Jugar Singh Johal v Sulakhan Singh Johal
| Jurisdiction | England & Wales |
| Judge | David Cooke |
| Judgment Date | 18 May 2021 |
| Neutral Citation | [2021] EWHC 1315 (Ch) |
| Date | 18 May 2021 |
| Docket Number | Case No: G30BM045 |
| Court | Chancery Division |
[2021] EWHC 1315 (Ch)
IN THE COUNTY COURT AT BIRMINGHAM
Business and Property Courts Work
Birmingham Civil Justice Centre
Bull Street, Birmingham B4 6DS
HHJ David Cooke
Case No: G30BM045
G30BM046
John Brennan (instructed by Consilium Legal Ltd) for the Claimants
James McWilliams (instructed by Irwin Mitchell) for the Defendant
Hearing dates: 12–15 April 2021
Approved Judgment
Introduction
It is common ground that at a meeting on 12 (or 13) June 2013 the defendant Sulakhan Johal said he would pay each of the claimants Jugar Johal and Hardeep Johal, who are brothers of his, £168,000. The claimants accept that they have each received £42,000 and now, by claims consolidated and tried before me, sue for the balance of £126,000 each. Their case is that a binding oral agreement was made for payment of £168,000 to them in four instalments, in consideration of their giving up their claims to an interest in a business that was conducted through a limited company of which the defendant was the sole registered shareholder but which was, they say, treated as a family business in which they shared beneficial interests.
The defendant's position is that there was no binding agreement for one or more of the following reasons:
i) The claimants had no such interest in the company or its business, which belonged to him alone and was not regarded as a family business. Accordingly the claimants could not provide consideration by giving up any such interest.
ii) Rather the payment was to be made by way of gift, which he was free to honour or not as he saw fit, and he chose not to because his brothers resiled from promises he considered they had made to him not to start a competing business nearby.
iii) Alternatively there was no intention to create legal relationships by anything said at the meeting.
iv) Alternatively any agreement reached was too uncertain to be capable of enforcement by the court.
There was a pleaded claim that if there was such a contract, the defendant entered it under duress and is entitled to avoid it and recover the sums already paid, but at the close of evidence Mr McWilliams rightly accepted that the evidence did not disclose circumstances capable of amounting to duress and that accordingly that pleading fell away.
The parties have two other brothers, Makhan Johal and Charanjit Johal. For convenience, I will refer to each of them by their first names, as they were at the trial.
Disputes over the beneficial ownership of businesses or properties said to be “family” assets are a very frequent subject of litigation in this court and others. It is very commonly the case that property is acquired and registered in the name of one family member, or a business is established and run on the apparent basis that it is owned by one family member, or a company owned by him, but other family members are involved on a more or less informal basis pursuant to arrangements between the family members that are either not documented or are incompletely documented, or where, to the extent that documents exist, it is said that they were created for external purposes such as presentation to authorities and do not represent the true arrangements within the family.
The essential nature of such disputes is whether arrangements can be shown by the evidence to exist that amount to the creation of interests enforceable by law, as they may do if it is shown that an express, constructive or resulting trust arises, or whether any arrangements or understandings that there were exist only as matters of family obligation and expectation that are not legally enforceable. Such claims are not doomed to fail because of the absence of documentary evidence, though that is inevitably a hurdle. The outcome often depends on findings made on disputed evidence of conversations between family members many years in the past, together with inferences from such documents as there are and the way in which the arrangements were implemented. This case is a variation on that theme.
Factual background
Given the issues that will be relevant to the outcome of this case, it is only necessary for me to describe the factual background in outline.
The parties' father Gurdial Singh came to the UK in 1963. He worked in a foundry in the Midlands. He was joined in 1967 by his wife Malkiat Kaur and their then three children, Makhan, Sulakhan and Charanjit. Hardeep was born in England in 1969, and Jugar in 1972.
Sulakhan was made redundant from a job at British Steel Springs in 1984. He purchased from BSS the assets used to make various parts for bicycles and set up a business, at the time unincorporated, to make those parts under the name Whiteburner Products. According to the claimants, this followed a family meeting at which it was agreed that he should do so for the benefit of all the members of the family and the business was financed, in part at least, by monies provided by the parents following the compulsory purchase of their house. Sulakhan's position is that there was no such discussion; the new business was his idea and financed solely by him.
In 1996 Sulakhan discovered that Mr Kanu Dheda Patel (aka Joe Patel) wished to sell a pub business that he owned known as the Sportsman in West Bromwich. He agreed a price of £135,000 to be paid in instalments and was allowed into possession in July 1996, notwithstanding the lease could not be assigned immediately. It took nearly three years to complete negotiations with the landlord, but the lease was eventually assigned into Sulakhan's sole name in March 1999.
According to the claimants, this purchase was also agreed after a family meeting at which their father agreed that it would be a good investment for the family and should be acquired on the basis that it was a family business to be run for the benefit of all and managed by Jugar. Jugar was trained up by Joe Patel in all aspects of the business and took over as manager with day to day charge of the operations from the beginning while Sulakhan worked during the day at the engineering business and came to the pub in the evenings. The purchase was financed in part by £12,000 provided by Hardeep and his wife (later repaid) and in part by monies lent by family friends Keru Singh and Amrik Singh at their father's request.
Sulakhan's account is that there was no such family meeting, the purchase was his idea and for his sole benefit and financed mainly by commercial borrowing by him. The family friends lent to him at his request and not to his father or at his father's request, and funds had come from Hardeep only because he had expressly asked his brothers if they wanted to invest to purchase shares in the business; only Hardeep had wanted to do so and initially provided some money but he later changed his mind and was repaid. Jugar had worked at the pub but only as employed bar staff and not a manager.
Gurdial Singh died in 1998. Whiteburner Products Ltd (“the Company”) was incorporated in February 2003 and the engineering and pub businesses were transferred to it. Sulakhan has at all times been the sole registered shareholder and director. Hardeep was named as company secretary, though he says Sulakhan did this without telling him and he never acted as such.
Over the years substantial amounts of money have been provided by Sulakhan for the benefit of other family members, to pay for weddings, purchase and/or renovation of houses and acquisition of other business interests. Mr Brennan prepared a schedule from Sulakhan's own evidence that was not disputed; those items that could be quantified totalled over £400,000 but the true total would be much higher if the unquantifiable items were taken into account. There were also other items that emerged in the evidence that were evidently significant but where no figures could be given. Jugar estimated in addition that Sulakhan had spent many hundreds of thousands of pounds buying and rebuilding his own house. In each case the only identifiable source of funds is the business. Sulakhan's case is that any payments he made to or for other family members were gifts by him; the claimants say they represented his obligations to other family members who were considered also to have interests in that business.
It is evident that disputes began to arise between the parties from at least some point in 2012, and that the claimants were asserting that they had interests in the business but were not receiving commensurate shares of its fruits. Sulakhan's case is that his brothers never had any such interests, the money generated by the business was his alone and that although he provided substantial sums to his brothers and other family members from those monies, he did so by way of gift without obligation.
Among the matters referred to in relation to that dispute are the following:
i) In late 2012 Hardeep contacted Mr Sira, the solicitor who acted for Sulakhan, and asked him to prepare an agreement documenting a partnership between Hardeep, Jugar and Sulakhan in the Sportsman business. Mr Sira produced a draft document but nothing was executed. According to the claimants, Sulakhan said he would recognise their interests by documenting a partnership, asked Hardeep to make contact with Mr Sira to get a draft agreement and promised that he would attend a meeting with Mr Sira to give instructions, but then reneged. Sulakhan says he made no such promise and Hardeep acted on his own initiative. Mr Sira gave evidence that he regarded Sulakhan as his client and so far as he was aware Sulakhan was the owner of the...
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...intention has been found in an agreement between siblings following a meeting convened for commercial purposes (in Johal v Johal [2021] EWHC 1315 (Ch) at [42]). The Agreement was unquestionably of a commercial nature both in terms of its content and in that all parties treated it as a part......