Vekaria v Dabasia (Nee Patel) & Anor

A common acquisition of property with an expectation of profit does not, without more, create a partnership. The court must determine whether the parties were carrying on a business in common, applying Partnership Act 1890, sections 1(1) and 2(1). A one-off investment governed only by agreed contributions and division of sale proceeds will ordinarily amount to co-ownership rather than partnership.

Some joint ventures may generate fiduciary duties, but that depends on their particular circumstances. The same indicators relevant to partnership are material. Expenditure increasing a co-owner’s share under a declaration of trust must be agreed. An allowance may be made for work actually undertaken, but only to the extent justified by the evidence.

The appeal arose from an order of Harman J concerning the division of proceeds from the sale of leasehold premises acquired by Yashwanti Dabasia, as nominee for Walji Patel, and Dhanbai Vekaria. The judge held that the arrangement was a joint venture falling short of partnership and dismissed the claim to a beneficial interest in the freehold acquired by Lexington Developments Limited.

The appellants argued that the arrangement was a partnership or fiduciary joint venture, so that the freehold was held for them, and challenged expenditure included in the calculation of Mrs Vekaria’s share. The central issues were whether the parties’ investment created partnership or fiduciary obligations, and whether a £9,000 planning fee was agreed expenditure.

The appeal was allowed only to the extent that the expenditure item of £9,000 was reduced to £1,000. In all other respects it was dismissed. Lord Justice Peter Gibson gave the leading judgment; the Master of the Rolls and Lord Justice Brooke agreed.

1. Partnership. The judge had correctly applied sections 1(1) and 2(1) of the Partnership Act 1890. Common acquisition and an expectation of profit were insufficient. Something additional was required to show that the parties were carrying on a business in common. The transaction was an isolated joint investment in the leasehold premises. The declaration of trust dealt with contributions and division of sale proceeds, but contained no arrangements for management or the conduct of a partnership business.
2. Fiduciary duties. A joint venture may, depending on its circumstances, impose fiduciary duties. Here, however, the same features that negated partnership also negated fiduciary obligations. The parties were co-owners of an investment, not participants in a relationship based on mutual trust and confidence.
3. Freehold. The funds supplied by Walji were paid for the leasehold transaction and were subsequently used by Lexington to acquire the freehold. They were not partnership property or a joint venture asset. The transaction was comparable to a simultaneous sale and subsale used to finance an acquisition. Mrs Vekaria was not accountable as a fiduciary who had acquired an interest through her fiduciary position.
4. Expenditure. Under the declaration of trust, expenditure increasing a party’s share had to be agreed. The evidence did not establish that the £9,000 planning fee was agreed expenditure. Nevertheless, work had been undertaken and a limited allowance of £1,000 was justified.

The appellants were ordered to pay 80 per cent of the first and second defendants’ costs. Chesham Properties Limited was awarded its costs.

• Court of Appeal (Civil Division): allowed the appeal only by reducing the £9,000 expenditure item to £1,000, and otherwise dismissed the appeal.
• Chancery Division, Harman J: gave judgment for Dhanbai Vekaria for £104,950.30 plus interest and dismissed the counterclaim seeking an interest in the freehold.