Home Information Cases Hetul Navinchandra Patel & Ors v Ashwin Motichand Shah & Ors (2005)

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Hetul Navinchandra Patel & Ors v Ashwin Motichand Shah & Ors (2005)

Summary

It was unconscionable for the appellants to claim a beneficial interest to commercial properties purchased under a joint venture between their predecessors and the respondents where the appellants had made no payments to keep the properties afloat, contrary to the aims of the venture, and had only shown interest once there was a profit to be shared. The respondents were released from the equitable obligations that had arisen under the resulting trusts created by the venture.

Facts

The appellants (C) appealed against a decision ([2004] EWHC 1683 (Ch)) that their claims for beneficial interests in properties had been barred by laches. C had claimed a beneficial interest in a number of properties which were purchased in the names of one or more of the respondents (D). The purchase of the properties was by way of a joint venture and had required the investors in that venture to contribute to any shortfalls that arose in respect of mortgage payments and moneys received. During the property slump in the early 1990's D had continued to make payments towards the properties, however the investors, including C's predecessor in title, had failed to make any payments towards shortfalls. The judge had found, inter alia, that in all the circumstances, it had been unconscionable for C to now assert a beneficial interest in the properties, since throughout the property slump D had taken on the whole burden of keeping the properties afloat and that what had been important had been that C had only made their presence known once there was a profit to be shared. C argued that the judge had incorrectly applied the principles of laches in that he should not have applied them to a claim to beneficial interests held by a trustee.

Held

The judge applied the test that the doctrine of laches was of great importance where persons had agreed to become partners, and one of them had unfairly left the other to do all the work, and then, there being a profit, had come forward and claimed a share of it and that in such cases, the claimant’s conduct opened him up to the remark that nothing would have been heard of him had the joint venture ended in loss instead of gain; and a court would not aid those who could be shown to have remained quiet in the hope of being able to evade responsibility in case of loss, but of being able to claim a share of gain in case of ultimate success (see Lindley and Banks on Partnership, 18th ed., paras. 23-20 to 23-25). That principle was stated within the setting of a partnership, and was equally applicable in the instant case of a joint venture. However, there was a more overarching principle which embraced laches and delay which could be invoked to equitable defences of property rights claims, namely, whether, in all the circumstances it was unconscionable for the claimants to assert a beneficial interest in the properties (Frawley v Neill (formerly Lindley) Times, April 5, 1999 applied). Accordingly, what had to be determined was whether the conduct of C, as found by the judge, was so unconscionable so as to release D from the equitable obligations under the trust. On the basis that this was a collaborative commercial agreement in which all involved were to have worked together to fulfil an aim of trading in property, the venture ceased to be joint when there were no further contributions made and D was left to do everything to keep the venture afloat. The creation of the resulting trust was not the aim of the venture, but was merely a bi-product. The judge was correct to find that C's acts, or lack of them, had been so unconscionable so as to release D from the equitable obligations under the trusts.

Appeal dismissed.

Court of Appeal
Mummery LJ, Keene LJ, Sullivan J
Judgment date
15 February 2005
References

LTL 15/2/2005

Practice areas