Taimoori v Anmol Residential Limited
[2021] NZHC 533
•18 March 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-000036
[2021] NZHC 533
BETWEEN MIRZA AREEB BAIG TAIMOORI
Plaintiff
AND
ANMOL RESIDENTIAL LIMITED
First Defendant
ANMOL SETH
Second DefendantANMOL INVESTMENTS LIMITED
Third Defendant
Hearing: 1–2 March 2021 (via VMR) Counsel:
BP Rooney for Plaintiff
JR Duckworth for Second Defendant
Judgment:
18 March 2021
JUDGMENT OF DOWNS J
This judgment was delivered by me on Thursday, 18 March 2021 at 10 am pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel:
Lovegroves, Auckland.
Jennifer G Connell & Associates, Auckland. BP Rooney, Auckland.
TAIMOORI v ANMOL RESIDENTIAL LTD [2021] NZHC 533 [18 March 2021]
A breach of fiduciary duty?
[1] Mirza Taimoori and Anmol Seth are members of Auckland’s Indian community and know each other this way.1 Mr Taimoori sues Mr Seth for breach of fiduciary duty in relation to a property development.2 Mr Taimoori says Mr Seth took a lot of money from him to develop property, then did nothing. He wants his money back. Mr Seth says Mr Taimoori entered an investment which failed, for which Mr Taimoori is partially responsible.
[2] The case has a particularly serious aspect. Mr Seth produced invoices, saying they corroborate development expenses. Mr Taimoori contends the evidence reveals them as fake.
Background
[3] In about August 2015, Mr Seth invited Mr Taimoori to join a venture in relation to the development of Mr Seth’s property at 185 Gray Avenue, Papatoetoe.3 Mr Seth bought the property in 2014 and on 16 April 2015 obtained resource consent for its subdivision to three dwellings.4
[4] Mr Seth later asked Mr Taimoori to invest $300,000 on the bases Mr Seth would contribute to the property and the pair share the profit of its development.
[5] Mr Taimoori had no experience in property development. He assumed Mr Seth was a successful businessperson. Mr Seth had told him this. Mr Taimoori was also influenced by social medial images. Mr Seth’s Facebook page referred to the “Anmol Entertainment Group” and described him, among other things, as the “business advisor at Anmol Wineries”; “Vice President at Anmol Hotel and Resorts”; “Chief financial officer … at Anmol Investments Ltd”; and “MD at Anmol Consultants”. The same Facebook page contained an entry for the “Anmol Group Corporation”, which apparently extended to “Anmol Hotels & Resorts”; “Anmol
1 The parties disagree about their involvement in a 2013 Bollywood event, “Temptations Reloaded”, and whether Mr Seth owed Mr Taimoori $18,000 in relation to this. Nothing turns on this.
2 And for breaching the Fair Trading Act 1986.
3 The property.
4 The consent included detailed plans.
Architect’s Group”; “Anmol Construction”; and “Anmol Barristers”. Hashtags on the Facebook page referred to “LordAnmol” and “billiondollarclub”, replete with images of expensive cars and private jets.
[6] Mr Taimoori did not have $300,000. Mr Seth suggested Mr Taimoori borrow the money, relying on equity Mr Taimoori had in his family home.
[7] On 6 August 2015, Mr Seth sent Mr Taimoori a “Memorandum of Understanding”.5 The MOU provided Mr Taimoori and Anmol Residential Ltd,6 a company controlled by Mr Seth, were recording an “investment agreement”.
[8] Anmol Residential was described as “in charge” of the “construction project”. Mr Taimoori was “to commit to an initial investment of $300,000 via home re-finance”. Mr Taimoori would then “be granted a JV”—presumably, a joint venture—in relation to the development of the property. The MOU provided it would be “superseded” by a second agreement between the parties, the “scope and intent” of which was to be “broadly defined by this MOU”. The MOU was signed by Mr Seth for Anmol Residential, dated 6 August 2015.
[9] The same day, Mr Taimoori transferred $50,000 of personal savings to Anmol Residential. Mr Taimoori signed the MOU the next day.
[10] Mr Taimoori’s bank would not lend him the balance of the money. Mr Seth told him he had a contact at Westpac who could help. The contact arranged finance for Mr Taimoori. She corresponded as Mr Seth’s “EA”, seemingly on behalf of “Anmol Consultants Limited, Accounting, Tax and Business Advisory”.
[11] Mr Seth’s lawyer was Shean Singh Law.7 Mr Seth encouraged Mr Taimoori to see Shean Singh in relation to the loan. Mr Taimoori did so. He said he did not think there was anything unusual about this.
5 The MOU.
6 Anmol Residential.
7 Shean Singh.
[12] The loan was drawn 20 August 2015, through Shean Singh. The same day, Mr Taimoori transferred $220,000 to Anmol Residential.
[13] On 25 August 2015, hence five days later, Mr Taimoori saw comments on a blog describing Mr Seth as a “conman”. Mr Seth later reassured Mr Taimoori this was not true at a meeting attended by others.
[14] The property has not been developed in any way. The single home on the property remains, as it was. No construction occurred.
[15] On 29 September 2016, Mr Seth transferred $10,000 to Mr Taimoori. Between March and October 2017, Mr Seth transferred a further $20,680 to Mr Taimoori. Mr Taimoori and Mr Seth corresponded digitally in this period. Mr Taimoori repeatedly asked Mr Seth for information about the property.
[16] On 9 January 2018, Mr Taimoori filed a claim against Mr Seth and Anmol Residential.
[17] In October 2018, Anmol Residential was placed in liquidation, staying Mr Taimoori’s claim against it. Other companies in the Anmol group were also placed in liquidation at that time.
[18] Mr Seth disputes three aspects of this narrative. First, he says Mr Taimoori approached him, asking to participate in a property development. Second, Mr Seth says the development did not proceed because Mr Taimoori invested $270,000, not
$300,000; and because costs became prohibitive. Third, Mr Seth says the monies he transferred to Mr Taimoori were not partial repayments of the $270,000, hence an admission of wrongdoing; rather, compassionate loans to someone in need. It is common ground Mr Taimoori came under financial pressure; the digital messages reveal as much.
[19] The claim’s messy history to trial need not be recorded, other than the late involvement of Mr Rooney for Mr Taimoori and Mr Duckworth for Mr Seth brought
a discipline and focus that had not hitherto existed. I record my appreciation to both counsel for their assistance.
The claim
[20] Mr Taimoori advances two causes of action against Mr Seth. First, breach of fiduciary duty. Second, contravention of the Fair Trading Act 1986 by misleading and deceptive conduct, false representation and other misleading conduct in relation to land; and false and misleading representation about the investment of money. Mr Rooney helpfully identified the first cause of action as the primary one. Indeed, he candidly acknowledged the second “added little”.
[21] Mr Taimoori seeks orders Mr Seth pay him $239,320;8 interest; and costs. Mr Taimoori also seeks a declaration he has a proprietary interest in the property.
[22] Mr Seth’s pleadings do not require mention beyond that an apparent defence of frustration “due to ... illness” was not advanced at trial.9
Trial
[23] The two-day trial coincided with Auckland’s fourth lockdown in consequence of the COVID-19 pandemic.10 Counsel appeared by Virtual Meeting Room. So too the three witnesses: Mr Taimoori; Richard Hayes, about whom more soon; and Mr Seth.
[24] By agreement, Mr Seth and Mr Duckworth were at the same location. Several short adjournments were required to ensure each could be easily heard; there was an occasional audio problem at their end. The hearing was otherwise unremarkable, the technology adequate.
8 The figure is the money Mr Taimoori invested minus Mr Seth’s alleged repayments.
9 Amended statement of defence for the second defendant dated 18 August 2020 [Amended statement of defence] at [3].
10 On the Sunday immediately before trial, Mr Duckworth filed a memorandum. The memorandum alerted the Court to his client’s instructions of possible impediments to commencement: Mr Seth was in Wellington with his ill mother; and Mr Seth’s laptop was in Auckland. The Registrar contacted me. At 7 pm, I conveyed this message through the Registrar, who, I note, was still at work at the courthouse: “Trial to proceed. Telephone conference at 9 am tomorrow to discuss format. I am amenable to use of VMR if required”. At Monday’s conference, everyone agreed the trial should proceed by VMR.
Breach of fiduciary duty?
Did Mr Seth owe a fiduciary duty to Mr Taimoori?
[25] Traditionally, fiduciary duties attach to particular types of relationship; two of the most obvious being doctor-patient and lawyer-client. However, Courts have long said these categories are not closed.11 Similarly, albeit more recently, Courts have said fiduciary relationships can arise on particular facts.12
[26] Fisher J captured these points—and the orthodox features of a fiduciary relationship—in Cook v Evatt (No 2):13
(a)The existence and scope of fiduciary obligations are not to be determined by placing the instant case into a preconceived category and then invoking the duties thought to attach to that category; they must be tailored to the particular case after a meticulous examination of its own facts.
(b)The essence of a fiduciary relationship is an inequality of bargaining power brought about by the trust or 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 … One application of that principle is that persons will generally assume fiduciary obligations in circumstances where they may benefit from a transaction and know that the other party is relying upon them for guidance and advice with respect to that transaction.
(c)When that test is applied to certain relationships – of which directors to companies, trustees to beneficiaries and solicitors to clients are examples – the inherent nature of the relationship will make fiduciary obligations inevitable. In others there may not be any relationship customarily understood to attract fiduciary obligations as a matter of course. In the latter cases fiduciary obligations may nevertheless flow from the particular circumstances affecting the parties and the transaction in question.
(d)Even where a fiduciary relationship is established, the scope of the fiduciary’s obligations is determined by the nature and extent of the reliance or trust which had been placed by the beneficiary upon or in the fiduciary. Again, this requires a meticulous examination of the facts of each individual case.
(e)In most cases beneficiaries will have trusted their fiduciaries to avoid using the fiduciary office to gain a personal advantage (“the use of fiduciary position” rule) or placing themselves in positions where the
11 Cook v Evatt (No 2) [1992] 1 NZLR 676 (HC) at 685.
12 Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433 at [75].
13 Cook v Evatt (No 2), above n 11, at 685.
fiduciaries’ interests would conflict with those of the beneficiaries on those matters where, by virtue of the trust relationship, the beneficiaries would be at the mercy of the fiduciaries (“the conflict of interest rule”). The latter does not mean avoidance of all conflicts of interest. An examination of the individual facts will be necessary before it will be possible to define the precise scope of the trust which had been placed in the fiduciary and hence the areas within which a conflict would be impermissible.
(f)In those cases where fiduciaries have entered into transactions with beneficiaries, the latter will usually have relied upon the former to disclose those facts known to the fiduciaries which would be likely to influence the beneficiaries in their decision to enter into the proposed transaction and, if so, on what terms (“the non-disclosure rule”). Again, the scope of the reliance in this respect will be a question of fact to be determined in each case.
[27] Mr Rooney argues a fiduciary relationship arose because: Mr Seth held himself out as an accountant and financial adviser; Mr Taimoori looked to Mr Seth for financial and business-related advice; the relationship was unequal: Mr Seth had experience as a property developer; Mr Taimoori had none; Mr Seth, through Anmol Residential, had exclusive control of the development; Mr Taimoori was an investor only, reliant on Mr Seth; the nature of the transaction—a joint venture—was consistent with a fiduciary relationship; and because Mr Seth had taken money from Mr Taimoori with an associated promise to use it a particular way (to develop the property, then share profit).
[28] Mr Duckworth argues no fiduciary relationship arose because the men were on reasonably equal terms, any joint venture was arm’s length, commercial transaction; and Mr Taimoori was dealing with Anmol Residential, not Mr Seth.
[29] Mr Rooney’s analysis is unquestionably correct. First, the features he identifies are grounded in largely uncontroversial fact.14 For example, Mr Seth’s pleadings acknowledge his holding out “as an accountant, a financial adviser, an entrepreneur, and a property trader and developer”.15 And, Mr Seth’s own social media
14 In evidence in chief, Mr Seth said he told Mr Taimoori “to carry out his own due diligence”. Mr Duckworth did not put this precise point to Mr Taimoori in cross-examination. Rather, he asked Mr Taimoori whether Mr Seth provided him “figures” about the development, and whether “as part of the due diligence, [Mr Taimoori] had costings”. Mr Taimoori said he looked at the title to the property, the development work Mr Seth had completed, and the file Mr Seth had at the meeting.
15 Second amended statement of claim dated 30 October 2020 [Second amended statement of claim] at [1]; and Amended statement of defence, above n 9, at [1].
pages (adduced by Mr Taimoori) demonstrate the point. Mr Seth said in evidence in chief he learned about property development from his father. Mr Taimoori said he had no such experience, about which he was not challenged. And so on, and so forth.
[30] Second, the arrangements between Mr Seth and Mr Taimoori were unequal. Mr Seth contributed more to the development; he provided the property. Development was the preserve of Anmol Residential, a company Mr Seth controlled. Mr Taimoori had no role beyond passive investor. Mr Taimoori’s only source of information about the development, and what was happening to his money, was Mr Seth. It follows Mr Seth controlled the development, Mr Taimoori’s related investment, and what Mr Taimoori knew about each.
[31] Third, Mr Seth knew Mr Taimoori could not afford to invest other than through borrowing against his family home. Mr Seth arranged alternative finance (through a contact) when Mr Taimoori’s regular bank would not provide it, and he encouraged Mr Taimoori to consult a lawyer who was other than independent. These aspects underscore Mr Taimoori’s trust in Mr Seth, and the inequality of their relationship.
[32] An otherwise unimportant fact is illustrative. Mr Taimoori said he believed Mr Seth a lord—“Lord Anmol”—as this is what Mr Seth wished to be called within the Hindu community, and how Mr Seth referred to himself on social media.
Mr Taimoori said “only recently” had he discovered this was fabrication.16
[33] Fourth, it is clear from the terms of the MOU, which, incidentally, Mr Seth sourced online,17 that Mr Taimoori provided the money for a specific purpose: development of the property. It follows Mr Seth could not, absent Mr Taimoori’s agreement, use that money for any other purpose. It also follows Mr Seth had a duty to return any money not used for that purpose.
[34] These observations address Mr Duckworth’s arguments. The men were not on equal terms, nor arrangements arm’s length. True, Anmol Residential was the other
16 Notes of evidence at p 46, li 10–15.
17 Brief of evidence of Anmol Seth dated 2 February 2021 at [30].
party to the MOU, not Mr Seth. However, Mr Seth controlled Anmol Residential; and the property to be developed was Mr Seth’s, not the company’s. In any event, Mr Seth said in evidence in chief the MOU was “a means to an end”. Anmol Residential was merely a corporate vehicle.
Did Mr Seth breach this duty?
[35]This, unsurprisingly, was the heart of the trial and very much in dispute.
[36] Mr Taimoori’s pleadings allege Mr Seth breached the fiduciary duty upon him this way:18
(a)Unbeknown to Mr Taimoori, Mr Seth bought the property through vendor finance, and the vendor, Vicki Katu, still has an interest in the property.
(b)The property was not available to Anmol Residential to carry out the development.
(c)Mr Seth did not have authority to develop the property.
(d)Through (a), (b) and (c), “no participation in a joint venture for the development was available” to Mr Taimoori.
[37] Mr Taimoori said he was “now aware … Vicki Katu … says that she was not paid the full purchase price” for the property. Mr Seth accepted in cross-examination Ms Katu had lodged a caveat against the property on the basis of unpaid vendor finance. However, Mr Seth denied he owed money to Ms Katu. Mr Seth said this is why he had not mentioned anything about this to Mr Taimoori.
[38]Little evidence, if any, was adduced in relation to (b) and (c).
[39] Had Mr Taimoori’s case rested exclusively on these points, it would have been in jeopardy. Mr Taimoori offered no evidence Mr Seth owes money to Ms Katu, only
18 Second amended statement of claim, above n 15, at [13].
his understanding of this allegation. Mr Seth did not admit he owes Ms Katu money. Ms Katu did not give evidence. No other material evidence about (a) was adduced, beyond a copy of the caveat, as registered. Moreover, as observed, little if any evidence was adduced in relation to (b) and (c).
[40] However, Mr Taimoori’s case was advanced on a broader, self-evident basis: that Mr Seth failed to develop the property; and failed to repay Mr Taimoori his money.19 Indeed, this is the gist of Mr Taimoori’s case and his related testimony.
[41] As to the latter, Mr Duckworth questioned Mr Taimoori closely. Cross- examination did not expose any material flaw in Mr Taimoori’s evidence, or credibility.
[42] Mr Taimoori’s evidence is consistent with his digital correspondence with Mr Seth in 2017. As observed, this reveals repeated requests of Mr Seth for information about the property. A snapshot is sufficient.
[43] On 21 November 2017, Mr Taimoori asked Mr Seth for “any news” about the property. Mr Seth replied he had fallen, and “cut open my skull”. Mr Taimoori said he was sorry to hear this, then asked if the real estate agent had been able to sell the property. Mr Seth did not reply.
[44] The next day, Mr Taimoori asked Mr Seth “what is … happening”? He noted it had been more than a year since they had been “trynna sell this house”. Mr Taimoori added, “I need the money bro”. Mr Seth counselled patience, “we can endure watever comes”. Mr Taimoori said financial pressure had stopped “my kid from [buying] things”. He then asked Mr Seth for the “project cost sheet”. Mr Seth replied that Mr Taimoori had not “invested under pressure”. Mr Taimoori said, “The project was not handled the way on which the money was [to be] invested”. Mr Seth said he was “sick off [Mr Taimoori’s] pressure”. Mr Taimoori expressed surprise at this answer: “Wtf?” He pressed Mr Seth for “the project cost sheet”. Mr Seth said he was “not [responding] anymore” and would talk when Mr Taimoori could approach things
19 These facts were pleaded; see, for example Second amended statement of claim, above n 15, at [8]. There could be no suggestion of ambush. None was.
“maturely”. Mr Taimoori responded he had been “very patient and understanding”, but he needed “that money back”. Mr Seth did not reply.
[45]Like exchanges are replicated throughout the messages.
[46] As will be recalled, Mr Seth’s case is that he used Mr Taimoori’s money to meet development costs, but the project failed, in part because Mr Taimoori did not invest the full $300,000. Mr Seth said the $30,680 he transferred to Mr Taimoori was not partial repayment of the money Mr Taimoori had invested, but a loan.
[47] Mr Seth’s evidence was vague and elusive. Some aspects were distinctly unsatisfactory.
[48] Mr Seth signed a brief of evidence 2 February 2021, a month from trial. In this, he said Mr Taimoori’s money was used “to assist in the preliminary work towards Stage 2 where construction would begin”. Mr Seth continued: “I have produced various invoices which confirm the use of monies received were used. These show Stage 1 was moving forward and expenses were being met as and when they were incurred”. Mr Seth did not give more detail in his brief. Indeed, Mr Seth did not identify in his brief the invoices to which he was referring.
[49] Mr Seth served a list of documents 5 February 2021.20 The list included eight invoices and one statement. Six of the eight invoices contained redactions, including the identity of the person or organisation allegedly responsible for the invoice.
[50] Mr Rooney objected. On 23 February 2021, Mr Seth discovered unredacted versions of some of the documents.
[51] Mr Seth relied on the invoices and statement at trial. Mr Seth did not adduce a single receipt for the invoices, nor corresponding bank records. Mr Seth did not call any of the documents’ authors.
20 His list was due 30 October 2020.
[52] The largest invoice produced by Mr Seth is from Gladstone Trust to Anmol Residential. The invoice is for $138,000; dated 8 April 2016; and has the number 080415.21 The narration is “Development Engagement”. I call it the 2016 invoice.
[53] I referred earlier to Mr Hayes as a witness. Mr Hayes is the manager of the Gladstone Trust, a consultancy in relation to property development. Mr Hayes was a late witness for Mr Taimoori; late because Mr Seth did not discover the unredacted invoice until 23 February 2021.
[54] Mr Hayes testified he had not seen the 2016 invoice before. He said Gladstone Trust sent an invoice to Anmol Residential for $215.11; dated 8 April 2015; with number 080415. Its narration is, “Travel to CHC regarding meeting with Eddie”. Mr Hayes said the number on the invoice reflected the (correct) date. I call this the 2015 invoice.
[55] Mr Hayes said Gladstone Trust did not send an invoice to Anmol Residential dated 8 April 2016, nor any other document that “could have been confused” with the 2015 invoice. Mr Hayes said he checked Gladstone Trust’s bank records. It never received $138,000 from Anmol Residential.
[56] In cross-examination, Mr Hayes accepted Gladstone Trust had provided services to Anmol Residential. Mr Hayes said these included a Christchurch-based project, and contingency fees that were never rendered. Mr Hayes agreed a January 2016 email to Anmol Residential referred to blocks of time which, if multiplied by an hourly rate, produced a figure of $138,000. However, Mr Hayes said the email did not refer to services in connection with the property, but a dispute between Mr Seth and a third party. Mr Hayes reiterated Gladstone Trust did not invoice Anmol Residential for $138,000.
[57] Mr Hayes presented as straight-forward, and as someone who was attempting to assist the Court years after the narrated events. Mr Hayes’ reference to
21 The seven other invoices produced by Mr Seth concern alleged services totalling $80,537.51.
Christchurch-related services is consistent with the narration to the 2015 invoice (“Travel to CHC …”).
[58] Mr Seth did not explain in oral evidence how Anmol Residential used Mr Taimoori’s money. But, he insisted the 2016 invoice was genuine. Mr Seth said the Trust provided “project management feasibility” and “introduced” contractors in relation to the property. Mr Seth did not elaborate.
[59] I mentioned earlier a statement. Mr Seth produced a statement on Burton Partners’ letterhead, implying the law firm was owed $19,570 in relation to the property as at 31 December 2015. Mr Seth did not explain the document or call a witness from the firm.
[60] Mr Seth was often evasive under cross-examination. When asked why he had redacted some of the documents, Mr Seth said he did so to protect the identity of those involved. Mr Seth said Mr Taimoori had taken “every measure outside [of] court” to place witnesses under “duress” and create “tarnishment” and “oppression”.
[61] Mr Rooney asked Mr Seth about the January 2016 email; see [56]. Mr Rooney put in evidence, without objection, a different version of the email. Unlike that produced by Mr Seth, the email had “818 cost recoveries” in its subject line; Anmol Residential’s Christchurch project concerned 818 Colombo Street. Mr Rooney asked Mr Seth why the version Mr Seth adduced did not have “818 cost recoveries” in its subject line. Mr Seth said he had produced what evidence he could in the available time, and he had been outside of Auckland immediately prior to trial due to a family bereavement.
[62] I asked Mr Seth what services Gladstone Trust had performed for Anmol Residential to the value of $138,000. Mr Seth said, “development engagement” and “add[ing] other contractors on board”. When I pressed a little more, Mr Seth said, “project management”, but he could not remember “the nitty gritty”.
[63] Mr Seth’s evidence cannot be reconciled with the property itself. No development has occurred; the single home remains. Mr Seth’s evidence cannot
be reconciled with the digital messages either. These reveal Mr Taimoori as complainant, not the other way around. Mr Seth’s exhibits—the invoices and statement—are unsupported by extrinsic evidence. Indeed, the only extrinsic evidence in relation to the largest invoice implies it a forgery. The sequence in relation to its discovery and its trial deployment are, frankly, troubling.22
[64] As will be apparent then, I accept the evidence of Mr Taimoori and Mr Hayes. I reject Mr Seth’s contrary testimony as unreliable, and his evidence about the invoices as worse. I find Mr Seth breached his fiduciary duty to Mr Taimoori by failing to develop the property and failing to repay all but $30,680.
Fair Trading Act claim
[65] This part of Mr Taimoori’s claim relies on the same ingredients as [36], albeit as misleading and deceptive conduct, and false and misleading representations. The same evidential problems arise. This conclusion makes it unnecessary to address Mr Seth’s limitation period defence (under s 43A of the Fair Trading Act).
[66]This cause of action fails.
A constructive trust, institutional or otherwise?
[67]This leaves a tricky point.
[68] Mr Taimoori’s pleadings allege he was “the beneficiary of a constructive trust conferring on him a proprietary interest in the property”.23 The pleadings say this arose because Mr Seth breached his fiduciary obligations to Mr Taimoori in relation to the invested money.
[69] Mr Rooney’s opening address said little about this topic. I said to Mr Rooney when he closed the next day, I would need to hear more.
22 This should not be understood as criticism of Mr Duckworth.
23 First amended statement of claim dated 23 April 2020 at [18.2].
[70] Mr Rooney’s closing address helpfully identified the principles in relation to fiduciary relationships, with the well-known cases of Cook v Evatt (No 2) (which I have already discussed),24 Gillies v Keogh,25 and Lankow v Rose.26 The second and third deal with constructive trusts, more particularly, when they arise. However, Mr Rooney again said little about how Mr Taimoori had a constructive trust in the property, as against a constructive trust over profit from its sale (post-development). Mr Rooney said “the facts of this case speak for themselves. Is it reasonable that [Mr Seth] keeps both [Mr Taimoori’s] money and the property?”. I acknowledge a powerful piece of advocacy. However, the submission contains no statement of principle.
[71] I asked Mr Rooney to identify the most helpful case for Mr Taimoori. He said Read v Almond.27 In Read v Almond, family members argued there was an oral agreement between them that when the property in dispute was purchased, they would each have shares based on their respective financial contributions to the purchase price and later improvements. Thomas J held such an agreement existed. The Judge also concluded each plaintiff had a reasonable expectation of an interest in the property. The Judge concluded a constructive trust had arisen in relation to the property.
[72]It is convenient now to stand back. Doing so will introduce my concerns.
[73] An institutional constructive trust arises when a person makes an unconscientious assertion of ownership to property to which another has contributed. The most frequently encountered circumstance lies in relationship property. Gillies v Keogh and Lankow v Rose are both relationship property cases, with the latter recognised as the leading one, and Tipping J’s judgment therein, the most cited.
[74] Tipping J identified four things a claimant must establish to have a beneficial interest in property, owned in law, by another.28 First, that the claimant contributed to the property. Second, that the claimant did so with the expectation of an interest in the
24 Cook v Evatt (No 2), above n 11.
25 Gillies v Keogh [1989] 2 NZLR 327 (CA).
26 Lankow v Rose [1995] 1 NZLR 277 (CA).
27 Read v Almond [2015] NZHC 2797.
28 Lankow v Rose, above n 26, at 294.
property. Third, that the expectation was reasonable. Fourth, that the defendant ought reasonably expect to yield an interest to the claimant.
[75] Lankow v Rose does not occupy the field in relation to the ingredients of an institutional constructive trust. This may also arise when the claimant contributes to the property in consequence of a common intention the claimant will have a share in the property. In this situation, it is not necessary “to fall back on reasonable expectations”.29 Cooke P made these points in Gormack v Scott.
[76] Read v Almond involved both instances of a constructive trust. The contributing parties did so in consequence of a common intention, and each had a reasonable expectation of an interest in the property. Read v Almond involved an institutional constructive trust, meaning the institution of a trust arose as the events occurred, merely to be recognised thereafter by the Court. A remedial constructive trust, however, as its name implies, is the remedy of a trust imposed by the Court when previously there was none. The former is commonplace. The latter is anything but.
[77] I return to this case. Clearly, Mr Taimoori gave Mr Seth a lot of money to develop the property. However, it is not clear Mr Taimoori actually contributed to the property. The assumption animating Mr Taimoori’s fiduciary duty claim is that Mr Seth failed to apply Mr Taimoori’s money as he ought. It is not clear how Mr Taimoori contributed to the property if, as is almost certainly the position, his money never reached it.
[78] Relatedly, it is not clear Mr Taimoori had an expectation of an interest in the property itself, as distinct from the expectation of an interest in profit from the property’s sale. Like observations attach to the third and fourth ingredients identified by Tipping J.
[79] The common intention variant of a constructive trust is no more promising. The MOU does not appear to contemplate Mr Taimoori having an interest in the property, nor the men’s related dealings. Mr Taimoori’s own evidence supports this conclusion:
29 Gormack v Scott (1995) 13 FRNZ 43 at 47–48.
Anmol told me that he wanted me to invest $300,000 into the development to get it under way by contracting a builder and starting construction, on the basis that he or one of his companies would enter into the joint venture with me to carry out the development project, and that he would make the property available to be developed by the joint venture. We were each to be repaid for our contributions once the development was completed. The contributions were the property itself (contributed by Anmol) and any investments. I was aware that Anmol had a mortgage to Westpac over the property, which was also to be repaid (as part of the repayment of Anmol’s contribution). The profits were then to be shared.
[80] Despite the pleadings then, what Mr Rooney really argues for is a remedial constructive trust which, again, “does not exist until declared by order of the court.”30 Professor Jessica Palmer says such a trust is “a remedy in situations not already covered by institutional constructive trusts … in which Judges feel a proprietary remedy is necessary to achieve justice.”31 Professor Palmer also says remedial constructive trusts constitute “an illegitimate use of equity to disrupt proprietary rights and obligations [absent] a sound, reasoned, basis” for their existence.32 In other words, the remedial constructive trust is controversial.
[81] In Commonwealth Reserves I v Chodar, Glazebrook J discussed attendant principle, drawing on observations of Tipping J:33
[41] In Fortex … Tipping J stated that there needs to be some asset or assets in the defendant’s hands upon which the Court considers it appropriate to impress a trust. He says that this must be on a principled basis vis-à-vis both the person owning the assets and any third party who has an interest in the assets. He went on to say:
“Equity intervenes to prevent those with rights at law from enforcing those rights when in the eyes of equity it would be unconscionable for them to do so.”
…
[42] The question that must be answered in this case is what that principled basis is. There appear to be two potential triggers for the exercise of the Court’s discretion to grant a remedial constructive trust. One is unjust enrichment. The other is unconscionability.
…
30 Fortex Group Ltd (in rec and liq) v MacIntosh [1998] 3 NZLR 171 (CA) at 173.
31 Jessica Palmer “Constructive Trusts” in Andrew Butler (ed) Equity and Trusts in New Zealand
(2nd ed, Thomson Reuters, Wellington, 2009) at [13.3.1].
32 At [13.3.1].
33 Commonwealth Reserves I v Chodar [2001] 2 NZLR 374 (HC) at 383–384.
[46] There is, however, a significant distinction between having jurisdiction to impose a remedial constructive trust, and choosing to exercise that discretion. It is apparent that a remedial constructive trust is potentially available as a remedy in cases of unconscionability and unjust enrichment. It is not inevitable that one will be awarded.
[47] Reliability and certainty are primary considerations of any system of property rights, and the unprovoked alteration of those rights is to be avoided where possible. This is all the more true in a commercial rather than a domestic context. The Court must carefully examine the reasons why other forms of relief are inadequate, the interests of any third parties and the other circumstances of the case, and consider whether proprietary relief can be justified.
[48] In cases where the interests of third parties would be prejudiced by a proprietary remedy, particularly if those third parties are in a substantially similar position to the plaintiff, or where the plaintiff has accepted the risk of the defendant’s insolvency, then proprietary relief is likely to be inappropriate.
[82] I decline to declare Mr Taimoori has a remedial constructive trust over the property for three reasons. First, it is quite possible others claim an interest in the property. Ms Katu alleges Mr Seth did not pay the full amount for the property; see [37]. Anmol Residential is in liquidation; see [17]. Interests of creditors may be in play; a remedial constructive trust could affect others’ rights. Second, an orthodox remedy is available: restitution of the outstanding balance. The evidence does not imply this relief would necessarily be inadequate. Third, a remedial constructive trust would provide Mr Taimoori an interest in the property even though his claim of an institutional constructive trust fails: see [77]–[79].
Result and orders
[83] The fiduciary duty cause of action is upheld, save for the contention of a constructive trust:
(a)Mr Seth must pay Mr Taimoori $239,320.
(b)Interest under the Interest on Money Claims Act 2016.
[84]The Fair Trading Act cause of action fails; and is dismissed.
Costs
[85] At the end of the trial, Mr Rooney said if Mr Taimoori were successful, he sought 2B scale costs, with a 25 percent increase from 5 February 2021.34 As will be recalled, that date is when Mr Seth provided discovery, albeit with redactions; see [49]–[50]. I did not understand Mr Duckworth to protest increased costs if Mr Seth were unsuccessful, given:
(a)Mr Seth should have discovered his documents by 30 October 2020, a date based on a consent memorandum.
(b)The redactions were unjustifiable.
(c)Late, redacted discovery compromised Mr Taimoori’s ability to investigate the invoices, hence address an important aspect of Mr Seth’s case.
[86] I award costs as sought. I record Mr Seth’s behaviour might have justified a higher increase, even indemnity costs.
Police referral
[87] In light of the testimony about the 2015 invoice and the 2016 invoice, and Mr Seth’s introduction of the latter as evidence of an expense in relation to the property, I direct the Registrar send this judgment to the Commissioner of Police.
Postscript
[88] On 15 March 2021, Mr Rooney filed and served a decision of Associate Judge Bell in relation Ms Katu and Mr Seth.35 The Judge concluded
34 High Court Rules 2016, r 14.6(3).
35 Katu v Seth [2021] NZHC 416.
Ms Katu did not have a caveatable interest in the property. I read the decision after completing this judgment (but obviously, before releasing it).
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Downs J
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