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Equitable Accounting: A further qualification to Stack v Dowden

John Wilson considers the judgments of Warren J arising from the complex cases of Amin & Amin v Amin and others and Amin v Amin (Supplemental) and examines the issue of equitable accounting and the implications for other cases involving the breakdown of relationships against what was a highly complex commercial background.

John Wilson, Barrister, One Hare Court

In Equitable Accounting: Not Dead Yet (Family Law Week August 2008),  I considered the case of Re Barcham (In Bankruptcy) [2008] EWHC 1505 (Ch) and the breath of life that it gave to traditional equitable accounting principles in the wake of Stack v Dowden [2007] UKHL 17 It is now more apparent than ever that the obituary was premature.  Whether this has anything other than academic consequences remains, however, unclear.

In Amin & Amin v Amin & Others [2009] EWHC 3356 (Ch)  Mr Justice Warren was faced with the task of resolving complex proprietary, partnership and corporate issues arising out of the breakdown of domestic and commercial relationships between two brothers (Vatsal – the claimant – and Udi – the defendant) and their wives.   His judgment ran to 113 pages and 614 paragraphs and any attempt to summarise the facts and history (covering several decades) would drown the reader in detail.   This article will attempt to extract the points of interest to the practitioner who must, from time to time, grapple with the consequences of the breakdown of family relationships against a complex commercial background.   For anyone who must imminently face up to these difficult questions a reading of the judgment as a whole (or at least those parts that touch upon the problems immediately under consideration) is recommended.  For the purposes of this article it will be of more assistance to set out some of the legal questions that arose and then to draw out, as succinctly as possible, the answers that lie within this judgment.
The area of most interest is that in relation to equitable accounting and, in particular, to the limits of the assertion by Baroness Hale in Stack v Dowden [2007] UKHL 17 that questions of equitable accounting are now governed by the Trusts of Land and Appointment of Trustees Act 1996 (TLATA).

Equitable accounting
There are, in Amin, three different illustrations of the application of the principles of equitable accounting:

(i) The treatment of Kingswood Manor, a property purchased by the brothers' father (a traditional patriarch) as a home for himself, his wife ("the Mother"), the brothers and their own families and then transferred into the joint names of the brothers as a matter of estate planning prior to his death.  Unfortunately, the Father died before the families took up occupation of this property.  The claimant and his wife left Kingswood Manor when relations had deteriorated to such an extent that it was not feasible for them to continue living there, leaving the defendant and his wife and family (and the Mother) in occupation.  Vatsal and his family left three bedrooms filled with their belongings. They took no further steps in caring for the Mother who was very old and frail; this task fell to Udi and his family.  Whilst Vatsal did not object to the Mother living out her days at this property and did not seek an occupation rent from her, he did seek an occupation rent from Udi and his family.

(ii) The treatment of a Kingston Road property.  This property was originally purchased in Udi's sole name in 1983 but then, in 1992, transferred into the joint names of Udi and Vatsal as part of their father's reorganisation of the family finances.  This was a sub-post-office and Udi was the sub-postmaster.  The post-office business, operated from the jointly owned premises, had always been owned by Udi.  Vatsal's arguments to the effect that he was gifted a half share in the business at his father's direction in 1992 failed (see below).  However, Vatsal claimed an occupation rent in relation to the sub-post-office and Udi sought to set off against any successful claim (which he denied) the works he had done in improving and  maintaining the property;

(iii) The treatment of a property in Rosendale Road from which a hairdressing business ("Changes") was run.  The business was owned 50:50 by Udi and a Mr Martin.  This property was purchased by the Father in the sole name of Vatsal although a memorandum from the Father envisaged the future holding being 75% to Vatsal and 12.5% each to Udi and Mr Martin.   What in fact happened was that, as part of the 1992 reorganisation, Vatsal on the direction of the Father, transferred the Rosendale Road property to himself and Udi as beneficial tenants in common in equal shares.  This transfer raised an interesting academic point as to the impact such a transaction would have had on Mr Martin's 12.5% share if he had one (see below).   The Judge rejected Vatsal's claim to an interest in the hairdressing business.  However, again, Vatsal claimed an occupation rent on the basis that Udi, through his partnership with Mr Martin, had enjoyed exclusive occupation of the property, which had been a joint property since October 1992.

Equitable accounting, TLATA and Kingswood Manor
In Stack v Dowden Baroness Hale said this in relation to Mr Stack's claims for the costs of alternative property:

"[93]   There remains the question of the payment for Mr Stack's alternative accommodation. This matter is governed by the Trusts of Land and Appointment of Trustees Act 1996. Section 12(1) gives a beneficiary who is beneficially entitled to an interest in land the right to occupy the land if the purpose of the trust is to make the land available for his occupation. Thus both these parties have a right of occupation. Section 13(1) gives the trustees the power to exclude or restrict that entitlement, but under s 13(2) this power must be exercised reasonably. The trustees also have power under s 13(3) to impose conditions upon the occupier. These include, under s 13(5), paying any outgoings or expenses in respect of the land and under s 13(6) paying compensation to a person whose right to occupy has been excluded or restricted. Under s 14(2)(a), both trustees and beneficiaries can apply to the court for an order relating to the exercise of these functions. Under s 15(1), the matters to which the court must have regard in making its order include: (a) the intentions of the person or person who created the trust; (b) the purposes for which the property subject to the trust is held; (c) the welfare of any minor who occupies or might reasonably be expected to occupy the property as his home; and (d) the interests of any secured creditor of any beneficiary. Under s 15(2), in a case such as this, the court must also have regard to the circumstances and wishes of each of the beneficiaries who would otherwise be entitled to occupy the property."

At paragraph 94 of her speech she said that:

"[94]   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. The criteria laid down in the statute should be applied, rather than in the cases decided under the old law, although the results may often be the same."

And we family practitioners breathed a, perhaps premature, sigh of relief.

Warren J carried out his own analysis of the operative parts of TLATA from paragraphs 283 to 304 of his judgment.  He extracted the following propositions from an examination of the statute and applied them to the issues in relation to Kingswood Manor:

(i) Under s.13(2) it was and is open to the trustees (Vatsal and Udi in this case) to exclude Vatsal's occupation rights.  They were not and are not, however, permitted to do so unreasonably or to restrict the entitlement to occupy to an unreasonable extent.

(ii) Under s.13(3) Vatsal and Udi were and are entitled to impose conditions on any beneficiary by reason of his entitlement to occupy under s.12.

(iii) Under s.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;

(iv) "Excluded or restricted" in s.13(6) must, said the Judge, be read as meaning excluded or restricted under s.13(1);

(v) In exercising their powers under the section (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 s.13(4) (the intentions of the persons creating the trust, the purpose for which the land is held, the circumstances and wishes of each of the beneficiaries entitled to occupy under s.12);

(vi) Vatsal was entitled to make an application under s.14 for the Court to make an order relating to the exercise by the trustees of their functions.

The Judge held that the Court could make an order for the payment of compensation under the section if, and only if, Vatsal could establish that his right to occupy had been excluded or restricted by the trustees.  Udi denied that this was the case.  Vatsal and his family left voluntarily and although a deterioration in family relations lay behind his departure, he was not constructively excluded and was free to resume occupation at any time.   Udi also relied upon the fact that Vatsal's family continued constructively to occupy part of the property by retaining their belongings in three of the seven bedrooms.

Warren J said at paragraph 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 an exclusion.  It will be a matter of fact and degree in any particular case whether there has been an exclusion in 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 authorize one trustee to exclude a beneficiary. If one or two or more trustees physically excludes a beneficiary, that exclusion is not effected pursuant to the power conferred by s.13; it does not, therefore, in my judgment, fall within s.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 s.14(2)(a)." {emphasis added}

The learned Judge said that these conclusions were not inconsistent with what was said in Stack v Dowden as in that case Mr Stack had been excluded, effectively, by agreement, thereby engaging the statute.  As to what Baroness Hale said at paragraphs 93 and 94:

"She clearly cannot be taken as saying that the statutory provision apply whenever one beneficiary excludes another; on any reading, the statutory provisions only apply wherever 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."

In other words, any claim that Vatsal had for an occupation rent/equitable accounting fell outside TLATA.  Just as was the case in Barcham, Vatsal was entitled to seek compensation in accordance with the line of authorities that preceded the introduction of TLATA.  Warren J then went back to the well-known cases of Re Pavlou a bankrupt [1993] 2 FLR 751 and Byford v Butler [2004] 1 FLR 56 (see paragraphs 292 to 294 of the judgment).  Whether one proceeded under TLATA or under the pre-existing common law made little difference to the outcome in this case. However, Warren J held that it would be right for the court when exercising its powers to award compensation outside TLATA, nonetheless, to bear in mind carefully the criteria laid down in ss.13(4) and 15(1) of the Act.

On the facts in relation to Kingswood Manor the learned Judge found that Udi and his family had born the costs and responsibility of looking after the mother without any assistance from Vatsal and that they could not care adequately for her unless they lived at Kingswood Manor.  He also found that Vatsal and his family continued constructively to occupy three of the bedrooms.  In those circumstances he concluded that it would not be fair to order Udi to account for an occupation rent so long as the mother was living at Kingswood Manor.  He said that he would have come to the same conclusion if the case had fallen within TLATA.

Equitable accounting, TLATA and Kingston Road
Vatsal claimed an occupation rent because Udi had enjoyed exclusive occupation of the property, which had been a joint property since October 1992.  The learned Judge, relying on his analysis of TLATA in relation to Kingswood Manor, concluded that TLATA did not apply to this property either, for two reasons:

(i) it was never a purpose of the acquisition, either by Udi in 1983 or by Vatsal and Udi after 1992, that the property should be made available for occupation by Vatsal; and

(ii) Vatsal was never excluded from occupation within the meaning of TLATA

Therefore such rights as Vatsal could assert fell outside TLATA.

Since Vatsal had no right to occupy this was not a case of exclusion of a beneficiary.  On the one hand, Udi had in fact enjoyed exclusive occupation of the property since Vatsal became a joint owner.  On the other, Vatsal acquired his interest with an existing business being carried on at the property in circumstances where neither Vatsal nor Udi could have intended a disruption to that business or the imposition of a charge which would have an immediate impact on the profitability of the business.  He said, at paragraph 95:

"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 Kingston Road at least while Vatsal made no objection to it…

…[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…"

In fact, by the time of the judgment Udi had bought out Vatsal's interest in the property pursuant to an earlier court order.   So Warren J held that Vatsal was entitled to an account, under common law principles, from the period that he objected to Udi having the sole benefit of the premises.  As to quantum:

"[97] …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 left to Udi of his occupation and that must surely reflect the profitability of the business."

Equitable accounting / TLATA and Rosendale Road
Again, Warren J rejected Vatsal's claims.  Again, he concluded that TLATA did not apply to this transaction / situation, for two reasons:

(i) 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 – it was acquired for occupation by Udi and Mr Martin carrying on business there; and

(ii) Vatsal was never excluded from occupation within the meaning of TLATA.

Any rights that Vatsal had, therefore, again fell outside the 1996 Act.   As to the facts on this issue, the property was acquired subject to a lease in respect of the hairdressing business.   The evidence suggested that this lease continued and, whether or not Vatsal received the benefit of that rent (which the Judge did not know), Udi could have no further obligation to account for the occupation of the property:

"[82] ... 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 ... [83] On the basis of the facts as I understand them, Vatsal has no claims for equitable compensation or an occupation rent in respect of 107a Rosendale Road."

It would appear that the generalisation in Stack v Dowden that equitable accounting, as developed in the Courts of Equity, has now been replaced by TLATA has been trimmed still further.   Whilst Warren J concludes that his clear and, it is submitted, correct analysis of the law is not inconsistent with the speeches in the House of Lords because, in that case, Mr Stack had effectively consented to his exclusion from the matrimonial home, I doubt whether the House had intended the ambit of its generalisation to be so narrowly curtailed.   It is likely that, in a significant proportion (if not the majority) of cases which the practitioner is likely to be faced with, one would not be able to say that one party's exclusion fell within the terms of s.13(1).  More often than not one party leaves either because to remain has become intolerable or because there is greener grass to graze.  It is highly unlikely that one or both cohabitees decide that they better consult s.13 (1) of TLATA before one or other of them moves out.  The majority of claims for an equitable account / occupation rent are likely to arise after one party has moved out unilaterally and, perhaps, unwillingly.   Unless there has been an agreement / consent order governing one party's departure, then, TLATA will not apply.  I find it hard to believe that this was what the House of Lords intended, although Warren J's logic seems impeccable.

The second point to make is that, at the end of the day, it doesn't seem to make a great deal of difference.  Baroness Hale in Stack v Dowden felt that, in that case, whether one relied upon the statute or the pre-existing rules, it would make little (if any) difference to the outcome.  Warren J, whilst concluding that TLATA did not apply but the old principles did, indicated that it would have made no difference to outcome in the Amin scenario.  He also added a gloss (see paragraph 294) to the effect that, when exercising its discretion outside TLATA, the Court should nonetheless bear carefully in mind the criteria laid down in s.13 (4) and s.15 (1) of TLATA.  It is difficult to envisage circumstances where the outcome would be different if one were to apply the statutory regime applied rather than applying the pre-existing authorities.  It may be a distinction without a difference.

The point is, probably, that the practitioner should, as a matter of rigorous logic, ensure that the analysis of the problem starts off on the right foot.  There may be situations where it makes a difference.   In two of the factual situations above there was an underlying commercial structure.  In such circumstances, the position in equity may provide a more flexible approach than the narrow reliance on statute would allow.

Other points
The case of Amin was not primarily about equitable accounting.  It covered a plethora of other issues and, for the trial judge, it was probably something like that dreadful examination question that we still all sometimes have nightmares about.  Three further points are probably worth mentioning:

(i) In relation to the Kingston Road property (the sub-post-office) Vatsal argued that as a result of the commercial re-organisation dictated by the father – which led to the transfer of the Kingston Road property from Udi's name into joint names – he was entitled to half of the sub-post-office business;

(ii) In relation to the Rosendale Road property the (ultimately academic) question arose as to what the effect of Vatsal transferring the property into joint names with Udi would have had if Mr Martin asserted a 12.5% interest in the property;

(iii) In relation to seven properties that were in the joint names of Vatsal and Udi an issue arose as to the effect of placing those properties within the balance sheet of the Cashco partnership, in which Vatsal and Udi each had a 45% interest but a relative had a 10% interest.  Did placing the properties within the balance sheet have the effect of reducing the brothers' interests from 50% each to 45% each?

Could the direction from the Father, aimed apparently at equalising the brothers' interests, have the effect of creating for Vatsal a half interest in the post-office business?
Warren J decided that the answer to this question was "no".  See paragraph 88:

"Whilst Vatsal and Udi had the greatest respect and affection for the Father and in practice would carry out his wishes (at least during is 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 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 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 the 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."

Udi had done nothing to transfer half of the business to Vatsal.  He was under no legal obligation to do so.  Accordingly, Vatsal's claims for a half share failed.  Thus, it is necessary, when advising on circumstances such as these, to take into account the social and cultural background to a particular case but then to analyse it from the perspective of the law of England and Wales.  In that respect the analysis of Warren J is no different from that adopted by Baron J in G v G (Matrimonial Property: Rights of Extended Family) [2006] 1 FLR 62.

If Mr Martin had a 12.5% share in the equity in the Rosendale Road property and the Father directed that Vatsal transfer half of his (Vatsal') interest to Udi (in order to equalise the brothers' entitlements) what was the effect of that?
Warren J dealt with this, correctly it is submitted, at paragraph 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 15th 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%."

Warren J had no hesitation in concluding that the latter interpretation was the right one.  Again, he was surely correct about this.  The mathematics of this example is of use to the practitioner.  It also raises a further point that is becoming increasingly important in practice:  as awareness of the significance of the TR1 is becoming more widespread there is a danger that practitioners will lose sight of the fact that there can still be beneficial interests that do not appear on the face of the deeds.  The obvious example is the "granny flat" situation.   A married couple have bought a property and the TR1 makes it clear that they are beneficial joint tenants of it.  There is no reference to the fact that one spouse's mother had contributed £100,000 for the construction of, for example, an annexe.  Does the existence of a TR1 declaring the interests of the couple and not referring to the third party mean that the third party has no interests and / or that the couple can ride roughshod over those interests?   The answer must surely be "no". 

What is the effect on beneficial ownership of property of placing that property into the balance sheets of a partnership?
Seven properties that were in the joint names of Vatsal and Udi were included in the balance sheet of the Cashco partnership.  Did those properties become assets of the partnership will all the attendant consequences of such an outcome?   It was common ground that the inclusion of the properties was to strengthen the balance sheet and give comfort to creditors and potential creditors.    The learned judge, in considering this conundrum, drew a distinction between a partnership and a corporate entity.   If dealing with the latter there was force in the submission that, if the properties did not in fact belong to the corporate body, that would constitute a fraud on the suppliers since the inclusion in the balance sheet would be a representation that the company owned the assets.  However:

"[230] ... {a partnership 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. ....

... [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 {the other partner} 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 learned judge concluded, after a review of the evidence in relation to the individual properties, that the inclusion of the properties in the balance sheet of the partnership was not intended to alter the pre-existing beneficial ownerships.

The dispute in Amin was long, sprawling and complex and covered a significant number of properties, businesses and individuals.  It is probably far removed from many of the disputes which practitioners have to negotiate.   However, the observations of the Court are likely to be of relevance in an increasing number of cases.   The House of Lords dicta on equitable accounting need to be considered in light of Warren J's analysis.  In addition, as third party interests take an increasingly prominent role in ancillary relief disputes, whether it be in the context of an extended Asian family (as in the case of Amin) or in the context of, for example, an extended farming family, it is important that the practitioner is aware of the legal principles that must be brought into consideration when third party interests are engaged.

The main body of this article is concerned with the substantive judgment in this case, which for the purposes of this post-script I will refer to as Amin (No 1).   A subsequent judgment, Amin v Amin [2010] EWHC 528 (Ch) which I shall refer to as Amin (No. 2) has now been reported by Family Law Week. This judgment deals with the issue of quantifying the value of services provided by a daughter to a family business.   There was a further discrete issue covered in Amin (No 1).   It concerned Harshika, who was the sister of Vatsal and Udi and her involvement with Cashco a partnership in which Vatsal and Udi each had a 45% share and a Mr Desai, Harshika's husband, who was a sleeping partner, had a 10% share.   As a result of the claims brought by Vatsal, Harshika, in 2005, brought a claim against Cashco/the partners in Cashco on the basis that she had worked for many years without remuneration for the partnership.  She claimed that there was an agreement between her and the Father, at a time when the Father, as a part-owner of the partnership, was able to commit the partnership to the arrangement, that she would in due course obtain a share of the partnership as reward for her work or obtain some other reward for the past as well as the future. This claim metamorphosed over time and argument into a claim for a quantum meruit.  Vatsal and Anju raised a limitation defence to this claim so that it most it could go back no more than 6 years from 2005.   Warren J dealt with this aspect, in principle, from paragraph 345 onwards in his judgment in Amin (No 1).

It was Harshika's case that she had worked full-time in Cashco since 1986 and that her responsibilities were substantial.  A summary of the wide-ranging nature of her duties can be found in the judgment in Amin (No 2).

Did Harshika have a claim to compensation and, if so, how should it be quantified?  Warren J sets out the law on quantum meruit claims, and his summary conclusions, from paragraph 390 to 403 of the judgment.   The essential ingredients of a restitutionary claim (which a quantum meruit is) are (see Rowe v Vale of White Horse DC [2003] 1 LL Rep 418 at paragraph 11 per Lightman J are:

(i) A benefit must be gained by the defendant;
(ii) The benefit must have been obtained at the claimant's expense;
(iii)  It must be legally unjust that is to say there must exist a factor rendering it unjust, for the defendant to retain the benefit; and
(iv) There must be no defence available to extinguish or reduce the defendant's liability to make restitution

Warren J accepted that these ingredients were present, and after anxious consideration concluded that there was a quantum meruit claim (see paragraph 403 of Amin (No 1), but one then came to the quantification question.   It was argued on her behalf that she should be entitled, by way of quantum meruit, to remuneration equivalent to what Cashco would have needed to pay to a third party over the years.   Warren J did not accept that this was the right analysis in a family context (paragraph 394 of Amin (No 1) :

"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 completed, Harshika would have received the level of benefit for which (her counsel) 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 … a sleeping partner…; 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 … were met from the assets of the broader family.  This is 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."

Warren J concluded in Amin (No 1) that:

(i) Harshika could not any footing expect to receive, as a member of the family, more than the business could afford and this should be borne in mind on any assessment of quantum;

(ii) The fact that her husband had a 10% share in the business would also have a (downward) effect on the quantum of her claim;

(iii) Harshika did not raise the issue with her father again during his lifetime after the original conversation – which also militated against a full commercial rate;

(iv) The claim had only been raised in response to the claims made by Vatsal and if the family hadn't fallen out she would not have done anything about her claim

He concluded that fair remuneration for Harshika 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.   He heard further submissions as to the way forward and there was subsequently another hearing (Amin (No 2)) when Warren J carried out the exercise of quantifying Harshika's claim.  

At this hearing an attempt was made to resurrect the commercial method of quantification.  This was rejected.  At paragraph 11 Warren J reiterates the factors – essentially family and cultural – that led him to conclude that Harshika was not entitled to a full commercial rate of compensation.  In particular, when looking at the historical profits of the family business, if Harshika had received a commercial salary it would have made a significant dent in the partnership profits enjoyed over time by the partners and the wider family.  It would produce a disproportionate benefit to Harshika as against Vatsal and Udi, particularly to Udi who was more heavily engaged in the business than Vatsal.

In arriving at the quantification, these factors having been taken into account, Warren J reviewed the work that Harshika was engaged in and concluded that it was a "way of life" business for her.  The fact that she worked 66 hours per week did not mean that one could increase what an employee working 40 hours a week would receive.   He had also to consider the arguments advanced on behalf of Harshika and Vatsal.  Harshika relied on two comparables suggesting a figure of between £53,000 to £55,000 per annum currently.  Vatsal relied upon complicated mathematical calculations built upon extracts from the Annual Survey of Hours and Earning of the Office for National Statistics – "ONS" - (which did not take into account London weighting).  Subject to that Warren J thought that Harshika's work overall was aligned to some extent with the examples provided by both counsel although closer to the ONS approach.   He concluded that, in these circumstances, the value of her work in 2005 was £20,000 per annum.   He took a rough and ready calculation as to the value of those services in 2002 – the mid-point of the six year claim, yielding £17,515 per annum.  He then multiplied that by 6 giving £105,088 and indicated that, subject to the calculation of the tax consequences of any payment to Harshika, she was entitled to interest from 2005 until payment.  He left it open to the parties to return to court (again) if they could not sort out the tax position.

The complexities of the quantum meruit arguments in Amin (Nos 1 and 2) demonstrate how, once families fall out, there can be immensely difficult, time-consuming and costly arguments as to how services, provided within the context of a large, extended and business-orientated family, should be calculated against a backdrop of family breakdown.  Again, Warren J's judgment in both parts of this case provide valuable assistance to the practitioner attempting to get to grips with the issues and to find the best way of quantifying them.    The judgment in Amin (No 1) as a whole provides a multitude of examples of the problems that can be thrown up, many of which have not been covered in this article.

Amin (Nos 1 and 2) developed out of a family row that was aired in a commercial and corporate context.  It was not a family law case.  However, as ancillary relief practitioners are increasingly becoming aware, the circumstances where there will be an intervention by one or more members of a family, either in the context of properties or businesses, are growing by the day.   It is, perhaps, only a matter of time before a case such as Amin has its main area of conflict within the Family Courts rather than the Civil courts.  At that point, Warren J's helpful analysis is likely to become even more valuable.