Pradeep Morjaria & Ors v Camran Mirza & Ors

A contractual duty of good faith must be construed in its contractual and commercial context. It requires honesty and may prohibit conduct that reasonable and honest people would regard as commercially unacceptable, but it does not automatically impose obligations beyond the contract.

A fiduciary duty may arise in a commercial joint venture where one participant undertakes to manage the venture in its interests, exercises decisive influence, and is entrusted with the affairs and property of the venture. The duty may be limited by the parties’ agreement, but requires disinterested advice and fully informed consent to profits or advantages obtained through the fiduciary position.

Fraudulent invoices, undisclosed profits and misleading cost claims may support deceit, breach of contract, breach of fiduciary duty, unjust enrichment, dishonest assistance, knowing receipt and conspiracy. A mortgagee exercising a power of sale in a conflict situation must take reasonable precautions to obtain the best price reasonably obtainable.

The claim arose from a long-running property joint venture concerning a hotel, data centre and serviced-office development. The principal parties were Mr Pradeep Morjaria and Mr Camran Mirza, with the venture conducted through corporate entities including Otaki and Viper.

The claimants alleged dishonest invoicing, misleading cladding-cost claims, breaches of the joint venture agreement and fiduciary duties, undervalue leases granted to Boomzone, unjust enrichment, dishonest assistance, knowing receipt and conspiracy. The defendants advanced counterclaims concerning VAT advances, bank KYC requirements, the sale of Viper and a private prosecution. Mr Mirza also brought a Part 20 claim against professional directors.

The central issues were whether fiduciary duties arose, whether the disputed payments and transactions were wrongful, whether the counterclaims succeeded, and what remedies and quantum followed.

1. Fiduciary status. Mr Mirza owed fiduciary duties to the JV Entities. Under the JVA he undertook to manage the daily operation of the joint venture in its best interests and exercised decisive practical influence over the Directors’ decisions. The fiduciary duties coexisted with the contractual duties and were not excluded by the express good-faith clause. Tydwell also assumed fiduciary duties in the circumstances; Redwire, Boomzone and Wolverine did not.
2. Invoicing and cladding. Requests and invoices which appeared to claim third-party costs, but included undisclosed profits or inflated costs, were fraudulent misrepresentations. Deceit was established against Mr Mirza, Mr John and Tydwell in relation to the invoicing and cladding claims. The same claims failed against Mrs Mirza and Ameer. The representations induced payments by the relevant JV Entities.
3. Contract and equity. Tydwell breached the JV/Tydwell contracts by claiming amounts beyond its contractual entitlement and failing to provide required supporting material. Amounts paid in excess of sums properly due were repayable. The claimants also established unjust enrichment, dishonest assistance and knowing receipt against the defendants identified in the judgment. The relevant conduct supported unlawful means conspiracies concerning the invoicing and Boomzone arrangements.
4. Boomzone leases. Mr Mirza breached the JVA and his fiduciary duty by procuring the Boomzone Leases on terms detrimental to Viper and without fully informed consent. The transactions fell within the fair-dealing principle or an analogous fiduciary remedy. Boomzone and LMH were liable in knowing receipt and held the relevant lease benefits on constructive trust for Viper. The deceit claims concerning the leases failed because Mr Mirza was not shown to have known that the pleaded representations were being made.
5. Wolverine transaction. Mr Mirza’s power of sale arose through equitable subrogation after he repaid the BOS debt as guarantor. The self-dealing rule did not apply. However, the conflict of interest shifted the burden to Mr Mirza and Wolverine to show that reasonable precautions had been taken to obtain the best price. That burden was not discharged. Mr Mirza’s clean hands and subrogation rights remained relevant to the future remedy, including possible rescission.
6. Counterclaims and remedies. The KYC, Viper SPA and Part 20 claims failed. The private prosecution was malicious, but the malicious prosecution claim failed for want of proof that there was no reasonable and probable cause. The tort of abuse of process did not presently extend to criminal proceedings. Liability was determined subject to a further hearing on remedies and quantum.