Bhatia v Toor

The Court of Appeal dismissed the defendant's appeal against a first instance judgment awarding the claimant £40,000 plus interest. The judge had found that a payment of £40,000 made in or about June 2003 was an unsecured personal loan from the claimant to the defendant and had not been repaid.

The court upheld the trial judge's assessment of the evidence, in particular: the payment was made into an HSBC account in the name of the defendant trading as the company; no shares were transferred to the claimant despite opportunities to do so; company profits and assets were dealt with without reference to the claimant; and the defendant's account to the court was inconsistent. Those findings supported the conclusion that the payment was a loan rather than an investment.

The court also rejected the defendant's submission that a later document described as the "Financial/Commercial Discharge Agreement" (dated 9 December 2004) should be construed as releasing the defendant personally from the loan. Applying established principles of contractual construction, the court held that the recitals, the parties defined in the agreement and the terms of clause 3 showed the agreement was directed to claims arising from the claimant's provision of services to the Evershine business and was not apt to cover a personal loan to the defendant.

Background and parties:

• The claimant, Mr Suraj Bhatia, brought a civil action for repayment of £40,000 said to have been paid in June 2003. The defendant was Mr Kulwant Singh Toor, a director and shareholder associated with Evershine Glazing Services Ltd.
• The matter reached the Court of Appeal on appeal from the Central London Civil Justice Centre (Her Honour Judge Walden-Smith QC), following a first instance judgment dated 28 September 2011 in favour of the claimant for £40,000 plus interest.

Nature of the claim and relief sought:

• The claimant sought repayment of the £40,000 paid in 2003. The defendant contended the payment was not a personal loan but an investment in Evershine Glazing Services Ltd and, alternatively, that the claimant had released any claim by virtue of a Financial/Commercial Discharge Agreement dated 9 December 2004.

Issues framed by the court:

1. Whether the £40,000 payment was a loan to the defendant personally or an investment in the company.
2. Whether the Discharge Agreement operated to discharge the claimant's claim in respect of the alleged loan.

Court's reasoning and findings:

• On the primary factual issue, the trial judge's findings were upheld. Key factors included the manner and account into which the cheque was paid, the absence of any transfer or allocation of shares to the claimant despite opportunity, the absence of evidence that the claimant was treated as a shareholder, and the manner in which company profits and assets were dealt with. The court emphasised that the first-instance judge had the advantage of assessing witness credibility and did not err in accepting the claimant's account in relevant respects.
• On construction of the Discharge Agreement, the court applied settled principles from leading authorities on contractual interpretation. The recitals and the body of the agreement showed it was principally directed to compromise of claims about services provided to the Evershine business. Party B was defined as a grouping connected to the business (the defendant and his brothers and the company) and the agreement was not drafted to address a personal loan to the defendant. The court therefore agreed with the judge that the agreement did not operate to discharge the loan claim.

Procedural posture:

This was an appeal from the Central London Civil Justice Centre; the Court of Appeal dismissed the appeal and upheld the judgment awarding £40,000 plus interest to the claimant.

Appeal dismissed. The Court of Appeal upheld the trial judge's factual findings that the £40,000 payment was a personal loan and not an investment, and concluded on contractual construction that the 9 December 2004 Discharge Agreement did not operate to discharge the claimant's loan claim because the agreement was directed to claims arising from the claimant's provision of services to the Evershine business and did not encompass the personal loan.

On appeal from the Central London Civil Justice Centre: judgment of Her Honour Judge Walden-Smith QC (9ED02751) dated 28 September 2011; appeal heard in the Court of Appeal (Civil Division) and dismissed, [2012] EWCA Civ 565.