Bhullar v Bhullar

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Jonathan Parker,Lord Justice Brooke,Lord Justice Schiemann
Judgment Date31 Mar 2003
Neutral Citation[2003] EWCA Civ 424
Docket NumberCase No: A3/2002/1085/1085A

[2003] EWCA Civ 424

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE CHANCERY

DIVISION, LEEDS DISTRICT REGISTRY

(HHJ BEHRENS)

Royal Courts of Justice

Strand,

London, WC2A 2LL

Before:

Lord Justice Schiemann

Lord Justice Brooke and

Lord Justice Jonathan Parker

Case No: A3/2002/1085/1085A

In The Matter of Bhullar Bros Ltd and

In The Matter of the Companies Act 1985

Between:
Mohan Singh Bhullar & Ors
Petitioners/Respondents
and
Inderjit Singh Bhullar & Anor
Respondents/Appellants

Neil Berragan (instructed by Norcliffe & Co Solicitors) for the Appellants

Rosalind Nicholson (instructed by Hammond Suddards Edge) for the Respondents

Lord Justice Jonathan Parker

INTRODUCTION

1

This is an appeal by the second and third respondents in the proceedings, Inderjit Singh Bhullar ("Inderjit") and Jatinderjit Singh Bhullar ("Jatinderjit") (together "the appellants"), against an order dated 8 May 2002 and made by His Honour Judge Behrens, sitting as a judge of the High Court in the Chancery Division, Leeds District Registry. Permission to appeal was granted by Arden LJ on 26 September 2002, following an oral hearing.

2

In the proceedings, the appellants' uncle Mohan Singh Bhullar ("Mohan"), his two sons Steven Singh Bhullar and Kalvinder Singh Bhullar (known as Tim) ("Steven" and "Tim" respectively) and his wife Charan Kaur Bhullar petition under section 459 of the Companies Act 1985 ("the 1985 Act") for relief in respect of a family company, Bhullar Bros Ltd ("the Company"). The petitioners (whom I shall call collectively "Mohan's family") together hold 50 per cent of the issued ordinary shares in the Company. The remaining 50 per cent is held by the appellants, their father Sohan Singh Bhullar ("Sohan") and their mother Rajinder Kaur Bhullar (I shall call them collectively "Sohan's family"). The directors of the Company are and have at all material times been Sohan, Mohan, the appellants and Tim. Hence Sohan's family have at all material times had a majority of 3:2 on the board of the Company. The respondents to the petition are Sohan's family and the Company. The Company has not played any independent role in the proceedings.

3

By the petition, Mohan's family allege that the affairs of the Company have been conducted in a manner which is unfairly prejudicial to their interests, and they seek by way of primary relief an order for the sale to them, or to the Company, of the shares held by Sohan's family at a price to be determined by the court; alternatively, an order giving relief in respect of the various matters of which complaint is made, including an order for the reconstruction or reorganisation of the Company's business. The petition also seeks authority for Mohan's family to bring proceedings in the name of the Company against the appellants for breach of fiduciary duty.

4

In the result, following a lengthy hearing, the judge declined to grant the primary relief sought by Mohan's family. He did, however, find that the appellants had breached their fiduciary duty to the Company in acquiring for their personal benefit a property known as White Hall Mill ("the Property"), which they had purchased in the name of Silvercrest Trading (GB) Ltd ("Silvercrest"), a company which they own and control. By his order the judge declared that Silvercrest holds the Property on trust for the Company and he ordered that the appellants at their own cost procure that Silvercrest transfer the Property to the Company at the price which was paid for it. He also directed an account of profits. In order to avoid the need for Silvercrest to be joined as a respondent to the petition, counsel for the appellants (Mr Neil Berragan, who also appears for the appellants on this appeal) was also instructed to represent Silvercrest.

5

The appeal relates only to the relief granted in respect of the purchase of the Property. There is no cross-appeal by Mohan's family against the judge's refusal to grant the primary relief sought on the petition. Mohan's family have, however, filed a respondent's notice seeking to uphold the relief granted in respect of the purchase of the Property on different or additional grounds.

THE FACTUAL BACKGROUND

6

Although the judge's recital of the factual history occupied 197 paragraphs of his admirably thorough and lucid judgment, the facts relevant to this appeal are not in dispute and can be shortly stated.

7

From about the 1950s, Mohan and Sohan ran a grocery shop at 44 Springwood Street, Huddersfield, as equal partners. On 22 October 1964 the Company was incorporated to take over the partnership business. The authorised share capital was £2,000 divided into 2,000 £1 ordinary shares. 1,000 shares were issued to Mohan and 1,000 to Sohan, and they became the first directors of the Company.

8

After some early loss-making years the Company began to prosper. In addition to its premises at 44 Springwood Street, it acquired a number of other properties in the locality from which it carried on its grocery business. It also acquired an investment property known as Springbank Works, Leeds Road, Huddersfield, which has at all material times been let to UK Superbowl Ltd for the purposes of a bowling operation. It is common ground that the objects of the Company as set out in its Memorandum of Association include the acquisition of property for investment.

9

On 1 February 1995 Tim and the appellants were appointed directors of the Company, joining Mohan and Sohan on the board.

10

By about May 1998 relations between Mohan's family and Sohan's family had broken down, and a state of considerable acrimony prevailed (the reasons for this are not material for present purposes). Mohan and Tim decided that the time had come for the two families to go their separate ways. They informed Sohan and the appellants of their decision at a board meeting held in about May 1998, saying that they did not wish any further properties to be acquired by the Company. Sohan's family accepted this decision in principle, and thereafter negotiations took place between the two families with a view to dividing the Company's assets and business between them. Unfortunately, for reasons which I need not go into, the negotiations came to nothing, and in 2001 the petition was issued.

11

In the meantime, in about June 1999 the appellants discovered by chance that the Property was on the market. The Property is adjacent to Springbank Works, and at that time UK Superbowl Ltd was using part of the Property as a car park. In paragraphs 71 and 72 of his witness statement Inderjit described what happened, as follows:

"71. …. During a visit by my uncle from the USA [a Mr Dhesi] and whilst going bowling at UK Bowling on Leeds Road, I noticed a 'Sold' sign on Whitehall Mill. On calling the agents …. I was informed that the building was under offer and no further offers would be considered. I insisted on being given a chance to look at the building and my offer being forwarded to the owners. I called Matthew Scoley of Eddisons Commercial to view the building the following day.

72. My and [Jatinderjit]'s first offer was rejected but my second, increased offer, was accepted. Both offers were through Eddisons Commercial and from the [outset] I informed them that this was my brother's and my private acquisition. In the meantime I informed Mr Reddington of Barclays Bank plc of our private venture and he gave us his backing. The intention was to place this building in a self-administered pension fund but we were advised there was insufficient time to carry out the necessary paperwork for a pension fund to acquire the property (the seller insisted on a quick sale) and we had no alternative but to place it in the name of [Silvercrest]."

12

Later in his witness statement, Inderjit states that prior to the acquisition of the Property he sought advice from the Company's solicitor, Mr John Norcliffe, as to whether there was any reason why he and Jatinderjit could not acquire the Property for their personal benefit. Mr Norcliffe's advice was to the effect that there was no difficulty about this.

13

Contracts were exchanged on 15 July 1999, and the purchase was completed shortly thereafter in the name of Silvercrest.

14

The appellants did not at that stage disclose the purchase to their co-directors.

15

Inderjit was cross-examined about the purchase of the Property by Mr James Corbett QC (appearing for Mohan's family). The transcript of his cross-examination contains the following passages:

"Q. There was no doubt in your mind, was there, that it would have been a worthwhile acquisition for the company, is that right?

A. No, because Tim and his dad [Mohan] had already ruled out any acquisitions of any further ….

…..

Q. It may be that the company did not want it, but would it not have been worthwhile the company having it?

A. Yes.

….

Q. What made you think it was necessary to go and get legal advice before acquiring the property?

A. I did not go to get the legal advice, I simply went to tell John that this is the case, my subject to contract has been accepted, you know: "Can you do the legalities on it, and do you see any problems with it?". You know – any conflict of interest in any shape or form. ….

Q. ….. Did you go to get advice or not?

A. I went to give John Norcliffe the document for the offers etc. That's when I got the advice, and the completion took place several weeks afterwards. So yes, I did get the advice before, but I did not go specifically to get the advice.

….

Q. What was it you wanted legal advice about?

A. I just wanted to make sure there was no conflict of interest.

Q. What made you think there might be a conflict of interest?

A. Because the property was adjacent...

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