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Home > Judgments > 2009 archive

Amin & Amin v Amin & Others [2009] EWHC 3356 (Ch)

Judgment arising from a complex family dispute involving family businesses and properties including applications under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) concerning beneficial interests and occupation rent with regard to the main family home.

This lengthy judgment is concerned primarily with resolving company and partnership issues surrounding a group of family companies and properties managed by the father and his two sons. After the father withdrew from day to day management of the businesses, the two sons fell out, commercially and domestically. As a result one son and his wife moved out of the family home which had been bought by the father as a home for him, the mother and the two sons' families. The main interests in this case for family lawyers are, then, the issues of i) whether the mother had an interest in the family home and ii) whether the son who had moved out could claim occupation rent as a result of his alleged exclusion from the property.

Mr Justice Warren, from paragraph 273, reviews the provisions of TOLATA and the application of those provisions in Stack v Dowden. He finds that the principles in Stack are invoked but that the common intention was that the mother and father would have a home for life, not a share in the property. He therefore rejects any submissions on quantum, as that issue does not need to be determined, and instead states that the mother's interest is that she is entitled to occupy the house as her home, without payment, for life. He then goes on to conclude that any application for occupation rent does not fall within s13 of TOLATA, though that did not exhaust the possible remedies for the excluded son. However, given that the son still residing in the home was providing full time care for the mother, it would be “grossly inequitable” to extract occupation rent where the other son was fulfilling the family duty. He also emphasises that he would have reached the same conclusion under TOLATA as the factors listed in ss13(4) and 15(1) are not exhaustive.

________________
Neutral Citation Number: [2009] EWHC 3356 (Ch)
Case No: HC05C00480
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 18/12/2009

Before :
MR JUSTICE WARREN

Between :
(1) VATSAL BABUBHAI AMIN
(2) ANJU VATSAL AMIN 
Claimants

 - and - 

(1) UDHYAM BABUBHAI AMIN
(2) RAHULKUMAR J DESAI
(3) PUSHPABHEN  BABUBHAI AMIN
(4) CHAMPABEN KANTIBHAI PATEL
(5) MANJULABEN BHARATBHAI PATEL
(6) SANGITABEN VIPINBHAI PATEL
(7) BHARATBHAI J PATEL
(8) VIPINBHAI PATEL
(9) HASMUKBHAI J PATEL
(10) INDUBEN H PATEL
(11)  BAKULKUMAR HARSHADRAY PATEL
(12) NAYANA BAKUL PATEL
(13) HARSHIKA RAHUL DESAI
(14) SWATIBEN B PATEL
(15) PRASHANTBHAI N PATEL
(16) BHAVINESHBHAI N PATEL
(17) BHAVINI UDHYAM AMIN
(18) BHAVINBHAI B PATEL 
Defendants

AND 

Number 4833 of 2005 
(1) VATSAL BABUBHAI AMIN 
(2) ANJU VATSAL AMIN 
Petitioners

and 

(1) UDHYAM BABUBHAI AMIN
(2) BHAVINI UDHYAM AMIN
(3) PUSHPABEN BABUBHAI AMIN
(4) VU CHEM LIMITED 
Respondents

Mr T Sisley and Mr J O'Mahony (instructed by Messrs Magwells) for the Claimants
Mr P Talbot QC and Mr D McCourt Fritz (instructed by Messrs Stephenson Harwood ) for the First,Ninth,Tenth, and Seventeenth Defendants
Mr T Braithwaite (instructed by Messrs Cumberland Ellis) for the other Defendants (excepting the fourth and eighth defendants)

Hearing dates: 27th,28th,29th,& 30th, April 2009,
1st,5th,6th,7th,8th,11th,12th,13th & 14th, May 2009,
29th & 30th June 2009, and 1st & 2nd July 2009.    

Judgment
Mr Justice Warren :

Introduction
1. The proceedings before me concern the unravelling of the business and, to some extent, the domestic property affairs of the members of a family.  There are, broadly, two sets of proceedings.  The first set relates to a number of partnerships carried on by different members of the family and to certain jointly-owned properties.  The main partnership is known as Cashco.  I will explain its genesis and nature later.  There are also a number of smaller partnerships – which have been called the Minor Partnerships - in relation to some of which a number of discrete points are raised.  The second set of proceedings relates to a company called VU Chem Ltd (“VU Chem”) which, as its name might suggest, is a company operating a number of retail pharmacies.  These latter proceedings take the form of an unfair prejudice petition under section 459 Companies Act 1986 and section 994 Companies Act 2006.  The objective of both sets of proceedings is to bring about a separation between the claimants/petitioners on the one hand and the rest of the family on the other hand.

The family
2. It will assist if I identify, at this early stage, the parties to the partnership action.  Since many of the individuals share the same family name – Amin - I hope that I will be forgiven if I refer, at least to most of them, by their given names.

3. The claimants are Vatsal and his wife Anjuben (“Anju”).  They are also the petitioners in the company action.  Vatsal’s father, who died on 22 February 1995, was called Babubhai Manibhai Amin and I shall refer to him as “the Father”.  His widow, Pushpaben Babubhai Amin, whom I shall call “the Mother”, is still alive; she is the third defendant and is also a defendant in the company proceedings.

4. The first defendant is Vatsal’s younger brother Udhyam (“Udi”) and the seventeenth defendant is his wife Bhavini.  They are both defendants in the company proceedings.  Udi is the most important figure on the defendants’ side of the record.

5. The second defendant, (“Mr Desai”) is married to the thirteenth defendant Harshika; she is a sister of Vatsal and Udi and the eldest of the four daughters of the Father and the Mother.

6. The fourth defendant is a neice of the Father.  She has played no active part in these proceedings. 

7. There are four married couples who are not related to the Amins but who are or have been involved in one or more of the partnerships.  They are the fifth and seventh defendants, the sixth and eighth defendants, the ninth and tenth defendants and the fourteenth (Swati) and sixteenth defendants.  The fifteenth defendant is the brother of the sixteenth defendant and the eighteenth defendant is the son of the fifth and seventh defendants; each of them is interested in one of the partnerships.

8. The twelfth defendant, Nayana, is another sister of Vatsal and Udi; she is married to the eleventh defendant; they are concerned in three of the partnerships.

Some brief background
9. The Father, who was very much the head of the family during his lifetime, was born in India in 1927 and married the Mother in 1948. They later moved, first to Uganda and then to England in 1967. They had 6 children: four daughters and two sons, Vatsal and Udi who are the two main protagonists in the majority of the disputes.

10. In 1969 the Father and Mother acquired their first business, a single unit shop with a post office at 273 Cavendish Road, Balham; it had accommodation upstairs.  In 1976 they acquired the freehold of that property, and by 1980 they had also acquired the freehold of 275 Cavendish Road. All members of the family, including the children, contributed to the running of the businesses.

11. The Father proceeded to acquire further such small properties, usually bringing in more distant family members to run the businesses to pay off the loans on the properties.

12. In 1978 the Father embarked on a new venture, Cashco. This was a cash and carry business originally established to supply the family’s shops and other shops owned by his partners in Cashco. I use the name Cashco to describe the continuing business which has, over the years, been constituted with different partners from time to time.  The first Cashco started in 1978.  The partners included the Father and Vatsal as well as other persons.  It  was loss-making in the early days.  It came to an end by agreement in 1981. The second Cashco partnership was formed in 1981 but it only lasted until 1983 when it was dissolved following a dispute over partnership shares.

13. The third Cashco partnership (with which I am concerned) involved, when established, only members of the immediate family.  They were (and I show their shares in brackets) the Father (30%), the Mother (20%), Vatsal (20%) and Udi (20%), together with Mr Desai, Harshika’s husband, (10%).  Between 1983 and 1995 it is apparent that profit was not regularly paid out according to these partnership shares. Moreover, it seems that the partnership shares could be and were varied at the direction of the Father. Until at least the late 1980s the Father remained firmly in control of this major partnership. This situation was accepted by all concerned - there were no serious disputes between the partners while the Father was alive.

14. It seems that the partnership shares were varied as from 1 October 1983 so that the Father had 10%, each of Vatsal and Udi had 40% and Mr Desai had 10%.  It is not altogether easy to see how this came about but it is common ground that I should treat Cashco as a partnership in those shares from 1983 until its dissolution some time in 1992.  I say 1992 because it appears that as part of the restructuring which I refer to later, the Father gave up his 10% share and passed it on to Vatsal and Udi.  In his witness statement, Udi says that the third Cashco partnership was only dissolved as a result of the Father’s death, when the shares became Vatsal (45%), Udi (45%) and Mr Desai (10%).  But that position was not maintained at the hearing.  I believe it became common ground that the Father had ceased to be a partner before his death.  I do not believe that anything actually turns on whether the Father ceased to be a partner before his death; it is accepted on all sides that the shares, following his death, were as I have set out.

15. The fourth Cashco partnership (whether running from the Father’s death or some time earlier) ran until Vatsal dissolved the partnership on 28 February 2005, an event which led to these two sets of proceedings.

16. In April 1983, the property 166 Weir Road was purchased.  This became the main office of Cashco and the place from which financial management of some other family enterprises took place. 

17. VU Chem was established by the Father in 1982 with 499 shares held by each of his sons while he retained 2 shares for himself.  Udi’s position is that the Father was, at least at first, the driving force and business brain behind VU Chem albeit that Vatsal, then a newly qualified pharmacist, ran the day-to-day operations. Although the sons formally had the majority stake in the company, it was clear, according to Udi, that the Father retained effective control both through force of personality and through his 2 “golden shares” which would enable him to arbitrate in any dispute between his sons if ever one should arise.

18. In December 1991, the Father reached the age of 65.  Udi says that the Father wished to prepare for retirement.  Whether or not that is quite correct – my impression is that the Father is unlikely to have been a man to relinquish the reins – it is certainly the case that steps were taken to restructure various businesses and to alter the property holding of various properties registered in the joint names of the Father and one or more of the Mother, Vatsal and Udi.  I shall turn to the detail of that (so far as relevant) in due course. 

19. As I have just mentioned, Vatsal himself is a qualified pharmacist.  There is some dispute about the level of involvement which the Father and Udi had in the affairs of VU Chem just as there is a level of dispute about the level of involvement which Vatsal had in any of the partnership business.  Vatsal says that he and Anju had responsibility for the affairs of VU Chem; he says he was not simply a sleeping partner in the partnerships of which he was a partner, in particular Cashco, but took a close interest in them.  Udi in contrast says that the Father during his lifetime took a close interest in the affairs of VU Chem as did Udi himself, his own involvement increasing after the Father’s death.  He accepts that Vatsal and Anju were responsible for the day-to-day running of at least one of the pharmacies, but says that he and Bhavini were from time to time concerned with day-to-day affairs.  In any event, he says, he (and before him the Father) had a direct and real involvement in the business of VU Chem in that they ran its finances from 166 Weir Road, dealing for instance with the accounts, VAT, wages and PAYE and payment of suppliers.  They were concerned with the strategic development of the company and immersed in its affairs.  Their involvement with VU Chem went far beyond any involvement of Vatsal in the Cashco or other partnerships where, according to Udi, Vatsal was in effect a sleeping partner.

20. The immediate family has always been close.  In particular, Vatsal and Udi remained living with their parents even when they had grown up.  When they married, their wives moved into the family home to live with the family and that is where their own respective children lived too.  In circumstances to which I will come in more detail later, shortly prior to the Father’s death, it was decided (no matter, for the moment, by whom) that the family would move from their home at Woodmansterne Road to a newly-acquired property, Kingswood Manor.  Sadly, the Father died before the refurbishment of this home was complete and before the family moved in.

21. Inevitably, the death of the Father changed the dynamic of the relationships within the family.  The Father had, as I have said, been very much the head of the family commanding respect and obedience albeit that he may have been loosening the reins of control over the activities of the various businesses.  The change in dynamic lead to tensions in particular between Vatsal and Anju on the one hand and Udi and Bhavini on the other.  I gained the impression that there came to be considerable animosity between the two wives with each husband, unsurprisingly, taking the part of his own wife. 

22. The upshot was that Vatsal and Anju decided that they would move out of the family home and find a new house in which to live with their children.  This decision of itself caused yet further family friction not least because, in order to afford the purchase of a home for themselves, Vatsal and Anju needed to have released to them sufficient funds to facilitate a purchase.  Udi, who as it will be seen was very much in charge of the financial side of the family businesses and the management of the family’s assets, considered some of the requests made to be extravagant and, it must be said, was opposed to the whole idea of a break-up of the family home in this way.  The two brothers and their wives are all convinced of the reasonableness of their own positions and regard the alleged intransigence of the others as being the root cause of the present litigation. 

23. It is no part of my function to apportion blame for the breakdown of relations between Vatsal and Udi and their wives (although certain specific events will need to be taken into account in the context of the unfair prejudice petition in assessing the unfairness or otherwise of one side or the other).  It is enough simply to record that Vatsal’s and Anju’s decision was to end the partnerships in which they were partners as they were entitled to do, the partnerships all being at will; and to seek to realise their shares in the partnerships by either a sale of the businesses or assets to third parties or by being bought out by their partners.  Similarly, I record their decision to terminate their business relationship with Udi, Bhavini and the Mother by taking appropriate proceedings under the Companies legislation with a view either, as shareholders, to buying-out the other shareholders or being bought out by them.

The partnerships
24. Cashco: The largest and most important partnership in the context of the present dispute is Cashco.  It is now common ground that Vatsal and Anju have effectively withdrawn from Cashco and should be bought out.  There are, however, the following disputes preventing final resolution of the amount which should be paid:

a. Whether the Mother has contributed capital to Cashco and if so how much.  There is disagreement about where the money alleged to have been contributed by her came from and whose it was and the terms on which it was contributed.

b. Whether Harshika has a claim against Cashco or, rather, the partners in Cashco and if so which individuals that claim lies against.  In essence, she has, she says, worked for many years without remuneration and claims that it was agreed between her and the Father, at a time when he was able to commit the partnership to the arrangement, that she would in due course obtain a share in the partnership as reward for her work or obtain some other reward for the past as well as the future.   In relation to any such claim, Vatsal and Anju now wish to raise a limitation defence, a defence which it was sought to raise only during the course of closing submissions.  In the absence of an express agreement, or at least an enforceable agreement, there is an issue as to whether Harshika has any sort of restitutionary claim.

25. A number of properties are held in the names of Vatsal and Udi; there is an issue whether these are Cashco properties.  These properties were at some stage shown on Cashco’s balance sheet so the question arises as to the intention of Vatsal and Udi and others when that first occurred.  The properties concerned are:

a. 3 Beckett Avenue, Kenley, Surrey
b. 23 Hambledon Place, London SE21
c. 130/132 Weir Road, London SW12
d. 338 Cavendish Road, London SW12
e. 34 Aberfoyle Road, London SW16
f. 38 Woodmansterne Road
g. Kingswood Manor.

26. This list is a composite list from both sides, although they appear to be unable to agree even what is disputed.

27. In relation to Kingswood Manor, there is an issue distinct from the effect of showing it on Cashco’s balance sheet, namely whether the Mother has some interest in the property pursuant to some sort of proprietary estoppel or under a constructive trust.  This issue is not of the importance which it initially had since Vatsal and Anju have no wish to evict the Mother from the property or to charge her for her use and occupation of it although whether this is a matter of concession or an acceptance of an interest in the Mother entitling her to remain is not clear.  Accordingly, a sale is not sought so long as the Mother continues to occupy the house.  Vatsal seeks a deferred order for sale.  He does however seek an order that Udi and Bhavini, who remain living at the house, should be ordered to pay an occupation rent, something which is opposed by them.

28. Kingston Road:  Kingston Road is a property from which a sub-post-office business is carried on.  Udi is the sub-post master.  It is agreed that the property itself was jointly owned by Vatsal and Udi (I think as tenants in common in equal shares rather than joint tenants, but nothing turns on that).  The dispute is about the ownership of the business which, as a matter of fact, Udi has carried on without any involvement on the part of Vatsal.  In 1992 there was a rearrangement of various aspects of the family ownership of properties and businesses.  One issue is whether the Father directed, as part of that rearrangement, that the business should be jointly owned by Vatsal and Udi.  If he did so, there is a question about the legal effect of such a direction.  Ultimately the question is whether Udi alone owns the business or whether he and Vatsal own it in equal shares.  If it is owned by Udi alone, there is a further issue namely whether Udi is liable to pay Vatsal an occupation rent; and, if he is, whether credit should be given for improvements to and expenditure on the property by Udi.

29. Rosendale Road: this is a hair-dressing salon.  The business is carried on under the name “Changes”.  The business is carried on by a Mr Martin.  Vatsal makes no claim to the business itself.  The question concerns beneficial ownership of the property.  Vatsal claims it is owned by Udi and himself in equal shares pursuant to a direction made by the Father.  Udi contends that the beneficial ownership is Udi 50%, Vatsal 37.5% and Mr Martin 12.5%.  There is a further possibility which is that Mr Martin has 12.5% with the remainder being divided equally between Vatsal and Udi with 43.75% each.  There is an issue whether Changes is liable to pay an occupation rent and if so whether credit should be given for improvements to and expenditure on the property.

30. Lloyd Avenue: this is a small residential property.  The issue concerns the shares in the property and the business.  Relevant to the resolution of that issue may be the contributions made by the partners.  Harshika, Nayana and Swati each claim a 25% share with Vatsal and Udi having 12.5% each (a position supported by the evidence of Udi) on the basis of an alleged phone conversation in July 2002.  Vatsal does not accept that.

Other areas of dispute
31. There are a number of specific matters of dispute most of which I will need to examine in more detail in due course.  They are as follows:

a. Harshika’s contribution to 336 Cavendish Road: There had been a dispute about an alleged contribution by Harshika to the property 336 Cavendish Road.  However, this is no longer an issue as it now accepted that she does indeed have an interest and, as I understand it, her share is agreed.

b. Furniture at Kingswood Manor: There is a dispute about the ownership of various items of furniture and other chattels at Kingswood Manor.  Vatsal says that the disputed items are owned by Udi and himself in equal shares.  Udi (and the Mother) say that they are owned by the Mother.  Vatsal does not seek an immediate order for sale while the Mother continues to occupy the house.

c. Indemnity against dilapidations:  This is a claim that VU Chem should indemnify Vatsal against a dilapidations claim by the landlord of the property at Queenstown Road occupied by VU Chem.  Vatsal was the legal tenant of the property but the lease which he holds is beneficially the property of VU Chem so that prima facie he is entitled to the indemnity which he seeks.  However, it is said Vatsal has acted in such a way that the opportunity to settle the dilapidations claim on favourable terms has been lost.  There is an issue whether VU Chem could have settled the claim for £35,000 plus VAT in January 2007 and, if so, whether the consequences of the failure to do so can be laid at Vatsal’s door.

d. Withdrawals from Cashco: Vatsal withdrew significant sums of money from Cashco in September 2004.  Issues arise about his purposes in doing so and the basis on which he decided on the amounts he would draw.

e. Locus Group: Whether Vatsal has any claim against Udi in relation to an interest in the Locus Group.  Whether Udi himself has any interest in the group.  There are factual disputes about who said what to whom.

f. Foreign bank accounts: Whether Vatsal has interest in certain American accounts.  Whether there is a relevant Indian account with the Bank of Baroda and if so whether he has an interest in that account.

g. Life policies: These are policies with (i) Scottish Amicable and (ii) Standard Life.  The Scottish Amicable policy is an asset of Cashco.  The issue is the value at which this policy should be brought into account in ascertaining the value of Vatsal and Anju’s interest in Cashco.  Udi claims to be the sole beneficial owner of the Standard Life policy; Vatsal says it is beneficially owned by them in equal shares.

32. The Minor Partnerships: Subject to resolution of the specific issues identified above, it is agreed that Vatsal and Anju will sell their interests in the minor partnerships.  Unfortunately, it has not been possible to agree the terms of an order and it is not clear whether Udi will be able to find the money needed.  None of the other partners has come up with an offer to buy. 

33. Mr Brian Callaghan’s valuation of the Minor Partnerships are now accepted by Vatsal and Anju although they disputed his valuation until quite recently.

34. Other assets: Vatsal and Anju seek orders for the purchase and sale of all other assets although they are content to be bought out at a fair value.  The assets concerned include Cashco, Rosendale Road and the jointly-owned letting properties. 

VU Chem
35. The major issues surrounding VU Chem are whether Vatsal and Anju have established facts sufficient to found an unfair prejudice petition and whether their own conduct has been such as to disentitle them from any relief to which they might otherwise be entitled.  There is a sub-issue as to whether the Court may have regard to Vatsal and Anju’s conduct after the date of the petition in deciding what, if any, relief to grant.

36. The particular areas on which I will need to focus include some or all of the following:

a. Vatsal’s and Anju’s purposes in withdrawing £51,844 odd from VU Chem in June 2004 and their reasons (or rather absence of reasons) for choosing the amounts totalling that figure which they did choose.

b. The taking over by Vatsal and Anju of control of VU Chem’s documents in May 2005 and the extent to which, having done so, they ensured compliance by VU Chem with its financial and statutory obligations (such as the filing of VAT returns and payment of VAT due).

c. Vatsal’s behaviour towards staff at Cashco’s premises at 166 Weir Road.

d. The handling of the methadone register at the Tower Bridge pharmacy at the time when Vatsal and Anju ceased to work there.

e. The extent of the preparation carried out by Vatsal and Anju in anticipation of the new NHS pharmacy contract which came into effect in April 2005.

f. Vatsal’s resignation without notice as supervising pharmacist on 18 July 2005, the withdrawal by him and Anju of their services to VU Chem and possible detriment to VU Chem of these actions.

g. The exclusion of Vatsal and Anju from the management of VU Chem and their removal as directors. 

h. The allegation by Vatsal and Anju that they were deprived of any financial advantage from their membership of VU Chem and that Udi and Bhavini were in breach of their obligations of trust and confidence in the context of this allegedly “quasi-partnership” company. 

i. Whether Vatsal and Anju suffered any prejudice qua members of VU Chem.

j. Whether conduct of which Udi, Bhavini and the Mother were unaware at the time when Vatsal and Anju were removed as directors of VU Chem (4 July 2005) is relevant to (i) the question whether their removal was unfair and (ii) the question of what, if any, relief Vatsal and Anju should be granted.

k. The consequences of offers (and refusals of them) which were made in each direction on various occasions.  These were (i) an offer to buy out made by Vatsal and Anju on 18 July 2005 (ii) an offer to buy out made by Vatsal and Anju on 5 December 2006 and (iii) an offer to buy out by Udi and Bhavini on 5 February 2007.

l. Assuming that an order is made that Udi and Bhavini (and possibly the Mother) should buy out the shares owned by Vatsal and Anju, whether in all the circumstances there should be a discount from the full value ie pro rata to the value of 100% of the shares.  If a discount is appropriate, the extent of the discount.

m. The appropriate date for valuing the shares if an order for the sale of Vatsal’s and Anju’s shares is made.  The extent to which Mr Callaghan’s valuation of the shares as at 31 May 2005 is conclusive.

n. Whether, and if so what, interest should be paid on the purchase price of the shares ordered to be sold (assuming such an order is made).

o. The effect of offers to settle the petition from each side on (a) whether relief should be granted at all and (b) if so the terms of such relief.

37. There is also an issue concerning certain dividends declared before 2003.  Although there was no formal resolution concerning these dividends, there is no doubt that the directors approved them informally.  There is a question whether this was sufficient to validate the dividends (the question being couched on behalf of Vatsal as one about the application of the Duomatic principle) and a question, if it was not, whether VU Chem is nonetheless prevented from recovering the dividends. 

The witnesses
38. I had placed before me, a considerable number of witness statements.  Several of the witnesses gave live evidence as well.  Vatsal and Anju were the only witnesses on their side.  The principal witnesses for the defendants were Udi, Bhavini, Harshika and Mr Desai.  The Mother had produced a witness statement but Mr Sisley realistically did not seek to cross-examine her.  I say realistically not because it is clear that everything which she says is accurate but rather because Vatsal recognises that his mother is frail and that forcing her to give live evidence would be at best very upsetting indeed, and might even damage yet further her health. 

39. Although there were in one or two respects material differences between Vatsal and Anju on the one hand, and Udi and Bhavini on the other, I do not think anyone was deliberately attempting to mislead the court.   The protagonists on each side have become so convinced of the merits of their own case that they have persuaded themselves that which they wish had happened actually did happen (and at the time when they recall it as happening).  I will, of course, have to resolve the differences between the witnesses, insofar as they need to be resolved, but I do not propose to embark upon a general review of how each witness gave evidence. 

The Partnership Proceedings
40. I am, in a real sense, only dealing with the tail-end of the partnership disputes.  Many issues were resolved between the parties.  I do not need to give a history of all the disputes which have arisen.  Instead, I deal, item by item, with the areas of dispute which still remain.

Lloyd Avenue
41. The Lloyd Avenue partnership was established in the summer of 2002 to buy and then let a small freehold property, 4 Lloyd Avenue, Norbury, SW16. The property was purchased on 11 July 2002 for £159,950. Broadway solicitors (“Broadway”) acted in the purchase for Vatsal, Udi, Harshika and Nayana.  Swati is not mentioned in the correspondence with Broadway nor does her name appear on the registered title.  The completion statement shows a total cost of £162,541.75 which included stamp duty, costs and search fees.  It showed a deposit paid of £15,950.

42. It is common ground that the partners in Lloyd Avenue were in fact Vatsal, Udi, Nayana, Harshika and Swati.  Vatsal says that no partnership shares were agreed, so equality prevails at 20%; he relies also on section 24(1) Partnership Act 1890.  Udi says that Vatsal and he each have 12.5% and the three sisters have 25% each.

43. Udi’s case is as follows. Vatsal and he paid the £15,950 deposit for the purchase of Lloyd Avenue with moneys drawn equally by them from Cashco.  He refers to a cheque dated 26 June 2002: this is signed on behalf of NatWest and is described in the Cashco current account as a draft.  Udi also says that Nayana and Swati each paid £15,000 to Broadway by cheques dated 4 July 2002.  There is, indeed, a copy of a cheque from Swati dated 4 July 2002.  Nayana’s contribution took the form of a cheque signed on behalf of NatWest: I have not seen the corresponding debit from her own account, but I see no reason to doubt that this was her contribution (or that of herself and her husband).  These contributions were I would add, made in time for completion.  Udi says that Harshika’s contribution of £15,000 was paid through a drawing by Mr Desai from Cashco and that the balance of the purchase price was funded by a loan of £100,000 from NatWest.

44. I note here that the loan to which Udi refers was not in fact made until later in the year, the bank document being dated 7 October 2002 although the partners did not sign until early to mid-November.  Swati was not a party to that loan agreement even though according to Udi, she was a partner.  I do not know when the actual loan was drawn down, but it was clearly not in time for completion.  Further, the purpose of the loan is described as assisting with refurbishment costs rather than acquisition costs although there is nothing to suggest that in fact refurbishment was carried out. 

45. I also note that actual completion appears to have been funded by a further payment of £116,591.75 from Cashco together with two the sums of £15,000 already mentioned which came from Nayana and Swati.   Unless Harshika’s capital contribution is somehow to be treated as included in this £166,591.75, she had not made that contribution prior to completion.

46. Udi goes on to say that in the year ended 31 March 2004 Vatsal and he both made capital contributions of £775; Nayana, Harshika and Swati each introduced £2,500.  As at 31 March 2004, the total capital contributions which had been made to the Lloyd Avenue partnership were, according to Udi:

(i) Vatsal  £8,750  (12.5%);
(ii) Udi   £8,750  (12.5%);
(iii) Nayana  £17,500  (25%);
(iv) Harshika   £17,500  (25%);
(v) Swati   £17,500  (25%).

47. The documentary evidence for these assertions about capital contributions is sparse.  I have already indicated how the completion of the purchase was in fact funded.  I have not seen documentation to substantiate the additional contributions which Udi says were made.  In any case, even if they were made, it is not suggested that these contributions changed some different pre-existing shares: rather they can only be relied on, I consider, as evidencing what Udi says had all along been agreed, namely the shares which all the partners other than Vatsal assert.  In effect, the additional contributions were made to ensure that each partner had contributed pro rata according to his or her share. 

48. It might be thought that the accounts of the partnership would throw some light on the true position.  The earliest available accounts are in the document titled “Financial Statements for the Year Ended 31 March 2004”.  I take that title to be accurate in the sense that they start with 1 April 2003 and end with 31 March 2004.  I have not seen – and I doubt that there have been produced – any accounts for the period from acquisition of the property to 31 March 2003.

49. Patel & Patel (the Accountants for the businesses) prepared a first draft of the accounts showing division of the profit as shown in the profit and loss account between the partners in equal shares.  The capital contributions were nonetheless shown in a way which did not reflect this equality.  Thus Vatsal and Udi are shown as having contributed £7,975 each (a figure equal to half the deposit which Udi says represented their initial contributions) and the three sisters as having contributed £15,000 each.  Additional contributions in the year are shown for Vatsal and Udi of £775 each, bringing them to a total of £8,750 and for the three sisters £2,500 each bringing them to a total of £17,500.  The capital contributions resulting are thus Vatsal and Udi 12.5% each and the three sisters 25% each which is precisely what Udi contends were intended to be the shares of the partners both as to capital and share of profits.  I have not been shown how the alleged extra contributions in 2004 were made.  And I do not believe it is suggested that Vatsal expressly agreed during the course of that year to make any further contribution; indeed, given that Udi was in control of the family finances, it is quite possible that he effected any necessary transfer of funds or book entries without needing to consult Vatsal.

50. These draft accounts were never signed by any partner including Vatsal.  Udi said in his witness statement that Patel & Patel had made a mistake in the first draft accounts in showing the partners as having equal shares, and that he drew this mistake to their attention. During his cross examination, he suggested how the mistake could have arisen:

“I can only presume they misread the capital introduction.  They've looked at it, I think very basically, five people divided by five and that's it.”

51. Although Mr SM Patel,(of Patel and Patel) was called and gave evidence, he was not cross-examined about how this mistake might have been made or about how the draft accounts for the year ended 31 March 2004 came to be produced.

52. A second version of the accounts was prepared dividing the profits according to the 12.5%/25% capital contributions but otherwise reflecting the first draft.  These accounts have been signed by all of the partners other than Vatsal.  The partners, other than Vatsal, all say that the shares were agreed in the proportions explained by Udi.

53. Udi, Harshika and Swati’s husband Bhavinesh all gave evidence that they had a telephone conversation with Vatsal in early July 2002 to discuss the opportunity which had arisen of acquiring Lloyd Avenue.  During this conversation, they say that Vatsal was told that he and Udi would both have 12.5% shares in the partnership. Udi, Harshika and Bhavinesh said that they were in the office of Cashco at 166 Weir Road when this conversation took place, talking on loudspeaker to Vatsal; Nayana said that she was in the warehouse when the conversation occurred, but that Udi called her into the office soon afterwards and explained the partnership shares to her.

54. It was put to Harshika and Bhavinesh that they had invented the telephone conversation with Vatsal; both denied this.  It was not, however, suggested to Udi or to Nayana that the telephone conversation had not occurred.  Mr Sisley, rather than suggesting that no conversation took place, asserted that nothing was agreed.  Indeed, Mr Sisley relies on Nayana’s evidence that she was told soon after the conversation that Vatsal was not happy when the shares were announced to him by Udi to show that Vatsal did not agree to the share he would enjoy.  He might also rely on Harshika’s evidence, as a person who was present during the phone call, that Vatsal was not happy with the proposal and questioned the result that “we are going to own only 12.5% each”.  She says that, after a pause, Vatsal nonetheless gave his approval. 

55. In my judgment, Vatsal is entitled only to a 12.5% share in the capital and profits of Lloyd Avenue.  The opportunity to acquire this property was, I consider, made known to Udi and it was he who introduced it to the other family members.  It is not suggested by Mr Sisley that Udi was under some sort of duty, fiduciary or otherwise, to arrange matters in such a way that each of the Father’s children should take either the whole for themselves or that they should have equal shares.  Udi had decided to make the opportunity available not only to his brother and sisters but also to Swati.  If he chose to do so, there was nothing to prevent him from doing so in the shares he proposed.  I accept the evidence from Udi, Harshika and Bhavinesh that a phone conversation did take place in the terms which they relate.  I am satisfied that the opportunity was presented to Vatsal on the basis that he would receive a 12.5% share.  It may well be that he was astonished and unhappy that he was receiving only that share.  But his choice, it seems to me, was to go along with it, albeit reluctantly, or to say that he did not wish to be involved at all on that basis.  He clearly did not reject any involvement; and having accepted that he would be involved, he can only claim to be a partner on the basis accepted by all the other participants. 

56. I do not consider that there is anything in Mr Sisley’s argument that Vatsal is entitled to a 20% share on the basis that “equality is equity” or under section 24 Partnership Act 1890.  The evidence is sufficient, in my judgment, to displace any presumption along those lines.  It is clear, of course, that the funds necessary to complete the purchase came largely from Cashco, refinancing by the bank coming only a year or so later.  But that does not give Cashco an interest in Lloyd Avenue – no-one contends, for instance, that Mr Desai, as a partner in Cashco, has an interest in Lloyd Avenue.

Changes and 107a Rosendale Road
57. “Changes” is the hairdressing business carried on at 107a Rosendale Road.  Mr Anthony Martin, who runs the business on a day-to-day basis, produced a witness statement which goes to the ownership of (i) Changes and (ii) 107a Rosendale Road. 

58. Mr Martin was not cross-examined.  I take what he says as correct.  Although he is not a party, he has been served with these proceedings in accordance with the CPR and will be bound by any determination which I make as to any share which he may have in 107a Rosendale Road – there is no dispute about his 50% share in Changes itself.

59. It appears from Mr Martin’s witness statement that 107a Rosendale Road comprises a salon on the ground floor, some garages and a shop at the back of the property and a flat on the first and second floors.  Changes occupies the salon; the garages are (or at least were at the date of his witness statement in April 2009) empty and there are tenants in the flat.  He does not say anything about the occupation of the shop.

60. He explains, consistently with Udi’s evidence, how Changes and 107a Rosendale Road were acquired.  In essence, he says that he agreed with Udi that they would become partners in Changes; Mr Martin expected to acquire a 50% share.  He left Udi and his father to arrange for the financing of the purchase.  Udi’s evidence is also that he and the Father arranged the finance: I accept that evidence.  Once Mr Martin and Udi had agreed to be partners in Changes, Mr Martin put the Father in touch with the freehold owner so that he, the Father, could try to acquire the freehold.  Mr Martin was not involved any further in this aspect but was aware that the Father did in fact arrange for the acquisition of the freehold.  He does not anywhere in his witness statement claim a share of the freehold, stating only that so far as he was concerned, the Father owned the majority of the freehold without saying who owned the balance.  In fact the property was put in the name of Vatsal when it was acquired; this came as a surprise to Mr Martin as he was not aware of any involvement on Vatsal’s part.  Mr Martin had a recollection that there was an option for him and Udi to acquire the property within a certain time.  He never considered doing so because he could not have raised the funds.  He was and is happy running the business and has no interest in owning the property.

61. Udi’s case is that the Changes business is a 50/50 partnership between him and Mr Martin; that is Mr Martin’s position too.  Vatsal does not challenge Mr Martin’s share but suggests that Udi’s 50% share is in fact owned by Udi and himself equally.  As to the 107a Rosendale Road itself, Udi’s case is that the property is owned beneficially as to 50% by him, as to 37.5% by Vatsal and as to 12.5% by Mr Martin.  I have already set out Mr Martin’s evidence and his understanding.

62. Shortly before completion of the purchase of Changes and 107a Rosendale Road, the Father prepared a written memorandum dated 25 June 1991 with completion of the freehold purchase timed for 11 July.  This memo envisages that Udi and Mr Martin would be equal partners in Changes and that the property would be owned beneficially as to 75% by Vatsal and as to 12.5% each by himself and Mr Martin.  The memo refers to Udi and Mr Martin “T/A Changes”.  I say “envisages” because what it actually provides is for Vatsal to make an agreement with Udi and Mr Martin incorporating the percentage ownership and also the inclusion of an option for Udi and Mr Martin to purchase Vatsal’s 75% share.  Udi and Mr Martin were to remain leaseholders for the remaining term of an existing lease and pay the future rent to Vatsal.  The memo envisaged that Vatsal would pay 75% of the mortgage instalments, and that Udi and Mr Martin would pay the other 25%. I believe that this initial position in relation to Changes itself (in contrast with the property) is agreed by Vatsal.  Even if it is not, I think it is clear that Vatsal had no interest in the business at its inception.  I will return to the beneficial ownership of Changes at the present time after considering the position in relation to the property, 107a Rosendale Road, itself.

63. It appears from the Father’s written memorandum that Mr. Martin and Udi were intended, at the time when it was written, by the Father, to own beneficial shares in the property.  Although the memo envisaged the making of an agreement about that, there is nothing to suggest that that was ever done.  Moreover, there are other aspects of the memo which do not appear to have been observed.  There is, for instance, nothing at all in the evidence to suggest that Mr Martin contributed anything towards the mortgage instalments.  Udi says that the mortgage was repaid in the proportions 75/25 consistently with the beneficial shares for which he contends.  I have seen no supporting documents in relation to that contention.  And given that on 15 October 1992 the property was transferred (as I will explain in a moment) to Vatsal and Udi, Vatsal cannot have had more than a 50% share from that date so that a 75/25 split would have been wrong.  Further, if the rent was to be dealt with as the memo suggests, Vatsal would have received it all.  He says he has not seen any of it.  What is more, rental income accounts for the year ending 5 April 1992 and up to 15 October 1992 show the rent being allocated equally between the Father, Vatsal and Udi and thereafter being allocated equally between Vatsal and Udi.   These rental allocations are not consistent with the memo. 

64. In 1992, there was a restructuring, at the behest of the Father, of some property interests, including 107a Rosendale Road and 104 Kingston Road.  The latter property had been acquired in Udi’s sole name; it is common ground that it was beneficially owned by him. 

65. After the evidence was complete and while the parties were completing closing submissions, three deeds dated 15 October 1992 which had not previously been disclosed were discovered.  By one of these deeds (“the Rosendale Road deed”), Vatsal transferred the legal estate in 107a Rosendale Road (title number SGL 22120) to Udi and himself, “by way of gift”. The purported effect of the Rosendale Road deed is that Udi and Vatsal should hold the estate on trust “as beneficial tenants in common in equal shares”.

66. By another of these deeds (“the Kingston Road deed”), Udi transferred the legal estate of 104 Kingston Road (title number SY 171281) to Vatsal and himself “by way of gift” to hold on trust “as beneficial tenants in common in equal shares”.

67. Udi and Vatsal were duly registered as the joint proprietors of 107a Rosendale Road and 104 Kingston Road on 17 May 1993.

68. It has not been suggested by anyone that those deeds are not valid and are not to be taken at face value.  The Rosendale Road deed is important not least because it substantially undermines Vatsal’s pleaded case that he is the sole owner on the basis that (i) he did not know how Udi’s name came to appear on the register and (ii) he was given no consideration for any transfer of his interest and that accordingly Udi and he hold the entire legal interest on trust for Vatsal.

69. However, the Rosendale Road deed clearly proceeds on the basis that as a result of the transfer Vatsal and Udi were beneficial tenants in common.  The evidence is that this transfer took place as part of the rearrangements directed by the Father.  It is reasonable to infer, as I do, that the Father did not think that Mr Martin had an interest which needed to be protected.  Further, Udi was willing to sign the transfer and to accept the trusts declared.  None of this is consistent with Mr Martin having any interest.

70. There are, accordingly, strong pointers away from Mr Martin having any interest.  First, his own witness statement contained nothing which would lead to the conclusion that he has any interest at all and he does not claim one.  Secondly, the memo is the only document which suggests that Mr Martin might have an interest but that memo has not been reflected in the way that rent has been allocated and nor did Vatsal make the agreement envisaged.  I am unable to accept Udi’s broad statement about the proportions in which mortgage outgoings have been paid since the 75/25 split has not reflected the true beneficial ownership since 15 October 1992 on any view.  Accordingly, I do not consider that a case is made out that Vatsal acquired the property upon trusts which would reflect the contents of the memo.  In particular, Mr Martin did not acquire an interest.  It is not necessary for me to decide precisely what the beneficial interests actually were since it cannot be suggested that anyone other than the Father, Vatsal and Udi had an interest.  Accordingly, when the transfer by Vatsal to himself and Udi was made on 15 October 1992 at the direction of the Father, the trusts declared took effect with the result that Vatsal and Udi became beneficial tenants in common in equal shares.

71. If I am wrong about that, so that Mr Martin received a 12.5% share when the property was acquired, then nothing which the Father, Vatsal and Udi did could have deprived him of his interest without his consent.  On that basis, the trusts declared in the transfer dated 15 October 1992 cannot take effect according to their terms.  There would be two possible results.  The first is that the deed was effective to transfer to Udi half of what Vatsal owned beneficially; on this approach, Udi would receive half of 75% giving him, with his original 12.5% a 50% share in total.  The second is that the deed was effective to produce equality between Vatsal and Udi in respect of that which they were able to share; on this approach, each would end up with 43.75%. 

72. In my judgment, the latter would clearly be the correct result as a matter of construction.  If Mr Martin had had no share, then it would be unarguable that the result was not equality and that would be so whether Udi previously had no share or already had a share.  It cannot, in my view, be correct that, because a third party, Mr Martin, also had a share, that the burden of that share (if I may put it that way) should fall solely on Vatsal’s share.

73. In reaching that conclusion, I do not overlook that Vatsal said in his witness statement that Udi had a half share in the property.  But that apparent concession must not be taken out of context.  At this point in his evidence, Vatsal was proceeding on the basis that Mr Martin did not have an interest.  It is quite clear to me from the overall thrust of his witness statement and what he said in oral evidence that he regarded himself as having an equal share with Udi and that, if a third party such as Mr Martin had a share, then his share and Udi’s share would be reduced equally.

74. Returning to the beneficial ownership of Changes, the pleaded case of Vatsal and Anju is that it is “a partnership between the First Defendant and an Anthony Martin”.  This is consistent with Mr Martin’s unchallenged evidence that he and Udi “are 50/50 partners in Changes” and Udi’s evidence that Changes “has always been a 50-50 partnership between [him] and Tony Martin”. It is also consistent with the financial statements for Changes which have been produced.

75. However, notwithstanding his pleaded case, Vatsal asserted in his witness statement for the first time that he was entitled to half of Udi’s interest in Changes. I agree with Mr Talbot when he says that it has never been adequately explained how Vatsal acquired an interest in Changes once it is accepted that the business initially belonged to Udi and Mr Martin.  It seems to be based on his understanding of the initial arrangement concerning the acquisition of Changes and 107a Rosendale Road and on an inference that, because the property came to be owned 50/50 (subject, I must add, to Mr Martin’s interest) between him and Udi, so too must be Udi’s share in the partnership.

76. Vatsal has never personally contributed any capital to Changes or worked for the business. In contrast, Udi paid 10% in cash towards the acquisition price of Changes, and has always dealt with the finances and accounts for the business.

77. Vatsal fails, in my judgment, to establish any interest in the Changes business.

78. My conclusions therefore are (i) that Vatsal has no interest in Changes and (ii) that Vatsal and Udi each have a 50% beneficial share in 107a Rosendale Road.

Occupation rent
79. Vatsal submits that he is entitled to an occupation rent because Udi, through his partnership with Mr Martin, has enjoyed exclusive occupation of the property which has been a joint property since 15 October 1992.  Mr Sisley suggested in his closing submissions that this was not seriously contested.  I do not think that is correct; in any case, seriously or not, it is contested and I must decide the point.  I consider the subject of occupation rent later in this judgment when dealing with Kingswood Manor and the provisions of sections 12 to 14 Trusts of Land and Appointment of Trustees Act 1996 (“TOLATA”).  It follows from the discussion of that topic that those provisions did not apply, even once the Act had come into force on 1 January 1997, to 107a Rosendale Road.  This is for two reasons: first, it was never a purpose of the acquisition either by Vatsal in 1991 or by Vatsal and Udi together in 1992, that the property should be made available for occupation by Vatsal; secondly, Vatsal was never excluded from occupation within the meaning of the Act.  Accordingly, such rights as Vatsal is able to assert arise outside the Act.

80. I also consider later in the judgment the principles on which compensation can be awarded.  As I have just mentioned, the property was never to be made available for Vatsal: it was acquired for occupation by Udi and Mr Martin carrying on business there.  That did not change when the property was transferred to Vatsal and Udi given my conclusion that Vatsal did not obtain any interest in the business.  Since Vatsal had no right to occupation, this is not a case of exclusion of a beneficiary. 

81. The Father’s memorandum concerning the acquisition indicates that the property was subject to a lease and that Vatsal, whilst having only a 75% share in the property, was to have all of the rent.  I do not know anything about the terms of the lease either as to its duration or the rent payable.  Rent was apparently received in 1994 as is indicated in the last rental account contained in the trial bundle for the year ending 5 April 1994.  The accounts for Changes show payment of rent and rates in the profit and loss account with the amount increasing until, in the accounts for the year end 31 January 2003, they are shown at £11,104.  For some reason, the figure reduces to £2,524 the next year.  Later accounts are not in the bundle.

82. It would seem, therefore, that the lease which subsisted in 1991 when 107a Rosendale Road was acquired has continued either according to its terms or by further mutual agreement by payment and acceptance of rent.  I have no reason to think that, at least until 31 January 2003, the rent was not a fair one.  Accordingly, assuming that the rent has actually been paid, Udi can have no further obligation to account for his occupation of the property.  Whether Vatsal has ever received the benefit of the rent which is shown in the Changes accounts as having been paid I do not know.   For the year ending 31 January 2004 and subsequently, the position is not clear to me.  There is nothing to suggest that the tenancy under which Udi and Mr Martin held the premises had come to an end and no explanation, therefore, of the amount shown in the accounts.  It seems to me that Vatsal’s remedy is not for an account against Udi for equitable compensation, but against Udi and Mr Martin for rent.  Perhaps I have entirely misunderstood the position and, if so, I will no doubt be corrected before this judgment is finally handed down. 

83. On the basis of the facts as I understand them, Vatsal has no claim for equitable compensation or an occupation rent in respect of 107a Rosendale Road.

104 Kingston Road
84. The property 104 Kingston Road was purchased in Udi’s name on 8 December 1983.  As I have mentioned, and as part of the 1992 restructuring, Udi transferred the legal estate of 104 Kingston Road to Vatsal and him “by way of gift” to hold on trust “as beneficial tenants in common in equal shares”.  Udi purchased Vatsal’s interest in the property on 6 June 2007 for £175,000 (in accordance with the procedure set out at paragraphs 15-16 of the Order of Mr Michael Furness QC dated 2 March 2007).

85. Vatsal asserts that he has a 50% interest in the business carried on by Udi at 104 Kingston Road.  Udi denies this, maintaining that the business is owned by him alone.

86. Vatsal’s case is that during the course of the 1992 rearrangements, the Father said that all the businesses were to belong to Udi and him equally.  In particular, although Udi’s appointment as postmaster at 104 Kingston Road could not be transferred into joint names, the Father said that the business belonged to both of them and it did not matter whose name was on the papers. Mr Sisley relies, as possible corroboration, on bank documentation showing joint ownership of the business.  I shall come to that in a moment. Vatsal did not adduce any other documentary evidence to support his contention that he is entitled to a 50% share of the business carried on at 104 Kingston Road. 

87. It is therefore not apparent to Mr Talbot on what grounds Vatsal claims to be interested in the business. The only answer which Vatsal has to that is to rely on the 1992 arrangement and the Father’s direction that all the businesses were to belong to the brothers in equal shares.  One must be careful about the evidence in that regard.  What Vatsal says in his witness statement is this:

“During about 1991 my father told Udhyam and me that he was handing the businesses over to us to avoid tax.  We were to take charge.  He wanted to spend only the summer months in England and spend the rest of the time where he had grown up in India and travelling.   He said that all the businesses were to belong to Udhyam and me equally.”

88. I must make these observations about that.  Whilst Vatsal and Udi had the greatest respect and affection for the Father and in practice would carry out his wishes (at least during his lifetime), there was no overarching legal obligation under English law on them to do so.  It is true that the Father might have been able to procure that assets which belonged to him would pass over to his sons on terms which he laid down; and in particular, he could ensure that businesses which belonged to him passed in equal shares to Vatsal and Udi.  But it is also true that, where a business did not belong to him in the first place, he would not have been able unilaterally to direct that it should belong to Vatsal and Udi in equal shares.  The respect in which the sons held the Father did not, in English law, give rise to legal obligations on the sons to do as he said.

89. In the light of those observations, it would not have been possible for the Father to direct, in a legally binding way, that the business carried on at 104 Kingston Road should belong to Vatsal and Udi equally if, in fact, it already belonged to Udi alone.  Such a direction might have some moral force, especially in the context of the relationships within this family.  But even if there had been a clear written request from the Father to transfer the business to Vatsal and himself – the Father at the same time acknowledging that Udi alone would have to remain in formal terms the (sole) postmaster – that would not have resulted in Vatsal obtaining a share unless Udi took steps to give legal clothing to the moral obligation created by the direction. 

90. I do not doubt that, before the 1992 rearrangements, Udi was the sole proprietor of the business carried on at 104 Kingston Road as well as being the postmaster.  He has been the postmaster of the sub-post office since 1984, has been solely responsible for the management and development of the business, and had invested his personal funds in repairs of, and improvements to, the business premises. He has returned the Kingston Road post office profits on his tax returns.  Over the nine years between 31 March 1994 and 31 March 2002, without exception, the accounts for the 104 Kingston Road business are stated to have been prepared for Udi alone, and are signed by Udi alone. Vatsal’s name does not appear. Vatsal himself does not claim ever to have participated in the 104 Kingston Road business, or to have invested any capital in it.

91. Udi has done nothing to transfer the business to Vatsal and himself jointly.  He did not, so far as I can see, come under any legal obligation to do so enforceable by the Father let alone by Vatsal.  Nor were the circumstances of the 1992 rearrangements such as to give Vatsal an interest in the business without further action on Udi’s part.  Accordingly, I conclude that Vatsal has no interest, and no entitlement to any interest, in the business carried on at 104 Kingston Road. 

92. I do not consider that any doubt is cast on this conclusion by the bank documentation which I have just mentioned.  That documentation was put to Udi in cross-examination.  He identified the document as a working paper produced by NatWest; it was suggested to him that it was apparent from the documentation that NatWest believed Vatsal and Udi to be partners in the Kingston Road post office business. Udi refuted this, explaining that there was a single bank account in his and Vatsal’s names which was used for the property (in which Vatsal was interested) and for the business (in which, according to Udi, Vatsal had no interest).  The bank might therefore see Vatsal not only as joint owner of the land but as a partner in the business.  I accept Udi’s explanation and find this document of no assistance in resolving the question whether the business itself was jointly owned; the document is perfectly consistent with both conclusions.

93. It is also to be noted that the actions of both Vatsal and Udi since 1992 and until the present dispute arose have been consistent with Udi alone owning the business and inconsistent with Vatsal having a share.  Nothing in the family finances which I have been shown suggest that Vatsal, either directly or indirectly, has received any benefit from the business nor has he taken any part in it management or strategic direction.

Occupation rent
94. As with 107a Rosendale Road, Vatsal submits that he is entitled to an occupation rent because Udi has enjoyed exclusive occupation of the property which has been a joint property since 15 October 1992.  Again, Mr Sisley suggested in his closing submissions that this was not seriously contested but again I do not think that is correct.  As I have said, I consider later in this judgment when dealing with Kingswood Manor the provisions of section 12 to 14 TOLATA.  It follows from that discussion that those provisions did not apply, even once the Act had come into force on 1 January 1997, to 104 Kingston Road.  This, as with Rosendale Road, is for two reasons: first, it was never a purpose of the acquisition, either by Udi in 1983 or by Vatsal and Udi together in 1992, that the property should be made available for occupation by Vatsal; secondly, Vatsal was never excluded from occupation within the meaning of the Act.  Accordingly, such rights as Vatsal is able to assert arise outside the Act.

95. Turning to equitable compensation or an occupation rent, the property, as I have just mentioned, was never to be made available for Vatsal: it was acquired for occupation by Udi carrying on business there.  That did not change when the property was transferred to Vatsal and Udi given my conclusion that Vatsal did not obtain any interest in the business.  Since Vatsal had no right to occupation, this is not a case of exclusion of a beneficiary.  But on the one hand, Udi has in fact enjoyed exclusive enjoyment of the property since Vatsal became a co-owner.  On the other hand, Vatsal acquired his interest with an existing business being carried on at the property in circumstances where neither of them can have intended a disruption to that business or the imposition of a charge (ie an obligation on Udi to pay for his occupation) which would have an immediate impact on the profitability of the business.  It seems to me that the underlying property rights were not seen in this family as determinative of how rents, profits and expenses were to be divided.  Accordingly, I do not consider that the broad justice which must be achieved between co-owners required Udi to account for his occupation of 104 Kingston Road at least while Vatsal made no objection to it.  Vatsal cannot, I think, be heard to say that he thought he was a 50/50 owner of the business and that it is only if (as has happened) the court were to decide that the business belonged to Udi that any question of equitable accounting would arise.  The reason he cannot be heard to say that is that not once since 1992, so far as I am aware, until the present dispute arose did he suggest that he had a share in the business or seek to obtain, either directly or indirectly, a share in the business.

96. However, once this dispute arose and Vatsal claimed for the first time a 50% share in the business, or failing that, an equitable accounting, I think the position changed.  I do not think that Udi could simply have continued to occupy the property resisting a sale and asserting that the terms on which the property was transferred entitled him to occupy free of cost for ever and a day.  He did not in any case take that line: rather he agreed to buy out Vatsal which he eventually did in June 2007. 

97. I do not know (if I have been told, I cannot now find a record) when the claim to 50% of the business was first made or when a claim to an occupation rent was first mooted.  The claim appeared for the first time at the latest in the original Particulars of Claim in March 2005.  It is unlikely that the relevant period from the claim first being raised and the sale to Udi of Vatsal’s share is more than 3 years or possibly 4 years at the most.   Even if Vatsal is in theory entitled to an account over this period, the amount to which he would be entitled is likely, I think, to be modest.  It should not be assumed that he is entitled to one half of an open market rent.  In my view, it would be right only to award an amount which reflected the value to Udi of his occupation and that must surely reflect the profitability of the business.  I have no information about these matters which would have to be left to an enquiry.  My present inclination is to think that to order an enquiry would be disproportionately expensive.  However, I have not heard argument on the consequences of the findings which I have made and the conclusions which I have reached, so I am prepared to hear further argument from Mr Sisley about the appropriate way forward.

98. Before leaving 104 Kingston Road, I note that the accounts contained in the bundle show an item of rent received.  No issue has been raised in relation to this rent so I assume it would be dealt with appropriately as between Vatsal and Udi, in the account which should be proceeding.

The foreign bank accounts
99. Under this head fall bank accounts in the United States of America and in India.  I take them in turn.

The American accounts
100. These are two accounts with Bank of America in California (numbered 00419-26975 and 00414-16969).  According to Vatsal, the documents demonstrate that he is a joint holder of these accounts.  The Mother says without detail that the Father opened the accounts in their joint names and that she is sole beneficial owner.  This would appear to be an admission that the American accounts still exist but she gives no details of them.  It would also appear to be an admission that there are assets in each of them. 

101. Mr Sisley submits that the Mother’s assertion that she is the sole beneficial owner is inconsistent with the names found on the bank statements.  The only bank statements available are those for June 2002.  These were sent by the bank addressed to the Mother, Vatsal and Udi at the address of their sister Grishma Patel in California.   The accounts were at that time in the names of the Mother, Vatsal and Udi.  There is no explanation of how the accounts come to be in those names if, as the Mother says, they were opened in the joint names of the Father and herself.

102. Vatsal says that the Father seems to have opened the accounts in the joint names of the Mother, Vatsal and Udi, but I have seen no evidence to support that proposition.  The only evidence I have is the Mother’s assertion that they were opened in the joint names of the Father and herself.

103. Mr Sisley says that there is nothing to suggest that Vatsal accepted any trust; the presumption of advancement would apply in both accounts to give Vatsal an undivided share.  He makes that submission on the footing that the accounts were opened in the names of the Mother, Vatsal and Udi but I will assume that he would say the same if the accounts were transferred from the names of the Father and the Mother by them (or by the Mother alone after the Father’s death).

104. Udi says that he does not know when or by whom the American accounts were opened, or whether they still exist.  His position is that neither he nor Vatsal has or has ever had any beneficial entitlement to the assets held in the American accounts and that the assets in these accounts are now beneficially owned by the Mother alone.  Accordingly, Udi’s position is that Vatsal’s claim is solely against the Mother since he himself makes no claim in respect of these accounts. 

105. In his witness statement, Udi says that he does not recall ever hearing about the American accounts until he saw the statements adduced by Vatsal and Udi.  However, on 19 June 2002, Udi received a fax from his brother-in-law (Grishma’s husband) from California.  It reads:

“June 02 bank statements as requested.  Please drop me an email ([address]) to confirm receipt of this fax.  OR fax a confirmation (fax # above).”

106. Udi was asked questions about this in cross-examination.  He said that he that he did not recall whether he had requested bank statements but acknowledged the contents of the fax in his brother-in-law’s hand.  He did not suggest that the request related to something other than these accounts but did say that his brother-in-law had just bought a house, that both Vatsal and he had sent money to assist in the purchase and wondered whether the request related to that, adding that he may have asked for the statements at the Mother’s request.  He disagreed with Mr Sisley’s assertion that the fax indicated that he had some familiarity with the operation of the account, a disagreement which Mr Sisley did not pursue. 

107. Udi does not deny – and seems almost to accept – that he did ask his brother-in-law for bank statements of some sort.  The overwhelming probability, it seems to me, is that the bank statements actually faxed to Udi were the bank statements which had been sent a few days earlier by the bank to the Mother, Vatsal and Udi at the Californian address.  What is not clear is how Udi came to ask for them.  One possibility is that he knew all about the account and that either he (or his brother-in-law at his request) had asked the bank to send the statements to the Californian address.  Another possibility is that that bank simply sent the statements to the Californian address as a matter of routine, that the brother-in-law informed Udi that they had been received and was requested to fax them over.  There are other possibilities.  But one result is the same in each case, namely that Udi received the bank statements and must have known upon their receipt, if he did not already know, of the existence of the American accounts.  Given the balance on the deposit account, it would be surprising to my mind if he had taken no interest in the matter especially as he was a named account holder. 

108. Mr Sisley relies, of course, on the fax and the bank statements, and Udi’s unsatisfactory explanation in cross-examination, as one of the straws in the wind (to use his own words) to show that Udi dealt with the American account as his own.  Another straw is the draft Centurion tax memo of 22 January 2003 which I deal with in more detail when considering the Locus Group and which identifies the sister in California as settler of £50,000.

109. As to the Centurion tax memo, I do not understand how it is possible to link this very complex proposal, under which some funds would find their way into settlement from the sister, with the American accounts.  It is, of course, possible that funds to be settled nominally by her would come directly or indirectly from funds belonging to any one or more of the Father, Mother, Vatsal and Udi (or perhaps even other family members).  But that does not mean either that the funds would come from the American accounts or that, even if they did come from those accounts, the beneficial ownership of the money before being settled was the same as the beneficial ownership of the settled property.  I gain no assistance from the Centurion tax memo in determining the beneficial ownership of the American accounts.

110. Vatsal does not claim to have opened the American accounts himself, and does not know who opened them.  He has never paid money into, or withdrawn money from, either account.  He has written letters to Bank of America but received no reply.  Copies of his letters have not, however, been disclosed. 

111. Mr Sisley submits that there is simply no basis for the Mother asserting that the accounts are hers.  He says that the money in the accounts either came from Cashco in which case Vatsal has an interest; or it came from the Father which would, he says, inevitably give Vatsal an interest.  There is, in fact, no evidence about the source of the funds in the account.  I have not been shown any material by Mr Sisley which would suggest that money went from Cashco after the Father’s death in 1995 into these accounts.  It is unlikely, I think, particularly given the assiduity with which Vatsal and his advisers have considered the financial papers of the various partnerships, that payments to the American accounts would have escaped notice.  The likelihood must therefore be that such monies as went into the American accounts did not come from Cashco after the Father’s death.

112. Accordingly, either payments into the accounts must have been from sources other than Cashco after the Father’s death or, if monies were credited before his death, it is quite possible – one might even think likely – that the money came from the resources of the Father and the Mother.  The Mother’s own evidence is, in any case, that the accounts were opened by the Father and thus in or before 1995.  If, as the Mother suggests, the accounts were opened in the names of the Father and herself, there is no reason at all to think that Vatsal or Udi had any interest in the accounts at the time when they were opened.  I see no reason to doubt that evidence.  Vatsal is quite unable, of his own knowledge, to state otherwise; and he has been unable to obtain any information from the bank to indicate otherwise. 

113. As I have said, nothing is known about the circumstances under which the name of the account was changed.   It is not even known if it was done before or after the Father’s death.  One can only speculate, but it would not be at all surprising if the change had been effected by the Father before his death.  In contrast, it would be surprising to me to discover that the Mother had, of her own volition, effected the change.  But if she did not, and the change happened after the Father’s death, one might speculate that it must have been Udi who effected the change, something which is wholly inconsistent with the evidence which he has given. 

114. I find myself, therefore, in this position.  Udi says he knows nothing about the American accounts and claims no interest in them.  I have considerable doubt about whether he is as ignorant as he professes but the fact is that he makes no claim to the accounts himself.  The Mother says that the accounts are hers beneficially.  She says that the accounts were opened in the joint names of the Father and herself but says nothing about the source of the funds in that account at any time.  There is no evidence at all about when, why or how the change in the account names came about and nothing to assist me in deciding whether the presumption of advancement really had any scope of application.  Vatsal himself knows nothing about the accounts and has apparently been unable to obtain information from the bank.  I do not even know for sure whether the accounts still exist or, if they do, in whose names it now stands although the inference to be drawn from the Mother’s evidence is that they do still exist.

115. The Mother was not cross-examined (for understandable reasons).  Although I am not bound to accept what she says uncritically, I would need to see at least some credible evidence to show that what she says is wrong.  There is nothing to suggest that she is wrong when she says that the accounts were opened by the Father in their joint names.  There is nothing to suggest that the beneficial ownership of the accounts was not that of the two of them at the time when they were opened.  There is nothing to suggest that Vatsal has indirectly contributed the accounts for example because payments have been made into them from Cashco and it is clear that he has not contributed himself.

116. Accordingly, the only argument which Mr Sisley can really raise on the evidence before me is that the presumption of advancement applied to give Vatsal and Udi interests in the accounts.  But even if that presumption applies, it would not give Vatsal an immediate share in the account.  The point has not been argued before me, but the position appears to me to be (see for instance Lewin on Trusts (18th ed) at 9-85 to 9-87) that, at best, Vatsal could claim a share of the amount standing to the credit of the account on the Mother’s death on the basis that by changing the names on the accounts, the Father and the Mother (or the Mother alone if the change took place after the Father’s death) were making an advancement in favour of their sons. 

117. The upshot is that I am not prepared to grant the relief in relation to the American accounts which Vatsal seeks.   His claim to a one-third share of the American accounts cannot, on the evidence before me, succeed. 

118. In the alternative, Mr Sisley seeks, as I understand it, an enquiry into the beneficial ownership of the accounts.  I am not prepared to make such an order at this stage although I may be prepared to consider an application for an enquiry at a later stage.  What I do think is, Vatsal is entitled to more information from those who might know the true position.  The bank has, as I have said, apparently refused to answer letters from Vatsal.  He is, however, a named account holder and may even be a signatory – Mr Talbot has at least suggested that he is a signatory.  It is surprising therefore to find the bank being uncooperative.  This difficulty is easily circumvented: it is hard to see how the bank could refuse to provide information if a request were made by all three account holders together.  That is the course which I think should be taken.  I would therefore invite Vatsal and his advisers to formulate precisely the questions which they would like the bank to answer.  Having seen those questions and an opportunity having been given to the Mother and Udi to comment on them, I will consider making an order requiring the Mother and Udi to join in making a request to the bank to answer the questions.

119. I ought to add that I have not overlooked Vatsal’s evidence in cross-examination that Udi had told him that money was available for him not only out of the Indian account (as he had said in his witness statement) but also out of the American accounts (something he said for the first time in cross-examination).  I reject this evidence in relation to the American account for reasons I will come to when considering the Indian account.

The Indian account
120. Udi has given very clear evidence that he does not know of any Indian account in his name or Vatsal’s name or their joint names.  He does not positively assert that no Indian account exists but says he knows nothing about any such account.  In any case, he does not claim an interest in any account which may exist.  No account has been identified. The Mother does, however, say that an account was opened by the Father in their joint names and, as with the American accounts, asserts that she is the sole beneficial owner of the assets in the account.  It is implicit in that that the account did exist and still exists.  In spite of what she says, I would be surprised to find that the Mother actually does know anything about the current position in relation to the account even if it still exists.  She says nothing about the details of it in her witness statement and has provided no disclosure in relation to it.  Disclosure does not appear to have been pursued by Vatsal and Anju in relation to this account.

121. Vatsal said in cross-examination that he knows an Indian account still exists although he did not explain the basis for this.  He said family members would be able to say but would not come forward.  He did not identify them and did not call them to give evidence.  He originally pleaded and gave evidence that the account was held with the Bank of Baroda, but admitted in cross-examination that that the Bank of Baroda simply had “come to mind” and that the account could be with a different bank.  Indeed, he suggested that there might be a multiplicity of accounts.

122. Vatsal, on his own evidence, has never paid any money into any alleged Indian account or withdrawn any money from such an account.   However, he says that when he was in India with his parents they took him to a bank in Baroda.  The Father told him that they had a savings account there and wanted Vatsal’s name on it as one of their sons.  He says they saw the manager and that he signed a mandate to be added as an account holder.  He says he was told (presumably by his parents) that the Father did the same with Udi (although how this could have been done in relation to the same account without the consent of Vatsal, who was by then an account holder, I do not know).

123. In his witness statement he said this in relation to the account:

“Udhyam seems to have control of that account. He said to me before things went wrong between us that the savings account with the Bank of Baroda contained £200,000, in case I needed money to spend while in India.”

124. Questioned about the assertion that Udi had control of the account, Vatsal responded “That’s right.  How else would he ask the brother-in-law to give him the balance?”.  Vatsal was clearly confused in this exchange.  The reference to the brother-in-law was to Mr Patel in California who had nothing to do, on any footing, with the account in India. 

125. During his cross-examination, Vatsal said, of the American accounts “my brother has said, ‘This is our monies to spend’”.  When it was pointed out to Vatsal that he had not previously mentioned this in relation to the American accounts, he responded “No, but, as I said, that was monies there and in India, and it’s for us to spend whenever we visited there. That’s what his indication was to me”  Later, when pressed by Mr Talbot who suggested that the conversation about the £200,000 never took place, Vatsal responded:

“What conversation?  No, the conversation, he definitely said to me, and I swear by my father, that, “That money is there and for us to spend”, in India and in America”.

126. I cannot accept that any conversation in those terms took place.  Initially, Vatsal made no claim to any of the foreign accounts; he introduced the claim by amendment.  His evidence in his witness statement referred only to a conversation about the Indian account.  His answers in cross-examination were, to put it mildly, confused – and this was not a confusion engendered by fast hostile cross-examination since Mr Talbot gave him every opportunity to answer slowly and after reflection.  Vatsal may have persuaded himself to the contrary and may not be deliberately misleading me, but I am quite satisfied that there was no conversation about money being available from the American accounts. 

127. This makes it very difficult for me to accept that any conversation took place with Udi even about the Indian account.  On balance, I think that the conversation is a matter of wishful thinking on Vatsal’s part.  Having discovered the Indian account, he may well consider it to be a family asset in which he has an interest and may have convinced himself that he must therefore have had a conversation along the lines suggested with Udi. 

128. But little may turn on whether I am right or wrong in this conclusion.  Even if I were to accept Vatsal’s evidence in relation to conversation concerning the Indian account, there is clearly insufficient evidence to enable me to grant him any relief effectively declaring that he has a one-third or any other interest in the Indian account.  I do not know the identity of the account or the bank where it is held; I do not know if the account still exists although the inference from the Mother’s evidence is that it does.  There is simply not enough for Vatsal to succeed on a substantive claim at this stage.  Unlike with the American accounts, there is no bank which can be written to in order to seek information to which Vatsal, as an account holder, ought to be entitled.  Accordingly, the most that Vatsal can say is (i) that he signed a mandate and became an account holder of an account with a bank in Baroda together with his parents and (ii) that Udi told him that the account (described originally as an account with the Bank of Baroda) contained £200,000.

129. The question then, it seems to me, is whether Vatsal should at this stage of the proceedings be entitled to further relief to enable him to pursue his claim to a share in an as yet unidentified account on the basis of factors (i) and (ii) just mentioned.  A difficulty facing Vatsal is that he did not, apparently, pursue any disclosure application against the Mother on this aspect nor seek further information from her in accordance with the CPR.  More importantly, Mr Sisley did not put to Udi that he, Udi, had spoken to Vatsal about the £200,000 even though in his witness statement Udi said that he knew nothing about any Indian account. 

130. I decline to order any further enquiries.  I consider that Vatsal has had his opportunity to pursue this claim, effectively a claim against the Mother alone since Udi makes no claim to an interest in the account.  Vatsal did not take the steps within the litigation to obtain further disclosure of information from the Mother.  Nor did his counsel, albeit for understandable reasons, cross-examine the Mother.  Had he done so, her answers might have resolved the doubts which Vatsal had about her interest in the account; or, in contrast, the answers might have been unsatisfactory in a way which would have persuaded me that Vatsal should be entitled to pursue the matter further.  But that is not what happened.  Vatsal must live with the consequences of his decision.

Insurance Policies
131. Only two issues remain in relation to the insurance policies which feature in the Amended Particulars of Claim: (i) the amount which Vatsal should receive in the dissolution of Cashco in respect of Scottish Amicable policy number 667LS271 (“the Scottish Amicable policy”); and (ii) the beneficial ownership of the Standard Life policy number X28714572 (“the Standard Life policy”).  The Scottish Amicable policy matured on 27 June 2008, over 3 years after the dissolution on 28 February 2005, producing £456,586.  Udi contends that Vatsal should receive only his share of the surrender value at dissolution of the partnerships.

The Scottish Amicable policy
132. It is common ground that the Scottish Amicable policy was bought by Cashco and was an asset of Cashco.  The only evidence as to the policy’s value as at 28 February 2005 is a letter from Prudential which states that the policy’s surrender value on that date was £279,396.

133. Vatsal’s and Anju’s position in relation to the Scottish Amicable policy is that the surrender value is not necessarily the fair value.  Mr Talbot says that they have failed to define what they think the “fair value” of the policy might be: in response to the question “What is a fair value?” Mr Sisley answered “Exactly: what is a fair value?  The policy would need to be valued”.

134. Mr Talbot also points out that Vatsal and Anju have also failed to adduce any evidence on point.  He criticises Vatsal and Anju for seeking to impugn what he describes as a valuation without adducing any evidence of their own.  There is some force in that criticism.  I accept, of course, that Mr Sisley’s objection is not that the surrender value is incorrect.  The objection is that the surrender value of a policy often does not – and in the present case does not – properly reflect the fair, or market, value of the policy.  That this can be so is not a matter on which the court requires expert evidence as the existence of a market in second-hand policies is well known.  It is not, however, necessarily the case that the market value will differ significantly from the surrender value: it all depends on the facts of the particular case.  If the only evidence before the court is the surrender value then, unless there is some evidence in the particular case that the market value is different, the court will be likely (although not, I dare say, bound) to take the surrender value as the value of the policy when it comes to attributing a value to it for a specific purpose such as the value of a share in Cashco at the dissolution date.

135. As to the actual value, Mr Talbot submits that it is not clear that the notional “fair value” of the Scottish Amicable policy in February 2005 would be at all different from the policy’s then surrender value.  He submits that, given the probable quantum of any difference which might emerge, it would be disproportionate to order an expert valuation of the policy as at 28 February 2005; doing so would only drag out a bitter and protracted family dispute yet further.  Unfortunately, I simply have no evidence one way or the other as to whether the difference would be significant.

136. This issue may, in any case, fall away.  If, for the purposes of a buy out by Udi of Vatsal’s share in Cashco, a valuation date at the present time rather than as at 28 February 2005 is agreed or imposed, the maturity proceeds will be the appropriate figure to bring into account (together, perhaps, with interest).  I have made some observations about the valuation date of Cashco at paragraph 407 below, pointing out that the issue of the valuation date is really one for negotiation.  In that context, the parties could by agreement take February 2005 as the appropriate valuation date but also agree to bring the entire policy proceeds into account.  Were the Court to permit Udi to purchase at a valuation, the court would have to determine the correct valuation date.  The court would, I suggest, be able if it thought it appropriate to direct the maturity value to be brought into account even if it adopted a 2005 valuation date more generally for valuing the business. The policy may be an asset of the partnership, but it can hardly been seen as an asset used in the trade.  There is a lot to be said for the view that Vatsal should be entitled to share in the full maturity value of the policy (giving credit, of course, for premiums paid after the dissolution date) whatever date is otherwise adopted for the purpose of valuing the partnership assets and goodwill.  As with the valuation of Cashco itself, I will hear further submission on how to proceed after this judgment has been handed down.

The Standard Life policy
137. Vatsal’s pleaded case in relation to the Standard Life policy is that Udi bought the Standard Life policy and thereafter held it as trustee for himself and Vatsal, and possibly others.

138. Udi’s defence to this claim is straightforward: he bought the policy, and he is the policy’s sole beneficial owner.

139. Udi’s evidence, which I accept, is that he bought the Standard Life policy because his own life was effectively uninsurable, “with the intention that its benefit would pass to my wife and children if I died”. During his cross-examination, Vatsal said that he had not known that this had been Udi’s intention, or that Udi’s life was uninsurable.

140. The timing of the policy’s purchase is significant since it indicates what it was that prompted the purchase: Udi’s evidence, which again I accept, is as follows.  He bought the policy in the summer of 1998, shortly after he was told that he required a kidney transplant, which he feared he would not survive.  The policy was bought with moneys drawn from the Britbuild current account, from which the policy premiums were also paid. I do not understand the thinking behind the choice of this policy as an investment rather than any other investment. The policy not being one on Udi’s own life, would not have matured on his death, and would not have provided funds for his family at that time.

141. The fact that Udi bought the policy with moneys drawn from the Britbuild current account does not, Mr Talbot submits, give Vatsal a beneficial interest in it: as Udi says and I accept, both brothers habitually made drawings from the Britbuild account for their personal use.  Vatsal did not dispute that and he did not assert that drawings for such personal use were habitually (or indeed ever) returned to the Britbuild account.  No doubt the account was equally owned and from time to time drawings would need to be equalised.  But there it would be wrong to say that each and every asset purchased with money drawn from the Britbuild account belonged to Vatsal and Udi in equal shares.  If the respective drawings, taking account of the purchase price of the Standard Life policy, have not been equalised, then adjustments must be made either by achieving equality or by a recognition in the accounts concerning the Britbuild account that the brothers’ shares are not equal. 

142. When Udi purchased the policy, its benefit was assigned solely to him.   In contrast with many of the other policies in relation to which Vatsal and Anju made allegations, no trust deed was executed in respect of the Standard Life policy. Mr Talbot submits that this suggests that the beneficial ownership of the policy mirrors its legal ownership: the policy is Udi’s alone.   I agree.

143. Accordingly, Mr Talbot succinctly submits as follows: the Standard Life policy is legally owned by Udi alone. Udi has given convincing evidence as to why it is also owned beneficially by him alone. Vatsal has given no positive evidence to the contrary. In the circumstances, only one conclusion is tenable: Udi is the policy’s sole beneficial owner.  Accepting Udi’s evidence on this issue, as I do, I agree with Mr Talbot.

The Locus Group
144. There is a dispute about whether Udi has any interest in a group of entities known as the Locus Group and, if he does, whether Vatsal can claim any share of that interest.  The group includes the following trading companies:

a. Axiom Care Ltd;
b. Inscape Care Ltd;
c. Modus 17 Ltd;
d. Enspire Ltd;
e. Positive Response Training Ltd; and
f. Hardy Solutions Ltd.

145. There also falls to be dealt with under this heading a company called Merchant Property Investment Company Ltd (“MPIC”), a Mauritian company.  There is some evidence to suggest that MPIC was to form part of the Locus Group structure and would act as the property holding arm.  This evidence is to be found in the letter to Vatsal and Udi from their solicitors Sherwood Wheatley dated 16 May 2003 (“the Sherwood Wheatley letter”) which I will consider in a moment.

146. Udi’s case in relation to his involvement in Locus Group and MPIC is, in summary as follows.

Axiom
147. Axiom Care Ltd (“Axiom”) was incorporated by Mr Craig Bradford (“Mr Bradford”) and others on 28 June 2001, before the conception of the Locus Group, to operate care homes in the Surrey area for adults with autistic spectrum conditions.  Mr Bradford invited Udi to participate in Axiom in the summer of 2001, and Udi in turn invited Vatsal to become involved.

148. NatWest provided Axiom with an overdraft facility of £60,000. Udi gave a personal guarantee to NatWest limited to £60,000 as security for the overdraft; no security was asked for by or provided to the bank in respect of Udi’s guarantee.  Udi became a director of Axiom on 11 March 2002.

149. Thus far, I accept Udi’s case: there is nothing to suggest to the contrary and the documents support what he says.  I note also that the incorporation of Axiom and the provision of the NatWest loan, together with Udi’s involvement, occurred before the idea of the Locus Group (as to which see below) had been mooted. 

150. I am not sure whether Vatsal now claims any interest in Axiom as result of events at that time (in contrast with his claim to a share in the Locus Group of which Axiom now forms part).  Mr Talbot refers to what Vatsal had to say about the NatWest loan and about Axiom more generally:

a. First, he draws attention to what Vatsal says in his witness statement

“I did not know at the time about the initial bank loan of £60,000 to Axiom. Udhyam and Mr Reading arranged it without informing me. As this had legal implications for me, I would have thought that I should have consented to this transaction before it was carried out.”

b. He then points out that, in cross-examination, Vatsal accepted that NatWest’s granting of an overdraft facility to Axiom did not have any legal implications for him.

c. Next, he refers to Vatsal’s assertion that he had been originally registered as one of the partners or a shareholder in Axiom, remarking that Vatsal stood by this assertion in the witness box, despite not knowing how many shares he had acquired or what he paid for them.   I would add that there is no documentary evidence to support a contention that Vatsal ever became a shareholder.

151. Udi’s case is that Vatsal did not want to take on the necessary commitment in relation to the £60,000 which Mr Bradford required should be provided.  Accordingly, he says that he decided to proceed alone and that Vatsal was not in any way involved with Axiom at that time. Mr Talbot points out that this evidence was not challenged during Udi’s cross-examination.  In light of the evidence, Vatsal’s assertions that (i) he was a shareholder in Axiom and (ii) he somehow invested in Axiom before the idea of the Locus Group was mooted are, Mr Talbot submits, exposed as false.

152. So far as Axiom (rather than Locus Group) is concerned, the only documents on which Vatsal can, I think, really rely are (i) a signed shareholders’ agreement dated at the latest 15 February 2002 and (ii) a draft of it dated 30 January 2002.  These do not show Vatsal as a shareholder at all although they do show Udi as having a 20% share.  The documents show Vatsal as an initial director and company secretary, but his name has been struck through, an alteration initialled by Udi in the signed version.

153. This, it seems to me, gets Vatsal absolutely nowhere.  Indeed, the deletion of Vatsal’s name is entirely consistent with Udi’s case that Vatsal was offered participation which he declined.  It makes sense that the draft documentation included Vatsal but, by the time of execution of the shareholders’ agreement, he had decided not to become involved.

154. It is clear to me that the £60,000 facility made available to Axiom was guaranteed by Udi alone.  The shareholders’ agreement, in providing for Udi to have a 20% stake, obliged him to guarantee loans to the company made in accordance with the business plan.  Since he arranged the £60,000 facility and gave the guarantee, he presumably became entitled to shares.  But even if, which he says is not the case, he had actually received shares pursuant to the shareholders’ agreement, he would not have acquired them on behalf of Vatsal and himself.  He was not under any legal duty to Vatsal to use his opportunity to invest in Axiom for the benefit of Vatsal any more than for any other members of the family. 

155. I conclude, therefore, that Vatsal had no interest either directly or indirectly through Udi in Axiom at the time of granting of the NatWest facility.

Locus Group
156. Following the incorporation of Axiom, it is Udi’s case that Mr Bradford formulated a business plan to bring together Axiom and Inscape Care Ltd (another healthcare company) in a structure with two other companies which provided healthcare training and services (Enspire Ltd and Positive Response Training Ltd), and then to vest the property interests in the premises from which these four companies operated in a fifth, offshore, company.  He says that in the summer of 2002 Mr Bradford invited him to invest in this proposed structure.  It was, he says, planned to use an offshore structure because the equity funding investors were resident offshore.  I should say at once that I accept this part of Udi’s evidence.  There is nothing at all to gainsay it and it is entirely consistent with such documentation as exists.

157. He says that he discussed this potential investment in the Locus Group with Vatsal, who was initially interested; and that accordingly, in the autumn of 2002, Vatsal and he agreed to make a sum of money available to the group.  It was initially thought that £600,000 would be required over a period of one year as a prelude to their contemplated investment in the proposed Locus Group (described by Udi as “an arrangement that was going to be”. In fact Mr Bradford did not call on this commitment until June 2006.

158. I should at this stage deal further with the Sherwood Wheatley letter (written by Roger Puttock) since it is relied on by Vatsal.  It is dated 16 May 2003.  The letter is a review of the papers which he had received from Udi and Stephen Jones, a solicitor and principal of Jirehouse Capital which was involved in the creation of the structure.  The purpose of the arrangements was to acquire in a tax-efficient way the health care business then carried on by Axiom and Inscape and to combine this with the service and training provided by Enspire and PTR.  There would be a company which would acquire premises for the businesses, MPIC.

159. Attached to the letter were two charts showing the intended structure.  The top entity in the group was to be Locus Group LP, a limited partnership constituted in Jersey.  This partnership was to own three (wholly-owned) companies. The first was Locus Holdings Ltd, a company which in turn was to hold directly or indirectly the operating companies ie Axiom, Enspire, Inscape and PTR.  The second was MPIC.

160. Locus Group LP was to be controlled by a Jersey-based general partner.  The partners who were to be the beneficial owners were to be five discretionary trusts set up in either Jersey or Mauritius.   One of these was to be the Banyan Tree Trust which Mr Puttock described as being “for the benefit of you” (ie Vatsal).

161. The general partner was to be advised by another Mauritian company, Loch Management Ltd; this is the third company to be wholly-owned by the partnership.  A company called Modus 17 Ltd had been formed as a holding company for Axiom and Inscape.

162. A facility had been arranged with the Royal Bank of Scotland for the acquisition by MPIC of a number of properties in the UK for the provision of specialist health care.  The facility was, according to Mr Puttock, to be “supplementary equity contributions to the cost of the properties by you and the partnership and will be secured by second charges on the properties (if required) and a loan note issued by [MPIC]”.  It seems clear from this that loan finance would be made available by the partners to MPIC but that the beneficial ownership of the properties would be that of MPIC itself.

163. The Sherwood Wheatley letter makes no reference to the extent of the share of each partner in the Jersey limited partnership.  Nor does it make any reference to any £600,000 loan.

164. Udi says that he and Vatsal transferred the required £600,000 from NatWest account number 31364934 (the Britbuild current account) to Sherwood Wheatley’s client account on 29 May 2003. To fund this payment, Britbuild obtained a loan from NatWest in the sum of £600,000, which found its way into the Britbuild current account on 2 June 2003.  The actual loan agreement does not appear to have been signed formally (by Simon Reading of NatWest, Vatsal and Udi) until 22 July 2003.  I accept this evidence.

165. Udi’s case is that Vatsal then changed his mind about investing in the proposed structure, principally because he was worried about his personal liability in respect of interest on the loan which Britbuild had obtained.  He says that when the relationship began to deteriorate in August and September 2003, he was not clear whether Vatsal would want to participate in the group as had been anticipated.  He says that Vatsal told him that he did not wish to participate in any further ventures with him.  In early 2004 it had become clear to Udi that the relationship was unlikely to improve.  Udi therefore arranged for the £600,000 to be repaid to Britbuild.

166. It is clear, and I find as fact, that £600,000 was transferred into the Britbuild current account on 11 May 2004.  I also find that this amount was returned to the Britbuild loan account the following day thus discharging Vatsal’s and Udi’s obligations to NatWest in respect of repayment of capital.  It is not the case that the onward payment was paid out to an unknown destination as was suggested in the skeleton argument in opening presented on behalf of Vatsal and Anju.

167. Further, I find as a fact that £37,909.53 was paid into the Britbuild current account in respect of interest on the loan to MPIC on 21 May 2004. This would have made Udi and Vatsal a modest profit in respect of the £600,000 loan transaction, the interest rate being paid by MPIC to Vatsal and Udi being slightly higher than that being paid by Vatsal and Udi to NatWest at a rate of 5.5%.   

168. Udi’s case is that he himself has no interest either directly or through any trust in the Locus Group.  He does, however, accept that he is a director of all of the trading companies in the Locus Group, and is remunerated as such, his principal role being to advise on property matters: his involvement is, he says, limited to that. 

169. Vatsal did not accept that he withdrew or that he had cold feet about the investment and his liability in respect of the loan.  His position is that Udi does, contrary to what Udi says, have an interest in the Locus Group.  He is unable to specify the extent of the interest but claims an equal share in whatever that interest may be.  Vatsal believes that this shared interest in the Locus Group is vested in a trust viz the Banyan Tree Trust as described in the Sherwood Wheatley letter.  He relies on the following documents (on which I comment as I go along):

a. The undated diagram of the offshore structure to which I have already referred.  This is a manuscript document in Udi’s hand.  Vatsal says that this document was Udi’s explanation to him of the structure.  Udi himself must have learned the information in this document from someone – quite likely from Mr Bradford as  Udi suggested was the case.  In spite of a lengthy cross-examination about it, it established no more than a proposal; further, the proposal was for a loan of £600,000 to MPIC and apparently for ownership of MPIC by some unspecified trusts.  This is all entirely consistent with the Sherwood Wheatley letter and the diagrams enclosed with it.  It is not clear when this document dates from but it is reasonable to assume that it was quite early on and quite likely before the Sherwood Wheatley letter.  Why, one might ask, would Udi give this explanation with a rather unsatisfactory diagram if Vatsal had already received the Sherwood Wheatley letter and the diagrams enclosed?

b. The shareholders’ agreement (dating from February 2002) for Axiom with the deletion of Vatsal’s name, which I have already considered at some length.  Just as this agreement was inadequate to show that Vatsal had acquired any interest in the share of Axiom or its assets, there is nothing in it which supports his claim that Udi has an interest in the Locus group. 

c. A discussion memorandum dated 2 September 2002, providing an explanation of structure.  This was prepared by Stephen Jones of Jirehouse Capital.  It pre-dates the Sherwood Wheatley letter by many months and was written at a time when, even on Udi’s evidence, it was anticipated that Vatsal would indeed agree to an investment in the project.  It cannot, any more that the Sherwood Wheatley letter, provide an answer or even an indication about whether the proposals contained in it were ever implemented. 

d. The memorandum contains at Appendix 1 a table of existing interests in the entities which it was proposed would be involved.  It shows an authorised share capital of 10,000 ordinary shares of 10p each of which only 10 shares had been issued.  Quite clearly, the terms of the shareholders agreement had not, by this time, been put into effect (if they ever were).  Udi had no shares at this time.

e. A later draft tax file note from Centurion Trust Group dated 22 January 2003 is to be found in the bundle.  This describes the general structure of the proposed group in much the same terms as one finds in the Sherwood Wheatley letter.  It probably formed the basis of that letter since one finds annexed to the note a draft equity funding agreement to which are annexed the diagrams enclosed with the letter.  The note refers to additional funds of £50,000 being received into a discretionary trust from Udi’s “sister in California USA” (ie Grishma).  Udi appears in two schedules described as “Funders (II)”.  In the draft equity funding agreement, there is a space on page 1 for Udi signature and for “[UDI’s brother]”.  This again is all entirely unsurprising given that even on Udi’s evidence, it was anticipated that Vatsal would be participating.

f. There is a document which Mr Sisley says – and I see no reason to doubt – shows the intended shares in the project.  It has manuscript annotations made by Vatsal.  He has written “Banyan Trust” and against that “funder 1 UA”.  The document itself dates from September 2002.  I do not know when Vatsal added his annotations or the circumstances in which he did so.

g. On 27 March 2003, Udi forwarded to Sherwood Wheatley an email to “Ken/Craig/Udi” from Stephen Jones attaching a draft equity funding agreement.  The draft is not in the bundle (or if it is, I have not been shown it and have not found it).  It is unclear to me from the email what the amount of the proposed equity participation is intended to be [it reads “A31,000,000”].  The equity contribution does not, in any case, appear to be equity in the sense of share capital; instead “equity contributions are made via participation’s [sic] in a subordinated loan note issued by MPIC….”.  In this email, Mr Jones wrote “I assume that Udi’s brother will be a party to the deal”.  Again, this is all consistent with Udi’s evidence that, at that stage, it was anticipated that Vatsal would indeed participate. 

h. The Sherwood Wheatley letter itself.   As I have said, this is looking to the future.  Udi does not contend that, at that time, it was proposed to exclude Vatsal from the project; on the contrary, it was anticipated that he would be involved.  It does not assist in answering the question whether the proposals went ahead and if so how.

170. There was a meeting on 9 October 2003 at the offices of Charles Russell.  It was convened to discuss the difficulties which had arisen between Vatsal and Anju on the one hand and Udi and Bhavini on the other, including Vatsal’s wish to acquire a property of his own to which he could move with his wife and children.  I consider this meeting elsewhere in this judgment.  For present purposes, it is necessary only to refer to a note (I believe taken by Vatsal) of the meeting.  Udi is recorded as saying that when he started this [a reference back to the time of the first involvement with Axiom] Vatsal said he did not want any part of it to which Vatsal replied that is not true and referred to his several trips to Cornwall.  Udi is also recorded as admitting, in relation to the possibility of borrowing money to finance a property acquisition for Vatsal, that “there are other properties which have no borrowing ie can be used as security but the income they generate directly goes into Britbuild on which we had done a joint equity borrowing (£600,000) to buy offshore properties for our Locus Group project”.

171. I see no reason to doubt the thrust of this note.  But there is no inconsistency on Udi’s part.  There is, of course, a dispute about whether Vatsal rejected the original Axiom investment so that the £60,000 facility was guaranteed only by Udi.  But in relation to the Locus Group, Udi says that initially Vatsal had indicated he wanted to be involved so that, when the £600,000 loan was taken, Vatsal was still on board.  The question really is when he indicated that he did not want to be further involved, if he did so at all, and the consequences of Udi recovering the £600,000 loan to MPIC. 

172. In that respect, Mr Sisley submits that Udi has given varying accounts of when it is said that Vatsal spurned any interest in the offshore trust.  Certainly, Vatsal has had difficulty in getting information.  Thus:

a. According to Mr Sisley, the date to be derived (by inference) from Udi’s main witness statement is between 22nd July and August/ September 2003.  This, with respect to Mr Sisley, is a misreading of Udi’s witness statement.  In the passages relied on by Mr Sisley, Udi was referring to the earlier proposal to become involved in Axiom and Vatsal’s decision not to get involved in the £60,000 guarantee.  This had nothing to do with the Locus Group and the offshore trusts.  What Udi does say later in his witness statement (at paragraphs 115 and 216) was that Vatsal told him in August or September 2003 that he did not wish to participate any further in business ventures with Udi.  But even so, Udi says that it was only in early 2004 that it became clear that their relationship was unlikely to improve leading him to arrange for the £600,000 loan by Britbuild to be repaid. 

b. It is true that Vatsal made attempts to obtain information about what was happening.  He obtained unsatisfactory responses (or sometimes no response) from Mr Puttock and had little more success with NatWest during September and early October 2003.  Matters were not really clarified at the 9 October 2003 meeting at the offices of Charles Russell.

c. On 17 November 2003, Vatsal spoke to Mr Vin Sethi at NatWest.  He was clearly under the impression then that he was an equal partner with Udi in an investment in Locus Group, referring to the £600,000 equity loan facility which he had signed up to.  Udi does not, of course, dispute that this loan was made.  But he has explained that it has been repaid and I have already accepted that it has been repaid. 

d. A request for information regarding Axiom on the same day from Mr Bradford produced no answer.  And on 19 November 2003, Simon Reading of NatWest explained that he was unable to explain because he did not know enough, but that Stephen Jones would be able to explain.

e. At a meeting with NatWest on 26 January 2004, Mr Reading re-iterated that £600,000 had been lent to Axiom – this was surely a slip for MPIC but I think nothing turns on that – mentioning that 5% cumulative dividends were to come back.  In correspondence with Mr Bradford and Mr Reading in late April 2004, Vatsal complained of the lack of information about the Axiom Inscape Autism Project and how “our joint equity” funds had been used.  He wrote to Mr Puttock saying that Udi had “ventured on his own into buying shares in Axiom Inscape Autism Project without prior consulting me and holding myself as partner”.  To which Mr Puttock replied that he had been previously unaware of Britbuild and was not privy to arrangements with Axiom or the funding of its project.  He noted that Britbuild had now been repaid with interest.

f. At a meeting with NatWest on 21 June 2004, Vatsal wanted to know “how without his permission the Bank accepted the repayment of £600K loan”.  At least we find here an acknowledgment by Vatsal that the loan – the only loan and the only participation of Britbuild in the Locus Group – had been repaid.  The reply from Mr Reading was that he had already written to Vatsal on this point.  I have not identified the letter and do not know what explanation was given. 

173. Mr Sisley comments that nobody expressed surprise that Vatsal was asking these questions which one might expect they would have done if Udi were correct in his assertion that Vatsal had indicated that he wished to have no interest in the venture.   I do not think that that is an entirely fair observation.  The fact is that £600,000 of Britbuild money had been lent to MPIC, something which Udi has never disputed.  Others would hardly express surprise that Vatsal might ask what had become of that money. 

174. In any event, Mr Sisley says that the £600,000 from the Britbuild account (Britbuild, it is to be remarked, was simply Vatsal and Udi under another name) had been put into the venture giving each of them an equal share in the venture.  Vatsal had thereby actually already acquired his interest.   That is entirely to beg the question of what interest was acquired by the £600,000 “investment”.  It is impossible to conclude, on the evidence, that the £600,000 was provided to MPIC other than as a loan.  Indeed, the documents refer to the equity involvement being by way of a subordinated loan note given by MPIC and Mr Reading refers to a loan investment with a 5% cumulative dividend.

175. The real question then is whether the £600,000 loan in fact entitled Udi to anything over and above repayment of the loan according to the terms of the lending.  Clearly, if the project as envisaged in the Centurion tax note and the Sherwood Wheatley letter had gone ahead, a discretionary trust, the Banyan Tree Trust, would have held the Amin family interests and no doubt Vatsal would have a strong case for saying that he and his family should be beneficiaries or potential beneficiaries of that trust just as much as Udi and his family.  I do not, in fact, understand Mr Talbot to say otherwise.  It would be hard for him to do so since, if the opportunity to obtain an interest as owner (through the trust) of, or partner in Locus Group LP came about because of the loan of Britbuild funds, that opportunity really belongs to the provider of those funds ie Vatsal and Udi equally.  But if no other opportunity in fact arose, or if it did not come to fruition, there would be nothing else to which Vatsal could lay claim.

176. Udi’s answer to all of this is that whatever might have been contemplated in relation to an involvement in the Locus Group, nothing, from his point of view, came to fruition.  He in fact obtained repayment of the loan with interest and that is the end of his involvement other than as a director of some of the companies involved.  As he said during his cross-examination: “These were draft documents and they’ve never –  I’m not involved”   If he did have any interest, one might expect his solicitors to know about it.  But Sherwood Wheatley stated in their letter to Magwells dated 15 April 2005 “Our understanding is that the transaction originally contemplated by the documents on my file did not take place”.  Udi confirmed in the witness box that this was correct in answering questions from me, and during his subsequent re-examination.

177. I accept Udi’s evidence that the loan had been repaid and that he has no interest in the Locus Group (other than as a director of various companies) as a result of that loan having been made.  I have already held that Vatsal has no interest in Axiom itself as a result of the earlier transaction involving the £60,000 guarantee and that would be so even if, as a result, Udi had received or become entitled to receive shares in Axiom.  It is not part of Vatsal’s case before me (and is not raised in the action at all) that Udi is liable to account in some way for having, according to Vatsal without his consent, obtained repayment of the £600,000.  I suppose that it might be said that the money should have been left out on loan in which case the Locus Group transaction would have gone ahead with the Amin family having an interest in Locus Group LP through the Banyan Tree Trust.  I do not propose to say anything about such a claim. 

178. I do not overlook Mr Sisley’s reliance on what Udi is alleged to have said at the meeting on 9 October 2003.  Mr Sisley suggests that Udi told the meeting that he had separate business interests.  That paraphrase of the note of the meeting is not inaccurate as far as it goes but it omits to add that Udi referred to these businesses as ones he had started a few years ago.  I do not see that this has any relevance at all to the Locus Group.

179. It is probably strictly unnecessary for me to decide, in the light of the approach which I have taken, whether Vatsal indicated that he did not want to be further involved in the £600,000 transaction.   Nonetheless, I consider it, on balance, to be more likely than not, that he did.  If he did not, then Udi’s actions in recalling the loan do not make a lot of sense unless he himself had got cold feet.  But if he had got cold feet, there is no reason why he should not have said so at the time and in his evidence.  Further, there would be no explanation for Udi deciding to exclude Vatsal.  Quite clearly, Udi was originally happy to involve Vatsal as the draft documentation shows.  The only plausible explanation which has been put forward for Vatsal’s non-involvement is that that is what he himself wanted.

MPIC
180. I need to deal separately with MPIC because it is possible, logically at least, that Udi has an interest in MPIC (eg as a shareholder) without that interest being held through the offshore trust or Locus Group LP.  There is no doubt, and it is not disputed by Udi, that he and Vatsal were involved with property acquisitions by MPIC.  Udi’s evidence is that, following the £60,000 guarantee to Axiom, Vatsal and he made some short term finance available in relation to some properties in the South West.  He flew to Cornwall on 19 September 2002 to meet Mr Bradford.  It appears from Udi’s notes of the meeting that they discussed the project to acquire Axiom and Inscape under some sort of offshore structure although whether this was the first discussion about what became the Locus Group proposals I do not know. 

181. Following this meeting, a number of properties were acquired for the new venture in which, of course, Udi was intending that he and Vatsal would be involved. 

182. The first property was 8 St Margaret’s Road, Torquay.  This was acquired in December 2002.  Udi says that Mr Bradford asked for a loan on a temporary basis and that he agreed with Vatsal that they lend £100,000 from money of Cashco held at that time on client account at Sherwood Wheatley.

183. The second property was 12 Grosvenor Road, Paignton.  This was acquired in March 2003.  Udi says that Vatsal and he agreed to lend £200,141 again on a temporary basis again out of Cashco funds held by Sherwood Wheatley.

184. The third property was 32 West Avenue Pennsylvania, Exeter.  This was acquired in May 2003.  Udi says that Vatsal and he agreed to lend £413,600 again on a temporary basis.  He refers to the money as being “advanced from a Britbuild loan facility arranged by me with the consent of my brother.  The loan was provided as a one year, interest bearing loan, pending completion of the documentation for the restructuring”.   This is clearly a reference to the £600,000 which had been drawn down at the end of May.

185. Udi’s evidence is that all of these loans were repaid.  That was not challenged and, indeed, Vatsal accepted that they had been repaid in his cross-examination.

186. Vatsal also refers to a fourth property which he says is owned by MPIC - Westbrook Grange, Lummaton Cross, Torquay.  That may or may not be so.  There is no evidence before me to suggest that Udi was in any way involved in the acquisition of that property.

187. Accordingly, I am satisfied that Udi’s only involvement with the acquisition of these properties was to procure loans by Cashco and Britbuild to MPIC for the acquisition of the first three properties.  Neither he nor any Amin family interests obtained any interest in the assets or MPIC or in the shares of MPIC as a result of these loans. The loans have been repaid.  Accordingly, there is nothing which Udi has which he could possibly be required to share with Vatsal.   There is no evidence to suggest that Udi has acquired any interest in any other assets (in particular in the Locus Group structure) as a result of these loans having been made.

188. Accordingly, Vatsal’s claims in respect of Axiom, MPIC, Inscape and the Locus Group generally fail.

The disputed properties and Kingswood Manor
189. There is a dispute about whether a number of properties are assets of Cashco or are owned beneficially by Vatsal and Udi in equal shares.  These are 130/132 Weir Road, 23 Hambledon Place, 3 Beckett Avenue, 34 Aberfoyle Road and 38 Woodmansterne Road.  There is a similar dispute about the beneficial ownership of Kingswood Manor and outbuildings with the added complication that the Mother also asserts an interest.  Resolution of these disputes is particularly difficult and to some extent artificial.  As my review of the available evidence will show, there are contradictory pointers as to what the parties intended and there are difficulties in rendering consistent those intentions and the legal result of what the parties actually did.  These contradictory pointers contribute to making the resolution of the disputes particularly difficult.  What makes the exercise to some extent artificial is that the court is forced to squeeze into the framework of English law the traditions and culture of this family where much was left unspoken and unconsidered. 

190. There are two aspects of the traditions and culture which are relevant.  The first is that all the family businesses and assets were seen as just that without anyone really focusing on who owned what.  No-one needed to focus on that because no-one even envisaged as a possibility that which has now happened, namely one member of the family wanting to go his own way and to take what he regards as his share of the assets with him.   The second aspect is that, in practical terms, the way in which assets were dealt with and the way in which they were seen as owned did not necessarily correspond with the documents under which the Father, the Mother, Vatsal and Udi held the various properties; nor do the accounts relating to Cashco and rental receipts and expenditure necessarily reflect what actually happened on the ground. 

191. I start with some aspects of the disagreement about the disputed properties other than Kingswood Manor which I deal with separately later.  As explained above, three deeds were executed on 15 October 1992.  I have mentioned two, in relation to 107a Rosendale Road and 104 Kingston Road; the third was in relation to 34 Aberfoyle Road.  These were not disclosed until 22 May 2009 due to an oversight by Stephenson Harwood.  The deed in relation to 34 Aberfoyle Road is a transfer by the Father, Vatsal and Udi (as trustees) to Vatsal and Udi.  The trustees transferred at the direction of the Father; the transfer seems to have been made on the basis that the Father was the beneficial owner.  The transfer is to Vatsal and Udi as beneficial tenants in common in equal shares.

192. Two further deeds executed on 15 October 1992, which relate to 3 Beckett Avenue and 38 Woodmansterne Road, although included in Udi’s original disclosure, were not included in the trial bundle. 

193. The deed in relation to 3 Beckett Avenue is a transfer by the Father and Mother to Vatsal and Udi.  It is expressed to be by way of gift and is a transfer to Vatsal and Udi as beneficial tenants in common in equal shares.  The transfer seems to have been made on the basis that the Father and the Mother were the beneficial owners.

194. The deed in relation to 38 Woodmansterne Road is a transfer by the Father and Udi (as trustees) to Vatsal and Udi.  The trustees transfer at the direction of the Father; as with 34 Aberfoyle Road, the transfer seems to have been made on the basis that Father was the beneficial owner.  The transfer is to Vatsal and Udi as beneficial tenants in common in equal shares.

195. These five deeds were overlooked by Stephenson Harwood (Udi’s and Bhavini’s solicitors) and by Udi so that their Counsel did not see them until 20 May 2009 when preparing their written closing submissions. 

196. In the light of these deeds, there can be no dispute about the beneficial ownership of 34 Aberfoyle Road, 3 Beckett Avenue and 38 Woodmansterne Road all of which are owned beneficially by Vatsal and Udi in equal shares, subject to the effect of their appearing on the Cashco balance sheet, an aspect which I will come to in due course.

197. I should note at this point that all of the above properties, other than 107a Rosendale Road and Kingswood Manor, were included, along with other properties, in a letter dated 16 July 1992 which the Father wrote to his solicitor instructing him to change the names on the titles of the various properties.  This was done as part of the re-arrangements which the Father wished to bring about in 1992 in effect passing on to Vatsal and Udi various family businesses and properties from which the Father wished to withdraw.  This letter seems to have resulted in the deeds mentioned above.

198. The letter also dealt with 166 Weir Road and resulted in a transfer and declaration of trust of that property, also dated 15 October 1992.  The transfer transfers the property into the names of Vatsal and Udi.  The declaration of trust provides for them to hold the property for themselves as to 45% each and for Mr Desai as to 10%.  From the letter, it appears that the Father, Vatsal and Udi were the registered owners; the instruction was for the Father’s name to be deleted.  The declaration of trust itself is not easy to reconcile with that position referring as it does to a transfer by the Father to Vatsal and Udi.  Be that as it may, the position after 15 October 1992 was clearly subject to the effect of the property appearing on Cashco’s balance sheet.  Perhaps the Father was not clear in his own mind about the title to all of the properties when he wrote the letter because another discrepancy can be seen in relation to 3 Beckett Avenue.  As I have already said the transfer was by the Father and the Mother, but the letter makes no mention of the Mother.   Since the shares in the property set out in the declaration of trust are the same as the shares which now subsist in Cashco, the current beneficial ownership is clear, namely Vatsal and Udi 45% each and Mr Desai 10%.

199. The letter also refers to both 130/132 Weir Road and 23 Hambledon Place.  The same instruction is given in relation to each of them as in relation to a number of the other properties, namely to delete the Father’s name as a freeholder or as a partner in the freehold – the Father uses each form of words in relation to different properties – and to continue with Vatsal and Udi alone. 

200. In relation to 23 Hambledon Place, there is a Land Registry transfer of the property into the names of the Father, Vatsal and Udi.  It is, however, clear that there was no deed of October 1992.  By a letter dated 18 October 1995, Sherwood Wheatley informed NatWest as follows:

“We also prepared a transfer of [23 Hambledon Place] and although this was executed by the parties it was never actually completed.  The reason for this is that the transfer was subject to a mortgage in favour of National Westminster Home Loans Limited and as a result it attracted stamp duty.  The clients were considering reducing the mortgage debt to bring it below the stamp duty threshold.  Mr. B. M. Amin subsequently died and no further action as taken in relation to the transfer of the property.”

201. The letter explains the position depending on whether there was a joint tenancy or a tenancy in common.  This seems to have been resolved in favour of a join tenancy.  Thus, on 31 January 1996, Sherwood Wheatley wrote to Udi confirming completion of the registration of the Father’s death at the Land Registry.  The letter included this:

“The property is now in the joint names of yourself and Vatsal without restriction which means that you hold the property as joint tenants and on the death of one the property passes to the survivor.”

202. The question whether the beneficial ownership was, all along, with Cashco does not appear to have been addressed.  However, Mr Braithwaite seems to accept that 23 Hambledon Place was put into the names of Vatsal and Udi as beneficial joint tenants and does not assert that it is a Cashco property (subject to the effect of its appearing on the Cashco balance sheet, an issue which I address in a moment).  I am not sure whether Udi still maintains that the property was acquired as a Cashco property.  If it was, then it presumably remained a Cashco property after the Father ceased to be a partner and remains such today, the registered proprietors at all times holding as trustees for the Cashco partners

203. So far as concerns 130/132 Weir Road, a further deed dated 15 October 1992 corresponding to the deeds for other properties has come to light during the course of the preparation of this judgment.  It transfers 130/1332 Weir Road from the Father, Vatsal and Udi to Vatsal and Udi as beneficial tenants in common in equal shares.

204. Vatsal’s original allegation that 273-275 Cavendish Road is owned by Britbuild was an error.  He and Anju now accept that the Mother owns a 75% beneficial share of the property 273-275 Cavendish Road, which she bought with the Father in 1980; Vatsal is only entitled to a 12.5% share.

205. Britbuild is an entity which has featured from time to time.  It is, in fact, no more than a name for Vatsal and Udi together.  It makes no difference whether a property or an asset is “owned” by Britbuild or by Vatsal and Udi.   Accordingly, there is no effective dispute about the ownership of a number of properties said to belong to Britbuild.  In particular, Udi accepts, I understand, that 338 Cavendish Road and 533 Wandsworth Road are beneficially owned in equal shares by Vatsal and himself.

206. Accordingly, the only property where there might now be any doubt about the beneficial ownership (other than Kingswood Manor0 is 23 Hambledon Place subject to the effect of any disputed property being included in Casco’s balance sheet.

207. I should say something at this stage about what Udi means when he says that a property is an asset of Cashco.  He means that it is to be treated like any other asset of the partnership so that, in effect, the partners have the same share in the property as their partnership shares – currently 45/45/10 Vatsal/Udi/Mr Desai.  He relies on the fact that certain properties are included in the Cashco balance sheet to show that the partnership owns those properties and that they are therefore beneficially owned in the same shares as the partners’ shares in the partnership.  Mr Sisley suggests that the properties with I am now concerned are not partnership assets at all and their appearance on the balance sheet was simply to strengthen it.

208. In support of their contention that 23 Hambledon Place is owned by Britbuild, Vatsal and Anju rely on these documents: rental income and expenditure accounts; a schedule prepared by Udi which he says relates to insurance; a note prepared by the Father in relation to inheritance tax on his death; and the Father’s letter of instructions to his solicitors resulting the transfers dated 15 October 1992.

209. The rental accounts relate to a number of properties and are headed “BM Amin & Sons” before the Father’s death, and “Mr VB Amin & Mr UB Amin” thereafter, but never “Britbuild”.  The accounts appear to have been dealt with in two blocks.  The first block related to 3 Beckett Avenue, 23 Hambledon Place, 130/132 Weir Road, 338 Cavendish Road, 34 Aberfoyle Road and 275 Cavendish Road.  The second block related to 533 Wandsworth Road and 166 Weir Road.  During the year ended 5 April 1992, 107a Rosendale Road was added to the second block.  166 Weir Road dropped out of the second block and did not feature in the account for the year ending 5 April 1993.  Perhaps that was an error since it came back in the next year.

210. The accounts in the bundle do not show any allocation of the rent for the first block until the account for the year ending 5 April 1993.  For that year, rent accruing up to 15 October 1992 (the date of the transfers referred to above) is allocated equally between the Father, Vatsal and Udi and after that date equally between Vatsal and Udi.  The total rent is treated as one pool. And expenditure is allocated in the same way.  Rent in respect of the second block is likewise allocated equally between the Father, Vatsal and Udi up until 15 October 1992 and to Vatsal and Udi equally thereafter.  In no case is any rent shown as allocated to Cashco or Mr Desai.

211. The equal division of rent between the Father, Vatsal and Udi certainly does not reflect the underlying ownership in all cases.  For instance, one sees the rent from 275 Cavendish Road appearing in these accounts.  Yet that property was owned during the Father’s lifetime by the Father and the Mother equally, and has since then been owned by the Mother, Vatsal and Udi in the shares 75%, 12.5%, 12.5%.  Similarly, it appears to be common ground that 166 Weir Road has always been owned by Cashco.  But it was listed in the accounts; and the expenditure relating to it is shown as borne equally by the Father, Vatsal and Udi or, later, by Vatsal and Udi. 

212. Another illustration is 107a Rosendale Road.  The accounts for the year ended 5 April 1992 include the rent from 107a Rosendale Road which are shown as divided between the Father, Vatsal and Udi.  Vatsal’s case was that the property was then owned by him alone.  I have reached a different conclusion but on any view, the property was not then owned by Vatsal and Udi in equal shares, something which was brought about only in October 1992.

213. Unfortunately, I do not know what the consequences of this rent allocation actually were.  I do not know, for instance, whether the rent was actually distributed in these shares.  However, Udi accepted that rent as allocated had appeared on the individuals’ tax returns and that no rent has been attributed to Cashco or Mr Desai  Quite possibly it was utilised in meeting mortgage repayments and outgoings in respect of this property or other properties inside or outside of Cashco.  However, it does not seem to feature in the Cashco’s profit and loss account, at least not as an item of rent and I do not see where else it could appear.  It is possible, of course, for partners in a partnership to agree to distribution of particular income in a different way from their ordinary partnership shares.  But there is nothing in the present case to suggest the Father, Vatsal, Udi and Mr Desai agreed that the rent of these properties should be dealt with in any particular way.

214. However, since it is clear that the rental allocation does not in all cases reflect the underlying shares in the properties, care must be taken in attempting to draw conclusions about beneficial ownership from these rental accounts.

215. The inheritance tax note which I have referred to probably dates from some time in 1988.  It indicates the following beneficial shares:

a. 273/275 Cavendish Road: the Father and the Mother: equal shares.  This is inconsistent with the rental accounts.

b. 3 Beckett Avenue: the Father and the Mother: equal shares.  This too is inconsistent with the rental accounts.

c. 533 Wandsworth Road: the Father as sole beneficial owner.  This too is inconsistent with the rental accounts.

d. 130/132 Weir Road, 23 Hambledon Place, 38 Woodmansterne Road, and 34 Aberfoyle Road: the Father, Vatsal, Udi: equal shares.  These, at least, are consistent with the rental accounts.

216. The insurance document to which I have referred is a spreadsheet drawn up by Udi dated 11 February 2002.  The probability is that Udi prepared this schedule in relation to insurance.  I agree with Mr Talbot when he says that the contrasting entries “Kingswood Manor Buildi” and “23 Hambl Pla Build & Cont” suggest that this document refers to buildings insurance for Kingswood Manor, but to buildings and contents insurance for 23 Hambledon Place.

217. The schedule shows a number of properties listed in a column headed “Under VB and UB Amin”: these included all of the disputed properties and Kingswood Manor.  In the column headed “%age share” appears “50.00”.  Other properties are listed in a columns headed “Under partnership”, “Under B&K Investments Ltd” and “Under VU Chem Ltd”.  166 Weir Road is shown in the partnership column with 45% against it (45%, it may be noted, is the share of each of Vatsal and Udi in Cashco; it will be remembered that it is common ground that this property is a Cashco asset).   The percentages shown against the other properties have not been explained; I can only say it is a complete mystery to me why 25% comes to be set against each of the properties under VU Chem Ltd.

218. Udi said in cross-examination that he did not know why he entered the percentage shares on this document as he did.  Mr Sisley describes this answer as not credible.  It is certainly a very unsatisfactory answer, but Mr Sisley did not push this matter any further with Udi.  Whilst I am left very much in the dark about what the percentages are, I would have thought that the column headings are of some help.  They draw a sharp distinction between properties under Vatsal and Udi, on the one hand, and properties under partnerships and companies on the other.  One might think, reading the schedule, that Udi considered all of the properties listed under the first heading to belong to Vatsal and Udi rather than to a partnership or company although I would not rule out the possibility in relation to Kingswood Manor that the Mother had an interest with Vatsal and Udi holding as trustees for themselves in equal shares subject to that interest.  This insurance schedule is not, I acknowledge, conclusive but it is a factor to be taken into account.

219. In contrast, Udi relies on the Cashco balance sheets, a letter from the Father and Udi dated 18 July 1994 and an undated schedule of properties sent to Patel & Patel.

220. The letter dated 18 July 1994 (signed by both the Father and Udi) relates to Cashco’s account for the year end 30 September 1993.  It states that revaluations had been obtained of 166 Weir Road and 130/132 Weir Road.  It  includes this final paragraph:

“Please incorporate the above information on the Balance Sheet as at 30th September 1993”.

221. The schedule of properties was, I find, sent to Patel & Patel.  Mr Patel gave evidence to that effect which was not challenged.  It is not clear, however, whether it was an attachment to the letter dated 18 July 1994 or was sent later.  It is a document which was prepared by Udi listing a considerable number of properties owned by the family and describing 130, 132 and 166 Weir Road, 34 Aberfoyle Road, 3 Beckett Avenue and 23 Hambledon Place as “presently in Cashco balance sheet” and Kingswood Manor as “Due to be added to Cashco balance sheet”.

222. The balance sheets themselves do not identify the properties which are included under fixed assets but simply give a global figure for them (at cost plus expenditure plus revaluation increases).  Included in the bundle is a schedule prepared by Udi which matches the properties acquired (according to their dates of acquisition) and the cost of acquisition with the running balances shown in the balances sheets.  The figures shown do not precisely match the amounts paid to acquire the properties even if account is taken of costs and expenses, although they do closely match. 

223. The bundle contains, so far as available, contemporaneous documents concerning the acquisition of each property.  The following emerges:

a. 130/132 Weir Road.  This was acquired in early 1983 together with 166 Weir Road.  The purchase was funded largely by a bank loan.  The Father, Vatsal and Udi had charged the property to the bank.  In connection with that, the Father, Vatsal, Udi and Mr Desai signed a document on Cashco headed notepaper in which they expressly acknowledged that the property formed part of the assets of Cashco. 

b. 23 Hambledon Place.  This was acquired in May 1985 from Barratt the well-known house-builders. The price was £225,000.  The one document emanating from Barratt is a reservation form showing the purchasers as the Father, Vatsal and Udi.  I am satisfied that the deposit of £22,200 was met out of the Cashco account.  The facility letter is addressed to the Father, Vatsal and Udi at “Cashco, 166 Weir Road….”.    The actual loan account was in the names of the three of them in relation to which there was no mention of Cashco.  There is some material to show that £190,305 was transferred into the Cashco account and used in the completion of the purchase, a figure rather less than the total facility drawn down of £210,000.  The balance of the price was funded by amounts provided by the Father and Udi which they introduced into Cashco.  This acquisition is not reflected in Cashco’s balance sheet for 30 September 1984.  I do not know how the deposit payment is reflected: perhaps it is within current assets under sundry debtors.  Nothing is shown in the profit and loss account in respect of costs and fees.  The same goes for the balance of the purchase price funded by the capital injections by the Father and Udi.  The property does not feature in Cashco’s balance sheet before 1988.  When it was introduced, it was not explained how the introduction is reflected on the other side of the balance sheet.

c. Udi says that the balance sheet for 1988 does include 23 Hambledon Place.  Certainly the schedule I have referred to shows it being brought in at a figure of £278,607.50.  I do not know where the very precise figure comes from.  If the property comes into the asset side, presumably the liability to the bank under the loan (or at least that part of it used to finance the purchase) is shown in the debt side but it is not possible to tell which, if any item, it falls within.  Alternatively, the partners’ capital accounts could be credited to reflect the introduction of the property as a capital contribution but that was clearly not done.

d. 3 Beckett Avenue: This property was acquired in August 1981 for £74,950 (or £77,232 including costs etc).  The completion statement indicates that the purchase was in the names of the Father and the Mother.  That is consistent with the transfer dated 15 October 1992 which was made by both of them.  It is not suggested that this property was shown in the balance sheet of Cashco prior to the 1988 accounts.  Udi’s own document setting out the completion funding recognises, I think, that this property belonged to his parents.  There are some manuscript notes which suggest that other family members might be contributing and taking shares but there is nothing to suggest that they did.

e. However, Udi says that the 1988 balance sheet does reflect the introduction of 3 Beckett Avenue.  It is one of the properties which represent the increase in the total freehold property value during the financial year.  It is, according to his schedule, brought into the account at a figure of £77,222.  It is again not clear how the introduction of this new asset is reflected on the other side of the balance sheet.  The profit and loss account does not disclose any costs or expenses in relation to the acquisition.

f. 34 Aberfoyle Road: This property was acquired in August 1987 for £76,000.  It appears from the transfer dated 15 October 1992 that the property was originally transferred into the names of the Father, Vatsal and Udi.  The deposit of 10% was paid from the Cashco account.  The balance for completion came from a bank loan (£60,000) and further sums from Cashco.   The property does not appear on Cashco’s balance sheet for the year end 30 September 1987 and it is not clear how its disbursements of the deposit and completion monies were dealt with (eg as loans or partners’ drawing).  According to Udi, it is included in the freehold properties appearing as fixed assets in the next year’s accounts.  It is yet again not clear how the introduction of this new asset is reflected on the other side of the balance sheet.

g. 38 Woodmansterne Road:  This property was acquired in January 1987 for £285,000.  The contracting parties as purchasers were the Father and Udi.  The deposit of 10% was paid out of Cashco’s bank account.  The balance of the completion monies came from a bank loan of £250,000 and from Cashco’s bank account (£6,500).  The transfer was taken in the names of the Father and Udi.  I do not have any details of the loan transaction.  This property appears on the balance sheet in the schedule for the first time in 1994, after the transfer to Vatsal and Udi as tenants in common on 15 October 1992. 

224. Although the properties are not specifically identified in Cashco’s accounts, I am satisfied from the evidence, including correspondence from Mr Patel, that the amounts shown against fixed assets in the balance sheets does reflect the various properties as I have set out the position above.  Accordingly, prior to 15 October 1992, 130/132 Weir Road, 23 Hambledon Place, 3 Beckett Avenue and 34 Aberfoyle Road were all included in the balance sheet.  I do not know the full circumstances in which those properties (other than 130/132 Weir Road which was included from its acquisition) and Kingswood Manor came to be included in the balance sheet when previously they had not.  However, the evidence from the Mother and from Udi is to the effect that this was to underpin, or strengthen, the balance sheet. 

225. Of course, the introduction of a property into the balance sheet would only strengthen it if Cashco did not already own it (in which case it ought already to have been shown as an asset on the balance sheet with corresponding balancing items on the other side).  The balance sheet would only be strengthened if the partners themselves introduced the property (or an equivalent sum of money) with their capital accounts being increased.  The assets of the partnership would then truly be increased. The accounts for the year ending 30 September 1994 show a significant increase in capital accounts but that increase nowhere near matches the value of the properties introduced (Kingswood Manor and 38 Woodmansterne Road at something over £875,858).  Perhaps the explanation is that some (or the remaining) finance costs are reflected in the bank loan under current liabilities.  As to the other properties, I do not have sufficient information, or sufficient analysis, to know how the introduction of those properties as assets has been reflected on the other side of the balance sheet. 

226. The evidence from the witnesses does not take one a great deal further than what can be got from the documents, namely a degree of confusion.  Mr Desai has always seen himself as very much a sleeping partner in Cashco.  He has never had much, if anything, to do with its management.  It appears that he was not keen to have anything to do with the acquisition of 130/132 Weir Road (see the correspondence with NatWest at the time of the acquisition in relation to the financing).  His only reason for claiming a share in any of the disputed properties and Kingswood Manor is that they appear on Cashco’s balance sheet.  He was not involved in the decision to acquire these properties or in their financing.  He did not discuss putting these properties on the balance sheet with the Father.  He first thought that he had an interest in them when he met with the accountants some time in 1995 after the father’s death and was told that he had a share because the properties were shown on the balance sheet.

227. As will be seen when I come to discuss Kingswood Manor, Udi did not have any idea that Mr Desai might have an interest in that property by virtue of its being placed on the balance sheet until he learned that this might be the case from Mr Patel, probably some time shortly after it was in fact placed on the balance sheet.  It must follow that he had no belief that Mr Desai might have an interest in the other disputed properties simply by virtue of their being on the balance sheet, prior to that time. 

228. In relation to Kingswood Manor, Udi explained in a further witness statement that it was put on the balance sheet to strengthen it.  He also says that the previous family homes, 3 Beckett Avenue and 38 Woodmansterne Road were put on the balance sheet for the same reasons “even though we knew that, at the time, they were owned by my parents” and goes on to say that

“I do not think that Kingswood Manor being entered onto Cashco’s balance sheet changed how it was owned.  I do however remember that when my father asked Mr S M Patel to enter Kingswood Manor on the balance sheet, Mr Patel said to him that if he did so Mr Desai could assert a 10% claim to it.  My father said that was fine.  I do not know whether my father said this because he thought that Mr Desai would never bring such a claim, or because he was happy for Mr Desai to have a 10% interest in Cashco’s share of Kingswood manor.  However, I suspect it was the former – certainly my father would not have expected Mr Desai to bring any claim in relation to Kingswood manor while he lived there.”

229. Again, as will be seen when I consider Kingswood Manor in more detail, I do not think that Mr Patel ever advised that Mr Desai would have an interest: he simply said that there was a risk that that might be so.  Whatever the balance sheet may have included from time to time, I do not think that the Father, Vatsal or Udi thought that Mr Desai had any interest through Cashco in the disputed properties during the Father’s lifetime and in particular not at the time when the various transfers were made on 15 October 1992; the whole tenor of each of those transfers is that it was only the Father and his immediate family who had any interest.

230. I should dispose of one point which Mr Talbot makes.  He submits that if, as Vatsal asserts, the disputed properties are not owned by Cashco, then there has been a fraud on suppliers who have relied on the balance sheet and on the ownership of Cashco of these assets.  If Cashco were a corporate entity, I could see some force in that submission since the inclusion of the asset on the corporate balance sheet would be a representation that the company owned the asset.  But Cashco is a partnership which does not have its own legal personality.  A partnership is in essence a contractual relationship between the partners.  At most, a person who looks at the balance sheet of a partnership will be entitled to assume that the assets disclosed are available to meet the partnership liabilities.  But such a person will not be concerned with (although he may, I suppose, enquire about) the way in which the partners share profits or how they have contributed to capital or how the underlying partnership assets are owned. 

231. Thus, suppose in the present case that Mr Desai was entitled only to a 10% share in the trading profits of Cashco but had not contributed to capital and was not entitled to share in any capital profit (eg on a sale of one of the disputed properties).  Suppose that the capital contributed by the other partners is used to purchase a capital asset (or that an asset is introduced in specie).  Mr Desai would have no beneficial interest in the asset.  But the asset would quite properly be shown on the balance sheet of Cashco and, as between a third party and the partners as a whole, the third party would be entitled to see the asset treated in the same way as any other partnership asset.

232. Accordingly, it seems to me that it would have been perfectly possible and permissible for the partners to have entered into express arrangement under which the economic ownership of an asset remained with the Father, Vatsal and Udi to the exclusion of Mr Desai whilst at the same time showing it, perfectly properly, on the balance sheet of the partnership.  Provided that the disputed properties are made available to meet the claims of third parties in precisely the same way as if such arrangements had been expressly made, there is no misrepresentation to third parties arising from inclusion in the balance sheet.  The question then, it seems to me, is whether by including an asset in the balance sheet, Cashco becomes the owner of the asset in the sense in which I have suggested Udi is viewing ownership; or whether the case is, or is to be treated as one, where the partners have agreed to put the asset on the balance sheet without intending any change in the beneficial ownership.

233. In answering that question, one of the factors which fall to be taken into account is the impact which the inclusion of the asset has had on other elements of the partnership accounts.  For instance, how has rent from the property been dealt with?  How has expenditure on the property been dealt with?  Has the partnership paid the outgoings on the property and in particular the finance charges?  How was the introduction of the property dealt with in the partners’ respective capital accounts?   How have these factors affected the calculation of profit share?  Unfortunately, the analysis of such evidence as there is does not enable clear answers to given to those questions.  There are some examples of expenditure being borne as a partnership expense; but rent has apparently not been shown in Cashco’s accounts or its tax returns and Mr Desai has seen none of it.  I have no idea at all about how the partners’ individual capital accounts have reflected the introduction of these properties, nor about how finance charges have been dealt with in ascertaining divisible profits.  I must therefore do the best I can, to use the hallowed phrase, on the material which I do have.

234. So far as concerns 130/132 Weir Road, there is, on the one hand, strong evidence which points strongly in favour of this being aquired as a Cashco property: all of the partners signed a document for the bank stating that to be the case.  Further, the deposit came from Cashco and the bank appears to have been dealing with Cashco.  The property was included in the balance sheet in the year of its acquisition.  On the other hand, the rental allocation, the insurance schedule, the letter dated 17 July 1992 and the inheritance tax note point in the other direction.  In my judgment, the property was acquired as a Cashco property.  Its inclusion in the balance sheet on aquisition simply reflected the correct underlying ownership The 15 October 1992 transfer purported to make Vatsal and Udi beneficial tenants in common. Mr Desai was not a party to this transfer. However, the Father was, as I have noted in other contexts, in control in a practical way, of the familybusinesses including Cashco. He was, I think, able to bind the partners to transactions concerning partnership property. In my judgment the Father having decided that this property should belong to Vatsal and Udi, it was effectively removed as a partnership asset. Its subsequent inclusion in Cashco’s balance sheetwas not, in my judgment, intended to effect any change of beneficial ownership for the same reasons as appear below in relation to 23 Hambledon Place.

235. So far as concerns 23 Hambledon Place, there is no equivalent to the acknowledgement to the bank which is found in the case of 130/132 Weir Road.  There is insufficient, in my judgment, to establish that the property was originally acquired as a Cashco property notwithstanding the source of the deposit and the fact that completion monies may have been funnelled through Cashco.  If it was not acquired as a Cashco property, it was acquired by the Father, Vatsal and Udi either as joint tenants or as tenants in common.  The question then is whether including the property in the balance sheet effected a change in the beneficial ownership.  In my judgment, it did not.  There is no explanation of why it was added to the balance sheet of Cashco other than the need to strengthen the balance sheet. None of the partners had any idea that a change of beneficial interest might have taken place until Mr Patel advised that this might be so in relation to Kingswood Manor several years later.  It was not intended that there should be any change and given that it would have been perfectly possible by express wording to include the property in the balance sheet without any change of beneficial ownership, I do not consider that the case that this is a Cashco property is made out. On balance I consider that the property was aquired as joint tenants with the result that Vatsal and Udi took the entire beneficial ownership as joint tenants on the Fathers death. The joint tenancy has been severed with the result that Vatsal and Udi are now beneficial tenants in common in equal shares.

236. As to 3 Beckett Avenue, this was, I am satisfied, acquired by the Father and the Mother beneficially and there is no real argument that it was acquired originally as a Cashco property.  It is, accordingly, only the inclusion in the balance sheet which supports the conclusion that the property has become a Cashco property.  As to that, as with 23 Hambledon Place, there is no explanation why it was added to the balance sheet of Cashco other than the need to strengthen the balance sheet; and the same points which I have made in relation to 23 Hambledon Place apply with equal force to 3 Beckett Avenue.  The terms of the transfer dated 15 October 1992 support the conclusion that the inclusion in the balance sheet had not changed the beneficial ownership: clearly the parties to the transfer did not believe it was a Cashco property and cannot therefore have thought that the inclusion in the balance sheet effected any change.  In my judgment, the Father and the Mother remained the beneficial owners until the transfer dated 15 October 1992 at which stage Vatsal and Udi became beneficial tenants in common in equal shares.  I do not consider that the inclusion of the property in the balance sheet after the transfer resulted in any change of beneficial ownership any more than it had done so before that transfer.  That is also consistent with the insurance schedule, but I attach no weight to that in reaching my conclusion.  I conclude that this property is not a Cashco property but belongs to Vatsal and Udi as tenants in common in equal shares. 

237. The position in relation to 34 Aberfoyle Road is not as strongly against the conclusion that it is a Cashco property as in relation to 3 Beckett Avenue but is, I consider, more strongly against that conclusion than in relation to 23 Hambledon Place.  As with the other properties, I do not consider that the inclusion in the balance sheet was intended to effect, nor did it actually effect, a change in beneficial ownership.  The question then is whether the property was originally acquired as a Cashco property.  In my judgment it was not, but was acquired by the Father, Vatsal and Udi either as beneficial joint tenants or tenants in common.  It does not matter which since the property was clearly transferred to Vatsal and Udi as tenants in common in equal shares by the transfer dated 15 October 1992.  For the reasons already given in relation to 3 Beckett Avenue, the subsequent inclusion in the balance sheet was not, in my judgment, intended to bring about a change in beneficial ownership and did not in fact do so. 

238. The position in relation to 38 Woodmansterne Road is clear to the extent that Vatsal and Udi became beneficial tenants in common in equal shares on 15 October 1992.  The Mother claims no interest in this property.  It had not appeared on the Cashco balance sheet before that so that, unless the property was already a Cashco asset prior to the transfer to Vatsal and Udi, the transfer would take effect according to its terms.  There is insufficient to persuade me that this property was actually acquired as a Cashco asset although I must accept that the actual beneficial ownership on acquisition is obscure.  The question is then as about the effect of the property being placed on Cashco’s balance sheet.  Here the position is a fortiori that of 3 Beckett Avenue.  I conclude that this property is not a Cashco property but belongs to Vatsal and Udi as tenants in common in equal shares.

Kingswood Manor
239. Kingswood Manor was bought for £560,000 on 21 December 1993 and was transferred into the names of Vatsal and Udi. I am satisfied on the evidence that the following contributions were made to the total purchase cost of £570,158:

a. The initial deposit of £56,000 was paid from a Cashco account. 

b. A total of £170,000 was paid by the Father and the Mother from their own personal savings.

c. £20,000 was paid from an account which was used in relation to the business and premises at 104 Kingston Road.

d. £20,000 was paid from an account in the name of Britbuild.

e. A mortgage loan of £290,000 (£289,985 net) was obtained in the names of Vatsal and Udi.

f. A further £15,000 was paid from the Cashco account in December 1993.

240. The total of those payments is slightly more than the total purchase costs: a sum of just over £806 was retained in their client account by Sherwood Wheatley.

241. Vatsal’s pleaded case was that Kingswood Manor was owned beneficially by him and Udi in equal shares but that the outbuildings were owned by Britbuild.  During his cross-examination, Vatsal accepted that the outbuildings had been bought as one title with Kingswood Manor and that the ownership of the outbuildings and Kingswood Manor itself was the same.  I shall refer to the whole property as Kingswood Manor.  As I have already remarked, the difference between Britbuild on the one hand and Vatsal and Udi on the other is immaterial.

242. Udi’s case is, and always has been, that Kingswood Manor is owned by Cashco, subject to such equitable or beneficial rights as the Mother, Mr Desai or any other person may be found to have. 

243. Vatsal originally pleaded that he and Udi had inherited Kingswood Manor but subsequently withdrew this in a Reply to Udi’s Request for Further Information saying that the pleading was a mistake.  He said the Father was never an owner and that the purchase was by himself and Udi.  Mr Talbot, in a forensic aside, remarks that Vatsal’s allegation that he and Udi inherited Kingswood Manor may have been a mistake (albeit one which was not corrected on amendment) but was nonetheless significant since it demonstrated how little Vatsal understood about the purchase and ownership of Kingswood Manor.  Vatsal accepted in cross-examination that he had no idea at the time where the monies for the purchase were coming from.

244. Mr Talbot relies on a passage in his cross-examination of Vatsal where Vatsal said “I accept that father bought the property”.   It would not be right to read too much into that answer.  The relevant exchange went like this:

“Q. Your mother and father appear to have paid, do they not, £170,000 of their own money towards the purchase of Kingswood Manor?"
"A.  That I see, sir, now, sir."
“Q.  You accept that, do you not?”
“A.  That it came from their account, yes.”
“Q.  Yes, you accept that?”
"A.  I accept that father bought the property."
"Q.  And using that money from their own funds?"
"A. Their funds, well, the moneys have come from them, yes, sir.”

245. This passage certainly shows that Vatsal accepts that the Father and the Mother contributed towards the purchase price and that, in that sense, the Father bought the property.  It is not to be taken as an acknowledgement that the house was purchased only by the parents or that the parents were to have 100% of the beneficial ownership.  However, if, as Vatsal contends, the house belonged beneficially to him and Udi to the exclusion of the parents (and not as an asset of Cashco) then the Father has clearly given something away. 

246. I am satisfied on the evidence that, at the time Kingswood Manor was acquired, Vatsal was not personally involved in setting up the funding arrangements: he left it to the Father and Udi.

247. In support of his claim that Kingswood Manor is owned by Cashco, Udi relies on the following (on which I make some comments as I go along):

a. Kingswood Manor appeared on the Cashco balance sheet every year from the year ended 30 September 1994 until the last incarnation of Cashco was dissolved on 28 February 2005.

b. Kingswood Manor was added to the Cashco balance sheet at the direction of the Father and Udi.   Clearly Mr Patel did not include Kingswood Manor off his own bat.  He must have been instructed to do so by someone and I have no doubt that it was by or with the concurrence of both the Father and Udi.  Udi says that the introduction into the balance sheet was needed to persuade suppliers to give the large credit facilities necessary to trade.  Some suppliers, he says, would demand to see Cashco’s current balance sheet before extending any significant credit facilities.  That evidence was not challenged and I accept it. 

c. The evidence of Mr Patel (of the accountants, Patel & Patel) was that he considered that Kingswood Manor was an asset of Cashco; he had included it in the balance sheet.  He says, and I accept, that he raised this with the Father explaining to him that “Mr Desai was also a partner and therefore could be a co-owner of the property and he said he understood this”.  Udi was asked in cross-examination when he first formed the view that Mr Desai had a 10% share in the disputed properties and Kingswood Manor.  His reply was this:

“When the accountants told myself and my father there was the risk that Mr Desai is entitled to 10 per cent by putting these properties on the balance sheet of Cashco.”

d. Udi does not, so far as I have been able to find, say anywhere in his evidence apart from that passage that Mr Patel said anything to him rather than the Father about this point; nor is there anything from Mr Patel to that effect.  Nor is there anything apart from that passage to suggest that Mr Patel said anything to the Father about the other properties which appeared on the balance sheet.  Furthermore, Udi puts it in terms of there being a risk, rather than firm advice; and Mr Patel’s own evidence is that he said only that Mr Desai could (ie might) be a co-owner.  This is hardly strong evidence that the Father and Udi positively intended that Mr Desai should have an interest.  If the Father had intended that, one might expect his response to Mr Patel would be “Of course, that’s exactly what I intended” rather than that he understood that there was a risk.  Udi’s evidence is also telling since it was apparently only when Mr Patel raised the matter – on Mr Patel’s evidence in relation to Kingswood Manor and thus after 1993 - that he, Udi, realised that Mr Desai might have an interest.  He can hardly be taken, therefore, as realising, by signing the Cashco accounts over the previous years, that the presence of the properties on the balance sheet meant that they were owned by Cashco let alone that it was intended that Kingswood Manor would, on its acquisition, be held by Vatsal and himself as an asset of Cashco.  I have already mentioned what Udi said in a supplemental witness statement: see under “Disputed Properties” above.  This is all consistent with an absence of intention on the part of the Father and Udi to provide an interest for Mr Desai.

e. The deeds to Kingswood Manor were given to NatWest as security for loan facilities granted to Cashco on a number of occasions.  I do not think that Mr Talbot can gain any support from that for his submission that Kingswood manor was a Cashco asset.  In this family, it would be entirely unsurprising if the deeds of any property were lodged as security and in particular that Vatsal and Udi would agree to the lodging of the deeds of Kingswood Manor (which was the home of the family) as security for the debts of Cashco (which was the family business) even though they were the beneficial owners.

f. Although the Kingswood Manor mortgage was agreed by Vatsal and Udi personally, Udi says that from the outset it appeared on the Cashco balance sheet as a liability of Cashco.  I accept that that is correct: it is certainly consistent with the changes in the balance sheet as at 30 September 1993 and as at 30 September 1994 and no other explanation has been suggested for that change.

g. The instalments payable on the Kingswood Manor mortgage were paid by Cashco by direct debit from the Cashco account.  I do not have the accounts for the whole period, but it is possible to see a regular monthly payment with the reference “NATWEST MTGE PAYT” which supports the proposition.  I find as a fact that the mortgage instalments were indeed paid from the Cashco account.

h. I also find that Cashco ultimately paid the final redemption cost of the Kingswood Manor mortgage on 5 May 1998. 

i. Udi says that the interest accruing on these loans was subsequently stated to be a business expense of Cashco, and therefore deductible for tax purposes.  I have been referred by way of example to Cashco’s statement of account for the year ended 30 September 2000, a statement that Vatsal signed and approved.  It may be that the interest payments are reflected in the accounts but the detail is not sufficient to see that that is so from reading the accounts alone.

j. Udi says that the costs of works on Kingswood Manor were paid for by Cashco (relying by way of example on the account for the year ended 30 September 1994, in which Cashco paid £10,166.99 in respect of works on Kingswood Manor).  There is some documentary evidence to support at least that example.  I accept that repairs were paid for out of the Cashco account on at least this occasion, but whether that was always the case, I cannot tell.

248. Mr Talbot reminds me that Udi has from the outset recognised that the Mother has an interest in Kingswood Manor. Udi maintains that, at the very least, the Mother should be entitled to stay there for the rest of her life, whether under an irrevocable licence or by virtue of having a life interest in the property.  Udi’s pleading was, as mentioned, that Kingswood Manor is a Cashco property subject to such equitable or beneficial rights as the Mother, Mr Desai or any other person may be found to have.  This is a slightly curious pleading.  So far as Mr Desai is concerned, the only interest which is asserted is one to which is entitled precisely because the property is a Cashco asset: he has that interest because he is a partner.  It is not suggested than any other third person has an interest in Kingswood Manor (although Harshika would have such an interest if it were established that she was entitled to a share in Cashco).

249. In relation to the Mother, Udi’s case that the property is owned by Cashco depends very largely on the fact that Kingswood Manor has been included in the balance sheet, the reason being, as was agreed on all sides, to strengthen it.  If he is right in his argument, then it must surely follow that the interests of the Father and the Mother in the property were reflected by the Father’s interests in Cashco; and their contributions to the purchase price ought to have been reflected in the Father’s capital account or, in the alternative and so far as the Mother’s contributions was concerned, as a loan by her (but then with no corresponding strengthening of the balance sheet).  If the Mother (or indeed the Father) had an interest other than through Cashco such as the one third share for which Mr Braithwaite contends, then it should follow that the repair costs which have been shown as a Cashco outgoing should have been shared between Cashco and the parents which they have not been.

250. Mr Braithwaite relies in relation to the Mother’s claim that she has some sort of interest on the following points:

a. The Father and the Mother each contributed monies to the purchase.  That is correct.

b. Kingswood Manor was purchased under the express direction of the Father.  That is also correct and is something which is admitted by Vatsal.

c. When Kingswood Manor was purchased, Vatsal and Udi assumed a moral obligation, at the very least, to provide for the needs of the Mother (something which again is admitted by Vatsal).  I only add that there is no concession by Vatsal that there is a legal obligation on him to provide for the needs of the Mother by allowing this house (or any other) to be available.

d. Mr Braithwaite says that one of the reasons Kingswood Manor was acquired was so that the Mother would have somewhere she would be able to live for the rest of her life.   That is not quite what the Mother said in her witness statement.  She says that it was done so that she would have a home if anything should happen to her husband but that does not preclude the possibility of an alternative home being made available if those providing it wished to move.  Nonetheless, I should mention the evidence from both Vatsal and Udi that if the Mother did not want to move, then the family would stay at Kingswood Manor.

e. Mr Braithwaite spoke of the works at Kingswood Manor as “the Father’s project”.  I am not sure what that was intended to convey.  What the evidence establishes is that the house needed refurbishment.  There is nothing to suggest it was the Father’s project rather than that of all involved in particular the Father, Vatsal and Udi.

251. One thing, which I think is reasonably clear is that Kingswood Manor was not acquired as an asset of Cashco.  It was not included in the balance sheet in the first accounts which appeared after the acquisition of the property, although it did appear the next year.  It is apparent that this was done because the Father wished to see the balance sheet strengthened and not because to do so would reflect the existing ownership.

252. Further, in my judgment, the inclusion of Kingswood Manor in the balance sheet was not intended to effect any change in the pre-existing beneficial interest (an aspect I will come to in a moment).  Just as with the previous family homes, 3 Beckett Avenue and 38 Woodmansterne Road, the reason for inclusion was to present a more favourable financial position to suppliers; and, for reasons which I have already given, I do not consider that there was anything improper or misleading about that.  I do not believe that Mr Desai was ever intended to obtain a beneficial interest in Kingswood Manor.  Not only was the inclusion of the property in the balance sheet not intended to change the beneficial interest, it did not, in my judgment, in fact do so.  I might add that it would be strange if Mr Desai were to obtain an interest in what was in fact the Amin family home.  Mr Talbot says that such a conclusion would fail to reflect the fact that Cashco is and has always been the family’s flagship business and that Cashco’s ownership of Kingswood Manor, an asset enjoyed by the whole family, is entirely consistent with the way in which the family’s affairs are run.  I disagree.  The concept of family is being used in two different senses in his submission.  In relation to Cashco it goes beyond the Father’s immediate family and includes Mr Desai and, even though he is married to Harshika, they have never, since their marriage, lived in the family homes.  In relation to Kingswood Manor, the family is restricted to those living in the house – the Father, the Mother and their sons (together with their wives and children).

253. I am aware, of course, that the accounts, as far as they go, of Cashco do, at least on some occasions, show outgoings in respect of Kingswood Manor as having been paid by Cashco.  But the accounts do not present a complete picture.  Let me take the accounts for the year ended 30 September 1996.  The balance sheet shows capital introduced of £426,287 and drawings of £131,129, that latter figure including an item for interest in respect of Kingswood Manor of over £21,000.  The breakdown of capital introduced shows it as having been introduced largely by Vatsal and Udi – only £30,000 was introduced by the Father and none by Mr Desai.  Of the drawings, only one is expressly shown as a drawing by a partner namely £5,000 to Mr Desai.  The accounts accordingly give no indication of the impact which drawings have had on the capital accounts of the individual partners.  It is at least possible that a proper breakdown of those individual capital accounts would show, for instance, that the interest in respect of Kingswood Manor was borne by Vatsal and Udi.  Perhaps the disproportionately large capital contributions by Vatsal and Udi reflect payments out of Cashco’s bank accounts in respect of liabilities that are really theirs such as outgoings on properties owned by them but shown in Cashco’s balances sheet.  I can only speculate since the material is not in the bundle.  The only conclusion I seek to draw is that the accounts do not show everything and it cannot be assumed that they are inconsistent with the beneficial ownership for which Vatsal contends.

254. The issue for me, then, is the beneficial ownership of Kingswood Manor on the footing that it is not an asset of Cashco.  Udi has said in his supplemental witness statement that, if anyone had asked, in August 1993 (and thus before it appeared in the balance sheet), he would have replied without hesitation that it was owned by the Father and the Mother.  So far as concerns beneficial ownership, he says that nothing should be read into the fact that it was transferred into the names of Vatsal and himself since all of the family knew that it was his parents home. 

255. Importantly, he adds this “I do not think that Kingswood Manor being entered onto Cashco’s balance sheet changed how it was owned”.  That was clearly his belief at the time when the property was in fact included in the balance sheet.  Following the advice given by Mr Patel, he now seems to think that the property is a Cashco asset from which it must follow, logically, that he now believes that including the property in the balance sheet did change how it was owned.

256.  Later in the same witness statement, he says that he believes the ownership “was always intended to reflect the common understanding that Kingswood Manor was to be a home for my parents, Vatsal and his family, and me and my family.  My parents, Vatsal and I all made contributions to the purchase cost because we understood that we would all have a share”.  It is not easy to see how that can be consistent with the answer he would have given to his own hypothetical question about who owned the property in August 1993. 

257. Against that, I have to measure Vatsal’s own evidence that the Father intended Vatsal and Udi to be the owners and even said to the vendor of the house that he was buying the house for his sons so that they could live there.  As Vatsal put it:

“At my father’s suggestion, as he was divesting himself from every other asset except the Cavendish Road property and business, Kingswood Manor was purchased in the joint names of Udhyam and me.  We were always intended to be the owner; it was never suggested that we held any part on trust for anyone else.”

258. There is one document on which Mr Sisley can also rely.   It is the insurance spreadsheet drawn up which I have already discussed.  For the reasons already given, I do consider that this document supports the view that Kingswood Manor was seen by Udi when he prepared it as a property owned by Vatsal and him in contrast with any partnership or company.  He would not, therefore, have seen the mere fact that a property was included in the Cashco balance sheet as leading to the conclusion that the property was an asset of Cashco notwithstanding the advice of Mr Patel.   The document also provides some indication that Udi did not see his Mother as having a share in Kingswood Manor when he prepared it.  It is, I think consistent with the heading “Under VB & UB Amin” that they hold the property as trustees for others including perhaps their mother.  But then the inclusion of “50.00” in the percentage column is difficult to explain if the Mother actually had a share.  In contrast, if she had some lesser right, such as a licence to remain in residence during her lifetime, the 50% entry would make sense.

259. Mr Talbot has not made detailed submissions about the beneficial ownership of Kingswood Manor if it is not an asset of Cashco except to say that the Mother at least has an interest which would entitle her to remain living at the property.    Mr Braithwaite contends for an interest in the Mother of one third, this being the combined interest, he says, which the father and she would have originally shared as joint tenants and which is now hers alone.

260. I accept Vatsal’s evidence that Kingswood Manor was put into his and Udi’s names at the suggestion of the Father.  I accept also that the Father never said expressly that he and Udi were to hold the property in trust for anyone else.  That would not, however, preclude the creation of a trust under which the Mother would take a share still less does it preclude some other right of occupation.  

261. I also accept Vatsal’s evidence that the Father said to the vendor that he was buying the house for his sons, so they could live in it.  It is not possible to spell out of that statement, however, an intention that Vatsal and Udi were to be the sole beneficial owners although the statement is, of course, consistent with that result.  The statement is in any case inaccurate since the Father was not buying the house: he was providing only some of the necessary funds.  That sort of inaccuracy makes it particularly important not to take the words used, especially in the context of casual remark to a stranger, as a clear indication of the Father’s intentions.

262. It is nonetheless the case, in my view, that the house was always intended to be a home for the Father and the Mother, Vatsal and his family and Udi and his family.  Udi’s evidence was to that effect and Vatsal did not say otherwise.   It might naturally be thought that the Father, Vatsal and Udi - the three interests if I may put it that way - might have an equal one third share each.  Even that would not guarantee the Father and the Mother a roof over their heads, but it would afford a strong element of protection.

263. However, it is also consistent with the intention just described that the entire beneficial ownership of the house should belong to Vatsal and Udi but subject to at least a moral, and possibly a legal, obligation to allow the Father and the Mother to reside there.  Compare the position with 38 Woodmansterne Road for instance.  By the transfer dated 15 October 1992, that property was placed in the beneficial ownership of Vatsal and Udi to the exclusion of the Father and the Mother – the Father was a party to that transfer and the Mother is not shown to have had any interest in it at all.  It would be wholly inconsistent with the express trusts of the transfer dated 15 October 1992 to maintain that the Father or the Mother has a beneficial share in the property after that date.

264. It is not easy to see, either, how the sort of interest in Kingswood Manor for which Mr Braithwaite contends if the Mother has no beneficial share, could have subsisted in 38 Woodmansterne Road after 15 October 1992 given that the father was a party to the transfer and thus to the express beneficial interests declared.  And yet this was the family home where the Father and Mother would expect to be able to live for so long as they wished.  They were apparently prepared to feel secure about that because of the nature of the family relationship in the context of the traditions and culture within which this family lived. 

265. Further, even if, contrary to the conclusion which I have reached, 38 Woodmansterne had become an asset of Cashco from the date of its inclusion in the balance sheet, the only interest which the Father and the Mother would have had would have been through the Father’s 10% share in Cashco, hardly a sufficient interest to protect the occupation rights of the Father and the Mother which Mr Braithwaite now asserts on behalf of the Mother.

266. Those considerations are not, of course conclusive.  There may be reasons for thinking that the Father and the Mother were intended to have an interest in Kingwood Manor even if they did not have one in 38 Woodmansterne Road.   For instance, the Father and the Mother did actually invest further personal monies in the acquisition and it might be that they did not wish to reduce their own assets any further than they had done in 1992.  Indeed, Mr Braithwaite makes that point in a slightly different way when he points out that the Father and the Mother had already passed on their assets insofar as they intended to make a living bequest to their children in 1992. What remained was theirs. The monies put towards Kingswood Manor were retained monies belonging to both of them, and the inference, he submits, is therefore that they represented a contribution to the property by the Father and the Mother in their own rights.

267. There are one or two other pointers on which Mr Sisley relies.  First, there is the insurance schedule which suggests that the Mother did not have a beneficial share (although she could consistently with the schedule have a more limited interest or right entitling her to remain in residence).  

268. Next, he points out that in connection with the divesting of assets to the next generation, the Father was careful to see that appropriate trusts were declared when they were needed as in the case of 166 Weir Road, and that the Father and Mother retain 273 and 275 Cavendish Road.  And so Mr Sisley submits that one may gather that if the parents had meant to reserve any interest, they would have done so explicitly. 

269. Vatsal’s case about the Mother’s rights has not always been clear.  He has consistently said that Kingswood Manor is beneficially owned by himself and Udi.  He said in answer to a question from me that he would not, of course, insist that the family move away from the house if his mother had wanted to stay.  But it was not clear whether this was an ethical position – as Mr Sisley puts it, any son with any decency would have said the same; Indian or not and Amin or not – or whether it was a recognition, a concession, that this was the legal position.  In opening, Mr Sisley was unable to give any adequate comfort: whilst saying that Vatsal did not wish to see his mother homeless at all, it was made clear that Vatsal would have some considerable difficulty if Udi and his family should then “ride on the slipstream of her occupation and say "we are staying here too"”. 

270. However, on a number of occasions, Vatsal has said that he does not wish to disturb the Mother’s occupation and that she may remain in the house as long as she wishes without payment by her.  He said in the witness box that he would have no objection to my making an order to that effect and, as I understood his position, this was not dependent upon my ordering that Udi pay an occupation rent (although of course, Mr Sisley’s submission is that I should do so).  There was an attempt to obtain further concessions from Vatsal in the witness box which I interrupted.  Clearly Vatsal was entitled to obtain legal advice before being pushed in that way into a concession.  However, his concession in relation to the Mother’s occupation was clear and was not questioned by Mr Sisley in his closing submissions. 

271. In the light of that concession, I propose to take the remainder of Mr Braithwaite’s submissions quite shortly.  As he puts it, the Mother claims, in decreasing order,

a. a beneficial interest under a constructive trust; alternatively

b. an interest arising by proprietary estoppel; alternatively

c. the exercise of the court’s discretion to postpone sale.

272. I take them in turn.

Constructive trust
273. Mr Braithwaite submits that the application of the principles explained in Stack v. Dowden [2007] UKHL 17, [2007] 2 AC 432 applied to the facts of the present case should produce the result that the Mother has a beneficial share in Kingswood Manor and that her share should be quantified as a 1/3rd share of the property.  His argument runs as follows:

a. The Stack v. Dowden analysis applies as between child and parent as it does between co-habiting couples: see Adekunle v. Ritchie [2007] EW Misc 5 (EWCC), [2007] WTLR 1505 at [65] approved by Lord Neuberger in Laskar v. Laskar [2008] EWCA Civ 347, [2008] 1 WLR 2695 at [16].  I am not sure that that is quite the right way of looking at it.  The point is rather that the property in Adekunle was purchased as a home for persons who were mother and daughter.  In contrast, Laskar was a case again involving a mother and daughter.  But as Lord Neuberger put it

“the primary purpose of the purchase of the property was as an investment, not as a home. In other words this was a purchase which, at least primarily, was not in “the domestic consumer context” but in a commercial context. To my mind it would not be right to apply the reasoning in Stack v Dowden to such a case as this, where the parties primarily purchased the property as an investment for rental income and capital appreciation, even where their relationship is a familial one.”

b. Nonetheless, I agree with Mr Braithwaite that the present case is one where the Stack v Dowden approach should apply.  This was a family purchase with a view to the provision of a home.

c. The relevant principles are apparent from the following extracts from Stack v. Dowden (which I accept as a sufficient citation for present purposes):

“Just as the starting point where there is sole legal ownership is sole beneficial ownership, the starting point where there is joint legal ownership is joint beneficial ownership. The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership. So in sole ownership cases it is upon the non-owner to show that he has any interest at all. In joint ownership cases, it is upon the joint owner who claims to have other than a joint beneficial interest.” [56] per Baroness Hale

“The search is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it.” [61] per Baroness Hale

If such an intention can be established then, “…there is much to be said for adopting what has been called a ‘holistic approach’ to quantification, undertaking a survey of the whole course of dealing between the parties, and taking account of all conduct which throws light on the question what shares were intended.” [61] per Baroness Hale, quoting the Law Commission’s Discussion Paper”

d. The present case is a sole ownership case, in the sense that the Mother, who is not on the registered title, seeks to establish an interest in the property although the legal title is, in fact, held by both Vatsal and Udi together.  I agree with that categorisation.

e. Mr Braithwaite submits that, contrary to Vatsal’s pleaded Reply, there is no role for any presumption of advancement in this analysis.  The starting presumption is that equity follows the law, and the function of the presumption of advancement (such as it was) is subsumed into the Stack v. Dowden test: see the observations of Arden LJ in Gibson v. Revenue and Customs Prosecution Office [2008] EWCA Civ 645, [2009] QB 348 at [26-27]).  I think that Mr Braithwaite goes too far.   The presumption is certainly considerably weaker than it was but has not yet altogether disappeared.  Even so, I agree with Mr Braithwaite to this extent: it is not easy to see what role the presumption of advancement could have in a case where it would take one to the same starting point as the Stack v Dowden analysis; that is so in the present case since both the presumption and the starting point lead to Vatsal and Udi being beneficial owners to the exclusion of the Father and the Mother.

274. The next stage in the analysis is to answer what has been called the threshold question, namely whether there is a common intention, express or inferred, that upon acquisition of the property, the Father and the Mother would have a beneficial interest in Kingswood Manor.  In that context, a direct contribution to the purchase price remains a significant factor in ascertaining the common intention.  I dare say that in the absence of any other material pointing to a contrary conclusion, a direct contribution would nearly always be sufficient to establish an interest.  Thus one finds Lord Bridge saying this in Lloyd’s Bank v. Rosset [1991] 1 AC 107, 132:

“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.”

275. Although there can be debate about whether the direct contribution gives rise to a constructive trust or a resulting trust, it cannot be doubted that such contributions will be highly relevant in answering the threshold question in a case where the Stack v Dowden principles apply. 

276. Stack v Dowden itself, the cases which it considered and the cases which have followed it are all concerned with establishing a share in a property.  However, I see no reason in principle why the constructive trust which arises from the application of Stack v Dowden principles should not be capable of producing interests other than percentage shares in a property just as an express agreement can produce such a result.   After the commencement of TOLATA on 1 January 1997, a trust arising in this way will not give rise to a settlement within the Settled Land Act 1925.  But before that date, there is room for doubt whether a settlement within the 1925 Act is created where a constructive trust gives rise to rights of occupation: see for instance Bannister v Bannister [1948] 2 All ER 133, Binions v Evans [1972] Ch 359 and Ungurian v Lesnoff [1990] Ch 206; contrast Dodsworth v Dodsworth [1973] EGD 233.

277. Once the threshold test has been answered in favour of an individual, the extent of his or her interest has to be determined.   This is a matter to be determined by the court in the light of all of the evidence including conduct before and after the purchase.  The object is to deduce (from agreements, inference or perhaps even imputation) the common intention of the parties deduced from all of the circumstances.  I have already recited the evidence which is relevant to the determination of both the threshold question and the quantification of the interest.  It is, on the evidence before me, not easy to determine whether the Father and the Mother were intended to retain any enforceable interest.  But what I do find easier to determine is the extent of that interest if the common intention was that they should have one.  It was not, in my judgment, the common intention that they should have a share in the property.  Rather, it was that they should have a home for their lives and the life of the survivor. 

278. I reject Mr Braithwaite’s submissions on quantum of interest.  He suggests that the Court is concerned here to value the joint interest of the Father and the Mother.  He further submits  that the result that best fits the intentions of the parties having regard to the whole course of dealing is that the acquisition of Kingswood Manor was a joint venture, which would mean that the Mother should hold a one-third interest.  All of that may be right if the exercise is to establish or value shares rather than some other interest.  But my view is that the result which best fits the intentions of all the parties, assuming an answer in favour of the Mother to the threshold question, is an interest pursuant to which she is entitled to occupy the house as her home without payment for the rest of her life.

279. This right is, however, precisely that which Vatsal has conceded (whether as a matter of law or not) that the Mother should enjoy; he is prepared to see such a right for the Mother to be enshrined in a court order.  Given that concession, it is not necessary for me formally to decide whether the Mother obtained such a right as a matter of law at the time of the acquisition of Kingswood Manor.  Mr Braithwaite may wish me, nonetheless, to make a formal determination.  Were he to do so, I would wish to hear further argument about the applicability or otherwise of the Settled Land Act 1925 since the relevant events took place before the commencement of TOLATA.  If I were of the view that the threshold question should be answered in favour of the Mother, I would want to consider whether her rights could be given effect to in a way which avoided the application of the Act. 

280. In expressing my conclusion concerning quantification of the Mother’s interests, I must say that I have taken careful account of the submissions made by Mr Braithwaite so clearly articulated in his written closing submissions.  I do not propose to rehearse them in detail but I should note the following:

a. The property was acquired to be the family home. The Father remained head of a family based on clear patriarchal principles, in which it was expected that the sons and their families would continue to live with their parents. 

b. All witnesses accepted there was an obligation on Vatsal and Udi at least in a moral or cultural sense. A constructive trust can arise by inference or imputation: and whilst a moral duty does not necessarily give rise to a legal one, it provides the foundation for it. A moral duty supports the notion of a common intention, and there is no reason it should not ripen to create legal rights and obligations in an appropriate case. 

c. Both Vatsal and Udi confirmed in evidence that, but for this dispute, it would ultimately have been the Mother’s decision as to whether Kingswood Manor should be sold or not. Doubtless, had the Father lived, it would have been his decision.  I do not disagree with that; but these conclusions are equally consistent with the right to reside, perhaps even more so that with a minority share of 1/3rd for which Mr Braithwaite contends.

d. Put in terms of risk, the question is whether, by directing the acquisition of the property in the names of Vatsal and Udi, the Father was intending thereby to relinquish his patriarchal role in the family and assume the risk that he and the Mother would have no future interest in the family home despite committing their own resources to the acquisition.  I do not find this a persuasive submission.  Such patriarchal role as the Father had cannot depend on whether he owned a share in the family home or not; he had already made the decision to pass assets on to the next generation and I cannot believe that the ownership of Kingswood Manor would have had any impact in the respect paid to him.  In any case, he was content not to own 38 Woodmansterne Road when that property was the family home.  The risk of being homeless would be met by the right to reside in the house.

Proprietary Estoppel
281. In a very real way, proprietary estoppel and constructive trust overlap to a considerable degree.  The result, in the present case, is the same namely that the Mother has the right to reside at Kingswood Manor for as long as she wishes.  In the light of the concession which Vatsal has made, I do not consider it necessary to decide whether the Mother has a claim based on proprietary estoppel or address Mr Braithwaite’s submissions on this topic.  I should  say, however, that I rather incline to the view that the facts in the present case, if they are enough to establish a proprietary estoppel, would also be enough to show that the threshold question should be answered in favour of the Mother in which case there is no need to establish an estoppel at all. 

Discretion
282. The discretion involved is that which the court has under section 14 TOLATA.   However, in the light of the concession, no question of the exercise of the court’s discretion in respect of an immediate sale arises since Vatsal is not in fact asking for one.  I do not consider that it is appropriate to make a deferred order for sale.  If and when the Mother ceases to reside at the property (whether upon her death or earlier) Vatsal and Udi will have to consider whether the property should be sold, or perhaps whether one should buy out the other, and if they cannot agree an application under TOLATA can be made.  It is premature to attempt to assess whether a sale should then be effected since the relevant factors must be judged as they are found at the time and not on the bases of hypotheses which may turn out to be wrong.

Occupation rent
283. Vatsal claims that Udi is liable to pay him occupation rent in respect of his use of Kingswood Manor.  Mr Talbot says that this aspect of Vatsal’s claim falls to be determined by reference TOLATA.

284. Mr Talbot says that Vatsal has a beneficial interest in Kingswood Manor, whether as a partner in Cashco or personally. Kingswood Manor was bought in part to house Vatsal and his family. He therefore has the right to occupy under section 12 TOLATA.  That is correct unless the Mother has an interest which gives rise to a settlement for the purposes of the Settled Land Act 1925, in which case there is no “trust of land”: see section 1(3) TOLATA.   I shall proceed on the basis that, even if a constructive trust arises, Kingswood Manor is not settled land.

285. Under section 13(2) TOLATA, it was and is open to the trustees (in this case Vatsal and Udi) to exclude Vatsal’s occupation rights.  They were and are not permitted to do so unreasonably or to restrict the entitlement to occupy to an unreasonable extent.  Under section 13(3), Vatsal and Udi were and are entitled to impose reasonable conditions on any beneficiary by reason of his entitlement under section 12.  Under section 13(6), where the entitlement of a beneficiary has been excluded or restricted, the conditions which may be imposed on a beneficiary occupying the land include payment of compensation to the beneficiary whose occupation has been excluded.  The reference to “excluded or restricted” in section 13(6) must, I consider, be read as meaning excluded or restricted under section 13(1).

286. In exercising their powers under the section (thus including the power to exclude and the power to impose a condition as to compensation), matters to which the trustees must have regard include those set out in section 13(4):

a. The intentions of the persons who created the trust.

b. The purpose for which the land is held.

c. The circumstances and wishes of each of the beneficiaries who is entitled to occupy the land under section 12. 

287.  Vatsal is entitled to make an application for an order under section 14: see section 14(1).  Pursuant to section 14, the Court may make an order relating to the exercise by the trustees of their functions.  Accordingly, the Court may, under the section, order the payment of compensation if, but only if, Vatsal can establish that his right to occupy has been excluded or restricted by the trustees.

288. Udi denies that Vatsal’s right to occupy was excluded or restricted.  Udi says that:

a. Vatsal left voluntarily, as he and Anju accept.  A deterioration in family relations may have lain behind Vatsal’s decision to leave, but the present dispute is a far cry from a matrimonial breakdown. Vatsal was not constructively excluded;

b. Vatsal and Anju have continued to occupy part of Kingswood Manor - they kept three of the seven bedrooms in the house and one of the bathrooms locked until late 2007, and still store their belongings in those rooms.  These facts are to some extent disputed.  Vatsal says that the locks were broken and many possessions missing when he last visited the house.

c. Vatsal could have resumed his occupation at any time.

289. It cannot, I think, be maintained that a person’s entitlement to occupy can only be excluded by actual physical exclusion or a demand by the trustees to vacate.  If a person is effectively excluded by threat or unpleasantness, that must surely qualify as exclusion.  It will be a matter of fact and degree in any particular case whether there has been exclusion within the statutory sense.  However, whatever does or does not amount to exclusion, the exclusion must be by the trustees.  Section 13 TOLATA gives the trustees as a body the power to exclude a beneficiary; it does not authorise one trustee to exclude a beneficiary.  If one of two or more trustees physically excludes a beneficiary, that exclusion is not effected pursuant to the power conferred by section 13; it does not, therefore, in my judgment, fall within section 13(6) so as to enable the trustees to impose conditions as to the payment of compensation and does not, therefore, engage the court’s powers under section 14(2)(a).  

290. I do not think that anything said in Stack v Dowden is inconsistent with these conclusions.  Lord Neuberger was careful to explain why he saw the case as one where the parties, who were the two trustees, had excluded Mr Stack: see paragraph 151 where he explains that, through a consent order made in the family proceedings, the trustees (Ms Dowden and Mr Stack) agreed that Mr Stack would be excluded, thus engaging the jurisdiction under section 13(3) and (6)(a) to agree compensation, a matter later for the court under section 14.  Lady Hale is less explicit.  But she too refers in paragraph 94 to the fact that Mr Stack agreed to leave.  Her words at the beginning of that paragraph (“These statutory powers replaced the old doctrines of equitable accounting under which a beneficiary who remained in occupation might be required to pay an occupation rent to a beneficiary who was excluded from the property.”) must be read in context.  She clearly cannot be taken as saying that the statutory provision apply wherever one beneficiary excludes another; on any reading, the statutory provisions only apply where trustees have excluded a beneficiary.  Nor do I think she can be read as intending to cover anything other than a case where trustees exclude a beneficiary, for instance where a property is in the name of one partner in a domestic arrangement but the beneficial ownership is joint or common.

291. This is not to say that Vatsal does not have any remedy if he has been wrongfully excluded by Udi (or perhaps even if has left voluntarily).  In my judgment, TOLATA is not, and does not pretend to be, exhaustive of the situations in which a beneficiary who is entitled to occupy but does not in fact do so (whether because he has been excluded or not) is entitled to an account, or to compensation, in respect of another beneficiary’s enjoyment of occupation at least when that other beneficiary is also a trustee.   Blackburne J reached the same conclusion in French v Barcham [2008] EWHC 1505 (Ch), another bankruptcy case.  He held that the trustee in bankruptcy had no right to occupy so that section 12 did not apply and thus sections 13 to 15 were not engaged.  Compensation was nonetheless payable in accordance with the line of authorities which I consider in a moment.

292. The law prior to TOLATA in an ordinary case of a joint tenancy was summarised by Millett in Re Pavlou a bankrupt [1993] 1 WLR 1050.  After reviewing a number of authorities he said this (at p 1050):

“I take the law to be to the following effect. First, a court of equity will order an inquiry and payment of occupation rent, not only in the case where the co-owner in occupation has ousted the other, but in any other case in which it is necessary in order to do equity between the parties that an occupation rent should be paid. The fact that there has not been an ouster or forceful exclusion therefore is far from conclusive. Secondly, where it is a matrimonial home and the marriage has broken down, the party who leaves the property will, in most cases, be regarded as excluded from the family home, so that an occupation rent should be paid by the co-owner who remains. But that is not a rule of law; that is merely a statement of the prima facie conclusion to be drawn from the facts. The true position is that if a tenant in common leaves the property voluntarily, but would be welcome back and would be in a position to enjoy his or her right to occupy, it would normally not be fair or equitable to the remaining tenant in common to charge him or her with an occupation rent which he or she never expected to pay.”

293. In Byford v Butler [2004] 1 P&CR 12, Lawrence Collins J expanded on this statement of principle.  In passing, I note that at paragraph 22 of his judgment he said, unsurprisingly, that there is no distinction to be drawn in this context between a joint tenancy and a tenancy in common.  The question was whether the occupier – the wife then widow of a bankrupt – was obliged to account to the trustee in bankruptcy for an occupation rent.  The trustee could not, of course, enjoy the property while the wife/widow lived there: he could not let the property nor could he use it physically.  But he had not been ousted from occupation in the way that a wife suffering violence can be seen to be ousted from the matrimonial home.  The judge summarised the position this way at the end of his judgment:

“What the court is endeavouring to do is broad justice or equity as between co-owners. As Millett J. said in Re Pavlou the fact that there has not been an ouster or forcible exclusion is not conclusive. The trustee cannot reside in the property nor can he derive any financial enjoyment from the property while the bankrupt's spouse resides in it, and the bankrupt spouse's creditors can derive no benefit from it until he exercises his remedies. I do not consider that the policy expressed in the new s. 283 of the Insolvency Act 1986 is of any assistance (even if it had been in force). It is true that the trustee could have realised his remedies earlier, but Mrs Byford benefited to a considerable degree by his inaction, while Mr Byford enjoyed the use of the property with Mrs Byford, without any benefit to his creditors.”

294. I would put one slight gloss on all of this, although it makes no practical difference in the present case.  It would, I consider, be right for the court when exercising its powers to award compensation outside TOLATA nonetheless to bear carefully in mind the criteria laid down in sections 13(4) and 15(1).  In particular, the intention of the persons creating the trust and the purposes for which the land is held must be borne in mind; but those are factors which would have had to be taken into account in the past in any case.

295. It is not appropriate for me to go into the minutiae of the unpleasantness between Vatsal and Anju on the one hand and Udi and Bhavini on the other.  Vatsal has described the position which came about as “intolerable” and Anju shares that perception.  I have no doubt at all that that the situation did become one where Vatsal and Anju considered that for their own health and that of their children, they had to move out.  It would be wholly unrealistic to think that they could move back in and live peaceably and happily in Kingswood Manor with Udi and Bhavini.  I do not think anyone who had seen them all in the witness box and observed their emotions could reach a different view.  I do not attempt to apportion blame if, indeed, blame has any useful part to play in the cold resolution of bitter family disputes such as this.  Accordingly, were it not for the involvement of the Mother in all of this, I would regard this as a case where Udi as one beneficiary ought to account to Vatsal, as the other, for his occupation to the exclusion of Vatsal.  Of course, the house was purchased as a home for both of them (as well as the Father and the Mother); that would be a factor to take into account had the Mother ceased to reside there and were Vatsal seeking a sale.  It would not, however, be of such significance in determining whether Udi should account for his exclusive occupation after the Mother had ceased to reside.

296. The question then is whether the actual residence of the Mother makes any difference to this so that a different approach must be applied.

297. Mr Talbot submits that Udi should not have to pay any occupation rent because he and Bhavini have borne the cost and responsibility of caring for the Mother since Vatsal left Kingswood Manor (which I find as a fact they have done).  Udi and Bhavini cannot care adequately for the Mother unless they live with her. It would be grossly inequitable, he says, for Vatsal, who has effectively relinquished his responsibilities for the Mother’s care, to extract a full occupation rent from Udi for doing so.

298. In this context, I should record (and find as a fact) that contrary to what was at one stage suggested by Vatsal, the Mother does not have a separate annexe at Kingswood Manor.  Also, she is extremely frail.  As Bhavini said, (and I accept):

“Mother-in-law, you have never seen mother-in-law.  Mother-in-law is an extremely frail lady.  She can't walk from here to here [indicating a short distance].  You make her walk, it will take 20 minutes.  She cannot cook for herself.  She cannot do anything for herself.  How is she going to live in an annex on her own?”

299. The position, I am satisfied, is that she requires full-time care  and lives in a room on the ground floor (as she is unable to use the stairs) which Udi and Bhavini had specially built for her.

300. Further, since he moved out of Kingswood Manor, Vatsal has not (unlike Udi) contributed to the upkeep of the house.  Moreover, I am satisfied, in spite of some conflicts in the evidence, that many of his and his family’s possessions remain at the property and that Udi and Anju and their family have not in practice enjoyed occupation of the entire house.

301. As I have already mentioned, the trust of Kingswood Manor was created by the Father and the Mother to the extent of their contribution to the price.  It was clearly intended that the Father and the Mother and the survivor of them would live there.  That is recognised by the concession which Vatsal has made in stating that he will submit to an order which protects her occupation and it may, indeed, be the legal position in any case under a constructive trust in her favour.   Moreover, regardless of whether the trust of Kingswood Manor was created by the Father, one of the purposes for which the property is held is plainly to house the Mother.

302. In my judgment, it would not be fair to order Udi to account for an occupation rent so long as the Mother is living at Kingswood Manor.  I reach that conclusion very much for the reasons articulated by Mr Talbot.  As it seems to me, one of the purposes, if not the main purpose, of the purchase was to provide a family home and, most importantly, a home for the Father and the Mother during their lives.  Given that the Mother is in occupation, how, one asks rhetorically, is one to assess the value of that part of the house which she does not occupy as her own private room when she can, to the extent of her physical ability, use other parts of the house such as the kitchen and communal living room?  How is Udi to account for the enjoyment which he and his family have of a house of which they do not have exclusive occupation, the Mother sharing occupation with them?  The difficulty in giving a satisfactory answer to those questions cannot, of course, give the answer to Vatsal’s claim.  But I must not be blind to the consequences of accepting his claim in principle.

303. However, the main reason, and by itself a sufficient reason, for rejecting Vatsal’s claim is that the purpose of the acquisition of Kingswood Manor was to provide a home for the family and in particular for the Father and the Mother and now the Mother alone.  So long as she continues to live there, the house will not, obviously, be sold.  In practical terms, there is no alternative to Udi and Bhavini living there and carrying out to the best of their ability their family duty to the Mother.  This is not a case where, to use the words of Lawrence Collins J, “broad justice or equity as between co-owners” demands that occupation rent should be paid.  Accordingly, I dismiss this part of Vatsal’s claim.  I would add that I would reach exactly the same conclusion if this case fell to be dealt with under TOLATA.  The factors listed in sections 13(4) and 15(1) are not an exhaustive list.  I consider that interests of the Mother and the implications of her presence for Udi and Bhavini fail to be taken into account.

304. This makes it unnecessary to address Mr Talbot’s alternative submission that allowance should be made for the expenses Udi has incurred in maintaining and improving the property (including adapting it for the benefit of the Mother), for the value of care provided by Bhavini and Udi to the Mother, and for Vatsal’s continuing use of parts of the property.  It is suggested that an assessment under an inquiry would not be proportionate and that a reasonable approach would be that the debits and credits are likely to balance each other.  I see some force in all of that but make no decision.

Kingswood Manor furniture
305. I propose to state my conclusions about the ownership of the furniture and then to explain why I have reached them.  With the exceptions which I mention in a moment, it is my judgment that all of the furniture and other disputed contents of Kingswood Manor belong to the Mother.  The exceptions are those items which were purchased with the property as part and parcel of the sale.  The vendor decided to take all of the contents other than a few items which he regarded as of little value and left for no charge.  However, included in the sale were three items: light fittings (£500) snooker table, cabinet and stand (£3,000) and gas cooker (£300). 

306. Vatsal’s pleaded case is that he and Udi were the joint owners of certain furniture (which is to be found listed in Schedule 1 to the Amended Particulars of Claim).  This is quite a long list. Vatsal sought an order for the furniture’s sale.  In opening, Mr Sisley explained the basis of Vatsal’s claim as being that the ownership of the furniture followed on from the ownership of the house itself.

307. Udi has always maintained that the furniture was jointly owned by the Father and the Mother and passed to the Mother absolutely by right of survivorship outside the Father’s will.  The Mother stated in her Defence that the furniture was hers.  Vatsal said that the furniture was “bought on trips made by Udhyam, my father and me... The furniture was all bought especially for Kingswood Manor.”

308. Vatsal has changed his case in relation to the furniture more than once and has made what I can only describe as extravagant claims as to their value.  I do not dissent from Mr Talbot’s description of some values ascribed by Vatsal as wildly speculative.  They are unreliable but I do not need to say, as Mr Talbot would have it, that some are downright dishonest.  The first schedule which I have referred to was superseded by a second which came with a response to a request for further information. This in turn was superseded by a third schedule exhibited to his witness statement.

309. Mr Talbot submits that Vatsal’s assertion that the furniture listed in the schedules he has adduced “was all bought especially for Kingswood Manor” is obviously wrong. The schedules themselves are so manifestly flawed as to be useless.  I agree. The following examples given by Talbot demonstrate his point:

a. Vatsal ascribed to the “Long wooden antique banqueting table from 1634” a value of £30,000 in one schedule and £35,000 in another.  He said it was paid for by Udi in January 1994. In contrast, I find as a fact that it was bought by the Father and the Mother in 1987 for £6,000 from the seller of the previous family home at Woodmansterne Road and was brought with them from Woodmansterne Road to Kingswood Manor.  This was accepted by Vatsal in cross-examination. 

b. In Vatsal’s first schedule, he listed a “Very large rare floral Persian rug” and estimated its value at £35,000. Two years later, in his second schedule, Vatsal valued the same rug at £85,000. By the time of his witness statement, the rug’s value (and, at least on the face of the document, its price) had gone up in his eyes yet again: Vatsal’s third schedule states that the rug was bought by Udi in cash for £95,000. According to Vatsal’s evidence, the rug increased in value by over 270 per cent in just four years.  Vatsal admitted that his original estimate of the rug’s value had been a guess.  There has been no valuation, professional or otherwise, to support his subsequent values.

c. The rug was, I find as a fact, in fact bought for £12,750 by Udi for the Mother, with the Mother’s money.  Udi gave evidence to that effect which was not challenged in cross-examination.  He is supported by the unchallenged statement of Mr Anthony Martin who helped him collect the rug when it was purchased.

310. In addition to the rug and the antique dining table, Vatsal admitted that a number of other items which he had claimed to own jointly with Udi and said were bought by him and Udi “especially for Kingswood Manor” had in fact, and as I find to be the case, been bought by the Father much earlier. In particular:

a. a zebra rug bought by the Father on a trip to Kenya between 1979 and 1981;

b. two small African elephant design tables, which came from a previous family home (Vatsal had asserted that these tables had been bought by Udi with cash from Cashco);

c. three wooden coffee tables which had also come from a previous family home;

d. the “specially designed showcase for glasses” which Vatsal said had been bought by Udi for around £3,250 with money from Cashco but which in fact was bought for a previous family home;

e. a set of three small brass serving tables bought by the Father from Harrods in about 1980;

f. the mirror in the snooker room.

311. The position in relation to the rug, the antique dining table and the other items listed above is, I find, that they were bought by the Father. Whether they were owned jointly by the Father and the Mother, so that they passed to the Mother by survivorship, or owned by the Father alone, so that they passed to the Mother under the Father’s will, the Mother is now their sole beneficial owner.

312. It is clear, I consider, that the ownership of the items purchased with Kingswood Manor follows that of the house itself.  I would note the extravagant values Vatsal has placed on these.  Vatsal said the billiard table was purchased for £12,500 when the price was £500 and he originally pleaded that it was worth £10,000. 

313. In respect of the numerous other items listed in the various schedules he has submitted to the court, I agree with Mr Talbot when he says that Vatsal simply fails to prove his case. He ultimately accepted that the court should completely ignore his valuations of the furniture.  He also said this in relation to ownership:

“No, what – the point was that after Udi said that we must sell Kingswood Manor to acquire smaller houses, there came a point where the furniture would have to be considered. That’s when I said that, you know, whatever half Udi has is what I have, and that’s what was – some of those items were purchased during my father’s time.”

314. So his case really comes down to the oft-repeated statement – a mantra as Mr Talbot and Mr Braithwaite would have it – that “whatever interest Udhyam has, I have half of it”. It follows that if, as Udi maintains and I decide, Udi has no interest in this furniture other than the items purchased with the house, neither does Vatsal.

326 Cavendish Road
315. It is now common ground that Vatsal, Udi, Harshika and  Mr Desai each have an equal 25% share in the proceeds of sale of  326 Cavendish Road.

Cashco
316. Udi and his advisers have adopted numbering, Cashco 1 to Cashco 4, for the different partnerships which carried on the continuing business.  Cashco 4 is the partnership which continued the business following the death of the Father. It is common ground that Vatsal, Udi and Mr Desai are the only partners in Cashco 4, entitled to shares of 45% each for Vatsal and Udi, and 10% for Mr Desai. Mr Braithwaite quite properly withdrew the claim (which was only formally made because I required him to do so) when the evidential position became clear. 

317. Cashco 3 ran from 1983 to 1985.  Until 30 September 1992, Udi’s case is that the partners were the Father (10%), Vatsal (40%), Udi (40%) and Mr Desai (10%).  He says that on 30 September 1992 the Father resigned as a partner in Cashco 3, dividing his 10% share between Vatsal and Udi.  The Father did not receive any payment for his share in Cashco 3 on resigning.  I accept all of that.  It is no longer contended by the Mother that the Father was a partner in Cashco until his death.  The Father’s executors' formal claim to the value of the Father’s interest in Cashco 3 as a debt is not sustainable; the evidence is clear that he intended to pass his interest to Vatsal and Udi without payment. 

318. It seems that the Mother was a partner in Cashco 3 for a short time in about 1983. However, subsequent declarations and apportionments of profit by Cashco proceed on the basis that she had ceased to be a partner. It is accepted by Mr Braithwaite that she ceased to be a partner a short time later.

319. Mr Braithwaite’s case is that the Mother has made numerous payments to Cashco.  It is her case that she made these payments in the belief that she was a partner. These payments, he says, appear to have been treated in the accounts as contributions to capital.

320. Two of the payments to Cashco are acknowledged by Vatsal to have been made out of monies belonging or available to the Mother.  These total £110,000 and were paid on 27 November 1995.  £30,000 was paid from an account which had been held jointly with the Father during his lifetime and £80,000 was paid from a new account: these monies quite possibly represented the proceeds of life policies on the Father’s life.  The new account was a premium reserve account in the names of the Mother, Vatsal and Udi including in the account details “Re B M Amin deceased”.  It is accepted by Mr Sisley that the Mother was, or is to be treated as if she was, beneficially entitled to the £80,000 paid to Cashco.

321. Whether the Mother is entitled to the return of these monies depends, as Mr Braithwaite submits, upon the characterisation of the payments. He must be right when he says that, realistically, they must either be gifts (entitling Cashco to keep them) or they were loans or other investments.

322. He submits that there is no reason to suppose that the Mother intended a gift relying on the following factors:

a. The Father’s will had expressly provided for certain gifts to the Mother.  These were her monies absolutely. Neither Vatsal nor Udi was able to say that any payment made by the Mother was understood to be a gift.

b. The question is one of the Mother’s intent - whether in all the circumstances she intended to make a gift, or whether she intended that the money would be repayable. 

c. Mr Braithwaite says that Vatsal’s only relevant explanation is based on the presumption of advancement.  He submits that the presumption of advancement does not apply as between the Mother and her sons. Even if it does, it does so in the weakest possible form, there being no obligation upon the Mother to provide for them (a fortiori on Vatsal’s case as to where the moral obligation lay, namely an obligation on the sons to provide for the Mother).

d. Mr Braithwaite adds that, in any event, the court has evidence of the Mother’s intention in her witness statement.  She says that she invested substantial monies in Cashco to aid cash-flow, referring to certain pages of bank statements which include the two payments of £30,000 and £80,000.  She also says that she believes she is a partner (a contention which I have rejected) or that she is entitled to her money back “with profit” by which I imagine she means with interest; however, that seems to me to be the assertion of a conclusion rather than evidence leading to it.  The real point is that she made the payments with a view to aiding cash-flow.

e. No witness contradicts the evidence concerning those payments: I accept it.

323. Other sums are also claimed by the Mother.  Two of them can be rejected.  The first is the sum of £50,000 transferred on 21 December 1993 from the same account as the £30,000 referred to above, a joint account with the Father.  That money went out at once on the purchase of Kingswood Manor and I have already effectively dealt with it in that context.  The second is a payment from Sherwood Wheatley of £15,000 as to which Mr Braithwaite accepts that there is no evidence as to its provenance and in respect of which the Mother’s claim is not, in my judgment, made out. 

324. The balance of the monies put into Cashco in respect of which the Mother claims came from the Corporate Diamond Account 35762799 in the names of the Mother, Vatsal and Udi. The payments are:

a. £200,000 paid on 30 June 1998;

b. £300,000 paid on 7 January 2000; and

c. £90,000 paid on 24 June 2003.

325. The Corporate Diamond account was opened in June 1997 with monies transferred from the same joint account in the names of the Father and the Mother as provided the £30,000 and £50,000 referred to above.  The opening balance was £100,482.  Mr Sisley has identified two payments into the joint account on 29 January 1996 (£31,000) and 16 April 1997 (£60,000) which account for the vast majority of the payment made to open the Corporate Diamond account.  The source of the £31,000 is not explained but could well be derived from Cashco trading.  The £60,000 came from an account of the Gatton Road business.  The Gatton Road journal confirms this transfer, which was largely made out of a loan of £52,000.  The Mother had no interest in the Gatton Road business. 

326. Further monies were paid into the Corporate Diamond account as follows:

a. On 16 October 1997, a deposit of cash or cheques totalling £225,000.  It is not explained where this money came from, but there is nothing to suggest that the Mother had resources of this sort out of which she could have made the payment.

b. On 5 November 1997, a deposit of cash and cheques totalling £73,418.  Udi gave evidence, which I accept, that this was a tax refund; the Mother was entitled to the benefit of the refund pursuant to the Father’s will under which she took personalty. 

c. On 26 November 1999, a transfer of £243,804.  That money, I am satisfied, came from the proceeds of sale of 326 Cavendish Road.

d. On 25 February 2002, an unexplained transfer of £40,000.

e. On 15 May 2003, an unexplained deposit of £15,000.

327. Mr Braithwaite points out that neither Vatsal nor Udi were account holders on the joint account (ie the account in the names of the Father and the Mother) and submits that, even it is correct that the balance on that account (ie just before it was transferred in order to open the Corporate Diamond account) seems to be derived from Cashco trading or had some other particular provenance, that fact by itself is insufficient to give rise to any beneficial interest in anyone other than the Mother. In the absence of evidence to the contrary, he says that the Mother will be assumed to be the legal and beneficial owner of the joint account; it is for Vatsal to prove otherwise, and he has not done so. 

328. As to the Corporate Diamond account, I have no evidence about why it was opened or who was intended to have an interest in the monies in the account.  I do not expect that anyone except perhaps Udi gave it any thought.  These were family monies which were shifted around from one account to another and the idea that one individual might claim it as against another would have seemed alien.  Nonetheless, the facts have to be analysed in a conventional English law context and I must resolve this question of ownership. 

329. As to that, I would, in the first place, reject the proposition that the Mother had no interest in the Corporate Diamond account.  If she did not, then the obvious question arises as to why her name was on the account at all.  More significantly, she has on any view contributed some of her own monies to this account and it would require strong evidence (of which there is none) to deprive her of any interest in her contribution given that she is herself one of the account holders.

330. I agree with Mr Braithwaite when he says that it is apparent that the Corporate Diamond Account was held and used by the Mother, Vatsal and Udi and contained, at various times, significant sums beyond those belonging only to the Mother, Vatsal and Udi – for instance the proceeds of sale of 326 Cavendish Road. On Mr Braithwaite’s analysis, the Mother contributed to the Corporate Diamond account the amount of the Inland Revenue refund and the opening balance from the previous account a total of just under £174,000.  These contributions were made prior to the first relevant transfer from the account to Cashco of £200,000 on 30 June 1998.

331. He therefore submits that the court should assume that the Mother was entitled to approximately £175,000 of the monies in that account which sum represents her investment in Cashco.  I cannot accept that, even assuming that the £175,000 is to be seen as a contribution by the Mother to the Corporate Diamond account.  Just before the sum of £200,000 was paid across to Cashco, the balance on the Corporate Diamond account was slightly over £412,000.  Even if (and it is a big “if” which I will deal with in a moment) the Mother is to be treated as if part of the money going across to Cashco’s were hers, there is no reason to attribute a larger amount to her than her pro rata share that is to say 175/412 of the payment. 

332. On the next day, a further amount of £200,000 was transferred “To C/A” which presumably means current account.  This reduced the balance on the Corporate Diamond account to £14,666 after taking account of some small entries.  I do not know to what account this transfer was made.  Although there is a credit of £200,000 on Cashco’s business account 02122944, this was on 30 June 1998 and must, I think, reflect the first of the two £200,000 transfers. 

333. I do not think that Mr Braithwaite suggests that the Mother was the source of the later payments of £300,000 and £90,000 out of the Corporate Diamond account to Cashco.  The large credit of £243,804 into the Corporate Diamond account on 26 November 1999 was, as Mr Sisley says, the sale proceeds of 326 Cavendish Road in which the Mother had no interest.  There is nothing to suggest that the other significant amounts of £40,000 and £15,000 were contributed to by the Mother.

334. Accordingly, the Mother can in my judgment claim an investment in Cashco of at most the sum of £110,000 paid in November 1995 and a fraction, at most 174/412, of the £200,000 paid on 30 June 1998; she could possibly claim the same fraction of the £15,000 odd left in the account but that is nothing to do with Cashco.

335. In the light of the way in which the Corporate Diamond account was operated, I do not consider that it is possible to conclude that the account can be regarded as a conventional joint account under which all of the account holders are jointly entitled.  In such cases, the proper outcome may depend on whether the contributions were made by one person or whether by each of the account holders.  For a helpful general discussion see Lewin on Trusts (18th ed) 9-85 to 9-90.  Where, as in the present case, contributions to the account are made by more than one of the account holders, there is only a presumption of joint tenancy.  I consider that such a presumption, if it arises at all on the facts of the present case, is rebutted.  The account seems to have been used as a money-box for various dealings by the family.  It would be wrong, I think, to see in the use of the account any intention to alter the beneficial ownership of the monies passing into it.  Accordingly, the monies in the account are held on resulting trust for the contributors.  There may be difficulties in appropriating particular payments-out to the interests of particular beneficiaries.  But, in the present case, and in the absence of evidence about where the second payment of £200,000 went, I conclude that the Mother’s potential claim in respect of monies paid to Cashco is as I have set it out above,  namely a claim to have paid the sums of £110,000 and her pro rata share of £200,000 to Cashco.

336. I return to Mr Braithwaite’s submission that Vatsal has failed to show that monies in the joint account in the names of the Father and the Mother were not hers beneficially.  There is nothing at all to suggest that monies in that account on 27 November 1995 were not hers.  It follows, and I so hold, that the payment of £30,000 out of the account to Cashco was made out of her money.  I do not think that that result is contested by Vatsal.  The question then is whether that sum and the £80,000 were intended as gifts or as loans or investments.  It is reasonable to infer, and I do so, that as with most family financial affairs, Udi (whether with or without discussion) was responsible for implementing these payments. He acted, or is to be taken as acting, with her authority.  She cannot, and indeed does not seek to, claim back the monies on the footing that they were paid without her authority. 

337. If one turns to Cashco’s accounts for the year ending 30 September 1996, the year in which the payments of £110,000 were made, the balance sheet shows no entry for any loan by the Mother (unless it has been incorrectly subsumed in Trade Creditors).  It is possible that the payments were treated as capital contributions in regard to which the balance sheet shows capital introduced of £426,487.  It is interesting to see how these are shown: there are three entries for Vatsal and Udi suggesting that they made three separate contributions.  The last of these was the sum of £80,000.   The Mother (who was not a partner in the partnership which had subsisted since the end of 1992) is shown as having contributed £30,000.  It is difficult not to conclude that the £30,000 represents the payment from the joint account and that the £80,000 represents the payment from the new account, and that is the conclusion I do reach. 

338. The accounts for Cashco (or at least the pages of them included in the bundle) do not show the balance on each individual partner’s capital account; they show neither an attribution of profit or drawings to those accounts.  One sees only a total.  One might question the accuracy of the accounts in the way that they reflect the interests of family members.  For instance, the accounts for the year ending 30 September 2001 state the partners to be Vatsal and Udi and make no mention of Mr Desai.  And the accounts for the year ending 30 September 2003, whilst showing Mr Desai (his share being divided between himself and Harshika – but nothing turns on that) as a partner again, also allocates a 6% share of profit to the Mother.  The balance sheet shows these shares of profit, including the Mother’s share, as added to capital account.  Those same accounts show Udi’s share of a total capital of £1,286,886 at £1,166,445 but there is nowhere anything in the accounts to show how his contributions and drawings as compared with Vatsal’s resulted in such a disparity.  Returning to the £80,000 shown as an addition to capital in the 1996 accounts, there is no way of knowing how it has in fact been allocated between Vatsal and Udi. 

339. The end position is, I think, as follows.  The Mother’s contribution of £30,000 has been reflected as a capital contribution by her in Cashco even though she is not a partner.  She has, however, had allocations of profit made to her – I know not why – and that share of profit, which remains undrawn apparently, should have been reflected in her capital account.  She has a claim to the amounts standing to her capital account.  Since she is not a partner, it is not possible to say that the balance on her account is not available to be withdrawn in contrast with the true partners.  There was, however, clearly no express agreement about paying interest.  In my judgment, she is not entitled to any especially as she seems in practice to have been allocated a share of profit which has been added to her capital account and which she can claim too.  So far as concerns the £80,000, Udi has not explained why he has shown this as a contribution to capital by Vatsal and himself.   He must have done so deliberately but there is nothing to suggest that the Mother agreed to this course or even knew of it.  It is one thing to say that Udi had her authority to make the payment but it is quite another to say that he could thereby unilaterally deprive her of the benefit of payment, especially when it would take the form of a gift, in effect, to Vatsal and Udi himself.  Even if a presumption of advancement might have applied had the Mother herself approved of the way in which the accounts reflected the £80,000 contribution, I do not consider that it can apply on the facts of the present case.  The upshot, in my judgment, is that the Mother should have the same rights in respect of the £80,000 as she has in respect of the £30,000.  In other words, the capital accounts should be adjusted to reflect the payment.

340. So far as the other payments to Cashco are concerned, I now turn to the question whether the monies paid into that account from the joint account in the names of the Father and the Mother were her monies or not.  As to the £31,000 deposit into the joint account, it is speculation on the part of Mr Sisley that it must have arisen from Cashco trading.  If then, that sum of money was owing from the Father and the Mother to Cashco and, unless paid by the end of the financial year, it should have featured in the Cashco balance sheet.  The only room for it in the accounts is against Trade Creditors.  It would be curious to find it there: but if it is there then either it has been paid since 1996 or it remains within the same heading for each subsequent year.  This seems unlikely.  I assume of course that the accounts provide a full picture of the trading activities.  It is always possible to imagine a dishonest scenario under which sales are not recorded in the profit and loss account with the undeclared receipts passing to an account outside Cashco such as the joint account.  It is not suggested, and could not possibly be suggested on the evidence before me, that conduct of that sort occurred.  Accordingly, I do not consider that any case is made out that the £31,000 payment into the Corporate Diamond account was other than the Mother’s money

341. In contrast, £60,000 was clearly transferred from the Gatton Road account in April, not long therefore before the June payment of £100,482 to open the Corporate Diamond account.  There is nothing at all to suggest that the beneficial owners or the account holders of the Gatton Road account intended to make a gift to the Mother – indeed such a suggestion would go wholly counter to the main thrust of Vatsal’s case that the Father and the Mother wished to hand assets down to the next generation.  Accordingly, I consider that the payment of £100,482 into the Corporate Diamond account was, as to £60,000, not made out of the Mother’s money. 

342. On my analysis, therefore, the contribution from the Mother to the Corporate Diamond account was not the £174,000 for which Mr Braithwaite contends, but £114,000 (ie £174,000 less £60,000).  The pro rata transfer to Cashco of the Mother’s money was therefore 114/412x £200,000 = £55,340 (I take a round figure, but it is near enough).

343. The £200,000 transfer on 30 June 1998 is shown as a capital contribution in Cashco’s accounts for the year ending 30 September 1998.  The accounts do not show how the £200,000 capital contribution was allocated among the partners (or indeed, partners and non-partners).  In my judgment, the Mother is entitled to assert a claim to £55,340 in the same way as her claim in respect of the £30,000 and £80,000 payments in 1995. 

344. The Mother’s claim therefore succeeds to the limited extent indicated above.

Harshika’s Claim to a Quantum Meruit
345. Harshika claimed in her Amended Defence to have a share in Cashco on the basis of (a) a promise made by the Father and (b) having worked without payment for many years in the business.  Alternatively, she claimed to be rewarded on the basis of a quantum meruit for the work she has done.  The claim to a share in Cashco was pleaded on the basis of a proprietary estoppel. 

346. In his written closing, Mr Braithwaite effectively abandoned the claim to a share in the partnership because, as he put it, the promise which Harshika alleges was made by the Father - that she would be made a partner - is too uncertain to be enforceable.  However, that does not preclude the possibility of a restitutionary claim (cf Cobbe v. Yeoman’s Row Management Ltd [2008] UKHL 55, [2008] 1 WLR 1752 at [40-44]), so he proceeds with the claim to a quantum meruit.

Limitation
347. Before considering Harshika’s case, I need to deal with a preliminary issue relating to the quantum meruit claim.  Harshika’s claim goes back for many years, the allegation being that she has worked full time for Cashco since 1986.  No formal defence was produced in relation to Harshika’s claim (made in her defence and counterclaim served in May 2005) until 30 June 2009 when Mr Sisley made an application to file a defence in the course of his closing submissions.  The issue of limitation – although not in the context of Harshika’s claim – had been raised by me with Mr Braithwaite in the course of his opening some weeks earlier.  A limitation defence was not mentioned in Mr Sisley’s written closing which had been provided to the court before 29 June when Mr Braithwaite started his oral closing submissions.  It may have been my discussion with Mr Braithwaite about limitation which triggered the preparation of the pleading which Mr Sisley sought leave to file. 

348. Mr Braithwaite did not touch on the question of limitation in relation to Harshika’s claim in his opening skeleton argument, his oral opening or his closing written submission: this is entirely unsurprising, since he had no reason to think that such a defence would be raised.  As I have said, Mr Braithwaite has effectively abandoned the claim to a share.  One reason why he abandoned the claim to a share in Cashco was because he considered that the quantum meruit claim was far stronger; he was entitled, as an advocate, to take that view and to run that case without running the claim to a share.  Continuing to press the claim to a share might conceivably have damaged the quantum meruit claim or at least have led me to view the quantum meruit claim more critically than I do.  He says that he presented the case and dealt with the evidence on the basis that the quantum meruit claim was not being resisted on the basis of a limitation defence.  Had such a defence been raised at the proper time he suggested, in his response to the late amendment application, that he might (he does not say would because this is all hypothetical in his submission) have presented matters in a different way and elicited evidence in a way which more strongly supported the case for proprietary estoppel than the actual evidence did.  Further, he has in effect abandoned the claim to a share in Cashco and has given his reason for doing so. It would be almost impossible for him now to resuscitate that claim now were I to allow a limitation defence to be raised to the quantum meruit claim and were the defence to succeed.

349. I am sceptical about what Mr Braithwaite could actually have done to improve the proprietary estoppel case.  His case on that issue depended critically on what took place in a conversation or conversations between the Father and Harshika herself.  If her evidence was insufficient to establish a proprietary estoppel, it is not easy to see what else could have done to bolster the case.  Mr Sisley makes precisely that point and says that Harshika will suffer no prejudice as a result of allowing a limitation defence to be raised other than the prejudice that such a defence may succeed.  His submission is to the effect that it cannot sensibly be said that Harshika is in any weaker a position than if the defence had been raised long ago.  The overriding objective therefore compels, he would say, the admissibility of a limitation defence. 

350. The position is now, in any case, different from what it was at the end of the hearing because I asked the parties, when preparing this judgment, to let me have any additional submissions they would want to make if in fact I allowed the amendment.  Mr Braithwaite has candidly accepted that Harshika does not consider that it is realistic to call any further evidence or to reformulate her case in a way that might defeat a limitation defence.   That is not to say that she (or Mr Braithwaite on her behalf) would not have sought to do so had the matter been raised much earlier, but it does reflect the reality that the alternative case would have been very, very difficult to run. 

351. Having been reminded of the case by Mr Braithwaite, I must take account of the decision of the House of Lords in Ketteman v Hansel Properties Ltd [1987] 1 AC 189 that a plea of limitation was a procedural defence that had to be pleaded.  The approach of the majority to the exercise of the discretion to allow a late plea raising limitation can be seen from the speech of Lord Griffiths at pp 219 – 20 from which I cite the following extracts:

“I have never in my experience at the Bar or on the Bench heard of an application to amend to plead a limitation defence during the course of the final speeches. Such an application would, in my view, inevitably have been rejected as far too late. A defence of limitation permits a defendant to raise a procedural bar which prevents the plaintiff from pursuing the action against him. It has nothing to do with the merits of the claim which may all lie with the plaintiff; but as a matter of public policy Parliament has provided that a defendant should have the opportunity to avoid meeting a stale claim. The choice lies with the defendant and if he wishes to avail himself of the statutory defence it must be pleaded. A defendant does not invariably wish to rely on a defence of limitation and may prefer to contest the issue on the merits. If, therefore, no plea of limitation is raised in the defence the plaintiff is entitled to assume that the defendant does not wish to rely upon a time bar but prefers the court to adjudicateon the issues raised in the dispute between the parties. If both parties on this assumption prepare their cases to contest the factual and legal issues arising in the dispute and they are litigated to the point of judgment, the issues will by this time have been fully investigated and a plea of limitation no longer serves its purpose as a procedural bar. [my emphasis]
If a defendant decides not to plead a limitation defence and to fight the case on the merits he should not be permitted to fall back upon a plea of limitation as a second line of defence at the end of the trial when it is apparent that he is likely to lose on the merits……

Whether an amendment should be granted is a matter for the discretion of the trial judge and he should be guided in the exercise of the discretion by his assessment of where justice lies. Many and diverse factors will bear upon the exercise of this discretion. I do not think it possible to enumerate them all or wise to attempt to do so. But justice cannot always be measured in terms of money and in my view a judge is entitled to weigh in the balance the strain the litigation imposes on litigants, particularly if they are personal litigants rather than business corporations, the anxieties occasioned by facing new issues, the raising of false hopes, and the legitimate expectation that the trial will determine the issues one way or the other. Furthermore to allow an amendment before a trial begins is quite different from allowing it at the end of the trial to give an apparently unsuccessful defendant an opportunity to renew the fight on an entirely different defence.”

352. Those observations remain, in my view, as true today under the CPR as they did under the rules contained in RSC in force at the time of that decision.  Nonetheless, the overriding objective is, as its name suggests, of the greatest importance.  If there is no prejudice to a person against whom a defence of limitation is taken (other than the mere fact of a defence defeating a claim), a party wishing to raise the defence has that important factor on his side.  That leads me to view with considerable sympathy Mr Sisley’s application to amend even at this late stage.  But what is so unusual – even if not unique – about the present case is this: Harshika’s claim to a quantum meruit for the period of time which is outside the limitation period must stand or fall on precisely the same facts as are relevant to her claim for the period of time within the limitation period (and which will form a significant part of the value of her claim if it is successful).  Harshika has not, therefore, been put to expense in preparing evidence or argument which, as a result of a limitation defence being successful, will have been wasted.  Nor has she been put to any expense in preparing the claim in respect of the period which does fall within the limitation period which would not have been incurred if the limitation point had been taken right at the beginning.  Further, although a limitation issue might not have arisen in relation to the alternative way of putting her case (that is to say, based on a contract) the evidence does not support a sufficiently certain agreement to be contractually binding and realistically there is no such evidence which can be called.  I have to say that I would find it very surprising in the light of the way that this litigation has been conducted that if such evidence existed it would not have been unearthed and presented.

353. Accordingly, I grant permission to Vatsal to rely on the limitation defence.  I therefore allow the amendment sought to be made in Mr Sisley’s proposed pleading.   I need only add that Harshika is entitled to take advantage of the relation back principle so that her counterclaim is deemed to have been brought on the same day as the claim so that Vatsal cannot rely on a limitation defence in respect of the period after 2 March 1999: see section 35(1)(b) Limitation Act 1980.  Mr Sisley accepts that consequence.

The quantum meruit
354. Harshika’s claim has not been entirely consistent over time.  In her Defence she says that she has worked full-time in Cashco since 1986 and sets out her responsibilities which on any view were substantial and not trivial.  The defence pleads as follows:

“Prior to beginning work for [Cashco] she was told by her father…that in return for such work she would receive a share in the [Cashco] partnership of the same 10% size as that held by [Mr Desai], her husband.  [She] understood from [the Father] that [Vatsal, Udi and Mr Desai] also agreed to this proposal from [the Father]” 

355. She then pleads reliance on this statement or promise and her understanding that she held a beneficial share by working without remuneration for 19 years and by investing £30,000 towards the purchase of 326 Cavendish Road.  In the alternative she claims a credit for the value on a quantum meruit basis of the work she has undertaken for Cashco since 1986 and an apportionment of the profit made on Cavendish Road. 

356. In her witness statement, she puts the case slightly differently.  Although the most important point she makes is the promise which the Father made, I think that the evidence which she gives about the context in which the alleged promise was made  is also important and refer to it in a little detail:

a. She refers to the sudden need, in 1980, for the Father to run the post office at 104 Kingston Road.  He asked her if she would do it for him.  She did this for nearly 2 years with the approval of her husband during which time “because circumstances would not permit it, I did not receive a wage from my father”.

b. Then the Father proposed the purchase of a retail unit at 15 Drury Lane.  She became a partner in that business with the Father and Kiran Patel.  She ran this business on a daily basis until 1985. 

c. She gave birth to her daughter in July 1986 when she went on maternity leave.  The Father later asked her to help in running the Cashco business. She agreed and started working there in 1987 (rather than in 1986 as stated in her pleading).

d. She then says this:

“I remember that as my father had been unable to reward me for my work at Kingston Road, he made it clear that the situation of Cashco would be different.  He said that he would either make me a partner in the Cashco Partnership or he would reward me for the work he wanted me to carry out at Cashco.  I agreed to work at Cashco on that basis; the agreement was reached because my father knew that I could not work indefinitely without any remuneration and that I needed some certainty that I would receive financial compensation if I was to devote my time to Cashco.  Having said that, [Udi, the Mother and Vatsal] were fully aware of and accepted what was promised to me by my late father and the agreement that we reached.  If I had not received this promise from my father I would not have committed myself to work at Cashco, for such a long period of time without receiving any wages over that time.”

e. There one sees the alleged promise itself which provides for an alternative reward, in contrast with the pleading which refers only to a partnership share.  The alternative claim in the pleading is made as a matter of the consequence of her work not in reliance on an alternative promise.  And one sees evidence carefully crafted to demonstrate all the elements needed to establish the claim.  She emphasised in cross-examination that the promise was made before she started work at Cashco.

357. The witness statement then goes on to describe the duties and responsibilities which Harshika undertook.  I do not need to go into the detail.  It is sufficient to say that I accept – and I do not think this was really challenged – that Harshika has worked significant hours at Cashco for many years with a real measure of responsibility.  Whether she has done so without remuneration is a matter I will come to in due course. 

358. There are a number of points which arise from Harshika’s cross-examination:

a. She accepted that she would have gone to work for Cashco whether or not the Father had made the promise she alleges “if my father had asked me”.    Accordingly, the fact that she did work at Cashco would not be inconsistent with her working without remuneration. 

b. She says that it was made clear that she would “be given a share or the remuneration” for her work. 

She said she would have thought that the share would be 10%, arriving at that figure because that was what her husband had.  This is rather different from the pleaded case according to which the Father himself said that the share would be 10%.  Later, Mr Sisley referred her to the pleading and what it states that the Father said, namely a 10% share.  She responded “Yes, same as my husband” and when pointed out that this differed from her earlier answer, she said “I probably didn’t understand the question”. 

c. That is simply not a credible answer; the earlier question was clear and the answer was clear.

d. So far as notification to Vatsal, Udi and Mr Desai of the promise by the Father and knowledge of it, the pleading states, as set out above, that she was told by the Father that they agreed to the proposal.  In her oral evidence, she felt able to tell the court that she was present when Vatsal and Udhyam were told.

“A. It came up in conversation quite often and my dad was quite open about it.  Not only my brother and my husband and my brother Vatsal Amin knew but my mum knew as well…..
……..

A:  They agreed, no-one objected, no-one said nothing.  What my father said, everyone took it for gospel.

Q.  So you were present and you remember them positively agreeing to what your father had said, is that your recollection?

A. Yes, sir.”

e. Mr Sisley pointed out to her that, in her pleading, she has said that she understood from the Father than Vatsal and Udi agreed, no mention being made by her of a discussion where they positively agreed.  She responded “Well, they did agree because they didn’t object when my father said it.  But they haven’t done it ‘til today”.   That answer did not really answer Mr Sisley’s question and does not meet his point. 

f. Harshika says that she did raise the question of remuneration with Udi.  This appears from the following exchange between her and Mr Sisley

“Q. Have you spoken to your brother Udhyam at any time since 1987 saying: okay, can I have a salary now?

A.  Yes, I ask him and he says: I'll sort you out.  He has not denied.

Q.  When did he say that?

A.  I asked him on maybe one or two occasions.

Q.  How many years ago would you have asked him that?

A.  It won't be like a specific time.  It might have come up in a conversation, like I would say jokingly: it's time you pay me.  Things like that.  I mean it's not a formal meeting to sit down and say: can you please pay me now.

Q.  Have you not pursued those questions: okay, you said you will sort me out, kindly do it?

A.  No, because I have faith in the family.  They not going to say no -- if I went to Udhyam and say: I'm in bad trouble today, give me a loan, give me something, I'm sure neither them will say no; and that is how my father brought us up, to stand by each other.”

359. Udi’s evidence in cross-examination was that he was not present when the Father said to Harshika that she would be made a partner in Cashco or would be rewarded for the work he wanted her to carry out.  He was asked by Mr Sisley whether the Father had reported to him that he had said something along those lines and responded “Not to me, not report in that sense”.   Udi suggested that it was “generally known that she would be rewarded” but “there was no specific conversation to say ‘my father said to me, you shall reward her’ but it was known in the family that she would be rewarded”. 

360. Udi was unable to identify any event or conversation to show when this came to his knowledge.  He did say that, on one or two occasions, Harshika “has asked me in the past that when can we talk about resolving this problem”.  He gathered that she would either become a partner or be rewarded.  When the matter was raised by Harshika, she “just generally asked me to resolve the problem in the past”; they did not discuss which solution was to be adopted or indeed ask for one rather than the other.  One at least of these occasions was after 1996. 

361. Udi was asked a number of questions about why he had not arranged to pay Harshika if, as he says, he was aware of the Father’s promise that she should either be a partner or be paid.  He really had no answer to this, at least from 1992, other than to say it was something which he should have done but had left undone.  Up until 1992, he thought that the Father may not have made arrangements to pay Harshika because Cashco was not in fact profitable: in the Father’s eyes it would have been stupid to pay a member of the family who will be rewarded at some stage from a business which was not making a profit.  After 1992, he said that he “wasn’t in the forefront of making those kinds of decisions while my father was around”.  And after 1992 it just got left on the shelf.  It should have been dealt with and it was his fault, he said, that it was not. 

362. Mr Sisley suggested to Udi that he was inventing the proposition that the Father had made a promise in order to cut down the amount which Vatsal would receive.  The response was this:

“Personally, I wasn't responsible for all those 19 years.  But since my father had said, that promise had been made, I will honour my father's promise and it's not an invention.  It's a fact.” 

He then went on to give an example of another agreement made by the Father which had been accepted by Vatsal and himself and put into effect.  The exchange went on:

“Q.  So in that instance, you put into effect what your father had agreed?
A.  I would like to think I want to put both things into effect what my father agreed.

Q.  Well Mr Talbot will interrupt me if I am mistaken but we have four bundles of correspondence in bundle I.  We have 11 bundles of documents in bundle G and I don't think we have anywhere in there a letter from you to Vatsal saying: ‘I really could kick myself.  We've let Harshika down badly by not paying her for 19 years.  Will you agree we should now pay her?"

A. I’m sure if things were better between myself and Vatsal that would have continued on and when we did address it, we would have both agreed to pay her.”

363. As to the documentation, Mr Sisley is correct in what he put to Udi.  There is no documentary support for Harshika’s claim.  Quite the reverse: the accounts of Cashco do not reflect any claim by Harshika to remuneration.  In particular, there is nothing in the balance sheet representing any debt to her.  Harshika says that she was perfectly happy not to receive remuneration because she was confident that she would be paid in due course; she was happy to leave the money in the business.  Even so, it is not easy to see why the accounts should not have shown the liability to her.  If it is said that this would have weakened the balance sheet (to a modest extent only, I would observe) this could have been avoided by showing the amount as a credit to a capital account as if she were a partner, as had been done with the amounts owing to the Mother at a time when she was not in fact a partner.

364. Mr Desai might be thought to be a person who would be concerned to establish his wife Harshika’s interest.  But he said nothing about this issue in his witness statement.  In his oral evidence, he said, to use my words not his, that the question of reward was a matter between Vatsal and Udi on the one hand and Harshika on the other.  His attitude is summed up in his own words: “I don’t interfere with their matters.  I’m just a sleeping partner in Cashco”.  He said he did not know that his wife might have a share until after dissolution of the Cashco partnership in 2005.  But then he said that something was said to the effect that she would get something before February 2005 although I have to say that the questions and the answers leave me in considerable doubt about whether his evidence was that he himself knew this to be the case before that time.  He said that Harshika told him she had asked Udi about her salary and he had promised to her that he would sort it out.  He could not place the date saying “three, four, five years” ago.  Mr Braithwaite, no doubt hoping to get out of Mr Desai that he attached importance to the promise asked a question, and received a reply, as follows:

“Q:  Mr Sisley said to you that for many years Udhyam did not keep his promise and you said that you did not think about it like that.  Could you tell the judge how you did think about it?

A: (Interpreted) Because the whole entire business is a family business and nobody ever needed anything like that, any monies like that, and there was no need for me to think that way either.”

365. The question, it seems to me, was asked on a wrong premise in that Mr Desai himself had probably known of the promise himself only since February 2005.  But the answer tells us how he would have regarded the position and how he must have regarded it since he did learn of the promise.  His answer is that Cashco was a family business and there was no need for anyone to think along the lines of who was entitled to what. 

366. Vatsal’s witness statement deals with Harshika’s involvement in Cashco.  He said there that she went to work at Cashco in about 1983 (some years before the time when Harshika herself says she started) at the time of the relocation to 166 Weir Road.  According to him, she asked to come to work at Cashco because she was dissatisfied with her job at Boots.  I pause here to remark that, if that is correct, it would be odd that she should ask to come to work for no remuneration, leaving a paid job at Boots. 

367. Vatsal says that he was a partner in Cashco at the time.  He knew she was going to start work but did not know and did not agree that she was to have any share of the business.  His case is that she came in “so as to represent Rahul [Mr Desai]” who, of course, had been given a 10% share by the Father although he did not work in the business.   He says that this was how the Father explained it to him adding that Mr Desai’s interest was not different from hers “as they were husband and wife and that is the Indian way of doing things”.  Vatsal’s case as he puts it in his witness statement is in effect that Mr Desai’s share is in fact Harshika’s recompense.

368. In his witness statement, Vatsal says that the Father never spoke of Harshika being entitled to any share in her own right or about her earning any share by her work.  He says

“The opposite, in fact.  Once when I was giving my father a lift into work he told me that Harshika was demanding a wage for working at Cashco, and he was going in to sort it out.  She and Rahul came to dinner that evening, and they seemed perfectly happy.  I do not know what agreement they came to.”

369. Vatsal could not place the date of this event accurately when questioned by Mr Braithwaite.  It was possibly as early as 1986 but he thinks it was much later.  He accepted that it was perfectly possible that the Father agreed with Harshika that she should receive some sort of reward for all the work she was doing at Cashco; and he agreed that whatever solution was reached between the Father and Harshika, she would have been satisfied with it.  It is, I would, add, not contended that what, if anything, the Father did agree was agreed other than on behalf of the partners in Cashco.

370. Vatsal accepted that Mr Desai had a 10% share in Cashco which he obtained in about 1981, some years therefore before Harshika started work at Cashco.  Vatsal’s case remained and remains that Mr Desai’s 10% is really held as to 5% for Harshika.

371. I need at this point to mention that Vatsal’s and Anju’s case is that Harshika was in fact remunerated for her work at Cashco.  She was, they say, paid in cash on a regular basis.  I will come to the detail of their case, and the evidence in support, in due course.  I mention it now because Vatsal responded in this way to Mr Talbot’s proposition that Harshika had worked for such a long time without remuneration:

“No, sir, I believe even my father was such a fair person, he wouldn’t have allowed it to go that far, without – you know, if you said on your own merits that my father was honourable, he would have paid my sister the wages due to her, and I believe she got her wages through the Cash & Carry, though cash”.

372. Now, that is an important answer because it shows that Vatsal believed that Harshika was being paid (even if she was not in fact being paid).  His case is that his belief is correct so that whatever promise was made by the Father has been fulfilled by actual payment in cash and by virtue of the enjoyment, with her husband, of a 10% share in the partnership.  But if, as a matter of fact, Harshika was never paid in cash or indeed at all – which, for reasons which I will explain in a moment, is my finding – then Vatsal is left in the uncomfortable position of asserting that Harshika is not entitled to a quantum meruit even though he, Vatsal, believed she was being paid when in fact she was not.  He must surely have thought that some sort of arrangement must have been made between her and the Father or Udi that she would be paid.

373. I also need to record this interchange between Mr Braithwaite and Vatsal:

“Q.  ……………was it your evidence two days ago that Harshika was actually being paid a wage while she was working at Cashco?

A.  I know she has been paid some sort of a wage, yes.

Q.  You know that?

A.  Yes.

Q.  How do you know that?

A.  Because nobody would work for 19 years without, you know, satisfactorily being paid in some way.

Q.  That's all you have to go on, is it?

A.  Yes.”

374. It has to be Vatsal’s case, however, that that is precisely the result which I should arrive at since he denies that Harshika is to be denied a reward on a quantum meruit if she has not, contrary to his case, already been paid.

375. Anju gave limited evidence on this issue of whether a promise was made.  She said this about Harshika’s claim in her witness statement.

"As we are a Hindu family and our custom is that shares in the family company go to the boys and the girls are expected to be supported by their husbands' families."

376. She adds that

“In an Indian family, there is no concept of private property separate from other members of the family.  We regard every members of the family as owning every family asset together.”

377. I do not find these general statements about the culture in an Indian family or Indian property rights to be of any assistance.   They are contentious statements and unsupported by evidence.  I have to judge this case by reference to concepts of English law and by reference to what is the culture and tradition of this family insofar as that is disclosed by the evidence.

378. As I have mentioned, it is part of Vatsal and Anju’s case that Harshika was paid in cash.  Mr Sisley did not push this very hard in his closing submissions.  He could hardly do so in the light of the evidence.  Anju had originally said that Harshika was paid in cash handed over in brown envelopes over the table at the family home at Kingswood Manor (and thus this evidence does not go to any period before the time when the family moved there in 1995 after the Father’s death).  Anju said in her witness statement that she often saw these envelopes being handed over and that she came to know that they contained money from one incident (the details of which I do not need to relate).   Further, she says that she heard Udi say, now and again when handing over the envelope, “these are your wages” in Gujarati.  She said that these events took place before 1998, so at most her evidence relates to a period starting some time in 1995 and ending at the end of 1997. 

379. Harshika accepts that envelopes sometimes were exchanged, for instance on birthdays, and occasions such as Diwali, Christmas and Easter.  This seems to me to be evidence which rings true and is a convincing explanation of what happened.

380. Vatsal did not say anything at all about this in his witness statement.  He did say he had seen “envelopes go past” and when asked when, replied “On her [ie Harshika’s] visits at home or at Cashco, whenever”.  His evidence was very confused (and confusing) on this issue.  His answers to Mr Braithwaite’s questions made clear he was speculating to a great degree and he became very defensive.  Having said clearly that on occasions he had seen brown envelopes pass (without being able to say how often) and that they contained money, he said this:

“I cannot prove a brown envelope and claim that there was a brown envelope there, but the sheer existence of that in the Cash & Carry business is quite obvious to people who work within Cash & Carry.”

And shortly afterwards, there was this exchange:

“Q.   How many brown envelopes did you see?

A.  Time to time, when I was there.

Q.  Three, four, five, ten?

A.  I cannot put numbers on it because I saw it time to time, but I am not suggesting in any way that that was the brown envelope which she got paid by or whatever, but I know she was rewarded in some way.

Q.  Well, I suggest that that's simply your speculation and you don't know about it at all?

A.  No, I know I am not speculating anything, sir.  I am telling the truth.”

381. I found this part of Vatsal’s evidence to be very unsatisfactory.  I do not believe that either he or Anju actually saw money in any envelope.  I do not accept that they ever heard Udi describe the contents as “wages”.  I agree with Mr Braithwaite that it is pure speculation on the part of Vatsal and Anju that Harshika had been paid and view their evidence on this issue as being wholly inadequate to establish their case.

382. In any case, one wonders, as did Mr Braithwaite, why on earth cash would be passed over at the family home (where Harshika did not live).  She herself worked at 166 Weir Road where the financial affairs of Cashco, in which she was closely involved, were carried out.  There would be no reason for a cash transaction to be carried out other than at 166 Weir Road.  I have no hesitation in rejecting this part of Vatsal and Anju’s case.  I am afraid that the fact that they were prepared to make the allegations which they did on evidence which has proved to be unreliable and the fact that they pursued this claim to the bitter end, reflects badly on them.

383. This is not to say that I have to disregard everything which Vatsal says about the promise to reward Harshika.  In particular, I accept his evidence that he did not know of any such promise until it was raised by Harshika following the termination of the Cashco partnership.  Her story has, as explained, not been wholly consistent and the detail of the way it has changed is not insignificant changing as it does from a claim to 10% share in her pleading to a share (simply assumed to be 10%) alternatively a wage in her evidence.  She has always asserted her quantum meruit as an alternative claim and it is on the basis of a quantum meruit that Mr Braithwaite now makes the claim. 

384. Her evidence in relation to the knowledge of Vatsal and Udi is, I consider, unreliable.  In her pleading, she asserts that it was the Father who told Vatsal and Udi and also that they approved.  In her oral evidence she says that she was present when they were told.  That evidence has to be rejected.  First of all, Vatsal denies that he knew about the promises. 

385. But even if I were to discount that evidence, Udi’s evidence is inconsistent with that of Harshika.  Although he says that it was known in the family that she would be rewarded, he accepted in cross-examination that the Father did not report this to him.  Whatever he understood by the use of the word report by Mr Sisley, I am quite sure that if the Father had ever said expressly to Udi that he had promised Harshika a reward, Udi would have said so in answer to Mr Sisley’s questions.  I certainly do not believe that there was any conversation at which the Father and Harshika were present when either Vatsal or Udi (or both) were told in clear terms that the Father had promised Harshika that she would be rewarded and I reject her evidence that there was such a conversation. 

386. Quite apart from that, neither Harshika nor Udi explain how it was known among the family that Harshika would be rewarded.  In this context, the family can only mean the Father, Vatsal, Udi (and their respective wives) and Harshika and her husband Mr Desai.  It is quite clear that Mr Desai had no knowledge of any of this until 2005 at the earliest.  One can immediately dismiss Anju as being the source of conduit of this family knowledge.  Since the promise, if it was made at all, was made by the Father in the presence of Harshika alone, it has to be one of them who first told someone else about the promise.  But, with two exceptions, there is no evidence that either of them ever did tell anyone else.  The two exceptions are these.  The first exception is that Harshika’s evidence to the effect that the Father told Vatsal and Udi about the promise clearly and explicitly in a conversation at which she was present, evidence which I have already rejected. 

387. The second exception is Vatsal’s evidence that he was told by the Father that Harshika was demanding a wage.   But that evidence is as consistent with Vatsal’s case as it is with Harshika’s case.  One might ask why the Father would have used language such as “Harshika is demanding a wage” if he had already promised her one, or even if she had been promised a share in Cashco.  It could be said that he would have reported to Vatsal that he had made a promise and now had to sort things out.  On the other hand, it could be said that the father was complaining that Harshika was demanding that he now implement his promise.  Vatsal does not, of course, know the outcome of the discussion which Harshika had with her Father, if indeed such a discussion took place.  There is, in any case, nothing to suggest that Vatsal told anyone else about this conversation with the Father, let alone that he communicated it as a recognition by the Father, or an understanding by himself, that Harshika would be paid.

388. Further, Harshika herself does not mention a discussion with her Father after she had started work at Cashco in her witness statement, no supplemental statement was adduced or questions asked in examination in chief and she was not cross-examined on this topic.  For all I know, she may say that no such discussion took place with the Father.

389.  So far as concerns general assertions to the effect that it was known in the family that Harshika would be rewarded, they are insufficient, even if they did take place, to indicate how, or the extent to which, she was to be rewarded or from what source the reward was to come.  If they did take place, they would however indicate that everyone knew that Harshika was not intending to work gratuitously and expected some sort of reward at some time.  This would be relevant to any quantum meruit claim.

The law
390. The parties all relied on the decision in Rowe v. Vale of White Horse DC [2003] 1 Lloyd’s Rep 418 (“Rowe”), a decision of Lightman J in the Administrative Court where a useful summary can be found of the essential ingredients of a restitutionary claim (Harshika’s quantum meruit claim can be categorised a restitutionary claim).  These are as follows:

a. A benefit must be gained by the defendant.

b. The benefit must have been obtained at the claimant’s expense.

c. It must be legally unjust that is to say there must exist a factor rendering it unjust, for the defendant to retain the benefit.

d. There must be no defence available to extinguish or reduce the defendant’s liability to make restitution.

See Rowe at paragraph [11] reflecting the speech of Lord Hoffmann in Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221 at 234.

391. I accept Harshika’s evidence that something was said to her before she went to work at Cashco in 1987 about having worked for nothing at 104 Kingston Road and that the situation at Cashco would be different.  Precisely how matters would be different is not at all clear.  I have only Harshika’s evidence about what was discussed; there is no contemporaneous documentation at all and, moreover, there is no subsequent documentary evidence to support any claim for compensation at all let alone the terms proposed.  Indeed, Cashco’s accounts do not recognise such a claim.  Harshika’s own case has, I have explained, not been consistent or, in all respects, credible.   Given the inconsistencies and the unsatisfactory way in which Mr Sisley’s questions were answered, I am not willing to find that the Father said anything as specific as Harshika now asserts – that he promised either a share or a reward (at least in the sense of payment as a wage).   All it is safe to conclude, in my judgment, is that the Father said things which led Harshika to think that her work would not go unrecognised by her father.  Whether that recognition would come in the form of a partnership share, a wage or some unconnected involvement in some other family enterprise was left entirely open.  Not only was the type of benefit not defined, nor was its quantum, value or timing or source of payment.

392. Vatsal himself must, however, be taking as accepting that there is (non-legal) merit in Harshika’s claim.  As already noted, he said that no-one would work for 19 years “without satisfactorily being paid”.  He said that, of course, to support his case that Harshika was in fact paid.  But if, in fact, she was not paid, as I held to be the case, then it would necessarily follow that she had done something which, on his assessment, no-one would do for nothing; and therein lies the merit of her claim. 

393. Accordingly, Mr Braithwaite argues that Harshika is entitled to payment on the basis of a quantum meruit by which I understand him to mean remuneration equivalent to that which Cashco would have needed to pay, over the years, to a third party employed to carry out the work done by Harshika.

394. I do not think that this can possibly be the correct result in this family context.  This is not a case of work carried out in anticipation of a contract or of services provided under an incomplete agreement where, had the reward been given or the agreement been completed, Harshika would have received the level of benefit for which Mr Braithwaite contends.  It is helpful, I think, to consider what would have happened if Harshika and her father had actually sat down together and resolved what she should be paid for her work.  There is no reason to think that such a discussion would have resulted in the level of remuneration which Harshika now asserts she is entitled to by way of a quantum meruit.   Such a discussion would have taken place in a family context where it must be remembered that Harshika’s husband had a 10% share but was, as he says, a sleeping partner playing no part in the business; and in a family context where the culture was for the family wealth to be ploughed back into the businesses.  The needs of the broader family (that is to say a group including not just the Father, the Mother, Vatsal and Udi and their wives and children but also the other children of the Father and the Mother and their own immediate families) were met from the assets of the broader family.  This was not a family where it would have been expected that Harshika would take what might be regarded as an ordinary commercial salary. 

395. This is a case of work carried out by a loyal daughter who worked in the family business controlled by her father albeit with a hope and possibly expectation of reward.  But as Harshika herself acknowledged, if the Father had asked her to work in the business without reward, she would have done so.  In similar vein, I have no doubt that, had the Father actually addressed the issue during his lifetime and ensured some financial recompense for Harshika at a level less than the “full” amount which Harshika claims, she would have accepted that.  On any footing, she could not expect to receive as a member of the family more than the business could afford.  In any assessment of the level of the quantum meruit which she should receive (if anything is payable at all) this factor will have to be borne in mind.

396. Harshika claims a rate of pay of £60,000 pa to £75,000 pa.  This is the figure at which she values her claim in her witness statement.  I can take that as no more than an assertion of the value of her work. Even accepting without question the amount of work she did, I am not prepared to accept the figure she claims – especially going back to 1987 without apparent change – without either expert evidence or strong supporting comparative evidence as establishing the commercial rate for her work – by which I mean the rate at which it would been necessary to pay an outsider with the necessary competencies to carry out the work which she in fact carried out.  Her claim as presently quantified seems to me to be an exaggerated claim.    

397. In this context, I should deal with the issue of Mr Desai’s 10% share in Cashco.  Vatsal suggests that Harshika’s work in Cashco is referable to that share and that she should not be entitled to anything else.  Mr Braithwaite, however, points out that Mr Desai was given his share by the Father some years before Harshika started working at Cashco and that her work simply cannot be seen as referable to that share.  I do not think that that follows.  It would seem to me to make some sense for Mr Desai’s share to be taken into account in assessing Harshika’s reward.  Suppose again that he had sat down with her father.  And suppose that he had said it was quite right that she should be paid but that her reward should reflect the benefit derived by her family (in other words her husband Mr Desai) from Mr Desai’s share which he the Father had given to him.  That would have been an entirely reasonable approach on the part of the Father.

398. This is not to say that the existence of Mr Desai’s share makes Harshika’s claim to a quantum meruit untenable.  If Mr Desai’s share had been seen by the Father as adequate reward for Harshika’s work, the Father would, in the original conversation with Harshika, surely have said that she could have no further reward because she was already enjoying through her marriage to Mr Desai the share to which he was beneficially entitled.   Accepting as I do that the Father said something to Harshika about recompense for her services, it cannot be that the Father said anything like that.

399. In rejecting a full commercial rate of pay, I take account of the fact that Harshika did not, during the Father’s lifetime, raise the matter with him again.  Instead, she loyally served at Cashco for no reward.  She only raised the question of reward with Udi on a couple of occasions and even in relation to that, it was not on the basis of a promise by the Father.  Even if the matter had come up in conversations, as Harshika and Udi both say it did, they only say that the understanding was that Harshika would get some sort of reward, not that the Father had promised her a share in the partnership or any particular level or reward. 

400. I note also that Udi himself has not, in practice, taken any steps to meet the claim which Harshika now makes.  Harshika hardly seems to complain about that.  She has not even pushed her claim to receive remuneration for the work she is currently undertaking or has undertaken since 2005 when she first articulated her claim.  Anyway, the fact is that this claim has only been raised in the context of Vatsal’s decision to terminate the partnership and to seek his share of the family assets.  I have no doubt that, if Vatsal and the rest of the family had not fallen out, Udi would have continued to do nothing about rewarding Harshika.  I also feel confident that Harshika herself would have done no more to further her claim to a share in the partnership or to remuneration than she had done over many years since the Father’s death.  She has been content not to put that strain in the business.  I would not be at all surprised to find that that continued to be her position with regard to the business now that it continues without the participation of Vatsal as a partner. 

401. Viewing the case against the criteria set out Rowe, Cashco has, I do not doubt, obtained a benefit.  That benefit has been gained, again I do not doubt, at the expense of Harshika assuming that there has been no benefit received by her to counterbalance the value of her work.  The limitation defence is available in respect of part of the claim but not the whole of it. 

402. The question then is whether there is an “unjust factor” that is to say a factor rendering it unjust for Cashco to refuse to recompense Harshika at all.  Since there is a limitation defence in respect of any time before 2 March 1999, we are concerned only with the partnership as constituted on and after that date, in practice Vatsal/Udi/Mr Desai in the proportions 45/45/10. And, so far as concerns Vatsal, Harshika’s claim runs only until the date of dissolution of the partnership on 28 February 2005.

403. I have found this a very difficult issue to resolve.  On the one hand, the case can be viewed simply as one of a family relationship not intended to give rise to any legal consequences.  On the other hand, as Vatsal himself said, who would work for 19 years without any pay?  The decision is not made any easier by the uncertainty of what the Father actually said.  My conclusion is that Harshika’s claim succeeds.  But it does not succeed to the extent to which Mr Braithwaite submits.  The question of what is fair remuneration in the context of the present case must be judged in the context of this family relationship in the context of this particular business and its profitability.  As to the quantum which Harshika should receive, there are three possible ways forward: the parties can attempt to agree, the matter can be referred to an enquiry or I can decide the issue myself.   An enquiry would be expensive and difficult to conduct.  And I suspect that the judge on the enquiry will not be all that much better placed than I am to make a final assessment.  It is true that he could be far better informed about the market rates from time to time for the services provided by Harshika; but those are only a starting point to which an inevitably unscientific discount (reflecting inevitably an element of subjectivity on the part of the judge) will have to be applied.  The parties might therefore prefer me to assess the amount myself.  But I am bound to say that this would be something akin to the spinning of a judicial roulette wheel.  I will hear further submissions on the way forward.

Minor partnership valuations
404. The minor partnerships are those identified in Schedule 1 to the Order of Michael Furness QC dated 2 March 2007 (Alfriston, Friends, Gatton, Lloyd Avenue, Global, Cavendish and Patco).  Pursuant to that order, Mr Callaghan was appointed to settle dissolution accounts for the minor partnerships as of 28 February 2005.  A timetable was laid down for any challenge to those accounts.  Once the accounts were agreed or any disputes resolved by the Court, Udi was to give notice whether he wished to proceed with a purchase of Vatsal’s share in the relevant minor partnership “at the value put on that share by [Mr Callaghan] or the Court”.  This was varied by an order of Arnold J dated 17 March 2009 to allow any partners in a minor partnership to bid.  Since Mr Callaghan’s valuation was to be made as of 28 February 2005, there can be little doubt that it was intended that the Court should adopt the same date in resolving any disputes.

405. Mr Callaghan produced his reports.  They are dated 10 February 2009.  Udi signified his acceptance of the valuations by a letter from Stephenson Harwood to Magwells dated 16 April 2009.  The other partners in the minor partnerships (except Vatsal and Anju) have signified their acceptances in their witness statements. 

406. Vatsal’s position when the trial opened was that he did not accept Mr Callaghan’s valuations.  During the course of the trial, various discussions took place, out of court, between the parties.  The upshot is that Vatsal and Anju now accept Mr Callaghan’s valuations (with one or two agreed alterations).  An agreement in principle was reached (the terms of which have not yet, I understand, been finalised) that Udi should purchase Vatsal’s and Anju’s interests in the Minor Partnerships.  I do not propose to say more in this judgment about the history leading up to resolution of those issues or about Mr Sisley’s objections to Mr Callaghan’s valuations.  That history will be highly relevant to the matter of costs. 

Valuation date for Cashco
407. Part C of Mr Furness’s order gave case-management directions for the pleaded issues not dealt within Parts A and B to stand adjourned for trial.  Since all parties agree that the Cashco partnership has been terminated, the pleaded claim is effectively for an order that the affairs of Cashco be wound up.  In practice, Udi has continued to run Cashco as a going concern.  I do not believe that Vatsal now seeks a winding-up but is prepared to see Udi buy his share.  I have resolved various issues which should enable a proper price to be agreed.  This is not a case, however, where the partnership agreement entitled Udi and Mr Desai to continue the partnership and to buy out Vatsal compulsorily.  I do not think that I have been asked to fix a valuation date for the purposes of enabling Vatsal to be bought out. I did not have argument about the appropriate valuation date. Mr Sisley wishes to contend for a present date, Mr Talbot wishes to contend for the dissolution date. Given that Udi has no right as a matter of partnership law, to buy Vatsal out at all, the issue is ultimately one for negotiation unless the court can be persuaded to order a buy out at a valuation. I will hear further submissions about the way forward after handing down this judgment.

The COMPANY PROCEEDINGS
The Law – unfair prejudice

408. The general principles of law concerning unfair prejudice petitions are well known.  I set them out in my judgment in Southern Counties Fresh Foods Ltd [2008] EWHC 2819 (Ch) at paragraphs 34ff.

409. The relevant statutory provisions are now found in sections 994 to 996 Companies Act 2006 (effectively re-enacting the provisions of section 459ff Companies Act 1985). Section 994(1) provides as follows:

"A member of a company may apply to the court by petition for an order under this Part on the ground –

(a) that the company's affairs are being or have been conducted in a manner which is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself) or

(b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial."

410. Section 996(1) provides:

"If the court is satisfied that a petition under this Part is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of …"

411. For a petition to be well-founded, it must establish (see Re Neath Rugby Ltd  [2007] EWCH 2999 (Ch) per Lewison J at paragraph 202) that:-

a. the acts or omissions of which it complains consist of the management of the affairs of the company;

b. the conduct of those affairs has caused prejudice to its interests as a member of the company; and

c. the prejudice is unfair.

412. The principles can, in large part, be distilled from the well-known cases of Saul D Harrison & Son plc [1995] 1 BCLC 14 and O'Neill v Phillips [1999] 1 WLR 1092: a shareholder generally needs to establish one of the following:

a. a breach of the terms on which he agreed that the affairs of the company should be conducted;

b. that equitable considerations (those referred to by Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 at 379) arising at the time of the commencement of the relationship or subsequently, make it unfair for those conducting the affairs of the company to rely on their strict legal rights;

c. that the board of directors has exceeded the powers vested in them or have exercised their powers for an illegitimate or ulterior purpose; or

d. some event putting an end to the basis on which the parties have entered into association with each other, making it unfair that one shareholder should insist on the continuance of the association.

413. There are a number of further points which need drawing out in the light of the facts of the present case.

414. One issue is the relevance of misconduct by a petitioner.  In Re London School of Electronics Ltd [1986] Ch 211, Nourse J. explained the relevance of misconduct by a petitioner [at 222]:

“The conduct of the petitioner may be material in a number of ways, of which the two most obvious are these. First, it may render the conduct on the other side, even if it is prejudicial, not unfair: cf. In re R. A. Noble & Sons (Clothing) Ltd [1983] B.C.L.C. 273. Secondly, even if the conduct on the other side is both prejudicial and unfair, the petitioner’s conduct may nevertheless affect the relief which the court thinks fit to grant...”

415. This proposition is now well-established. In Richardson v Blackmore [2006] BCC 276, CA, Lloyd LJ discussed the effect of the petitioner’s misconduct as follows [at 289, paragraph [53]]:

“…it seems to me clear that, depending on the seriousness of the matter and the degree of its relevance, such conduct would be capable of leading a court to deny the petitioner any relief at all, even though the conditions under s.459 are made out.”

416. Misconduct can have an impact on costs.  Thus one finds Lloyd LJ in the same case saying this:

“[62] It would have been open to the judge to have taken account of the misconduct in his order for costs.”

417. Conduct which may be taken into account is not confined solely to conduct which took place prior to the petition. In Grace v Biagioli [2006] 2 BCLC 70 it was held at p 96:

“[73] …The prospective nature of the jurisdiction is reflected in the fact that the court must assess the appropriateness of any particular remedy as at the date of the hearing and not at the date of presentation of the petition; and may even take into account conduct which has occurred between those two dates. The court is entitled to look at the reality and practicalities of the overall situation, past, present and future.”

This includes misconduct during the trial, as is shown again by Richardson v. Blackmore [2006] BCC. 276, CA, Lloyd LJ at [57]. 

418. Mr Talbot submits that the broad nature of the inquiry which the court should carry out before deciding whether relief should be granted suggests that conduct prior to the petition is a relevant consideration, whether or not it was known about at the time.  This approach, he says, is supported by the wording of section 994 which states that a ground for petitioning is that: “the company's affairs are being or have been conducted in a manner that is unfairly prejudicial” wording which, according to him, suggests that the determination of unfairness is, in principle, objective: it makes no reference to the state of knowledge of the petitioner or of the respondent. In determining whether the conduct complained of was unfair, the conduct of both petitioner and respondent, whether or not known about at the time, will be relevant considerations.  I agree with that submission although, as will become apparent, the principle matters of alleged misconduct – the wrongful withdrawal of money from VU Chem in June 2004 and the suggested hijacking of cash and papers from May 2005 – were both known to Udi and Bhavini prior to the removal of Vatsal and Anju as Directors.

419. Although I am not dealing with a winding-up position, the possibility of winding-up is something to which I return later in this judgment.  At this point, I note that Lewison J considered in some detail the relationship between winding-up on the just and equitable ground and relief under section 994 in his judgment at first instance in Neath Rugby Ltd [2007] EWHC 2999 at paragraphs 21 to 231.  It would be a work of supererogation to repeat his analysis and review of the authorities (in particular Re Yenidje Tobacco Co. Ltd [1916] 2 Ch. 426 and Symington v. Symington's Quarries Ltd. (1905) 8 F. 121).  I gratefully adopt what he says. 

420. During the course of that review, Lewison J considered the decision of Jonathan Parker J in Re Guidezone Ltd [2001 BCC 692.  Jonathan Parker J held, in effect, that conduct which is insufficient to found an unfair prejudice petition is necessarily insufficient to found a winding-up petition based on the “just and equitable” ground and conversely, I should add, that anything that would have justified winding up on the just and equitable ground will also justify the grant of relief under section 994.  Lewison J doubted the correctness of that approach.   The Court of Appeal has now agreed with Lewison J and held that Guidezone Ltd  should not be followed on this point: see Neath Rugby Ltd [2009] EWCA (Civ).

Offers
421. A respondent to an unfair prejudice petition can protect himself even where he has excluded a minority shareholder by making what Lord Hoffmann has called a reasonable offer.  If a reasonable offer is made, then the exclusion will not be unfairly prejudicial to the petitioner.  A petitioner who rejects a reasonable offer will not be entitled to any relief because he will not have suffered any prejudice.  The matter was put this way by Lord Hoffmann in O’Neill v Phillips at p 1107:

“But the unfairness does not lie in the exclusion alone but in exclusion without a reasonable offer. If the respondent to a petition has plainly made a reasonable offer, then the exclusion as such will not be unfairly prejudicial and he will be entitled to have the petition struck out. It is therefore very important that participants in such companies should be able to know what counts as a reasonable offer.

In the first place, the offer must be to purchase the shares at a fair value. This will ordinarily be a value representing an equivalent proportion of the total issued share capital, that is, without a discount for its being a minority holding. ……..

Secondly, the value, if not agreed, should be determined by a competent expert. The offer in this case to appoint an accountant agreed by the parties or in default nominated by the President of the Institute of Chartered Accountants satisfied this requirement. One would ordinarily expect the costs of the expert to be shared but he should have the power to decide that they should be borne in some different way.

Thirdly, the offer should be to have the value determined by the expert as an expert. I do not think that the offer should provide for the full machinery of arbitration or the half-way house of an expert who gives reasons. The objective should be economy and expedition, even if this carries the possibility of a rough edge for one side or the other (and both parties in this respect take the same risk) compared with a more elaborate procedure….

Fourthly, the offer should, as in this case, provide for equality of arms between the parties. Both should have the same right of access to information about the company which bears upon the value of the shares and both should have the right to make submissions to the expert, though the form (written or oral) which these submissions may take should be left to the discretion of the expert himself.

Fifthly, there is the question of costs. In the present case, when the offer was made after nearly three years of litigation, it could not serve as an independent ground for dismissing the petition, on the assumption that it was otherwise well founded, without an offer of costs. But this does not mean that payment of costs need always be offered. If there is a breakdown in relations between the parties, the majority shareholder should be given a reasonable opportunity to make an offer (which may include time to explore the question of how to raise finance) before he becomes obliged to pay costs. As I have said, the unfairness does not usually consist merely in the fact of the breakdown but in failure to make a suitable offer. And the majority shareholder should have a reasonable time to make the offer before his conduct is treated as unfair. The mere fact that the petitioner has presented his petition before the offer does not mean that the respondent must offer to pay the costs if he was not given a reasonable time.”

422. Lord Hoffmann said what he did in relation to the common sort of situation where the minority holder is looking to be bought out by the majority.  It is not always the case, even where a buy-out is the correct remedy, that it will be the majority shareholder who acquires the shares of the minority shareholder.  In some cases, the appropriate remedy might be for the minority to be entitled to buy out the majority.  It will not, therefore, necessarily always be the case that an offer by the respondent majority shareholder to buy out the minority at full value and with a payment of all costs would justify the striking-out of the petition although ordinarily that would be so.

423. In the ordinary type of case, however, where it is obvious that the correct remedy, if unfair prejudice is established, will be for the majority to be ordered to buy out the minority, a reasonable offer will protect the respondent.  He can apply to strike out the petition or, if he does not do so, can submit at trial (as is done in the present case) that the offer removes the unfair prejudice.  But what then is the position of the petitioner?  His petition will be struck out or dismissed at trial and he will no doubt have to pay costs.  But what can he then do?   The prejudice which, absent the offer, he has suffered remains.  Can he bring another petition based on the same conduct, thus in effect compelling the majority shareholder to repeat his offer (excluding, of course, the costs of the previous petition)?  Or will he be met with a successful plea that for the court to entertain the second petition would be an abuse of process?  It does not seem particularly just that, by rejecting a reasonable offer and suffering the costs consequences of doing so, he should lose altogether, the opportunity of departing from the company with receipt of a proper price for his shares.

The facts
424. The principal issue in these proceedings is that of alleged unfair prejudice by Udi and Bhavini; Vatsal and Anju claim to be bought out at a non-discounted valuation of their shares pro rata to their holding – 48% of the issued shared.  Less important, but not insignificant, issues are (i) the amounts owing to or by Vatsal and Anju on their directors’ accounts and (ii) Vatsal’s entitlement or otherwise to an indemnity in respect of his liability for dilapidations as the tenant. Although the unfair prejudice petition is a separate proceeding, it would be wrong to view it isolated from the general family falling-out and the break-up of the various family partnerships and division of other properties.  The activities of Udi in relation to the partnerships and family properties may inform some of the actions taken by Vatsal and Anju in relation to VU Chem.  That said, a great deal of caution must be had when it is sought by Vatsal and Anju to justify actions which they took in relation to VU Chem by reference to how they were, or at least perceived how they were, being treated in relation to the family’s business (and to some extent domestic) affairs as a whole.

425. Vatsal qualified as a pharmacist in 1981.  Anju is also a qualified pharmacist; so too is Bhavini. 

426. In 1982, a vacant shop, 6 Queenstown Road, Battersea, was found – Vatsal says by him and the Father but nothing turns on that.  The property was held under a lease under which the Father and Vatsal were the lessees.  VU Chem was formed on 21 May 1982 to operate the pharmacy business which opened at the premises around that time.  Vatsal says that the start up capital of £10,000 was lent to VU Chem by Cashco and repaid in due course out of profits.  That has not been challenged.  The shareholdings were these: Vatsal (and later with Anju) 49.9%, Udi (and later with Bhavini) 49.9%, the Father 0.2%.  The 0.2% share passed to the Mother under the Father’s will and has since been purchased by Udi and Bhavini from her.  The 0.2% share in practice would have given the Father (and after his death the Mother, who inherited the shares) the power to resolve differences between Vatsal and Udi concerning the affairs of VU Chem should any arise.

427. As to VU Chem, the intention of the shareholders was put succinctly by Udi in his witness statement: the company would be continued on the basis of the personal and family relationships between the shareholders; it was always understood that Vatsal, Anju, Udi and Bhavini would all work for the benefit of the company; and there was an understanding that the share of an individual shareholder would not be transferred outside the family. 

428. In 1986 Hall’s Chemists at 246 Wandsworth Road was acquired to become the second of the VU Chem pharmacies.  Vatsal’s picture is of an old and neglected shop full of old and out of date stock which he and Anju turned round in some 4 months so that, following modernisation, the trading figures improved dramatically.  Udi paints a different picture in order to show that Vatsal had a far less difficult task than he asserts.  Nothing turns on this but it is indicative of how, at every turn, each of the brothers loses no opportunity to denigrate the other. 

429. In 1987, two further premises were acquired for VU Chem, Harfleur’s chemists at Tower Bridge Road and at Stockwell station.  Vatsal says that this was done on his recommendation. That may be so, but the decision was that of the Father and Udi as well.

430. In 1991, VU Chem acquired 322-324 London Road, Croydon and 395 Walworth Road.  Vatsal says that he “found the purchases” through his professional contacts, which I accept.    The former property was rented out in 1997 when the pharmacy at that address was moved to 514 London Road, a property which VU Chem had purchased that year.  Another property, 24 Queenstown Road, was purchased. 

431. There is some dispute about the respective roles of Vatsal and Anju on the one hand and Udi and Bhavini on the other.  In his witness statement, Udi stated that Vatsal “dealt with the day-to-day administration of the pharmacies” while Udi himself was responsible for “the financial management, record-keeping and strategic management of the Company.” 

432. Vatsal, in his witness statement, set out his responsibilities at some length.  I accept that he and Anju “had the legal and professional responsibility of running the shops, recruiting and staffing the businesses, and purchasing and pricing stock”. Vatsal disputed in general terms that Udi undertook financial and strategic management.  He agreed, however, that “[Udi] supervised some bookkeeping and accounting tasks”.  There is, however, no dispute that the books of VU Chem were kept at its registered office at 166 Weir Road, which was also the office of Cashco .Vatsal wishes, of course, to paint a picture in which Udi and Bhavini had next to nothing to do with VU Chem.  On that basis, the removal of himself and Anju as directors and their subsequent resignation from their management positions is the more serious.  I do not need to make any findings about the precise detail of their respective roles.  It is enough to say that both sides were significantly involved in the management and strategic direction of the company.  On a day-to-day basis, Vatsal and Anju were responsible for and in charge of what went on in the pharmacies; but, again on a day-to-day basis, Udi and his staff at Cashco were responsible for the financial management of the company which was carried on at 166 Weir Road.   I am satisfied on the evidence that Udi gives a broadly correct description of the way in which the company was managed.  But that is not to say that Vatsal never had input into strategy and financial management (certainly he attended meetings with the bank manager on occasions and signed accounts) or that Udi and Bhavini never had any input into the day-to-day affairs of the pharmacies. 

433. As I have already said, the relationship between Vatsal and Anju on the one hand and Udi and Bhavini on the other hand, had deteriorated badly after the Father’s death.  They were all living together, with the Mother, at Kingswood Manor.  Vatsal and Anju decided that the two families could not continue living under the same roof; not only were they themselves becoming increasingly unhappy, but their children were being adversely affected too.  It does not matter who was to blame, if blame is an appropriate concept in this context at all; nor does it matter whether the perceptions and feelings of Vatsal and Anju were justified since they were clearly real and not manufactured for some ulterior motive.  Accordingly, Vatsal and Anju announced their intentions and sought Udi’s agreement to acquire a suitable property.

434. Udi puts the position somewhat pejoratively this way:

“In September 2003, my brother and his wife decided that they wanted to purchase an expensive house for themselves alone, as their private property.  The house they identified was on the market for £1.8 million.”

435. This was no doubt intended to give the impression that Vatsal and Anju were greedy with no concept of what could and could not be afforded.  Indeed, Udi says, quite possibly correctly, that the family businesses could not have afforded the drain on resources necessary to fund the mortgage which would be required to purchase such an expensive property.  Udi says that Vatsal and Anju simply did not accept his position on this matter.  It was as a result of this, according to Udi, that relationships began to deteriorate.   I do not think that that is so; I think that it was the deteriorating relationship which led to the request for assistance in purchasing a house although I am sure that the request made matters a lot worse.  Udi, for family and financial reasons, did not want to see a departure from tradition and culture which the split would represent.

436. That impression of Vatsal and Anju’s selfishness would not be fair.  It is true that one of the properties which Vatsal presented as a potential home was the expensive house which Udi refers to; I would not dissent from the proposition that this was a property which was too expensive and not suitable in the overall family context for Vatsal and Anju to acquire.  But they had put other proposals to Udi, including moving to 38 Woodmansterne Road which was still owned by the family and which, according to Vatsal, the Father had said would always be available if ever he and Udi had a problem living together.  I do not need to decide whether the Father did ever say that.  What is clear is that Vatsal suggested that he should move there but Udi refused to contemplate it or to consider how vacant possession might be obtained to enable Vatsal and his family to move there.

437. Further, Vatsal says, and I see no reason to doubt this, that he and Anju collected details of a number of possible properties with prices starting at £250,000 and going up to the expensive property which Udi has mentioned.  He says that he showed Udi a file of properties and asked which could be afforded without dragging any family businesses down: there was no response.  He suggested that a house be bought in the joint names of himself and Udi, but Udi rejected that.  I accept Vatsal’s evidence that these alternatives were suggested to Udi but were rejected.

438. Vatsal’s evidence is to the effect that he obtained the offer of a mortgage facility from NatWest but that Udi effectively blocked any borrowing by indicating that he would refuse to allow the mortgage payments to be made through any of the businesses and that he refused to allow Vatsal and Anju to withdraw capital from any of the partnerships to put towards the purchase of a house.  

439. Even if that is true, it is only part of the picture.  Sometime in the autumn of 2003, probably in September, Vatsal and Anju consulted Charles Russell.  That firm wrote to Udi on 3 October 2003.  The first paragraph of that letter is in the following terms:

“Vatsal and Anju have consulted me because they are unhappy that they do not have an opportunity to be as fully involved as they would like in the family business and they would like to know what is going on within that.  The unhappiness and the effect which this is having on, not just themselves but also their children, has meant that they feel it would be best for all concerned if they were to move out of the home that they share with you and other family members, to a new home that is owned in the same way.”

440. It appears that at about this time, Vatsal had had a telephone conversation with Mr Reading at NatWest.  The tone of the conversation cannot have been good.  This can be seen from two letters written by Mr Reading to Vatsal and Udi.  In the letter to Vatsal, Mr Reading states that it had become apparent in the conversation that the relationship between the two brothers had “reached a point where I felt it was necessary for me to look at the action required to protect the Bank from any claims of paying funds away inappropriately”.  A similar sentiment was expressed in the letter to Udi (dated 6 October 2003).  That particular potential problem was resolved with the bank mandate continuing as before with the agreement of Vatsal.

441. Matters were proceeding on Vatsal’s side with the potential house purchase.  On 16 December 2003, Charles Russell wrote to Udi informing him that Vatsal had had discussions with the bank and had now found a suitable property on the market at around £800,000.  The bank was said to be willing to provide medium term finance by way of a mortgage of £600,000 and £200,000 as a secured business loan.  The cost would be £3,000 per month on an interest only basis and £4,500 on a capital repayment basis.  An alternative was a bridging loan whilst Kingswood Manor was marketed and sold.  A third possibility put forward was that notice to quit be given to the tenant at 38 Woodmansterne Road; the property would be refurbished for Vatsal and his family who would all move in; following a separation of the business assets, Vatsal would be in a position to acquire another property, with 38 Woodmansterne Road subsequently being sold.

442. Udi’s response was not an outright rejection of all of these proposals.  He in fact made some proposals of a reasonably constructive nature including the possibility, previously rejected, of obtaining vacant possession of 38 Woodmansterne Road for Vatsal – with Vatsal taking all the necessary steps and bearing the costs to obtain vacant possession.  He adds this:

“To accommodate and resolve the current situation, I can if required, move out from Kingswood Manor, of course whilst not revoking any rights and only on a temporary basis to facilitate the immediate separation of both our business interests and the sale of Kingswood Manor.”

443. I note in parentheses here that this approach to the disposal of Kingswood Manor sits uncomfortably with the currently expressed views of both sides that nothing would be done without the consent of the Mother. 

444. Further, Udi says that, in about April 2004, he proposed to Vatsal that they should divide the assets and businesses between them, each taking assets of equal value, and suggest a mechanism for achieving this amicably, but Vatsal said he was not prepared to agree.  Whether or not is correct, matters were not resolved amicably.

445. From Vatsal’s perspective, the position reached in April 2004 was this: He and Anju wished to move out of Kingswood Manor; they wished to buy a house in their own names; they could not afford to do without financial assistance which could only come from the family enterprises; Udi declined to allow capital to be withdrawn or to agree that a mortgage borrowing could be funded.  What was he to do?

446. He sets out in his witness statement as to what he did do in this way:

“I decided to make a large withdrawal from Cashco, Britbuild and VU Chem both to secure myself and to force Udhyam’s hand to make him sit down and talk sensibly.  I ensured that the amount that I took was no more than we were entitled to out of the partnership and no more than accrued directors’ loan out of VU Chem.  In other words, I was not taking a penny that did not belong to me.  I calculated it otherwise as what we needed to set ourselves up elsewhere and meet our ordinary expenses.  I drew seven cheques from VU Chem totalling £51,727.  I drew a total of £248,155.50 from Cashco and £41,860.97 from Britbuild.”

447. It became perfectly clear from Vatsal’s cross-examination that he did absolutely nothing to ensure that he took no more than he was entitled to (or even what he perceived that he was entitled to); moreover, nothing in the terms on which the partnerships were conducted or in the constitution of VU Chem would have allowed these withdrawals to be made by Vatsal unilaterally.  Further, in spite of being pressed very hard on this, he could produce no explanation for the amounts of the seven individual cheques drawn on VU Chem.  The only rational explanation is that the amounts were chosen as other than round figures in the hope that Udi’s attention would not have immediately been drawn to them when he glanced over relevant bank statements.  He took the money which he did, not because he thought he was entitled to it but because he needed it to protect his position as he saw it and to force Udi to the table (if he needed any forcing). 

448. It is convenient to mention here that the recurrent reliance on the need to protect his position can only be taken as meaning having money to purchase a home in which to house a family.  There can be no suggestion that Udi was going to hide or dissipate assets.  A dispute about whether Vatsal should be able to take the value of his share of the businesses and VU Chem thus appears to have been seen by Vatsal as justifying the taking of action more appropriate to the protection of assets which might be lost through the wrongful conduct of other parties (that is to say, Udi and Bhavini). 

449. Udi, it is to be noted, also made drawings from VU Chem and some of the businesses.  Vatsal has listed them in his witness statement.  So far as concerns VU Chem, £80,321 was withdrawn on 28 September 2004 but Mr Sisley accepts that this came back.

450. Returning to the withdrawals from VU Chem, these were effected between 4 June and 28 June 2004.  On 12 July 2004, Udi received a letter from Magwells informing him that they now acted for Vatsal and Anju in place of Charles Russell.  They indicated that Vatsal and Anju wanted a complete break and that Udi was no longer authorised “to make any material decisions affecting any of the affairs of the business without approval in writing from this firm….” The reference to the business being to all the family businesses thus including Cashco, Britbuild and VU Chem.  They informed Udi of the payments totalling £51,727 from VU Chem which they held on client account, explaining that the money would be used for payment of rent, utility bills and general expenses incurred by Vatsal and Anju. 

451. Udi did not react immediately.  When he did react (which was in a letter dated 12 August 2004), it was not to give a reasoned response to Magwells’ letter but to demand, on behalf of VU Chem, repayment from Magwells of the monies paid out to Vatsal and Anju in June.  Repayment was not made.

452. The withdrawal of funds from VU Chem was not an end of Vatsal’s and Anju’s actions to “protect their interests”.  On 25 September, a transfer of £52,389 was made from Cashco: this transfer was not mentioned in Vatsal’s witness statement; a further transfer of £248,178, which is the amount he did mention give or take a few £s, was made on 27 September.  On the same day, a transfer of £41,860 was made from the Britbuild account.  These transfers were all made to Magwells’ client account.  None of them was made with Udi’s consent or even prior knowledge.

453. There is no doubt that these payments from Cashco and Britbuild caused Udi a lot of concern because Cashco was taken close to its credit limits.  Although this is not directly relevant to Vatsal’s unfair prejudice petition in relation to VU Chem, it is all part of the background against which I must judge the actions taken by each of Vatsal and Udi in relation to the company. 

The October Agreement
454. On 5 October 2004, Vatsal and Anju attended a meeting with Udi (representing himself and the other interests in the family businesses) at 3/4 South Square, Gray’s Inn.  Also present were Mr Sisley, Mr Prakesh Patel of Magwells, Mr Alan Bercow of Stephenson Harwood, his trainee and Mr Glen Davis (Udi and Bhavini’s then counsel).  The meeting ran into the next day.  The parties reached some resolution of the major differences dividing the family which was intended to lead in an orderly manner to the withdrawal of Vatsal and Anju from the family enterprises and the realisation of the value of their interests.  It was also intended to produce an adequate cash-flow for Vatsal and Anju in the meantime.  I need to describe the resulting agreement on 6 October (“the October Agreement”) which related to Cashco, Britbuild, VU Chem and B&K Investments Ltd (a vehicle holding certain family property investments) and a number of other partnerships.  It provided in summary as follows:

a. Vatsal’s personal tax liability of some £42,000 odd was to be met out of Cashco money held by Magwells, Vatsal’s solicitors.

b. Magwells were to transfer specified sums of money to the accounts of Cashco (£306,000 odd), Britbuild (just under £42,000) and VU Chem (just under £36,000).   This was money which had come into Magwells' hands as result of drawings from Cashco and VU Chem by Vatsal.

c. Each of Vatsal and Udi were to receive £1,750 per week from one of VU Chem’s accounts until further notice.

d. Each of Vatsal and Udi were to be entitled to draw down a further £6,000 against declared dividends of VU Chem.

e. Vatsal and Anju were to be able to draw down an amount to meet the school fees of their children, again against declared dividends.  £150 per month was to be allowed to each family for mobile phone bills.

f. Up to £2,000 could be drawn by Anju in respect of dental bills for her family, each of Vatsal and Udi were to be able to draw £1,500 to make charitable donations and provision was to be made for legal expenses of each side, again in each case against declared dividends.

g. All corporate credit cards were to be stopped.

h.  All direct debits (with an exception for life insurance premiums) were to be cancelled.

i. Bills for the upkeep of Kingswood Manor would continue to be drawn and paid from Britbuild.

j. Joint instructions were to be given for the sale of Kingswood Manor.

k. An independent expert was to be agreed upon to carry out a valuation of the assets, businesses and properties.

l. The parties were to preserve the value of the businesses in which they are interested pending resolution of their disputes.

m. There was an “entire contract” provision and it was stated that the Agreement supersedes all previous agreements, representations and understandings.

455. The October Agreement is important in the context of the unfair prejudice petition not only because it envisages payments being made from VU Chem but also because it forms an important part of the factual matrix against which the actions of the parties are to be judged.  It was not an agreement in terms for the sale of Kingswood Manor but it can be seen as governing the position for a reasonable period to enable what was then hoped would be an amicable resolution of the family differences and to enable a cost-effective and tax-efficient result to be reached.  The money which was to be returned was duly returned in accordance with the October Agreement.  Unfortunately, both sides now accuse the other not only of not honouring its spirit but also of breaching its terms.  So each side says the other is to blame for the absence of the amicable resolution which each says it sought.

456. Vatsal has not, however, demonstrated any breaches by Udi of the October Agreement.  He complains that on 2 February 2005, Stephenson Harwood wrote “forbidding any drawing from Cashco”.  That is not quite what the letter says; rather it explains why, in Udi’s view, Cashco was unable to meet the requests and demands for payment which Vatsal was making.  The October Agreement does not, in any case, make any provision for payment to Vatsal from Cashco or Britbuild.  It provides only for payments from VU Chem’s account.  So far as I am aware, there was never any refusal or failure by VU Chem to make the significant payments – including a regular payment of £1,750 per week – before it was terminated. 

The February 2005 Offer
457. Be that as it may, on 3 February 2005, Stephenson Harwood put forward an open offer by Udi to compromise all of the disputes concerning the businesses (VU Chem, B&K Investments Ltd, Britbuild, Cashco and the Minor Partnership).  The letter accuses Vatsal of delay and obstruction in implementing the valuations envisaged by the October Agreement and complains about non-observance of the spirit, although not the letter, of the October Agreement.  Under Udi’s offer, Vatsal and Anju would receive:

a. Udi and Bhavini’s share in Kingswood Manor.

b. Their shares in VU Chem

c. 12 of their shares in B&K Investments Ltd.

d. Their interests in Britbuild.

e. Their interests in Cashco.

f. Their interests in Kingston Road.

g. One-half of their shares in a number of the partnerships

h. One quarter of their interests in Global and Lloyds Avenue.

458. Under this offer, Udi and Bhavini would receive:

a. 23 Hambledon Place.

b. A gross sum equivalent to £800,000 net of all taxes.

c. Costs.

d. A tax indemnity.

e. A policy of IHT insurance.

f. An indemnity in relation to the costs of any future enforcement of the settlement agreement.

g. Releases and indemnities in respect of the businesses, the bank and third parties.

459. In addition, the interests of Udi, Vatsal, Anju and Bhavini in the Cavendish Partnership plus £100,000 would be transferred to the Mother to be settled on trust for her for life and on her death for other members of the family.  107A Rosendale Road would be transferred to Mr Martin.  Mr Desai would resign from Cashco.

460. This offer was rejected.  Vatsal says that this was because nothing was said about Locus Group (hardly surprisingly given the findings which I have made that Udi had no interest in Locus Group).  He also says that he did not know what liabilities he would be taking on, commenting that the family accountants had refused to release any information relating to those assets he would be taking over.  Given the time which Vatsal and his team had spent inspecting the books of the businesses, I am sceptical about this reason but I do not need to decide where the truth lies.  Having seen both Vatsal and Anju in the witness box, I would be entirely unsurprised to find the offer being rejected even if Vatsal had been satisfied that Udi had no interest in Locus Group and even if he had had all the information he could possibly need.  I say that because I find it difficult to think that Vatsal and Anju would have been capable of running these enterprises by themselves.  They had neither the training nor the expertise; nor I suspect did they have the aptitude. 

461. On 28 February 2005, matters were brought to a head when Magwells served notice terminating the partnerships.  It is common ground that the partnerships were effectively dissolved as of that date.  VU Chem however, remained unaffected by those dissolutions.

462. Udi has more to say about events between the date of the October Agreement and the date of the dissolution of the partnerships.  These events are to a greater or lesser extent, of relevance to the unfair prejudice petition.

463. The October Agreement provided that direct debits from VU Chem would be cancelled.  Udi’s first complaint is that Vatsal failed to cancel a direct debit in favour of Aequs Finance.  This resulted in payments of trivial amounts.  This trivial complaint does not warrant expenditure of further time or consideration by the court.

464. More serious is the failure to cancel a direct debit in favour of Whitgift School where Vatsal’s children were being educated.  The October Agreement made specific provision for payment of school fees.  This resulted in unauthorised drawings from VU Chem of £2,099 in each of October and November 2004.

465. The October Agreement allowed drawings of £150 per month from VU Chem (on account of declared dividends) for mobile phone bills.  Vatsal and Anju exceeded that limit every month by between £7 and £117.  This again is a trivial complaint in the context of this litigation.

466. More significantly, Udi complains of breaches of the provision in the October Agreement which obliges the parties to preserve the value of the businesses pending resolution of the disputes.  These alleged breaches relate to a rent review memorandum and deed for rectification in relation to 26 Tooting High Street, a proposed loan agreement between Global Investments and the bank and a legal mortgage required by the bank in connection with Knights Hill, all matters in relation to which it is said Vatsal failed to act in the interests of the business by failing to sign documents or to deal properly, or at all, with the matters.  Udi complains that Vatsal also declined to sign a number of other documents (including partnership accounts) in relation to several of the businesses.  The matters do not directly concern VU Chem or its business; I do not therefore propose to go into the rights and wrongs of the parties’ positions but observe only that differences between them only worsened the distrust between them. 

467. The October Agreement required the parties to meet again before 30 November 2004 to review progress and to take further decisions.  Stephenson Harwood wrote on 26 November 2004 stating Udi’s willingness to attend a meeting at their offices on 30 November.  On 29 November, Magwells replied stating that they were taking their clients’ instructions.  No meeting took place on 30 November and no further meeting has ever taken place.

468. The temperature continued to rise with Vatsal’s withdrawal on 17 December 2004 of authority for Sherwood Wheatley (who had for a considerable time acted as solicitors to Cashco and other partnerships) and Patel & Patel (who for a considerable time acted as accountants to Cashco and other partnerships)  to act on the instructions of Udi alone.  Vatsal had not raised the question of authority with Udi before acting as he did.  So far as concerns VU Chem in particular, the change in the way in which Patel & Patel had up to that time been operating, namely on Udi’s instructions, had not been raised with Udi or Bhavini at all, let alone in the context of a directors’ meeting.

469. I need at this point to refer to one incident which illustrates the sad state which relationships had reached.  Vatsal’s young son was, and may still be, a keen cricketer.  He was selected by his school to play in a team on a visit to Australia.  On 11 January 2005, Magwells wrote to Stephenson Harwood to inform them of this and identifying a cost of £1,500 for the fare, living expenses and equipment.  They ended their short letter with this:

“Please note that our client will be drawing this unusual expenditure from the VU Chem Ltd Expense Account.”

470. This withdrawal, was effected on that day, 11th January 2005.  It will be noted, that it was not authorised by the October Agreement.  It might have been better if Magwells had politely asked whether the unauthorised drawing could be made (which Udi, as an uncle might have approved in spite of the hostility with his brother) instead of writing as they did.  However, no immediate protest was registered.  Instead, in a long letter (to which I will refer in more detail later) dated 3 February 2005, Stephenson Harwood pointed out that the withdrawal represented a breach of the October Agreement and stated that the money must be repaid.  The point is emphasised by Udi who, in his witness statement, also says that the withdrawal was not authorised and was in breach of the terms of the October Agreement which were intended to impose strict limits on withdrawals, adding that Vatsal and Anju nonetheless made this unauthorised withdrawal.  

471. I am bound to say that Vatsal’s witness statement gives the clear impression – whether intended or not – that his son had the opportunity to go on the cricket tour but, because of a refusal by Udi to allow release of funds, he was unable to go.  But in fact he did go.  Be that as it may, according to the evidence which emerged in cross-examination, Vatsal and Anju borrowed the necessary funds from friends, albeit that they had previously drawn that amount of money from VU Chem (which remained unspent in Magwells’ client account).  Udi, for his part, attempted in cross-examination to distance himself from his solicitors’ letter, saying that he would not begrudge his nephew a cricket tour but pointing out that he was being presented with this drawing after it had been made. 

472. Mr Talbot, fearing no doubt that I might not approve of what had been presented by Vatsal as a refusal to allow payment for the cricket tour, emphasised the misleading impression given by Vatsal’s evidence.  He also puts what was said in the solicitors’ letter in perspective.  The complaint about the withdrawal of the £1,500 was only one part of a litany of breaches alleged in the letter; and, as Mr Talbot correctly points out, was a complaint made in the context of what might be seen as quite generous provision for Vatsal (and Udi too, of course) under the October Agreement. 

473. Some time not long after the October Agreement had been made, Vatsal and Anju retained the services of an independent firm of accountants, Weston Kay, to act as expert valuers on their behalf.  Udi took exception to this as being (a) a waste of money and (b) contrary to the spirit of the October Agreement.  At the end of October 2004, while Udi and Bhavini were on holiday, it appears that Vatsal attended with Weston Kay at 166 Weir Road, they were able to spend some time that day and subsequently, investigating and copying records and documents.  Udi says, on the basis of what he was told by Mr Desai, that Weston Kay spent from 9.00 am to 7.00 pm at the premises for approximately 10 days.  Mr Desai says nothing about this in his own witness statement.  I am sure that Weston Kay spent a substantial time at 166 Weir Road and were able to extract the information which they needed to carry out their task.

474. On 24 January 2005, Vatsal visited 166 Weir Road.  It is said by Udi that at the end of his visit he became agitated and was abusive to staff.  Vatsal denies this.  It is not clear whether Vatsal was there on Cashco business or VU Chem business or on both.  Even if he was agitated and became abusive, as to which I make no finding, this is of no relevance in my view to the question whether Vatsal and Anju have suffered unfair prejudice within section 994 and should have no impact on the relief to which they would otherwise be entitled.

475. On 31 January 2005, Magwells wrote to Stephenson Harwood informing them that Vatsal was anticipating an income-tax liability of about £80,000.  The letter stated that traditionally Udi had paid Vatsal’s tax liabilities from the Cashco account and sought confirmation that the impending liability would be met in the same way.  Such a drawing was not contemplated or authorised by the October Agreement: I expect that when that agreement was made, the parties expected that some resolution and further agreement would have been reached by this time. 

476. Udi’s evidence, which I see no reason to doubt, is that Cashco was then overdrawn to within £67,000 of its overdraft limit.  He also adds, which may be more questionable, that Cashco did not have cash or credit facilities available to enable such amounts to be withdrawn.  He says that it would not have been in the interests of Cashco to increase the level of borrowing which would have to be paid out of cash flow.  Accordingly, Stephenson Harwood wrote to Magwells on 31 January 2005 indicating that the respective partners would have to make their own arrangements.  I interpose here to say that, in spite of suggestions to the contrary, I do not believe that Udi met his own tax liability out of Cashco funds whilst, at the same time, refusing Vatsal the same facility.

477. For my part, I am sceptical about this part of Udi’s evidence.  I have little doubt that, had the brothers not fallen out, Vatsal’s and Udi’s income tax liabilities would have been funded one way or another out of the family businesses including by way of increased borrowing without Udi being unduly troubled by whether or not it was “in the best interests of Cashco” to increase borrowings.  But whether or not this is correct, tax had never, in the past, been met out of VU Chem’s funds; and the refusal to meet the tax out of Cashco’s funds cannot be seen as conduct (whether prejudicial or not) of VU Chem’s affairs for the purposes of section 994.

478. There then followed the letter dated 3 February 2005 which I have already mentioned, containing Udi’s open offer to settle the disputes.  I have described the offer but not yet dealt with other aspects of the letter.  In paragraphs 4 to 11 of the letter, a number of alleged breaches of the October Agreement are identified.  The letter purports to accept “your clients’ conduct (as summarised in paragraphs 4-11of the letter) as constituting, individually and taken as a whole” as a repudiatory breach of the October Agreement which was thereby terminated and with it any authority for Vatsal and Anju to withdraw any monies from VU Chem.  Paragraphs 4 to 11 identify the following alleged breaches:

a. Paragraph 4: Vatsal had used the period of nearly 4 months since the October Agreement to “pursue his own agenda, while conspicuously failing to assist in carrying the Agreement into effect”.  Vatsal was delaying by (wrongly) requiring a full investigation of the affairs of the businesses by his own accountants in order that he should be fully informed about those affairs.  It was not the intention of the October Agreement that “your client would have a protracted opportunity to conduct a unilateral review of the Businesses, nor that such a review would be paid for out of the limited free funds”.

b. Paragraph 5: As a result of Vatsal’s lack of co-operation, no single valuer had yet been appointed.  The October Agreement was thereby “stalemated”.

c. Paragraph 6: A complaint is made about a breach of the spirit of the agreement with particular reference to earlier correspondence complaining about delays in valuations, in the instruction of a valuer to value Kingswood Manor and in progressing the proposed amicable separation.

d. Paragraph 7: This deals with the cricket tour withdrawals.

e. Paragraphs 8, 9 and 10: Attention was drawn to the provision of the October Agreement requiring the parties to preserve the value of the businesses.  It was said that it was fundamental to the agreement that no step would be taken to wind-up the partnerships or dissolve the companies until appropriate valuation advice had been taken and advice about the best way to realise the value of the businesses and separate the respective interests of Vatsal and Udi.  In the light of that, concern was expressed about the termination of the authority of Udi alone to instruct Sherwood Wheatley and Patel & Patel.  All rights were reserved in case this should have resulted in a dissolution of the partnerships.

f. Reference was made to the Cashco incident.

479. Udi asserts that Vatsal has made a number of unauthorised drawings from Cashco.  He says, correctly, that there has never been any agreement that either he or Vatsal should be paid a salary by Cashco.  He also says, again correctly as a matter of fact, that since the dissolution of the partnerships on 28 February, Vatsal had not provided any services to Cashco or been involved in the management of Cashco.  I use the word “involved” since that is neutral as to whether Vatsal was excluded rather than simply taking no part voluntarily.  The evidence establishes that Vatsal withdrew 7 payments of £1,750 between 17 March and 25 April 2005 and £8,398 on 5 April 2005.  Equivalent regular weekly payments were due from VU Chem under the October Agreement unless it had been repudiated as Stephenson Harwood asserted.

480. At the same time as dissolving the partnerships, Vatsal and Anju purported to requisition a general meeting of VU Chem for the purpose of (a) selling the assets of VU Chem and placing it into winding-up and (b) agreeing remuneration for working for VU Chem in the sums of £80,000 pa for Vatsal and £55,000 pa for Anju.  The response to that was contained in a letter from Stephenson Harwood dated 11 March 2005 dealing with a number of matters and was to the effect that the resolutions as drafted would be opposed and would therefore fail in the light of the shareholdings – the Mother would vote against.  I will return to this in a moment, but I note here that Stephenson Harwood stated that Udi and Bhavini would in principle support an immediate cessation of trade and the voluntary liquidation of VU Chem.  VU Chem did not in fact convene a meeting pursuant to Vatsal and Anju’s requisition; nor did Vatsal and Anju themselves convene such a meeting. 

481. Stephenson Harwood’s letter dated 11 March 2005 contained some proposals concerning VU Chem.  In setting out Udi’s support for a cessation of trade and voluntary liquidation, they identified Andrew Conquest of Grant Thornton as liquidator, putting him forward because they considered that he would be acceptable to the bank which might otherwise appoint their own receivers under a number of charges.  It was pointed out that, pending formal steps to wind up the company, there was no agreement for any drawings from the company and that “there must be no repetition of your clients’ previous misappropriation of the Company’s funds” – a reference, I imagine, to the seven cheques drawn on VU Chem in June 2004.  After a holding reply, Magwells indicated that Vatsal and Anju accepted that VU Chem should be placed in voluntary liquidation but expressed concern about the cessation of trade, suggesting that if the company continued to trade a better price would be attracted.  Further, they rejected Mr Conquest as the liquidator, suggesting that they “can approach the ICA for a nomination”.  Subsequently, Magwells threatened an (unspecified) petition if the suggestion of an ICA nominee were rejected.   The petition in these proceedings was eventually presented on 28 September 2005.

482. Udi makes complaints about Vatsal’s conduct and in particular his behaviour on visits to 166 Weir Road.  Vatsal does not accept that his behaviour was as described, or that it was otherwise unacceptable or inappropriate.  I do not propose to go into the detail of these complaints; it would be difficult for me to resolve them and their resolution does not, so it seems to me, have any impact on the issues which I need to decide.  In particular, even if Vatsal was rude and aggressive to Udi and to staff of Cashco, it has no impact, in my view, on the question whether Vatsal and Anju have suffered unfair prejudice.  Even if Vatsal’s behaviour was as Udi suggests, it comes nowhere near behaviour which would disentitle him and Anju from relief to which they would otherwise be entitled.

483. I should, however mention one incident on 13 May 2005 when, according to Vatsal, he went to 166 Weir Road with the weekly takings but was denied access to the main office and made to wait in kiosk at the entrance.  He complains that he was rudely treated and humiliated in front of staff.  Udi for his part says that Vatsal was rude and aggressive.  Whatever the truth of this argument, Stephenson Harwood wrote to Magwells on 17 May 2005 forbidding Vatsal access to 166 Weir Road save on appointment. 

484. 166 Weir Road was not a property belonging to VU Chem; rather, it had belonged to Cashco.  Vatsal was, however, a former partner in Cashco and entitled, on one view, access to 166 Weir Road just as much as was Udi.  Further, the financial affairs of VU Chem were conducted from 166 Weir Road so that Vatsal does have some reason to complain that he was denied access by Udi.   Nonetheless, it needs to be remembered that this exclusion took place after Vatsal had served notice dissolving the partnerships.  In practice, the valuable businesses, in particular Cashco, had to be managed and it is hardly surprising that it was Udi who continued to do so as he had done previously.  The exclusion of Vatsal from Cashco’s premises needs to be seen in that light and cannot, I think be seen in any way as an exclusion of Vatsal from the management of the affairs of VU Chem.  I ought to add that Vatsal accepted in cross-examination that the only operational problem with the company was that he had been obstructed in his access to 166 Weir Road and delivery of cash and papers. 

Alleged hijacking of cash and records by Vatsal and Anju
485. Over a long period, the practice had been for deliveries of goods for sale in the pharmacies and drugs to be made by one of Cashco’s staff – in the period in question, a Mr Choudhery –  to the various pharmacies, usually once a week on a Thursday.  At the same time, cash would be taken for staff wages and cash takings would be collected.  Some time in December 2004 or January 2005, Vatsal arranged for this task to be taken over by one of his own (or rather, VU Chem’s) staff, a Mr Vora.

486. The financial and accounting affairs of VU Chem were conducted from 166 Weir Road.  All VU Chem’s books were kept there; and it was there that wages were dealt with too.  It was of course necessary for those carrying out the accounting functions to have the relevant financial documentation such as invoices and till receipts; these too would be collected on the weekly round and taken to 166 Weir Road.  In practical terms, all that side of the business was handled by Udi and his staff at Cashco; if Vatsal and Anju took any part in this, it was in a passive and non-interventionist way.  No complaint was made before the present disputes arose about how these aspects of VU Chem’s business were carried out.  Indeed, there is no allegation even now that Udi has carried out these functions incorrectly or inefficiently; and there is not, and has never been, a hint that Udi might have misappropriated funds for his own benefit or that VU Chem’s assets were in any way at risk from actions which Udi might take.  Rather, Vatsal’s and Anju’s complaints relate to their alleged exclusion from management of VU Chem, from being starved of funds as a result of refusal by Udi to countenance any resolution providing for their remuneration and by the adoption of a dividend policy which provided next to nothing for the shareholders.

487. In May 2005, Vatsal stopped sending the cash and supporting documents to Cashco for reconciliation.  Udi was therefore unable to carry out the accounting functions which for he had up to then been responsible.  I have no doubt that Vatsal was asked by Udi on several occasions over the next few weeks, both orally and in writing, to deliver the cash and paperwork to Cashco. 

488. On 20 May 2005, Anju sent a fax to the accounting staff at Cashco asking them to post cheques for payment of staff and pharmacists by registered post to the individuals concerned at the relevant pharmacies.  Up to that time, the wages had been taken to staff on the weekly round which I have mentioned.  It is not explained by Vatsal and Anju why, since they had retained the papers and takings, they did not take responsibility for this themselves.  I think it likely that they were simply not equipped or competent to carry out the payroll function which is why Udi arranged, as I am satisfied he did, for cheques to be sent as Anju had requested.

489. On the same day, Udi attempted to make arrangements for paperwork and weekly cash takings to be collected and for wages and goods to be delivered from Cashco.  Vatsal would not need to attend 166 Weir Road.  Udi says that he thereby hoped to avoid the unpleasant scenes which he says had accompanied Vatsal’s attendances at Cashco’s premises.  He wrote to staff accordingly.  Vatsal’s and Anju’s approach to the actions of Udi is to view them, along with nearly everything else which he did, as designed to undermine them and gradually to ease them out of the business. 

490. On 23 May 2005, Vatsal wrote to staff at the pharmacies signing himself as “Superintendent and Managing Director”.  Although he was the Superintendent Pharmacist, it had not been agreed that he would have, within VU Chem, the status or designation of “managing director” although it is true that he was a director and that he did manage the pharmacies on a day-to-day basis.  In that letter, he instructed staff to ignore the communication which they had received (ie the letter from Udi) and re-stated the arrangements which were to be in place, namely that he would personally visit the shops, deliver the goods, carry out necessary supervision, discuss all matters affecting the pharmacy, and collect all monies and paperwork.

491. Udi was concerned about the absence of cash and accounting records because of the difficulties it would create, in his perception, in the payment of creditors, the preparation of VAT returns and the completion of year end accounting and bank reconciliation.  I am quite sure that he is being entirely honest in explaining these concerns in his evidence; they are concerns which in my view were fully justified.  

492. It appears that, on 26 May 2005, Udi visited a number of pharmacies to collect money and paperwork.  He discovered that in fact Mr Vora had done a round the day before and had delivered these items to Vatsal at the Mayday Pharmacy (where Vatsal primarily worked).  I pause to note that I do not need to resolve the dispute between Vatsal and Udi about whether Udi “demanded” the takings from the locum pharmacist who was in the shop.  Thereafter, Udi did not go to the Mayday Pharmacy to obtain the cash and documents from Vatsal – he says that he did not do so because he wished to avoid a confrontation and believed that Vatsal and Anju had no intention of delivering these items to him or Cashco, a belief he was, I consider, fully justified in holding.

493. Udi did, however, write to Vatsal and Anju on 27 May 2005.  He asked for details of weekly wages and fees to locums to enable the relevant payroll to be processed.  He also asked for various other bits of paperwork to be delivered, pointing out that these were needed to complete VAT returns and to reconcile bank statements.   He gives evidence, which I accept, that the absence of paperwork was causing problems with creditors asking for payment of invoices about which Udi and his staff knew nothing.  Work on VAT returns, due at the end of June, was being delayed, and difficulties were being faced in completion of monthly PAYE and NI returns due on the 19th of each month.  Udi was concerned that action would be taken against VU Chem and that the failure to complete VAT returns would not only be a default but would actually result in adverse cash-flow for the company where the trading position was such that it was a net repayment trader.  Udi’s perception was that Vatsal was taking this action to put pressure on him, especially as it followed on from the request of 28 February 2005 for a resolution to put VU Chem into winding up.  Not only am I satisfied that that was Udi’s perception; I am satisfied also that it was correct perception. 

494. On the same day, 27 May 2005, Magwells wrote to Stephenson Harwood.  Their letter included the following:

“VU Chem
In the light of the recent obstruction at Cashco, your client [sic] clear attempts to frustrate our clients in the management and running of the operations of the business of V U Chem Ltd, we write to inform you as a matter of courtesy that our clients as of 13 May are now dealing with all aspects of the operations of the business of V U Chem.

As your clients are aware our clients have always been the primary managers and operators of the businesses.  Therefore to avoid any further operational problems, to the possible detriment of the businesses, it seems to us perfectly sensible that they should now take over all aspects of operations.

Please therefore instruct your clients to deliver up forthwith all books and records of V U Chem, including those in the attached Schedule B” [Schedule B included all invoices, files, all bank statements and all cheque books and paying in slips.]

495. Whether justified or not, one could not expect to see a much clearer intention than that on the part of Vatsal and Anju to exclude Udi and Bhavini from any role in VU Chem. 

496. On 10 June 2005, Udi wrote asking formally for delivery of a number of outstanding documents including counter takings, “Z readings”, audit roll, credit card vouchers, receipted invoices and details regarding employment of staff, pharmacists and locums.  He queried certain banked amounts and certain unexplained drawings from VU Chem’s expenses account.  Without these documents and answers to his queries, Udi was unable to complete the current VAT return or to deal with PAYE and NI contributions.  Stephenson Harwood also sought these documents by a letter dated 13 July 2005.  This produced a response from Magwells which, to my mind is surprising giving the refusal to deliver the documents, namely that “our clients will of course return to 166 Weir Road such documents and records that they have in their possession relating to VU Chem”.  The documents were eventually released at Magwells’ offices on 1 August 2005. 

497. Udi’s evidence is that, even before the attempt to exclude himself and Bhavini, he had concluded that it was not possible to go on with Vatsal and Anju as directors.  He lists 6 matters in particular in his witness statement leading to this conclusion:

a. Vatsal and Anju had tried to get Udi and Bhavini to agree to unsustainable withdrawals.

b. Vatsal had written cheques to Magwells for over £50,000.

c. Accounts went unapproved.

d. They had tried to liquidate the company and take control of its disposal.

e. Vatsal had been rude to bank staff.

f. They had hijacked the cash takings and records.

498. I should deal with those complaints at this point in my judgment. There is nothing in the first complaint.  It can hardly be described as improper in any way for a director to put forward matters of this nature for the consideration of the board.  Given that some at least of the supposed unsustainable withdrawals were to represent remuneration at a reasonable level for services carried out, I find it difficult to see how the suggestion that such remuneration should be paid can be thought to be anything other than appropriate.

499. As to the second complaint, it is certainly the case that these cheques were drawn.  But this was done well before the October Agreement.  Udi and Bhavini (and for that matter the Mother) did not consider that Vatsal’s actions had been so wrong that they warranted his dismissal as a director at that time; at least, they took no steps to remove him at that time..  It was only later, when no doubt relations between the two brothers were getting worse and worse because of events unconnected with VU Chem, that Udi sought to rely on these withdrawals.  In particular, Vatsal’s termination of the partnerships caused Udi a great deal of upset because he saw, on his own evidence, the disposal or closing of a business something which should never be done and which could bring shame on the family.  The money was, in any case, repaid save as provided for in the October Agreement Mr Sisley says that the payments were “waived” by the October Agreement, by which I understand him to mean that they could no longer be relied on as a wrong to justify the removal of Vatsal and Anju as directors. 

500. Moreover, once Udi and Bhavini had purported to terminate the October Agreement, Vatsal and Anju did not seek to misappropriate monies of VU Chem.  Indeed, the reverse was the case since they stopped drawing anything from VU Chem and instead drew sums of money from Cashco.  Those drawings may well have been unauthorised but whatever else they were they were not improper conduct vis a vis VU Chem.  In any case, the alleged reason for the removal – to allay the fear of further unauthorised drawings – could have been met easily by a change in the bank mandate; it would, I consider, have been a more proportionate response.

501. As to the signing of accounts, I do not recall any evidence that Vatsal and Anju had declined at all, let alone improperly, to sign any accounts of VU Chem prior to their dismissal as directors.  I do not think that there is anything in this complaint.  But even if there is, there does not appear to have been any adverse consequence and the failure hardly forms a justification, even along with other complaints, for their removal.  No doubt, in relation to later accounts which were unapproved, Vatsal and Anju would say “Of course accounts were unapproved: we did not approve them because Udi refused to give us adequate financial information”.  It is quite impossible to assess the rights and wrongs of the failure to sign the accounts without an entirely disproportionate enquiry of the detailed back-and-forth of correspondence and conversation.  I do not in any case have the complete picture in the evidence actually presented.  I suspect that neither side is free of blame and have the clear impression that this area is simply reflective of the hostility with which each side views the other.  It is not, in the context of this overall dispute, a matter which would render fair conduct (ie the removal of Vatsal and Anju as directors) which would otherwise be unfair. 

502. As to the attempt to liquidate the company, I make the same observations as in relation to the first complaint, adding that there is nothing to suggest that there would, in a liquidation, be any attempt to control the disposal of the company.  In any event, Udi himself had been content to go along with the liquidation route as the best way forward until it was realised that this could have an adverse effect on the contract with the NHS.

503. There is no evidence to suggest that Vatsal was rude to bank staff.  What is the case is that, as a result of Vatsal’s meeting with Mr Reading of NatWest, the latter became concerned about the bank’s position as a result of possible fall-out from the dispute between the brothers.  Perhaps Udi is concerned about the meeting with Mr Sethi on 9 November 2003, but it hardly seems credible that reliance could be placed on a meeting so long before the resolution to dismiss Vatsal and Anju as directors.

504. The hijacking of cash takings and records is a more serious matter.  This alleged hijacking and its practical consequences seem to me to be the only reasons with any substance or merit for removing Vatsal and Anju as directors. Udi makes a great deal of the fact of the alleged hijacking; but it must be remembered that Vatsal and Anju were as much directors of VU Chem as were Udi and Bhavini.   The latter had, in theory, no more right to company papers or to deal with company cash than the other.   Nonetheless, there had been established a clear division of functions.  Vatsal and Anju ran the pharmacies on a day to day basis; Udi and his staff at Cashco ran the financial side.  One can imagine the furore which Udi’s intervention in the day to day running of a pharmacy would have engendered; it is not surprising that Vatsal’s actions provoked the responses which they did.  It must also be remembered that, by the time of their removal as directors, Magwells had written their letter dated 27 May 2005; although this was at a time by which Udi and Bhavini had almost certainly decided to remove Vatsal and Anju, the fact is that, by the time of the EGM on 4 July 2005, Udi and Bhavini had been told that they were in effect being excluded from the business.  This could only have gone to reinforce Udi’s view of Vatsal’s and Anju’s conduct as a “hijacking” of the takings and company papers.

505. It is not so much the mere fact of Vatsal’s and Anju’s unilateral imposition of a new regime – or even the exclusion of Udi and Bhavini – which causes me to question their behaviour.  Rather, it is the way in which, having retained cash and company papers instead of providing them to Udi, they then dealt – or rather failed to deal – with the company’s affairs.  I am satisfied on the evidence that they failed to take a number of steps which they ought to have taken: they failed to ensure that the company met all invoices issued by suppliers, causing real and justified concern on Udi’s part that trading relations would be damaged; they failed to take any steps so far as I can see (and certainly any adequate steps) to ensure compliance by the company of its obligations in relation to VAT, PAYE and NI; and they expected Udi to continue to deal with staff wages and locum pharmacists’ fees whilst at the same time failing to provide him with the paperwork (and cash takings) to enable him to do so.  In spite of requests in writing and orally these failures remained unrectified from the middle of May until the date, 4 July 2005, on which Vatsal and Anju were removed as directors.  Indeed, documents were not finally and satisfactorily provided until well after that.

506. It is Vatsal’s assertion that he and Anju were “forced to take over the administration ourselves”.  In his witness statement Vatsal stated that:

“Anju and I were forced to take over all the administration ourselves. In addition to the other problems that would have arisen, if continuity was not maintained on day to day medical running of the shops we would have almost certainly lost our NHS contracts. An NHS contract requires a chemist’s shop to ensure continuity of service during adequate opening hours, with sufficient stocking to meet the needs of customers. Therefore I had to ensure payments to staff, to suppliers and to other creditors such as landlords…”

507. Mr Talbot submits that the explanations given in this paragraph are simply not supported by the facts. They are reasons concocted after the event in an attempt to cast the attempt by Vatsal and Anju to seize control of the Company in a more favourable light.  In reality, he says that their whole stratagem was to put pressure on Udi by withholding the cash takings in order to force him to the table again to give in to their demands.  Following very much Mr Talbot’s submissions, which I accept, the position as I see it is as follows.

508. Vatsal’s assertion that “Anju and I were forced to take over all the administration ourselves” is wrong. Vatsal and Anju were not forced to do anything: they chose to take over the administration of the Company without justification and for no good reason.  The financial administration had always been carried out by Udi and the staff at Cashco. It is clear from the communications which I have already considered (eg the fax dated 20 May 2005 from Udi to all the pharmacies to make alternative arrangements for collecting the paperwork; the fax dated 27 May 2005 from Udi to Vatsal and Anju requesting all the papers which they had retained) that Udi had not abandoned his responsibilities: Vatsal and Anju were not forced to take over the administration in the slightest.  On Vatsal’s own evidence there was no reason why the usual arrangements should not have continued. In cross-examination he admitted that there was no problem with Udi’s financial management.  He also admitted that there had been no interference with the running of the pharmacies.  It is therefore difficult to see why the NHS contract might have come under threat by the ordinary continuation of the business.

509. Vatsal may have been concerned about something rather different.  This rather surprising exchange took place between him and Mr Talbot:

“Q. So you decided to take those clear responsibilities away from your brother, didn’t you?

A. That’s right, because my brother didn’t want me to be there, sir.

Q. So you decided that you would change the financial management of this company without any notice or agreement from the board of directors, didn’t you?

A. Because their solicitors had written that they would willing to put a cessation of trade, and have it put into liquidation, and that was my worry, sir.”

510. I say that this exchange is surprising because Vatsal’s answers bear no relation to reality.  It is clear from the contemporaneous correspondence up until June 2005 that both Vatsal and Udi appeared content to put VU Chem into liquidation as a possible way of sharing the assets.  As already mentioned, Vatsal proposed calling an EGM to pass a resolution to liquidate the company on 28 February 2005 while Udi replied on 11 March 2005 that he would support such a liquidation in principle. The first reference to a risk to the NHS contract as a consequence of winding up VU Chem was made by Magwells in their letter of 17 June 2005:

“You and we have previously agreed that VU Chem should be placed into liquidation and the assets sold. We have come across a serious impediment to that plan. It appears that on the company going into liquidation, it would immediately lose its authority to fill NHS prescriptions”

511. Thus it can be seen that when Magwells discovered the NHS contract “impediment”, they properly brought it to Stephenson Harwood’s attention.  Udi clearly took that point on board: he did not suggest after that that VU Chem should be liquidated.  When it was pointed out to Vatsal in cross-examination that the NHS contract was not mentioned in Magwells’ earlier letter of 27 May 2005 (which sought to explain Vatsal and Anju’s conduct), Vatsal said: “There’s no mention because the solicitors didn’t even understand”.

512. I agree with Mr Talbot when he says that the suggestion that this was a concept too hard for Vatsal’s solicitors to understand is not credible. And I agree that a far more likely explanation is that the supposed risk to the NHS contract was not even recognised until June 2005, after Vatsal and Anju had begun to keep the cash and papers from the pharmacies.   I conclude that Vatsal and Anju’s retention of cash and VU Chem’s papers had nothing to do with concerns about the NHS contract and that this purported justification is made up with the benefit of hindsight.

513. Mr Sisley valiantly attempted to minimise the impact of Vatsal’s actions.  He accepts that there is a valid complaint insofar as the impact for VAT is concerned but says that there is no evidence of penalties of other adverse consequences.  He suggests that Vatsal and Anju paid staff and employees, using the chequebook until it ran out and then paying out of cash which they had received rather than banking it, relying on Vatsal’s evidence in his witness statement to that effect.

514. However, I do not accept that evidence.  Udi’s evidence is that he was experiencing problems with creditors questioning why their invoices were not being paid; and he says that staff were paid in accordance with the arrangements which he had put in place at Anju’s request.  I accept Udi’s evidence, not least because Vatsal eventually admitted in cross examination that not a single supplier had been paid during the period when he had control of the relevant documents as the following exchange show:

Q. “Which suppliers did you pay using the VU Chem Expenses Limited bank account, when you had control of all these papers?”

A. I’d only limited cheques, sir, there, and they were used to pay just the staff, sir.

Q. And also, of course, in early June –

Mr Justice Warren: “Does that mean the answer to Mr Talbot’s questions is: none?

A. None. Not that I can recall any, sir.”

515. He did not suggest in cross-examination that he paid suppliers in cash.  It would be surprising if he had done so given that suppliers had previously dealt with Udi at 166 Weir Road and some, at least, were questioning the non-payment of their invoices with him.  Mr Fazal, the accountant at Cashco at the time, made a statement (prior to his death before the hearing) that bills remained unpaid.  Further, the thrust of Vatsal’s evidence, namely that the financial affairs of the business continued to be conducted in apple-pie order, is clearly incorrect.  It is incorrect in relation to VAT as Mr Sisley acknowledges and Vatsal accepted in cross-examination.  This is a surprising default given that the need to make the VAT payment was specifically drawn to his attention in Udi’s letter to him of 27 May 2005.

516. Now it may well be that Udi and Bhavini were looking for ways of getting Vatsal and Anju out of the family businesses including VU Chem.  It may also be that Udi protests too much when he relies, as he does on all 6 of the factors for removing Vatsal and Anju as directors.  But that does not detract from the seriousness of the sixth complaint as to which Vatsal has not provided the court with sufficient justification. 

517. In any event, Udi and Bhavini requisitioned an EGM by notice dated 2 June 2005, Udi says with a view to removing Vatsal and Anju as directors by reason of their misconduct as just itemised.   The Mother apparently agreed that this should be done.  Vatsal and Anju did not attend the EGM which was convened for 4 July 2005.  Resolutions were duly passed removing Vatsal and Anju as directors.  There is no reason to doubt the validity of the removal.  The majority of the directors who, together with the Mother, were also the majority of the shareholders were able, as a matter of company law, to achieve this result. 

518. In terms of justification for the removal, it is only the sixth factor relied on by Udi and Bhavini ? the alleged hijacking of cash and documents ? which has, in my judgement, any substance.  But the fact that some reasons are relied on which do not provide justification for their actions does not preclude them from relying for justification on the remaining reasons.  I must make clear what I mean by the word justification.  In an ordinary case, shareholders and directors do not need to give or provide a justification – or perhaps even a reason – for dismissing a director.  Dismissal may have legal consequences however: if the director serves under a service contract, he may have an action for breach of contract and wrongful dismissal, and he may have a claim for unfair dismissal.  Another consequence is that the director may be able to establish that his dismissal is unfairly prejudicial conduct to him as a member of the company.  In this case, the company may be able to show that the director’s own conduct was such that his removal as a director was not unfair, even if it was prejudicial.  In that case, it can be said the removal was justified; and it is in that sense that I am using the words “justified” and “justification”.

519. In my judgment, the actions of Vatsal and Anju in relation to the cash takings and documents of VU Chem, taken by themselves and a fortiori when taken with the letter of 27 May 2005 purporting to exclude Udi and Bhavini from any management role, were actions which justified Udi, Bhavini and the Mother removing them as directors.  These actions may have been latched on by Udi and Bhavini as an excuse to do that which they wanted, and perhaps intended, to do.  But that does not excuse Vatsal’s and Anju’s actions or preclude Udi and Bhavini from taking advantage of the opportunity which was presented to them.

520. On the same day, Udi informed staff at the pharmacies that Vatsal and Anju were no longer directors and that he would in future make arrangements for the collection of takings and paperwork.  On the next day, Bhavini phoned the pharmacist in each pharmacy.  She says that this was in order to check that everything was in order at the branch concerned and to reassure staff that there would be no adverse implications for the business.  She denies Anju’s allegation that she told the pharmacists and staff that they were not to speak to Anju.  I make no finding on this dispute of fact.

521. Following their dismissal as directors, further resolutions were passed at a board meeting on 13 July 2005, terminating Vatsal and Anju’s authority to sign cheques of VU Chem’s bank accounts.  This was purportedly done on the basis that they had made unauthorised drawings (ie the drawings of some £50,000 odd prior to the October Agreement) and that they had failed to explain the withdrawal of some £10,749 from VU Chem’s expense account; and also because Udi and Bhavini were concerned about the possibility of further unauthorised drawings being made.  Vatsal’s evidence is that the £10,749 was used to pay wages.  That may or may not be so.  But even assuming it is so, Udi’s case is that there was a failure to explain that that was so or to demonstrate that it was so.  That, coupled with the concerns about previous withdrawals, means that Udi and Bhavini cannot sensibly be criticised for introducing a new regime for the writing of cheques and operating the bank account.  Vatsal and Anju may have felt offended but there was no unfair prejudice to them in their capacity as members in this decision on the part of the board.

522. On 18 July 2005, the counter assistant at the Tower Bridge branch telephoned Bhavini to say that the locum pharmacist was off sick; she had tried to reach Vatsal and Anju but without success.  Bhavini arranged for the attendance of a locum, Mr Mamoodi, and went herself to the branch to meet him.  She stayed with him for the morning.  Bhavini says that she had concerns about certain aspects of the administration of the branch which was Vatsal’s responsibility.  She says that there was confusion about controlled drugs and could find no note of the methadone register (a register which pharmacies are required by law to keep). 

523. It is one of the less appealing aspects of Udi’s and Bhavini’s evidence that they have sought to attack the professional standards of Vatsal and Anju by making these allegations about the methadone register.  Vatsal and Anju were both well aware of the importance of the register and the serious consequences for the business if the register was not properly kept and were that failure to be discovered.  I am satisfied that the register was properly kept and that it was readily available for inspection at the premises.  It may be that Bhavini was unable to find it immediately upon taking up duties at the pharmacy.  But both Vatsal and Anju knew where it was to be found – under the counter – and there is no evidence to gainsay Anju’s evidence that the regular locum pharmacists knew where it was to be found.  Not only was Bhavini’s evidence on this aspect unappealing in making the professional attack, it was misleading since Bhavini not only said that she could not find the register but failed to reveal that it had in fact been found and where it had been found.  Moreover, she quite wrongly continued to press her criticism of Vatsal and Anju in cross-examination.  I hope she will reflect carefully on this shameful conduct.

524. On 18 July 2005, Vatsal resigned as superintendent pharmacist.  He did not inform Udi of his intention to do so or even that he had in fact done so.  On 19 July 2005, a letter was received by VU Chem from the Royal Pharmaceutical Society of Great Britain informing it of the resignation; a request to appoint a new superintendent pharmacist was made.  Udi says, and I accept, that this was the first occasion on which he or Bhavini had heard that Vatsal had resigned.  It is a requirement for a pharmacy to have a superintendent pharmacist so that a number of shops were left without one for a number of days until Bhavini (who it will be remembered was a qualified pharmacist) was appointed.  I am bound to say that this behaviour on the part of Vatsal can only be described as shoddy; it did not do, but it might have done, serious damage to the business.  It certainly caused unnecessary inconvenience. 

525. Vatsal and Anju both chose to stop working for VU Chem altogether in July 2005.  They thereby removed themselves from their management roles.  The question then arises whether the circumstances in which Vatsal and Anju ceased to work resulted in their having been excluded from their management roles by Udi and Bhavini.  This question is closely connected with the allegation of deprivation of remuneration and financial advantage, which I consider later in this judgement and where I will deal with this point too.

526. Udi has presented me with detailed evidence about the hours worked by Vatsal and Anju.  I do not propose to lengthen this already over-long judgment by rehearsing the detail.  I am satisfied on the evidence that both Vatsal and Anju worked full hours in the pharmacies.  I reject the attempts by Udi and Bhavini to demonstrate – by reference to the extensive use of locums – that Vatsal was not really working full-time but was employing locums to carry out much of the work which he himself should have been carrying out.

527. A further attack is made on Vatsal’s professional competence.  It is said that he failed properly or at all to prepare for the new NHS Contract.  Bhavini explains how she found the businesses significantly unprepared for the new contract and that she herself had to spend a great deal of time in a great deal of a rush in order to put VU Chem in a position to retain business under the new contract.  Vatsal rejects that criticism.  He has demonstrated that he had undertaken a considerable amount of the necessary preparatory work (Bhavini issues the riposte that this was inadequate and inappropriate).  He also says that there was not the rush which Bhavini asserts; there was time, in practice, to introduce the required new practices over a longer period than the one apparently demanded in the formal requirements of the NHS.  This criticism of Vatsal is one latched onto in order to justify, by reference to the conduct not known of at the time, the removal of Vatsal and Anju as directors, such conduct being admissible in accordance with the legal principles already addressed.  In my view, it is not a major point.  Even if Vatsal was not as advanced in his preparation as he might have been, I do not perceive his dilatoriness as representing a serious threat to the business. 

528. Mr Talbot remarks that a great deal of effort (and cost) has been expended on this issue, but submits that it relates only to two points. The first point is that it provides a further small, but significant, reason why the removal of Vatsal and Anju as directors of the Company was not, with hindsight, actually unfair. More significantly, it provides a further reason why VU Chem should be valued at the date of Vatsal and Anju’s removal as directors so that they do not obtain the benefit of Bhavini and Udi’s work in remedying the situation which they, through their own fault, had left behind them. 

529. That puts the matter fairly tendentiously.  I am not prepared to make a finding on this petition that Vatsal’s conduct in relation to preparation for the new NHS contract would  have been such as to justify his dismissal as a director had it been known about before the dismissal. I make no finding either way.  Nonetheless, I ought to say this: if the failure was as serious as Udi suggests, that might be a good reason to dismiss Vatsal as superintendent pharmacist and as the executive in charge of the day to day management of the business.  I do not at the present time, however, see why that would justify his removal as a director, let alone the removal of Anju. 

530. As to the valuation date, there is something in the point; but it could equally well be met by allowing Udi and Bhavini some remuneration for their effort from VU Chem, especially given that they seek more general remuneration for the period since the date of the petition.

Offer by Vatsal and Anju dated 18 July 2005
531. On 18 July 2005 Magwells wrote to Stephenson Harwood making two offers on behalf of Vatsal and Anju, either of which was open to acceptance.  The first was for the assets of VU Chem to be sold and the company then be placed in members’ voluntary liquidation, the sale and liquidation being conducted by an accountant nominated by the president of the Institute of Chartered Accountants.  The second offer was expressed as “intended to conform to the guidelines in O’Neill v Phillips [1999] 1 WLR 1092”; it was for Udi, Bhavini and the Mother to purchase Vatsal and Anju’s shares.   Whether Vatsal and Anju were in a position to put such an offer – carrying costs consequences if the offer were rejected – will turn to a large extent on whether they had grounds for an unfair prejudice petition in the first place.  In the absence of unfair prejudice, a minority shareholder has no right to “put” his shares on the majority at full value.  Even if there is unfair prejudice, the consequences of a refusal to accept a reasonable offer can be reflected only in costs.  In contrast, where it is the petitioner who refuses a reasonable offer, that can eliminate unfairness altogether with the result that the petition will fail.  Although there was a reply to this letter dated 20 July 2005, there does not appear ever to have been an explicit rejection of the offers but nor has either of them ever been accepted.

Offer by Vatsal and Anju dated 5 December 2006
532. Jumping ahead, I record that a second offer was made on 5 December 2006 when Vatsal and Anju offered to buy Udi and Bhavini’s shares in VU Chem for £2.1 million. This offer was expressly linked to a requirement that Vatsal and Anju should be entitled to purchase the Patco Post Office property and business. The offer was not accepted. 

Offer by Udi and Bhavini dated 5 February 2007
533. Mr Callaghan was appointed following the orders of Peter Smith J on 10 May and 14 June 2006 to value the property of and shares in VU Chem as of 31 May 2005.  He produced his report on 20 September 2006, valuing the shares in the company in the range £3,415,000 to £3,495,000.  He was asked on behalf of Udi to prepare a further report to put a more precise value on the shares and to clarify his views on the “best price” for Vatsal’s and Anju’s shares in the company.  He provided that that further advice in a further report on 1 February 2007.  He concluded that the open market value of their shares as at 31 May 2005 would be £2,503 per share, or £1,300,384 for their 499 shares.  He put a value on the entire shareholding of £3,428,500, or £3,428.50 per share.

534. Udi and Bhavini then decided to make an offer to Vatsal and Anju based on the undiscounted value (ie ignoring the fact that Vatsal and Anju held a minority interest and instead taking a pro rata amount based on the value of the entire shareholding in the company).  The offer, which was unconditional, was set out in a letter from Stephenson Harwood to Magwells, dated 5 February 2007; it was to acquire Vatsal’s and Anju’s shares for £1,710,822 and included an offer to pay Vatsal and Anju’s costs on the standard basis.  In addition, Udi and Bhavini agreed to waive any claim in relation to past drawings from VU Chem, even though, according to them, Vatsal and Anju had drawn £129,000 more than Udi and Bhavini at this date. This offer was worth, according to Udi and Bhavini, a further £64,500 on top of the full value of the shares and costs.

535. The offer was not accepted within the period of 21 days for which it was expressed to be open for acceptance.  Indeed, there was not even a reply to the offer within that period.

536. Both of Mr Callaghan’s reports were ordered to stand as evidence of the Company’s shares as at 31 May 2005 by the Order of Mr Michael Furness QC dated 2 March 2007.

537. In February 2008, Udi purchased the Mother’s 2 shares in VU Chem since when he and Bhavini have had a controlling interest in the company. 

Dividends after 2003
538. Udi and Bhavini’s position is that VU Chem performed well in 2004 and that it would have been appropriate to declare a substantial dividend.  They say that it was not possible to agree a dividend recommendation with Vatsal and Anju while they were directors so that, while they remained directors, a dividend was not declared.  Far from preventing Vatsal and Anju from sharing in the profits, Udi and Bhavini would say that the blame for the absence of a dividend lay with Vatsal and Anju.

539. The formal position is this.  On 19 October 2005 (and therefore after Vatsal and Anju had been removed as directors), Udi and Bhavini resolved to recommend that a dividend of £100,000 should be declared for the year ending 31 May 2004.  A document of that date is expressed in language recording that the members, by written resolution signed by Udi, Bhavini and the Mother, resolved that such a dividend should be declared.  This document was sent to Magwells on 28 October 2005 requesting Vatsal and Anju to sign it.  They declined to do so.  Accordingly, on 12 December 2005, Udi and Bhavini requested the directors to convene an EGM giving special notice of their intention to propose a resolution to bring about that dividend declaration.  They also wrote to Vatsal and Anju to tell them about this request.  Questions were raised by Vatsal and Anju; they sought information (which Udi says they already had) and queried why the dividend was not larger.  According to Udi in the light of this, he and Bhavini decided not to proceed with the EGM so that no dividend was declared.  Some time later, a dividend of £200,000 was declared for the year ending 31 May 2005 to compensate, according to Udi, for the fact that no dividend had been declared for the year ending 31 May 2004.  I accept Udi’s evidence about that.

Vatsal and Anju’s position
540. Although the bare facts of the events which I have related are not open to question, Vatsal and Anju say that they do not reflect the reality of what was happening.  They suggest that the events represent an unfolding of a strategy by Udi and Bhavini to marginalise them in the management of the partnerships and VU Chem with a view to forcing them out on financially disadvantageous terms.  Almost every aspect of Udi’s and Bhavini’s behaviour is interpreted in that way, including Bhavini attending a course designed to bring her pharmacy qualification more up do date shortly before Vatsal and Anju were removed as directors. The actions which they took were, they say, entirely justified in the light of the conduct of Udi and Bhavini.  They go further, of course.  Not only was their own conduct justified and fair, the conduct of Udi and Bhavini was unjustified and unfair, unfair not only in a common-sense way, but unfair in the way which constituted unfair prejudice for the purposes of a petition under section 994.

541. In this context, they say that it is appropriate to look at the conduct of Udi and Bhavini not just in the context of VU Chem, but rather in the context of an overall family dispute.  To view their conduct in relation to one part of the family enterprise – VU Chem – divorced from their conduct in relation to other parts of that enterprise – the partnerships – would be wholly unreal; the rights and wrongs of Vatsal’s and Anju’s conduct in relation to VU Chem cannot be viewed in isolation.  This is particularly so, it is argued, bearing in mind that VU Chem is clearly, or so it is said, a quasi-partnership the affairs of which have in practice been conducted in precisely the same way as the affairs of the non-corporate businesses. 

542. The essential complaint of Vatsal and Anju is that they have been starved of funds – implicitly so far as concerns this petition improperly starved of funds by VU Chem.  They (have to) say that this starvation has led to – and justifies – the actions which they took in relation to VU Chem.  They say that this starvation, both of funds from VU Chem and the partnerships, was all part of Udi and Bhavini’s campaign to obtain ownership and control of all the enterprises and to marginalise them.  That allegation needs to be viewed with some circumspection in the light of the funds which have, one way and another, been obtained, perfectly properly, by them from the family businesses including VU Chem. 

543. It is also to be remembered that the October Agreement gave them a significant income during the period which it envisaged for resolution of the disputes.  This income and the payments which I have just mentioned do not together immediately appear to be properly categorised as a starvation of funds. 

544. Nonetheless, at the time of his main witness statement in April 2009, Vatsal complained that a dividend was to be voted for 2004 “but still we have received nothing”.  I have already explained the position in relation to dividends from which it can be seen that, as a matter of fact, a dividend for 2005 of £200,000 was declared.  Vatsal and Anju’s shares of that dividend were credited to their respective directors’ accounts. 

545. There has, however, been a refusal by Udi to allow VU Chem to repay to Anju the amount standing to the credit of her director’s loan account.  Even if it is appropriate – which is highly questionable – to set off against the balance owing to her the debit on Vatsal’s account, is a net sum of nearly £64,000. 

546. This plan to starve out Vatsal and Anju, as they now perceive it, was they say put into effect early on.  Vatsal refers to the cricket tour dispute which I have already addressed in some detail.  He complains that Udi has taken over the businesses – that of VU Chem and of the partnerships – and has paid nothing since early 2005, stopping payments of direct debits out of Cashco (including direct debits on life policies) and stopping payment of school fees and university fees for his children.  He relates what he perceives as a vindictive action on the part of Udi in taking a car (a red VW worth about £2,000 apart from the number plate) in Vatsal’s possession which had a personalised number plate “VBA 1”.  He contrasts that with the three Mercedes cars which Udi drives, again with personalised number plates.  In his witness statement, he attempts to paint Udi in a particularly bad light pointing out that these vehicles cost £60,000, £50,000 and £70,000.  But he makes no attempt to state their current values which, on any footing, are nowhere near that valuable.  

547. One item of expenditure in particular is a cause for complaint.  Historically, even if adjusted later at the year end, the income tax on Vatsal and Udi’s income had always been met by Cashco.  Since 31 January 2004, no such payments have been made so that Vatsal has had to find the money himself.  In his witness statement, Vatsal draws a contrast with Udi in relation to whom he says “I am sure that Udhyam has taken his payments from Cashco; there is nowhere else he could have got them from”.  Udi’s own evidence is that he has not funded his own income tax from Cashco as Vatsal alleges.  I do not have the material on which to resolve that issue, but remark only that so far as the evidence before me goes there is nothing to support Vatsal’s certainty which seems to me to be mere speculation.  Vatsal laments that his straightened circumstances mean that his hopes to fulfil the Father’s social role have had to be abandoned; he has been unable to live up to the social status that the Father earned for his family, a matter of considerable distress to him.

Vatsal’s and Anju’s complaints
548. In formal terms, the overarching complaint of starvation of funds is articulated in the Particulars of Claim and fall under the following headings:

a. Exclusion from management;
b. Deprivation of remuneration and financial advantage;
c. Breach by Udi and Bhavini of obligations of trust and confidence;
d. Wrongful refusal to allow realisation of share value; and
e. “Engrossing” by Udi and Bhavini of Vatsal’s and Anju’s interests in VU Chem.

549. Vatsal and Anju contend that the above acts, which are further particularised in the Particulars of Claim, were carried out in order that Udi could take over VU Chem and deprive Vatsal and Anju of any benefit from it.

550. I have already dealt with the first of those complaints insofar as concerns the removal of Vatsal and Anju as directors.  Another aspect of exclusion from management is their resignation from all management roles within the company.  They resigned because they were not prepared to work for nothing and Udi had refused to contemplate the payment of any remuneration. 

551. Mr Talbot suggests that, in practical terms, the removal of Vatsal and Anju as directors need not have affected their roles in VU Chem or Vatsal’s role as Superintendent Pharmacist at all.  This, he says, was made clear in a letter from Stephenson Harwood to Vatsal and Anju on 13 July 2005 (and thus at a time after they had been removed as directors but before they ceased working at VU Chem and before presentation of the petition on 23 July):

“We are instructed that, as long as the position regarding the accounting records is regularised immediately, the Board are in principle content that Mr Vatsal Amin should continue to act as the Company’s Superintendent Pharmacist, on the same basis as hitherto.”

552. Mr Sisley comments that slavery has been abolished.  It seems to me to have been perfectly reasonable for Vatsal and Anju to resign in the absence of any remuneration agreement (although the manner of their going left much to be desired).  I add a further comment about this quoted passage.  What this shows is that Udi and Bhavini did not consider that the actions of Vatsal and Anju were sufficiently serious for them to be removed from management posts within the company, but only that they should be removed as directors so that they would be subject to the control and supervision of a board which excluded them.  It is also consistent with the fact that Udi and Bhavini did not use their powers as directors or shareholders to remove Vatsal and Udi from their management roles within the company. 

553. It is therefore correct that what Stephenson Harwood wrote is true in the sense that Vatsal and Anju did not need to cease providing services (unpaid) to VU Chem simply because they had ceased to be directors.  But Mr Talbot goes on to accuse Vatsal and Anju of being disingenuous in claiming that this meant that they should continue to work for no pay.  He says this in his written closing:

“They had never been paid a substantial salary by VU Chem, and they did not expect to be so paid. Their principal remuneration came through dividends and through the profits of the partnerships in which Udi and Bhavini worked [Vatsal’s evidence]. As with Udi and Bhavini, Vatsal and Anju’s payment came from all the family businesses and not simply from the business in which they happened to work. Their refusal to continue to work for VU Chem meant that they would contribute nothing further to the family at all.”

554. I cannot agree with that analysis.  It would have some merit if it had been the case that Vatsal and Anju would continue to receive from the partnerships (in which they had never worked) the same sort of level of payment that they had hitherto received.  It could then be said with great force that their contribution to the family by working for VU Chem would be rewarded – in practice if not in a legally binding way – out of the overall family resources and that they should not expect to be paid as well by VU Chem.  But this was clearly not the case by the end of July 2005.  The dispute had already changed the underlying approach to income distributions from the various businesses.  Thus, in January 2005, Udi had indicated that Cashco would not, in a departure from the traditional approach, fund Vatsal’s income tax.  Even before that, the October Agreement represented a departure from the dual expectations that Vatsal would work for no salary in VU Chem but would receive his share of the income of the partnerships.  The fact is that Vatsal’s income stream did dry up (although I do not overlook that he can hardly claim to have been starved of funds in the light of the considerable sums he has received in respect of his share in various assets).

555. Accordingly, it does not seem to me to be in the least disingenuous for Vatsal and Anju to claim that they would be working for no pay.  Moreover, it seems to me that this refusal to contemplate paying Vatsal and Anju for their work led directly to their decision to take over the management of the company, withholding cash and records from Udi.   It also led directly to their decision to leave VU Chem altogether once it became apparent that their attempt to take over the entire management of the company could not succeed.

556. However, the end of their management role could not, in my judgment, possibly be unfairly prejudicial conduct (within the meaning of section 994) on the part of Udi and Bhavini unless Udi and Bhavini had brought about that result and had done so in a way which was itself unfairly prejudicial.  [I do not intend to imply that this is the only hurdle facing Vatsal and Anju: this is simply the first hurdle which they face.]

557. In my view, an argument that Udi and Bhavini brought about the termination of Vatsal’s and Anju’s management role in an unfairly prejudicial way is critically dependent on it being shown that the refusal by Udi and Bhavini to permit VU Chem to remunerate Vatsal and Anju was itself unfairly prejudicial conduct.  They cannot rely on their removal as directors, since, for reasons already given, that removal was not unfairly prejudicial conduct; that leaves as the only candidate for unfairly prejudicial conduct the refusal to pay remuneration.  So it is to the refusal to pay remuneration which I now turn.

Remuneration and Dividends
558. The allegation concerning remuneration and financial advantage is this: Vatsal and Anju claim that Udi and Bhavini “have deprived the Petitioners of any remuneration for their work in the Company and any financial advantage from their membership”.  There are, it can be seen, two aspects of this complaint:

a. They have been deprived of remuneration: this relates to pay.
b. They have been deprived of financial advantage: this relates to dividends.

559. I deal with remuneration first.  Historically, Vatsal and Anju were not remunerated (by way of salary or wages) by VU Chem.  The arrangement so far as concerns VU Chem was simply that the shareholders would receive such dividends as the company decided to pay (which would in any event be restricted to what could lawfully be paid).  There was nothing in the arrangement under which Vatsal and Udi first became shareholders in VU Chem or arising out of the manner in which their affairs and those of VU Chem were subsequently conducted which Vatsal is entitled to see as giving rise to any right or expectation that he or Anju would be paid a salary.  He could not have insisted on one whilst he and Udi were on good terms; he was not, in my judgement, entitled to insist on, or even expect, one once his other sources of income had dried up.  It cannot be maintained that Vatsal or Anju had any expectation that they would receive remuneration (over and above dividends against which they could draw) from VU Chem. 

560. In a quasi-partnership company, a shareholder may be able to establish unfair prejudice where an expectation or understanding about his management role is frustrated by another shareholder.  Even if the same approach applied in relation to remuneration, it is not possible to invoke it in the present case to establish a right for Vatsal and Anju to be remunerated.  There simply never was any expectation of remuneration. 

561. I do not consider that that result is affected by the fact that the anticipated reward for working in VU Chem (namely a sharing of the family income from other enterprises) has come to an end.  It is not by virtue of their position as shareholders that Vatsal and Anju are adversely affected by their lack of remuneration.  Rather, it is by virtue of the absence of any expectation that they would receive remuneration in this quasi partnership coupled with the unforeseen circumstances of the termination of the actual partnerships.  There was never any understanding that they would be paid a salary: no member of the family received a salary of any significance – remuneration was always by way of drawings on dividends or partnership profits.  I can and do accept that Vatsal has suffered financially as a result of the dispute with Udi and from the termination of the partnerships and his (and Anju’s) removal as directors of VU Chem.  It was, however, their decision to terminate the partnerships and such deprivation – or starvation – of funds as they have suffered really stems from that rather than from any conduct, whether prejudicial or not, in the conduct of the affairs of VU Chem. 

562. Further, the fact, if it be a fact, that Vatsal and Anju have been unfairly treated in relation to the partnership does not justify (although it may explain) any improper behaviour on their part in relation to VU Chem.  Nor does a reduction in their income from the partnership (in particular Cashco) mean that they should expect, or extract, any more from VU Chem than they had been previously enjoying or than which VU Chem could properly afford.  The termination of the partnerships no doubt had a direct impact on the amounts which they would receive from the partnerships; but that would not, of itself, justify them in taking from VU Chem, monies to make up, to a greater or lesser degree, the shortfall in their expected incomes nor can it give rise to an expectation of an entitlement to remuneration.

563. Nor do I consider that Vatsal and Anju can complain of conduct unfairly prejudicial on the basis that VU Chem now employs other persons (locums) who are being paid for the work  which they previously carried out (or at least some of it – Bhavini now carries out some of their previous functions) rather than Vatsal and Anju themselves.  Even if that is prejudicial conduct (which I doubt) it is certainly not unfairly prejudicial conduct to them in their capacities as members of VU Chem.

564. Given that Vatsal and Anju had no contracts of employment and were not in fact paid and given that they had no reasonable expectation of being remunerated by VU Chem, it is difficult to see how they can complain of unfair prejudice within section 994.  Vatsal might consider it unreasonable that Udi and Bhavini refuse to contemplate his and Anju’s remuneration, given that someone else will have to undertake the work which they had previously undertaken and that such a third party would have to be paid.  Vatsal and Anju would no doubt think it more reasonable than employing a third party to employ them.  There is half an answer to that as a matter of fact since it was Bhavini who undertook much of that work and has done so herself without remuneration from VU Chem; it is only half an answer because she and Udi now seek the authority of the court to charge for their services.  But none of this is to the point.  Even if Udi’s behaviour in refusing to employ Vatsal and Anju is unreasonable, it is not prejudicial to them in their capacity as members of VU Chem.  It is conduct which simply falls outside section 994.

565. In the light of the above, the refusal by Udi and Bhavini to allow remuneration to be paid to Vatsal and Anju did not, in my judgment, constitute unfair prejudice to them as members of the company.

566. Turning to dividends, prior to the presentation of the petition in July 2005, dividends had been regularly declared. £100,000 had been declared for the financial years ended 31 May 2000, 2001, 2002 and 2003. I have already explained how the dividends for 2004 and 2005 were provided for, with a £200,000 dividend for 2005 to cover both years.  In accordance with long-standing practice, these sums were credited to the directors’ loan accounts from which drawings could be made. 

567. No dividends were declared for the years ending 31 May 2006 to 2008.  Udi has given the reasons for this in his witness statement.  These relate, essentially, to the financial stability of the company arising out the challenges faced by business in relation to Queenstown Road and London Road.  Another reason related to the proposed purchase (which did not in the event take place) of 5 Weir Road.  This evidence was not challenged in cross-examination and I accept it.

568. Since their removal as directors, Vatsal and Anju have continued to receive limited drawings from VU Chem.  These drawings have been debited against their directors’ loan accounts.  According to Udi, Vatsal is overdrawn by £128,768 and Anju is in credit to £192,651.  Between them the net position is therefore a credit of some £63,853.  Vatsal does not accept these figures.  He is not in a position to explain precisely how they are wrong, complaining that he has been unable to obtain the relevant underlying financial information which is within Udi’s knowledge and control.

569. Vatsal and Anju have continued to draw on their loan accounts. Up until March 2005 they were entitled to draw £1,750 per week (and various other sums) in accordance with the October Agreement.  Even after Vatsal cancelled the standing order on VU Chem’s account (for reasons which I do not understand and which he did not explain), payments amounting to some £6,000 per year have continued to be made on Vatsal’s behalf to pay insurance premiums. 

570. Mr Talbot submits that, given the history of VU Chem, it is not unreasonable that dividends might be left undrawn for its benefit. Indeed, the family philosophy, prior to this dispute, has consistently been to accumulate wealth and spend only what is necessary.  As at 31 May 2008, for example, Udi and Bhavini’s combined loan account was some £327,000 in credit. 

571. I am satisfied on the evidence that Vatsal and Anju have no justifiable complaint – and are certainly not unfairly prejudiced as members – by the absence of dividends since 2005.  Udi has explained the circumstances which have led to the directors’ decisions not to declare any dividend, an explanation which I accept and which appears to me to justify the decisions.  There is nothing in the underlying understandings surrounding the formation of VU Chem or the involvement of Vatsal and Anju in it which would entitle them to expect dividends to be paid in the circumstances described.

572. In summary, there has been no conduct which is unfairly prejudicial to Vatsal and Anju in their capacity as members of VU Chem by virtue of the absence of remuneration or dividends.

573. However, that leaves outstanding a complaint of unfair prejudice under the heading “Refusal to pay indebtedness”.  The pleading in the Amended Particulars of Claim asserts that VU Chem owes both Vatsal and Anju money as the amounts standing on their directors’ loan accounts.  They are unable to give precise figures.  The pleading claims that they were notified (and accept) that on 31 May 2003, Vatsal was owed £108,724 and Anju was owed £154,572.  It is pleaded that Udi has asserted that drawings have been made after that date of £156,907 which they say is incorrect, adding that Udi and Bhavini have withheld any detail of those drawings. 

574. Udi’s Defence tells a different story.  In 2003 (I think this refers to the year end 31 May 2003), Vatsal is shown as £17,000 overdrawn and Anju £2,881 in credit.  The figures for 2006 are £270,262 (overdrawn) and £66,039 (credit) in each case after crediting the £200,000 dividend for 2004 and 2005.  These figures reflect purported drawings by Vatsal and Anju of £181,400 and £10,705 respectively in 2005.  But a schedule prepared by Udi from around early 2007 shows the figures for drawings as £154,781 and £4,222 respectively.  Udi’s evidence is different again: he exhibits a schedule showing the closing balances on Vatsal’s and Anju’s accounts as £105,976 (overdrawn) and £203,926 (credit) on 31 May 2005.  Modest drawings since then result in the figures at 31 May 2008 already mentioned, namely £128,767 (overdrawn) and £192,650 (credit). 

575. Quite apart from the inconsistencies in these figures, Vatsal questions the figures from earlier years which have resulted in the carried forward balances, he claims that some business expenses have been wrongly attributed and asserts that he did not take the large drawings which Udi has shown.  In particular, some amounts are shown as drawings which he subsequently repaid.

576. However, even on Udi’s figures a substantial sum is owed to Anju and, even taking account of Vatsal’s alleged indebtedness, a not insignificant sum of nearly £64,000 is owing.  Mr Talbot says in relation to the loan accounts that, given the history of VU Chem, it is not unreasonable that dividends might be left in the company for its benefit. As at 31 May 2008, for example, Udi and Bhavini’s combined loan account was, according to Udi, some £327,000 in credit.  Vatsal and Anju have therefore not been prejudiced as members.  I disagree.  The payment of dividends is clearly a matter of concern to members of a company.  In VU Chem, dividends were the only mechanism for the shareholders to extract value from the company.  The balances on directors’ loan accounts reflect historic dividends (or overdrawings on account of future dividends).  In my judgement, a failure by VU Chem to pay to a shareholder that which is owing to her as such (albeit that it is retained in accounts called director’s loan accounts) is conduct in the affairs of the company and affects the shareholder concerned in her capacity as a member.  Mr Talbot has not suggested a defence to Anju’s claim in relation to the balance on her own account, let alone a defence to the smaller amount after netting-off the debit on Vatsal’s account. 

577. There is no suggestion that the failure of VU Chem to pay at least the amount owing to Anju after netting off Vatsal’s overdrawn account is due to an inability to pay.  It is tolerably clear that it is because of a decision by the board that it will not pay.  Accordingly, the failure to pay is properly to be seen as conduct which is unfairly prejudicial to Anju (but not to Vatsal).  Unfortunately, I do not know when payment was first sought.  Certainly, the claim was not relied on as unfair prejudice until an amendment to the Petition some time in the early part of this year. 

578. However, it does not seem to me that the correct remedy to correct this unfair prejudice would be to make a share purchase order to the effect that Udi and Bhavini should purchase Anju’s shares let alone that they should purchase Vatsal’s shares.  If the failure to pay the balance due on loan account had been the only alleged act of unfair prejudice, I would have taken the view that the correction of this default ought not properly to be the subject matter of an unfair prejudice petition at all.  Rather, Anju should have sued VU Chem for recovery of the amount due.  Given the existence of the petition on other substantial grounds, there is nothing wrong in adding it as a head of complaint.  But if, in the event, it turns out that this is the only instance of unfair prejudice which is established, the relief on the petition (if any is given at all) should be no more than an order for payment since that is sufficient to correct that particular unfair prejudice.  In saying that, I do not wish to be taken as suggesting that it is correct as a matter of general principle that either (i) only conduct which is itself unfairly prejudicial can be taken into account in fashioning the remedy or (ii) that the remedy is necessarily restricted to the minimum necessary to eliminate the unfair prejudice.  But what I do say on the facts of the present case is that, if the only element of unfair prejudice established is the failure to pay amounts due on a loan account, then notwithstanding the complete breakdown of relations between the parties, it would not be right to make a share purchase order; in other words, it would be wrong to achieve the fiscal divorce which is sought on the comparatively minor instance of unfair prejudice.

Breach of obligations of trust and confidence
579. The next complaint is that Vatsal and Anju allege that Udi and Bhavini “have been in breach of their obligations of trust and confidence as quasi-partners”.

580. Trust and confidence is a two-way bet: Mr Talbot submits that

“…given Vatsal’s and Anju’s conduct, Udi and Bhavini have shown remarkable trust and confidence, not to say tolerance and forbearance, towards them.  The withdrawal of over £51,000 without notice, and without good reason in June 2004, was never likely to inspire much trust. Even so, it was only with the hijacking of all the Company’s papers in May 2005 that the Respondents were finally moved to exclude Vatsal and Anju as Directors.”

581. I am not sure that that is an answer to the complaints in the other direction. But for my part I am entirely unable to detect from the evidence which I have heard anything in the context of VU Chem – there may be more argument in relation to the partnership – which could properly be categorised as a breach of any obligations of trust and confidence. 

Wrongful refusal to allow realisation of share value
582. Vatsal and Anju allege that Udi and Bhavini “have wrongly refused to allow the Petitioners to realise the value of their shares in the Company”.

583. Mr Talbot submits that this allegation is misconceived: as a matter of law, minority shareholders have no right to “put” their shares on other shareholders at full value. There is no right to exit at will (O’Neill v Phillips [1999] 1 WLR 1092 per Lord Hoffmann at 1105).   I agree with that proposition.  It is certainly not the case that a minority shareholder who wants to end his involvement and to recover his investment can make an offer, either to sell his own shares or buy the majority’s shares, at a proper value and then to allege, when the offer is refused, that the refusal amounts to unfairly prejudicial conduct.  All he can do is make the offer and rely on it when it comes to costs if he is successful in an unfair prejudice petition based on some other unfairly prejudicial conduct.

584. A gloss needs to be put on this.  If the facts are such that a winding up petition on the “just and equitable” ground would succeed but the majority refuse to agree to a winding-up out of court, that conduct might amount to unfair prejudice, the unfairness being to compel the minority to continue to participate in the company when the court would, on this hypothesis, wind it up.  I will return to this in a moment.

“Engrossing of the Company”
585. Vatsal and Anju allege that “it is to be inferred that [Udi and Bhavini] have so acted in order to engross to themselves or to [Udi] the Petitioners’ interest in the Company.

586. There is nothing in evidence to suggest that Udi and Bhavini have (i) sought to deny Vatsal and Anju’s joint shareholding of 499 shares (ii) sought to dilute that shareholding or (iii) sought to deny Vatsal and Anju any of their rights as shareholders. Moreover, in the February 2005 Offer, Udi and Bhavini offered to sell all their shares in VU Chem to them as part of an overall settlement.  This allegation can, I think, entail no more than that, in acting as they have, Udi and Bhavini have been motivated by a desire to, and have attempted to bring about, a situation where in one way or another they would be able to obtain  Vatsal’s and Anju’s interests in VU Chem without giving full and proper value.  Such a desire is not of itself capable of being unfairly prejudicial conduct.  And the alleged attempts to achieve that desire must be looked at on their merits (or perhaps de-merits) to see if they are unfairly prejudicial.  This adds nothing to the specific headings already addressed above.

Conclusion
587. In my judgment, Vatsal and Anju fail to establish that the affairs of VU Chem have been conducted in any way prejudicial to them as members of the company with one minor exception.  That exception is the refusal to pay to Anju the balance standing to the credit of her director’s loan account.  I decline to grant any relief in relation to that instance of unfair prejudice.  As will have been seen, Vatsal and Anju wish to challenge the amounts actually shown in their respective accounts.  I am bound to say that I do not have sufficient information to resolve the figures and would need to order an enquiry were I to take matters further.  In my view, this discrete element of the dispute is best dealt with in an action brought by Anju to recover what is due to her where disclosure will have to be given.

Postscripts
588. There are three further matters I wish to address in the company context notwithstanding that these do not strictly arise given my decision on unfair prejudice.  The first is the effect of the offers which have been made, the second is the issue of dilapidations in relation to Queenstown Road and the third is the possibility of a winding up on the “just and equitable” ground.

Offers
589. In the light of my decision in relation to unfair prejudice, I need say very little about the offers in each direction.  As already explained, the offers made by Vatsal and Anju could go only to costs.  The rejection of an offer by a minority petitioner cannot of itself be unfair prejudice.  So far as the offer made by Udi and Bhavini is concerned, the offer would only be of relevance if the valuation date on which the offer was based is the correct date for valuing VU Chem assuming that unfair prejudice had been established.  I am far from satisfied that that would be right.  It gives rise to difficult questions which I do not propose to address given the findings which I have made.  Further, even if that is the correct date, Vatsal and Anju have arguments which would need to be addressed, about whether Mr Callaghan’s valuation should bind them.  They are arguments which face considerable difficulties, but I do not propose to answer them in this judgment.

Queenstown Road dilapidations
590. Vatsal and Anju contend that the premises at 6 Queenstown Road were leased to Vatsal and the Father for the benefit of the VU Chem.  They say that VU Chem was to indemnify Vatsal against all liability under the lease.  Udi acknowledges that VU Chem was intended to have the benefit of the lease and that it would indemnify the Father and Vatsal against reasonably incurred liabilities under the lease.  The dispute is this.  Udi and Bhavini claim that the dilapidations claim could have been settled for about £35,000 plus VAT plus some other disbursements in 2007.  The fact that it was not settled at that time for that figure is Vatsal’s fault.  It is now not possible to settle for that figure: the landlord now seeks something over £106,000.  Vatsal is only able to claim under his indemnity the amount for which the claim could and should have been settled in 2007.  Udi and Bhavini are prepared to accept a figure of £50,000 in order to avoid the need for further enquiries and valuations.

591. Udi set out the history of the matter in his witness statement, an account which was not challenged in cross-examination.  It is not clear from that evidence that the landlord would in fact have settled for the figure indicated above nor does the evidence indicate the strength of the present claim to the much higher figure.  It is far from obvious on the limited evidence before the court that Vatsal has lost his right to an indemnity in excess of the figure at which it is said the landlord would have settled in 2007. 

592. Since I have rejected Vatsal’s and Anju’s allegations of unfair prejudice, there will be no share purchase order either way, it is not necessary to determine the extent of Vatsal’s rights in these proceedings and I decline to do so.   Nonetheless, since I have been presented with a considerable amount of material and argument, I will say something about this issue.

593. The position is summarised in the following paragraphs.

594. The landlord of 6 Queenstown Road sent a schedule of dilapidations to that address on 8 November 2006. Vatsal denies seeing that letter.  VU Chem’s solicitors (Sherwood Wheatley) forwarded another copy of the dilapidations schedule to Vatsal on 13 November 2006.  He admits receiving that letter, but gave an answer from which it was apparent that he had done nothing in response to it:

“As I explained, sir, I'm not technically knowledgeable in these schedules of dilapidation, everything was handled by my brother over the years”

595. On 29 November 2006, VU Chem attempted to deal with the liability for dilapidations by employing the surveyors Dawson and Company to negotiate directly with the landlord.  Mr Dawson of that firm estimated that the matter could have been settled in January 2007 at approximately £35,000 plus VAT and landlord’s costs and considered that to be the appropriate figure as of the date of his letter of 20 March 2009.  Udi also acknowledged that an upward adjustment would be needed to reflect the fact that there would have been further disbursements in addition to the headline figure of £35,000.

596. Mr Talbot suggests that VU Chem had conducted negotiations directly with the landlord, but that the liability could not be settled as the landlord refused to finalise the outline agreement until they had received confirmation that “the tenant” (ie Vatsal according to Mr Talbot) was satisfied with it.  He relies on a letter from Mr Dawson to Udi dated 13 April 2007 where Mr Dawson reports that he is unable to make any further progress on the negotiation until the tenant’s intentions can be formally clarified to the landlord.  Thus according to Mr Talbot, everything was down to Vatsal to enable matters to proceed.

597. I do not read the correspondence that way.  Let me go back a bit.  On 5 January 2007, Mr Dawson wrote to Udi reporting on his site visit with a representative (Mr Gadbury, of the landlord’s agent) and putting forward some proposals for settling any dilapidations claim.  Mr Dawson subsequently wrote a without prejudice letter to Mr Gadbury setting out his proposals.  A response was received on 25 January 2007 making positive suggestions for the way forward.  On 9 February 2007, Mr Dawson received an email from Mr Gadbury.  There is no copy in the bundle but from Mr Dawson’s letter to Udi dated 3 March 2007 one can see that the email told Mr Dawson that the client was inclined to agree the proposals.  Mr Dawson was requested by Mr Gadbury to confirm “my client’s intention to vacate – once clarified we can finalise the dilapidations issue”.  One might have thought from that email that what the landlord was seeking was confirmation that the premises were going to be vacated, something which was entirely in the hands of VU Chem to confirm and which did not need Vatsal’s involvement. 

598. Mr Dawson gave that confirmation by email on 22 February 2007.  But subsequent phone calls raised a difficulty arising from the fact that the lease was held in the name of Vatsal.  Mr Gadbury was told that VU Chem’s solicitors were attempting to get the legal situation regularised and was asked if the dilapidations issue could be progressed.  The response in a phone call was to the effect that Mr Gadbury had not taken his client’s instructions and was not prepared to go any further until they have formal confirmation of the tenant’s plans.  It is not entirely clear if this meant formal confirmation from Vatsal or formal confirmation from VU Chem.  Given the earlier phone calls, the former seems more likely.  On 8 May 2007, Mr Gadbury sent a further schedule of dilapidations. 

599. In the meantime, Vatsal’s confirmation had been sought. Sherwood Wheatley wrote to Magwells on behalf of VU Chem on 7 March 2007 as follows:

“Whilst our client will be responsible for the expenses incurred in complying with any agreed settlement, your client is the tenant and his authority will be required to conclude any settlement, unless he delegates that function to the company.

We should be grateful if you will confirm, in writing, that your client is happy for our client to conclude the negotiations with the landlord’s surveyor on your client’s behalf and without further reference to him, on the basis that your client will not be responsible for any of the expenses and costs involved.”

600. Vatsal was, in effect, offered the full indemnity in relation to the dilapidations that he now seeks provided only that he authorised VU Chem to conclude a settlement.  Magwells replied on 9 March 2007.  They did not give the confirmation sought but asked for “a copy of the lease and copies of all relevant correspondence between your firm and those acting for the landlord”.  

601. There was a reply to this letter dated 20 March 2007.  It had been omitted from the bundle.  Mr Sisley was unaware of this reply when he suggested that it was harsh to blame Vatsal for not settling advantageously when VU Chem had not replied.  The reply enclosed a copy of the lease and stated that there had been no correspondence with the landlord’s representatives.  Magwells replied on 26 March thanking Sherwood Wheatley for their letter of 20 March and stating “We shall review this with our client and revert to you”.  They did not in fact revert to Sherwood Wheatley.

602. At some stage, Udi removed VU Chem’s property from 6 Queenstown Road, made the property windproof and watertight to reduce its deterioration, and wrote to the landlord on 14 May 2007 enclosing the keys to the property and providing Vatsal’s contact details. 

603. Vatsal’s and Anju’s pleading asserts that on 15 August 2007 the lessor served a schedule of dilapidations on Vatsal and has demanded payment for breach of contract.  It is said that VU Chem has failed to answer a request that it deal with the demand.  Mr Talbot points out that it has not been pleaded or put to any of  Udi’s and Bhavini’s witnesses when such a request was made.  The sum demanded by the landlord was £106,097.01.   The dilapidations claim has still not been settled.

604. Vatsal claims a complete indemnity in respect of the dilapidations.  Mr Sisley submitted that there was no evidence indicating that a higher bill for VU Chem was caused in any way by inactivity on the part of Vatsal.  For their part, Udi and Bhavini admit that VU Chem has an obligation in respect of the dilapidations, but deny that Vatsal should have an indemnity against the consequences of his negligence and/or default.  They say that he has been guilty of negligence and default. 

605. It is no doubt the case that an agent is not entitled to an indemnity against losses or liabilities in consequence of his own negligence, default or breach of duty.  Mr Talbot has cited to me in support of that proposition Bowstead and Reynolds on agency (18th ed 2006) at 7-062 and 7.065.  To similar effect is Chitty on Contract (30th ed) at 31-161 where various cases are referenced, including Lage v Siemens (1932) 42 Ll. L. Rep 252, KBD.  In that case ship agents claimed an indemnity against the ship owners for a fine levied by Customs. The fine could have been avoided by the agent if they had given, as they could have, a reasonable explanation to Customs.  Their failure to do so was negligence so that they were not entitled to an indemnity. 

606. Mr Talbot puts Udi’s and Bhavini’s case this way.  He says that Vatsal took no steps at all in relation to his obligation to VU Chem on whose behalf he took out the lease on 6 Queenstown Road. He did not reply to the landlord’s original letter of 8 November 2006 (although Vatsal it must be remembered says he never saw the original).  More importantly, he took no action when the schedule of dilapidations was forwarded by Sherwood Wheatley on 13 November 2006.

607. In the event, VU Chem did not wait for Vatsal to deal with the landlord as he ought, according to Mr Talbot, in any event, to have done. VU Chem carried out negotiations, reached an outline agreement, and was fully prepared to settle the matter at no expense to Vatsal personally whatever. All Vatsal had to do was give his consent. This he failed to do. He failed to respond substantively to the letters of 7 and 20 March 2007 asking for his consent, and he failed to carry out any other step to address the issue.

608. Mr Talbot submits that Vatsal was negligent both in failing to take appropriate steps to reduce or minimise the amount due himself, and also in failing to provide his consent to VU Chem when asked.  He says that the contention that there is no causative link between Vatsal’s default and VU Chem’s increased liability is without substance. Vatsal negligently failed to consent in March 2007. The only evidence there is as to the extent of the dilapidations liability is that the matter could have been settled in January 2007 for £35,000 plus VAT and landlord’s costs. This was not challenged in cross-examination.

609. Since any increase in the dilapidations liability is a result of Vatsal’s negligence in withholding his consent and/or in failing to address the issue himself. Vatsal is not entitled, according to Mr Talbot, to an indemnity in respect of this increase. Udi and Bhavini’s position is therefore that VU Chem’s liability to Vatsal should be limited to that which it negotiated in outline in January 2007.  It is admitted that the figure of £35,000 plus VAT and costs was a broad estimate. Accordingly, to allow a margin of error and in the hope of putting an end to any further enquiry on this point, Udi and Bhavini seek an order that VU Chem’s liability to Vatsal in respect of the dilapidations at 6 Queenstown Road be limited to £50,000.

610. In the light of my decision to reject the unfair prejudice petition, this issue of this indemnity does not strictly arise.  Its introduction into these proceedings was as part of the larger dispute about how to value the shares in VU Chem.  But had I determined the petition in favour of Vatsal and Anju and ordered Udi to purchase Vatsal’s shares, I would have directed this issue be determined at a separate hearing on the basis of rather fuller evidence than was presented to me.  In terms of quantum, all I have is an assessment of Mr Dawson as to the costs of certain works which he was proposing.  Although the landlord had indicated a willingness to proceed on the basis of Mr Dawson’s assessment of what works VU Chem would be obliged to carry out, there is no certainty that the landlord would have signed up to that.  Moreover, it was clear, in any case, the landlord was reserving its position in relation to further dilapidations which might be revealed during the course of VU Chem’s strip-out.  There is simply too much uncertainty at the moment: the extent of the dilapidations claim is known but the extent of the validity of that claim is not.  It follows that the extent of Vatsal’s liability as tenant is not known nor the possible extent of the indemnity to which he is prima facie entitled.  This might mean that the final valuation of Vatsal’s and Anju’s shares in VU Chem would have to be delayed until after VU Chem’s liability under the indemnity is known but it should not be difficult for the valuers to produce a formula for adjustment in the price once VU Chem’s liability on the indemnity is known. 

611. In all the circumstances, I decline to make any declaration about the extent of the indemnity to which Vatsal may become entitled.

“Just and equitable” winding-up
612. I have already referred to, and gratefully adopted, the summary and analysis of the “just and equitable” ground carried out by Lewison J in Neath Rugby Ltd.  Perhaps taking the view, unsurprisingly in the light of Guidezone Ltd, Vatsal and Udi did not seek the winding-up of VU Chem in these or separate proceedings.  The law would have been perceived to be that any conduct sufficient to found a winding up petition on the “just and equitable” ground would of itself be enough to found an unfair prejudice petition.  Nor did Vatsal and Anju seek agreement to a winding up other than by the court because that was perceived of carrying considerable risk in relation to the NHS contract.

613. Things have changed.  The approach in Guidezone Ltd has been shown to be wrong by the decision of the Court of Appeal in Neath Rugby Ltd.  Accordingly, it would be open to Vatsal and Anju to petition the court for the winding up of VU Chem on the “just and equitable” ground.  This possibility has not been canvassed in front of me and is certainly not relief available on this petition.  But it must surely be acknowledged that there are arguments with some force in favour of making a winding up order.  There has been a complete breakdown in relations between the two families and the whole basis on which VU Chem was incorporated, and its place in a larger family business empire, has changed radically so far as concerns Vatsal and Udi.  If that is correct, it does not matter any more that the facts which justify a winding up order are insufficient to found a petition under section 994.  There are also arguments with some that the potential damage to the business as the result of risk surrounding the NHS contract should not preclude the making of a winding-up order if the court were otherwise willing to do so.  The making of a winding-up order on the “just and equitable” ground is discretionary and it may be open to the court, if satisfied then an order should in principle be made, to allow the majority the opportunity to acquire by agreement the shares of the minority before making an order. 

614. I make these observations without, I emphasise, intending to indicate any view about the correctness of the suggestions I have raised, because it seems to me that it is highly unsatisfactory that these two families should continue shackled together in VU Chem when they have succeeded in breaking all of the partnership chains.  They should surely go their own ways with each taking his or her appropriate share of the value.  But then perhaps all that has prevented settlement of these disputes in the past is a fundamental difference between the parties about what is appropriate, a matter on which I say no more.