Rahman v Miah

A partner who acquires partnership property or an opportunity for personal benefit must account to the other partners unless there is actual consent given after full and frank disclosure of all relevant matters. A partner’s inability to raise finance does not remove the obligation to offer a genuine opportunity to participate. Delay alone does not bar equitable relief through laches or acquiescence. The question is whether, in all the circumstances, it would be unconscionable to permit the claimant to assert the right, ordinarily with consideration of prejudice and the parties’ conduct.

The parties were equal partners operating an Indian takeaway from premises held under a partnership lease. The defendant purchased the freehold reversion in his own name, without informing the claimant of the purchase or of the availability of full finance. After the partnership was dissolved, the claimant sought a declaration that the freehold was held for both parties equally, an account of rents and profits, partnership accounts and related relief.

The defendant alleged prior or later consent, acquiescence, waiver, laches and a subsequent agreement under which the claimant abandoned his rights. The principal issues were whether the purchase breached fiduciary duties, whether the claimant had consented or abandoned his rights, and what interests and remedies followed.

1. The proprietary claim succeeded. The freehold reversion was held on trust for the claimant and defendant in equal shares. The defendant was accountable for rents received or which ought to have been received, and the claimant was entitled to partnership winding-up and accounts. An order for sale could be made if required.
2. The rule in Keech v Sandford [1558–1774] All ER Rep 230; (1726) Sel Cas Ch 61 prevents a fiduciary from renewing or acquiring property connected with the fiduciary relationship for personal benefit. The rule extends to partners and to the acquisition of freehold reversions, as illustrated by Thompson’s Trustee in Bankruptcy v Heaton [1974] 1 W.L.R. 605 and Don King Productions Inc. v Warren [2000] Ch. 291.
3. The defendant breached fiduciary duty by acquiring the reversion personally and failing to offer the claimant the opportunity to participate. The claimant’s inability to obtain finance was not the relevant question. The relevant failure was the denial of that opportunity.
4. Consent would only have been effective if it were actual consent following full and frank disclosure of all relevant matters. The defendant’s failure to disclose the availability of advantageous 100% finance meant that any supposed consent would have been ineffective, applying Murad and another v Al-Saraj and another [2005] EWCA Civ 959; [2005] All ER (D) 503 (Jul).
5. There was no binding agreement at the family meeting to abandon the claimant’s rights. Agreement to stay away from the premises was made in anticipation of mediation and did not amount to contractual abandonment.
6. The defences of acquiescence, waiver and laches failed. The claimant’s delay was accompanied by continuing complaints known to the defendant, and the defendant was not shown to have acted differently because of the absence of formal proceedings. The approach in Patel v Shah [2005] EWCA Civ 157 was distinguishable. Following In re Loftus Deceased [2007] 1 WLR 591, the broad question was whether it would be unconscionable in all the circumstances to permit the claimant to assert his rights. It would not.
7. The business tenancy continued under the Landlord and Tenant Act 1954, because no effective surrender or forfeiture had occurred. The court declined to make a declaration on the tenancy immediately, as the issue appeared financially immaterial, but invited further argument if its enduring significance was shown. Existing undertakings remained in force until an order giving effect to the judgment.

First-instance decision of the High Court (Chancery Division). No earlier judgment or appeal is stated in the judgment.