Bhullar v Bhullar & Ors

A director breaches fiduciary duties by causing company funds to be advanced to his own company for speculative purposes without full disclosure, proper authorisation, or adequate protection of the company’s interests. Unanimous shareholder consent under the Companies Act 2006 cannot be inferred from knowledge alone. Acquiescence requires informed consent or circumstances making silence unconscionable. A director’s honest but unreasonable belief that family members may use company assets does not justify relief under section 1157. Equitable compensation for breach of fiduciary duty may fall outside the ordinary limitation period where company property has been converted to the director’s use, but dishonesty and deliberate concealment must be established separately where relied upon.

The claimant brought a derivative claim on behalf of Bhullar Developments Limited and Bhullar Brothers Limited against his brother, a director of both companies. The claim concerned payments made to a company owned and controlled by the defendant to fund property development. The defendant contended that the payments were authorised by family agreements and that the other shareholders and directors had consented or acquiesced. The court also considered limitation, relief under section 1157 of the Companies Act 2006, and the appropriate remedy.

The claim followed permission granted by Morgan J, reported at [2015] EWHC 1943 (Ch). The central issues were whether the payments were authorised, whether the defendant was protected by the Duomatic principle or acquiescence, whether the claim was time-barred, and what relief should be granted.

1. Breach of fiduciary duty. The defendant caused substantial sums to be paid by the claimant companies to his own company for speculative property development. He failed to disclose his interest formally, obtain the necessary company approvals, agree repayment or interest terms, or obtain security. The transactions were therefore breaches of fiduciary duty.
2. Consent and Duomatic principle. The relevant consent had to be unanimous and informed. The burden was on the defendant to establish actual assent or acquiescence by all relevant shareholders. The evidence showed that the defendant’s parents knew of and consented to the principal payments, but the claimant was not informed in advance and did not consent. The Duomatic principle therefore did not apply.
3. Acquiescence. The claimant’s later correspondence questioning the payments and seeking authorisation documents did not amount to acquiescence. Silence cannot constitute consent unless the shareholder knew consent was required or the circumstances made silence unconscionable.
4. Limitation. The claim for equitable compensation was not barred under section 21(1)(b) of the Limitation Act 1980, applying Burnden Holdings v Fielding [2016] EWCA Civ 557. The defendant was not shown to have acted dishonestly, and deliberate concealment was not established for the earlier payments. Later payments made when the claimant lacked access to the relevant records were not time-barred.
5. Relief and remedy. Relief under section 1157 of the Companies Act 2006 was refused because the defendant had not acted reasonably. The appropriate relief was repayment of the outstanding indebtedness, with interest to be determined. An account of profits and further investigations were refused.

The judgment records that earlier proceedings between members of the Bhullar family included an appeal decided by the Court of Appeal in [2003] EWCA Civ 424. That decision concerned a different stage and issue in the wider family dispute. Permission for the present derivative claim was granted by Morgan J in [2015] EWHC 1943 (Ch).