Choudhury & Ors v Choudhury & Ors

A family arrangement dividing assets into factions may create beneficial interests without allocating particular assets to individual members. Where assets are thereafter acquired, transferred and managed for the common benefit of the faction, the legal owners may hold them on trust in the agreed proportions. The arrangement does not become a partnership merely because property is managed and traded with a view to increasing its value. Specific assets may, however, be allocated or gifted outside the common fund where the evidence establishes that intention. A company’s assets belong to the company, but its shares may be held on trust for the persons beneficially entitled to them.

The claimants sought an account and division of family assets. They alleged that assets distributed under a 1997 family agreement and a subsequent county court consent order remained held for family members in agreed Shariat proportions, notwithstanding that legal title was placed in different names and assets were reinvested. They alternatively alleged a partnership.

The defendants denied any continuing trust or partnership and asserted that assets had been allocated to individuals. The issues included the effect of the 1997 Agreement and Consent Order, the beneficial ownership of properties and company shares, and the treatment of specific gifts, loans and acquisitions.

1. The partnership claim failed. The parties had not carried on business in common in the relevant legal sense. There were no joint accounts, partnership documents, invoices, meetings or other evidence that they held themselves out as partners.
2. The 1997 Agreement created a new settlement. It gave each relevant family member a beneficial share in the family assets and divided the assets between Jainul’s faction and Badrul’s faction. It did not generally allocate particular assets to particular individuals within Badrul’s faction.
3. The Consent Order and attached Agreed Assets Schedule confirmed the division between the two factions. Read in context, they did not effect an individual allocation of all assets within Badrul’s faction. The continuing conduct of the parties, including pooled funds, reinvestment and Badrul’s control of transactions, supported that conclusion.
4. Subject to specific exceptions, legal owners within Badrul’s faction held properties and other assets on trust for the faction members in their agreed Shariat shares. Saleha held properties placed in her name on the same basis. The arrangement continued while assets were managed and reinvested for the common benefit.
5. The exceptions included the allocation of 29 Malzeard Road to Sufia in partial satisfaction of her share, the allocation of certain cars to Badrul and Ziaul, and the gift of 7 St Ethelbert’s Avenue to Rockshonara outside the 1997 Agreement and Consent Order. Monies derived from Mahabubur and genuine third-party loans were excluded from the family fund, subject to accounting and tracing.
6. HSHC beneficially owned property acquired in its own name. Its shares, however, were held by Badrul, Ziaul and Saleha on trust for the members of Badrul’s faction in their agreed proportions.
7. The claimants were therefore entitled to the necessary accounts and enquiries. Further disclosure and accounting issues were left for subsequent determination if the parties could not agree.

This was a first-instance decision. The judgment records earlier proceedings between members of the family which resulted in a consent order dated 28 February 2000, but no appeal from that order was before the court.