Arvindar Singh (as trustee in bankruptcy of Mrs Angela Garcha) v Angela Garcha & Ors
[2024] EWHC 1844 (Ch)
Hidayat Ullah v Mohammed Anf Ullah & Anor
21 December 2023
[2023] EWHC 3313 (KB)
High Court
A son bought his bankrupt father's houses cheaply from the bankruptcy trustee, without telling the trustee the father still owned them. The court said the son acted wrongly and the father can sue him, even though the trustee knew about the dispute. The father's lawsuit was allowed to continue.
Key Facts
- •Hidayat Ullah (Appellant) appealed the dismissal of his claim against Mohammed Anf Ullah and Mohammed Tarik Ullah (Respondents).
- •The claim concerned seven properties, two in particular, purchased with the Appellant's business profits but registered in the Respondent's name.
- •The Appellant was declared bankrupt in 1997, vesting his interest in the properties in the Trustee in Bankruptcy.
- •In 2012, the Trustee sold his rights in the two properties to the Respondent for £55,000.
- •A 2013 judgment found the properties were beneficially owned by the Appellant, but the bankruptcy and subsequent assignment prevented him from claiming them.
- •The Appellant later sued the Respondent, alleging that the assignment was at an undervalue and in breach of fiduciary duty.
- •The lower court struck out the Appellant's claim, finding that the Trustee was fully aware of the circumstances and acquiesced in the sale.
- •The Appellant appealed, arguing that the Respondent breached the fair dealing rule by failing to disclose the Appellant's beneficial interest.
Legal Principles
Fair dealing rule: A fiduciary cannot contract with their principal unless they can positively prove the principal consented to the adverse interest and that full disclosure of all material facts was made.
Snell’s Equity 15-007; Tito v Waddell (No.2) [1977] Ch 106 at [241]; Lewin on Trusts (46-043)
Fiduciary liability to account does not depend on causation of loss. It is sufficient that the profit falls within the scope of the fiduciary's duty of loyalty.
Murad v Al-Saraj [2005] EWCA Civ 959; Attorney-General v Blake [2001] 1 AC 268
CPR 3.4: The court may strike out a statement of case if it discloses no reasonable grounds for bringing the claim or is an abuse of process.
CPR 3.4
CPR 24.3: The court may give summary judgment if a party has no real prospect of succeeding and there is no other compelling reason for a trial.
CPR 24.3
Res judicata: A matter already judged cannot be relitigated.
Henderson v Henderson (1843) 3 Hare 100
Outcomes
Appeal allowed. The lower court's decision to strike out the claim was overturned.
The lower court erred in finding that the Trustee's acquiescence in the sale precluded the claim. The Respondent's failure to disclose the Appellant's beneficial interest constituted a breach of the fair dealing rule, regardless of the Trustee's knowledge. Causation of loss is irrelevant in fiduciary claims.
Amendments to the Particulars of Claim allowed, except for those relating to the National Westminster Bank account which are also allowed.
The proposed amendments concerning breaches of the fair dealing rule and fiduciary duty were not abusive and were necessary to clarify the claim. While the lower court's concerns regarding delay and costs were valid, they were outweighed by the merit of the amended claim.
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