Syed Ahmed & Anor v Tipu Sultan Ahmed

The claim sought restitution and an account for alleged misappropriation of company funds, together with an enquiry; the counterclaim sought a declaration that the defendant was beneficially entitled to 50% of the company shares and damages for unlawful dismissal. The court found that the Particulars of Claim were inadequately particularised to sustain an allegation of dishonesty on their face but, having tried the factual issues, concluded there was no fraud or dishonest misappropriation.

The judge found that the company records, cash reconciliation processes and accounting steps provided transparency, and that cash takings had been used for legitimate company outgoings; the defendant did not act dishonestly. The court held that, on the balance of probabilities, the parties had agreed in 2015 that the claimant would hold 50% of the shares on trust for the defendant.

Accordingly, the company claim was dismissed; the counterclaim declaration of beneficial ownership was granted and damages awarded to the defendant for unlawful dismissal. The interim injunction excluding the defendant was discharged.

Background and parties: The claimants were Syed Ahmed (a sole shareholder and appointed director) and Panache Leasing Ltd (the Company). The defendant was Syed's brother, Tipu Sultan Ahmed, who ran day-to-day operations of the Company from its formation in 2016 until his exclusion in November 2020.

Nature of the proceedings and relief sought: The company sought repayment and restitution, an account and inquiry, alleging that the defendant had dishonestly diverted substantial sums (including cash takings and rents from sub-tenants) and had made improper payments (including to online gambling and pornographic sites). The defendant counterclaimed for a declaration that he was the beneficial owner of 50% of the issued shares and for damages for unlawful summary dismissal following an injunction which had excluded him from the premises.

Issues framed: (i) Whether the Particulars of Claim sufficiently pleaded dishonesty/fraud; (ii) whether, on the evidence, the defendant had misappropriated company funds or acted dishonestly; (iii) whether cash takings and other disputed payments were adequately recorded and accounted for; (iv) whether the defendant held a beneficial interest in 50% of the shares by virtue of an oral 2015 agreement; and (v) whether the defendant was lawfully dismissed and entitled to damages.

Court’s reasoning and findings: The court observed that allegations of fraud require particularisation (referring to Ivey v Genting and procedural guidance) and noted that, on an interim injunction application, findings of final fact would be surprising. The judge considered documentary evidence, witness testimony and recorded meetings from 2020. The company’s contemporaneous accounting records, excel cash ledgers maintained by employees, trial balances and year-end accounts provided a transparent accounting trail. Key bookkeeping witnesses (including the fleet/operations and accounting personnel) supported the defendant’s account that cash receipts were recorded and used for legitimate company outgoings.

The court found inconsistencies and limitations in the claimant’s evidence, including admissions by the director about limited engagement with accounts. On the balance of probabilities the judge concluded there was no intention to permanently deprive the Company of monies, no established fraud or dishonesty by the defendant, and that the defendant’s evidence that the parties agreed equal beneficial ownership at the Company’s inception was more likely than not. Because the defendant was excluded from the business by injunction and had not been lawfully dismissed for gross misconduct, the court awarded six months’ salary as damages for unlawful dismissal.

Wider comment: The judge observed that, while the Particulars of Claim risked vulnerability to strike-out for inadequate particularisation of dishonesty, a trial to determine the factual issues was the fair and proportionate course.

The claim by the Company and Syed is dismissed on the merits because the court found no fraud or dishonest misappropriation; the counterclaim is allowed in that the court declares that Syed holds 50% of the issued share capital on trust for the defendant (the defendant is beneficially entitled to 50%); the defendant is awarded damages for unlawful dismissal (six months’ salary). The interim injunction excluding the defendant is discharged. The court’s rationale was that contemporaneous company records and witness evidence established transparency in cash handling and accounting, the allegations of dishonesty were insufficiently particularised and not proven, and the 2015 oral agreement as pleaded by the defendant was more likely than not true.