Rahman v Miah [2007] EWHC 3546 (Ch)

CLAIM No 5BM30279[2007] EWHC 3546 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue BIRMINGHAM DISTRICT REGISTRYDate 19 th October 2007Venue At Birmingham Civil Justice Centre
Before
His Honour Judge Purle QCsitting as a High Court Judge
Between
MUZIBUR RAHMANClaimantMOHAMMED LEBU MIAHDefendant
Mr Sham Uddin, Solicitor-Advocate, of Hampstead Law Practice, appeared for ClaimantMr Raza Mithani, Counsel, instructed by HMA Law, appeared for DefendantHearing Hearing Dates: 10 th, 11 th, 12 th, 19 th and 20 th July 2007Date of handing down of judgment: 19 th October 2007 (corrected on 26 th October 2007)
JUDGMENTJudge Purle QC:Introduction
[1]The parties are cousins and former business partners who ran an Indian takeaway from 58 Damson Lane Solihull (“Damson Lane”) under the name “Saffron Indian Takeaway”.[2]Damson Lane was occupied under a lease dated 11th July 1995 for a period of 10 years with an annual rent of £10,000 subject to review. The partners were the tenants and the lease was partnership property, having been acquired solely for the purpose of the business. The original landlords were Mr and Mrs Wellings.[3]For reasons said to be related to the adverse financial profile of the Defendant at the time, the partnership bank account was opened in the sole name of the Claimant. The VAT registration and trading accounts were also in his sole name. Nevertheless, the fact that the parties were equal partners is common ground.[4]On 11th October 2002 the Defendant purchased the freehold reversion of Damson Lane on his own account for £120,000. The Claimant’s case is that this was done without his knowledge or consent, and in breach of fiduciary duties owed by the Defendant as partner. It follows, he says, that the freehold reversion is held upon trust for himself and the Defendant in equal shares, and that the Defendant is accountable for any profit derived from the transaction.[5]The Defendant’s case is that the Claimant consented to his purchase of the freehold reversion before it took place. Alternatively, he has since consented and his claim is barred by acquiescence, waiver and/or laches. He also pleads that the lease of Damson Lane was surrendered following dissolution, or is to be treated as forfeited by peaceable re-entry.[6]Following his acquisition of the freehold, the Defendant received rent from the partnership until it was dissolved by him by notice on 7th May 2005. Since that date, he has carried on business there as a sole trader, though using his wife’s name for VAT purposes. The Claimant has been excluded from the premises, the Defendant having changed the locks at the time he dissolved the partnership. In carrying on the business, the Defendant has used the partnership’s business name, as well as taking over its employees, furniture, equipment and fittings. The Claimant seeks partnership accounts. The Defendant claims that the Claimant abandoned all claims by agreement following dissolution, in return for the Defendant giving up any claims for additional rent and dilapidations due to him as landlord.

Did the Claimant consent to the Defendant’s purchase of the freehold?

[7]I heard a great deal of oral evidence. The most important witnesses on the issue of prior consent were the 2 parties and Mr Wellings, one of the original Landlords.[8]The Claimant came across as an intelligent, quietly spoken and thoughtful man. His role in the business was to act as chef. This did not mean that he lacked business acumen. On the contrary, I find that he had an instinctive understanding of basic business issues. He monitored the performance of the partnership business, banked its receipts (after sharing a portion of the cash receipts with the Defendant) and signed off the business accounts. At a late stage of the trial, he was recalled to deal with a conviction involving forgery of an MOT certificate. This conviction shows that the Claimant is the sort of person who is willing to act fraudulently for his own financial advantage (the false certificate meant that he did not have to buy a replacement vehicle or spend money bringing his existing vehicle up to scratch). He also told me that the accounts for the business prepared in his name understated the real profits, as the partners were receiving an average of £200 per week in cash. I accept that this was so but this also identifies him as someone who is prepared to cheat the Revenue and is therefore less than wholly honest. I have accordingly approached his evidence with some caution but do not feel it would be right to reject his evidence on these grounds alone. A person may be willing to mislead or cheat the Road Traffic and Revenue authorities but less willing to lie in Court against a family member and former business partner. I mention too that the Defendant was well aware of the true state of the finances of the business, from his daily contact with the Claimant and his position as manager.[9]Despite these reservations, I found the Claimant relatively straightforward as a witness and his evidence on the issue of prior consent was credible. He was quite firm that he did not agree to the Defendant purchasing the reversion, and that he did not find this out until he was told as much by Mr Wellings (then in Spain) over the telephone on 12th November 2002 (the date is ascertainable from the Claimant’s telephone log). By this time, he was endeavouring to buy the freehold reversion himself, the Defendant having ostensibly agreed to this.[10]The Claimant told me (in effect) that he could not put into words what he felt upon finding out that the Defendant had bought the freehold for himself. He clearly felt shocked. This evidence struck me as inherently credible and my inclination is to accept it. Moreover, there are a number of other matters which persuade me to do so.[11]The Claimant gave evidence to the effect that Mr Wellings (one of the landlords) came to the restaurant in October 2002 and brought a piece of paper which contained an account name (Five Pearls Property) and number, into which Mr Wellings asked him to pay future rent. This happened shortly after completion of the sale to the Defendant, as Mr Wellings confirmed. The Defendant was also present and asked the Claimant to come out of the kitchen to meet Mr Wellings. The Defendant worked in the restaurant as manager, dealing with callers and customers generally. The Claimant on that occasion (according to his evidence) suggested that Mr Wellings should sell the property to the partners. Mr Wellings gave him his telephone numbers (which also appear on the piece of paper handed over to the Claimant) and said he might be interested. The matter could not be pursued then and there as there were customers coming in who needed looking after. The Claimant subsequently spoke to the Defendant who told him to buy the property alone and, if not, he should let him (the Defendant) know. In fact (but unbeknown to the Claimant) the Five Pearls Property account was the Defendant’s, and the Defendant had already bought Damson Lane.[12]After that, the Claimant had telephone conversations (confirmed by his log) with Mr Wellings. These were about his proposed purchase of Damson Lane, a point which makes no sense if he already knew that the Defendant had already bought it.[13]Mr Wellings agreed that he gave the Five Pearls Property account details to the Claimant, though he claims that this was in the context of his telling the Claimant that the property had been sold to the Defendant. Both Mr Wellings and the Defendant alleged that the Claimant had already had the opportunity of buying the property. He was (they said) unable to raise the finance so Mr Wellings sold Damson Lane to the Defendant, having first introduced him to his own bank.[14]Mr Wellings came across as a bluff, self-confident witness whose word he expected to be accepted without question. He was however unable to give any convincing explanation as to why he should give the Five Pearls Property account details to the Claimant, rather than those account details coming from the Defendant, whose account it was, and who had become the landlord. There is no obvious reason why the Claimant should have connected this account with the Defendant, and I find as a fact that he did not do so and that he was not told at this meeting that the Five Pearls Property account was the Defendant’s.[15]Nor was Mr Wellings able to give a sensible explanation of why he gave his telephone numbers to the Claimant after completion. He was unable to suggest what he might have spoken to the Claimant about over the telephone other than the Claimant’s proposed purchase of the property. I accept the Claimant’s evidence that he did speak to Mr Wellings about his proposed purchase, and that he was not told until 12th November 2002 of the Defendant’s purchase, when Mr Wellings revealed this to him over the telephone.[16]Mr Wellings claimed that the real purpose of his October visit was to sort out an overpayment of rent following completion, and was not really about the payment of future rent. However, there was no overpayment (the rents had been apportioned on completion). Further, had there been an overpayment, it would not have been corrected by Mr Wellings giving details of the Five Pearls Property account to the Claimant. One effect of Mr Wellings giving the details of that account was to give the impression that the account had something to do with him when it did not (it was opened at his bank and branch). I find that the Defendant asked him to give the account details to the Claimant, and that his motive in doing so, rather than give the account details himself, was to conceal the true ownership of the account from the Claimant.[17]I should add that the evidence established a considerable degree of goodwill on Mr Wellings’ part towards the Defendant, which was not matched by similar feelings towards the Claimant. Mr Wellings said that all his dealings had been with the Defendant and he had also met him when visiting the restaurant for a takeaway. He clearly got on well with him, but had no prior personal contact with the Claimant at all.[18]The Defendant was more outgoing than the Claimant. He is highly intelligent but was a poor and at times evasive witness. He challenged a statement put to him by the Claimant’s Solicitor-Advocate (to the effect that he had initially been unwilling to undertake a long-term commitment when the purchase of the freehold was first mooted) only then to be confronted with the fact that what was being put to him were his own words. He falsely claimed in an early witness statement to have sold the business to his wife when manifestly he had not. In his oral evidence he pretended that the business belonged to himself and his wife jointly, but that was not true either. The business accounts were prepared in his name alone, as he must have known, and his wife never played any part in the running of the business. He made light of these serious inaccuracies when giving evidence before me, barely recognising them as inaccuracies.[19]In addition, he constantly claimed a lack of recollection of many of the matters upon which he was being questioned. Whilst I accept that he could not be expected to remember every detail of events occurring may years ago, I was under the strong impression that his supposed lack of recollection became a refuge of convenience. Most notably, he seemed unable to recall any of the details of the meeting at which Mr Wellings handed over the details of the Five Pearls Property account. He was unable to give a sensible explanation of why Mr Wellings (rather than himself) should hand those details over. Nor did he give any convincing explanation of why the account should be referred to as “Five Pearls Property” rather than openly as his own. In fact, the account was in his name and not in the name of “Five Pearls Property” though there are bank account entries referring to “Five Pearls”.[20]Despite his generally poor recollection, he claimed to be able to remember the Claimant agreeing to his purchase of the freehold. His version of events was that he had initially agreed (well before October, in the summer) that the Claimant should buy the freehold if he could, as he did not think he or the partnership could afford it. The Claimant could not raise the finance. Mr Wellings got fed up waiting and introduced the Defendant to the Manager of the Sheldon Branch of HSBC. The Defendant borrowed 100% from that Bank, with security over the freehold, and over other security (10 Taunton Road) which was shortly afterwards (on 8th November 2002) released so that it could be sold. No part of the proceeds went in reduction of the £120,000 borrowed for the purchase.[21]The Defendant alleges in his witness statement prepared for the purposes of the trial that he told the Claimant, when he was unable to raise the money, that he wished to purchase the property himself and that the Claimant agreed to this. On a number of occasions while giving evidence, he asserted, without being specific as to detail, that the Claimant knew all along that he was buying the property. However, his evidence in an earlier witness statement of 17th August 2005 (made in connection with injunction proceedings) was that he believed that Mr Wellings informed the Claimant and he (the Defendant) also informed him “subsequently”. There is no evidence that Mr Wellings ever told the Claimant that the Defendant was purchasing Damson Lane before that occurred. On his own evidence, Mr Wellings told the Claimant afterwards, not before. Even had I accepted Mr Wellings’ evidence on this point (which I did not) the Defendant on this version of events could not have told the Claimant of his purchase until after completion.[22]I am bound to say that I find the Defendant’s claim of prior consent implausible. The Defendant was, as I have said, raising the whole of the purchase price from HSBC, to whom he had been introduced by Mr Wellings. The Defendant (as he accepts) did not tell the Claimant of this connection, or of the fact that 100% finance was available. I feel sure that the Claimant, had the conversation which the Defendant claims to have had occurred, would have wanted to know how the Defendant was proposing to finance the purchase, especially as the Defendant’s initial reluctance to become involved was because he did not think the proposition was affordable. Had the Claimant been told that 100% finance was available, I have no doubt that he would have wanted to be part of the deal. He did have additional security of his own that he could offer. Moreover, when he himself proposed to buy the property alone, his elder brother Mohammed Rafiqur Rahman (whose evidence I accept) told him that both of the partners should buy it together. This was probably after the Defendant had purchased Damson Lane, but I feel sure (as the reaction is a natural one) that the Claimant would have taken the same line had the Defendant ever told him that he was proposing to buy the property on his own. I should add that Mohammed Rafiqur Rahman had a similar conversation with the Defendant at about the time of or following the property purchase but was sharply rebuffed. The reason for the rebuff (I find) was that the Defendant was either planning to purchase the property alone or had already done so (probably the latter) but was not at that stage minded to tell the Claimant or his brother.[23]On the whole, therefore, I much prefer the evidence of the Claimant to that of the Defendant and Mr Wellings. There is however one point that has troubled me about the Claimant’s evidence. Both the Defendant and Mr Wellings are insistent that the proposal for the sale and purchase of Damson Lane was mooted much earlier than October. In one sense, this must be true, as the Defendant actually bought Damson Lane on 11th October 2002, so the proposal for that purchase must have been mooted earlier. The question is: was the Claimant a party to those earlier discussions? The clear drift of his evidence is that he was not. Yet if he was not, it is difficult to see what would have triggered the suggestion which he says he put forward in October (when Mr Wellings came to the premises) that Mr Wellings should sell.[24]In my judgment, there probably was an earlier discussion between the Claimant and the Defendant following Mr Wellings’ original approach. I am not however persuaded that Mr Wellings had discussions with the 2 of them at that stage and reject both the Defendant’s and Mr Wellings’ evidence to the contrary. Mr Wellings’ point of contact was the Defendant, with whom he had had all previous dealings. He did not (I find) have any discussion about any possible purchase with the Claimant until he came to the premises after completion. His approach was made to the Defendant alone. He only had contact with the Claimant following completion because the Defendant asked him to hand over the details of the Five Pearls Property account to the Claimant.[25]Mr Wellings’ evidence of an earlier telephone conversation with the Claimant is, I find, false. His evidence was that he had received a telephone call from the Claimant back in the summer, and that the Claimant wanted to buy the freehold alone, asking Mr Wellings not to mention this to the Defendant. It is not explained where the Claimant got Mr Wellings’ phone number from, or why (if he had his numbers) Mr Wellings gave them to him again in October. The content of the conversation as recalled by Mr Wellings does not make sense either, as it is common ground that (whenever the Claimant’s approach was made) it was made with the Defendant’s prior consent. Mr Wellings’ evidence was that when the Claimant could not raise the money, he sold to the Defendant. Yet the contemporaneous record indicates that he was making no real distinction between the 2 partners. Answers 8(1) and (2) of The Seller’s Property Information Form (sent under cover of a letter from Mr and Mrs Wellings’ solicitors to the Defendant’s then solicitors dated 4th October 2002) stated that the property was leased to the purchasers (in the plural) and stated:
“they are the purchasers” and “they are buying it”
. The moving date (in Answer 13) was said to be “just to suit the purchasers”. This flatly contradicts any suggestion that a sharp distinction had already been drawn in Mr Wellings’ mind between the Claimant and the Defendant. Though the form was filled in by his solicitors, the information must have come from him.[26]I do however consider it likely that the Defendant (having been approached by Mr Wellings) discussed before October the possibility of a purchase of the freehold with the Claimant, but in no great detail, as he did not (until he was introduced to HSBC by Mr Wellings) consider the proposition viable. He also probably let it be known (both to the Claimant and maybe Mr Wellings) that the Claimant could proceed alone if he wished and was able to, and that the Claimant expressed an interest in doing so. The price of £120,000 was not mentioned to the Claimant. Nor did the Defendant ever report to the Claimant the possibility which subsequently emerged of obtaining 100% finance through HSBC. He did not do that because the proposed deal with HSBC was so good that he wanted it all himself. He hoped and expected that the Claimant would be unable to get an offer of finance which would enable the Claimant to make a bid of his own. In that event, the Defendant could (as he saw the matter) proceed on his own account.[27]With the prospect of a substantial rent review following completion, there was a good chance of the deal with HSBC being or becoming completely self-financing. To the extent that it was not self-financing, the loan being in the form of a repayment mortgage would be repaid and the whole of the equity in Damson Lane would thus be released over time. The loan proposal from HSBC was therefore an attractive one.[28]The HSBC loan proposal would have been an equally if not more attractive proposition for both partners had the Defendant ever raised it with the Claimant. There was enough money in the business to service the loan. The loan repayments were £1021.03 per month and monthly interest charges (initially of approximately £600 per month) were simply charged back to the reducing loan account with HSBC. So the outgoing cash flow requirement was (in round figures) just over £1000 per month, a figure not much more than the existing rent, which was due to be reviewed substantially upwards (in fact the review was overdue), and which would no longer be payable if the freehold was purchased for the partners, as the freehold and leasehold would merge. In addition, a sum in excess of £4000 per annum (not shown in the business accounts of the restaurant business) was being paid by sub-tenants in respect of a residential flat at Damson Lane. The evidence established that an August 2003 sub-tenancy commanded a rent well in excess of £4000 per annum, and that there were earlier sub-tenancies. There is no direct evidence of what was payable under the earlier sub-tenancies but I infer that the earlier rent was not significantly less than what was paid under the 2003 sub-tenancy. This rental stream coupled with the rental saving which buying the freehold for the partners would have achieved would therefore have been more than enough to service the 100% loan from HSBC. Furthermore, I have already found (in paragraph 8) that the profits of the business were greater than declared. In those circumstances I really do not understand what impediment there was (greed apart) to the Defendant offering to share this opportunity with the Claimant. I find that the Claimant would have jumped at it.[29]In addition, as I have said, the Claimant (should it have been needed) was able to provide additional security of his own. He did approach National Westminster Bank himself for a loan, but it was naturally more difficult for him as an individual acting alone to raise finance than it would have been for the 2 partners acting together. Be that as it may, I accept his evidence that National Westminster Bank were willing (at least in principle) to consider an advance of 70% of the purchase price and that he was taking steps to raise the remaining 30%. However, there was a way to go and the price of Damson Lane had not been determined at this stage. Mr Wellings, when asked by the Claimant over the telephone after the October meeting whether he was willing to sell, at first referred him to the Defendant. When the Claimant came back to him (after the Defendant told him to buy it himself) Mr Wellings mentioned a value of £190,000 to £200,000 but this was not a serious price, and was probably intended to put the Claimant off. Mr Wellings was in a difficult position. He wanted to help the Defendant to whom he felt grateful for having purchased Damson Lane at a time when he (Mr Wellings) needed the money. He had gone along with the Defendant’s suggestion that he (Mr Wellings) should ask the Claimant to pay future rent into the Five Pearls Property account and now found himself being increasingly involved in a continuing deception of the Claimant. Eventually, he told the Claimant both that he had sold Damson Lane to the Defendant and that the Five Pearls Property account was the Defendant’s.[30]The Defendant points to a letter which his then solicitors wrote on his behalf as landlord to the Claimant and himself as tenants on the day of completion (11th October 2002) proposing an increased rent. That letter referred to the Defendant as “the Freeholder”. The Defendant relies upon this as showing that he was in no way concealing his purchase from the Claimant at the time. However, there is no evidence that the letter was sent at this stage. The Claimant denies receiving it then and says that it was sent months later (in May 2003). He has produced a copy of an envelope post marked 16th May 2003 and says that this was the envelope in which the letter arrived. The Defendant has not been able to identify any other letter which might have been in the May envelope, though the envelope in question clearly emanates from his then solicitors. Had the letter been sent earlier, I would have expected it to be answered or, if not answered, followed up. In fact, the next letter on file is an identical letter dated 22nd May 2003, which would hardly have been necessary had the letter dated 11th October 2002 been sent at the time.[31]I find that the letter of 11th October was not sent at the time and take some comfort in reaching this conclusion from the fact that it is not referred to in the Defendant’s original witness statement of 17th August 2005, though the identical letter of 22nd May 2003 is. I also infer that the probable reason it was not sent was because the Defendant did not want it to be sent at that time. He has not come up with another explanation and has not called his then solicitors to shed light on the matter. He was himself unable to shed any light on the matter in the witness box. He claimed not to recall instructing his solicitor in relation to this letter and did not know (so he said) whether it was sent or not. Why the letter was not sent is therefore not clear. The Defendant may initially have wanted to tell the Claimant of the freehold purchase himself but then, upon becoming aware that the Claimant was still interested in purchasing the freehold, decided to hold his hand, expecting and hoping that the Claimant would not be able to raise the finance thus leaving it open to him (as he saw the matter) to tell the Claimant that he had bought it as the Claimant could not. I do not at the end of the day think that it matters why the letter was not sent. The fact is that it was not sent and the Claimant was therefore kept in the dark until Mr Wellings told him the true position in November.[32]It is suggested on the Defendant’s side that the Claimant’s complaints are a late invention, concocted following the dissolution of the partnership because he believed that the value of Damson Lane had increased. There is nothing in this point. In my judgment, the Claimant made his objection plain from the outset. It has always been his case that the purchase of the freehold by the Defendant on his own account was without his knowledge. Moreover, the Defendant has known this throughout.[33]The Claimant mentioned to Sanu Miah, an employee at the restaurant that the Defendant had bought the freehold unknown to him shortly after he found this out from Mr Wellings. He made the same point to his elder brother, Mohammed Rafiqur Rahman, in November 2002, who in turn raised the matter with the Defendant’s elder brothers, but got nowhere. A mutual cousin of the parties, Mohammed Hafizur Rahman, discussed the Claimant’s allegation that the freehold had been purchased without his knowledge with the Defendant himself in November or December 2002. He also got nowhere, but the complaint was clearly known to and understood by the Defendant. The Claimant also raised his complaints with his Solicitors in May 2003. They advised him to write to the Defendant recording his complaints. He did not do that but he did adopt their advice of attempting to mediate his differences through the Bangladesh community. He approached Kamrul Hasan, a senior member of that community, and told him that the Defendant had bought the freehold without his knowledge and was now causing problems as landlord. Kamrul Hasan went to see the Defendant in about the summer of 2003, passed on the complaint and attempted to bring about a solution. The Defendant again denied that he had acted without the Claimant’s knowledge, but it is clear that he knew full well what the allegation was.[34]I accordingly find that the Claimant did not consent in advance to the Defendant’s acquisition of the freehold in his name alone. I consider the consequences of this finding later.

Was there later consent between the purchase and the dissolution on May 7th 2005?

[35]I have summarised the early complaints in paragraph 33 above. These certainly persisted down to the summer of 2003. They were not pursued through legal channels, partly due to lack of funds and partly because the Claimant’s then solicitors were concerned that the partnership might be denied, and the available evidence of a partnership was not in their view particularly strong, given that the business accounts were prepared in the Claimant’s sole name. Added to that was their concern that the Claimant’s previous conviction would be used against him. Their advice is set out in a letter dated 2nd July 2003, which was produced during the course of the trial. They also warned (then and subsequently) of the dangers of delay. They of course did not have the advantage of an admission of partnership which we have today.[36]On 14th July 2003 the Claimant’s then solicitors recorded an attendance on the Claimant in which he stated that he had decided not to proceed. He said that he wanted a new 10 year lease from 2005 (which was when the existing lease expired). I accept the accuracy of the attendance note. It clearly indicates that the Claimant, having considered the earlier advice, was not going to proceed through legal channels with his complaint about the purchase of the freehold. Some attempt was made to persuade me that the attendance note was more limited than that, but I was not persuaded that the attendance note meant anything other than what it said.[37]Between then and May 2005, there was sporadic correspondence between the parties’ solicitors (the Defendant changed his during the course of the correspondence). A revised rent of £11,500 was agreed in principle, but the date from which that revised rent should commence was not agreed. A schedule of dilapidations was served by the Defendant upon himself and the Claimant and these were priced by the Claimant at approximately £6,500. He continued to seek a new lease, demanded a contribution in respect of the dilapidations, and complained of the Defendant granting a sub-tenancy of the residential flat without consultation seeking (in effect) an account of his share of the rental stream.[38]All that might indicate that the Claimant was accepting the Defendant’s rightful position as owner of the freehold. But his complaints about the freehold purchase had been voiced through family intervention and through Kamrul Hasan in late 2002 and 2003. Those complaints did not go away. They were not pursued but they were simmering beneath the surface and the Defendant knew this. In fact, the freehold purchase triggered a family rift. In the summer of 2003, as Mahbubur Rahman (a mutual cousin of the parties) told me, the Defendant’s younger brother was married. At his wedding, Mahbubur Rahman was surprised to see that there was nobody from the Defendant’s mother’s side of the family (this was the Claimant’s side). He discovered from the Defendant’s mother that this was because of the dispute between the parties. A number of other witnesses confirmed this family rift, and the absence of the mother’s side of the family at the wedding.[39]After the wedding Mahbubur Rahman discussed the family rift with the Defendant’s elder brother, Sultan Miah. He remembered the Defendant being present at the same meeting. He (Mahbubur) stated that the problem was that the Defendant had purchased the freehold without the Claimant’s knowledge.[40]The Claimant’s elder brother Mohammed Rafiqur Rahman confirms that both sides of the family stopped seeing each other after his earlier unsuccessful intervention at the end of 2002. He also says that he spoke to Mohammed Ansar Miah (an elder brother of the Defendant) in February 2005 over whether the dispute between the parties had ended the relationship between the 2 families. He suggested that a way of repairing the breakdown in the family relationship was for the Defendant to transfer 50% of the freehold to the Claimant. Mohammed Ansar Miah stated that the Defendant would not consider doing this. He (Mohammed Rafiqur Rahman) replied that there was no way that the matter would finish. This exchange demonstrates that each of the elder brothers knew precisely what their younger brother’s thinking was, and that the matter of the propriety of the freehold purchase was still a matter of debate as late as February 2005. I have no doubt that this was well known both in the families generally and to the Claimant and Defendant in particular. The dispute over the freehold had not gone away but had the potential to be never-ending. I should add that I am satisfied on the evidence that the Defendant was close to Mohammed Ansar Miah and held him in particular respect as one of his elders (though he was in no sense ruled by him). In all probability, therefore, he would have known of this conversation, and any similar conversations, at the time. I should also add that the Defendant’s evidence on the family rift and the absence of his mother’s side of the family at his brother’s wedding was particularly unimpressive, as he feigned unawareness of all of that.[41]I accordingly find that although there was no correspondence challenging the propriety of the freehold purchase until the Claimant’s solicitors’ letter of 25th June 2005, the complaints had in fact been widely though sporadically canvassed through the family and the community throughout the period following the Claimant’s discovery of the purchase until the partnership’s dissolution, and were well known to the Defendant. Although they were not being actively pursued, the Defendant was under no illusion as to what the Claimant’s attitude was. He was claiming (rightly or wrongly) that the freehold purchase was effected without his knowledge or consent and that the Defendant should have included him in the acquisition.[42]I also find that had the complaint been formally raised in the solicitors’ correspondence, it would have made no difference to how the Defendant conducted himself. I am sure that even had the Claimant made a claim in 2002 or 2003 to an interest under a constructive trust, the Defendant would have wished to keep the pressure on by progressing the rent review procedure and the dilapidations claim. The Defendant would not simply have given in any more than he has given in now. I doubt incidentally whether the Defendant ever saw the dilapidations claim as a route to money. Its real objective seems to have been to lay a foundation for forfeiture of the lease or resisting a renewal of the tenancy on the expiry of the old. He was focussing on getting the property back without the lease. Kamrul Hasan’s evidence was that he had proposed to the Defendant when he met him in 2003 that he should buy the Claimant out or transfer the lease to him. The Defendant replied by saying that the lease had 2 years to run and that he felt that he would get the property back without the lease. If a renewal was sought, he would claim he needed the lease himself, a point echoed in the Defendant’s solicitor’s letter of 9th May 2007 following dissolution.

Dissolution and post-dissolution events

[43]The partnership was dissolved by written notice on 7th May 2005, which was a Saturday. The Claimant was away the next day (Sunday). When he returned, he found the locks had been changed and he could not gain access to the restaurant premises. This led to a tense day on Monday 9th May 2005 culminating in a meeting at Mohammed Ansar Miah’s house, attended by the Defendant and members of his family and a number of family members on the Claimant’s side. The Claimant’s elder brother Mohammed Rafiqur Rahman was in Bangladesh at the time and so Mizanur Rahman, the Claimant’s younger brother, led the discussions for the Claimant. The Claimant himself was not at this meeting.[44]I have read and re-read all the witness statements and notes of cross-examination that I have on the 9th May meeting. On the whole, all the Claimant’s witnesses who gave witness statements tried to help me, though their insistence that they had not (with limited exceptions) discussed their evidence with the Claimant did not ring true. However, I do not think that any of their evidence of what happened at the meeting was false.[45]There is one exception to this: Mohammed Ansar Ali an employee at the restaurant changed his evidence (without explanation) as soon as he was in the witness box in 2 important respects. I did not find him a credible witness and have therefore discounted his evidence.[46]Additionally, Mohammed Ansar Miah and Syedul Alam (the Defendant’s elder and younger brother respectively) gave evidence in response to witness summonses issued by the Claimant. Mohammed Ansar Miah was not particularly helpful and seemed to resent being in Court at all. He could or chose not to remember much though what he did remember was of some limited assistance. Syedul Alam was not very helpful for different reasons – he was not important enough in the overall family structure for his evidence to be of any real use, as he was not a major player in the events of the day.[47]At the end of the day, the issue is a short one: did the Claimant in some way abandon his rights? I can state my conclusions on what transpired at this meeting quite shortly.[48]The Defendant makes the point in his witness statement that the negotiations took place on the basis that the dissolution of the partnership and the division of the assets were not the most important aspect to the meeting. It was more important that family relationships should be repaired and people should stop fighting. I have no doubt that the repairing of family relationships was in everyone’s minds. Nevertheless, the fighting would only stop if the issues of contention were addressed once and for all.[49]It is clear that a number of people said a number of different things at the meeting; sometimes a number of people were talking at the same time.[50]The proposal emerged that the Claimant and the Defendant should each present their contentions with supporting documents to Mohammed Ansar Miah (the Defendant’s elder brother) who would effectively adjudicate on the dispute and rule on what the Defendant should pay. Various figures were bandied about but nothing was finally agreed. Mohammed Ansar Miah said he would underwrite the deal and even add 10% if the Claimant kept away from the business. Mizanur Rahman and the other Rahman family members present said they would try and persuade the Claimant to agree to this, which subsequently he did. By “agree” I do not mean enter into a binding commitment. The process was more akin to mediation with Mohammed Ansar Miah having the task, as a trusted senior member of the family, of bringing the 2 sides together. The family and community pressure (had he come up with a figure) upon each of the parties to act in accordance with his judgment would have been immense, but I am unable to find that the parties committed themselves to that result as a matter of contractual obligation.[51]The Defendant’s evidence in paragraph 28 of his witness statement was that he “believed that both parties would just walk away, and that the value of the goodwill and fixtures and fittings would be traded off against the debts owed by the partnership to myself”. He seeks to construct a case, on the basis of this belief (which he may well have had, albeit somewhat optimistically, as a belief of what the eventual outcome might be), that the Claimant was committed to walk away without more. I do not think this is right or is justified by the evidence as a whole. None of the other witnesses supported it, including Mohammed Ansar Miah. Indeed, not even paragraph 28 of the Defendant’s witness statement, properly read, supports the conclusion of a “walk away” agreement.[52]In my judgment, the sense of the meeting is best summed up in Mahbubur Rahman’s witness statement, where he says:
“Mizanur Rahman agreed with Ansar Miah that he will try and persuade [the Claimant] not to go back to the takeaway. However, as far as I was concerned no deal had been done. There was a discussion between Ansar Miah and Mizanur Rahman obviously in the absence of [the Claimant].”
[53]The Claimant did agree to stay away from the restaurant premises, but this was (I find) in anticipation of a speedy resolution being achieved through the process discussed at the meeting of 9th May, and did not preclude the Claimant from asserting his rights if that process did not work, which it did not. The reasons why it did not work do not matter, but, despite a further meeting which was held at Mohammed Hafizur Rahman’s house a few days later, where mutual accounts were produced, Mohammed Ansar Miah never came up with a figure and the Claimant understandably thought he was being strung along.[54]I should also record that there is an attendance note of the Claimant’s then solicitors of a telephone call they had with the Claimant on 9th May 2007, when he was advised not to attend the premises as argument between the 2 partners was inevitable and problems would not be solved in that way. This was sensible advice and I would be most reluctant to hold that the Claimant had in some way abandoned his rights by following it. Keeping away from the premises for the sake of peace and good order is not the same as abandoning any claim in law to be entitled to an interest in those premises (whether in the freehold or in a continuing lease) or in the business being carried on there.[55]I also note that there is no reference to a binding agreement having been made on 9th May (or at all) in the Claimant’s solicitor’s note of a further attendance on him on 10th May. In addition, an internal email within the Claimant’s solicitors of 11th May merely records, following a further conversation with him, that “people in the community are trying to resolve the disputes for him and [the Defendant]”. That is a long way from agreement having been reached. In my judgment, none was.

The result of my findings

[56]The primary claim is for a declaration that the Defendant holds the property on trust for himself and the Claimant in equal shares. In my judgment, this claim succeeds.[57]The rule in Keech v Sandford [1558–1774] All ER Rep 230, (1726) Sel Cas Ch 61, establishes that a trustee of a lease may not renew a lease for his own benefit but holds the renewed lease upon a constructive trust for the beneficiaries. As Lord King said in that case:
“I very well see, if a trustee, on the refusal to renew, might have a lease to himself, few trust-estates will be renewed to cestuis que use.”
[58]This rule has been extended to fiduciaries, including partners, and to the purchase of freehold reversions: see, generally, Thompson’s Trustee in Bankruptcy v Heaton [1974] 1 W.L.R. 605; Don King Productions Inc. v Warren [2000] Ch. 291. It may be that in the circumstances of the present case, the rule operates as a rebuttable presumption, which is displaced if the Defendant can show that he did not in fact abuse his fiduciary position or in any sense intercept an advantage coming to him as partner; compare Re Biss [1903] 2 Ch. 40, especially at 56.[59]However the rule is applied in the present case, the Defendant on my findings clearly acted in breach of it. The Claimant did not consent and, though much time was spent on trying to establish that the Claimant was unable to raise the finance, this evidence, even had I accepted it, did not address the real complaint, which is that the Claimant should have had the opportunity of coming in on the Defendant’s acquisition. He was not given that opportunity, and the Defendant even on his own evidence never suggested that the parties should proceed jointly, and never revealed the availability of 100% finance on advantageous terms, obtained through Mr Wellings’ introduction to HSBC.[60]The Defendant thus acted in breach of fiduciary duty by acquiring the reversion for himself, and failing to offer the Claimant the opportunity of coming in on the acquisition. As partners, the parties owed each other duties of good faith and full disclosure when dealing between themselves in relation to partnership property and opportunities. That would mean that, even had I thought (which I did not) that the Claimant consented to the purchase, that consent would be vitiated by the Defendant’s non-disclosure of the availability of finance from HSBC.

(D) 503 (Jul):

“To obtain a valid consent, there would have to have been full and frank disclosure … of all relevant matters. It is only actual consent which obviates the liability to account.”
[61]In this case, an account of profits is also sought. The Defendant points to various difficulties in this connection, questioning whether the purchase price really was as advantageous as the Claimant apparently thinks, and noting that the entire burden of the purchase price and acquisition costs have been borne by the Defendant. This, however, misses the point. As the property is held on trust for the parties equally, it will have to be sold unless the parties can agree a different solution. It is common ground that the property has increased in value. The Defendant, as trustee, has a lien on the property for what he has expended, and will be recouped in that way.[62]The Defendant will in addition remain accountable for any rents he has received (from the partnership or otherwise) or should have received (in respect of his own period of occupation).[63]There remains the question of whether the Claimant has lost any of his rights (or relief ought to withheld) by reason of acquiescence or laches. In my judgment he has not. I have rejected the “walk away” defence on the facts, so that leaves the period of extended delay between October 2002 (or, more strictly, 12th November 2002, when the Claimant was told by Mr Wellings of the Defendant’s purchase) and June 2005, when this claim was first asserted through legal channels.[64]This is not (unlike the case of Patel v Shah [2005] EWCA Civ 157, upon which the Defendant’s Counsel relied) a case where the Claimant deliberately waited in the background to see which way the market might go, refusing to make contributions which he was otherwise bound to make. This is a case where his beneficial interest has never been recognised, and where his ability even to establish the existence of a partnership was uncertain until the Defendant served notice of dissolution.[65]The modern approach to laches and acquiescence defences is not to recognise delay of itself as barring substantive rights. It normally has to be coupled with something else, typically some prejudice on the part of the Defendant. The inquiry is a broad one. In In re Loftus Deceased [2007] 1 WLR 591 at 42, it was held that the question is whether in all the circumstances it would be unconscionable for the party in question to be permitted to assert its right. In my judgment, it is not unconscionable for the Claimant to assert his rights. The Defendant, though not facing a formal claim, was (as I have held) well aware of the Claimant’s position, and the absence of a legal claim did not cause him to act differently. Moreover, the Claimant was in the position he found himself in because of devious and dishonourable conduct on the part of the Defendant. The disadvantages he faced were thus largely of the Defendant’s making. In all the circumstances of this case, I consider that it would be unconscionable for the Claimant’s claim to be denied, rather than the reverse. The defences of laches and acquiescence accordingly fail. The defence of waiver as pleaded relies on exactly the same facts, so that fails too, for the same reasons.[66]I shall accordingly declare that the freehold of Damson Lane is held on trust for the parties equally, and that the Defendant is accountable for all rents and profits which he received or should have received therefrom. I shall also (if asked) make an Order for sale.[67]I am also asked to decide whether the tenancy of the property has continued. This point is largely irrelevant in the light of my primary findings and ruling. If it continued, it did so for the benefit of the partners. If it did not, the partners have the benefit of the freehold anyway. The resolution of this issue appears therefore to make no difference in financial terms. I shall therefore deal with the matter shortly. The business tenancy has in my judgment continued automatically under the terms of the Landlord and Tenant Act 1954, as no steps were taken to bring it to an end. It was not (on my findings) surrendered by agreement, as there was no “walk away” agreement of the kind alleged. Nor was the lease forfeited for rent arrears as the Defendant did not have a right of forfeiture, no agreement for an increased rent ever having been concluded. It is true that an increased level of rent was agreed in principle but the start date was not agreed and either party, in the absence of complete agreement, could have renounced the agreement in principle without being in breach of anything.[68]As the continuing existence of the tenancy seems to me to be largely irrelevant, I am not inclined to make a declaration about it as asked. I will however hear further argument on the point if the declaration is still sought, in case the issue is of some enduring significance not presently apparent to me.[69]Partnership winding-up and accounts are also sought. It seems to me that the Claimant is entitled to this, and I shall hear submissions on the form of Order and other ancillary directions (such as a sale of the partnership business together with a sale of the premises) following the handing down of this judgment. The only real defence put forward to this form of relief was the “walk away” agreement, and I have ruled against that on the facts.[70]Finally, I note that by an order of His Honour Judge McCahill QC stamped on 1st September 2005, various undertakings on the Defendant’s part are recorded as having been given “until trial or further order”. I take that to mean until the conclusion of the trial. Although this judgment is being handed down on 19th October 2007, the trial has still not been concluded, and will not be concluded until an Order is made giving effect to this judgment, at which point the appropriateness of the undertakings can be revisited. Until that happens, the undertakings remain in full force and must be obeyed.