Goyal v Florence Care Ltd & Ors

An account of profits is a remedy to which a beneficiary is virtually entitled as of right following a fiduciary breach. It may be withheld only on established equitable grounds. The court must not refuse an account merely because proceedings have taken time, the relevant venture has collapsed, or the fiduciary’s profit remains undisclosed. Where an account is needed to identify profits and enable an informed election between remedies, it should ordinarily be ordered. A solicitor’s client account normally holds money on trust for the solicitor’s client. A different trust requires a binding arrangement, communicated with sufficient knowledge to the solicitor. Receipt of a restriction in an unattended general email inbox does not necessarily attribute knowledge to the firm.

The appellant appealed parts of a County Court judgment concerning money advanced for a proposed care-home joint venture. The County Court found that the second respondent, Mr Edwards, had breached fiduciary duties by using the appellant’s money for purposes outside the venture, but refused an account of profits and awarded interest instead.

The appellant also challenged the dismissal of claims against the third respondent solicitors. He argued that the money had been held on a resulting or Quistclose trust and that the solicitors had acted in breach of trust when payments were made from their client account. The central issues were whether an account should be ordered against Mr Edwards and whether the solicitors knew of, or were bound by, any restriction on the use of the money.

1. Appeal against Mr Edwards. The appeal was allowed. An account of profits is ordinarily available, virtually as of right, against a defaulting fiduciary. Although the remedy is equitable and may be withheld on established equitable grounds, the judge’s broad balancing exercise was wrong in principle.
2. The appellant sought an account and inquiry to discover whether Mr Edwards had made profits and to make an informed election between compensation and an account of profits. Mr Edwards’ refusal to explain what happened to the money was a powerful reason for ordering an account. The court could not give him the benefit of uncertainty about profits which he was best placed to disclose.
3. The procedural history, the passage of time, the collapse of the joint venture and Mr Edwards’ bankruptcy did not justify withholding the remedy. The bankruptcy position had not been sufficiently investigated, and the possibility of proprietary relief remained relevant.
4. The court therefore ordered an account and inquiry into Mr Edwards’ use of the appellant’s money for his own benefit. The order was not confined to the Plas Eleri transaction. Written submissions were invited on the precise form of order, after which further applications would be remitted to the County Court.
5. Appeal against the solicitors. The appeal was dismissed. Money paid into a solicitor’s client account is ordinarily held on trust for the solicitor’s client. A contrary trust requires words or conduct creating a binding arrangement and knowledge by the solicitor of the restriction. The appellant’s email was received in a general inbox, but knowledge was not thereby attributed to the solicitors’ relevant fee earners or to the firm.
6. There was no duty to inquire merely because the appellant paid money into the client account. The default position permitted the solicitors to treat the money as available to their client. In any event, the later instruction concerning the Florence Care purchase permitted use of the £160,000 for the deposit, while the £590,000 payment was not separately impressed with a trust.

1. High Court (Chancery Division): appeal from parts of orders made by His Honour John Hand QC, sitting as a Deputy Circuit Judge in the County Court at Central London, following judgment handed down on 14 June 2019 and an order dated 4 July 2019. The appeal was allowed against the second respondent and dismissed against the third respondent.