Khan v Khan & Anor

A claim may be abusive where a claimant starts substantially similar proceedings after earlier proceedings were struck out, although the court should consider the resources actually used in the earlier case. A bankrupt claimant is divested of causes of action vested in the trustee in bankruptcy and cannot pursue them personally. Under the Part 24 test, judgment may be given where the claim has no realistic prospect of success.

An employee’s salary, PAYE treatment and employment benefits may be inconsistent with an implied partnership. Silent acquiescence in work performed as a paid employee will not ordinarily establish a representation giving rise to a constructive trust or proprietary estoppel. A lien requires a connection between the property charged and the obligation secured.

The claimant sought compensation and proprietary relief arising from his alleged partnership in, or beneficial interest in, a family food business later operated by the second defendant company. He also claimed a lien, adverse possession and specific performance concerning two properties.

The defendants applied to strike out the claim and for judgment under Part 24. Earlier substantially similar proceedings had been struck out for invalid service. The claimant had also become bankrupt, and the official receiver had become trustee in bankruptcy. The central issues were whether the proceedings were abusive, whether the claimant retained standing to pursue the causes of action, and whether the various claims had realistic prospects of success.

1. Abuse and bankruptcy. The principle in Securum Finance v Ashton [2001] Ch 291 was not confined to claims previously struck out for delay. It was engaged where substantially similar proceedings were brought again. However, the earlier claim had been struck out at an early stage and had not materially misused court resources, so that ground alone would not have justified striking out the new claim.
2. All the claimant’s causes of action had accrued before his bankruptcy. Under sections 293 and 306 of the Insolvency Act 1986, they vested in the official receiver as trustee in bankruptcy. The claimant was therefore divested of them. The proceedings, brought personally after that vesting, were abusive and had no realistic prospect of success. There was no sufficient reason to stay them to allow the official receiver to consider adoption, because the claims themselves lacked realistic prospects.
3. Property claims. The adverse possession claim failed because time against the freeholder began in 1994, after the leasehold interest ended, and the requisite period had not expired before the Land Registration Act 2002 came into force. No application for registration had been made under the new regime. The alleged payment agreement concerning land was time-barred, lacked the statutory formalities required by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, formerly section 40 of the Law of Property Act 1925, and could not be rescued by part performance because the transfer was inconsistent with the alleged contract.
4. A lien could not survive the failure of the underlying payment claim. In any event, the asserted common law and equitable liens were unrealistic. Lawful possession is required for a common law lien, and an equitable lien requires a nexus between the property charged and the transaction or circumstances giving rise to the equity. The decision in Tappenden v Artus [1964] 2 QB 185 explained the exceptional nature of common law liens. No sufficient basis existed for creating a new general lien.
5. Business claims. The claimant’s employment under PAYE, salary and substantial benefits were inconsistent with an implied agreement to carry on business in common with a view to profit under section 1 of the Partnership Act 1890. The same facts defeated the constructive trust and proprietary estoppel claims. Silent acquiescence could in an appropriate case amount to a representation, especially where a cultural expectation reinforced the claimant’s belief, but reliance and detriment remained essential. The claimant’s conduct was fully consistent with well-paid employment and did not establish detrimental reliance.
6. The claim was struck out and judgment was given for the defendants under Part 24 CPR. Applications for restrictions at the Land Registry were dismissed, and the claimant was ordered to pay assessed costs of £23,500.

The judgment describes earlier proceedings between the parties which had been struck out by Master Teverson on 5 September 2013 for failure to serve the claim form within its lifetime. The present claim was a first-instance application before the High Court (Chancery Division).