Oberman v Collins & Anor

A common intention constructive trust may arise over a fluctuating portfolio of properties where the parties expressly agreed, or objectively demonstrated, that the portfolio was to be held jointly and equally, and the claimant acted to her detriment in reliance on that intention. Detriment need not be financial or referable to each individual property. A portfolio may be treated as a single subject matter if it can be identified with sufficient certainty.

A private company may be a quasi-partnership where there is mutual confidence, an understanding that shareholders will participate in management, and restrictions or practical impediments on transferring interests. Unfair prejudice may arise from exclusion from management, failure to provide information, conflicts of interest, stripping company assets and diversion of company funds.

Ms Oberman brought consolidated proceedings against Mr Collins and Bluegen. She claimed a beneficial 50% interest in properties acquired during their long relationship, alternatively by constructive trust or proprietary estoppel. She also petitioned under sections 994 and 996 of the Companies Act 2006, alleging unfair prejudice in the conduct of Bluegen’s affairs.

The principal property issue was whether properties registered in Mr Collins’s sole name formed part of a jointly owned portfolio. The petition concerned Bluegen’s status as a quasi-partnership, Ms Oberman’s entitlement to participate in management, the treatment of company assets and liabilities, and the valuation of her shares.

1. Part 7 Claim allowed in substantial part. The court declared that Ms Oberman had a 50% interest in the Oberman Property, the Joint Properties and specified Collins Properties, excluding the Third Party Properties. Mr Collins was ordered to account for mortgage receipts, rents, sale proceeds and payments made to Blue Letts, with consequential payment of sums due. The court made no immediate order for sale but granted permission to apply for further directions.
2. The parties had expressly agreed that the portfolio acquired in Bluegen’s name and in their sole or joint names would be held for their joint and equal benefit. Registration in different names reflected financing requirements and did not determine beneficial ownership. The agreement and the parties’ subsequent conduct supported treating the properties as a single portfolio.
3. Ms Oberman relied detrimentally on that common intention. Her detriment included financial contributions, unpaid work, assuming liabilities and guarantees, and allowing Mr Collins to control rents and proceeds. Detriment need not be financial, quantifiable or referable to the acquisition of each individual property. The court rejected the submission that separate proof was required for every property.
4. The court held that a common intention constructive trust could attach to a fluctuating portfolio, provided the subject matter and beneficiaries were sufficiently certain. Alternatively, the same intention and subsequent conduct supported trusts over individual properties. Proprietary estoppel provided a further basis for awarding a 50% interest in the portfolio, excluding assets held by Bluegen.
5. Bluegen was a quasi-partnership. The relationship involved mutual confidence, an understanding that both shareholders would participate in the business, and no practical freedom for Ms Oberman to realise her interest elsewhere. She had a legitimate expectation of participation and consultation. After the relationship broke down, Mr Collins was obliged to provide sufficient information for her to participate as director and shareholder.
6. Mr Collins’ failure to provide management information, refusal to arrange an audit, exclusion from the office, unilateral transactions, conflicts involving Blue Letts, transfer of properties and grant of leases to himself were unfairly prejudicial. The Blue Letts arrangements involved breaches of statutory and fiduciary duties and the stripping of Bluegen’s assets.
7. The appropriate relief was an order requiring Mr Collins to purchase Ms Oberman’s 49 shares in Bluegen at fair value without a minority discount. The valuation was to treat Bluegen as beneficial owner of the Elmdene Road leases and to exclude the Blue Letts debt and specified unsubstantiated loans, subject to credit for £60,000 owed to Mr Harber.