Harcourts, New Zealand's largest real estate chain, is suing a south Auckland couple for $1.27m after the high-profile failure of the once flourishing 10-branch Preet & Co Real Estate and Preet & Co Rentals businesses.

Harcourts Group sought summary judgment from Justice Roger Bell in the High Court at Auckland today against husband and wife Gurpreet and Ramanjit Grewal.

From Gurpreet, Harcourts wants $1,012,300 under loan agreements and a further $259,736.63 under franchise agreements plus interest on the amounts.

From his wife, Harcourts wants $69,532.76 under the franchise agreement, interest and costs for a solicitor for the court proceedings.

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Harcourts, represented by Tyrone Cooley, says the two defendants "have no defence to the allegations contained in the statement of claim".

On October 16 last year, Preet & Co Real Estate entered into a loan agreement for $758,824.51, with Harcourts as the guarantor. Separately, Preet & Co Rentals entered into a loan agreement for $197,000, Harcourts said.

But last November, the businesses went into voluntary administration and on April 5 this year, the two businesses went into liquidation and there was a default on the loan agreements, Harcourts said.

By May this year, the first company owed $803,514,74 and the second company owed $208,785.31 because interest had been accrued, Harcourts said.

Harcourts made demands for repayments but Grewal "failed to pay the loan agreement debt of any part of it to the plaintiff".

Harcourts is also taking action over the franchise agreement, saying the franchisees had failed to pay fees. Preet & Co Real Estate owes $241,135.41 in franchise fees which includes interest and Preet & Co Rentals owes $18,601.22 in franchise fees and interest, Harcourts claims.

Preet was the guarantor of the franchise agreements and Harcourts wrote to him on May 14 this year: "Despite the demand, the defendant has failed to pay the franchise agreement debt or any part of it to the plaintiff," Harcourts said.

But Preet, represented in court by Gareth Round, opposes the summary judgment application. His affidavit in notice of opposition said: "The defendants have a set off and/or counterclaim which exceeds the plaintiff's claim."

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The various franchises owned by Preet & Co Real Estate and Preet & Co Rentals were extremely profitable and generated revenue to Harcourts of more than $1m each year, he said. In 2017, the companies collapsed as a result of a funding shortage brought about or engineered by the Harcourts, he claimed.

Harcourts had no responsibility for the "trust account discrepancies" discovered in August last year but representations were made about funding assistance, Preet said. He had relied on those "to my considerable detriment".

Preet said he had tried to sell Preet Real Estate for between $4.4m and $4.7m but Harcourts had refused. Had they agreed, Preet said the two businesses would have been able to pay its creditors in full and the companies would not be in liquidation. Harcourts had unlawfully interfered with a business sale, he says.

In addition, he is claiming $146,043 as a rebate on levies from Harcourts, due to be paid on October 20 last year.

Preet then went on to explain how last August, principal officer Joe Voordouw told him the trust account was not reconciling, so Preet said he immediately organised a meeting with chief operations officer Garry Mason, former Harcourts head office northern regional manager Claire Wright - who subsequently worked as Preet Real Estate general manager - and Voordouw.

That meeting decided to immediately tell the auditor, Harcourts Group and seek legal advice. In July 2017, Preet said he had introduced about $1.7m into the business to reduce its loan and save money on interest and he told how he met with BNZ representatives to explain the situation.

He also told of informing the Real Estate Authority about the issues in September last year.

Harcourts valued the 10 Preet & Co Real Estate offices at $1.85m and Preet said he strongly disagreed with that because "I had paid/invested $8m into the sales business over the years". But Harcourts said they knew of someone who would pay $900,000 for a 50 per cent stake.

But the business had a BNZ loan for $2.7m and the bank told Preet it considered the business insolvent. Yet Preet said he found buyers willing to pay $4.4m to $4.7m.

In court today, the judge asked Cooley about breaches of the franchise and loan agreements, for proof of debts and raised issues of liability and the validity of the guarantee. He also asked financial statements.

Neither Preet nor his wife appeared in court and no Harcourts executives attended the hearing.

A reserved decision is expected.