Shaun Robert Fraser in his capacity as joint and several receiver and manager of Pacific Street Properties Pty Ltd (Receivers and Managers Appointed) and Campbelltown Factory Outlet Pty Ltd (Receivers and Managers Appointed) v Gogia
These proceedings concern the question of who is entitled to the fit out and certain stock, consisting of leather goods and other clothing and fashion accessories, currently at shops 226, 232 and 233 (the Shops) in the "Brands On Sale" Discount Factory Outlet Centre located at 32 Queen Street, Campbelltown (the Centre). The Centre is owned by Pacific Street Properties Pty Ltd and Campbelltown Factory Outlet Pty Ltd, which are both in receivership. The receivers, who are the plaintiffs in these proceedings, do not claim any interest in the fit out and stock. They commenced these proceedings as interpleader proceedings and claim only their costs of the proceedings. They did not appear at the hearing. The stock is claimed by the first defendant, Mr Gogia, and second defendant, Adia Holdings Pty Ltd, on the one hand and the third defendant, Mr Harjai, on the other. The stock is under the control of the plaintiffs following an attempt by Mr Harjai to take possession of it and an agreement between the parties, following the intervention of the police at the time, that the stock would remain where it was until the matter was resolved through the parties' legal representatives.
From about 2008, Mr Gogia and Mr Harjai, together with Mr Harjinder Dhindsa, operated in partnership a number of retail businesses either personally or through companies they controlled. Two of the companies controlled by Mr Gogia were Gogia Holdings & MultiFurniture Pty Ltd (Gogia Multi) and Gogia Holdings Pty Ltd (Gogia Holdings), both of which have been deregistered. A third company controlled by Mr Gogia, which was incorporated on 30 May 2011, is Adia Holdings.
The competing claims to the stock are not easy to evaluate. Mr Harjai appeared for himself at the hearing. He relied principally on affidavits sworn by him that were prepared at a time when he was legally represented. But his affidavit in chief in particular contains a great deal of irrelevant material relating to the business relationship between the parties. That material appears directed at establishing that Mr Gogia breached various obligations he owed to Mr Harjai in connection with their partnership. The evidence, if accepted, may demonstrate that Mr Harjai has a claim against Mr Gogia arising out of their business relationship, or at least that he or his company, Great Australian Leather Company Pty Ltd, have a right to make an application for the partnership to be wound up and an account taken, but it sheds little light on who owns the stock in question, which is the only issue in these proceedings. Mr Harjai's case, at least in part, appears to be based on an assumption, never expressly articulated, that he is entitled to a proportion of the stock to satisfy other claims he or his company have against Mr Gogia, although those claims are not the subject of these proceedings.
The position is further complicated by the way in which Mr Harjai's case was pleaded. In accordance with directions given by Darke J on 14 July 2014, the issues between the defendants were to be identified by Points of Claim to be filed by Mr Harjai and Points of Defence to be filed by Mr Gogia and Adia Holdings. The original Points of Claim were filed on 4 August 2014 at a time when Mr Harjai was still legally represented. It is not easy to understand from those Points of Claim how Mr Harjai says he became entitled to the stock. In general terms, however, what was alleged was that he and Mr Gogia and Adia Holdings had entered into a number of agreements that gave rise to that entitlement. The difficulty, however, with that claim is that in his affidavit evidence Mr Harjai denies entering into a number of those agreements and indeed alleges that his signature on them was forged. On the first day of the hearing, Mr Harjai sought to file Amended Points of Claim to overcome that difficulty and to raise for the first time a claim that the stock was partnership property. Ms Goodchild, who appeared for Mr Gogia and Adia Holdings, opposed those amendments. She pointed out, with considerable force, that it was the first time the point had been raised and that, if her clients had been on notice of that allegation, they would have been able to lead evidence in relation to it. However, it became apparent that Ms Goodchild thought that she would be in a position to prepare the necessary evidence in the remainder of the day. Moreover, without the amendments it was impossible, having regard to Mr Harjai's evidence, to make sense of his claim. In those circumstances, I allowed the amendments and adjourned for the remainder of the day to permit Mr Gogia and Adia Holdings to prepare the additional evidence on which they intended to rely.
Against that background, it is possible to turn to the factual allegations in the case.
[2]
The factual allegations
It is common ground that, prior to 15 January 2011, Gogia Multi carried on a business known as "ASW Arpelle Shoe Warehouse" (ASW) from shops 232 and 233 and Gogia Holdings operated a business trading as "Arpelle Clothing" (Arpelle) from shop 226 in the Centre. As I have said, Mr Gogia, Mr Harjai and Mr Dhindsa (or, more accurately, companies associated with them) operated in partnership similar businesses under the same or similar names at various times in other cities, although there is some uncertainty concerning the scope of the partnership business.
Relevantly, however, in 2008 a partnership was formed between Great Australian Leather Company Pty Ltd, Gogia Holdings and Simple Star Pty Ltd, a company controlled by Mr Dhindsa, with each partner taking a one third interest in the partnership. The partnership operated two shops in the Harbour Town Shopping Centre in Docklands, Melbourne. One was known as "Arpelle Melbourne". It sold leather goods. The other was known as "Priced2Clear". It sold furniture. Mr Harjai managed Arpelle Melbourne. Much of the stock for Arpelle Melbourne was supplied by Gogia Holdings and later Adia Holdings. According to Mr Gogia the stock was supplied on a consignment basis. According to Mr Harjai, the partnership pre-paid for the stock. The first pre-payment is said to have come from money left over from a contribution made by the landlord to the fit out of the shops. Neither party produced documentary evidence supporting their claims, although presumably there are some accounting records that would reveal the true position.
Priced2Clear ceased to trade in May 2010.
It appears that Gogia Multi and Gogia Holdings got into financial difficulties. It is Mr Harjai's case that Mr Gogia was concerned about the possibility (that came to fruition) that Gogia Multi and Gogia Holdings would be placed in liquidation and that liquidators would obtain control of the businesses they carried on, including Gogia Holdings' interest in the partnership and ASW and Arpelle. For that reason, Mr Gogia arranged for ASW and Arpelle to be sold to Mr Harjai and in May 2011 also arranged for his accountant to set up Adia Holdings, originally with Mr Harjai as its sole shareholder and director, to take over the business of Gogia Holdings. The sale of Arpelle to Mr Harjai is evidenced by a schedule completed in the form of a schedule prescribed by the Estate Agents (Contracts) Regulations 2008 (Vic) and dated 10 December 2010. According to that schedule, the purchase price of the business was $10,000, which Mr Gogia says he lent to Mr Harjai. The sale included the stock of the business. On the same day, Gogia Holdings granted a sublease of shop 226 to Mr Harjai. The sale of ASW to Mr Harjai is also evidenced by a completed schedule in the form of the schedule prescribed by the Estate Agents (Contracts) Regulations 2008 (Vic), this time dated 15 January 2011. Again, the purchase price was expressed to be $10,000, which Mr Gogia says he lent to Mr Harjai, and the sale included the stock. Again also, on the same day Gogia Multi granted a sublease of shops 232 and 233 to Mr Harjai. Mr Harjai says that his signature on each of the documents giving effect to these transactions was forged.
On the other hand, it is Mr Gogia's evidence that in around August 2010, Gogia Holdings sold the "Arpelle" brand name to him and then sold the business it operated to Mr Harjai. It is also his evidence that he owned Gogia Multi with Mr InderJeet Singh, that Mr Singh was the active partner in the business, that Mr Singh contracted cancer in early 2011 and for that reason wanted to cease work. It is in those circumstances that the business carried on by that company was sold to Mr Harjai. In addition, Mr Gogia says that he decided in or about May 2011 to start a new company operating a fashion and fashion accessories business, which would license the Arpelle brand name from him. He says that he told Mr Harjai of his plans, Mr Harjai expressed an interest in being involved and it was in those circumstances that Adia Holdings was established. Mr Gogia says that the new business required capital of $250,000, that Mr Harjai was unable to raise his share and as a result Mr Gogia became the sole shareholder and director of Adia Holdings and Adia Holdings took over the responsibility of supplying stock to Arpelle Melbourne and the other businesses owned directly or indirectly by Mr Gogia.
It seems accepted that following the sale or purported sale of ASW and Arpelle to Mr Harjai, neither business traded. Mr Gogia says that Mr Harjai told him that he (Mr Harjai) was having difficulty in raising working capital to carry on the businesses. As a result, according to Mr Gogia, they reached an oral agreement in or around July or August 2011 that Mr Harjai would sell the businesses to Mr Gogia for the same price as Mr Harjai had agreed to pay (by cancellation of the debt owed by Mr Harjai to Mr Gogia), that the sale would include the stock and fit out and that Mr Gogia would agree to assume liability for rent and expenses. According to Mr Gogia, Aida Holdings then started supplying stock to ASW and Arpelle.
On 24 July 2012, the plaintiffs granted Mr Harjai a licence for six months to occupy the Shops. Again, Mr Harjai says he knew nothing about those licences. On 11 April 2013, the plaintiffs granted Mr Harjai a further licence of the Shops for six months. Mr Harjai accepts that he entered into those licences but he says that he did so under pressure from Mr Gogia. Mr Gogia says that he asked the plaintiffs' representative to grant the licences to him, but the plaintiffs' representatives gave various reasons for why that could not be done. In the case of the first licences, his position appears to be that it became apparent only at the last minute that it would be necessary to enter into the licences, that they had already been prepared in Mr Harjai's name and that it was convenient for Mr Harjai to execute the licences in those circumstances. In the case of the second licences, he says various explanations were offered to him for why the licences could not be changed to his name, including that the costs of redrafting, that the representative was unable to get a response from the plaintiffs and that there were upcoming auction dates.
Following the agreement said to have been reached for the sale of the businesses to Mr Gogia, Mr Gogia says that he or Adia Holdings became responsible for paying utility and similar charges. That evidence is corroborated to some extent by invoices addressed to Adia Holdings. Mr Gogia also says that stock was ordered by him and delivered during the period April 2012 to June 2013 for the shops and again that evidence is corroborated by various invoices and other documents addressed to Adia Holdings, although the documents do not expressly state that the goods were supplied to the Shops rather than other shops in which Mr Gogia or Adia Holdings had an interest.
In submissions, Mr Harjai took issue with some of those invoices. He pointed out that one was addressed to Gogia Holdings after that company had been de-registered and that other invoices did not correspond to Adia Holdings' business activity statements. One difficulty with this submission is that the allegations were not put to Mr Gogia in cross-examination. That difficulty aside, the evidence is that Mr Gogia and Adia Holdings carried on business from the Shops. They would have needed stock to do so. At least some of that stock must have been supplied directly by Adia Holdings.
The relationship between Mr Harjai and Mr Gogia began to breakdown in early 2013. Arpelle Melbourne was in financial difficulties and Mr Gogia proposed that at the end of the lease it be closed and that Mr Harjai put the remaining stock into storage so that Mr Gogia could use the stock in other stores he owned. It is unclear what happened to the stock then. Mr Harjai says that Mr Gogia arranged for three quarters of the stock to be transported to Tasmania, although it is far from clear that that happened. Mr Harjai also says that Mr Gogia proposed that he (Mr Harjai) move to Canberra to manage one of Mr Gogia's stores there, which is what he did. Mr Gogia says that Mr Harjai was the only person who had access to the store in Melbourne and that he moved all of the stock held there to Canberra. He also says that in May 2013 he reached an arrangement with Mr Harjai that Mr Harjai would license the shop in Canberra and would pay Adia Holdings for stock that he sold. In the meantime, following the closure of Arpelle Melbourne, Mr Dhindsa ceased to have any further involvement with the partnership business.
The relationship between Mr Harjai and Mr Gogia continued to worsen during 2013. The precise reasons are not clear. Mr Harjai gives extensive evidence of repeated requests he made to obtain financial information in relation to the partnership and what he says was Mr Gogia's failure to provide that information. He also says that he became concerned about Mr Gogia's conduct in relation to the ASW and Arpelle businesses.
The disputes reached a head in August 2013. Mr Dhindsa became involved in negotiating a settlement between the parties. On 1 August 2013 he sent the following email to each of Mr Harjai and Mr Gogia:
As agreed by both of you, the following is finalised for Arpelle. Jay [Mr Harjai] will get $50000 stock from Melbourne stock no more after that.
Jay will run Canberra store till 21 August 2013. From 1st may [sic] till 2nd of August Jay will pay Sunny [Mr Gogia] for the stock sold @leather jacket $145, wool $80 and outdoor $45 all out standings invoices for Canberra Centre. From 3rd of August till 21st of August payment for all stock sold will be cleared on every Monday. Jay will drop left over stock fittings etc at Campbell town [sic] and pick up his share of Melbourne stock after 21st of August. Please confirm this by sending me return email. No further negotiation will be entered after this.
It appears, however, that those terms were not agreed. According to Mr Gogia, Mr Harjai changed the name of the lease on the shop in Canberra to himself and, in early August, locked Mr Gogia out of that shop and the Shops. There were then further negotiations between the parties which resulted in two documents dated 22 August 2013.
The first document is described as a "Memorandum of Understanding" (MOU) between Mr Harjai and Adia Holdings and Mr Gogia. That document recites that up until the date of the MOU "SG" (meaning Mr Gogia) and "AH" (meaning Adia Holdings) "have been operating two shops within the complex known as Brands On Sale". The Memorandum of Understanding purports to go on to clarify the responsibilities of AH and "JH" (meaning Mr Harjai) "in relation to the ongoing trading of shops at 226, 232 and 233 respectively". The Memorandum of Understanding then records the following:
1. It is mutually agreed between AH and SG, that they shall, both jointly and severally, provide any such guarantees, personal and company guarantees, which may be required by them from Brands on Sale, either pursuant to a licence agreement or a formal lease in respect of the Shop Premises.
2. It is acknowledged by AH that the stock and fit-out in respect of the Shop Premises is the absolute property of AH, and JH hereby covenants that he shall maintain no right to any management decisions relating to the day to day business of the aforementioned shops, and concedes all management decisions in favour of AH and SG.
3. JH will use his best endeavours to ensure that Brands on Sale, or its designated manager, will transfer any lease or licence currently existing in favour of AH.
4. AH, for its part, shall stand responsible for the execution of any lease or licence agreement presented to AH, and/or SG, and will execute any further documentation to give effect to that arrangement.
5. AH, for its part, shall be responsible for any liability in relation to the current lease or licences granted to the Shop Premises from their respective dates of commencement.
The second document, described in the Points of Claim as the "Stock Agreement", is signed by Mr Gogia and accepted by Mr Harjai. It records the following:
RE: OUTSTANDING STOCK
This letter will serve to confirm that all outstanding stock issues between Sunny Gogia and Jitender Harjai shall be resolved upon the following basis:
1. That stock to the value of $50,000 shall be provided by Adia Holdings Pty Ltd to Jitender Harjai to be assessed upon the basis of the old invoice cost for each item.
2. Such stock will be ready for delivery to Jitender Harjai by 2 September 2013.
3. Upon the delivery of the stock at the level agreed, Jitender Harjai will have no further claim right or action against Adia Holdings Pty Ltd or Sunny Gogia.
At about the same time (the evidence is not clear about precisely when), Mr Gogia took over control of the Canberra store and subsequently closed it. It is not clear where the stock from that store went, although Mr Harjai submits that the court should infer that Mr Gogia moved it to the Shops.
Mr Harjai also contends that neither of the documents dated 22 August 2013 records the true agreement between the parties. He says that he and Mr Gogia reached an oral agreement at about the same time which is pleaded in the Amended Points of Claim in the following terms:
On a commercial basis, in consideration of previous debts arising between the First Defendant and the Third Defendant business done around Australia and the transfer of the business of ASW and Arpelle, the Third Defendant agreed to accept a transfer $50,000 worth of stock from the business of ASW and Aprelle [sic] to be delivered to the Third Defendant by 2 September 2024 … The value of the stock to be transferred was to be assessed based upon the old invoice cost for each item. …
Mr Harjai contends that that agreement was breached, that he therefore is entitled to terminate it and claim "approximately $200,000 worth of stock contained within the Premises" or a reasonable sum. He also contends that the MOU is of no effect because:
(a) A licence agreement is not a transferable instrument.
(b) The MOU lacks certainty.
(c) There was no consideration provided for in the MOU.
(d) There is no evidence of the MOU being a final agreement between the parties.
In addition, the Stock Agreement is said not to be legally binding because:
(a) The Stock Agreement lacks consideration.
(b) The Stock Agreement lacks certainty.
(c) The Stock Agreement lacks intention.
For his part, Mr Gogia relies on the two agreements, but he submits that neither gives Mr Harjai an entitlement to any of the stock held in the Shops. The MOU was concerned with resolving the position in relation to the businesses carried on at the Shops. It specifically states that "[i]t is acknowledged by AH that the stock and fit-out in respect of the Shop Premises is the absolute property of AH". On the other hand, the Stock Agreement was concerned with resolving outstanding issues in relation to the partnership and, in particular, ownership of the stock at the Canberra store. It had nothing to do with the stock held in the Shops; and in any event Mr Gogia says that he has provided stock to Mr Harjai in accordance with that agreement because Mr Harjai was permitted to sell stock from the Canberra store without paying for it.
[3]
Consideration
As I have said, the only issue in this case is who owns the fit out and stock in the Shops. There does not seem to be a serious dispute that the fit out is owned either by Mr Gogia or by Adia Holdings. Mt Harjai's position is that he never had an interest in the businesses carried on at those shops and that the documents that suggest otherwise were forged. He did license the Shops for a period of six months, but it is not contended that those licences remain on foot or that he obtained a right to the fit out as a result of them. The real dispute concerns the stock.
As to the stock, Mr Harjai's case appears to depend on three contentions. The first is that the stock, or at least some of it, is partnership property and, as a result, he has an interest in it. That contention must depend on his claim that some of the stock from Melbourne found its way to the Shops, presumably via the Canberra store. Second, and connected to the first point, Mr Harjai submits that the setting up of Adia Holdings, the transfer of the Arpelle and ASW businesses to Mr Harjai and then to Mr Gogia were "phoenix transactions" which were designed to defraud the liquidators of Gogia Multi and Gogia Holdings. For that reason, the stock cannot belong to either Mr Gogia or Adia Holdings. Third, Mr Harjai says that he is not bound by the MOU or the Stock Agreement.
In my opinion, there are a number of difficulties with Mr Harjai's submissions.
First, there is no evidence that any of the stock is partnership property. There is no suggestion that the Shops were operated by the partnership. On Mr Harjai's case, some of the stock at least was owned by Gogia Multi and Gogia Holdings and was transferred to Mr Gogia or Adia Holdings as a means of defrauding the liquidators of those companies. On Mr Gogia's case, the stock belongs to him because he bought it when he re-acquired the business from Mr Harjai or because it was always held on consignment at the Shops from Adia Holdings. There may be substance in Mr Harjai's claim that the transactions in relation to the Shops were designed to hide assets from the liquidators of Gogia Multi and Gogia Holdings. But it is not necessary to resolve that issue in these proceedings. Whatever the position, it does not establish that the stock belongs to the partnership. Some of the stock must have been purchased to enable the Shops to trade or was held at the Shops on consignment from Adia Holdings. Absent any other evidence, that stock must belong to Mr Gogia or Adia Holdings. It appears that the former liquidator of Gogia Holdings has applied for the company to be re-registered and It is conceivable that as a result of the re-registration the liquidator of that company will be entitled to pursue a claim against Mr Gogia or Adia Holdings. But such a claim is not the concern of these proceedings.
Mr Harjai submits that the court should infer that some of the stock in the Shops came from Canberra and that that stock was partnership property. However, I am not satisfied that that is the case.
As I have said, there is a question whether any of the stock belonged to the partnership or whether it was always held on consignment from Gogia Holdings initially and then Adia Holdings. The evidence in relation to this issue consists of nothing more than assertions by Mr Gogia and Mr Harjai. Mr Harjai does give some explanation for the source of capital available to the partnership to buy the stock (the money left over from the fit out). In the absence of anything more, I am not prepared to conclude that all of the stock was held by the partnership on consignment, and I accept that the partnership owned at least some stock which was sold through Arpelle Melbourne.
Accepting that the stock in Canberra came from the Melbourne store, I am not satisfied that any of it ended up in the Shops. The evidence suggests that Mr Gogia owns other shops. It was not put to him in cross-examination that he was responsible for transferring the Canberra stock to the Shops. There is a reference in Mr Dhindsa's email dated 1 August 2013 to Mr Harjai dropping off "left over stock fittings etc at Campbell town [sic] and pick up his share of Melbourne stock after 21st of August". But it seems agreed that that proposal was not implemented and there is no evidence from Mr Harjai that he delivered stock to the Shops.
The second difficulty with Mr Harjai's claim is that he gave an acknowledgement in the MOU that "the stock and fit-out in respect of the Shop Premises is the absolute property of [Adia Holdings]". I do not accept that the MOU is unenforceable for the reasons advanced by Mr Harjai. The licence agreements are transferrable. That transfer could occur through a novation of the licences to Mr Gogia. The MOU is obviously an informal document, but it is apparent that it was designed to resolve the disputes between the parties in relation to the Shops, and in my opinion, it does so in sufficiently clear terms to be enforceable. The MOU imposes obligations or contains acknowledgements binding on both parties. The parties' respective obligations and acknowledgements provide consideration. On its face, the MOU purports to resolve finally the disputes between the parties concerning the shops. In those circumstances, Mr Harjai is bound by the acknowledgment it contains.
I accept Mr Gogia's submission that the Stock Agreement is not concerned with stock stored in the Shops. It required Mr Gogia to deliver $50,000 worth of stock to Mr Harjai. It does not state the source of that stock. There may be a question whether Mr Gogia has breached that agreement. However, even assuming that he has, I do not think that breach gives Mr Harjai an interest in the stock held in the Shops. At most, it would give him a right to sue Mr Gogia for breach of the agreement.
Third, even assuming that Mr Harjai is not bound by the statement in the MOU and even assuming that some of the stock held in the three shops belonged to the partnership, that does not demonstrate that Mr Harjai has an entitlement to it. It is not possible to determine which of the stock belongs to the partnership. If any of the stock in the Shops did come from the Melbourne store, the likelihood is that it has now become inter-mingled with stock that was already in those shops. Mr Harjai was not a partner. His company was. Mr Harjai, therefore, has no claim personally to partnership property. The stock now forms part of the business operated by Mr Gogia and as between him and Adia Holdings on the one hand and Mr Harjai on the other, the stock belongs to Mr Gogia and Adia Holdings. Any claim in respect of it on the basis that it was partnership property would need to be brought by Great Australian Leather Company Pty Ltd and it would be necessary for the other partners to be parties to that claim. Having regard to the fact that the stock belonging to the partnership is now intermingled with other stock, it would not be appropriate to make an order for delivery up of that stock to the partnership or someone acting on its behalf. The appropriate remedy in relation to any partnership dispute appears to be an account between the partners, not an order that some stock that may or may not belong to the partnership be delivered up to Mr Harjai.
It follows that Mr Gogia and Adia Holdings are entitled to the property located in the Shops.
[4]
Orders
The orders of the court are:
1. Declare that the stock and fit-out located in shops 226, 232 and 233, "Brands On Sale" Discount Factory Outlet Centre, 32 Queen Street, Campbelltown, New South Wales (the Disputed Property) belongs to the first and second defendants;
2. The plaintiffs' costs of these proceedings be paid out of the Disputed Property;
3. The third defendant pay the first and second defendants' costs of these proceedings (including any costs payable by the first and second defendants to the plaintiffs consequent on order (2));
4. Liberty to apply on 7 days' notice for further orders to give effect to this judgment.
[5]
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Decision last updated: 16 October 2015
Parties
Applicant/Plaintiff:
Shaun Robert Fraser in his capacity as joint and several receiver and manager of Pacific Street Properties Pty Ltd (Receivers and Managers Appointed) and Campbelltown Factory Outlet Pty Ltd (Receivers and Managers Appointed)