Sharma v Mundath

[2019] NZHC 705

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2018-404-000572

[2019] NZHC 705

BETWEEN

DATA RAM SHARMA and GANESH

DIXIT as Trustees of the SHARMA FAMILY TRUST
First Plaintiffs and 33 others

AND

MUJEEB RAHIMAN MUNDATH

First Defendant

AND

AFSHEEN MUJEEB

Second Defendant

AND

FULCRUM MANAGEMENT CONSTRUCTION LIMITED

Third Defendant

AND

MUDRA INVESTMENTS NZ LIMITED

Fourth Defendant

AND

SUJIN HWANG

Fifth Defendant

AND

KOYAMA PTY LIMITED

Sixth Defendant

Hearing:	3 April 2019
Appearances:	E Morrison & P Shanahan-Pinker for Plaintiffs P Rice for Defendants
Judgment:	4 April 2019

JUDGMENT OF VAN BOHEMEN J

This judgment was delivered by me on 04 April 2019 at 4.30pm

Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

SHARMA & ORS v MUNDATH & ORS [2019] NZHC 705 [4 April 2019]

Introduction

[1]                 The second  defendant,  Afsheen  Mujeeb,  seeks  leave  in  accordance  with r 15.9(3) of the High Court Rules 2016 to file a statement of defence to the plaintiffs’ claims against her, which has been listed for formal proof.

[2]The plaintiffs oppose Ms Mujeeb’s application.

[3]Ms Mujeeb’s application called on the duty list on 3 April 2019.

Relevant procedural history

[4]                 In an amended statement of claim filed on 7 August 2018, Data Ram Sharma and the other plaintiffs brought claims against the first defendant, Mujeeb Raman Mundath, seeking recovery of the sum of $5,411,622.05 plus interest and costs, in causes of action alleging:

(a)Breach of statutory duty;

(b)Deceit;

(c)Knowing receipt; and

(d)Money had and received.

[5]In the amended statement of claim, the plaintiffs also allege:

(a)Knowing receipt against Ms Mujeeb (who  was  and  may  still  be  Mr Mundath’s wife) and the third and fourth defendants;

(b)Money had and received against Ms Mujeeb and the third, fourth and fifth defendants;

(c)Tracing against the fourth and fifth defendants.

[6]                 Ms Mujeeb was served with the notice of proceeding in relation to the amended statement of claim on 26 August 2018. Ms Mujeeb did not file a statement of defence within 25 working days of service of the notice of proceeding, that is by 28 September 2018, as prescribed in r 5.47(2)(b) of the High Court Rules 2016.

[7]                 On 4 December 2018, Associate Judge Bell heard the plaintiffs’ application for summary judgment in their causes of action against Mr Mundath for breach of fiduciary duty and deceit. In his decision of 24 January 2019, Associate Judge Bell gave summary judgment against Mr Mundath in favour of the plaintiffs for breach of fiduciary duty in the amounts set out in the schedule to his judgment, without prejudice to the plaintiffs’ right to continue their claims against him for other amounts.1

[8]                 By memorandum dated 20 December 2018, counsel for the plaintiffs requested that the claims against Ms Mujeeb and the third and fourth defendants be listed for formal proof pursuant to r 15.9 of the High Court Rules. In accordance with r 15.9(2), no notice was given to the defendants.

[9]                 By Minute dated 13 March 2019, Jagose J ordered that the plaintiffs’ claims against Ms Mujeeb and the third and fourth defendants be listed for formal proof.

Draft statement of defence

[10]              Ms Mujeeb’s counsel, Mr Rice, provided the Court with the draft statement of defence that Ms Mujeeb wishes to file. In the draft statement of defence, Ms Mujeeb:

(a)Denies most of the allegations made in the statement of claim except:

(i)The allegation that she was at all relevant times the wife of   Mr Mundath but she says that although Mr Mundath continued to live in the matrimonial home until March 2018, they separated in early 2016;

1      Sharma v Mundath [2019] NZHC 24 at [118].

(ii)The allegations concerning bank accounts held by Ms Mujeeb in her own name and jointly with Mr Mundath;

(b)Pleads the affirmative defences of:

(i)Relief under s 74B of the Property Law Act 2007 in respect of payments made under mistake where the recipient has altered his or her position in reliance on the validity of the payment; and

(ii)The common law defence of change of position.

Relevant law

[11]              Mr Rice for Ms Mujeeb and Mr Morrison for the plaintiffs agree that the factors relevant to the Court’s decision are those set out by Kós J in Neumayer v Kapiti District Council:2

(a)Whether the defendant has a substantial ground of defence;

(b)Whether the delay is reasonably explained;

(c)Whether the plaintiff will suffer irreparable injury if leave to defend is belatedly granted.

Plaintiffs’ position

[12]              Mr Morrison submits that Ms Mujeeb has not demonstrated that she has a substantial defence. He challenges the applicability of the affirmative defences pleaded in Ms Mujeeb’s draft statement of defence, saying that:

(a)Relief under s 74B of the Property Law Act 2007 cannot apply as the payments were not made by mistake; and

2      Neumayer v Kapiti District Council [2014] NZHC 417

(b)In terms of the second defence, Ms Mujeeb has not particularised how she changed her position in reliance on the funds.

[13]              Mr Morrison also says that proof of Ms Mujeeb’s knowledge is not required to establish the claim for money had and received, and that a tracing exercise is all that is required. He  also  says  that  Bell  AJ’s  summary  judgment  decision  against  Mr Mundath establishes Ms Mujeeb’s liability to account for the funds in the bank accounts in her name and the names of Ms Mujeeb and Mr Mundath.

[14]              Mr Morrison says no reasonable explanation has been given for the delay. He also says that Ms Mujeeb is making a desperate attempt to delay being held to account and that she has not been truthful in saying that she and Mr Mundath have separated, but provides no evidence to substantiate the last allegation.

[15]              On injury damage to the plaintiffs, Mr Morrison says that if Ms Mujeeb is given leave to defend the claim, that will further delay recovery by the plaintiffs and deplete funds held by Ms Mujeeb that would be available to the plaintiffs if their claims are upheld.

Ms Mujeeb’s position

[16]              Mr Rice says Ms Mujeeb has a substantial defence. Her defence to the knowing receipt claim is that she denies the allegation that she knew or ought to have known that the payments into the bank accounts were in breach of Mr Mundath’s fiduciary duties. She also denies the allegations that monies held in the bank accounts were held by her as constructive trustee and that she must account for them. Mr Rice says Bell AJ’s judgment makes no findings about Ms Mujeeb’s liability to account.

[17]              Mr Rice accepts that there is no good explanation for the delay except for error on his part. He says he had prepared the draft statement of defence but neglected to file it on time. He accepts that the plaintiffs were under no obligation to give notice of their application to list the claims against Ms Mujeeb for formal proof but says counsel for the plaintiffs were well aware of Ms Mujeeb’s intention to defend the claims.

[18]Mr Rice says it is clear that the plaintiffs will not suffer irreparable injury.

Analysis

[19]              In Neumeyer, Kós J granted leave to file a defence in circumstances where he held the defendant’s defence to be arguable, although he deliberately made no comment on its merits or whether it would succeed at trial, and the application to be “atrociously late” and the delay not reasonably explained. He did so because he considered that the third factor was the trump consideration and counsel for the plaintiffs in that case accepted that his client would not suffer irreparable harm.3

[20]              In the present case, regardless of the merits of the affirmative defences pleaded, it is apparent that Ms Mujeeb has an arguable defence. She is putting the plaintiffs to proof and they will have to establish that she knew or ought to have known that the payments into the bank accounts were in breach of Mr Mundath’s fiduciary duties, and that she has duties to account for those funds. Like Kós J in Neumeyer, I make no comments on whether that defence will succeed at trial. Mr Rice is correct, however, that Bell AJ makes no findings about Ms Mujeeb’s liability to account.

[21]              The delay in this case is six months, less than the 10 months was the case in Neumeyer. Delay was not fatal in that case and should not be here either, especially when counsel takes responsibility for the delay.

[22]              I recognise that it will be inconvenient for the plaintiffs to have to proceed separately against Ms Mujeeb and that active conduct of her defence may lessen the amount of funds that may be available to them if they succeed. However, that cannot amount to irreparable injury to the plaintiffs or be a reason to deny Ms Mujeeb the opportunity to defend the claim. In accordance with Kós J’s finding that this is the trump consideration, I see this factor as decisive. However, as in Neumeyer, I consider that Ms Mujeeb should pay the plaintiffs’ costs on the application.

[23]              For all these reasons, I consider leave should be granted to Ms Mujeeb to file a statement of defence.

3      Neumayer v Kapiti District Council [2014] NZHC 417 at [4], [10]-[12].

Result

[24]              I grant leave to Ms Mujeeb the second defendant to file a statement of defence to the plaintiffs’ amended statement of claim and to defend the claim.

[25]              I award the plaintiffs costs on this application on a 2B basis to be fixed by the Registrar.

G J van Bohemen J

Solicitors/Counsel:

K3 Legal Ltd, Auckland
P Rice, Barrister Auckland