Reddy v Punja and Sons Ltd [2005] FJHC 296; HBC0069.1996 (16 November 2005)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

ACTION NO. HBC0069 OF 1996

BETWEEN:

SHIRIRAM REDDY also known as NRSIMHA DAS
(father’s name Venkat Reddy) of Varadoli, Ba, School Teacher and
BHAVNA BEN REDDY also known as PRANESHWARI DEVI DAS
(father’s name Ishwarial Jamnadas) of Varadoli, Ba, married woman.
PLAINTIFFS

AND:

PUNJA AND SONS LIMITED
a limited liability company having its registered office in Lautoka.
FIRST DEFENDANT

GOPALS LIMITED
a limited liability company having its registered office in Lautoka.
SECOND DEFENDANT

KANTI PUNJA
(father’s name Punja Kara) of Lautoka, Fiji. Businessman Trustee of ISKCON, Suva
SIXTH DEFENDANT

JAG JIWAN PUNJA also known as JAGANNATH DAS
(father’s name Punja Kara) of Lautoka, Fiji, Businessman and Trustee of Jagnnath Trust.
SEVENTH DEFENDANT

LILA WATI PUNJA also known as KRISHNA LILA DEVIDAS
(father’s name Chhagan Lal) of Lautoka, Trustee of Jaggannath Trust.
EIGHTH DEFENDANT

FIJI NATIONAL PROVIDENT FUND
a duly incorporated body established under the Fiji National Provident Fund Act.
TWELFTH DEFENDANT

REGISTRAR OF TITLES
THIRTEENTH DEFENDANT

Plaintiff in person
Mr B C Patel and Ms C. Punja for the 1st, 2nd, 6th, 7th & 8th Defendants

Dates of Hearing: 14 and 15 November 2005
Date of Judgment: 16 November 2005

ORAL JUDGMENT OF FINNIGAN J

The Plaintiff commenced these proceedings on 28 February 1996. In an eloquently and clearly pleaded Statement of Claim he sued thirteen Defendants including two societies for Krishna Consciousness (ISKCON’s) and other persons both legal and personal who were allegedly involved with those societies and involved in certain dealings that were made for transferring certain Real Estate properties out of the ownership of one of those ISKCON’s.

The Court is proceeding on the Statement of Claim at the Plaintiff’s request putting aside the Amended Statement of Claim which actually adds very little or nothing.

At this hearing the first named Plaintiff alone appeared and conducted proceedings on his own behalf. He says he was originally joined by his wife but from the evidence seems clear that his wife who was the second named Plaintiff has withdrawn her support for whatever reason and the reason is not material to these proceedings. From here on I will refer simply to the Plaintiff and the Plaintiff as he says, sues as a member of one of the two named ISKCON’s which was formerly the Tenth Defendant. He claims to be acting as representative of and with the authority of others. There is however neither pleading nor evidence to make this a representative or class action as known to the law. That is excluded by the Statement of Claim which was professionally drawn by his then solicitors and is entirely clear in all its claims. The Plaintiff’s claim first becomes clear at paragraph 7 of the Statement of Claim and his claim is that certain Real Estate properties more than nine in number but nine in particular for the purposes of this action were purchased for the original Tenth Defendant the Fiji ISKCON, with the ISKCON’s money, and that all the Defendants conspired and planned to defraud the Plaintiff and other members of the Tenth Defendant, and in doing so fraudulently transferred various properties and businesses to themselves and/or to third parties and made profits for themselves. There were originally thirteen then fourteen Defendants to the action. Suffice it as to say for present purposes there are now seven Defendants remaining of which five are significant. These are the First Defendant PUNJA & SONS LIMITED the Second Defendant GOPALS LIMITED and three individual members of the Punja family. The other two Defendants regard themselves as and are treated as nominal Defendants.

To prove his case the Plaintiff relied on ten documents which he put before the Court and his own oral evidence. From his affidavit of documents filed on 28 April 1997 I am aware that he has possession of other documents relevant to the legal transactions in the properties but he did not produce or rely on them.

The documents he has produced include documents which I labeled P1 and P2. P1 is a declaration of the Will of the Founder of the International Society for Krishna Consciousness and P2 is the Certificate of Incorporation of the ISKCON in New York.

During his evidence the Plaintiff made it entirely clear that his objective is to preserve what he regards as the true identity of an ISKCON from which ideal he claims there have been departures in Fiji. True adherence he maintains includes adherence to the Will of the Founder and emulation and/or adoption of the constitution of the ISKCON in New York.

He has expressed his concerns and his quest for a remedy for these concerns in legal terms so that in this Court he may obtain a remedy. In doing so, he has expressed a child-like faith in the jurisdiction and powers of this Court. Having said that, I am bound to hold that the Plaintiffs main concern expressed in evidence is that the Krishna Consciousness Movement in Fiji has departed from its pure ideals and needs reform. Whether that may be so, I am not in the position to say. I cannot in this Court enter into any claims raised by the Plaintiff about compliance by Fiji ISKCON’s with either the Will of the Founder or the constitution of the ISKCON in New York. Each of those documents is a legal document but only for enforcement purposes in their own legal jurisdiction. The Will of the Founder itself as a legal document is subject to interpretation but that cannot arise in these proceedings.

In this Court the Plaintiff sues on a statement in the document P1 at page 14, that it is the Will of the Founder that “in principle” properties outside India should never be mortgaged etc and he said in evidence that this statement means it is unethical to mortgage a temple in Fiji.

This claim of ethics is not a claim known to the law in Fiji. If a temple is constructed on a defined plot of land that is entitled at law to a registrable certificate of leasehold or freehold title then there is nothing at law to prevent legal enforcement of any loan secured by any mortgage registered on that title, with some exceptions such as fraudulent registration.

The Plaintiff claims that the Board or Governing Body of Commissioners or some other authority was left to do the Founder’s Will and is not doing it. If he were to establish by evidence that there is a trust known to the law in Fiji and that he is a beneficiary of that trust and if he then establishes a breach of that trust to his detriment then there a cause of action may lie. But this is neither claimed nor proved in the present proceedings.

Other than that in those matters as he said in his evidence the outcome depends not on the trustees in any event but on God.

I return now to the Statement of Claim. The fraudulent property dealings claimed in paragraph 7 mentioned above, are pleaded in detail in paragraphs 11, 12, 13 and 14 which cover four pages. In essence the Plaintiff claims that some of the original Defendants some of whom are no longer in the action formed a second ISKCON in Suva, which at one time was the Eleventh Defendant, without the knowledge of all of the members of the ISKCON Fiji (which was the former Tenth Defendant) and did so in order to defraud the members of the ISKCON Fiji. They are said then to have transferred and/or sold the properties of the Tenth Defendant to the Eleventh Defendant and then from the Eleventh Defendant to third parties and various Defendants and how this is said to have been done is actually set out in respect of each of the nine properties that I earlier mentioned. It is good pleading.

After hearing the Plaintiff’s evidence and perusing the documents put before him in cross-examination by Defendants’ Counsel I think it safe to say that such dealings did take place. However at the end of the hearing the claims of fact and law that they took place in order to defraud remain only claims. The Plaintiff was unable to put before the Court any essential facts which might have proved fraudulent dealings i.e. to prove that these dealings were done with intent to defraud the members of the Fiji ISKCON and to enrich unjustly the persons to whom the properties were sold. I make that finding knowing fully that the purchasers of those assets have some connection with the trustees who sold them and knowing full well that those new owners may be profiting from their ownership.

The Plaintiff gave little or no evidence about the facts of those transactions. He said little had been made known to the membership. He expressed mostly his own very strong belief. The facts of the matter as I find them after considering the Plaintiffs documents and some of the Defendant’s documents (which were 418 pages) and the comments made about them by the Plaintiff during his cross-examination, are briefly as follows:

I accept as fact the details of the course of the dealings through which Counsel for the Defendants took the Plaintiff in cross-examination but will state my findings without that detail and in general only. Nonetheless they come to eleven numbered paragraph.

1. From 1975 some members of the Punja family donated land and effort and money for establishment of the Krishna Consciousness Movement in Fiji particularly at first in Lautoka. The ISKCON was itself formed as a legal entity according to Fiji law.
   
2. Three members of that family gave an unlimited personal guarantee to the ANZ Bank to underwrite substantial loans for buildings and plant for the ISKCON which at all times operated its own Bank Account and its own Overdraft.
   
3. There were substantial borrowings and substantial capital acquisitions by the ISKCON over the period 1975 to 1994.
   
4. By January 1994 as shown in the Defendant’s document No 66 “a faction of Devotees in Fiji (were) making allegations that the trustees are dishonest in running the business operations”. There was reported and recorded in the Minutes a move by the International Organisation to take over control of the Fiji operations.
   
5. On 30 January 1994 at a meeting of the Board of Trustees the Minutes of which are Document 66, the trustees of the Fiji ISKCON in Lautoka made a decision for the reasons I have mentioned in paragraph 4 to sell all the businesses of the ISKCON so that the ANZ Bank loans would be fully repaid and the unlimited guarantees of the trustees (being at least three of the five present) would be discharged.
   
6. This decision was immediately acted on and the ISKCON openly advertised its properties for sale by tender in the Fiji Times on at least one occasion 3 February 1994.
   
7. The tenders received for all the seven properties advertised were lower than the trustees had hoped to achieve. All the properties were thereupon purchased by other entities controlled by the trustees for prices substantially higher than the highest tenders. Punja and Sons Limited the First Defendant bought some properties and plant and Gopals Limited the second Defendant bought most of the rest. Where balance payments were to be made, the purchasers were to pay (and did pay) interest at 1% above the current bank fixed deposit rate. This was not necessarily the highest rate available but it certainly is evidence of good faith. Two residential properties were purchased by a third entity the Jagannath Trust. All three purchasers are associated with the Punja family.
   

Taking one property as an example, it was purchased by the ISKCON in 1988 for $50,000.00. It was purchased from the ISKCON in 1994 by Punja and Sons Ltd for $350,000.00. This is a capital gain of $300,000.00 over six years. Expressed differently, a gain of 100% for each of year of ownership. This did not necessarily represent the killing of a golden goose, because this paid price was more than double the market value assessed for that property by a Valuer which was $150,000.00.

This arrangements were completed in 1994. The Plaintiff commenced this action in February 1996.

8. All of the money paid for these properties was deposited to the credit of the ISKCON bank account and the total of the principal payment was $2,151,197.00. Interest paid in addition is said to have been $343,136.39. The last payment was made on 12 January 2001.
   
9. These transactions in respect of all properties are fully set out in normal legal documentation and the Defendants’ documents show the history of the Real Estate properties from the time of purchase by the ISKCON to the time of sale, and the profit on the sales made by the ISKCON is either calculated in the documents or calculable. All the details are there.
   
10. In addition there were substantial benefits obtained for the Fiji ISKCON over the years by way of commercial interest rates, cash donations of at least $10,000.00 at about six monthly intervals and documented donations in kind of foodstuffs and related items, all or most of these being from Punja and Sons Ltd. These are substantial amounts which are recorded in the documents. The accounts of the ISKCON for the relevant years were prepared and I am told audited by Coopers and Lybrand which firm one assumes is above reproach.
    
11. So, in the outcome and compressed into a nutshell the evidence suggests that the trustees of the ISKCON having acted as stewards and benefactors of the ISKCON, for reasons which included obtaining relief in uncertain circumstances from their unlimited financial guarantees, sold the Real Estate and business assets of the ISKCON to legal entities over which they themselves are perceived to exercise some control.
    

In return for these Real Estate business and residential assets by the time of the last payment on 12 January 2001, the ISKCON had a cash asset of $2,151,197.00, (subject to loan repayments). This was 25 years after set up in 1995 with no assets. There may as well have been other assets outside the scope of this proceedings.

The amount itself is not significant. What I have to assess is whether the ISKCON and its members have been defrauded. There are two things to say about that.

First, these dealings, which were traced with the aid of their evidentiary documents by Counsel for the Defendants in cross-examination of the Plaintiff, appear to me to have been conducted openly and in accordance with fair business practice. They were advertised. The prices paid appear at or above market prices after the properties or the bulk of them were put out for tender. Evidence of fraudulent conduct is absent.

The second thing is that the ISKCON itself might be the first to make the claim that it was defrauded. From the evidence neither the International Movement nor the Fiji Devotees have ever claimed that, except only the Plaintiff.

The Plaintiff has bravely raised the claim and paid the price for his convictions and his belief. He says he spent $12,000.00 and has lost both his job and his family as a result of his single-handed pursuit of this case. His evidence however does not make out his claim. The evidence favours the defences pleaded by the Defendants in their original Statements of Defence and in the Amended Statement of Defence. On the evidence the transactions in question were bona fide.

For that reason I must enter judgment for the remaining Defendants that is the First, Second, Sixth, Seventh, Eighth, Twelveth and Thirteenth.

The Counter-Claim

I record that in submissions Counsel withdrew the counter-claim and submitted that the Plaintiff had expended only effort plus the cost of filing his Statement of Defence so would be entitled to minimal or no costs. The Plaintiff himself made no submission about that. Neither party went past the pleadings and I make no order for costs on the counter-claim.

Cost:

On costs generally, these follow the event and in the claim must go to the Defendants. I assess quantum summarily, lower than usual, and take account of the circumstances particularly of the relatively brief hearing and the Plaintiff’s financial circumstances. Costs are payable to the First Defendant for convenience and are fixed in the sum of $2,000.00.

D.D. Finnigan
JUDGE

At Lautoka
16 November 2005