Singh v Sabulite Property Investments Limited
[2017] NZHC 1763
•28 July 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-3192 [2017] NZHC 1763
UNDER the Companies Act 1993 IN THE MATTER
of an application for an order under section 174
BETWEEN
ANGELA SINGH Plaintiff
AND
SABULITE PROPERTY INVESTMENTS LIMITED First Defendant
PRITESH PATEL Second Defendant
Hearing: 11 May 2017 Counsel:
BM Cunningham for plaintiff
PJ Broad for defendantsJudgment:
28 July 2017
JUDGMENT OF FITZGERALD J [As to s 174 application]
This judgment was delivered by me on 28 July 2017 at 4 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Skeates Law Ltd, Auckland (G Skeates) PJ Broad, Lawyer, Auckland
Singh v Sabulite Property Investments Limited [2017] NZHC 1763 [28 July 2017]
Introduction
[1] Ms Singh and her accountant, Mr Patel, decided to purchase an investment property (“Property”) together. In May 2013, they incorporated a company called Sabulite Property Investments Ltd (“Sabulite”) as a vehicle for this venture. Both were registered as Sabulite’s directors and both were equal shareholders.
[2] Two months after the company’s incorporation, and before the Property was purchased, Mr Patel removed Mrs Singh as a director and shareholder of Sabulite and replaced her in each of those roles with his wife. While initially claiming that she did not consent to these changes, it became apparent at the hearing before me that Ms Singh’s essential grievance is that, while she “went along with” those arrangements, that was only because Mr Patel had told her that such a step was appropriate given the Patels, including Mrs Patel, were putting up the security for the borrowings which was to fund the Property’s purchase.
[3] Ms Singh says that in around December 2016 (some three years later), she became aware that Mrs Patel had not in fact contributed (in her personal capacity) to the security for the borrowings. Ms Singh says that as a result, Mr Patel has essentially robbed her of an opportunity to have a half share in the investment in the Property.
[4] Ms Singh accordingly claims that her removal as a director and shareholder of Sabulite was unfairly prejudicial to her in terms of s 174 of the Companies Act 1993 (“Act”).1 In short, she wishes to be restored as a shareholder and a director and to have Mrs Patel removed.
The general background
[5] Ms Singh’s de facto partner, Mr Allan Eaton, learned about the Property around April 2013. It was up for mortgagee sale, and comprised three titles and six flats. Mr Eaton came up with the idea of purchasing it and setting it up as a
boarding-house business.
1 The statement of claim also includes a claim of breach of s 133 of the Act by “the defendant”,
which is presumably a reference to Mr Patel in his capacity as a director of Sabulite.
[6] Mr Eaton approached his accountant, Mr Patel, with a view that they might jointly purchase the Property as investment partners. They agreed to incorporate a company to facilitate the business venture.
[7] It was agreed that Mr Patel and Mr Eaton’s partner, Ms Singh, would be the shareholders and directors of the company, Sabulite, rather than Mr Patel and Mr Eaton. Mr Patel deposed that this was because Mr Eaton had a bad credit rating at that time, which might have made obtaining finance difficult. Mr Eaton, in his affidavit, said that he did not have an adverse credit rating at the time. However, in cross-examination, Ms Singh confirmed that the reason she had been put forward as the shareholder and director was because of Mr Eaton’s credit rating.
[8] There is no dispute that it was agreed that Ms Singh and Mr Patel would hold equal shares in Sabulite and would contribute equal funds and security to purchase the Property.
[9] Sabulite was duly incorporated on 1 May 2013, reflecting this arrangement: Ms Singh and Mr Patel were each allocated 2,500 shares, and both were listed as directors. They proceeded on the basis that Sabulite would sign a sale and purchase agreement for the Property on 2 July 2013, and that settlement would occur on
1 August 2013.
[10] In the meantime (between 1 May and 1 July 2013), the parties went about organising finance and security to support their half of the purchase. The parties’ accounts of events during this period differ significantly and are canvassed in further detail below. In short, however, Mr Patel says Ms Singh and Mr Eaton struggled to obtain finance and so decided to withdraw from the venture. But Ms Singh and Mr Eaton disagree with this, and are of the view that Mr Patel set about to effectively “rob them” of their investment.
[11] It is common ground, however, that on 1 July 2013, without any of the necessary formalities having been complied with,2 Mr Patel updated the company
records to:
2 I.e. there had been no formal resolution as to Ms Singh’s removal as director (s 156), no formal resolution to appoint Mrs Patel as director (s 153(2)), and no signed form of transfer and consideration in respect of Ms Singh’s shares (s 84).
(a) Remove Ms Singh as a director of Sabulite;
(b) Appoint his wife, Mrs Nisha Patel, as a director of Sabulite; and
(c) Transfer Ms Singh’s 2,500 shares in Sabulite to Mrs Patel.
[12] Ms Singh and Mr Eaton’s knowledge of and consent to these changes are matters of some dispute, and will be discussed below. Nevertheless, Sabulite went ahead and completed the purchase on 1 August 2013.
[13] Mr Eaton’s involvement with the Property did not cease at this point, and it seems he continued to act as its property manager until around April 2015. It is also apparent that there may be a separate dispute between Mr Patel and Mr Eaton as to whether Mr Eaton has been properly paid for these services. Mr Patel deposes that invoices were presented by Mr Eaton or his companies, and have been fully paid. He says in his affidavit that he has a full list of invoices received and evidence of payments made. Mr Eaton, in his affidavit in reply to Mr Patel’s affidavit, does not specifically comment on this aspect of Mr Patel’s affidavit. However, Ms Singh said in cross-examination that Mr Eaton has only been paid $200 for the property management services he provided.
[14] Finally, in October 2015, Mr Patel further amended the shareholding of Sabulite by making a new allocation of 2,500 shares to a company called Pritesh Nisha Trustee Ltd. The shares held by Mr and Mrs Patel were also reduced to
1,250 shares each.
Ms Singh’s claim
[15] Ms Singh now applies for relief under s 174 of the Act, claiming that Sabulite acted in an unfairly prejudicial manner towards her:
(a) By removing her as a shareholder without the necessary formal documentation, transferring her shares to Mrs Patel, and then further amending the share allocations in respect of Pritesh Nisha Trustee Ltd.
(b)By removing her as a director, without formal resolutions and appointing Mrs Patel in her place, all without formal resolutions.
[16] Ms Singh also claims that the transfer of the shares was not done for a proper purpose within the meaning of s 133 of the Companies Act because Mr Patel derived a material financial benefit from it, as Mrs Patel is his wife.3 Moreover, she claims Mr Patel did not act in good faith and what he believed to be in the best interests of the company when transferring the shares.4 These aspects of the statement of claim were not, expressly at least, pursued at the hearing.
[17] For relief, Ms Singh essentially seeks orders that would restore Sabulite’s shareholding and directorship to its pre-1 July 2013 position. She wants to be restored as a director and 50-per-cent shareholder, Mrs Patel to be removed from both of these offices and Pritesh Nisha Trustee Ltd removed as shareholder.
[18] As noted in the introductory section above, Ms Singh and Mr Eaton’s key grievance appears to be that they were “misled” about why it was appropriate that Ms Singh be removed as a director and shareholder of Sabulite and replaced with Mrs Patel. In this context:
(a) In Ms Singh’s reply to Mr Patel’s statement of defence, it is pleaded
that:
The plaintiff says that she discovered that the defendant had misrepresented the basis for the transfer of shares and directorship, namely that the defendant was able to secure finance to purchase the property only on the basis he granted the lender a mortgage over his family home … and [a commercial property] which the defendant says were jointly owned by Nisha Patel.
(b) In his affidavit sworn on 3 May 2017, Mr Eaton deposes that:
I did not discover until December 2016 that Pritesh Patel and Nisha Patel had not given security in their personal capacities for the purchase of the property, as Pritesh Patel had led me to believe, but their family home had been transferred on 1 August 2013 to a company, Pritesh Nisha Trustee Ltd, with a mortgage to ANZ bank.
3 Companies Act, s 139(1)(d).
4 Companies Act, s 131.
[19] Mr Patel and Sabulite oppose Ms Singh’s application. Their opposition is principally factual. They say Ms Singh cannot be unfairly prejudiced because she consented to the transfer of the shares and the directorship. They further say that Mr and Mrs Patel have indeed personally put up security for the purchase, including a mortgage over their family home (which they acknowledge is now held in a family trust) and personal guarantees given by each of them to the lender (ANZ Bank).
[20] Their other point is essentially that Ms Singh had “no skin in the game” at
any time she was a shareholder and director of Sabulite (between 1 May to 1 July
2013), or subsequently. They say she had not advanced any funds to Sabulite, the original transfer of shares to her had been made without any consideration and that her share capital remained unpaid throughout the period. They say that she has put up no security for the funding of the Property, such that it would now be quite wrong to “re-insert” her back as a shareholder of the Company, which would amount to a significant windfall to her. The defendants further note that Ms Singh first raised this issue in December 2016, some three years after the transfer of shares and directorship.
Law
[21] Section 174 of the Act allows a former shareholder who considers that the affairs of the company have unfairly prejudiced them to apply to the court for relief. The court has a wider range of remedies available if it considers the granting of relief to be just and equitable.5
[22] In Thomas v H W Thomas Ltd, the Court of Appeal held that the test for unfair prejudice encompasses any conduct of a company that is unjustly detrimental to the shareholder, whatever form it takes, and regardless of whether there has been an invasion of legal rights, lack of probity, or bad faith.6 Relevantly, it can encompass conduct that unfairly excludes a shareholder from management
participation.7
5 Section 174(2).
6 Thomas v H W Thomas Ltd [1984] 1 NZLR 686 (CA) at 693.
7 At 694.
[23] The inquiry under s 174 is intensely factual. Consistent with this, and other than Thomas v H W Thomas Ltd, neither party referred me to any authorities on which they rely in the context of the s 174 claim.
The events between 1 May and 1 July 2013
[24] The first issue for determining Ms Singh’s claim is factual: to what extent did
she consent to her own removal and replacement as shareholder and director on
1 July 2013? And if she did consent, was that brought about by conduct which can be categorised as unfairly prejudicial for the purposes of s 174 of the Act?
[25] Ms Singh, Mr Patel, Mr Eaton, and a Mr Grant Clifton (from Countrywide Financial Services, Mr Clifton being a mortgage broker assisting Mr Patel and Ms Singh obtain funding for Sabulite’s purchase) have all given evidence by affidavit. Ms Singh was also cross-examined before me at the hearing. The witnesses’ account, however, are not easy to reconcile, and it is necessary to set them out in some detail.
[26] Ms Singh’s initial evidence was simply an affidavit verifying the contents of her statement of claim. She did, however, provide reply evidence in response to the statement of defence. Mr Eaton’s evidence was in response to Mr Patel’s affidavit. Given this, I consider it most appropriate to set out Mr Patel’s evidence first, before considering the other witnesses’ response.
(a) Mr Patel’s account of events
[27] Mr Patel deposes that, between 1 May and 1 July 2013, Ms Singh and Mr Eaton were unable to raise finance or provide any security for Ms Singh’s share of the purchase.
[28] Mr Patel says his bank (ANZ) was also unwilling to lend money for the purchase because of Ms Singh’s association with Mr Eaton. He says ANZ would only agree to advance him the entire purchase price, including Ms Singh’s share, on the basis that mortgages would be registered against both the Patels’ family home
and one of Mr Patel’s commercial properties. He attaches to his affidavit various communications between him and ANZ which he says support his position.
[29] Mr Patel says that on 27 June 2013, he sought legal advice regarding this proposed arrangement. He deposes that he was advised by his solicitor that both the family home and the commercial property were his wife’s (Mrs Patel’s) relationship property, and that she would need to be made a joint shareholder in Sabulite in order to protect her half share in the two properties.
[30] That same day (27 June 2013), Mr Patel says he was cc’d into an email sent to ANZ by Mr Clifton. This email was produced as an exhibit. In it, Mr Clifton said the following:
Andrew [8]
Angela Singh has decided to withdraw from the purchase given the
reliability on The Patel’s home.
Pritesh’s wife Nisha will become the other 50% shareholder of Sabulite.
I think this will also give the bank more comfort moving forward, can you amend please provide a formal loan offer reflecting this.
Thanks
Grant Clifton
[Emphasis added]
[31] Mr Patel says he interpreted this email to mean that Ms Singh no longer wished to purchase the Property. He says Ms Singh was “advised accordingly” (it is not clear by whom) that she would be removed as a shareholder and director due to her not providing any equity or security.
[32] Mr Patel says that on 30 June 2013, Ms Singh confirmed in a telephone conversation with him that she was happy for this to occur. An email sent by Mr Patel to various people, including Mr Clifton, on 1 July 2013, confirms that he then removed Ms Singh and replaced her with Mrs Patel:
I have today updated the company register and removed Angela Singh &
included Nisha Patel as Director and Shareholder with 50% shareholding.
8 Mr Andrew McIlwrick, from ANZ.
Directorship will be updated once Nisha has signed the mandated.
[33] Mr Patel additionally says that in the period 1 May to 1 July 2013, Ms Singh did not put any money into Sabulite or provide any funds (directly or indirectly) to purchase the Property. He says that neither Ms Singh nor Mr Eaton raised any issue about the transfer of the shares or directorship until December 2016. Finally, he says that Mr Eaton provided some remedial and maintenance work on the Property, for which either Mr Eaton or his company has been fully paid.
(b) Ms Singh’s account of events
[34] Ms Singh swore a short reply affidavit in response to the statement of defence. She also gave evidence before me by cross-examination.
[35] In her affidavit, Ms Singh disputed Mr Patel’s assertion that she was unable to secure finance for her half-share of the purchase. And she said that although she was being advised on the purchase of the Property by Mr Clifton, he was not her agent (rather he was acting for herself and Mr Patel, rather than only her). She maintained this stance in cross-examination, saying she never authorised Mr Clifton to act or speak on her behalf.
[36] Ms Singh says she was misled by Mr Patel’s representation that he was able to secure finance only on the basis that he granted the lender a mortgage over his family home and his commercial premises. She rejected Mr Patel’s assertion that Mrs Patel would have needed to be a shareholder and director of Sabulite.
[37] Moreover, Ms Singh says Mr Patel advised her to withdraw from the purchase and that he told her that Mrs Patel would become the other 50 per cent shareholder in order to allow Mr Patel to purchase the Property. During cross- examination, however, Ms Singh said Mr Patel did not telephone her on 30 June
2013 to discuss transferring her shareholding in Sabulite to Mrs Patel.
[38] Lastly, Ms Singh stressed that she did not consent to the share transfers.
[39] My overall impression of Ms Singh was that she had little knowledge or understanding of Sabulite’s affairs or the financial arrangements that were being negotiated before 1 July 2013. It was apparent that her involvement with Sabulite (as shareholder and director) was a proxy for Mr Eaton, and it was he who “called the shots” as far as Sabulite’s business decisions. For example, Ms Singh said in cross-examination that she never made any enquiries herself with potential lenders to purchase the Property. She also said that it was only in about November or December 2016 that she became aware that she was not in fact a shareholder and director of Sabulite. Not only do I consider this inherently unlikely, it is also at odds with the essence of her own case that she was misled in 2013 into being removed as a shareholder and director by Mr Patel’s advice that he and his wife were providing security for the funding of the purchase. As such, Ms Singh’s evidence provides me with little reliable insight into the events relevant to this proceeding.
(c) Mr Eaton’s account of events
[40] Mr Eaton’s evidence was in reply to Mr Patel’s affidavit. As with Ms Singh, he disputes that he was unable to raise the funds to purchase the Property.
[41] Mr Eaton said he had no knowledge of the bank telling Mr Patel it would not finance the purchase due to his relationship with Ms Singh. Indeed, Mr Eaton included an email from Mr McIlwrick (from ANZ Bank), dated 25 July 2013, in which Mr McIlwrick wrote to Mr Patel saying ANZ was prepared to provide finance in respect of both Mr Patel and Ms Singh.
[42] Mr Eaton says that on 26 June 2013, Mr Patel emailed Mr Clifton proposing to remove Ms Singh from Sabulite. The email was annexed to Mr Eaton’s reply affidavit:
grant
I have read the indicitive offer.
Anz wants don adberson[9] out and willing to fund an extra $100k
This means that they take further security over my titirangi property.
9 Mr Don Anderson was the vendor of the Property. At the early stage of purchasing the Property, it appeared that Mr Anderson had been proposed as a potential partner in the venture.
I spoke to andrew yesterday and he advised me that they have completely discounted angelas financial position and only looked at mine to approve loan.
In light of this …i think i have a solution to keep everyone happy I remove angela as shaholder of sabulite and insert my wife nisha Nisha and i take over sabulite and provide our house as security and commercial property.
I have a side agreement with angela and allan that within 6 months once all renovations done, property re valued and it can stand on its own right that i bring angela in and remove security over titirangi.
In the meantime , sabulite property give management services job to allan to do renovations and pay for his services.
I believe this is the best approach so i am covered.
For some unknown reason and. Never know waht can happen in future i cannot put my titirangi property on the line
If this is in agreement with you …then you need to speak to allan and bouncevit off him to this approach
Regards, Pritesh Patel
Sent from my iPad
[Emphasis added]
[43] Mr Eaton says he regarded this as an attempt by Mr Patel to steal the investment from Ms Singh and ignore their partnership arrangement.
[44] He says Mr Clifton was never Ms Singh’s mortgage broker, and he says Mr Patel (misleadingly) told him that Mrs Patel had to be a director and shareholder of Sabulite due to her relationship-property interest in the Titirangi family home and Mr Patel’s commercial property. Mr Eaton also says he has no knowledge of any move to bring Ms Singh “back in”, as suggested in Mr Patel’s email.
[45] Mr Eaton says that in December 2016, he discovered that, at the time Sabulite purchased the Property, the Titirangi family home had been transferred to the trustee company Pritesh Nisha Trustee Ltd. As such, Mr Eaton says that Mrs Patel has not herself provided security for the purchase. Mr Eaton also claims to have discovered at this time that no encumbrance existed over Mr Patel’s commercial property.
[46] Mr Eaton therefore claims to have been mislead by Mr and Mrs Patel as to the fact that they would be providing personal security for the purchase of the Property.
(d) Mr Clifton’s account of events
[47] As noted, Mr Clifton advised both Mr Patel and Ms Singh as to Sabulite’s intended purchase of the Property. He gave evidence for Ms Singh by affidavit in reply to the statement of defence.
[48] Mr Clifton says he was an adviser to all parties in raising finance for the transaction. He said he was “not unable” to secure finance for Ms Singh’s half-share of the Property’s purchase price. Rather, he says that “with my assistance, Mr Patel arranged alternative finance for Sabulite to purchase the property”.
[49] Significantly, however, Mr Clifton accepts that he sent the email, at [30] above, in which he notified Mr McIlwrick from ANZ Bank that Ms Singh had decided to withdraw from the from the purchase and that Mrs Patel would become the other 50 per cent shareholder in Sabulite.
[50] But Mr Clifton says that he was not consenting to any share transfers on behalf of Ms Singh. And he says that he was not acting as Ms Singh’s agent. He says he did not have the capacity or authority to consent to the removal of Ms Singh as shareholder and director of Sabulite.
[51] Mr Clifton says he was “only informing the ANZ Bank of the change of plans and requesting the ANZ Bank to provide a formal loan offer reflecting the change.” While he does not expressly state what “change of plans” he is referring to, I take it to be the proposal that Ms Singh be removed as a director and shareholder and replaced by Mrs Patel. He does not detail the negotiations or understandings behind that email.
Discussion
[52] Unfortunately, the evidence as to what happened between 1 May and 1 July
2013 is patchy. Moreover, I am not particularly convinced as to the reliability of aspects of the affidavit evidence (including aspects of Mr Patel’s evidence), which is, in part, inconsistent with the contemporaneous documents. I have also commented above on my assessment of the reliability of Ms Singh’s evidence (and the conflict between her evidence and Mr Eaton’s as to Mr Eaton’s credit rating at the time).
[53] Rather, I place more weight on the content of the contemporaneous documents themselves.
[54] On the balance of probabilities, I find that by 30 June 2013, there was an understanding between Mr Patel, Mr Eaton and Ms Singh that Ms Singh would be removed as a shareholder and director of Sabulite and replaced by Mrs Patel. This understanding is indicated by the 26 June 2013 email Mr Patel sent to Mr Clifton (above at [42]), the 27 June 2013 email Mr Clifton sent to Mr McIlwrick (above at [30]), and it is consistent with Mr Patel’s account of events. It is also consistent with Ms Singh and Mr Eaton’s own claims that they were “misled” by Mr Patel at the time as to the securities that would be placed on Mr Patel’s own properties. Indeed, this very claim of being “misled” sits somewhat awkwardly with Ms Singh’s simultaneous assertion that she did not consent to what occurred. At the hearing, Mr Cunningham acknowledged (rightly in my view) that Ms Singh “went along with” the arrangements, but said that it could be put at no higher than that.
[55] I accept that the removal of Ms Singh as shareholder and director, and her replacement by Mrs Patel, did not comply with the procedure and formalities that are required under the Companies Act. That is unfortunate, and Mr Patel now accepts as much. But, I find that Mr Patel’s removal and replacement of Ms Singh did occur with Ms Singh’s knowledge and consent. And given that, I do not consider that her removal was, in and of itself, unfairly prejudicial to her or was a breach of Mr Patel’s
director’s duties.10
10 See also Re Duomatic Ltd [1969] 2 Ch 365 (Ch).
[56] I therefore turn to consider Ms Singh and Mr Eaton’s contention that they were misled by Mr Patel as to the nature of the securities that would be given to support the funding used to purchase the Property. Ms Singh and Mr Eaton claim to have discovered this misrepresentation in December 2016, when they learned that Mr and Mrs Patel’s Titirangi home had in fact been transferred to a trustee company on the day the sale of the Property to Sabulite settled, and that Mr Patel’s commercial property did not have a security over it.
[57] From the documentary record, it appears that ANZ was not comfortable to lend with vendor finance being provided,11 but was prepared to lend the total purchase price of $670,000.12 Mr Patel also deposes that he had spoken with his banker at ANZ and that “he advised me that they have completely discounted Angela’s financial position and only looked to mine to approve loan”.
[58] Mr Patel was not cross-examined in respect of this evidence. And while Mr Patel’s evidence of what ANZ said to him is strictly hearsay, it is consistent with the contemporaneous documentation, including the written initial offer of funding from ANZ. That initial funding offer was dependent upon ANZ having access to, or being able to rely upon, its priority amount under its existing security over the Patel’s
residential home in Titirangi.13 In the funding offer, ANZ observed to Mr Patel that
“if you feel there is too much reliance on the Titirangi property we can look to take security over the Papatoetoe commercial property…” In addition, the offer noted that personal guarantees would be required from each of Ms Singh, Mr Patel and Mrs Patel.
[59] I am therefore satisfied that the ANZ funding proposal was reliant on ANZ
having access to the equity in the Patel’s residential home (and the alternative being to take a security over the Papatoetoe commercial property).
11 As noted in Mr Patel’s email to Mr Clifton
12 Page 72 of the hearing bundle.
13 Pages 72 -73 of the hearing bundle, and in particular, the text under the heading “Confirmation
of Structure” on page 73 of the bundle.
[60] Having reviewed the funding offer, Mr Patel advised Mr Clifton that he could not “put [his] Titirangi property on the line”.14 He therefore advanced the proposal outlined at [42] above, namely that Ms Singh be replaced by Mrs Patel as shareholder and director of Sabulite; that he have a “side agreement” with Ms Singh that once the Property “stands on its own” and security is removed from the Titirangi home, Ms Singh be “brought [back] in” to Sabulite; and in the interim, Sabulite gives the property management work to Mr Eaton and “pay for his services”.15
Mr Patel asked Mr Clifton to “speak to Allan and bounce it off him to this approach”.16
[61] I also infer that Mr Clifton did discuss the proposal with Mr Eaton, given Mr Clifton’s email to ANZ dated 27 June 2013 and referred to at [30] above (in which he confirmed that “Angela Singh has decided to withdraw from the purchase give the reliability on the Patel’s home”). Mr Cunningham accepted at the hearing that there was no basis to suggest that Mr Clifton “just made up” this aspect of his email. Mr Clifton also noted in his email to ANZ that he thought the new arrangements would “give the bank more comfort moving forward”.
[62] Mr Patel’s evidence was that the need for Mrs Patel to be a director or shareholder of Sabulite was as a result of legal advice he received from his solicitor at that time. Again, Mr Patel was not cross-examined on this matter. Nor was there any evidence from his solicitor on this topic. However, whether or not such advice was provided and if so was correct, it does not alter the position that ANZ’s offer of funding of the purchase was reliant on ANZ’s access to the equity in the Patel’s family home.
[63] It is correct that the Patel’s family home was subsequently transferred into a trust (“Trust”) as at the date of the settlement of the purchase of the Property. As
noted, it seems that this is the key reason why Ms Singh now says she was misled by
14 At [42].
15 Ms Singh does not plead or rely on this alleged “side agreement” between herself and Mr Patel.
16 This reference to discussing the matter with Mr Eaton reinforces, in my view, that Mr Eaton, rather than Ms Singh, was the primary party on their side of the arrangement.
Mr Patel as to the reason why she should step down from being a shareholder and director of Sabulite.17
[64] That the Titirangi family home was transferred into a family trust at the time of the Property’s purchase does not persuade me that Mr Patel’s representations to Ms Singh as to security arrangements were misleading or “unfairly prejudicial” for the purposes of s 174 of the Act:
(a) The contemporaneous documentation demonstrates that, as noted, ANZ’s offer to finance the funding of the purchase of the Property did rely on its access to security in the Patels’ family home (up to its priority amount, then $340,000).18
(b)Mrs Patel (together with Mr Patel) also gave a personal guarantee in respect of the lending from ANZ to Sabulite.
(c) The sole trustee of the Trust is Pritesh Nisha Trustee Limited. Mr and
Mrs Patel are the owners of the trust company.
(d)Each of Mr Patel, Mrs Patel and Pritesh Nisha Trustee Limited are sureties to one of the two loan facilities advanced by ANZ. Pritesh Nisha Trustee Limited’s liability as trustee (in the absence of intentional default or dishonesty) is limited to the assets of the Trust; i.e. the Titirangi home.
(e) Once ANZ was notified that the family home was to be transferred into a trust, it also required the Trust to provide a guarantee and indemnity of Sabulite’s obligations (this requirement being noted in the new security schedule to the second of the loan facilities entered
into between ANZ and Sabulite).
17 See Ms Singh’s affidavit, at [53]; Mr Eaton says much the same; see Mr Eaton’s affidavit sworn
3 May 2017 at [40].
18 This was later increased to $1million, but it does not appear that that was a condition of the initial financing offer; rather, this appears to have been done to gain access to the residential lending rates, rather than commercial rates. The increase to $1m priority was, however, a condition precedent to one of the two loan facilities advanced by ANZ to Sabulite.
[65] Accordingly, and for all of the reasons set out above, I am not satisfied that
Ms Singh has made out her case of oppressive conduct in breach of s 174 of the Act.
[66] For completeness, whether there had been an agreement that Ms Singh (or Mr Eaton) would be let “back in” to Sabulite after six months (as suggested in Mr Patel’s email at [37]) is less clear. In any event, and as noted above, a breach of such an agreement is not pleaded in the statement of claim.
[67] I also note that Ms Singh and Mr Eaton’s evidence discusses the property manager role that Mr Eaton performed in respect of the Property until April 2015. As noted, Ms Singh says that Mr Patel or Sabulite have not paid Mr Eaton for this work. If that is the case, this proceeding, in which Mr Eaton is not a party, is neither the appropriate forum nor claim to address that matter.
Conclusion
[68] I decline to grant the relief sought by Ms Singh.
[69] There does not appear to be any reason why costs ought not to follow the event in the usual way. If the parties are unable to agree on costs, memoranda (not exceeding five pages in length) may be submitted. The defendants’ memorandum is to be filed and served within 10 working days of this judgment. The plaintiff’s is to be filed and served within a further five working days. Absent further order of the
Court, I will then proceed to determine costs on the papers.
Fitzgerald J
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