A Queen’s Service Medal holder and former Justice of the Peace has been ordered to pay more than $825,000 in damages after losing an appeal over the sale of a leaky Auckland home described by a judge as “quite literally a cover-up”.
According to a report by NewstalkZB, Davinder Singh Rahal was twice found jointly liable for misleading a young couple into buying a rot-infested property in Goodwood Heights, Manukau.
The Court of Appeal has now upheld findings that Rahal personally engaged in deceptive conduct under the Fair Trading Act after authorising cosmetic repairs to hide serious water damage before the house was relisted and sold as newly renovated.
According to NewstalkZB, the property was purchased in March 2020 by first-home buyers Ameet Bhargav and his wife Renu Khajuria through Rahal’s company, First Trust Ltd (FTL), which is now in liquidation.
In the newly released judgment, the Court of Appeal said the couple suffered significant financial and personal hardship after becoming trapped in a home plagued by leaks and rot.
“Mr Bhargav and Ms Kharjuria were not able to sell to move to a leak-free home, were forced into a negative equity situation, living in sub-standard housing with their young family, and having to repair the property themselves,” the decision says, NewstalkZB has quoted.
Rahal had argued the home was sold by his company and that he should not be personally liable for damages. However, the court rejected that argument, finding there was “more than enough evidence” showing he played a central role in the misleading conduct.
The couple’s lawyer, Sarah Wroe, said the ruling was significant because it showed Rahal could not avoid responsibility through the “corporate veil” of his company.
“This decision shows the courts will enforce fair trading legislation to compensate buyers who are misled,” Wroe said, as quoted by NewstalkZB.
“It is bad news for vendors who hide defects, then try to hide behind their company to avoid liability,” NewstalkZB has quoted.
An earlier High Court ruling by Justice Anne Hinton found Rahal knew the property had water damage when he bought it in 2019 and later approved superficial repair work to conceal the defects before the sale.
According to NewstalkZB, Rahal admitted parts of the property “smelt damp and mouldy” when he inspected it, but claimed he believed it was simply a “do up”. He denied knowing the home leaked and said he would never have bought it if he had known about the issues.
Justice Hinton rejected that explanation, ruling Rahal had authorised “cover-up works” and that his actions “constituted misleading and deceptive conduct,” as reported by NewstalkZB.
During the appeal hearing, Rahal’s lawyer, Andrew Grant, argued his client was a “very old, sick man” who did not have enough involvement in the sale process for personal liability to apply. Grant said other parties, including a real estate agent and Rahal’s business partner, had handled much of the transaction and renovation work.
However, Wroe argued Rahal was the “puppet master” behind the scheme.
“This was a case of deliberate deception of a young couple buying their first home,” she told the court, as quoted by NewstalkZB.
The court heard evidence that Rahal had been shown “visible” water damage before purchasing the property and had told an agent “it would not be a problem” because he planned to fix it.
The couple later discovered they had taken on a 30-year mortgage for a property worth far less than they paid and were unable to afford major repairs.
“They were immediately locked into a negative equity situation,” Wroe said. “The plaintiffs would not have bought had they known the truth. They would have walked away, as quoted by NewstalkZB.
“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,” as quoted by NewstalkZB.
In its final ruling, the Court of Appeal said the family’s “plans, hard work and savings were completely derailed” by the misleading conduct of Rahal and his company.
The court awarded the couple $688,868.40 for breaches of the Fair Trading Act and a further $103,107 for consequential losses. An earlier $80,000 award for general damages was reduced on appeal to $35,000.
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