With substantial commercial holdings and expertise in the hospitality industry, Murali Kodoor encouraged California-based Shyla Venkataswamy to invest in a proposed Orewa property development with promises of rich returns juiced up by lack of a capital gains tax in New Zealand, the High Court was told. Over a decade later, Kodoor and investment partner Geeta Ganesh have been ordered to pay a 300 per cent return on the balance of her USD634,000 investment following their breach of trust. The Orewa project did not go ahead; they put the money into their other business interests.
Ms Venkataswamy made her intended investment in several tranches though 2010 and 2011.
The High Court was told the initial agreement was for a three year investment. By mutual agreement, there was a partial repayment before the three years was up, at the request of Ms Venkataswamy.
But Justice Andrew found there was no mutual agreement as to what happened subsequently. He ruled that both Kodoor and Ganesh were in breach of trust and breach of fiduciary duty by subsequently converting the balance owed to their own purposes, failing to account for use of Ms Venkataswamy’s money.
Allegations and counter allegations about source of Ms Venkataswamy’s funds and whether she had received payment through a counterparty in India were not helped by limited accounting records on all sides.
In a 2023 court ruling, Justice Andrew ruled she was still owed a balance of USD634,641.
It was then back to court with argument how damages should be calculated for breach of trust.
Justice Andrew ruled Ms Venkataswamy was entitled to damages as if the promised commercial development had proceeded. This required an assessment of the total return on investment in commercial property for the period 2011-2023.
Evidence was given that average commercial property return for the period was 260 per cent, increasing to 368 per cent for industrial commercial property.
Justice Andrew ruled compensation should be calculated on a total return (capital gain and income) of 300 per cent for the period 2011-2023.
This represents the profit that would have been made by Ms Venkataswamy but for the breach of trust that saw her money diverted elsewhere.
Justice Andrew ordered the damages calculation be based on the USD634,600 owed and the resulting figure be both expressed and paid in USD. It was implicit in their original agreement that the investment would be made in USD and all returns made in USD, Justice Andrew said.
The NZD has depreciated against USD since her original 2011 investment.
In addition, Ms Venkataswamy was awarded NZD50,000 general damages for the financial stress suffered as a result of the long delay in recovering payment. She was also allowed a fifty per cent increase in the court ordered contribution to her legal costs. The failure to properly account for use of Ms Venkataswamy’s funds had contributed to the time and expense at trial.
Mr Kodoor was an untrustworthy and unreliable witness, Justice Andrew said.
Vantkatswamy v. Kodoor & Ganesh – High Court (28.03.17 & 17.04.24)
24.094