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Cite as: [2015] EWHC 2625 (Ch)

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Neutral Citation Number: [2015] EWHC 2625 (Ch)
Case No: HC-2014-00657

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL
21/09/2015

B e f o r e :

MASTER BOWLES
____________________

Between:
Shaukat Ali Khan
Claimant
- and -

Mohammed Ali Khan
Ambala Foods Limited
Defendants

____________________

Stephen Willmer (instructed by Public Access) for the Claimant
Alastair Panton (instructed by Bromptons Solicitors) for the Defendants
Hearing dates: 24th and 25th June 2015

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Master Bowles :

  1. By a Claim Form, dated 14th October 2014, the Claimant, Shaukat Ali Khan has brought these proceedings, seeking therein a number of different reliefs.
  2. His primary claim is that he was, until 2008, a partner with the First Defendant, his father, in the business which is now carried on by the Second Defendant, that, in breach of fiduciary duty, he was ousted from that partnership by his father and that, in consequence, he is entitled to compensation and to trace his partnership share into the assets of the Second Defendant on the footing that those assets were, or had been, partnership property.
  3. In the alternative, he contends that, prior to the incorporation of the Second Defendant, his father held a share in the business upon trust for him, such that, on the incorporation of the Second Defendant and the vesting of the assets of the business in the Second Defendant he was deprived, in breach of trust, by his father, of his share and is, in consequence, entitled to compensation to reflect the value of his share, or, in the alternative to trace his share into the assets of the Second Defendant.
  4. By way of further relief, the Claimant asserts a lien over a property, the first floor flat at 2 Charles Place NW1 (Charles Place), until payment of sums allegedly due to him arising from his transfer of another property, 9 St Andrews Road, Golders Green NW11 (9 St Andrews), to his father, in 1988, ostensibly for natural love and affection, but, according to the Claimant, on the footing of an agreement that his father pay him either the then value of that property, or the amount (112,000) which the Claimant had had to borrow, by way of mortgage, in the purchase of another property.
  5. In the alternative to the lien, the Claimant asserts a claim to a possessory title to the flat at 2 Charles Place, by way of adverse possession. As a further alternative, he claims specific performance of the contract of sale of 9 St Andrews Road.
  6. By application notice, dated 27th February 2015, the Defendants, Mr Mohammed Ali Khan and Ambala Foods Limited, applied to strike out the entirety of the Claimant's Claim and for Part 24 judgment on that Claim.
  7. By my order of 25th June 2015, I acceded to that application, struck out the Claim and gave judgment in favour of the Defendants pursuant to Part 24 CPR. By way of consequential relief, I directed that applications made to the Land Registry for the registration of a restriction against the title of 9 St Andrews Road, Golders Green NW11 be dismissed. I ordered that the Claimant pay the costs of the Claim, assessed by me at 23,500. This judgment provides the reasons for the order made.
  8. The Defendants advanced two grounds for striking out the Claim and a further ground for an order that the Claim be stayed. The application to stay and one of the grounds for striking out derived from the past history of proceedings between these parties.
  9. Put very shortly, in July 2012, the Claimant had applied to register restrictions in respect of a number of properties registered at the Land Registry in the name of the First Defendant. Those properties included both 9 St Andrews Road and Charles Place, but, also, a number of properties which the Claimant alleged to be partnership property held on trust for the partnership in which he was a partner. That application was contested by the First Defendant and referred, therefore, to the Adjudicator to the Land Registry, who, by a direction dated 11th February 2013, directed that, unless the Claimant commenced court proceedings by 20th February 2013, his application for restrictions over and in respect of the various properties would be cancelled. In the interim, the application was stayed. The reason, as I understand it, that the matter proceeded in that manner, was because the allegations as to partnership were felt to give rise to issues outside the jurisdiction of the Adjudicator.
  10. Be that as it may, consequent upon that direction, by a Claim Form dated 20th February 2013 and by Particulars of Claim, dated 24th June 2013, the Claimant sought High Court relief on substantially the same basis as is alleged in the current proceedings. The only substantively new issues raised were, as I read the 2013 Particulars of Claim, those relating to the adverse possession of, or lien over, Charles Place.
  11. Those proceedings came before Master Teverson on 5th September 2013 and were struck out by the Master on the basis that they had not been validly served within the 'lifetime' of the Claim Form. The Claimant was ordered to pay the costs of the Claim and to make a payment on account of those costs of 3,000. At an earlier hearing in that Claim, the Claimant had also been ordered to pay costs of 1,672.60.
  12. Consequent upon the striking out of the proceedings and by further order of the Adjudicator, dated 21st November 2013, the Adjudicator directed that the application for restrictions be cancelled and gave further directions as to costs. Thereafter, by order of the 23rd January 2014, the Adjudicator ordered that the Claimant pay the costs of the proceedings before the Adjudicator in the sum of 2,047.80.
  13. Neither the costs ordered by this court, nor those ordered by the Adjudicator have been paid.
  14. Against this background, the Defendants contend, firstly, that the current proceedings, being, as they are, substantially the same as the proceedings struck out by Master Teverson, constitute an abuse of process and an attempt by the Claimant to have two 'bites at the cherry' and, secondly, that, pursuant to CPR 3.4(4), the new Claim should be stayed pending payment of the costs ordered to be paid in respect of the struck out Claim.
  15. In regard to the stay for payment of costs, counsel for the Claimant, Mr Willmer, accepted, rightly, that, in the event that the Claim was otherwise sustainable, he could not resist a stay pending the payment of the costs (some 4,672.60) currently assessed and due in respect of the previous proceedings.
  16. The abuse argument, so far as it arose from the issue of new and substantially similar proceedings following the striking out of the earlier proceedings, was advanced primarily having regard to the well known decision of the Court of Appeal, in Securum Finance .v. Ashton [2001] Ch 291. In that case Chadwick LJ, giving the only judgment, held that, contrary to earlier and pre-CPR authority, that where a claim had been struck out, but where limitation had not yet expired, a new and substantially similar claim was, potentially, abusive, because it gave rise to a misuse of the court's limited resources, which, properly used, would have resulted in matters being dealt with within the first, or earlier, proceedings.
  17. That decision, reflected, among other things, the overriding objective, as then laid down, and the need to weigh, against an individual's wish to pursue a second case, the need to allot the court's limited resources to other cases. That latter consideration has, as I see it, even greater force, in the current litigation climate, given that the overriding objective now makes specific and explicit reference to the need to allot only an appropriate share of court resources to any particular case.
  18. Mr Willmer sought to limit the width of the decision in Securum to cases where the striking out was on grounds of delay (taking, understandably, as his text the first paragraph of the headnote in Securum). That headnote, however, does not, in my view, accurately set out the statement of principle in Securum, which is not, in terms, or at all, limited to cases of striking out for delay.
  19. That said, one can well see why the principle may well be particularly apt to apply in cases of delay, where, very often, there will have been, associated with delay, a number of unnecessary applications and hearings.
  20. In this case, however, because of the failure of service and because the Claim was struck out at an early stage, albeit following one, apparently, abortive application by the Claimant in respect of which he was ordered to pay costs, no very significant part of the resources of the court were used, or misused, in the earlier proceedings. Accordingly, although the jurisdiction to strike out for abuse was undoubtedly brought into play, in respect, at least, of those parts of the new claim that substantially replicated the original Claim, I would not have been minded to strike out the Claim upon this ground alone.
  21. The second ground of abuse, however, is one that I find to be made out. That ground stems from the bankruptcy of the Claimant and the consequent vesting of his causes of action, if any, in his trustee in bankruptcy.
  22. The Claimant was declared bankrupt on his own petition, in respect, I gather, of credit card debts, on 20th February 2013. It is common ground that all the Claimant's claimed causes of action had accrued by that date and, accordingly, that they constituted 'property' of the bankrupt, for purposes of his bankruptcy and formed part, therefore, of his estate, for that purpose.
  23. The consequence of that, by reason of section 306 of the Insolvency Act 1986, is that, upon the appointment of a trustee in bankruptcy taking effect, or upon the official receiver becoming trustee, all the Claimant's causes of action vested in his trustee and the Claimant, himself, was, correspondingly, divested of those causes of action.
  24. In this case, no trustee was appointed, as such, but, rather, as was confirmed upon behalf of the Claimant, the official receiver became the trustee in bankruptcy, pursuant to the procedure set out in section 293 of the Insolvency Act, whereby, if the official receiver elects not to call a meeting of creditors within the twelve week period prescribed by that section, he serves notice of that decision upon the court and upon known creditors and whereby, upon that service, he becomes the trustee.
  25. The result, or consequence, of the foregoing is that, as from, at latest, May 2013, the Claimant has not retained the causes of action upon which, in these proceedings, commenced in October 2014, he purports to rely, and that, inevitably, these proceedings fall to be struck out as an abuse of process, as being proceedings doomed to failure. For the same reason, the proceedings, likewise, have no realistic prospect of success and the Defendants are, in consequence, entitled to judgment against the Claimant upon his Claims.
  26. In the face of this situation, Mr Willmer made the only submission open to him, namely that, rather than, at this stage, striking out the Claim, or giving judgment upon the Claim to the Defendants, I should, instead, stay the Claim, in order to give the official receiver, as trustee, the opportunity, if so advised, to adopt the Claim.
  27. I declined that invitation. For the reasons given later in this judgment, I am satisfied that the Claimant's Claim has no realistic prospects of success and, therefore, that there is no realistic prospect of the official receiver adopting the Claim.
  28. In regard to the merits, I am satisfied, as just foreshadowed, that the various claims sought to be advanced by the Claimant are not claims which, collectively, or individually, have realistic prospects of success. Mr Willmer sought to persuade me, notwithstanding the full argument that I had heard, to confine my decision to that arising from the circumstances of the Claimant's bankruptcy. I, again, declined that invitation.
  29. Given that I have had regard to the merits, in deciding not to stay the proceedings, but, rather, to strike them out and give judgment for the Defendant, it is, as I see it, incumbent upon me to explain my conclusions in that regard.
  30. Even if that were not the case, it seems to me that, where other grounds for dismissing a claim exist and have been argued, the full grounds for that dismissal should be articulated. This is the more the case, in this case, where, as it seems to me, the possibility that the Claimant may wish to take an assignment of the potential causes of action from the official receiver cannot be discounted.
  31. In that event, it seems to me that the Defendants are entitled to a ruling as to the prospects of the various causes of action and to the benefit, if that be the case, of any estoppels arising from that ruling. Conversely and correspondingly, the Claimant should, in the circumstances of this case and before taking an assignment and seeking to launch new proceedings, be made aware by the court of the prospects, or lack of them, of his putative new claims.
  32. I turn, therefore, to the merits.
  33. Mr Willmer, for the Claimant did not seek to support the adverse possession claim and nor, in the event, the claim for a lien. In both instances, he was correct.
  34. The alleged adverse possession claim was said to be founded upon a taking of possession in 1989. Putting aside any and all questions as to whether that taking, at that, or any, date, was adverse, the claim faces insuperable difficulties.
  35. In 1989, the First Defendant had only a leasehold interest in Charles Place. He did not acquire the freehold until 1994. In that context, it is clear law that where adverse possession is taken against a leaseholder and, during the running of the requisite period of adverse possession, the lease falls in, whether by surrender, merger, or otherwise, time begins to run again as against the freeholder.
  36. On that footing and treating time, as against the First Defendant, as freeholder, as commencing in 1994, the then requisite twelve years adverse possession, pursuant to the Limitation Act 1980 would not have expired until 2006.
  37. However, by virtue of the changes in the law as to the treatment of adverse possession in respect of registered land, such as Charles Place, contained in and created by the Land Registration Act 2002, other than where the transitional provisions of that Act apply, a possessory title by adverse possession can only now be obtained if the alleged adverse possessor (with, now, ten years adverse possession) has, first, applied to the Land Registry for registration of his title.
  38. In this case, no such application has been made and, accordingly, unless the transitional provisions under the 2002 Act apply, a title by adverse possession cannot be achieved. Those provisions, however, require that that the twelve year period of adverse possession should have expired before the coming into force of the 2002 Act. That Act came into force in October 2003. In consequence, the Claimant could not have achieved the requisite period of adverse possession by the relevant date and his adverse possession claim had to fail.
  39. In regard to the alleged lien over Charles Place, the issues, in that regard, necessarily, relate to the merits of the Claimant's claim to be entitled to payment in respect of the transfer of 9 St Andrews to his father in 1988 and, correspondingly, to his Claim for specific performance of the agreement for transfer and payment. If the Claimant has no entitlement to payment under that agreement, then any lien, being, as it is, security for that payment, must also fail.
  40. Mr Panton challenged the realistic possibility of the alleged agreement upon the basis that any contract which carried within it two alternative modes of satisfaction of the agreement must be unenforceable. I cannot agree. I can see no reason why, as alleged by the Claimant, parties cannot agree that the consideration for a particular promise (here a promise to transfer property) cannot be one of two things, it being at the election of the promisee as to which of those two things he chooses to take up.
  41. The Claimant's problems with the agreement are different and turn upon the fact that the agreement was an agreement for the disposition, or transfer, of an interest in land and, further, upon the fact that the agreement was made twenty seven years ago and not fulfilled.
  42. Taking the latter first, the effect of an agreement for sale of land at a price, without there being expressed in the contract a time for payment and without time being made of the essence of the agreement, is that payment must be made within a reasonable time. By no stretch of the imagination can it be said that, in this case, a reasonable period of time has not, long since, expired. More particularly, it cannot sensibly be said that that reasonable time had not expired on 14th October 2008; that is to say the date six years prior to the issue of the Claim Form. Accordingly, there being no suggestion, either, that there was ever, at any stage within what might constitute a reasonable time for payment, any written acknowledgment of the entitlement to payment, such as to extend the limitation period beyond 14th October 2008, the claim for payment and with it any claim for specific performance of the promise to pay is time barred.
  43. The Claimant's other problem is one of formalities.
  44. There is no suggestion that the agreement for a payment in respect of the transfer was anything other than oral and, as such, falls foul of what would now be section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, but, which, as at 1988, would have been section 40 of the Law of Property Act 1925. In short, to be enforceable, there would have had to be a sufficient memorandum of the agreement. There is none; the only document pertaining to the transfer being the TR1 and that document referring to the consideration for the agreement being natural love and affection.
  45. By the same token, even putting aside any question of laches, the agreement would not have been susceptible of specific performance, by reason of the application of the doctrine of part performance (still then in force), given that, for that doctrine to apply, the conduct, said to give rise to an entitlement to part performance and, hence, an enforceable equitable obligation to make one or other of the possible payments alleged, must be shown to be referable to a contract and, at the least, consistent with the contract alleged.
  46. The only conduct, here, which could constitute part performance is the transfer of the land, purportedly for love and affection. That transfer, given its terms, is not referable to any contract and is, likewise, wholly inconsistent with the contract alleged.
  47. In the result, the Claimant has no actionable claim for, or legal, or equitable entitlement to, the monies the payment of which is said to be secured by the alleged lien, or for the specific performance of the agreement said to give rise to that entitlement. In that circumstance and as already stated, the claim to a lien over Charles Place as security for monies to which the Claimant was entitled in respect of the transfer of 9 St Andrews must also fail. A lien, as a security for monies due, cannot survive the loss of the right to the monies the payment of which the lien is said to secure.
  48. I should add that I have, in any event, very grave doubts as to the potential existence of the lien alleged, even were it to be the case that there were monies due to the Claimant such as might sustain a lien.
  49. In stark terms, the alleged lien is a lien which is said to have entitled the Claimant to take and retain possession of a property (Charles Place), over which he asserted no other legal right, by way of security for the payment of monies the alleged entitlement to which had no nexus, or connection, at all with the property in respect of which the lien was asserted.
  50. It is clear law, in respect of liens at common law that for a lien to arise the lienee's possession must have been lawful at its inception. It follows that, if, as is alleged by the Claimant in his pleading, he took adverse possession (i.e. possession as a trespasser) of Charles Place, then no common law lien could come into being.
  51. Even if that were not the case, there can be no doubt but that the suggested lien does not fall within any established category of common law general lien (that is to say that category of lien where the lienee is entitled to retain possession of property pending payment by the owner of the property in question of all claims outstanding between the lienor and the lienee). That is not to say that a new category of lien, general, or particular, cannot come into being; if that were so the debate, in Your Response Ltd .v. Datateam Business Media Ltd [2015] QB 41, as to whether a particular lien could exist over database information would have been easily answered.
  52. It does mean, however, given that the common law lien is, as described and explained, in Tappenden .v. Artus [1964] 2 QB 185, one of those primitive self help remedies created at common law at a time when proceedings in contract, other than contracts under seal, were in an early stage of development, that, in a mature legal system, such as the present, very good reasons would have to be advanced before the court would accede to the creation of a new class of general lien. None have been provided.
  53. In regard to the possible existence of an equitable lien, in the circumstances posited by the Claimant, that, too, seems to me to be fraught with difficulty.
  54. The underlying characteristic, of all, or any, equitable lien, is that there is a nexus to be found between the fund, or property, over which the equitable lien arises, by way of equitable charge, and the circumstances which give rise to the relevant equity. Accordingly, where a trustee expends his own money in the protection of, or to benefit, trust property, he has an equitable lien for the money expended. Similarly where a solicitor, by his exertions upon behalf of his client, secures the recovery of property (other than real property) upon behalf of his client, he has a lien over the property, or fund, recovered for his fees. Again, the unpaid vendor of real property retains an equitable lien over that property pending payment, on the principle that a person having got in the estate of another shall not keep that estate without payment of the consideration due. Correspondingly, a purchaser of property, where the sale goes off, other than by his default, obtains a lien over the property for any deposit paid, or other payment made, on the principle that a person having received the price for property (or a part of it) cannot retain the price without making the conveyance for which the price was paid. In both the last instances, the court protects the vendor and the purchaser, respectively, by imposing a lien over the property in question for the amounts, in the one case, unpaid and, in the other case, due to be repaid.
  55. In all these instances and in other instances where an equitable lien may arise, for example, by way of subrogation, or, in those particular circumstances where a lien arises when money is expended upon, or in respect of, the property of another, there is a clear connection between the property or fund over which the lien arises and the transaction or circumstances out of which it arises.
  56. In this case, however, there is no connection whatsoever between the property (Charles Place) said to be impressed with the lien and the circumstances, namely the non payment of the monies allegedly due in respect of 9 St Andrews which are said to give rise to the lien.
  57. Nor, given that an unpaid vendor's lien would, on the Claimant's case, have arisen in his favour over 9 St Andrews, does it seem to me to be a realistic conceptual possibility that an equivalent lien could independently arise in his favour over an entirely unconnected property.
  58. In light of the foregoing, had it been necessary to my decision, I would have held that the Claimant had no realistic prospect of establishing either a common law or an equitable lien over Charles Place and would have dismissed that aspect of his Claim upon that basis.
  59. There remains for consideration the Claimant's claims for a share in the business now carried on by the Second Defendant. These claims, if made out, would, it is acknowledged, be, potentially, of substantial value and it was in respect of those claims that Mr Willmer focussed his argument.
  60. Mr Willmer accepted, both in his pleading and in his argument, that no express partnership agreement can be shown and, also, that, in regard to the trust claim, which, in his argument, had its genesis in concepts of constructive trust, or proprietary estoppel, that no specific assurance, or representation, is alleged, such as might, given other ingredients, found either a constructive trust, or the creation of an equity which might be satisfied by the grant of a beneficial interest.
  61. What is said by Mr Willmer is that a partnership agreement can be implied as between the Claimant and his father upon the basis of a cultural norm said to exist in families from the Indian sub-continent, in circumstances where, as alleged, a son of the family comes in to the father's business and that that agreement arises, or may arise, notwithstanding the absence of any documentation or explicit discussion in respect of the agreement in question.
  62. Those bones are fleshed out, on the particular facts, by way of the Claimant's averment that he came into the business at the express request of his father, that, to do so, he left school at sixteen and gave up the prospect of a university education and that, having entered the business in 1974, by 1977 and thereafter he took more and more responsibility for the management and expansion of the business over a lengthy period, during which the First Defendant took only a limited strategic role in the business, during which, de facto, if not de jure, the Claimant took the role of Chief Executive and during which, in addition to a substantial salary and other benefits, the Claimant took significant drawings.
  63. The Claimant's alternative case, relying upon the same alleged factual scenario, is that the First Defendant's silent acquiescence in the role that the Claimant took in the business, in the context of the alleged cultural norm, amounted to a representation, acted upon by the Claimant, in taking up the role that he did in the business, that he was to have a beneficial share in the business, such that it would be inequitable for the First Defendant to deny him such a share, whether by way of constructive trust, or in satisfaction of the equity arising in the given circumstances.
  64. I have no conceptual difficulty with either of the Claimant's propositions.
  65. I can readily envisage circumstances whereby someone in the position of the Claimant comes to work in a family business, takes a role in the business and is paid, other than on a salaried, or wage paid basis, from the business. In those circumstances, it seems to me that the court might very well find an implied agreement that that person, together with the other family members in the business, were carrying on business in common with a view to profit, for purposes of section1 of the Partnership Act, and, thus, that that person would be entitled to a share in the partnership business.
  66. Equally, I have little difficulty with the proposition that, where a family member goes into a family business, without any express assurance of an interest in that business and, with the acquiescence of the other family members, most particularly the family member, or members, owning the business, is allowed to act in the business in a way which is only really consistent with his having an interest in the business, that acquiescence can, in an appropriate case, constitute, or give rise to, a representation that the family member in question is to have an interest and, in that context, the activities of the family member, if carried on in reliance upon that implicit representation, may well render it inequitable for the business owner, or owners, to go back upon their representation and, in consequence, give rise to a beneficial interest, by way of constructive trust, in the business, or to an equity, by way of proprietary estoppel, to be satisfied by the grant of such an interest.
  67. The question, here, however, is whether, on the facts and in the circumstances of this case, there is a realistic prospect that the Claimant can bring himself within one, or other, of the above scenarios. My conclusion is that he cannot.
  68. In regard to implied contract (Mr Willmer's more favoured scenario), the factual position is very far away from that outlined in paragraph 65 of this judgment.
  69. This is not a case of a family member working in the family business without agreed wages, or salary and, by agreement, taking earnings from the business.
  70. From an early stage, identified by the Claimant as being at least as early as the early 1980s, he was employed in the business at a salary and was paid as an employee under the PAYE scheme. The records before me show, also, that, until falling out with his father in 2005, he was generously paid as an employee and that his emoluments included, as, again, he confirms, the provision to him by the business of a 'top end' car, for the benefit of the use of which further tax was paid. None of that is at all consistent with his status being that of a partner, nor with any implication of an agreement that he should be, or was, a partner.
  71. Rather, as it seems to me, the demonstrable and admitted fact that the Claimant was an employee in his father's business is and has to be fatal to his partnership claim. One cannot imply an agreement which negates, or is inconsistent with, an express agreement and, here, there was an express agreement, which, unless a sham, defined the Claimant's status as that of an employee of the business. As a matter of trite law, one cannot both be a partner in a business and an employee of the business.
  72. I am not remotely persuaded that the provisions under which the Claimant was paid for so many years (and in respect of which very substantial sums in tax would have been paid) did not reflect the true agreement between the parties.
  73. I find further confirmation for that view in the events, adverted to by both Claimant and First Defendant, which gave rise to the Claimant's leaving the business in 2005.
  74. In short form, the documentary record shows the Claimant resigning from the business, by way of a letter of resignation dated 8th October 2005, taking effect, apparently in early November 2005, coupled with a letter, of 20th October 2005, to the First Defendant apologising for his unauthorised use of the title of Chief Executive. The background, in contest between the Claimant and the First Defendant, was a dispute between the Claimant and the First Defendant over the grant of franchises in respect of shops in Leicester, Hounslow and, I think, Tooting, in which the First Defendant made allegations of forgery against the Claimant and, in which, says the Claimant, he was forced, under an implied threat of police action, to make the apology in question.
  75. Whatever the rights and wrongs of that dispute and the true facts underlying it, the Claimant's conduct does not, in any way, reflect the conduct of a wrongly excluded partner, against whom false allegations had been made.
  76. Mr Willmer ascribed the Claimant's apology and resignation and his complete failure to assert what the Claimant allegedly perceived to be his true status in the business to family pressures apparently imposed upon the Claimant in the context of his tempestuous relationship with his father. I find that explanation unrealistic and implausible. I cannot believe and do not think that any court at trial could believe that the Claimant, if he had been, or if he had seen himself as, a partner with his father in the business, would have been prepared, in any circumstances, to resign from the business without, in any form at all, seeking to assert his position as a partner and co-owner of the business. I am satisfied that the reason that he did not do so was because, at that stage, he did not see himself as a partner and, indeed, was not a partner
  77. Two contra-indicators are advanced by the Claimant. Firstly, there is the Claimant's assertion that, with the agreement of his father and the knowledge of the business's accountant, he took some 1,200 to 2,000 per month from the business, in addition to his salary and benefits. Secondly, he places emphasis upon his decision to go into the business at an early age and without completing any form of further, or higher, education.
  78. As to the first, Mr Willmer drew my attention to the fact that the accounts of the business, at the time that the Claimant worked in the business prior to 2005, show significant drawings in the business's balance sheet. Mr Willmer, rightly, concedes, however, that the drawings are not identified in any document as being drawings of the Claimant and, necessarily, accepts, in the context of what was, in form, a sole trader business, that drawings would be apt to reflect the income taken by the First Defendant from his business.
  79. Even accepting, as it is right that I should, on an application of this nature, that monies were taken by the Claimant from the business with his father's knowledge and approval, that is not enough, given all the other circumstances, to raise any realistic prospect that a court at trial would find that the Claimant and his father had implicitly agreed that they would carry on the business in common with a view to profit, or, consequentially, that the Claimant was a partner entitled to a partnership share. In the context of an employee, taxed and paid as such, but in the further context of the family relationship between Claimant and Defendant, the fact that the father may have allowed his son money out of his business does not, realistically, found a claim in partnership.
  80. As to the circumstances in which the Claimant went into the business, there are two reasons why those circumstances do not assist the Claimant's case.
  81. Firstly, his suggestion is that the presumed partnership does not merely embrace himself but also others of his brothers who have gone into the business and who did so having first undertaken higher, or further, education.
  82. Secondly, while the fact that the Claimant forewent potential educational opportunities, in order to go into the business, might, in other circumstances, suggest the possibility of an understanding that the quid pro quo for that disadvantage would be an agreement that the Claimant come into the business as a partner, on the facts of this case I do not see that as a realistic possibility. In this case, any disadvantage which the Claimant might have suffered by being deprived the prospects of university, or the like, were met, or compensated, by the role that he took and was given as a senior and well paid employee of the business. In that context, there is no scope for any inference, or implication, of partnership arising from the circumstances in which the Claimant joined the business.
  83. Turning to Mr Willmer's alternative formulation in trust, or proprietary estoppel, the same factors as preclude any implication of a partnership also, as I see it, preclude the existence of a constructive trust, or the existence of any equity arising by way of proprietary estoppel.
  84. The essence of any claim in constructive trust or proprietary estoppel, arising by way of representation, is that a promise, assurance, or representation has been given by one party to another and in reliance upon that promise, assurance, or representation that other has acted to his detriment in a way that he would not have done had the promise, or assurance, or representation not been made and which, in consequence, makes it unconscionable for the party who has made the assurance, or representation, to renege.
  85. Where the representation is said to arise from silent acquiescence, it is the conduct of the alleged representor, in standing by while the alleged representee acts in respect of the representor's property in the apparent belief, known to the representor, that he is to have some right, or interest, in that property and in not disabusing the representee of that belief, which, by, thereby, encouraging the representee in that belief, gives rise to an implicit representation, or assurance that the representee is to have the right, or interest, in which he believes and upon the basis of which he has acted. A cultural norm, of the kind alleged by the Claimant, could well reinforce a representee's belief that he was to have some right in the representor's property and render it the more important that the representor disabuse the representee of that belief, if incorrect.
  86. In this case, however, where the Claimant has gone into his father's business as an employee and been well paid in that employment and where there is no suggestion that the work that he carried on in and in the development of the business was anything other than that for which he was paid, there is no realistic basis upon which the court could conclude at a trial that his father, in standing by while the Claimant acted in that way and on that basis, thereby encouraged in the Claimant a belief that he was to have an interest in the business for which he worked. The very fact that the Claimant was, as he well knew, employed in his father's business in that way must, realistically, have negated any expectation, otherwise arising from the alleged cultural norm, that he was, without more, to have an interest in the business.
  87. Even where an expectation is created by a representor, that expectation will, as already set out, only found a constructive trust interest, or a proprietary estoppel, if acted upon by the representee, in reliance upon the expectation, to the detriment of the representee and, in the case of a constructive trust, acted upon in such a way as only to be consistent with an understanding, or belief in the representee that he, or she, was to have a beneficial interest.
  88. In this case, there seems to me to be nothing in the conduct of the Claimant such as to indicate that his conduct in respect of his father's business arose out of any reliance upon any expectation created by his father, or that he has acted to his detriment in consequence of any such reliance, or that his conduct can be regarded as being only consistent with his having an expectation of an interest in the business.
  89. Rather, all of his conduct is wholly consistent with his performance of his duties as a well paid senior employee of the business and, on his own evidence, the de facto chief executive of the business. It cannot be said that, in performing those duties, for which he was very well paid, the Claimant, in any sense, acted to his detriment, whether in reliance upon any expectation, or at all.
  90. In all the above circumstances, I have no doubt at all, that the Claimant's claims in respect of his father's business have no realistic prospects of success and that the First Defendant is, consequentially, entitled to judgment against the Claimant upon those claims, as well as upon the other claims already discussed.


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URL: http://www.bailii.org/ew/cases/EWHC/Ch/2015/2625.html