asked Mr Singh, in the presence of Ms Lachmi, to manage both properties, in exchange for which Mr Singh could deduct an eight per cent management fee on the gross rentals received on the Northland Property and six per cent on the Krull Street Property rentals. Mrs Singh, they say, was not appointed Mr Perera’s agent.
[6] The parties did not enter into a written formal contract of services. Instead, the agreement was oral (the Agency Agreement). Mr Perera says its terms provided that:
(a)Mr and Mrs Singh were to manage the Northland Property, which would include advertising for and finding tenants when required,
receiving the rental income, and arranging all payments towards the mortgage, rates, insurance, repairs and maintenance;
(b)Mr and Mrs Singh were to service Mr Perera’s life insurance policy with National Mutual Group (which became AXA New Zealand and subsequently AMP) (the Insurance Policy), ensuring the monthly premium payments of $98.54 were made; and
(c)in consideration for Mr and Mrs Singh’s management of Mr Perera’s affairs, Mr and Mrs Singh were entitled to a management fee of eight per cent of gross rental income, that is, the rental income received before expenses were deducted.
[7] Contrary to Mr Perera’s evidence, Mr Singh said that he was to pool the rents received for the Northland Property and the Krull Street Property, and use those pooled rents to pay the loans secured against the respective properties. Thus, payments of
$1,500 were to be made per month on account of Ms Lachmi’s mortgage and $600 per month were to be paid on account of Mr Perera’s mortgage.
[8] Mr Singh, in his statement of defence, denies that the Agency Agreement required him to service Mr Perera’s life insurance policy, but that position was not sustained through the hearing.
[9] In mid-1997, Mr and Mrs Singh attended on solicitors in connection with a proposal that both rental properties (the Krull Street Property and the Northland Property) be transferred into their names. Mr Perera says he knew nothing of these purported transactions, and nor did he give permission or consent for the Northland Property to be transferred. Mr and Mrs Singh disagree. Mr Singh gave evidence that he went to see the solicitors at Mr Perera’s request, to propose putting the Northland Property in Mr and Mrs Singh’s name. This transfer did not eventuate, Mr Singh submits, because of a caveat that had been lodged on the Northland Property by Ms Lachmi.
Events in 2000
[10] In 2000, Mr Perera and Ms Lachmi were having relationship difficulties. In around late May or early June 2000, Mr Perera spoke with Mr Singh on the telephone. Mr Perera gave evidence that the two discussed Mr Perera’s separation and the difficulties Ms Lachmi was experiencing. During this call, Mr Singh told Mr Perera that Ms Lachmi had registered a caveat on the Northland Property. Mr Perera asserts this was the first time he became aware of the caveat. Mr Singh also told Mr Perera that he had been paying the mortgage payments on Ms Lachmi’s property (the Krull Street Property) out of the combined rental of both properties.
[11] Mr Perera gave evidence that he was “very surprised by these revelations”. He became concerned Ms Lachmi was going to “ruin” his financial security, and decided she was not to be trusted. He did not consider that Mr or Mrs Singh had deliberately sought to deceive him and did not place blame on Mr and Mrs Singh. Mr Singh assured Mr Perera he would make amends for the lost rental income, and Mr Perera submits he “trusted them to put things right”.
The June 2000 email
[12] On 6 June 2000, a few days after the telephone conversation, Mr Perera wrote an email to Mr Singh (the June 2000 email) requesting that he take the following steps:
(a)Place a caveat on the Krull Street property in Mr Perera’s name so Ms Lachmi could not sell or dispose of the property without Mr Perera’s approval. This was lodged on 21 June 2000.
(b)Make as few payments as possible towards the Krull Street Property mortgage.
(c)Increase the loan on the Northland Property mortgage to the maximum amount possible. In Mr Perera’s words, this was to:
… deplete the equity in the Northland Property so that I could say during the relationship property negotiations that the Northland Property was heavily encumbered: it would be a less valuable asset. Avninder [Mr Singh] would in the meantime hold the funds for me in
his account and revert them to the mortgage when my relationship property agreement with Vijay [Ms Lachmi] was settled.
[13] In March 2004, both parties agree that Mr Perera executed a Power of Attorney and Deed of Delegation in favour of Mr Singh (the Deed). Mr Perera submits he did so as he was told by Mr Singh this was necessary to facilitate Mr and Mrs Singh’s management of the Northland Property, a statement which Mr Singh denies.
[14] Between 18 October 2000 and 16 April 2015, a number of transactions, in the nature of loan drawdowns, manual transfers and internet transfers, were made from Mr Perera’s bank accounts to Mr and Mrs Singh’s bank accounts, amounting to the sum of $315,388.74 (the Transactions).1 Mr Perera submits the Transactions were unauthorised, while Mr and Mrs Singh submit they were all made with Mr Perera’s authority, and that some of these payments in fact went into Mr Perera’s various other accounts.
[15] Between 30 June 1998 and 19 May 2015, Westpac Trust and/or Westpac applied 287 transaction charges and fees to Mr Perera’s accounts, amounting to the sum of $4,439.66 (the Bank Charges and Fees).2 Mr Perera submits these charges were owing to Mr and Mrs Singh’s mismanagement of his bank accounts, a statement which Mr and Mrs Singh deny.
[16] In late June 2007, Mr Singh actioned a cash withdrawal on the Insurance Policy in the sum of $19,900. Mr Perera submits Mr Singh achieved this by impersonating Mr Perera and forging his signature. It will be noted that, at this time, Mr Singh had the Power of Attorney for Mr Perera. The proceeds of the withdrawal were paid into one or more bank accounts held by Mr Singh and/or his business, Nijar Holdings. Mr Singh submits that the withdrawal occurred at the direction of Mr Perera, with Mr Perera’s full knowledge, signed on behalf of Mr Perera with his express knowledge and consent. He explains the money was used to fund payments from his accounts for Mr Perera’s benefit.
1 The Transactions are itemised in date order in Schedule 1 of the fourth amended statement of claim and adduced in Mr Perera’s evidence.
2 The Bank Charges and Fees are itemised in date order in Schedule 2 of the fourth amended statement of claim and adduced in Mr Perera’s evidence.
[17] In October 2014, Mr Perera visited Wellington to attend his father’s funeral. It was on this visit that he discovered some of the Transactions, and that Mr Singh had arranged four loan accounts against the Northland Property, which amounted to a debt of $300,000.
[18] As a result, Mr Perera terminated the Agency Agreement, revoked the Deed, and required Mr and Mrs Singh to account for all monies received and all monies expended in respect of the Northland Property. In December 2014, Mr Singh sent an email to Mr Perera saying “all payments would be made”. Mr Singh admits to sending this email, but says he has not at any time admitted any monies were owed by him to Mr Perera. Both parties agree that following this discussion, in February 2015, Mr Singh’s lawyers wrote to Mr Perera stating an account would be provided and that it would be completed “as soon as practically possible”.
[19] On 23 December 2016, Mr and Mrs Singh, through their solicitor, provided an account of rent received between 1991 and 2014. Mr Perera submits this was a limited account and that it was inaccurate, as it included rent received and expenses incurred in respect of the Krull Street Property, which was not part of the Agency Agreement. Mr Singh accepts the account included funds in respect of the Krull Street Property. This acknowledgement is consistent with Mr and Mrs Singh’s position that the Krull Street Property was also a part of the Agency Agreement.
[20] Mr Perera says that, despite the termination of the Agency Agreement and Deed in October 2014, Mr and Mrs Singh continued to make unauthorised transfers between Mr Perera’s bank accounts and Mr Singh’s bank account, which in turn caused further unnecessary bank charges and fees to be applied to Mr Perera’s bank accounts. Mr Singh admits these transfers were made, but submits that although Mr Perera revoked the Deed on 19 November 2014, Mr Perera did not make arrangements regarding payment of insurance premiums in respect of his policies nor loan repayments which were being debited from Mr Singh’s bank account. As a result, during that period Mr Singh was still paying expenses for the benefit of Mr Perera but receiving no income to fund that expenditure. Mr Singh therefore submits the transfers were for reimbursement to Mr Singh for sums paid out of his bank account for Mr Perera’s benefit.
Mr Perera’s claim
[21] Mr Perera claims that from 1991 to 2016, Mr and Mrs Singh misappropriated considerable sums from him. First, over the course of the Agency Agreement, the rental income of the Northland Property should have been such that there was a surplus. However, at the termination of the Agency Agreement there was no surplus of funds and Mr Perera was not paid anything. Second, between 2000 and 2015, Mr and Mrs Singh drew down several hundred thousand dollars of debt against the Northland Property, which Mr Perera submits he did not authorise and nor were the proceeds used for his benefit.
[22] Mr Perera says that the Agency Agreement and the Deed created a relationship between Mr Singh and/or Mrs Singh and him, in which Mr and Mrs Singh owed Mr Perera a fiduciary duty to manage the Northland Property, the Insurance Policy, and Mr Perera’s bank accounts for his benefit. Mr Perera says that Mr and Mrs Singh breached those fiduciary duties by failing to carry out their obligations by not paying over any surplus funds from rental income, making the Transactions which led to the Bank Charges and Fees, defaulting on insurance premium payments, and taking loans out on Mr Perera’s Insurance Policy. As a result, Mr Perera claims that he has suffered a loss, to the sum of $940,049 which Mr and Mrs Singh are obliged to repay. Mr Perera also claims an order that Mr and Mrs Singh indemnify him for all ongoing liabilities incurred, between the termination of the Agency Agreement and revocation of the Deed, and the date of judgment.
[23] Mr Perera identifies his loss as considerable. He says the Northland Property was heavily indebted in excess of $250,000, when it should have been unencumbered and a retirement “nest egg”. He received no rental profits or any interest on them and was left with an Insurance Policy in default on premium payments and from which a significant cash withdrawal had been made, with no benefit to him. In addition to the increased debts and outstanding interest, he points to the Transactions made and the Bank Charges and Fees incurred by Mr and Mrs Singh’s management of his accounts.
[24] In addition, Mr Perera claims general and exemplary damages. He submits he has been put through a “gargantuan ordeal simply to seek judgment for what he is
owed,” and therefore claims an award of general damages, on a joint and several basis, in the sum of $180,000. Mr Perera also submits that because of the way Mr and Mrs Singh have conducted themselves, an award of exemplary damages in the sum of
$40,000 should be made to both punish them and act as a deterrent to others contemplating defrauding family members. Mr Perera claims for interest and costs.
Mr and Mrs Singh’s position
[25] Mrs Singh maintains that she was not a party to the Agency Agreement, and she had no obligations to her brother, Mr Perera, under that Agreement.
[26] Mr Singh accepts that he was a party to the Agency Agreement with Mr Perera, and accepted, during the hearing, that he had obligations of a fiduciary nature. He says, however, his actions did not breach any fiduciary duties. Mr and Mrs Singh say that all actions concerning the Northland Property, Mr Perera’s bank account, and Mr Perera’s Insurance Policy were undertaken by Mr Singh with authorisation from Mr Perera himself. In closing submissions, Mr Singh accepted he breached the Agency Agreement in failing to pay all the insurance premiums. However, Mr Singh submits that breach has not caused Mr Perera any loss, as the policy is still on foot.
[27] Mr Singh further submits that, although the Deed gave rise to fiduciary duties between Mr Perera and himself, they are not in the nature outlined by Mr Perera. Mr Singh denies there was any duty for him to act in good faith towards Mr Perera’s interests or use reasonable care and skill in the execution of his powers under the Deed, nor to keep accounts of all the transactions entered into on behalf of Mr Perera, nor disclose all relevant information that significantly affected Mr Perera’s interests relating to the Northland Property and Insurance Policy. Mr Singh submits he has not breached any fiduciary duties in relation to the Deed, as at all times he acted in accordance with the instructions from Mr Perera.
[28] Mr and Mrs Singh therefore submit that Mr Perera has not suffered any loss as a result of any breaches of fiduciary duty. By way of defence, Mr and Mrs Singh submit that they are not liable in respect of any acts or omissions which occurred on or before 21 September 2009 pursuant to the Limitation Act 1950.
[29] Lastly, Mr Singh has submitted a counterclaim of unjust enrichment, claiming that Mr Perera received the benefit of funds in excess of his entitlement under the Agency Agreement as the result of Mr Singh mistakenly deducting less than the eight per cent management fee to which he was entitled. Mr Singh initially sought judgment of $15,430 against Mr Perera, although this was not pursued at the hearing.
Issues
[30]The principal issues for determination are:
(a)What was the nature of the Agency Agreement?
(b)Did the Agency Agreement give rise to any fiduciary or contractual obligations between the parties?
(c)Did the Deed give rise to any fiduciary duties between Mr Singh and Mr Perera?
(d)Did Mr and/or Mrs Singh breach their obligations?
(e)What loss, if any, has Mr Perera suffered?
(f)Is Mr Perera entitled to general and/or exemplary damages?
(g)Does the Limitation Act 1950 assist Mr and Mrs Singh?
(h)Does the equitable defence of acquiescence apply to any of the transactions?
Issue One: What was the nature of the Agency Agreement?
[31] It is not disputed that Mr Perera and Mr Singh entered into an Agency Agreement in 1991, leaving aside whether Mrs Singh was a party to the Agency Agreement, which I address below. Both parties agree that the terms of the Agency Agreement provided that Mr Singh (and/or Mrs Singh) would manage the Northland Property, including dealing with tenants, receiving the rental income and arranging
payments associated with the Northland Property. Both parties also agree that in consideration for Mr Singh’s management of the Northland Property, Mr Singh was entitled to a management fee of eight per cent of gross rental income.
[32] However, the parties disagree on three key aspects of the Agency Agreement: whether Mrs Singh was a party to the Agency Agreement; whether the Krull Street Property was included in the Agency Agreement; and whether the Agency Agreement required Mr Singh (and/or Mrs Singh) to service Mr Perera’s Insurance Policy.
[33] In relation to the first disagreement, Mr Perera submits Mrs Singh was a party to the Agency Agreement. He submits that the course of dealing between the parties with regard to his affairs shows that it is more likely than not that Mrs Singh was indeed a party to the Agency Agreement and acted in a way consistent with her being subject to it. Mr and Mrs Singh submit Mrs Singh was not a party to the Agency Agreement.
[34] On the evidence as a whole, I am persuaded that Mrs Singh was a party to the Agency Agreement and managed the Northland Property together with Mr Singh. I make this finding for the following reasons:
(a)Mrs Singh was present alongside Mr Singh when Mr Perera suggested the Agency Agreement in 1991 during a family dinner in Wellington.
(b)Mr and Mrs Singh together had a rental property of their own at this time, demonstrating they have worked together before to manage a rental property.
(c)Throughout the course of the next two decades, Mrs Singh informed Mr Perera about the Northland Property through email correspondence which shows Mrs Singh organising tenants, arranging repair work, scheduling electricity, insulation, plumbing and other handyman services, and Mr Perera directing Mrs Singh in the managing of his accounts.
(d)At one point, Mrs Singh suggested that it was all too much work for her and that Mr Perera ought to sell the Northland Property. An excerpt from the email from Mrs Singh to Mr Perera provides the necessary context:
Everything is going as per usual. The tenant of your top flat wants to leave and this is going to take another chunk out of my life to try and find tenants and the electricity they have changed the meters and the calculation that used to happen for upstairs and downstairs is not feasible anymore so need to sort that out as well. I think you would be better off to sell it [the Northland Property] and keep the money in the bank Srilal [Mr Perera] – think about it please – So stressful to find tenants as it is so far away…
[35] While I find Mrs Singh managed the Northland Property with Mr Singh, I find that Mrs Singh was not involved in making payments from Mr Perera’s bank accounts. They were managed by Mr Singh.
[36] Second, Mr Perera claims that the Northland Property only was subject to the Agency Agreement. Mr Singh says that the Krull Street Property was also a part of the Agency Agreement. He submits that he was to pool the rents received for Mr Perera’s Northland Property and Ms Lachmi’s Krull Street Property and then use those pooled rents received to pay the loans secured against those respective properties.
[37] I acknowledge that Mr Perera, in the June 2000 email referred to above, instructs Mr Singh on how to deal with the Krull Street Property, and that Mr Perera was the guarantor of the Krull Street Property mortgage. Despite these facts, I find that, on the balance of probabilities, only the Northland Property was the subject of the Agency Agreement. The Krull Street Property belonged to Ms Lachmi. It was treated as the separate property of Ms Lachmi, with a lower management fee of six per cent payable to Mr and Mrs Singh. Consistent with that, in the relationship property division with Mr Perera in 2000 Ms Lachmi retained the Krull Street property as her separate property.
[38] Further, apart from the June 2000 email when Mr Perera learns of Ms Lachmi’s caveat over his property and the pooling of his rentals with Ms Lachmi, I have not been directed to any correspondence between Mr Perera and Mr and Mrs Singh in
which the Krull Street Property is discussed. This contrasts with the substantial correspondence between Mr Perera and Mr and Mrs Singh regarding the Northland Property.
[39] Ms Lachmi and Mr and Mrs Singh may very well have come to their own agreement regarding the management of the Krull Street Property, but I do not have sufficient evidence upon which to make a finding on that issue. Tellingly, Ms Lachmi was not called to give evidence.
[40] However, I am satisfied that under the Agency Agreement, only the Northland Property was arranged to be managed by Mr and Mrs Singh. I accept Mr Perera’s evidence on this issue.
[41] The third and final disagreement is whether the Agency Agreement also required Mr and Mrs Singh to service Mr Perera’s Insurance Policy. Mr and Mrs Singh initially denied that the Agency Agreement required them to service the Insurance Policy. However, at the hearing they conceded this point, accepting that they were required to do so.
[42] In any event, the following facts make it clear that Mr and Mrs Singh considered themselves under an obligation to service Mr Perera’s Insurance Policy:
(a)From 1992, letters from Trust Bank (the initial company which serviced Mr Perera’s loan) were sent to the Northland Property in the name of Mr Perera. These were collected by Mr and/or Mrs Singh, as Mr Perera was not in New Zealand. From 1994, Trust Bank re-addressed these letters directly to Mr and Mrs Singh’s property in Island Bay, with Mr Singh’s name also appearing on the documents. This indicates that Mr Singh was receiving mail in relation to the Insurance Policy, and was acting on such letters to service the Insurance Policy.
(b)There is also evidence that Mr Singh was in fact servicing the Insurance Policy. For example, in August 2003, Mr Singh received a letter from Westpac (now the holder of the Insurance Policy) that the interest rate
had changed and the loan repayments would need to be at $455 per fortnight. About the same time, each fortnight $455 started coming out of Mr Singh’s bank account into the loan account, described as LOAN REPAYMENT.
(c)After Mr Perera revoked the Agency Agreement in October 2014, Mr Singh stopped making the loan repayments even though Mr Singh was still receiving the bank demands and statements. This reinforces the obvious inference that Mr Singh was servicing the Insurance Policy on behalf of Mr Perera, as required by the Agency Agreement.
Conclusion
[43] I have reached the conclusion that Mrs Singh managed the Northland Property together with Mr Singh. I do not accept Mrs Singh’s evidence that the numerous invoices and receipts addressed to her, including interactions and relationships built up with tradesmen, were just a feature of helping her husband.
[44] I find that the Krull Street Property, Ms Lachmi’s separate property, was not part of the Agency Agreement.
[45] I find that Mr Singh was obliged, under the Agency Agreement, to meet the payments of Mr Perera’s Insurance Policy.
Issue Two: Did the Agency Agreement give rise to any fiduciary or contractual obligations between the parties?
[46] Mr Perera’s claim is one of disloyalty, based on the fiduciary relationship created by the rights and obligations in the Agency Agreement between Mr Perera and Mr and Mrs Singh, in which Mr and Mrs Singh owed Mr Perera a fiduciary duty to manage the Northland Property, the Insurance Policy, and Mr Perera’s related bank accounts for his benefit. In their pleadings, Mr and Mrs Singh denied that the Agency Agreement gave rise to fiduciary duties.
[47] However, in closing, Mr Lakshman for Mr and Mrs Singh accepted that the Agency Agreement did give rise to a fiduciary relationship, but that such a relationship
was based in contract. On that basis, he says the alleged breaches are contractual and therefore all alleged breaches on or before 21 September 2009 are statute-barred under s (4)(1)(a) of the Limitation Act 1950.3
Fiduciary obligations
[48] Generally, fiduciary duties arise out of a fiduciary relationship. Such a relationship can be either inherently fiduciary (such as solicitor-client, or trustee- beneficiary), or the circumstances of a specific relationship may be such that fiduciary duties arise.4 While “[n]o single formula or test has received universal acceptance in deciding whether a relationship outside the recognised categories is such that the parties owe each other obligations of a fiduciary kind”,5 the following broad statements of principle have been employed to determine whether, in a given case, one person stands in a fiduciary relationship with another:
(a)A fiduciary undertakes or agrees, either expressly or impliedly, to act for or on behalf of, or in the interests of, another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense.6
(b)The essence of a fiduciary relationship is an inequality of bargaining power brought out by the trust and confidence reposed in, and accepted by, the fiduciary to perform some function for another’s benefit in circumstances where the beneficiary lacks the power adequately to control or supervise the exercise of that function.7
[49] Two further observations can be made in determining whether fiduciary duties exist:
3 This statute has been repealed and replaced by the Limitation Act 2010. However, all breaches before 1 January 2011 continue to be covered by the Limitation Act 1950: Limitation Act 2010, s 59.
4 Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433 at [73]–[75].
5 At [75].
6 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 (HCA) at 68; and Frame v Smith (1987) 42 DLR (4th) 81 (SCC) at 99 per Wilson J, adopted in DHL International (NZ) Ltd v Richmond Ltd [1993] 3 NZLR 10 (CA).
7 Cook v Evatt (No 2) [1992] 1 NZLR 676 at 685.
(a)it is necessary to consider any express agreement between the parties and the actual course of dealing between the parties;8 and
(b)assistance is to be gained by way of analogy from relationships generally regarded as giving rise to fiduciary duties.9
[50] Applying the above principles, I am satisfied fiduciary duties arose out of the relationship between Mr Perera and Mr and Mrs Singh in the Agency Agreement.
[51] First, Mr Singh agreed that the Agency Agreement required him to manage the Northland Property and related bank accounts. This was an express undertaking of Mr Singh to act for and on behalf of Mr Perera. I have also found this same undertaking was given to Mr Perera by Mrs Singh. In order to fulfil those requirements, Mr and Mrs Singh were given full access to the Northland Property, Mr Perera’s bank accounts, and Mr Perera’s mail. In this way, Mr and Mrs Singh were able to exercise their power and discretion in relation to the managing of Mr Perera’s affairs, which affected the legal and practical interests of Mr Perera by engaging tenants and repairs for Mr Perera’s property, making payments into and out of Mr Perera’s bank account, and making payments on Mr Perera’s Insurance Policy.
[52] Second, Mr Perera, in providing Mr and Mrs Singh with his bank details and access to the Northland Property, placed full trust and confidence in Mr and Mrs Singh to manage his affairs while he could not. It was reasonable in the circumstances for Mr Perera to place such trust and confidence in Mr and Mrs Singh as he needed someone to act on his behalf in respect of his New Zealand property whilst he was overseas. Further, Mr Perera and Mr and Mrs Singh had a longstanding relationship (as siblings and siblings-in-law respectively), and Mr Perera knew Mr and Mrs Singh already had a rental property of their own and considered them up to the task.
[53] Third, there is an analogy between this relationship and that of agency, which is an inherently fiduciary relationship.10 An agency relationship exists where one
8 New Zealand Netherlands Society “Oranje” Inc v Kuys [1973] 2 NZLR 163 (PC) at 166.
9 Liggett v Kensington [1993] 1 NZLR 257 (CA) at 281-282.
10 Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at 17.3.5.
person has the authority or capacity to create legal relations between another person and a third party,11 or someone who, though having no power to create legal relations between two parties, represents the interests of one person in dealings with another.12 Whether the relationship exists depends on the true nature of the arrangement or the exact circumstances of the relationship.13 It is particularly relevant where property is concerned.14 Here, Mr and Mrs Singh had either the authority to create legal relations or the authority to represent the interests of Mr Perera with regard to the Northland Property. They did, in fact, create legal relations regarding Mr Perera’s property, by entering into tenancy agreements as landlord with tenants.
[54] Mindful that fiduciary obligations are not to be imposed lightly,15 I am satisfied that, on the balance of probabilities, Mr and Mrs Singh owed Mr Perera fiduciary duties to:
(a)place Mr Perera’s interests under the Agency Agreement above their own interests or interests of any third party;
(b)act with absolute openness and fairness, which includes disclosing to Mr Perera significant business decisions in relation to the Northland Property and Insurance Policy such as any loan variations to the mortgage held against the Northland Property, and any cash withdrawals from the Insurance Policy;
(c)manage the Northland Property, Mr Perera’s bank accounts, and his Insurance Policy in a reasonably prudent manner, including to account to Mr Perera for, and pay over, the income generated by the Northland Property, with interest; and
11 L C Fowler & Sons Ltd v St Stephens College Board of Governors [1991] 3 NZLR 304 (HC) at 306.
12 Reading v Attorney-General [1949] 2 KB 232 (CA) at 236.
13 L C Fowler & Sons Ltd, above n 11, at 306.
14 Butler, above n 10, at 560.
15 Disher v Farnworth [1993] 3 NZLR 390 (CA) at 399.
(d)ensure that confidential information obtained during the course of the fiduciary relationship was only used for Mr Perera’s benefit and interests.
Contractual obligations and the Limitation Act 1950
[55] As noted, Mr Lakshman submits that if there is a fiduciary relationship existing between Mr Perera and Mr and Mrs Singh, that relationship is based in contract and is therefore statute-barred under the Limitation Act 1950.
[56] Under contract law, for a binding contract to be in force there needs to be an agreement, including certainty of the terms and obligations which the parties are to undertake, consideration, and an intention to create legal relations.16 Both parties accept that there has been an agreement, namely, the Agency Agreement. Under the Agreement, consideration passed from Mr Perera to Mr and Mrs Singh, which was the eight per cent of the rental income to be paid to Mr and Mrs Singh. In turn, Mr and Mrs Singh undertook to manage Mr Perera’s Northland Property and related bank accounts.
[57] There is, however, disagreement as to some of the terms of the contract, namely whether Mrs Singh was a party to the Agency Agreement, which I find she was; whether the Agreement included the Krull Street Property, which I find was not included; and whether the Agreement required Mr and Mrs Singh to service Mr Perera’s Insurance Policy, which I find they did. The question is whether the essential terms are clear or can be ascertained.17 These terms were discussed and determined under Issue One.18 They are the essential terms. I consider this aspect satisfied.
[58] There also must be an intention to create legal relations. In such situations, the presence or absence of an intention to create legal relations depends on the inference
16 Fletcher Challenge Energy Ltd v Electricity Corp of New Zealand Ltd [2002] 2 NZLR 433 (CA) at [53].
17 At [50]–[52].
18 See [31]–[45] of this judgment.
drawn by the court on a careful examination of the facts of the case and the language used by the parties.19 Such intention is to be objectively ascertained.20
[59] In Fleming v Beevers, the Court of Appeal acknowledged that when a business transaction is undertaken between strangers, it will almost always be reasonable that they were intending to create a legally enforceable relationship.21 The Court continued:22
If, however, a transaction is undertaken between husband and wife or between other family members that will not necessarily be so. Indeed some of the authorities suggest that, subject always to the circumstances of the particular case, there is a presumption that persons in a close familial relationship do not intend to create legally enforceable relations when they undertake business or other financial transactions.
[60] On the evidence I have heard, and reviewing the relevant authorities, I am satisfied there was no intention to create legal relations when the parties created the Agency Agreement. This was a relatively informal oral agreement in which Mr and Mrs Singh agreed to manage some of Mr Perera’s affairs while he was absent, in return for a fee. The arrangement was among family members and made on a social occasion, and therefore more analogous to a favour than a contract. At no point did either party refer back to the Agency Agreement, either to rely on its terms or change them, prior to these proceedings, even when the parties’ relationship soured in 2014.
Conclusion
[61] I find that the Agency Agreement was one of trust and confidence among family members and was not of a contractually binding nature. This conclusion is supported by the fact that the parties were unclear on the exact terms of the Agency Agreement and disputed who were the parties to the Agency Agreement. As a result, I find that the Limitation Act 1950 defences do not apply.
19 Jeremy Finn, Stephen Todd, and Matthew Barber (eds) Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at 162; and Fleming v Beevers [1994] 1 NZLR 385 (CA) at 389-390.
20 Fleming v Beevers, above n 19, at 390.
21 At 389.
22 At 389.
Issue Three: Whether the Power of Attorney Deed gave rise to any fiduciary duties, owing from the first defendant to the plaintiff
[62] This issue can be addressed briefly, because the legal principle is clear and Mr and Mrs Singh accept it. A Power of Attorney creates an agency between the donee/agent and the donor/principal, as the Court of Appeal confirmed in Vernon v Public Trust by holding that:23
A power of attorney is simply a formal type of agency under which the donor appoints the attorney as agent, to do certain things that the donor himself has the legal right to do.
[63] Both Mr Perera and Mr Singh accept that under the Power of Attorney and Deed of Delegation, Mr Singh, as agent and donee, owed Mr Perera, as principal and donor, fiduciary duties.
[64] The instrument, in this case the Deed, specifies the purposes for which the agent is empowered to act. The Deed required Mr Singh to, among other things, act for Mr Perera in his name on his behalf and in his interests in all matters with which he may be connected as fully and effectually as if he were personally present; sign and use Mr Perera’s name in any manner in any deed document or writing; and act in Mr Perera’s place for any persons or bodies corporate who have appointed Mr Perera their or its Attorney. This power essentially authorised Mr Singh to act generally in relation to Mr Perera’s property and banking affairs in New Zealand as Mr Perera himself would.
[65] Such an agency creates a fiduciary relationship between the agent and principal, with enforceable duties upon an agent. The Court of Appeal described it fully by stating that in performing such acts:24
… equity imposes enforceable duties upon an agent to ensure that he or she discharges a power for the purpose for which it is granted. Fiduciary obligations are a necessary incident of the relationship of principal and agent. Unless the instrument or statute requires otherwise, the agent must discharge his or her duties towards the principal with the utmost loyalty, honesty, and good faith. He or she must ensure that he or she does not benefit himself or herself at the donor’s expense. And he or she must act always in the donor’s
23 Vernon v Public Trust [2016] NZCA 388, [2016] NZAR 1375 at [36], quoting Law Commission
Misuse of Enduring Powers of Attorney (NZLC R71, 2001) at 2.
24 Vernon v Public Trust, above n 23, at [37] (footnotes omitted).
best interests, in particular where a power is granted for the purpose of preserving and managing the donor’s property.
Conclusion
[66] I therefore find Mr Singh owed the following fiduciary duties to Mr Perera under the Deed. Mr Singh was obligated to:
(a)act in good faith towards Mr Perera’s interests in the execution of his powers under the Deed;
(b)use reasonable skill and care in the execution of his powers under the Deed;
(c)keep accounts of all transactions entered into on behalf of Mr Perera; and
(d)disclose all relevant information that significantly affected Mr Perera’s interests relating to the Northland Property and the Insurance Policy.
Issue Four: Whether Mr and/or Mrs Singh breached their fiduciary duties
[67] Mr Perera’s claim alleges Mr and Mrs Singh have made unauthorised Transactions from his bank accounts, for their own benefit, in breach of their fiduciary duties. In response to Mr and Mrs Singh’s Limitation Act defence, Mr Perera alleges that Mr and Mrs Singh’s actions amounted to a fraudulent breach of trust and pleads ss 21 and 28 of the Limitation Act.
[68] When allegations of dishonesty or fraud in the civil context are made, the law recognises that “the more serious the allegation, the more cogent is the evidence required to overcome the unlikelihood of what is alleged and thus to prove it.”25 I adopt the approach of Duffy J in Eden Refuge Trust v Hohepa, where she stated that:26
Because some of the allegations in this case are in substance akin to suggesting that the defendants have committed fraud, I would approach the facts for
25 Eden Refuge Trust v Hohepa 1 NZLR 197 (HC) at [56], quoting Re Dellow’s Will Trusts [1964] 1 All ER 771 (Ch) at 773.
26 Eden Refuge Trust v Hohepa, above n 25, at [56].
determination on the basis that before reaching an adverse view of the defendants’ conduct, I should assess the evidence using a standard of proof that takes the highest degree of probability as its measure.
[69] I turn, therefore, to assess each of the allegations of breach of fiduciary duty, taking the highest degree of probability as the applicable standard of proof. Because of the nature of the allegations of breach, the credibility of the parties is critical to my assessment and I make those findings below.
Findings on credibility
(a) Mr Singh
[70] There were numerous examples in the course of Mr Singh’s evidence which gave rise to serious doubts about his credibility. I will focus on three areas in particular:
(a)Mr Singh’s production and redacting of bank statements;
(b)Mr Singh’s concessions and acknowledged “mistakes”; and
(c)Mr Singh’s acknowledgement of his duty to Mr Perera and his failure to keep accounts.
[71] Throughout the course of these proceedings, particularly in the latter stages, Mr Perera faced considerable difficulty obtaining disclosure of bank statements and financial records from Mr Singh. I will address two issues in relation to the bank statements which I consider seriously impinged on Mr Singh’s credibility.
[72] The first was withholding Mr and Mrs Singh’s personal National Bank statements. Mr Singh accepted that he opposed the disclosure of his unredacted bank statements on the ground that this was an unnecessary invasion of his privacy. He subsequently acknowledged that he had provided his bank statements to his accountants, but they were not provided to Mr Perera’s lawyers because they were not relevant. When pressed under cross-examination as to why bank statements were not provided to Mr Perera’s accountants, Mr Singh said, “It must have been by mistake.” Those bank statements were not disclosed.
[73] The second issue relates to Mr Singh’s redaction of the bank statements. It was clear during the cross-examination of Mr Singh he had redacted lines in the bank statements which identified his receipt of loan drawdowns from Mr Perera’s loan accounts, or demonstrated that Mr Singh had made a cash withdrawal from Mr Perera’s accounts into his. I refer to two examples only, by way of illustration.
[74] The first is the 21st transaction of $8,553.23 on 27 August 2008. Mr Singh acknowledged he redacted that transaction, which had the description “Perera M, loan drawdown, M, loan drawdown”. When pressed as to why he redacted that line in the disclosed bank statements, Mr Singh replied:
Well, like I said, I had quite a lot to do, so it’s again by accident.
[75] The second example of Mr Singh’s redaction showed that on 10 July 2007, Mr Singh transferred $10,000 from the $19,900 cash withdrawal on Mr Perera’s Insurance Policy into his business bank account. Mr Singh had redacted the bank statement line item which showed that he had received the $10,000. Mr Singh admitted under cross- examination that he had invested it in his business:
Q:So I’m going to put it to you Mr Singh that of this $19,000, you can’t account for, … you can’t account for nearly $18,000 of this?
A: I can, there’s $10,000 that like I said I put in my business. Q: You put $10,000 in your business?
A: Yeah.
Q: That wasn’t to Mr Perera was it? A: No. Have I said that?
Q: No. So has that money been used for Mr Perera, that $10,000?
A: …Like I said before things were tough with us, so I just kept some money away in case anything happens to the house in Northland, if I needed money and I had that money there so I could pay the people, the tradesmen.
Q:So that $10,000 you talk about, that you’ve put away, you think this is very important for this Court to know about that, do you?
A: No, no, I’m just telling you that’s what I did.
Q: Because [you] redacted that receipt of that payment didn’t you?
A:... I made a couple of – I made a lot of mistakes I would say. It’s not that I wanted to do it but because of that nature that I had to hurry things and sometimes you don’t remember things, it’s so long, so many years…
[76] Turning to Mr Singh’s various concessions and acknowledged “mistakes”, from the outset, Mr Singh attempted to explain why he received money from the Insurance Policy drawdown by saying Mr Perera had told him to transfer money from Mr Perera’s account to cover the costs on the Northland Property. Mr Singh later admitted this was a “mistake”. Because of its importance, I set out the passage from Mr Singh’s cross-examination as follows:
A:[reading from his brief of evidence]: “…in 1994 there were issues with the properties and a shortfall in rental which I met. I wrote to Srilal [Mr Perera] about this. Srilal told me to transfer money to cover these costs from his account.”
Q: So do you agree that that’s not consistent with what you told the Court on Friday, that nothing had happened?
A: That’s, that particular thing is a mistake that should be … That was an error, that, but that’s what’s written there.
Q:So to get your evidence clear, what are you saying had happened in 1995 when this fax was sent?
A: Yeah, yeah.
Q: Which is the correct version here, Mr Singh?
A:When that fax was sent, I told him that I needed money and that was it, yeah, and that’s 1994.
Q: And nothing happened? A: Nothing happened.
Q: So this evidence here, the last sentence of paragraph 71 – A: Yeah.
Q:– “Srilal told me to transfer money to cover these costs from his account.”
A: Yeah, I couldn't transfer because … Q: That’s not true is it?
A: That’s not true.
Q: Now you had quite a lot of time to prepare this brief of evidence.
A: Yeah.
Q: Can you explain why this is wrong please?
A: I think that that was a mistake. I think it should belong to the top but somehow or other, I think that I must have, you know, not read it properly and just put it there. It’s my mistake,… Yeah, that was, that was a sheer mistake, that’s what I would say. Because like I said, I had no control in 1994 of his accounts.
[77] Mr Singh signed the authorisation from the bank for the drawdown on the Insurance Policy by signing Mr Perera’s signature. Mr Singh at that time was operating under the Power of Attorney from Mr Perera, but instead of signing as Mr Perera’s agent, signed as though it was Mr Perera. Mr Perera says this was a forgery. I make no determination on that allegation, as it is a criminal one and not one that is necessary for findings of fiduciary duty breach.
[78] There is one other attempted transaction by Mr and Mrs Singh which raises considerable suspicion about their intentions. Mr and Mrs Singh attended on a firm of solicitors for the purpose of transferring the Northland Property into their own names. When asked for an explanation for their actions, Mr Singh said it was on Mr Perera’s instructions. He said Mr Perera wanted a “negative gearing” in respect of the Northland Property, although Mr Singh could not explain what that meant.
[79] The invoice from the law firm for those attendances was addressed to Mr and Mrs Singh and its heading is “Re Perera and Lachmi”. The reason the transaction could not proceed is that, unbeknown to Mr and Mrs Singh, Ms Lachmi had placed a caveat on the Northland Property. Mr Perera was not aware of this. The law firm had sent withdrawal of caveat documents to Ms Lachmi, which she did not action.
[80] Although the transfer of property did not eventuate, this attempted transaction raises serious questions about Mr and Mrs Singh’s credibility. I am satisfied Mr Perera knew nothing of their visits to the solicitors, or Ms Lachmi’s caveat, or the attempted transfer of the Northland Property into Mr and Mrs Singh’s name and that he never gave Mr and Mrs Singh any instructions to that effect.
[81] Throughout the hearing, Mr Singh made other concessions. He conceded that his answer to an interrogatory, when he denied that he failed to make payments
towards Mr Perera’s Insurance Policy premiums, was a mistake. Again, contrary to his assertion that he did not withdraw money from Mr Perera’s bank account after the termination of the Power of Attorney arrangements in 2014, Mr Singh acknowledged that he did access Mr Perera’s account to reimburse himself.
[82] In addition to the above, Mr Singh on numerous occasions under cross- examination had to concede that his previous evidence was either wrong, or his actions were a mistake. As the hearing progressed, it also became clear that Mr Singh, either through dishonesty or ineptitude, misled the Court as to how and why a number of the Transactions occurred.
[83] I turn, then, to Mr Singh’s acknowledgement of his duty. Mr Singh agreed that when Mr Perera entrusted Mr Singh with his affairs he put a great deal of trust in him. Mr Singh also acknowledged that he had a duty to keep a record of the transactions he was making on Mr Perera’s behalf. When pressed, however, about the state of the accounts he agreed he did not start doing the accounts until either 2014 or 2015. When asked to explain how he differentiated between Mr Perera’s accounts and Mr and Mrs Singh’s private and business accounts, Mr Singh said that he kept accounts in his head:
Q: How would you know what money is which when you mix money up between Mr Perera’s money and your own money and your business account’s money? How would you keep account of everything?
A: I normally had that in my head, basically, and that’s how I used to always work with. Like when I didn't have any money for my own account, I used to pay, and then I used to think back … when I get some money, some extra money, I shall then reimburse myself. That’s how I used to do. That’s how I worked from the beginning.
[84] In addition to the factors outlined above, I also had the opportunity to assess Mr Singh’s demeanour and responses in the witness box. He admitted throughout the hearing to making “mistakes” in his brief of evidence, in his accounting evidence, and in redacting his bank statements which hid the true nature of what occurred in relation to the Transactions and the cash withdrawal on Mr Perera’s Insurance Policy. I found Mr Singh’s credibility and reliability as a witness was seriously compromised.
(b) Mrs Singh
[85] There are aspects of Mrs Singh’s evidence which also compromised her credibility. Mrs Singh acknowledged that in preparing her brief of evidence, Mr Singh helped her write her brief. She conceded that she was wrong when she asserted she was a 14 year old schoolgirl when she helped Mr Perera with his cleaning business. She also accepted that in an affidavit sworn by her in support of an application for further and better discovery, her deposition that she sent personal funds to Mr Perera was incorrect. The funds were sent on behalf of their father. Mrs Singh accepted “this was truly a mistake”.
[86] Of relevance to my finding on the parties to the Agency Agreement,27 I record that Mrs Singh, despite her claim that she was not a party to the Agency Agreement, accepted that she helped find tenants for the Northland Property, she developed relationships with key tradespeople in regard to the management of the Northland Property; and she was involved in multiple minor and major repairs and maintenance at the Northland Property. She also accepted that she arranged for insulation work to be undertaken on the Northland Property and that she passed on information to Mr Perera in relation to the repairs and maintenance work. Yet, Mrs Singh still asserted that she “never had anything to do with maintaining the property”.
[87] Mrs Singh’s concessions about the work she did around the Northland Property confirmed my view that she was a party to the Agency Agreement and I have made that finding accordingly.
[88] I am also satisfied, despite Mrs Singh’s inability to remember whether or not she was involved in seeking to transfer the Northland Property into her and her husband’s name, as outlined in [78]–[80], that Mrs Singh clearly knew about the intended transaction. The transaction was to transfer the Northland Property into both their names.
[89] In light of the above evidence, I found Mrs Singh’s credibility was compromised in this hearing. I am satisfied, however, that Mrs Singh did not deal
27 See [33]–[35] of this judgment.
with Mr Perera’s bank accounts, leaving Mr Singh to manage Mr Perera’s bank accounts and expenses in respect of the Northland Property and the Insurance Policy.
(c) Mr Perera
[90] In turn, Mr and Mrs Singh challenged Mr Perera’s honesty and credibility, citing two examples. The first example concerned a transaction on 18 October 2000, where $50,000 was added to the mortgage on the Northland Property, and was drawn down from Mr Perera’s bank account. It is not clear where that $50,000 went. Mr Perera says it was deposited into one of Mr Singh’s account, though there is no evidence of that. Mr and Mrs Singh deny they ever received that money. The following day, $10,000 was then withdrawn from Mr and Mrs Singh’s account and transferred into a bank account in Melbourne.
[91]Mr and Mrs Singh say that Mr Perera requested that Mr Singh organise a
$50,000 loan increase on the Northland Property. Mr Singh says that he forwarded the bank documents to Mr Perera who filled them out and sent them back. Mr Singh then sent the completed form to Mr Perera’s bank, and the loan was increased. Mr and Mrs Singh say they do not know where the $50,000 went, though they believed the
$50,000 was paid into Ms Lachmi’s account. Mr and Mrs Singh then say Mr Perera instructed them to send $10,000 as a repayment to people in Melbourne, from whom he had borrowed money to pay his lawyer’s fee in respect of an urgent custody dispute with his partner, Ms Lachmi. This dispute occurred following their separation in mid- 2000.
[92]Mr Perera’s evidence and claim is that both the $50,000 draw down and the
$10,000 transfer were unauthorised transactions. Under cross-examination, Mr Perera was shown a Travelex money transfer of $10,000 to a Commonwealth Bank account in the names of G P and T U Dassanayake in Melbourne. Mr Perera said he did not recognise the name Dassanayake and confirmed he did not authorise the $10,000 payment.
[93] Following Mr Perera’s evidence, Mr Singh contacted G P and T U Dassanayake in Melbourne by telephone. They confirmed that they knew Mr Perera and had received $10,000 by bank transfer from Mr and Mrs Singh in October 2000.
Mr Singh had then obtained an affidavit through Ms Lachmi, sworn by T U Dassanayake, known as Ruwandi, who was a witness in Mr Perera’s and Ms Lachmi’s child support proceeding in Melbourne. Mr Singh gave evidence of the telephone call and produced Mrs Dassanayake’s affidavit.
[94] I granted leave to Mr Romanos to re-call Mr Perera, in light of Mr Singh’s evidence which had not been put to Mr Perera. Mr Perera explained to the Court that he did not recognise the names G P and T U Dassanayake when he was questioned about the Travelex money transfer. He acknowledged that he did authorise a transfer to a couple whom he knew only by their first names, Gamani and Ruwandi. Their actual initials, as shown on the Travelex document, do not reflect the first names by which he knew them.
[95] Mr Perera said he also did not connect or associate the money transfer to Melbourne, as it stated on the Travelex document. Mr and Mrs Dassanayake lived in Corio, which is not in Melbourne. Thus, when he was asked if he had authorised a transfer of $10,000 to a couple in Melbourne with a name he did not recognise, Mr Perera denied it. He said at the time he could not think of anyone in Melbourne to whom he would have sent any money, and this “put him off”. That is why he wished to come to Court again to correct the matter.
[96] I accept Mr Perera’s explanation. As he told the Court, his children were young at that time and his partner knew Mr and Mrs Dassanayake, who looked after their children as caregivers. After Mrs Dassanayake’s affidavit from the custody proceedings was produced, Mr Perera also rang Mr and Mrs Dassanayake whose number was recorded in the affidavit. From his conversation with them, he remembered that he had borrowed some money from Mr Dassanayake to pay his lawyer’s fee arising from the custody dispute. I consider it is understandable in those circumstances that he knew them by their first names only, and the reference to Melbourne, not Corio, in the document was confusing. I found Mr Perera to be a credible and reliable witness overall, including his explanation for not recognising the Dassanayake name or address.
[97] The second example raised by Mr and Mrs Singh as to Mr Perera’s honesty and credibility is his 6 June 2000 email. Mr and Mrs Singh claim Mr Perera tried to “cheat” Ms Lachmi of her proper share of relationship property, by instructing Mr Singh to increase the loan on the Northland Property mortgage so that the equity in the Northland Property was reduced.
[98] I reject this allegation of dishonesty on the part of Mr Perera, and I can deal with it briefly. Mr Perera had discovered in early June 2000, through a telephone conversation with Mr Singh, that Ms Lachmi had placed a caveat on the Northland Property, clearly in contemplation of a future relationship property claim against the Northland Property. He also discovered that Mr Singh had been paying mortgage repayments on the Krull Street Property from the rental proceeds of the Northland Property. Mr Perera’s relationship with Ms Lachmi had broken down and, consistent with Mr Perera’s evidence, Ms Lachmi was to retain the Krull Street Property as her separate property, with the benefit of Mr Perera’s rental income reducing her mortgage.
[99] The allegation of dishonesty and Mr Perera’s attempt to “cheat” Ms Lachmi out of her proper share of relationship property is entirely misplaced. The loss of value was at the hands of Mr Perera. I do not consider this allegation affects Mr Perera’s honesty or credibility.
[100] In light of the above findings on credibility, I turn now to analyse the claims for breach of fiduciary duty.
Breach of fiduciary duties under the Agency Agreement
[101] Mr Perera alleges that Mr and Mrs Singh breached their fiduciary duties under the Agency Agreement by:
(a)failing to account and pay over to him the income generated by the Northland Property during the period of Mr and Mrs Singh’s agency and after the expiry of the Agency Agreement, including interest on the nominal rental profits and the income which went towards the Krull Street Property;
(b)making the Transactions without Mr Perera’s knowledge, which caused Mr Perera’s bank account to be more indebted and/or increased the mortgage against the Northland Property, and failing to use the proceeds of the Transactions for the benefit of Mr Perera;
(c)failing to notify Mr Perera about the cash withdrawal on the Insurance Policy and transferring that sum to Mr Singh’s bank account;
(d)failing to make payments towards the Insurance Policy between 11 September 1994 and 11 February 1997, and failing to inform Mr Perera of this;
(e)failing to inform Mr Perera at the termination of the Agency Agreement that he continued to hold the Insurance Policy, which led to him being in default on his payments towards it between 11 February 2016 and 11 August 2017; and
(f)allowing Mr Perera’s bank accounts to incur the Bank Charges and Fees and not informing Mr Perera about them, which caused Mr Perera’s account to become more indebted and/or increased the mortgage against the Northland Property.
[102] Mr and Mrs Singh deny all the above allegations of breach of fiduciary duty. They claim all their actions were undertaken with the full authorisation of Mr Perera and in accordance with his instructions.
[103] Mr Perera has to prove, on the balance of probabilities, that Mr and Mrs Singh breached each fiduciary duty in the above ways. I turn, therefore, to assess each of the allegations of breach of fiduciary duty, with the highest degree of probability as the applicable standard of proof.
(a) Failing to account for and pay over to Mr Perera the Northland Property income
[104] Two sets of accounts were provided by the parties. Mr and Mrs Singh’s accountant submits that in relation to the rental income, Mr Singh owed Mr Perera
money in the sum of $57,920.85. Although this figure differs dramatically from Mr Perera’s figure of the rental income and interest owed, I treat this as an acknowledgement by Mr and Mrs Singh that they owe Mr Perera income from the Northland Property. This is, in effect, an admission by them that they breached their fiduciary duty by failing to account to Mr Perera, and pay him for, the income generated by the Northland Property. I analyse the actual loss suffered later in this judgment. However, I am satisfied Mr and Mrs Singh breached their fiduciary duty in failing to account for, and failing to pay to Mr Perera, the income generated by the Northland Property.
(b) Making the Transactions and failing to use the proceeds for Mr Perera’s benefit
[105] In response to Mr Perera’s allegation that the Transactions made were in breach of Mr and Mrs Singh’s fiduciary duties, Mr and Mrs Singh alleged that every transaction was made with the knowledge of Mr Perera and with his express consent. On the evidence, large amounts of money were transferred from Mr Perera’s accounts into Mr and Mrs Singh’s accounts. There is only Mr Singh’s word that he used this money towards the Northland Property. Mr Singh has not provided the Court with evidence that many or most of the Transactions were used for the benefit of the Northland Property.
[106]There are 115 Transactions which make up Mr Perera’s claims, totalling
$315,388.74. As they span the time period from October 2000 to April 2015, I do not intend, and nor is it necessary in ascertaining breach of fiduciary duty, to set out each and every transaction. They were pleaded and proved to my satisfaction as having occurred. I highlight, however, two of the principal Transactions which illustrate the way in which monies were drawn down from Mr Perera’s account into Mr and Mrs Singh’s accounts.
[107] The first is the increase in the mortgage on the Northland Property by $50,000. On 18 October 2000, Mr Perera had an existing mortgage of $25,000. The same day, that loan was cleared and a new account was opened at $75,000, secured against the
Northland Property. The following day, $10,000 was sent to Mr and Mrs Dassanayake in payment of Mr Perera’s lawyer’s fees.28
[108]Mr Romanos invited the Court to draw the following inferences:
(a)On 9 October 2000, consent orders were made in Mr Perera’s custody dispute and he needed money to pay for his legal fees, which were paid by Mr and Mrs Dassanayake.
(b)Mr Perera asked Mr and Mrs Singh to send money to Mr and Mrs Dassanayake to pay them back.
(c)Mr Perera, a few months before, sent Mr and Mrs Singh a variation of loan document. This could not be actioned by Westpac because a caveat was present on the Northland Property. Mr Perera also sent a cover note with the variation of loan document authorising the drawdown for the maximum amount possible.
(d)When Mr Singh was told by Westpac the documents could not be processed because of the caveat registered on the title of the Northland Property, it was suggested that as Mrs Singh is Mr Perera’s sister and Mr Singh is his brother-in-law, Westpac agreed nevertheless to arrange for money to be drawn down. This explains the $50,000 increase in Mr Perera’s loan balance.
(e)Consistent with that movement of funds, on 19 October 2000 Mr and Mrs Singh, in anticipation of receiving money, prepared an international money transfer through Travelex of $10,000 to Mr and Mrs Dassanayake for the following day.
(f)The $50,000 was therefore drawn down by Mr Singh out of Mr Perera’s account, and placed into Mr Singh’s own personal account. Aside from
28 See [91]–[96] of this judgment.
the payment of $10,000, Mr Singh failed to use the funds for the benefit of Mr Perera.
[109] In the absence of any loan documentation, I am satisfied that the inferences Mr Romanos asks the Court to draw are consistent with the documents that were available to the Court and the dates and timing of both the $50,000 drawdown and the $10,000 payment. Mr Singh denied that the $50,000 was transferred into his account, but accepted that all other Transactions did go into his account.
[110] Although the $40,000 does not appear in Mr and Mrs Singh’s disclosed bank account, Mr Singh accepted that there were funds received in Mr and Mrs Singh’s National Bank account from cash withdrawals drawn out of Mr Perera’s accounts. Mr and Mrs Singh’s National Bank account was not disclosed. Wherever the funds did finally go, three things are clear: Mr Perera was left with a debt of $50,000; $10,000 was an authorised payment by Mr Perera; and Mr Perera did not receive the benefit of the remaining $40,000. I therefore draw the inferences, as Mr Romanos submitted.
[111] The second example involves two transactions in May 2003. On both 8 May and 26 May 2003, $30,000 was withdrawn from Mr Perera’s account and deposited into Mr Singh’s account. Again, there are no loan documents supporting the transfers of these sums from Mr Perera’s account to Mr Singh’s. Initially, Mr Singh said that Mr Perera had authorised the two transactions, which were in effect drawdowns from the Northland Property, in order to maximise the borrowing and minimise the equity in the Northland Property. Mr Singh points to Mr Perera’s cover note to the loan variation document, referred to earlier, which requested that Mr Singh draw down the maximum amount possible, and the June 2000 email which requested the same. However, the May drawdowns occurred three years after the cover note was written and the June 2000 email. I do not accept that three years after the requests, Mr Singh was finally acting on them.
[112] Under cross-examination, Mr Singh explained that the monies were provided by Mr Perera as a loan in order to purchase a property in Malaysia. In the absence of any supporting documentation, I accept Mr Perera’s evidence that he neither knew
about the transactions nor authorised them. Again, this resulted in a significant additional increase of $60,000 of mortgage debt to be repaid by Mr Perera.
[113] From June 2003 to April 2015, I find that the remaining 112 Transactions were all unauthorised. As canvassed above,29 throughout the hearing, it became clear that Mr Singh, either through dishonesty or ineptitude, misled the Court as to how and why a number of the Transactions occurred. Even taking a lenient view and accepting ineptitude as the reason for these failings, it is clear that Mr Singh did not keep adequate accounts to enable him to account for the Transactions, despite claiming his certainty they were all made for the benefit of Mr Perera.
[114] I record that in response to questions about his lack of adequate records, Mr Singh said that as a result of a flood in 2010, a large number of documents relating to the property management arrangement with Mr Perera and Ms Lachmi were destroyed. However, Mr Singh could not provide the precise date of the flood or the details of what was destroyed or retrieved as a result of it. The fact remains that the records of the Transactions were inadequate and his explanations for payments received were unconvincing and lacked credibility.
[115] Given the state of the accounts, the large and frequent transfers between the accounts with often no corresponding payments towards the Northland Property, and the number of “mistakes” acknowledged by Mr Singh when cross-examined about transfers of money, I am satisfied that these payments were not used for the benefit of Mr Perera on his Northland Property, but were instead mixed with Mr Singh’s personal finances and used by Mr Singh for his own personal and/or business debts.
(c) Failing to notify Mr Perera about the cash withdrawal on the Insurance Policy
[116] Mr Perera claims that on or around 25 June 2007, Mr Singh forged his signature to obtain a cash withdrawal from the Insurance Policy. He was aware, from an email from Mrs Singh, that Mr Singh had telephoned the insurance company and pretended to be him. He did not know that Mr Singh had withdrawn $19,900 from the Insurance Policy and into Mr Perera’s account, and that Mr Singh had then transferred some or
29 See [70]–[84] of this judgment.
all of the funds from Mr Perera’s bank account to his own. $10,000 of the funds are recorded as being deposited into Mr Singh’s business account called Nijar Holdings.30 Mr Singh appears to have reimbursed himself for a $2,000 payment he gave to Mrs Singh’s relative on Mr Perera’s behalf, and allegedly $5,000 went to Mr Perera’s lawyer in Melbourne. It appears the remaining $12,900 went into Mr Singh’s own account. I use the word “appears” because Mr Singh’s answers to these questions were difficult to follow. He referred to other monies from Mr Perera’s bank accounts and an alleged gift from Dilip Perera, Mr Perera’s father.
[117] At the time, Mr Singh held Mr Perera’s Power of Attorney as well as performing his duties under the Agency Agreement. The terms of the Power of Attorney allowed Mr Singh to sign and use Mr Perera’s name.31 However, the withdrawal of those funds, at the very least, required disclosure to Mr Perera under the duties arising in the Agency Agreement. The sum is large and initiating cash withdrawals on the Insurance Policy cannot be said to be a part of the Agency Agreement.
[118] I am satisfied that Mr Singh withdrew the $19,900 cash on Mr Perera’s Insurance Policy without Mr Perera’s authorisation, and transferred it to his own accounts.
(d) Failing to make payments towards the Insurance Policy
[119] Initially, Mr Singh claimed that there were no missed payments on the Insurance Policy between September 1994 to February 1997. However, in cross- examination, Mr Singh accepted this was not true. He suggested that his “accountant made a mistake on this one”. The passage is as follows:
Q: And in fact, Mr Singh, it’s been claimed by you or on your behalf that there were no missed payments during this time, isn’t that right? September ’94 to February ’97 you’ve claimed that in 1995 life insurance was paid and in ’96 life insurance was paid, $1182.72?
A: Yep.
Q: Now, you’re aware that that’s just not true, aren’t you?
30 See [75] of this judgment.
31 See [126] of this judgment.
A: Yeah, I think my accountant made a mistake on this one. Q: So it’s a mistake?
A:Yeah, I think when they did the accounting exercise it could’ve happened.
[120] There is therefore no dispute that Mr Singh failed to make payments towards the Insurance Policy between these dates and that he failed to inform Mr Perera of the lack of payment. This is also reflected in the AMP Insurance records, which show plainly that Mr and Mrs Singh failed to make payments towards the Insurance Policy in 1994 and 1997.
[121] I uphold Mr Perera’s claim that this is a breach of Mr Singh’s fiduciary duty to manage Mr Perera’s Insurance Policy in a reasonably prudent manner.
(e) Failing to inform Mr Perera that he continued to hold the Insurance Policy
[122] On the termination of the Agency Agreement, Mr Perera submits that Mr and Mrs Singh failed to inform him that he continued to hold the Insurance Policy. Since Mr and Mrs Singh took control of the premium payments in 1991, the relevant insurance company changed multiple times, following acquisitions. At the conclusion of the Agency Agreement, Mr Perera was not informed of the name of the insurance company and was unable to keep up premium payments, incurring unnecessary expenses and costs.
[123] Although lacking transparency, I do not accept this is a breach of fiduciary duty. Generally, fiduciary obligations do not survive the ending of the fiduciary relationship.32 At this point, the Agency Agreement had been terminated, and Mr Perera was therefore in charge of his own premium payments on the Insurance Policy. It became Mr Perera’s obligation to get all the relevant details to service his own Insurance Policy. There is no evidence to suggest he contacted Mr and Mrs Singh for the relevant information, even though he must have realised he was not receiving correspondence about premium payments from Tower Insurance, the company he understood held his Insurance Policy.
32 Attorney-General v Blake [1998] Ch 439 (CA).
[124] In these circumstances and particularly because the fiduciary relationship had come to an end, I consider Mr Perera needed to actively contact either Mr and Mrs Singh or Tower Insurance to take over the premium payments for his Insurance Policy. I do not consider any fiduciary duties were breached in relation to Mr and Mrs Singh failing to inform Mr Perera that he continued to hold the Insurance Policy once the fiduciary relationship had ended. I therefore disallow any claim for expenses and costs in relation to the Insurance Policy from the termination of the Agency Agreement to the present.
(f) Allowing Mr Perera’s bank accounts to incur the Bank Charges and Fees
[125] Finally, it follows from my conclusions above that I am satisfied that Mr and Mrs Singh failed to manage Mr Perera’s bank accounts in a reasonably prudent manner in allowing the accounts to incur the Bank Charges and Fees. The amounts claimed have not been challenged as inaccurate and those amounts are appropriately incorporated into the calculations of loss,33 which I deal with under Issue Five.
Breach of fiduciary duties in respect of the Deed and the Power of Attorney
[126] The Deed and Power of Attorney (POA) ran from March 2004 to November 2014. The POA allowed Mr Singh, among other things:
(a)To act for me [Mr Perera] in my name on my behalf and in my interests in all matters with or in which I shall be in any way connected or concerned (whether solely or otherwise) as fully and effectually as I could if personally present
(b)To sign and use my name in any manner in any deed document or writing
(c)To act in my place as Attorney for any and all persons or bodies
corporate …
[127] Plainly, the POA provided more comprehensive and general powers and duties than those provided for under the Agency Agreement. Significantly, it authorised Mr
33 The bank debt is included in the figure of $255,438 for “the actual bank balance”, shown in Ms Kelly’s calculation at [152] of this judgment.
Singh to act generally for Mr Perera as if Mr Perera himself were personally present, and it allowed Mr Singh to sign for Mr Perera, using his signature.
[128] Such a relationship plainly invokes fiduciary duties and, as canvassed above,34 the agent must discharge his or her duties towards the principal with the utmost loyalty, honesty, and good faith.35 The agent must ensure that he or she does not benefit at the donor’s expense.36 The agent must act with absolute openness and fairness to the donor,37 and must act always in the donor’s best interests, in particular where a power is granted for the purpose of preserving and managing the donor’s property.38
[129] Mr Perera submits that Mr Singh has breached these fiduciary duties owed under the Deed by:
(a)Failing to act in good faith in Mr Perera’s interests by:
(i)initiating credit limit increases to Mr Perera’s accounts, without authorisation;
(ii)initiating loan drawdowns from Mr Perera’s bank account to Mr and Mrs Singh’s bank accounts, and using the proceeds for self- interested purposes, including Mr and Mrs Singh’s repayment of personal and business debts which did not advance Mr Perera’s interests;
(iii)initiating manual and internet bank transfers between Mr Perera’s bank accounts and Mr and Mrs Singh’s bank accounts for self-interested purposes that did not advance Mr Perera’s interests; and
(iv)initiating the cash withdrawal from the Insurance Policy and transferring that sum to Mr and Mrs Singh’s bank accounts for
34 See [62]–[65] of this judgment.
35 Vernon v Public Trust, above n 23, at [37].
36 New Zealand Netherlands Society v Kuys, above n 8, at 165-166.
37 Butler, above n 10, at 535.
38 Vernon v Public Trust, above n 23, at [37].
self-interested purposes which did not advance Mr Perera’s interests;
(b)Failing to use reasonable skill and care in the execution of his powers under the Deed insofar as Mr Singh caused Mr Perera’s accounts to become more indebted than Mr Perera would have authorised, including by making drawdowns and transfers from Mr Perera’s account to Mr and Mrs Singh’s accounts and by allowing the Bank Charges and Fees to accrue unnecessarily:
$498,472.
[163] These figures are markedly different. Ms Kelly’s figures are based on the expected amount of mortgage repayments, using a mortgage balance for the Northland Property of $42,390 as at 1 April 1991.46 Mr Corke’s figures, however, are based on the mortgage repayment figures in Ms Soo’s summaries, which include payments to the mortgagee of the Krull Street Property and rely on figures supplied by Mr Singh.
46 The evidence shows that the mortgage balance for the Northland Property was $38,871.86 at 9 February 1993. By February 1996 the balance had reduced to $29,692.78. The decrease in the principal owing over this sixty-month period is $9,179.08, or $152.98 per month. Accordingly, Ms Kelly assumed for the purposes of her calculations that the principal payments would have been $152.98 for the life of the loan. This works out to a balance of $42,390.51 at 1 April 1991.
[164] The second difference is that Ms Kelly included the outstanding mortgage debt of $255,438 as the actual bank debt incurred by Mr and Mrs Singh. Mr Corke, however, does not include them in his calculations. Instead, he treated $285,393.80 as monies paid by Mr Perera for the benefit of Mr Singh.47
[165] The third difference is Ms Kelly’s inclusion of interest on a projected surplus each year on the Northland Property at Judicature Act 1908 rates, as a lost opportunity calculation on the basis that Mr Perera would have had the opportunity to invest those funds. Mr Corke did not include any interest component on the $57,000 which he calculated was owed.
[166] The other differences are Mr Corke’s inclusion of the Krull Street Property figures in his assessment, Mr Corke’s deduction of the $10,000 from the October 2000 transfer.
[167] After considering both expert accountants’ evidence, I prefer Ms Kelly’s calculations, with two exceptions: her calculation of the interest component of
$325,549 and the lack of a deduction of $10,000, which I deal with below.
[168]I prefer Ms Kelly’s calculations for the following reasons:
(a)Ms Kelly’s “rent received” figures were based on both the actual rent received by Mr Singh, with the gaps filled in where there were no records of tenants and the rent received. This was then compared against the “mean rents” data recorded by MBIE for that period. This produced a substantially similar result, though Ms Kelly took the lower figure. This contrasts with Mr Corke’s approach, which assessed the actual value of rent received in the absence of complete records.
(b)Ms Kelly undertook her assessment on the Northland Property figures only, which is consistent with my finding that the Agency Agreement involved the Northland Property only.
47 This figure comprises a number of loan drawdowns that were transferred into Mr Singh’s account, as well as other transfers from Mr Perera’s account to Mr Singh’s.
(c)Ms Kelly’s evidence was more comprehensive and robust. Ms Kelly explained the assumptions she made, and the “accounting practice” she adopted to fill in the inevitable gaps where figures, documents, invoices, and receipts were not available.
(d)Ms Kelly used the AMP Insurance figures in calculating the Insurance Policy payments, whereas Mr Corke used figures provided by Mr Singh.
[169] My preference for Ms Kelly’s figures should not be seen as a reflection on Mr Corke. The problem for Mr Corke was that in undertaking his assessment, he relied on summaries of income and expenditure provided to him by Ms Soo. Ms Soo was called, but not as an independent expert. She has a close association with Mr and Mrs Singh and relied on Mr Singh in preparing the spreadsheets and summaries for Mr Corke. I also note that Ms Soo was present when Mr and Mrs Singh made telephone contact with Ms Lachmi, during the course of the hearing. I consider her position to be somewhat compromised because of her close association and friendship with Mr and Mrs Singh. I do not consider, therefore, that Mr Corke had the benefit of independent and reliable financial data.
[170] However, I wish to record that Mr Corke, as an independent expert and professional, made appropriate acknowledgements. For instance, he described Mr Singh’s accounts as a mess and, despite Mr Singh’s assertion that the $285,393.80 funds were paid in reimbursement of Mr Singh’s expenditure on the Northland Property, he did not accept that because there were no supporting invoices, receipts, or other documentary records. Although I do not accept Mr Corke’s loss assessment, I do accept his deduction of the $10,000 transfer authorised by Mr Perera on 19 October 2000. I also partially accept his evidence on the assessment of interest, which I deal with below.
[171] My assessment of Mr Perera’s loss, on the basis of the accountancy evidence and leaving aside an award of interest, is $614,500, as calculated by Ms Kelly, less
$10,000 for the fund transfer authorised by Mr Perera in October 2000. This amounts to $604,500, to which an amount of compensatory interest should be added.
Clarification is also sought as to any claims for the Insurance Policy expenses since the termination of the Agency Agreement. Such sums are to be deducted from the total loss suffered.48 I now deal with the issue of interest.
[172] The Court has a wide discretion to determine whether interest should be awarded.49 The principle upon which the Court exercises its discretion to award interest is that the plaintiff has not had the use of money which should have been available to him, and he should be compensated for that.50
[173] I am satisfied that Mr Perera is entitled to interest on monies he otherwise would have received by rental payments from 1992 to the date of judgment, less the deductions for Insurance Policy premiums and mortgage principal payments. I accept, therefore, the method for Ms Kelly’s calculation of interest, but I am not satisfied that the Judicature Act rates used by Ms Kelly are appropriate. I consider Mr Corke’s approach is more reasonable. The Judicature Act interest rates over the respective years of 11 per cent, 7.5 per cent, 8.4 per cent and five per cent need to be reviewed against the applicable bank rates prevailing at the relevant times. However, as the funds were to be available when required, the bank rate should be the equivalent of an interest-bearing bank account, such as a savings account, not a term deposit rate.
[174] Ultimately, the Court’s power is discretionary and is to be exercised as the justice of the case requires.51 The award of interest may be for the whole or any part of the loss accrued. As the parties have not submitted on the appropriate bank rate with which the interest should be calculated, I reserve my position in relation to the compensatory interest, until I have heard from the parties. I am, therefore, allowing the parties to recalculate interest rates on the “Total Cash” available for the years 1992 to the present, as calculated by Ms Kelly.52 I make those directions at the end of this judgment.
48 See [124] of this judgment.
49 Judicature Act 1908. Although this Act was repealed on 1 January 2018 by the Interest on Money Claims Act 2016, this claim remains to be dealt with under the old Act: Interest on Money Claims Act 2016, sch 1, cl 1.
50 Worldwide NZ LLC v NZ Venue and Event Management Ltd [2014] NZSC 108, [2015] 1 BZKR 1 at [23]; and Day v Mead, above n 42, at 452-453 and 463-464.
51 Worldwide NZ LCC, above n 50.
52 See sch 2 of Ms Kelly’s brief of evidence, dated 5 February 2019.
[175] I also seek clarification from counsel on the amount of Mr Perera’s Insurance Policy claim since termination of the Agency Agreement in December 2014.
Issue Six: Is the plaintiff entitled to general and/or exemplary damages?
General damages
[176] Mr Perera also submits he is owed general damages in the sum of $180,000 for the stress he has suffered throughout the proceeding.
[177] In equity, a plaintiff can sue for compensatory damages to restore the plaintiff to the position that he would have been in but for the breach,53 and/or damages for mental stress.54 In claiming for damages of mental stress, the general principles of causation, remoteness, and mitigation apply,55 and must be proved by Mr Perera on the balance of probabilities. Such damages are awarded only where the kinds of harm suffered were reasonably foreseeable consequences of the particular breaches of duty and were caused by those breaches of duty.
[178] Mr Perera submits he has been put through a “gargantuan” ordeal to seek judgment for what is owed, and the stress of the proceeding has been exacerbated by the nature of Mr and Mrs Singh’s breach of their duties and their conduct throughout the course of proceedings.
[179] I am not satisfied that a claim for damages for mental stress has been made out. In comparable cases where the court has awarded damages for mental stress, the stress suffered by the plaintiff is at a much higher level, and the damages sought were substantially lower in sum.56 On the evidence, I do not consider Mr Perera’s claim for mental stress meets the threshold for mental distress damages here. The pleading has not particularised the basis for mental stress and the evidence from Mr Perera is
53 Day v Mead, above n 42.
54 Mouat v Clark Boyce (No 2) [1992] 2 NZLR 559 (CA) at 569.
55 Butler, above n 10, at 917.
56 In Mouat v Clark Boyce, above n 54, for example, a 75 year old woman lost her home as a result her lawyer’s breaches of duty and the Court awarded damages in the sum of $25,000, acknowledging that this was at the high end of claims for distress damages. In that case, Mrs Mouat’s stress was considered “immense” where she was in fear of losing her home, and where vulnerability was a factor.
commensurate with the stresses of litigation involving family members, rather than the mental distress damages for which awards have been made.
[180]The claim for general damages for stress is not upheld.
Exemplary damages
[181] Mr Perera also submits that Mr and Mrs Singh have conducted themselves in a manner befitting an award of exemplary damages in the sum of $40,000 to both punish them and act as a deterrent to others contemplating defrauding family members.
[182] Exemplary damages may be awarded whether the cause of action is founded in law or equity.57 In particular, exemplary damages may be awarded for breach of fiduciary duties. In Cook v Evatt (No 2), Fisher J summarised three requirements for the imposition for exemplary damages.58 First, Mr and Mrs Singh’s conduct must have been so outrageous that punishment is called for as an end in itself. Second, such other remedies as Mr and Mrs Singh will have to bear in any event must fall short of an adequate punishment. Third, exemplary damages should be awarded only in “serious and exceptional” cases.
[183] In this case, I am not satisfied that an award of exemplary damages should be made. I accept that the conduct of Mr and Mrs Singh in this instance is such that punishment may be necessary in and of itself, a step which has been described as a relatively short one to make where the successful cause of action is breach of fiduciary duty.59 However, I am not convinced the judgment for Mr Perera’s loss against Mr and Mrs Singh is inadequate punishment for the breaches, and I do not consider this case falls into the category of “serious and exceptional”.
[184] The misappropriation of money by family members is a grave breach of trust. However, I consider the findings of breach of their fiduciary duties and the monetary judgment against Mr and Mrs Singh is punishment enough, both to deter others who
57 Cook v Evatt (No 2), above n 7, at 706.
58 At 706.
59 At 706.
might be minded to exploit similar positions of trust and to punish Mr and Mrs Singh for their actions towards their family member.
[185]I decline to make an award for exemplary damages.
Issue Seven: Does the Limitation Act 1950 assist Mr and Mrs Singh?
[186] Mr and Mrs Singh have pleaded a defence of limitation under the Limitation Act 1950 (the Act). They submit that any claims by Mr Perera against Mr and Mrs Singh are based in contract, as well as fiduciary law. Section 4(1)(a) of the Act provides that actions founded on simple contract or tort shall not be brought after the expiration of six years from the date on which the cause of action accrued. As the date of filing the proceedings was 21 September 2015, Mr Lakshman for Mr and Mrs Singh submits that all alleged breaches on or before 21 September 2009 are therefore statute- barred.
[187] In response, Mr Romanos for Mr Perera submits first that s 4 does not apply as this is not a contract that also gives rise to fiduciary duties. It is simply a breach of fiduciary duties. Second, Mr Romanos submits that, if the Court is minded to find a contract occurred in this instance, ss 21 and 28 of the Act apply which provide exceptions to the statute-bar in s 4 (1)(a). He says that ss 21 and 28 apply as Mr and Mrs Singh’s actions amount to equitable fraud. He relies on the Privy Council decision in O’Connor v Hart, which states that:60
“Fraud” in its equitable context does not mean, or is not confined to, deceit; “it means an unconscientious use of the power arising out of circumstances and conditions of the contracting parties” …
[188] It is unnecessary to go into the submissions in any more detail on ss 21 and 28 of the Act as the answer to this issue lies in s 4(1)(a). I have found that the relationship between Mr and Mrs Singh and Mr Perera was not founded in contract. It was a fiduciary relationship, giving rise to equitable duties. The limitation defence in s 4, therefore, has no application to these facts.
60 O’Connor v Hart [1985] 1 NZLR 159 (PC) at 171.
[189] In addition, s 4(9) of the Act provides that s 4 does not apply to a claim for equitable relief unless the equitable actions are sufficiently analogous to common law actions to be treated in a like manner. Mr and Mrs Singh have not made out or attempted a limitation-by-analogy argument. For both these reasons, the limitation defence under s 4 fails.
Issue Eight: Does the equitable defence of acquiescence apply to any of the Transactions?
[190] Acquiescence was not pleaded by Mr and Mrs Singh under the Limitation Act defence pleading.
[191] During the course of final submissions from both parties, I raised with counsel whether the equitable defence of acquiescence was available on the evidence adduced at the hearing. I referred to the evidence which relates to Mr Perera’s discovery on the June 2000 telephone call with Mr Singh, confirmed by the June 2000 email, that the mortgage payments for the Krull Street Property were being paid from the rentals from the Northland Property. Mr Perera separated from Ms Lachmi and entered into a relationship property agreement with her without seeking an account from Mr Singh for the amount of rental payments that had been applied to the Krull Street Property mortgage. Nor did Mr Perera seek an adjustment in the division of property with Ms Lachmi, who received the benefit of those payments as she kept the Krull Street Property as her separate property.
[192] The Limitation Act 1950 preserves the equitable defence of acquiescence. Section 31 provides that:
Nothing in this Act shall affect any equitable jurisdiction to refuse relief on the ground of acquiescence or otherwise.
[193] The precise meaning and scope of acquiescence is unclear. A number of cases refer to slightly different meanings of the word “acquiescence”,61 and the authors of Equity and Trusts in New Zealand suggest three separate meanings:62
61 Duke of Leeds v Early of Amherst (1846) 2 Ph 117, at 123; De Bussche v Alt (1878) 8 Ch 286 at 314; Orr v Ford (1989) 167 CLR 316 and 337; Goldsworthy v Brickell [1987] 1 Ch 378 at 410; and O’Connor v Hart [1983] NZLR 280 (CA) at 296.
62 Butler, above n 10, at 38.1.5.
(a)Estoppel: “acquiescence” refers to those situations where the plaintiff stands by while he or she sees the violation of his or her rights in progress and takes no steps to interfere.
(b)Waiver, affirmation and release: “acquiescence” refers to those situations where the plaintiff with full knowledge of his or her rights refrains, over a long period, from exercising those rights in circumstances where it can be inferred that he or she has effectively abandoned them.
(c)Laches: “acquiescence” is used in cases of laches to refer to the prejudice or detriment suffered by the defendant or a third party, or the willingness of the plaintiff to let time pass to see if he or she will be advantaged.
[194] Mr and Mrs Singh submit that if the Court finds Mr Perera was aware Mr and Mrs Singh were managing both properties and the manner in which they were doing so, by applying the rental income from the Northland Property toward the loan repayments on the Krull Street Property, then Mr Perera must be taken to have acquiesced in Mr and Mrs Singh’s actions and conduct from the time that he knew of the management of both properties. From that time, Mr Perera stood by and did not seek an account from Mr and Mrs Singh or take any other step to ascertain the true financial position as between him and Ms Lachmi, even though they had recently separated and were in the process of dividing their relationship property. This, they submit, is acquiescence.
[195] In response, Mr Romanos submits that the defence of acquiescence cannot apply. This is because of Mr Singh’s representation to Mr Perera during the telephone call in 2000 that Mr and Mrs Singh would “make amends for the lost rental income”. That is, Mr and Mrs Singh stated they would account for the rental income from the Northland Property that had been used to service the Krull Street Property mortgage, and therefore Mr Perera cannot be said to have acquiesced. Second, Mr Romanos submits that as a result of Mr and Mrs Singh’s failure to plead any such defence, even post-trial, it would not be equitable for acquiescence to be applied in any form. Third,
and Mr Romanos notes that this is to take the defence “at its highest”, the defence may be arguable solely on the basis of a limited waiver of rental income from the Northland Property between May 1998 and May 2000. This limitation, he submits, is because during the 2000 phone call, Mr Singh told Mr Perera that Ms Lachmi had contacted Mr and Mrs Singh “a year or two” beforehand and instructed him to use the Northland Property income to service Ms Lachmi’s mortgage.
[196] I accept Mr Romanos’ first submission. Mr Perera was unaware of his loss as a result of Mr and Mrs Singh’s breaches until late December 2014. He became aware of the pooling of his rentals in June 2000, when he was in the process of separating from Ms Lachmi. I accept his evidence that on finding this out, Mr Singh said he would make amends for lost rental income. Only Mr Singh would be aware of what amount that comprised and how much should be repaid. I therefore consider that it would be unreasonable for Mr Perera to take action to recoup such losses from Ms Lachmi in their property relationship negotiations, as he was unaware of how much was involved. Also, he had Mr Singh’s reassurance that it would be repaid.63
[197] I am satisfied that the defences of acquiescence, waiver or laches do not apply here. Mr Perera was entitled to rely on his fiduciary’s word and any additional loss which he suffered as a result of the pooling of the Northland Property rentals with the Krull Street Property should be compensated. The difference, in any event, is minimal and I make no adjustment.
Interim Result
[198] Mr Perera’s claim for breach of fiduciary duty against Mr and Mrs Singh succeeds.
[199] Mr Perera is entitled to compensation in the sum of $604,500 together with a compensatory sum of interest, and a deduction for Insurance Policy costs and losses after December 2014 following receipt of the parties’ further submissions.
63 I add that on their further submissions, Mr Romanos submitted revised accounts from Ms Kelly including the Krull Street Property. On Ms Kelly’s recalculation with the Krull Street Property included, the difference was minimal, being approximately $2,504.
[200]I therefore make the following directions:
(a)Counsel are directed to file memoranda on the calculation of interest, using Ms Kelly’s methodology in schedule 2 of her brief of evidence for the period 1992 to the present but applying the applicable savings account rates for the relevant years, within 10 days of the date of this judgment.
(b)Counsel for Mr Perera is to advise the specific amount claimed for Insurance Policy costs and losses from December 2014 to the date of hearing.
Costs
[201] Counsel are to confer on costs. To assist the parties, at this stage I do not consider a departure from 2B costs is warranted. In the absence of agreement, counsel for the plaintiff is to file a memorandum within 20 working days of the final decision. Counsel for the defendants is to provide a memorandum in reply within a further 15 working days. Memoranda is not to exceed 10 pages.
Cull J