Recovery Partners GP Limited & Anor. v Irakli Rukhadze & Ors.
[2023] EWCA Civ 305
Christopher Charles Fisher v Colin Laverock Dinwoodie
26 May 2023
[2023] EWHC 1279 (Ch)
High Court
Two friends had a business together. They argued about who owned what. A judge said one friend owed the other money and shouldn't compete in the same business. An appeals court agreed about the money but said the competition ban was too harsh.
Key Facts
- •Mr. Fisher and Mr. Dinwoodie had a long-standing friendship and business relationship.
- •They initially conducted business informally, then formed two companies, BEM and BME, to provide consultancy services.
- •A dispute arose regarding the beneficial ownership of shares in BEM, BME, and other companies (AML and QVT).
- •Mr. Dinwoodie claimed a beneficial interest in the shares based on a fiduciary relationship, express trust, and constructive trust.
- •The lower court found in Mr. Dinwoodie's favor on all counts and granted an injunction against Mr. Fisher preventing competition.
- •Mr. Fisher appealed the findings of partnership, fiduciary duty, express trust, constructive trust, and the injunction's scope.
Legal Principles
Partnership Act 1890, Section 1: Defines the elements of a partnership.
Partnership Act 1890
Fiduciary duties: Obligation of loyalty, acting in good faith, not profiting from trust, avoiding conflicts of interest.
Bristol & West Building Society v Mothew [1998] Ch 1
Fiduciary duties in commercial context: While unusual, they can arise based on the facts.
Various cases cited, including Glenn v Watson [2018] EWHC 2016
Three certainties for express trusts: Certainty of words, subject matter, and objects.
Not explicitly cited but implied.
Constructive trust principles: Arise when it's unconscionable for the owner of property to deny another's beneficial interest. Pallant v Morgan principles involve a common intention that one party will acquire property, and does so, giving the other an interest.
Pallant v Morgan [1953] Ch 43; Farrar v Miller [2018] EWHC Civ 172
Companies Act 2006, Section 125: Allows court rectification of the register of members.
Companies Act 2006
Injunctions and restraint of trade: Injunctions should not be a restraint of trade unless there are continuing fiduciary duties.
Various cases discussed, including A-G v Blake [1998] Ch 439
Appellate review of evaluative judgments: Appellate courts should be cautious in interfering with a trial judge's evaluative judgments unless there's an identifiable flaw.
Re Sprintroom Ltd [2019] EWCA Civ 932; Biogen Inc v Medeva plc [1997] RPC 1
Outcomes
Appeal dismissed regarding the finding of a partnership.
The judge's finding was an evaluative judgment supported by sufficient evidence, even if not fully detailed in the judgment.
Appeal dismissed regarding the finding of fiduciary duty.
The judge correctly applied the law and considered sufficient facts to establish a fiduciary relationship based on the close personal and business relationship, reliance, and the parties' understanding of their 50/50 ownership.
Appeal dismissed regarding the finding of an express trust.
Sufficient evidence supported the judge's finding of an express trust based on the parties' agreement, even if the exact timing of the agreement was slightly unclear.
Appeal allowed regarding the Pallant v Morgan constructive trust.
Insufficient findings of fact supported the judge's conclusion, though a constructive trust might be established on other grounds.
Appeal allowed regarding the injunction.
The injunction was too broad and lacked sufficient justification given the termination of the relationship. While some restrictions on the use of joint venture assets might be warranted, a complete ban on competition was excessive.