Watt v Sharma HC Auckland CIV 2006-404-2975

[2010] NZHC 1463

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2006-404-002975

BETWEEN  REGINALD JAMES WATT & ORS Plaintiffs

ANDSUREN SHARMA & ORS Defendants

Hearing:         12 August 2010

Appearances: D Grove for Plaintiffs

D Smyth for Defendants

Judgment:      12 August 2010

Reasons:        12 August 2010

REASONS FOR JUDGMENT OF VENNING J ON APPLICATION TO CROSS-EXAMINE

Solicitors:           Ellis Law, Auckland  [email protected]

Ganda & Associates, Auckland [email protected]

Copy to:            D Grove, Auckland  [email protected]

D Smyth, Auckland  [email protected]

WATT & ORS V SHARMA & ORS HC AK CIV-2006-404-002975  12 August 2010

Application

[1]      The plaintiffs seek a freezing order.   The application is to be heard on 17

August 2010 (one day allocated).

[2]      Mr Grove applies for an order requiring Mr Suren Sharma to attend this Court at 10.00 o’clock 17 August 2010 for the purposes of being cross-examined. The application is opposed.

[3]      Rule 7.28 provides jurisdiction for an order to require the attendance for cross-examination for a person who has made an affidavit in opposition to an interlocutory application.   The order may, however, only be made in special circumstances.   Special circumstances are wide, comprehensive and flexible but indicate something abnormal, uncommon or out of the ordinary but less than extraordinary or unique:  Kidd v Van Heeron.[1]

Background

[1] Kidd v Van Heeron (1997) 11 PRNZ 422 (CA).

[4]      On 29 October 2008 John Hansen J directed Mr Sharma to file an affidavit undertaking the purchaser in an agreement for sale and purchase of a property at 1

Prescott Street, Penrose, was not Mr Sharma, his family trust or any legal entity associated with Mr Sharma or members of his family.

[5]      The issue arose on an application by Mr Sharma for payment out of funds to meet various debts in relation to that property.  During the course of the hearing it became apparent that the property was the subject of an agreement for sale and purchase.  The plaintiffs were concerned the purchaser was an entity related to Mr Sharma.   They raised the matter with the Judge who made the direction for Mr Sharma to file the affidavit.

[6]      Mr Sharma subsequently swore an affidavit confirming that the purchaser was not himself nor any family trust nor any other legal entity associated with him or

members of his family.  He further stated the purchaser had been introduced by the real estate agent.

[7]      However,  in  an  affidavit  sworn  on  8  July  2010  Mr  Richardson,  (at  all relevant times either personally or through his company Rich Trustees Limited) a trustee of the Sharma Family Trust and Sharma Family Trust No. 2, has deposed inter alia that:

I recall discussing with Mr Sharma the problems he was having with the property  that  he  owned  through  his  company  Mutual  Trust  Properties Limited at 1 Prescott Street, Penrose, Auckland.

The property was going to be sold at mortgagee sale by First Mortgage Trustee because he was in default.  I think that this discussion took place in September or October 2008 but I am not certain of the date.   Mr Sharma thought the property was too good to be let go at mortgagee sale and wanted to retain the property, but he was concerned that the ongoing dispute he had with Reg Watt over their business transactions would lead to the property being frozen.

Mr Sharma advised me that he had arranged for a long term associate of ours, Wes Taylor, to front a company for him to purchase the property.  He would  supply  the  cash  to  settle  the  transaction  and  that  Mr  Taylor’s company Renovations Unlimited Co 2005 Limited would hold the property for him. I believe from what Mr Sharma said to me recently that this is where the $900,000 that was funnelled through Rich Trustees Limited’s bank account went.

I am aware from my own knowledge that Mr Taylor would not have the resources to have purchased the property.  He is a simple and honest man who no doubt thought he was doing a friend a favour.

Mr Sharma also advised me that he needed his interest to be kept secret because he wanted to use Prescott Street as collateral security for other transactions.

[8]      If Mr Richardson’s evidence is correct then, as Mr Grove submits Mr Sharma has at the least deliberately misled the Court and has deliberately concealed an asset in the context of an undertaking to freeze assets, the subject of the dispute.

[9]      In a recent affidavit sworn on 6 August 2010 for the purposes of the hearing on 17 August 2010 Mr Sharma stated “1 Prescott Street is not being held in trust for me”.

[10]     During the course of submissions Mr Smyth suggested it was unnecessary for the Court to make an order requiring Mr Sharma to attend for cross-examination because it was now effectively conceded that 1 Prescott Street was owned by Sharma interests. He suggested there was no jurisdiction for the order made by John Hansen J in the first place and further that there was no equity in the property at the time of the previous sale, that Mr Sharma had acted to purchase the property in the way he had because of his and his family trust’s potential liability as guarantors of the mortgage.  He submitted there was no practical value to the plaintiff in 1 Prescott Street at the time and there was no practical value in Mr Sharma being cross- examined at the hearing on 17 August 2010.

[11]     I note that no appeal was taken from the decision or orders of John Hansen J. There was jurisdiction for the orders at the least in the inherent jurisdiction of the Court.  In any event, Mr Sharma complied with the order to the extent that he swore the affidavit in response.  It is now a matter of record.  There is a direct contradiction between what Mr Sharma said in that affidavit and repeated in the affidavit sworn as recently as 6 August and Mr Richardson’s evidence and counsel’s understanding.

[12]     In the case of Burslem Holdings Limited v GB & JB Bockett Limited[2]  the Court allowed cross-examination on an interlocutory matter where credibility was the pivotal issue.  In that case, which is not dissimilar to the present, there was an allegation of a transfer of assets in a sham transaction designed to defeat an interim injunction.   The issue of good faith could only be resolved by cross-examination. Hillyer J held that constituted “special circumstances” and justified the order sought.

[2] Burslem Holdings Limited v GB & JB Bockett Limited [1989] 2 NZLR 238.

[13]     In the present case where the issues on the application for freezing order will include whether there is a risk of dissipation of assets the credibility of Mr Sharma and any evidence he has given will be relevant.  I accept that special circumstances are made out.

[14]     For those reasons after hearing from counsel I made an order requiring Suran Sharma to attend the High Court, Auckland at 10.00 o’clock on 17 August 2010 for the purpose of being cross-examined on the contents of his affidavits sworn on 31

August 2008 and 6 August 2010 in relation to his and any related party interest in the

Prescott Street property.

[15]     Costs to the applicant on a 2B basis for the application and hearing today.

Venning J