Uddin v Bashir & Ors

Informal agreements concerning property and business interests must be construed objectively by reference to their terms and legal effect. Subjective intentions are not relevant to construction unless a claim for rectification is made. Trust property must be distinguished from partnership property, and a purported partnership dissolution notice has no effect where the claimant was not a partner or the asset was held on trust. For investment or business property, the presumption of equal beneficial ownership does not apply; beneficial shares are presumed to reflect contributions unless expressly declared otherwise. A trustee’s failure to account gives rise to an account, not damages, and payment may require a corresponding adjustment of beneficial interests.

The claimant brought two related actions against his brothers and others concerning interests in restaurant businesses and properties, including Lloyds Restaurant, the Jalalabad, Solihull Balti, Mango Spice and associated freeholds and leases.

The disputes principally concerned the authenticity, construction and effect of a manuscript agreement dated 10 February 2005, its relationship with earlier and later deeds, the parties’ beneficial interests, alleged partnerships, and the first defendant’s unauthorised borrowing against trust property.

The court determined the agreed issues by reference to the evidence, the relevant deeds and the legal distinction between partnership and trust interests.

1. Construction of the 10 February 2005 agreement. The document was genuine and was intended to affect the parties’ legal rights. It had to be construed objectively. The defendants’ attempt to rely on subjective intentions was misconceived because no claim for rectification had been made.
2. Lloyds Restaurant and Station Road. The agreement did not dispose of the Lloyds business. The earlier trust arrangements continued, and the later March 2005 deed governed the freehold and lease arrangements. The second defendant held part of his partnership interest on trust for the claimant.
3. Jalalabad and Solihull Balti. The claimant ceased to be a partner in the Jalalabad. The agreement affected rental income from the Solihull Balti but did not alter the existing trust in the freehold at 763 Old Lode Lane. The dissolution notices were misconceived because the relevant assets were trust property or the claimant was not a partner.
4. For business or investment property, the presumption of equal beneficial ownership does not apply. The presumption is that beneficial shares reflect contributions, subject to an express declaration: Stack v Dowden [2007] UKHL 17 was distinguished and Laskar v Laskar [2008] EWCA Civ 347 applied.
5. Mango Spice and Mere Green. The claimant was not a partner because Mr Hussain had rejected the proposal to admit him. Section 21 of the Partnership Act 1890 was not engaged. However, the first defendant was accountable as trustee for the claimant’s share of trust property used to obtain the loan applied towards the Mere Green acquisition.
6. Claims against the trustee for failure to account were claims for an account rather than damages. The claimant was entitled to specified accounts and sums, subject to appropriate adjustments of beneficial interests on payment. Brief further submissions were invited concerning the proposed £18,000 account relating to Mere Green.