Seth v Taimoori [2021] NZCA 474 (20 September 2021)

Last Updated: 28 September 2021

IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA

CA210/2021 [2021] NZCA 474

	BETWEEN	ANMOL SETH Appellant
	AND	MIRZA AREEB BAIG TAIMOORI Respondent

Hearing:	23 August 2021
Court:	French, Mander and Palmer JJ
Counsel:	J G Ussher for Appellant B P Rooney for Respondent
Judgment:	20 September 2021 at 9 am

JUDGMENT OF THE COURT

1. The appeal is dismissed.
2. The appellant must pay costs to the respondent for a standard appeal on a band A basis, together with usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by French J)

Introduction

• [1] Mr Taimoori paid money to a company controlled by Mr Seth for the purposes of a property development. The property development never eventuated. In the High Court, Downs J held that Mr Seth was liable to repay the money on the grounds that he owed Mr Taimoori a fiduciary duty which he had breached.^[1]
• [2] Mr Seth now appeals that decision.

Background

• [3] Mr Taimoori and Mr Seth were acquaintances. In August 2015, there were discussions between them about Mr Taimoori participating in the development of an Auckland property owned by Mr Seth. Mr Seth had obtained resource consent for a sub-division for three dwellings.
• [4] Subsequently Mr Seth asked Mr Taimoori to contribute $300,000 on the basis that Mr Seth would undertake the development and the two of them would share in the profits. When Mr Taimoori said he did not have $300,000, Mr Seth suggested he borrow it and provide his family home as security.
• [5] Mr Taimoori had no experience in property development. Based on what Mr Seth told him and Mr Seth’s Facebook pages, he understood Mr Seth to be a successful businessman and entrepreneur.
• [6] On 6 August 2015, Mr Seth sent Mr Taimoori a document for signature. The first page was headed “Memorandum of Understanding” and identified the parties to the document as Mr Taimoori and Anmol Residential Ltd (Anmol Residential). It also stated that the parties were entering into the memorandum of understanding to record an “investment agreement”.
• [7] Anmol Residential was a company controlled by Mr Seth whose first name is Anmol. Mr Seth was the sole director, and the only shareholder was another of his companies in the Anmol Group. Mr Seth had signed the memorandum on behalf of Anmol Residential.
• [8] Key provisions of the memorandum were:

(a) Anmol Residential was described as being “in charge” of the construction project.

(b) Mr Taimoori was to commit to an initial investment of $300,000 via home re-finance.

(c) Mr Taimoori would then be “granted a JV” (it was common ground that this meant “joint venture”).

(d) The memorandum would be superseded by a second agreement, the scope and intent of which would be broadly defined by the memorandum.

• [9] On receipt of the memorandum, Mr Taimoori transferred $50,000 of personal savings to Anmol Residential and on the following day he added his signature to the memorandum.
• [10] Mr Taimoori’s bank declined his application for a loan for the balance. However, Mr Seth told him he had a contact at Westpac who could help. The contact, who corresponded with Mr Taimoori as Mr Seth’s executive assistant, duly arranged finance.
• [11] Mr Seth also encouraged Mr Taimoori to see Mr Seth’s own lawyer, a Mr Singh, regarding the loan. Subsequently, the loan was drawn down on 20 August 2015, through Mr Singh’s firm. Mr Taimoori then transferred $220,000 to Anmol Residential.
• [12] A few days later, Mr Taimoori sought assurances from Mr Seth after seeing a comment on a blog describing Mr Seth as a conman. Mr Seth told him the allegation was false.
• [13] The development never eventuated. No houses were ever constructed.
• [14] In September 2016 and in 2017, Mr Seth made payments totalling $30,680 to Mr Taimoori. The latter was coming under increasing financial pressure and was repeatedly asking Mr Seth for information about what was happening with the property. In evidence, Mr Seth said the $30,680 was not a partial repayment of the $270,000 and so not an admission of wrongdoing, but rather a compassionate loan to someone in need. That evidence was not accepted by the Judge.^[2]
• [15] In early 2018, Mr Taimoori issued proceedings against Mr Seth and Anmol Residential. Later in 2018, Anmol Residential was placed into liquidation as were other companies in the Anmol Group. The effect of the liquidation was to stay Mr Taimoori’s claim against Anmol Residential, leaving Mr Seth as the only defendant.
• [16] The statement of claim originally pleaded three causes of action but one of those was struck out before trial, leaving a claim for breach of fiduciary duty and a claim of misrepresentation under the Fair Trading Act 1986.

The High Court decision

• [17] The Judge held that the claim for misrepresentation under the Fair Trading Act failed. That was because there was insufficient evidence to prove the particular misrepresentations relied on.^[3] These related to Mr Seth’s title to the property and the non-disclosure of an interest allegedly retained in it by the person who had sold it to him, thereby rendering it impossible for him to develop the property.
• [18] However, the Judge upheld the claim for breach of fiduciary duty. He rejected an argument that the two men were on equal terms and operating at arm’s length.^[4] Instead, applying the indicia of a fiduciary relationship identified in Cook v Evatt (No 2),^[5] the Judge held that Mr Seth owed a fiduciary duty to Mr Taimoori to use the latter’s money only for the purposes of the development and to return any money not used for that purpose.^[6]
• [19] The Judge further held that Mr Seth had breached that duty by failing to develop the property and failing to repay all of Mr Taimoori’s money.^[7] In coming to that conclusion, the Judge rejected Mr Seth’s evidence that he had in fact used the money to meet development costs and that the reason the project failed was because Mr Taimoori had not invested the full $300,000. In support of his assertion that the money had been spent on development costs, Mr Seth had produced invoices. The Judge considered extrinsic evidence implied the largest of these was a forgery.^[8] He generally found Mr Seth to be a vague and evasive witness who lacked credibility.^[9]
• [20] Having found there had been a breach of fiduciary duty, the Judge turned to remedies. Mr Taimoori had asked the Court to find that he had a constructive trust over the property giving him a beneficial interest in it. However, the Judge was not persuaded to find there was or should be a constructive trust. In his view, the appropriate remedy was the orthodox remedy of restitution of the outstanding balance.^[10]
• [21] The Judge therefore ordered Mr Seth to pay Mr Taimoori the sum of $239,320 together with interest.^[11] He also ordered payment of increased court costs on account of Mr Seth’s conduct of the litigation^[12] and, in light of the testimony regarding the invoices, directed the Registrar to send a copy of his judgment to the Commissioner of Police.^[13]
• [22] On appeal, Mr Seth raised a number of grounds of appeal which we now turn to address.
• [23] Before doing so, we record there is no cross-appeal on the part of Mr Taimoori regarding the Judge’s dismissal of the Fair Trading Act claim and his refusal to find a constructive trust.

Analysis

Was a fiduciary duty owed by Anmol Residential, not Mr Seth?

• [24] On behalf of Mr Seth, counsel Mr Ussher submitted that if there was any fiduciary duty owed, it was owed by the company and not Mr Seth personally. He acknowledged there was no reason as a matter of law why there could not be concurrent fiduciary duties. But he argued that, on the facts of this case, it was only the company who could have been a fiduciary. In support of that contention, Mr Ussher said it was clear as evidenced by the memorandum of understanding that the two parties to the arrangement were Mr Taimoori and the company and that it was the company who was going to head the project. In those circumstances, Mr Ussher submitted the fact Mr Seth was the director of the company and the owner of the property should not have been determinative.
• [25] The Judge’s finding of a fiduciary relationship however was not based solely on Mr Seth’s status as director and landowner but also on his actual conduct and the vulnerability of Mr Taimoori. As Mr Seth well knew, Mr Taimoori had no commercial experience and, without any power or ability to supervise Mr Seth, was totally reliant on him personally. It was very much a relationship of trust and confidence. Mr Seth was Mr Taimoori’s only source of information about the development and what was happening to his money. It was Mr Seth who held himself out to be an expert. And it was Mr Seth who personally helped arrange the finance and who encouraged Mr Taimoori to use Mr Seth’s own lawyer. As the Judge also noted, in evidence Mr Seth himself described the company as the means to an end, in effect merely a corporate vehicle.^[14]
• [26] In all those circumstances, we consider the Judge’s finding of a fiduciary relationship was consistent with established principle and justified on the evidence. This ground of appeal fails.

The finding Mr Seth had breached his fiduciary duty was contrary to the evidence

• [27] Mr Ussher submitted the basis of the Judge’s finding of a breach was that no work had been done on the property at all. However, that was not correct on the evidence before the Court. Mr Ussher cited references in Mr Taimoori’s evidence to the fact he looked at the completed development work and to statements that the reason he wanted his money back was because he lost interest in the development and wanted to move on with something else.
• [28] Those references are however taken out of context. The rest of the evidence shows that Mr Taimoori was talking about work that had been done before he ever became involved. And that the reason he lost interest in the development was because of the complete lack of progress. He never saw any evidence of work after he had paid his money over.
• [29] Mr Seth’s evidence was that Mr Taimoori’s money was used “to assist in the preliminary work to ensure that the development could proceed towards Stage 2 where construction would begin”. He also stated “Stage 1 was moving forward and expenses were being met as and when they were incurred”. His brief of evidence said that the invoices he was producing confirmed that the money received from Mr Taimoori was in fact used. The brief of evidence did not contain any detail of this alleged work nor did Mr Seth identify in his brief the invoices to which he was referring. He did produce invoices and statements at the hearing which on the face of them equated with the amount of money paid by Mr Taimoori, but as mentioned the Judge found (for good reason as we discuss) that some of the documents were likely to be forgeries.
• [30] In our view, there was a strong evidential foundation for the Judge’s finding of breach. We too would have reached the same conclusion. This ground of appeal also fails.

There was no pleaded basis for the Judge’s finding of breach

• [31] Mr Ussher identified this ground of appeal as the most important.
• [32] Under the heading “First cause of action - breach of fiduciary duty” the second amended statement of claim pleaded the same misrepresentations pleaded in relation to the Fair Trading Act claim. The Judge said that had Mr Taimoori’s case rested exclusively on those points it would have been in jeopardy because of the same evidentiary problems that prompted him to dismiss the Fair Trading Act claim.^[15]
• [33] However, the Judge went on to say that 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. That, the Judge said, was the gist of Mr Taimoori’s case and his testimony and it was consistent with the digital correspondence between him and Mr Seth in 2017 when Mr Taimoori was pressing for information.^[16]
• [34] In Mr Ussher’s submission, given that insufficient evidence was offered on the pleaded basis and leave was not sought to amend the second amended statement of claim, that should have been the end of the matter. Mr Ussher emphasised the importance of parties being bound by their pleadings, citing the decision of this Court in Price Waterhouse v Fortex Group Ltd.^[17]
• [35] We acknowledge the importance of pleadings,^[18] but consider the suggestion that “[j]udgment against [Mr] Seth accordingly was entered on a basis that departed from, and was inconsistent with, [Mr Taimoori’s] pleaded case” is untenable. While the failure to take any steps to carry out the development may not have been pleaded as a particular of breach, it was expressly pleaded in the general allegations. Mr Ussher conceded in oral argument that the relevant paragraph was a basis for the causes of action. It was thus a matter in respect of which Mr Seth had been put on notice and about which there was evidence. Most importantly, we note too that whether any work had been done was very much a live issue at the trial as demonstrated by the evidence of both parties and the submissions of counsel. Mr Seth does not point to any prejudice he has sustained as a result of the pleading not being under the head of particulars.^[19] And nor could he.

It was a breach of natural justice for the Judge to refer the judgment to the police

• [36] In written submissions, Mr Ussher argued that it was a breach of Mr Seth’s right to natural justice as affirmed in s 27(1) of the New Zealand Bill of Rights Act 1990 to refer the judgment to the police without giving Mr Seth an opportunity to comment.
• [37] However, whether that is so or not, it cannot possibly impact on the correctness of the judgment which is our sole focus in this appeal. We therefore reject this ground of appeal.

The Judge unfairly declined to grant an adjournment

• [38] The High Court hearing held in March of this year coincided with Auckland’s fourth COVID-19 lockdown. On the Sunday immediately before the hearing was due to commence, Mr Seth sought an adjournment through counsel on the grounds that he was in Wellington with his ill mother, that he had always intended to return to Auckland for the hearing but once the lockdown was announced had assumed it would not be proceeding and his laptop was in Auckland. The Judge advised counsel that same evening that the trial was to proceed and that there would be a conference call first thing in the morning to discuss format. The Judge indicated that he was amenable to the use of VMR if required.
• [39] At the conference call, the parties agreed that the trial should proceed by VMR.
• [40] On appeal, Mr Ussher says that although Mr Seth was able to appear by VMR, it meant flying back to Auckland from Wellington with his ill mother. That affected the fairness of the trial.
• [41] We were not however provided with any detail as to how it impacted on the fairness of the trial and there is certainly nothing in the record to indicate that it did.
• [42] This ground of appeal is also rejected.

The Judge wrongly allowed late evidence to be adduced

• [43] This ground of appeal relates to the evidence of Mr Hayes, a witness called by Mr Taimoori. His brief of evidence was provided on Thursday 25 February 2021, only one full working day before the hearing due to start on Monday 1 March 2021. According to Mr Seth, allowing Mr Hayes’ late evidence seriously prejudiced Mr Seth’s rights to a fair trial.
• [44] It is necessary to explain the relevant background.
• [45] Mr Hayes’ evidence related to the invoices produced by Mr Seth. As mentioned, in his brief of evidence Mr Seth asserted that Mr Taimoori’s money had been applied to the development and that he was producing various invoices confirming this. Mr Seth’s brief of evidence was served on 2 February 2021. The invoices in question were not attached to the brief but on 5 February 2021 Mr Seth served a list of documents. The list included eight invoices and one statement. Six of the invoices were redacted including the identity of the creditor.
• [46] The redactions were objected to and on 23 February 2021, Mr Seth provided unredacted copies of some of the documents.
• [47] The most important invoice in terms of amount was an invoice for $138,000 issued by an entity called the Gladstone Trust. The invoice was numbered 080415. It was dated 8 April 2016 and contained a description of the work done as “Development Engagement”. Mr Hayes was the manager of the Gladstone Trust and after making inquiries of him about the invoice, Mr Taimoori’s lawyers prepared a brief of evidence and served it on 25 February 2021.
• [48] In his evidence, Mr Hayes said he had never seen the invoice of 8 April 2016 before, that the Gladstone Trust had never invoiced Anmol Residential for $138,000 and that the Gladstone Trust’s bank records showed it had never received a payment of $138,000. Mr Hayes produced an invoice with the same number 080415 which he said the Gladstone Trust had sent Anmol Residence but:

(a) with a different date — 8 April 2015, not 2016;

(b) with a different amount — $215.11, not $138,000; and

(c) with a different description of the work — “Travel to CHC regarding meeting with Eddie”, not “Development Engagement”. Mr Hayes says the “meeting with Eddie” was about a Christchurch project.

• [49] Mr Seth had also produced a copy of an email from Mr Hayes which had some brief costings totalling $120,000. With GST added, that would have come to $138,000. The copy Mr Seth produced did not have a subject line. Mr Hayes provided a copy of the same email he had sent which did contain a subject line “818 cost recoveries”. This, Mr Hayes said, related to the 818 Christchurch project where the costs had arisen due to a Mr Fonagy defaulting on a contract with Mr Seth.
• [50] As will be apparent, Mr Seth’s complaint about the late filing has a somewhat hollow ring to it. It was entirely his own fault. There was no valid justification for the redactions and once the unredacted copies were made available, Mr Taimoori’s counsel acted quickly. To have excluded the evidence on the grounds of lateness would have been contrary to the interests of justice.
• [51] Mr Seth contends that he was prejudiced by the late filing because it meant he was denied the opportunity to locate and produce documentary evidence so as to meet these new and serious allegations. However, despite having had over five months to locate this documentary evidence, he has not done so.
• [52] We conclude that none of the grounds of appeal whether viewed individually or collectively has any merit. The appeal is therefore dismissed.
• [53] As regards costs, counsel agreed costs should follow the event, meaning that the losing party should pay costs to the successful party.

Outcome

• [54] The appeal is dismissed.
• [55] The appellant must pay the respondent costs for a standard appeal on a band A basis, together with usual disbursements.

Solicitors:
PCW Law Ltd, Auckland for Appellant
Lovegroves, Auckland for Respondent

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^[1] Taimoori v Anmol Residential Ltd [2021] NZHC 533 [High Court judgment] at [64] and [83].

^[2] High Court judgment, above n 1, at [64].

^[3] High Court judgment, above n 1, at [65]–[66].

^[4] At [29]–[34].

^[5] At [26], relying on Cook v Evatt (No 2) [1992] 1 NZLR 676 (HC) at 685.

^[6] At [33].

^[7] At [64].

^[8] At [63].

^[9] At [47].

^[10] At [82].

^[11] At [83].

^[12] At [85]–[86]

^[13] At [87].

^[14] At [34].

^[15] At [39].

^[16] At [40].

^[17] Price Waterhouse v Fortex Group Ltd CA179/98, 30 November 1998 at 17–18.

^[18] See Yan v Mainzeal Property and Construction Ltd (in liq) [2021] NZCA 99 at [493]–[494].

^[19] Compare Keller v Daisley [2021] NZCA 351 at [117]–[119].