Maghsud Azhdari v Farhang Adjari

Whether an informal business arrangement amounts to a partnership, and whether a claimant has a beneficial interest in property, depends on the parties’ agreement and the evidence viewed in the round. Written agreements are not essential, particularly in dealings between close family members. The court may assess subsequent conduct, contemporaneous documents, objective probabilities and the parties’ financial contributions. A common intention constructive trust may arise where there is an agreement as to ownership, reliance and detriment making it unconscionable to deny the claimant’s interest.

The claimant and defendant were cousins who operated a takeaway business from mixed-use premises. The claimant sought declarations that they had operated the business as equal partners and that he held a 50% beneficial interest in the long lease of the residential part of the property.

The defendant contended that he had operated the business as a sole trader and was the sole beneficial owner of the lease. The dispute principally concerned what the parties had agreed, the claimant’s financial contributions, and the significance of their subsequent conduct.

1. Outcome. The claimant succeeded. The court declared that the parties had been in partnership, dissolved on 14 February 2018 upon the incorporation of El-Paso Leam Limited, and that the claimant had a 50% beneficial interest in the 2018 Lease.
2. The absence of a written partnership agreement was not decisive. Informal business arrangements between close family members may evolve through oral exchanges. The court assessed the competing accounts on the balance of probabilities and could not remain undecided.
3. The claimant’s case was supported by his involvement in negotiating the original lease and acquisition of the property, his role as guarantor, his substantial contributions to refurbishment and purchase costs, and his involvement in attempted refinancing. It made little commercial sense for him to assume substantial financial risk without an agreed interest in the business or property.
4. The parties’ subsequent conduct corroborated the alleged joint venture. Relevant matters included profit ledgers showing the defendant’s salary and equal profit divisions, payments from business profits, the claimant’s execution of a tenancy agreement as landlord, the defendant’s statements acknowledging the claimant’s half share, the transfer of 50% of the company shares, and messages referring to ending the joint venture.
5. The court was entitled to draw adverse inferences from missing documents and absent witnesses where the surrounding evidence justified them. Such inferences were matters of ordinary rationality assessed in context. The court also gave particular weight to contemporaneous documents and objective probabilities, while treating the parties’ recollections with caution.
6. The constructive trust test in Matchmove Limited v Dowding and Church was satisfied. There was an agreement concerning ownership, reliance by the claimant, detriment through financial contributions and other commitments, and circumstances making it unconscionable for the defendant to deny the claimant’s ownership.