A young couple tricked into purchasing a rot-infested home in a case described by a judge as “quite literally a cover-up” were locked into negative equity by the deception and unable to move on with their lives, a court has heard.
But former JP and Queens Service Medal (QSM)recipient Davinder Rahal, who was found jointly liable for deceiving the purchasers and ordered to pay nearly $1 million in damages, says he is not responsible and blames others for the couple’s plight.
Rahal and his wife were the sole directors and shareholders of First Trust Limited (FTL), which purchased a Goodwood Heights, Manukau, property in 2019.
An earlier court judgment by Justice Hinton found Rahal was aware the property suffered from water damage and that he authorised cosmetic repairs to mask the defects before selling it to Ameet Bhargav and his wife Renu in March 2020 without disclosing the weather-tightness problems.
Rahal accepted parts of the property “smelt damp and mouldy” when he viewed it, but said he thought this was what made it a “do up”.
He denied being told by the selling agent that it was a leaky home and said he would never have bought it if he knew it leaked.
Davinder Rahal was found to have knowingly sold a leaky home to a young couple in Goodwood Heights, Manukau, in March 2020.
The judge disagreed, ruling that Rahal had authorised “cover-up works” and that his failure to disclose that information “constituted misleading and deceptive conduct”.
The couple launched legal action in 2021 and FTL and Rahal were found jointly liable and ordered to pay total damages of $900,000.
But Rahal appealed the decision, saying he should not have been made personally liable and that one of the damages awards was too high.
At a hearing yesterday in the Court of Appeal, Rahal’s lawyer Andrew Grant described his client as a “very old, sick man”.
While Rahal was the director of the vendor company, he “personally did not have sufficient involvement” in the sale process to “pierce the corporate veil and sheet home liability to him”.
Grant told the court real estate agent Gary Bal had handled the sale and since entered into a settlement with the couple.
Rahal’s business partner Ranjay Sikka had acted as an agent of FTL and overseen the renovation, Grant said.
“This is not a case in which Mr Rahal was solely driving activities of this company.”
Former Governor-General Sir Jerry Mataparae with Davinder Singh Rahal (right) as the latter receives the Queen's Service Medal for services to the Indian community in 2012. Photo / Supplied
Grant was asked by one of the three justices overseeing the case about the earlier finding that Rahal was aware of the defects and authorised a “cover-up”.
Grant said the facts of the case were not disputed, but stressed his client never had “face-to-face” dealings with the purchasers and was not personally responsible for their loss.
However, the couple’s lawyer Sarah Wroe said Rahal was the “puppet master” who orchestrated the deception and should be held liable for his actions.
While there were two FTL directors, “for all intents and purposes it was a one-man band”.
She said Justice Hinton found Rahal was an unreliable witness who gave “implausible” evidence by claiming he did not know the property was leaky.
She said the trial heard evidence Rahal was shown “visible” water damage when he viewed the property, but told an agent “it would not be a problem” because he would fix it like he’d done with other investment homes.
“Mr Rahal signed the sale and purchase agreement,” Wroe said.
“He was well aware of the entirely false condition of the property as it was being presented to the purchasers.
“This was a case of deliberate deception of a young couple buying their first home.”
Learning their home leaked had been a huge blow for the couple. They couldn’t use the downstairs level for boarders as they’d planned, or have visiting family from India stay.
Dampness and mould also posed serious health risks.
They had taken on a 30-year $600,000 mortgage for a home that was only worth $480,000 and were in no position to buy back into the market.
“They were immediately locked into a negative equity situation. The plaintiffs would not have bought had they known the truth. They would have walked away.”
Wroe said the Fair Trading Act sought to protect consumers and hold people to account for misleading or deceptive conduct by awarding damages that reflected the harm suffered.
“This is an exceptional case. We haven’t been able to find a similar level of deception and the quite tragic outcome for this young couple and their family.”
Queen's Service Medal recipient Davinder Rahal's company is in liquidation owing $4 million and a finance company is chasing him for $180,000 owed on a luxury 2015 Rolls Royce Ghost.
FTL has been liquidated with creditors owed more than $4m, including $179,000 to a finance company for a luxury Rolls-Royce Ghost vehicle with the licence plate “RAHAL”.
The company was a trustee of the Rahal Family Trust. Receivers have now been appointed over the assets of the trust.
Despite the damages order, the couple are yet to receive any money from Rahal.
Wroe told the Herald a finding of personal liability against Rahal was important because if the company was in liquidation it was unclear what, if anything, the couple would recover through the liquidation process.
Lane Nichols is a senior journalist and Auckland desk editor for the New Zealand Herald with more than 20 years’ experience in the industry.
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