Singh v Patel

Case [2021] NZCA 242

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IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA
 CA548/2020
 [2021] NZCA 242
BETWEEN

JASVINDER SINGH
Appellant

AND

ROOPA PATEL
First Respondent

AND

ELITE BUSINESS SERVICES NZ LIMITED
Second Respondent
Hearing:

20 May 2021

Court:

Cooper, Simon France and Edwards JJ

Counsel:

A R Gilchrist for Appellant
A A H Low for Respondents

Judgment:

10 June 2021 at 10.30 am

JUDGMENT OF THE COURT

A        The appeal is dismissed.

BThe appellant must pay the respondents costs calculated for a standard appeal on a band A basis, and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Cooper J)

  1. The appellant, Jasvinder Singh, commenced a proceeding in the High Court against Roopa Patel and Elite Business Services NZ Ltd (Elite) seeking damages for conversion of his shares in a company called Steve Taylor & Associates North Shore Ltd (STA) which operated an accounting business in Auckland. 

  2. Lang J rejected the claim and Mr Singh now appeals.  The appeal gives rise to one issue and that is whether, on the facts that he found, the Judge should have held the respondents liable in conversion.[1]  Other causes of action pursued in the High Court were also rejected,[2] but the appeal relates only to the cause of action in conversion. 

The facts

[1]Singh v Patel [2020] NZHC 2242 [High Court judgment].

[2]These causes of action were the knowing assistance by Mrs Patel to Elite to acquire Mr Singh’s shares and an allegation that Mrs Patel had agreed to assume personal liability to pay to Mr Singh the funds required to pay loans obtained by Mr Singh and Ms Sandhu.

  1. There is no dispute about the primary facts found by the Judge.  We summarise these findings in the following paragraphs. 

  2. Mr Singh purchased the shares in STA for the benefit of his wife, Parminder (Pam) Sandhu, who was studying to be an accountant in 2015.  Ms Sandhu met Mrs Patel (who was an accountant) in 2009.  In early 2015, Mr Singh and Ms Sandhu became aware that Mrs Patel had entered into an agreement to buy the shares in STA from IP & Admin Ltd, a company owned by Stephen Taylor.  It was common ground that by 11 March 2015 Mr Singh and Ms Sandhu had agreed to buy 49 per cent of the shares in STA.  Because Ms Sandhu could not get a loan to buy the shares herself, she and Mr Singh decided to register the shares solely in the name Mr Singh.

  3. The terms on which Mr Singh agreed to purchase the shares were not reduced to writing.  Solicitors acting for him prepared a draft shareholders’ agreement, but it was never signed.  Consequently, it was necessary to ascertain the contractual relationship between Mrs Patel and Mr Singh from contemporaneous oral and written communications between the parties and their respective solicitors.

  4. To fund the purchase of the shares, Mr Singh and Ms Sandhu mortgaged their unencumbered…

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Singh v Patel [2021] NZCA 242
Case
[2021] NZCA 242
Decision Date

CaseChat Overview and Summary

In the matter of Singh v Patel, the High Court of Australia was tasked with determining the validity of certain share transfers in relation to shares in a company called STA. The primary issue for the court to decide was whether the respondent, Mrs Patel, had the legal authority to transfer the shares of the appellant, Mr Singh, to herself and Elite, given that there was no evidence of STA maintaining a share register. The secondary issue was whether the respondents' actions constituted a conversion of Mr Singh's shares, depriving him of ownership and possession.

The court found that under the Corporations Act 2001, the share register is a crucial document for evidencing ownership of shares. The absence of a share register in this case meant that Mrs Patel's purported transfers of shares were ineffective. The court noted that the directors of STA were required to ensure the share register was properly kept and that share transfers were promptly recorded. The court concluded that Mr Singh's ownership and possession of the shares remained unchanged despite the alterations to the Companies Register and Mrs Patel's continued actions as if Mr Singh was still a shareholder. The court also found that the respondents did not commit an act that deprived Mr Singh of his ownership or possession of the shares, leading to the dismissal of the claim in conversion.

The court ordered that the appeal be dismissed, with the appellant to pay the respondents' costs of the appeal on a band A basis, along with usual disbursements.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

The registered shareholders as set out in the register are the owners of the shares. In this respect s 89 provides as follows:89 Share register as evidence of legal title(1) Subject to section 91, the entry of the name of a person in the share register as holder of a share is prima facie evidence that legal title to the share vests in that person.(2) A company may treat the registered holder of a share as the only person entitled to—(a) exercise the right to vote attaching to the share; and(b) receive notices; and(c) receive a distribution in respect of the share; and(d) exercise the other rights and powers attaching to the share. In this case, there is no evidence that STA maintained a register. If it did not it was in breach of its duty under s 87(1). Also, under s 90(1), each director must take reasonable steps to ensure that the share register is properly kept and that share transfers are promptly entered on it in accordance with s 84. Transfers of shares such as those which Mrs Patel purported to carry out in this case by filing a notice of particulars of shareholding with the Registrar of Companies are ineffectual to secure any change of ownership. That can only occur under s 84(1) which provides that “[s]ubject to the constitution of the company, shares in a company may be transferred by entry of the name of the transferee on the share register”. “Share register” is defined in s 2(1) of the Act as meaning “the share register required to be kept under section 87”. It is also relevant to note that under s 90(2), a director who fails to comply with the duty set out in subs (1) commits an offence and is liable on conviction to the penalty set out in s 373(2), namely a fine not exceeding $10,000. If STA did not maintain a share register the company committed an offence under s 87(4), and so did its directors. Whether or not STA maintained a share register nothing done by the respondents was sufficient to deprive Mr Singh either of ownership or possession of the shares. They were his and remained his once he had purchased them. The Companies Register was altered for Mrs Patel’s purposes to secure further funding. But that did not affect Mr Singh’s possession or ownership of the shares. That conclusion is also supported by the Judge’s finding that after the notice of particulars was filed with the Companies Office in January 2016, Mrs Patel continued to act as if Mr Singh had not ceased to be a shareholder of STA.[28][28]High Court judgment, above n 1, at [25]. We are satisfied that the Judge was right to conclude that neither Mrs Patel nor Elite committed an act that devested Mr Singh of the ownership or possession of his shares in STA or prevented him from exercising dominion or control over them. That conclusion means that the claim in conversion necessarily fails. The appeal is dismissed. The appellant must pay the respondents costs calculated for a standard appeal on a band A basis, and usual disbursements.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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