Venkataswamy v Kodoor

[2024] NZHC 833

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-002374

[2024] NZHC 833

BETWEEN

SHYLA VENKATASWAMY

Plaintiff

AND

MURALI GANESH KODOOR and GEETA MURALI GANESH

Defendants

Hearing:

29 – 30 November 2023

Further submissions: 11 and 20 December 2023

Appearances:

N J Scampion and M A Ashmore for Plaintiff M I S Phillipps for Defendants

Judgment:

17 April 2024

JUDGMENT OF ANDREW J

[Remedy and costs]

This judgment was delivered by Justice Andrew on 17 April 2024 at 3.00 pm

pursuant to r 11.5 of the High Court Rules 2016 Registrar / Deputy Registrar

Date ………………………….

VENKATASWAMY v KODOOR [2024] NZHC 833 [17 April 2024]

Introduction

[1]    In my liability judgment of 18 May 2023,1 I found the defendants liable for the second and third causes of action, namely breach of trust and breach of fiduciary duty. The defendants were ordered to repay the plaintiff an outstanding principal amount of USD634,641 but remaining questions concerning remedy and costs were deferred pending either resolution between the parties or a further hearing to determine those issues.

[2]    This is my judgment on remedy and costs. It follows a further two-day hearing and receipt of submissions from the parties.

The judgment of 18 May 2023

[3]In my judgment of 18 May 2023, I found that:

(a)Sums totalling USD998,551 were advanced by Ms Venkataswamy to the defendants between 21 September 2010 and February 2011.2

(b)The defendants repaid the sums of USD163,910 and USD200,000 on 16 November 2011 and 30 July 2012, leaving the sum of USD634,641 to be repaid by the defendants to Ms Venkataswamy.3

(c)The mutual understanding or expectation was that Ms Venkataswamy would receive a significant return on her investment exceeding what she might obtain from real estate investment in California. Her whole rationale for investing in New Zealand was the representation made by Mr Kodoor that very attractive rates of return on real estate investments were   available   in   New   Zealand.   It   was   also   agreed   that   Ms Venkataswamy would need to keep her investment for at least three years (it was originally two years, but the parties subsequently seemed to agree to a three-year minimum term).4

1      Venkataswamy v Kodoor [2023] NZHC 1189.

2      Venkataswamy v Kodoor, above n 1, at [95] and [98].

3      Venkataswamy v Kodoor, above n 1, at [27], [38], [122] and [123].

4      Venkataswamy v Kodoor, above n1, at [128].

(d)The funds were advanced for investment in commercial real estate in New Zealand. The clear expectation and consensus were that there would be a generous rate of return having regard, among other things, to the lack of a comparable capital gains tax in New Zealand.5

(e)Ms Venkataswamy made demand for return of funds before the three-year agreed investment period had expired. This must have had some impact on the rate of return that Mr Kodoor might have achieved.6

(f)Despite misgivings about the pleadings, the defendants cannot simply be allowed to keep Ms Venkataswamy’s money because it falls into a legal lacuna. The parties have now squarely addressed the issue of breach of trust and breach of fiduciary duties in the additional submissions received by the Court. The facts justify the intervention of equity.7

(g)An order needs to be made requiring the defendants to repay the outstanding sum of USD634,641. The defendants are also required to pay equitable compensation to the plaintiff.8

(h)The plaintiff had sought equitable damages based on a contractual measure of damages.9

(i)A 75 per cent return based on the proposed Orewa purchase would be excessive and disproportionate.10

(j)It would be helpful to know what the appropriate calculation might be if I were to award interest reflecting a capital gain return on the investment based on the average rate of return for commercial property

5      Venkataswamy v Kodoor, above n 1, at [160].

6      Venkataswamy v Kodoor, above n 1, at [132].

7      Venkataswamy v Kodoor, above n 1, at [126].

8      Venkataswamy v Kodoor, above n 1, at [151] and [162].

9      Venkataswamy v Kodoor, above n 1, a at [3].

10     Venkataswamy v Kodoor, above n 1, at [159].

developments in Auckland  and/or  New  Zealand  over  the  period  31 March 2010 until 1 March 2023.11

(k)In the event that the parties are unable to reach agreement on the amount, the quantum of equitable compensation will be determined at a subsequent remedies hearing focusing on the discrete issue of that quantum.12

(l)Ms Venkataswamy has been successful with her claim and is entitled to costs.13

[4]    The defendants have paid Ms Venkataswamy the sum of NZ$400,000 and paid the balance sum to make up a total of USD634,641 (i.e. the principal component).

The issues

[5]I need to resolve the following issues:

(a)What is the appropriate measure of equitable compensation and, in particular:

(i)What is the appropriate start date for the calculation?

(ii)What is the impact of Ms Venkataswamy’s request for money to be returned?

(iii)Should compensation be paid in US or New Zealand dollars?

(iv)In light of the expert evidence, what is the appropriate rate of return?

(v)Should there be an adjustment to account for re-investment?

11     Venkataswamy v Kodoor, above n 1, at [162].

12     Venkataswamy v Kodoor, above n 1, at [164](d).

13     Venkataswamy v Kodoor, above n 1, at [165].

(vi)Should there be an adjustment to account for the use of leverage?

(vii)Should there be an adjustment to account for student loan interest payments?

(b)Should I award general damages and/or equitable damages which have never been specifically pleaded?

(c)Should any award of equitable compensation be reduced for contribution by Ms Venkataswamy towards her own loss?

Issue (a) – Measure of equitable compensation

[6]    One of the purposes of equitable compensation is to restore successful plaintiffs to the position in which they would have been if the inequitable wrongdoing had not occurred.14 The defendant may have to compensate for loss suffered and also restore to the plaintiff any value transferred when the rationale for the transfer has failed because of the wrong.15

[7]    The judicial discretion to grant equitable remedy should be exercised to do justice in the circumstances of the particular case.16

[8]In Day v Mead, Somers J held:17

The equitable jurisdiction is exercisable in the absence of adequate remedies at law. The assessment will reflect that which the justice of the case requires according to considerations of conscience, fairness, and hardship. …

14 Geoff McLay “Equitable Damages” in Andrew S Butler (ed) Equity in Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [32.3.1]; Chirnside v Fay [2004] 3 NZLR 637 (CA) at [67]; and Premium Real Estate Ltd v Stevens [2009] NZSC 15, [2009] 2 NZLR 384 at [99].

15 Premium Real Estate Ltd v Stevens, above n 14, at [102]. Tipping J held that the three types of monetary relief with which the courts are concerned as a response to civil wrongs can be described as compensatory damages, disgorgement damages and restorative damages. Compensatory and restorative damages are not necessarily inconsistent. Conceptually, they are capable of being cumulative even if they arise from the same wrong.

16 Premium Real Estate Ltd v Stevens, above n 14, at [107].

17 Day v Mead [1987] 2 NZLR 443 (CA) at 462.

[9]    In Premium Real Estate Ltd v Stevens, Tipping J held that  much will  turn  “in each case” on the seriousness of the wrong which has been committed.18 Further factors include the degree of moral turpitude attending the commission of the wrong and whether the plaintiff has received any ultimate value from the defendant’s efforts.

[10]   If, for whatever reason, the errant trustees made a profit from their malfeasance, they will generally not be permitted to retain that profit and must give it up to the principal.19

[11]   In this case, Ms Venkataswamy is to be restored to the position that she would be in if the defendants had complied with their fiduciary duties. That includes compensation for loss of the opportunity to invest the money that was kept from her.

[12]   The defendants submit that Tipping J in Premium Real Estate Ltd v Stevens specifically rejected attempts to differentiate between equitable and common law awards of damages.20 However, that submission is not, in my view, an accurate description of his Honour’s conclusion. I accept that Tipping J expressed a clear preference to use the single unqualified word “damages” without reference to the historical source of the cause of action upon which they are based. However, it is clear from his judgment that he maintained a distinction between the three types of monetary relief, namely compensatory damages, disgorgement damages and restorative damages.21 Those distinctions have application in this case.

[13]   In this case, I have found that there were multiple and egregious breaches of trust and fiduciary duty by the defendants.22 In my earlier judgment, I concluded that there had been a complete failure to account to Ms Venkataswamy for how the funds were invested, including a very incomplete record of the alleged repayments.23 I held that the defendants had misapplied the funds. The wrongs in this case are thus serious, attended by a high degree of moral turpitude.

18 Venkataswamy v Kodoor, above n 1, at [104].

19  Boardman v Phipps [1997] 2 AC 46 (HL). See also Premium Real Estate Ltd v Stevens, above n14, at [103]; Chirnside v Fay [2007] 2 NZLR, at [103]–[154], which permits some reward/remuneration to errant fiduciaries in certain circumstances.

20     Venkataswamy v Kodoor, above n 1, at [111].

21     Venkataswamy v Kodoor, above n 1, at [102].

22     See Venkataswamy v Kodoor, above n 1, at [134].

23     Venkataswamy v Kodoor, above n 1, at [149].

[14]   Against that background, and in applying the principles of equitable compensation, I find that the measure of compensation is the profit that would have been made had the defendants dutifully invested Ms Venkataswamy’s money in the agreed sector for the period it was kept from her. That is, the period from 2010 until 2023 but with the adjustments that I address below. This is consistent with the approach taken in Re Mulligan (deceased) that compensation is to be the difference between actual performance by the trustee and what a prudent trustee was likely to have achieved.24

[15]   I reject the defendants’ submission that equitable compensation should only be awarded for the period 2011 until February 2014. The defendants say that because they returned some of the money in 2011 and 2012 no equitable returns other than statutory interest should be payable after November 2011.

[16]   In my view, Ms Venkataswamy’s loss continues until the money is returned. Her loss did not cease in 2014 simply because the original expectation was that the defendants would return her money at that stage. They did not cease to be trustees then. They remained trustees. And because they forced the trust arrangements to continue past the originally intended end date, they remained subject to the duties and liabilities of trustees throughout the whole extended period – i.e. up until 2023. To conclude otherwise would amount to rewarding the defendants for their neglect of their fiduciary duties.

[17]   In these circumstances, an errant trustee cannot be entitled to retain the fruits of their wrongdoing. To accept the defendants’ submissions would allow them to make a profit in their wrongdoing because, as I have concluded was likely, had they invested their money in their own commercial interests they would likely have obtained far greater returns than the statutory interest rate. By intermingling their money  with  Ms Venkataswamy’s money and keeping very few records, the defendants set out their affairs in such way that prevents the untangling of any profit they made. I find that in these circumstances they should not be allowed to sever the trust and limit their liabilities.

24     Re Mulligan (deceased) [1998] 1 NZLR 481 (HC) at 508–509.

Issue (a)(i) – The start date

[18]   Ms Venkataswamy’s  money  was  paid  in  multiple  instalments  between  20 September 2010 and February 2011.

[19]   The defendants say, therefore, that I should take the latest date, namely February 2011, as the starting date. That is an assumption that favours the defendants. They say that such an assumption should apply, based on the expert evidence of Mr Harris, because it is normal for the full amount of an investor’s investment to be combined before any property purchase is made.

[20]   However, I find that there is no evidence in this case to support that assumption. It also makes an assumption that does not apply in this case:

(a)There is no evidence that  the defendants  needed any money from  Ms Venkataswamy in order to make their investment.

(b)The assumption relates to a conventional, arms-length commercial arrangement. Here, Ms Venkataswamy was convinced to part with her money, missing out on investments that would have provided her with a good return, on the basis of a promise of a more generous return with monthly returns in the meantime.

[21]   The evidence establishes that the defendants indicated in late 2010 that the money was earning five per cent per annum as a return “from day one”. They further indicated in July 2011 that the money was returning 8.65 per cent before being invested in commercial property. In my view, that gives an indication of what a reasonable, prudent trustee would have done.

[22]   I find that the start date for assessing the compensation should be “from day one” (and day one is the day that each transfer was received by the defendants).

Issue (a)(ii) – Request that money be returned

[23]   The defendants, at the request of Ms Venkataswamy, returned USD163,910 on 16 November 2011 and USD200,000 to Ms Venkataswamy on 30 July 2012.

[24]   The defendants say that I should assume that “break fees” would apply and the return of those monies would mean the end of the investment because the defendants would need to sell their investment to return Ms Venkataswamy’s money.

[25]   There are a number of difficulties with that submission. Although the defendants had promised to buy a commercial property and say that related assumptions should apply, it is not at all clear that they did so. They simply held on to Ms Venkataswamy’s money  and  used  it  themselves.  Even  if  they  had  used Ms Venkataswamy’s money in their own existing investments, then it would not be appropriate to apply those assumptions.

[26]   In my 18 May 2023 judgment, I recorded that the defendants have extensive property investments in New Zealand and overseas (including a number of hotels).25 It is more likely than not that some of Ms Venkataswamy’s funds were invested in those properties.

[27]   The defendants’ assumptions also favour them and there is no evidence for such assumptions in the documents or in the witness evidence. On the contrary, the evidence suggests the defendants are wealthy, with widespread investments. I find that they probably were able to find USD163,910 and USD200,000 without difficulty.

[28]   Importantly, the level of compensation in equitable claims is fixed by reference to what is described as “plaintiff friendly causation rules”.26

[29]   Counsel for Ms Venkataswamy submit that I should make and apply the following assumptions, had the defendants complied with their fiduciary duties:

25     Venkataswamy v Kodoor, above n 1, at [161].

26     Geoff McLay, above n 14, at [32.5.5] and [32.5.6].

(a)Ms Venkataswamy’s money and the investment would have been visible to her.

(b)The defendants would have paid her a return on her investment from day one;

(c)The money would have returned in the region of 23.9 per cent or 23.8 in 2011, and 25.5 per cent or 21.3 per cent in 2012;

(d)It would have been clear to Ms Venkataswamy that the investments were on target to earn those returns, and she would have been receiving a monthly return;

(e)Ms Venkataswamy in those circumstances may have kept the money with the defendants’ commercial property. Had the defendants said her request would have meant selling a successful investment, she would not have asked for the return of her money.

[30]   There is some force in those submissions. It also aligns with the rebuttable presumption that counter-factuals should be interpreted in the beneficiary’s favour.27 However, having reviewed the evidence presented in this case, I find that the presumption has been rebutted and that Ms Venkataswamy would have requested these sums to be returned even if the defendants had not breached their fiduciary duties. For her own pressing financial reasons, Ms Venkataswamy needed the money and was well aware of the original agreement for a three-year investment term. She chose to break the investment, at least in part. She needed the money as a matter of priority and in my view would likely have requested its return regardless of the state of the investment.

[31]   Accordingly, the defendants rightly point out that the total sum of USD363,910, being approximately 36.4 per cent of the total amount advanced, was repaid to Ms Venkataswamy before the expiry of the agreed three-year period for the

27     Premium Real Estate Ltd v Stevens, above n 14, at [85].

investment. That was, of course, a reneging on the consensus/expectation of a three- year term.

[32]   In assessing all these factors, I conclude that there should be some reduction in the rate of return to recognise the premature demand for early payments in the context of a property investment.

Issue (a)(iii) – Repayment in New Zealand or US dollars

[33]   I accept, as I found in my judgment of 18 May 2023, that Ms Venkataswamy was repeatedly clear that she wanted the money returned in US dollars. When some money was repaid to her, it was of course repaid in US dollars.

[34]   In my view, it is implicit in the arrangements the parties agreed to that the defendants would take the risk with the exchange rate and the rate of return (both income and capital). I accept that the US dollars Ms Venkataswamy transferred to New Zealand were converted into New Zealand dollars and invested as New Zealand dollars in New Zealand real estate. However, the expected returns were based on US dollar calculations.

[35]   I also take judicial notice of the fact that the New Zealand dollar has depreciated somewhat against the US dollar since 2012. It would be unconscionable for the defendants to take some advantage of that. They wrongly retained and made use of Ms Venkataswamy’s funds.

[36]   In the circumstances, I find that repayment should be in US dollars and the calculations for the rate of return based on US dollars.

Issue (a)(iv) – The calculation of the appropriate returns

[37]   Both parties called expert evidence on the issue of the average rate of return for commercial property investment in New Zealand from 2011 to 2022. Mr Moricz, research   analyst   and   executive   director   at    CBRE,    gave    evidence    for  Ms Venkataswamy. Mr Harris, senior director and registered valuer at Jones Lang LaSalle, gave evidence for the defendants.

[38]   The experts agree that there were properties for the defendants to invest in in 2010 and 2011 in all relevant commercial property sectors.

[39]Mr Moricz calculated a total return (i.e. capital gain and income) of between

242.20 per cent and 341.90 per cent in commercial property between 2010 and 2022. The higher figure of 341.90 per cent relates to industrial commercial property investment and the lower figure of 242.20 per cent relates to average commercial property. Mr Moricz’s figures also show that the average capital returns in the first three years would be:

(a)       2011–2012: 9.7 per cent;

(b)       2012–2013: 13.1 per cent; and

(c)       2013–2014: 15.8 per cent.

[40]Mr Moricz explained that the average commercial capital return was between

6.1 per cent to 9.3 per cent per annum over the period, and the average income return was 7.6 per cent.

[41]   Mr Harris calculated a total return for a similar period, namely between March 2010 and March 2023, of 239.6 per cent. That was the figure he gave for what he described as the cumulative gross return for that period that an investor could have expected to receive for investment in commercial property. As Mr Harris noted, that is not substantially different from the figure adopted by Mr Moricz of 242.2 per cent for the cumulative total return for the average commercial property investment.

[42]   Both Mr Moricz and Mr Harris were professional and competent witnesses. To the extent that there are any meaningful differences between them, I prefer, on balance, the evidence of Mr Moricz. On the day, he was the more impressive witness in full command of his subject matter. Mr Moricz is also better qualified than Mr Harris. In saying that, I acknowledge that Mr Harris is well qualified and has significant practical experience. Ultimately, of course, the test is one of “substantial help”.28

28     Evidence Act 2006, s 25.

[43]   I accept and adopt the figures of Mr Moricz and those are the figures to be used in determining the quantum of the equitable compensation. Those figures conclude that the return on investment in commercial property in New Zealand for 2023 would have been in the region of 18.6 per cent to 26.3 per cent and the total return on investment in commercial property in New Zealand from the start of 2011 to 2023 would be 260.8 per cent to 368.2 per cent. The figure of 260.8 per cent is for the average commercial property return and the figure of 368.2 per cent is for industrial commercial property investment. The average return over that period for average commercial property investment is 20.6 per cent and for industrial commercial property investment 28.32 per cent.

[44]   Ms Venkataswamy submits that on the basis of Mr Moricz’s figures, if the defendants had invested her money in the agreed sector for the period she says it was kept from her, her USD998,551 would have become:

(a)USD2,604,521 (on the basis of an investment in “average” commercial property; or

(b)USD3,676,665 (on the basis of an investment in “industrial” commercial property).

[45]   Those figures of USD2,604,521 and USD3,676,665 provide a helpful benchmark for the assessment of the equitable compensation in this case. However, some adjustment needs to be made to those sums to take into account my findings that Ms Venkataswamy broke the initial investment (requesting the repayment of USD363,910) and my overall assessment of the justice of the case.

[46]   I find that compensation should be based on a total return of 300 per cent (i.e. capital gain and income) on the sum of USD634,641 for the period 1 February 2011 until 31 December 2023. That takes into account that a prudent trustee would likely have invested in both average commercial property and industrial commercial property over that period. Some recognition also needs to be given to the fact that the generous returns originally offered by Mr Kodoor reflected, no doubt, a particular level of expertise and skill he had in commercial property investment in New Zealand.

[47]   I have come to these conclusions without recourse to Ms Venkataswamy’s additional evidence about the Californian property market and what returns might have been available to her there. It is not necessary for me to do so and, in any event, it is of no real assistance to me.

Issue (a)(v) – Re-investment

[48]Ms Venkataswamy submits as follows:

(a)Associated with the trustees’ obligation to invest the sums that they are entrusted with, so that they are not degraded by inflation, is an obligation to continually review investments.29

(b)A prudent trustee would re-invest the income returns from the investment.

(c)The simplest way to derive a realistic, conservative figure from re-investment is to assume the following:

(i)The defendants should have paid Ms Venkataswamy a return of

7.5 per cent per annum, paid monthly.

(ii)An interest rate of five per cent is a conservative estimate (in view of potential returns from property or the stock market).

(iii)If the plaintiff had been paid her expected return on her investment the returns would result in an additional money figure due to interest over time of USD293,358.80 (that is based on a starting principal in 2012 of USD998,551).30

29 It is said that the object of the review is to ensure the investments are performing adequately, maintaining their values (if the subject-matter of security) and providing an adequate spread of income and capital growth. See Andrew S Butler “Investment of Trust Funds” in Andrew S Butler (ed) Equity in Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [8.2.14].

30 See [46] of Ms Venkataswamy’s submissions on remedy, dated 20 December 2023.

[49]   I find that some provision should be allowed for the issue of re-investment. I find that an allowance of five per cent on the sum of USD634,641 should be paid for the period 1 February 2011 until repayment in 2023.

Issue (a)(vi) – Leverage

[50]   Ms Venkataswamy seeks additional equitable compensation to take into account leverage. She submits:

(a)The experts agree that leverage is a feature of commercial property investment.

(b)The simplest way to derive a realistic, conservative figure from leverage is to assume the following:

(i)The defendants were looking to purchase properties for around NZ$5.5 million.

(ii)Using leverage at 50 per cent they could purchase two such properties, borrowing NZ$5.5 million.

(c)Their borrowing costs would be roughly 4.9 per cent per annum, so NZ$269,500 per annum.

(d)Their income return would average NZ$836,000 (at 7.6 per cent per annum).

(e)Assuming borrowing costs were paid from income return, their annual net income return would be NZ$566,500.

(f)Leverage would mean they could double their capital return and income return at a ‘cost’ of NZ$269,500 per annum.

[51]   Ms Venkataswamy further submits that on this basis, the defendants would increase their return using leverage. An investment of NZ$11 million over such a long period would produce:

(a)       NZ$26,642,000; or

(b)       NZ$37,609,900.

[52]   Based on Mr Moricz’s figures, Ms Venkataswamy then submits that using leverage the defendants in this case might therefore have made a return of between:

(a)       NZ$25,600,220; and

(b)       NZ$40,705,879.

[53]   Ms Venkataswamy says that this indicates that the defendants might (or should) have increased their return using leverage by roughly 80 per cent and she says that her return should increase by a commensurate amount.

[54]   I find that no allowance should be made for leverage. Any additional profit that the defendants may have obtained is irrelevant to the issue of compensation for Ms Venkataswamy’s loss. What is relevant is whether, and to what extent, a prudent trustee would have used leverage to increase her returns. The issue is that Ms Venkataswamy has provided insufficient expert evidence to establish that a prudent trustee during the relevant period would leverage the sum in the way suggested, and what the potential impact on returns would be. In this way, it can be distinguished from Re Mulligan (deceased) in which the Court heard substantial expert evidence on the issue. As the onus to prove the extent of her loss falls on Ms Venkataswamy, I find her submissions on leverage to be too speculative to discharge this onus. In this context, the substantial sum of money claimed under this head is beyond any reasonable and fair measurement of loss. Furthermore, Ms Venkataswamy only claimed an adjustment for leverage in her submissions on quantum dated 20 December 2023, and not in her earlier submissions dated 25 October 2023. This raises significant

natural justice concerns because the defendants were not able to respond to this point in their submissions dated 20 November and 11 December 2023.

Issue (a)(vii) – Student loan interest payments

[55]   Ms Venkataswamy claims that as a result of the defendants’ failure to return her funds to her, her eldest daughter had to take out student loans to pay for college. The interest on the loan amounted to USD48,000. Ms Venkataswamy claims this USD48,000 “on trust” for her eldest daughter.

[56]   I reject Ms Venkataswamy’s claim for interest payments of USD48,000. This is a new claim brought at a very late stage of the proceedings and should have been expressly pleaded at an earlier stage.

[57]   On this basis, much of the additional evidence Ms Venkataswamy sought to produce  is  not  relevant.  In  any  event,  the  evidence  presented  suggests  that   Ms Venkataswamy’s financial affairs are somewhat chaotic and very difficult to understand.

Issue (b) – Can general damages and/or exemplary damages be awarded?

[58]   The defendants say that a claim for equitable damages does not encompass a claim  for  general  and/or  exemplary  damages.    Alternatively,  they  say  that    Ms Venkataswamy did not include a claim for general and/or exemplary damages in her pleadings and should not now be permitted to claim them.

[59]   Ms Venkataswamy says that a claim for equitable damages includes claims for general damages and exemplary damages. She further says that her intention to claim these damages was clear from her submissions of 6 April 2023.

[60]   There is merit to the defendants’ criticism of Ms Venkataswamy and her very late claim made for both general and exemplary damages. The proceedings have, of course, been under way since 2016 and there have been numerous iterations of the statement of claim.

[61]   However, I have a wide jurisdiction under r 5.31 of the High Court Rules 2016 based on what the Court “thinks just” to grant relief even if it has not been specifically claimed. The first enquiry is whether the plaintiff is “entitled” to the relief sought. The next enquiry is whether it is “just” to grant the further relief sought. In addressing that issue, it is necessary to address whether there has been prejudice and/or surprise.31

[62]   In  the  circumstances   of  this  case,  I  find  it  would  be  just  to  allow    Ms Venkataswamy to make a claim for general damages. It is clear from my liability judgment that she has suffered significant stress and harm as a result of the defendants’ actions and, in particular, the financial stress that she has suffered as a result of being denied access to her funds for a very long period. To the extent that her recent evidence addresses this issue, I find it should be admitted.

[63]   I find that Ms Venkataswamy should be awarded NZ$50,000 in general damages.

[64]   I further find that Ms Venkataswamy’s claim for exemplary damages is to be disallowed. They may be a species of equitable compensation but, in my view, they should have been expressly pleaded at a much earlier stage. The defendants are, in my view, prejudiced by the late claim for exemplary damages. It may well be that the cross-examination and the defendants’ own evidence would have been somewhat different had an express claim for exemplary damages been made at the appropriate time. The threshold for exemplary damages is, of course, a high one and a defendant is generally entitled to proper notice of what is alleged to have been misconduct.

Issue (c) – Should the award of equitable compensation be reduced on account of contributory conduct by Ms Venkataswamy to her own losses?

[65]   The defendants submit that the amount of equitable compensation should be reduced by 10 per cent to recognise Ms Venkataswamy’s contribution to her own losses. They note that she:

31     Kwok v Rainey [2020] NZHC 923 at [247].

(a)chose not to document her arrangements with the defendants in any way;

(b)did not record or document with the defendants any of the third-party payments other than to record them in her own diary;

(c)made further payments to the defendants after the initial proposed investment fell through;

(d)did not record or document what the defendants were required to do with her funds;

(e)did not ask the defendants to confirm what they had done with the funds; and

(f)did not seek repayment of any specific sum which she claimed was due.

[66]   In short, the defendants submit that Ms Venkataswamy left it entirely to the defendants to invest her funds knowing that the Orewa purchase had fallen over. She then sued on the original proposed terms relating to the Orewa purchase.

[67]   I reject the defendants’ contention for a 10 per cent discount. In my liability judgment I found that the defendants had committed serious and multiple breaches of trust and fiduciary duty. Ms Venkataswamy may have been remiss in not insisting upon proper documentation of the arrangements between the parties. However, I find that there was no real fault or contributory conduct on her part which could fairly be said to have contributed to her losses.

Conclusion and orders on remedy

[68]I make the following orders:32

32    These are additional to those I made at [164] of my judgment of 18 May 2023.  In that judgment I ordered that the defendants were to pay to the plaintiff, Ms Venkataswamy, the sum of USD 634,641.

(a)The defendants are to pay to Ms Venkataswamy, the plaintiff, the following equitable compensation:

(i)8.65 per  cent  on  USD163,910  from  the  payment  date  of 21 September 2010 until 16 November 2011, and to be paid in US dollars;

(ii)8.65  per  cent  on  USD200,000  from  the  payment  dated   21 September 2010 until 30 July 2012 and to be paid in US dollars;

(iii)A return on investment, to be paid and calculated in US dollars, being a total return of 300 per cent on the sum of USD634,641 for the period 1 February 2011 until repayment of the principal in 2023 and to be paid in US dollars;

(iv)A sum to reflect that income returns would have increased by virtue of re-investment. That is to be calculated in accordance with [49] above – i.e. five per cent on the sum of USD634,641 for the period of 1 February 2011 until repayment of the principal in 2023;

(v)General damages of NZ$50,000.

[69]   I direct that counsel for the plaintiff, Ms Venkataswamy, is to file a memorandum proposing final calculations on quantum (based on the above findings) for approval by the Court. Counsel for Ms Venkataswamy is to confer with counsel for the defendants and to submit such memorandum for approval within 28 days.33

Costs

[70]   Ms Venkataswamy seeks indemnity costs or, alternatively, increased costs. She contends that Mr Kodoor’s dishonesty has been extensively catalogued over the course

33     As suggested at [60] of the Ms Venkataswamy’s submissions on remedy dated 20 December 2023.

of the case and my liability judgment. Ms Venkataswamy says that much of the dishonesty was obvious and flagrant; Mr Kodoor was lying to try to defeat her claims and his lies were integral to his defence.

[71]   The defendants accept that Ms Venkataswamy has substantially succeeded on her claim and is entitled to costs on a 2B basis. They oppose the claim for indemnity costs or increased costs.

[72]   Rule 14.2(1)(g) of the High Court Rules 2016 provides that so far as possible the determination of costs should be predictable and expeditious.

[73]   In Bradbury v Westpac  Banking Corp, the court held that increased costs     (r 14.6) may be awarded where there is a failure by the party paying to act reasonably and indemnity costs may be awarded where the party has behaved either badly or very unreasonably.34

[74]   In Commissioner of Inland Revenue v Chesterfields Preschools Ltd, it was held that the court should consider the extent to which the failure to act reasonably contributed to time or expense of the proceedings.35 Only then can any uplift be applied.

[75]   I accept that in my liability judgment I found the defendants have committed multiple and serious and breaches of trust and fiduciary duty. I also acknowledge that it is well established that trustees can be liable to pay indemnity costs for breach of trust when they have acted and used the beneficiary’s funds with intent to defraud.36 However, in this case, where Ms Venkataswamy’s own conduct has to some extent contributed to the cost, delay and length of the proceedings, I find that on balance, and as a matter of discretion, no award of indemnity costs should be made.

[76]   The better approach, which I adopt, is to order increased costs of 50 per cent beyond the 2B scale. In the circumstances of this case, that is a more appropriate

34     Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

35     Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010) 24 NZTC 24,500 at [165].

36     Richter v Huber HC Napier CIV-2004-441-784, 8 September 2005 at [10], [15] and [16].

reflection of the overall unreasonable conduct of the defendants. The failure of the defendants   to   act   reasonably   and,   in    particular,    dishonestly    depriving   Ms Venkataswamy of her funds for a substantial period in a wholly unaccountable fashion, has significantly contributed to the time and expense of the proceedings. I note also that the defendants unsuccessfully advanced or defended some significant interlocutory applications.37 The discovery in these proceedings has also been extensive and complex. The  defendants’ failure  to  properly  account  for  use  of Ms Venkataswamy's funds must inevitably have given rise to the issues encountered. A substantial increase of 50 per cent is therefore justified.

[77]   In assessing the unreasonable conduct of the defendants, I have had regard to my earlier finding that the defendants’ defence has evolved over time38 and my finding that generally Mr Kodoor was  an  untrustworthy  and  unreliable  witness.  As  to Ms Venkataswamy’s own contribution to cost and delay, I note that she has repeatedly breached timetable directions and been responsible for delays in the proceedings. I further note that both parties have engaged in extraneous activities in India (documented in my earlier judgment), the relevance of which is difficult if not impossible to unravel or make sense of.

[78]   I reject the defendants’ submission that there should be any further reduction in costs because Ms Venkataswamy was not successful  on  every cause  of action. Ms Venkataswamy should not be penalised for advancing the same factual case but with alternative legal analyses. As the Court of Appeal noted in Weaver v Auckland Council,39 it is necessary to adopt a “realistic appraisal” of the end result in adopting costs.

37 Venkataswamy v Kodoor [2023] NZHC 277 (leave to appeal interim payment order); Venkataswamy v Kodoor [2022] NZHC 2737 (interim payment application); Venkataswamy v Kodoor [2017] NZHC 2038 (review of decision dismissing application for stay); Venkataswamy v Kodoor HC Auckland, CIV-2016-404-2374, 15 May 2017 (leave to appeal Associate Judge Doogue’s decision of 28 March 2017); and Venkataswamy v Kodoor [2017] NZHC 554 (application for stay declined).

38 Venkataswamy v Kodoor, above n 1, at [78].

39 Weaver v Auckland Council [2017] NZCA 330 at [26].

[79]   I now turn to address the calculation of costs (i.e. on the basis of 2B with a  50 per cent uplift) in accordance with the schedule attached to the costs submissions of Ms Venkataswamy dated 20 December 2023.

[80]   I address only the disputed items which Ms Venkataswamy’s submissions have helpfully set out in the “comments” column.

Item 1 – Commencement of proceedings

[81]I accept Ms Venkataswamy’s calculation of NZ$6,690.

Item 11 – Various memoranda

[82]   I award scale costs of NZ$17,844, as proposed by Ms Venkataswamy. I accept her explanation that the error in relation to the 29 November 2018 memoranda was at most mutual and ultimately the responsibility of counsel for the defendants to remind the Judge. The memorandum of 22 September 2022 may only have been presented to the Court. However, that is irrelevant.

Item 30 – Application to strike out

[83]   I accept Ms Venkataswamy’s proposed calculation of scale costs of NZ$4,780. The memoranda were substantial. Ms Venkataswamy was wholly successful.

Item 21 – Inspection of defendants’ further affidavit

[84]   I find that this item is claimable. As Ms Venkataswamy submits, the inspection in this step relates to the underlying documents. Second, the affidavit of documents was obligatory.

Item 24 – Memorandum on notice of opposition

[85]This item is claimable and for the reasons submitted by Ms Venkataswamy.

Item 23 – Notice of opposition of 18 August 2023

[86]This item is claimable. There is no duplication as the defendants suggest.

Item 22 – Application for release of interim payment

[87]   I agree with the defendants’ submission that because the application was not opposed only 0.6 days should be allocated.

Item – Unsuccessful application for a stay, jurisdictionally incorrect application for review and unsuccessful application for review of the stay

[88]   The parties agreed that all three of these applications should be dealt with together by the Court with the defendants paying NZ$13,488.50 into court as security for costs.

[89]   I agree with Ms Venkataswamy that it is now appropriate for this sum to be released to her.

Total costs

[90]   The total calculation for costs will, of course, need to be adjusted (from the schedule provided by Ms Venkataswamy) to take into account the findings I have made. The starting point is Ms Venkataswamy’s figure of NZ$187,863, then deducting the items I have disallowed in my findings above. Once that figure is arrived at then the 50 per cent uplift is to be applied.

Disbursements

[91]   I agree essentially with the submission of the defendants on the issue of disbursements and as set out  at  schedule  D to  their submissions  on costs  dated  11 December 2023.

[92]This means that there is no allowance for items 4 and 5 on that schedule.

[93]   I also agree with  the  defendants  that  no  allowance  is  to  be  given  for  Ms Venkataswamy’s travel to India. This was not necessary and, in any event, I am in no position to ascertain the merits or otherwise of what happened in India.

[94]   The defendants responsibly accept that a claim for reasonable return airfares to and from Auckland for the purpose of attending the hearing, together with reasonable accommodation costs during that period, should be allowed.

[95]   I order that Ms Venkataswamy is to submit for approval by the Registrar, with appropriate receipts, a claim for reasonable return airfares to and from Auckland for the purpose of attending the hearing, together with reasonable accommodation costs during that period.

[96]   I note that Ms Venkataswamy did not attend in person at the quantum hearing. She was not in New Zealand at that time but, rather, was in India. No allowance is made for that.

Andrew J