Dalkilic & Anor v Pekin & Anor

An oral agreement that company shares are to be held for several founders may create a constructive trust, even where the legal title and company records identify only one shareholder. A disposition of an existing equitable interest requires writing under section 53(1)(c) of the Law of Property Act 1925, but the statutory requirement does not prevent a constructive trust arising from an agreement for value. A beneficiary under a sub-trust may enforce the beneficial interest without joining an intermediate trustee who has no active duties. Laches and estoppel require more than delay: the circumstances must make enforcement unconscionable, ordinarily involving detrimental reliance or prejudice. A trustee receiving trust property on a lawful transfer with notice of the trust cannot rely on the ordinary six-year limitation period under section 21 of the Limitation Act 1980.

The claimants alleged that Paragon Quality Foods Limited was founded by Metin Pekin, Ali Pekin, Hasan Dalkilic and Cafer Pekin in equal beneficial shares. Sevim Pekin claimed a 10% interest transferred to her by Ali as part of their divorce settlement. The legal title was later consolidated in Metin and transferred to Paragon Property Investments Limited.

The defendants denied any beneficial ownership, contended that claims had been settled at meetings in March 2012, relied on laches, estoppel and limitation, and brought counterclaims for repayment of sums paid to Hasan and Sevim. The principal issues were the ownership of the shares, the legal effect of Ali’s agreement with Sevim, the alleged 2012 settlements, equitable defences, and limitation against PPIL.

1. Ownership. The court found that the four founders had agreed to own Paragon equally. The agreement created a constructive trust of the first type described in Paragon Finance v Thakerar [1999] 1 All ER 400. Hasan therefore owned 25% beneficially.
2. Sevim’s interest. Ali had agreed to transfer 10% of the total shareholding to Sevim as part of the divorce settlement. The relevant correspondence evidenced the agreement but did not itself implement the disposition. Section 53(1)(c) of the Law of Property Act 1925 was therefore not satisfied. However, under section 53(2), the agreement for value created a constructive trust and the transfer was effective without a written disposition. The analysis in Oughtred v Inland Revenue Commissioners [1960] AC 206, followed in Neville v Wilson [1997] Ch 144 and Singh v Anand [2007] EWHC 3346 (Ch), was accepted.
3. Sevim could enforce her interest without joining Ali. The intermediate trust arrangement gave Ali no active duties, consistent with Sheffield v Sheffield [2013] EWHC 3927 (Ch) and Re Charlotte Street Properties [2019] EWHC 1722 (Ch).
4. The court rejected the alleged settlements with Hasan and Cafer. Ali’s settlement concerned only his remaining 15% interest and did not release Sevim’s 10% interest. The counterclaims failed.
5. Laches, estoppel and limitation. Applying the principles discussed in Patel v Shah [2005] EWCA Civ 157, P&O Nedlloyd v Arab Metals [2007] 1 WLR 2288 and Fisher v Brooker [2009] 1 WLR 1764, the delay did not make enforcement unconscionable and caused no material prejudice. PPIL received trust property through a lawful transaction with notice of the existing trust. The claims therefore fell within section 21(1)(b) of the Limitation Act 1980 and were not time-barred.
6. Hasan was declared beneficially entitled to 25% and Sevim to 10% of the shares, held on trust by PPIL. PPIL was required to transfer the relevant shares. Further submissions were directed on interest and remaining relief.