Having agreed to jointly develop an Auckland property eventually sold for $1.485 million, Pareshkumar Patel and Prakashkumar Patel were required to share profits equally. Prakash put up most of the money; Paresh managed the project.
In May 2014, the two agreed to redevelop a property available for sale on Ashgrove Road, Mangere. Prakash was a courier driver; Paresh a real estate agent. They are not related, but had been acquaintances for many years. The High Court was told their plans were to relocate a house on the 1.3 hectare property, then divide the property into three titles putting houses on the two new sites. In what was later to be a point of contention, Paresh shifted a house off one of his other properties onto the Ashgrove site; a free gift said Prakash, a financial contribution said Paresh. Justice Gwyn was to later count this relocated house as a $55,000 financial contribution by Paresh.
The High Court was told Prakash put $776,530 cash into the project. Paresh’s financial contribution was assessed at $252,100. When all three properties were sold, Prakash refused to repay Paresh his financial contributions or to hand over any share of the profit. Prakash claimed their deal was limited to the two new sections carved out of the original site. Paresh sued.
Justice Gwyn ruled their business venture was governed by the Partnership Act. They were carrying on a business in common with a view to profit. There are no formal requirements to establish a partnership. An informal oral arrangement can amount to a partnership. The default rule in the Partnership Act is that profits are shared equally. The two had agreed financial contributions with interest calculated at six per cent would be repaid before division of profits, Justice Gwyn said. After return of financial contributions plus interest, profits from development of all three lots are to be shared equally, she said.
Patel v. Patel – High Court (22.10.19)
19.179