Hidayat Ullah v Mohammed Anf Ullah & Anor
[2023] EWHC 3313 (KB)
Mary Shovlin v Site Civils and Surfacing Limited & Anor
24 May 2024
[2024] EWCA Civ 585
Court of Appeal
A trust's money was lent to a company by one trustee. The other trustee sued, saying the first trustee was disloyal. The court said there wasn't enough proof the first trustee was disloyal, so the lawsuit failed. It was important that the suing trustee didn't even testify.
Key Facts
- •Mary Shovlin, sole surviving trustee of the Shovlin Plant Hire Trust (the Trust), appealed a High Court decision dismissing her claims against Site Civils and Surfacing Ltd (SCS) and George Crosby.
- •The Trust lent £645,000 to SCS in two tranches via the late co-trustee, Austin Fergus.
- •Shovlin alleged breach of fiduciary duty by Fergus, claiming the loans were unauthorized, unsecured, at a low interest rate, and lacked documentation.
- •Shovlin claimed SCS was a knowing recipient of the misappropriated funds and sought an account of profits from the sale of land acquired using the loans (Mercury Way).
- •Shovlin also claimed a proprietary interest in Greenacres, a house built using proceeds from Mercury Way, via backwards tracing.
- •The High Court judge dismissed the claims, finding insufficient evidence of Fergus' breach of duty, lack of unconscionability on SCS's part, and inadequate connection for backwards tracing.
- •Permission to appeal was granted on grounds relating to the Judge's analysis of fiduciary duty, knowing receipt, and backwards tracing.
Legal Principles
Knowing Receipt: A claimant must establish a primary breach of fiduciary duty before secondary liability can be imposed on a knowing recipient.
El Ajou v Dollar Land Holdings plc [1994] 2 All ER 685 at 700g
Proprietary Tracing: A proprietary tracing claim requires a primary breach of fiduciary duty; without it, the recipient holds full title to the funds.
Lewin on Trusts (20th ed.) at 44-010 to 44-013
Breach of Fiduciary Duty: The distinguishing feature is the obligation of single-minded loyalty; a breach requires demonstrating disloyal disregard or subordination of the principal's interests.
Bristol and West Building Society v Mothew [1998] Ch 1 at page 18
Backwards Tracing: Requires a sufficiently close connection between the misappropriated funds and the acquisition of the asset.
Republic of Brazil v Durant International [2016] AC 297
Burden of Proof: The claimant bears the burden of proving a breach of fiduciary duty. Adverse inferences may be drawn from a party's failure to provide evidence.
Various
Outcomes
Appeal dismissed.
The Court of Appeal upheld the High Court's finding that Shovlin failed to prove Austin Fergus breached his fiduciary duty. The Court found the Judge's conclusion was justified based on the evidence presented, noting the lack of evidence from Shovlin herself and the Judge's assessment of witness credibility.
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