Harcourts Real Estate pumped $1.01 million into failed south Auckland Harcourts franchise Preet & Co to cover shortfalls in its trust account. Preet director Gurpreet Grewal was ordered to honour his guarantee of repayment.
Real estate business Preet & Co hit the news for all the wrong reasons in late 2017 with details of shortfalls in its trust account. Harcourts moved fast to protect its name as franchise owner. The extent of deficiencies in client money at Preet & Co was identified, funds advanced to cover the shortfall and Mr Grewal required to guarantee repayment. Harcourts took control of Preet & Co’s trust account. After signing guarantees covering the funds advanced by Harcourts, Mr Grewal later disputed liability. He had been misled when signing, he said. Harcourts had failed to deliver on its promised ‘continued support’, he complained. It is a stretch to say ‘continued support’ meant Harcourts could not do anything Mr Grewal might disagree with, Associate judge Bell said. Given that Preet & Co was hopelessly insolvent and that further financing from any source would require his signature as guarantor, Mr Grewal could not object to Harcourt’s demand he sign. In any event, Harcourt’s standard franchise agreement signed earlier by Mr Grewal committed him to reimbursing Harcourts for any payments made on behalf of Preet & Co. Mr Grewal was held liable to repay the guaranteed $1.01 million loan with interest running at ten per cent.
Summary judgment for franchise fees of $259,700 allegedly owing to Harcourts was refused. Detailed accounting evidence is required at a full trial. The Harcourts franchise agreement required payment of franchise fees by Preet & Co calculated at eight per cent of its gross income.
Harcourts Group Ltd v. Grewal – High Court (19.11.18)
19.006