Kul Bhushan (1) Vinod Kumar (2) Gurmel Chand (3) Sat Paul (4) v Kahan Chand
| Jurisdiction | England & Wales |
| Judge | HHJ David Cooke |
| Judgment Date | 08 May 2015 |
| Neutral Citation | [2015] EWHC 1298 (Ch) |
| Docket Number | Case No: 1BM30584 |
| Court | Chancery Division |
| Date | 08 May 2015 |
[2015] EWHC 1298 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
Birmingham Civil Justice Centre
Bull Street, Birmingham B4 6DS
HHJ David Cooke
Case No: 1BM30584
Avtar Khangure QC (instructed by Aspect Law Ltd) for the Claimants
Clifford Darton (instructed by George Green LLP) for the Defendant
Hearing dates: 12–16, 19–23, 26–30 January 2015
The parties in this case are five brothers, the defendant being the eldest. Between them they own a considerable number of commercial and residential properties in and around Birmingham each of which is registered in the name of one or other of them. Some of the residential properties are lived in by the brothers or members of their families, others are let out. They also carry on or control two businesses known as Mastersons Fashions (which manufactures clothes) and Mastersons Warehouse (a general retailer of household and other goods), and have in the past also run various shops and other businesses. These assets have been built up since the family arrived in this country in the 1960s, during most of which time it is clear the brothers worked closely together. They fell out however in 2010, leading to the present litigation.
The claimants' case is that all the properties and businesses have been acquired and run under a general arrangement, expressly discussed and agreed between them, that they would work together and acquire assets for their joint benefit, it being a matter of convenience and without significance to them in whose name the assets stood or the businesses were conducted. The income of all the businesses and properties has they say been shared between them accordingly. Their claim, which is put in constructive trust and/ or proprietary estoppel, is that as a result all the properties and both businesses are beneficially owned in equal shares by all five brothers, whichever of them is the registered or apparent owner.
The defendant denies any such agreement or arrangement. His position is that each property is beneficially owned by the brother who is its registered owner, that Mastersons Fashions is solely owned by him and that he has no interest in Mastersons Warehouse, which is owned by a limited company whose shareholders are Kul Bhushan and his wife. He maintains that he was the driving force behind acquiring all the properties and starting all the businesses other than Mastersons Warehouse, that they all derive from his financial and business contribution, and that insofar as the claimants have run or worked in those businesses it has been because he provided work for them and benefits to their families when they were otherwise unwilling or unable to find work, and that insofar as properties have been bought in the names of any of the claimants it has been with his money and as gifts to his brothers provided out of his sense of family obligation. He denies that the claimants have shared any income from their properties or businesses with him.
There are in addition other properties in India and one property and business in the UK, known as the Smethwick Working Men's Club, which are acknowledged to be owned equally between the five brothers. The evidence has also extended to a number of properties owned in the names of sons of the claimants, which the defendant says have been acquired with money from the businesses run by the brothers and, if there is to be any general sharing of assets, should be brought into account.
The relevant legal principles
The starting point is that the beneficial ownership of property follows the legal ownership, see Stack v Dowden [2007] 2 AC 432. The burden is of course on the claimants to show that they have an interest in businesses or assets that presently are held in the defendant's name. The claimants' primary case is based on expressly agreed common intention and I shall consider that first. Mr. Darton submits that, in effect, only proof of such an express agreement at the time of acquisition will suffice. He relies on the well known passage in the speech of Lord Bridge in Lloyds Bank v Rossett [1991] 1 AC 107 at p 132 E:
"The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs, there has at any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made it will only be necessary for the partner asserting a claim to a beneficial interest against the partner entitled to the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or a proprietary estoppel.
In sharp contrast with this situation is the very different one where there is no evidence to support a finding of an agreement or arrangement to share, however reasonable it might have been for the parties to reach such an arrangement if they had applied their minds to the question, and where the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention to share the property beneficially and as the conduct relied on to give rise to a constructive trust. In this situation direct contributions to the purchase price by the partner who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust. But, as I read the authorities, it is at least extremely doubtful whether anything less will do."
This is not, he submits, a case in the domestic or shared occupation context (save perhaps in relation to the house at 104 St Paul's Rd which was occupied by all the brothers for a period) in which he submits that cases such as Oxley v Hiscock [2004] EWCA Civ 546 hold that the existence of a common intention to share ownership (as distinct from the proportions in which ownership once agreed is to be shared) may be inferred from other conduct and dealings in relation to the property. To the extent contributions to the purchase price are relied on to prove such an intention they must be direct in the sense referred to by Lord Bridge and not indirect such as work done on the property or in a business owned by someone else which generates the funds used to buy the property.
I do not myself think the question whether the court might infer an intention to share ownership by inference from conduct other than direct financial contribution to the purchase price is quite closed—see for example the remarks of Lord Walker in Stack v Dowden at para 25. But for present purposes, this is a case where the claimants have given evidence that there was an expressly communicated common intention of joint ownership, and the question is whether that evidence is to be accepted. I do not need to consider inference of intention unless I reject the evidence of express discussion and agreement. It is clear in my judgment that the court can have regard to the subsequent conduct of the parties in relation to the property (including indirect contributions such as work done) in determining whether their evidence as to an express agreement is to be believed or not, and if so whether they have relied on that agreement to their detriment.
It is for the claimants to establish not only that there was an agreed common intention but also the terms of it. There is no contemporary documentary evidence of the discussions and agreements the claimants contend for, so the conclusions I come to will depend on resolving conflicts of oral testimony, for which purpose I will consider the extent to which what the parties say they did or did not discuss or agree is consistent with what they did afterwards (which itself is on many points disputed). As is common in such cases, and despite the volume of documents produced, there is little in the way of reliable contemporary documentary evidence directly dealing with the material points, and where contemporary documents do exist, a party with whose case they may be inconsistent seeks to dismiss them as having been merely produced to show a position for a particular purpose rather than reflecting the true intention of the parties. Many of the events relied on occurred long ago and the evidence of them is purely the testimony of the parties, which it is clear is strongly coloured by the positions they have now adopted. Conclusions of fact therefore rely heavily on inference from actions that in my judgment are likely to be reliable guides to what the parties truly intended at the relevant time, as distinct from actions the purpose of which was mere convenience or disguise for the purpose of outsiders such as Her Majesty's Revenue and Customs.
I accept and bear in mind also Mr. Darton's submission that the evidence relied on must be suitably convincing bearing in mind that the finding of the court as regards ownership may affect third parties, particularly creditors. There cannot be one position as between the parties and another as regards outsiders, and the court must be wary of accepting too readily contentions that enable what may be regarded as a convenient and fair solution to be arrived at between the parties presently before it.
The facts
I will now...
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