Basra & Ors v Badhan

An express agreement between the parties to treat companies as jointly owned may make the registered shareholder a trustee of the shares for the other party, even where the other party is not recorded as a shareholder. That beneficial ownership does not, without more, confer a direct personal interest in the companies’ assets or profits.

A beneficial interest in land registered in one party’s name requires sufficiently clear agreement or assurance and reliance. Evidence that company funds were used for acquisition or improvement is not, by itself, enough to establish personal beneficial ownership. The court may nevertheless find a constructive trust where the evidence shows a specific agreement that a particular property would be jointly owned and that agreement was relied upon.

The proceedings concerned a long-running dispute between Joga Singh Basra and Narash Kumari Badhan arising from their personal and business relationship. The corporate claimants alleged that Ms Badhan had misappropriated company money, retained documents and failed to account for business income. Ms Badhan counterclaimed for beneficial interests in the companies and properties, repayment of a personal loan, jewellery, furniture and consultancy fees.

The central issues were whether the parties had agreed that the companies were jointly owned, whether Ms Badhan acquired beneficial interests in properties registered in Mr Basra’s name, and whether either party owed further accounts or repayments.

1. Companies. The court found that the parties had agreed to establish and run the companies as an equal joint business. Mr Basra had represented Ms Badhan as his business partner and owner, and she had relied on the agreement through her work and contribution to the business. He therefore held 50 per cent of the issued shares on trust for her. This did not give her a direct personal beneficial interest in company assets or profits.
2. 175 Tettenhall Road. Applying the starting presumption that equitable interests follow legal ownership, as stated in Stack v Dowden [2007] UKHL 17, the court found a specific agreement that the property would be jointly owned. Ms Badhan relied on that agreement by accepting that registration would occur later and by permitting company funds to be used for renovations. A declaration of equal beneficial ownership and an order for transfer into joint names were made.
3. Other properties. Ms Badhan failed to prove sufficiently clear promises or assurances concerning the other properties. The claims were expanded over time, lacked particulars and were unsupported by reliable documentary or other evidence. Those claims were dismissed.
4. Accounts and other claims. The companies’ claims for repayment of withdrawals and pub takings were rejected. The evidence indicated an agreed practice of using company funds for both business and personal expenditure. A limited order was made requiring Ms Badhan to identify and return, or account for, any company documents still in her possession. Mr Basra’s jewellery claim and Ms Badhan’s jewellery and consultancy-fee claims were dismissed. Mr Basra was ordered to return the antique table. The £9,100 loan claim was rejected because repayment had already been made from company funds.
5. The freezing injunctions concerning the two property-holding companies were continued.