Bhullar v Bhullar [2003] EWCA Civ 424
Citation: Bhullar v Bhullar [2003] EWCA Civ 424
Rule of thumb: If a partner in a firm comes across a good business opportunity, can they leave the firm and take this up for themselves? No, all opportunities a partner comes across whilst a partner in the firm, must be shared amongst all the partners in the firm.
Judgment:
The basic facts of this case were that the Bhullar brothers were in business together in a company called Bhullar Brothers Ltd which ran a grocery business. The Brothers also owned an investment company where they would buy property and lease it out to people – they were also looking to acquire good new property under this company. However, the brothers started to fall each other, and it was reaching where they were on the point of splitting up as a business partnership and working with their sons/sons in law. From the grocery store one of the brothers noticed that a nearby parking lot was up for sale. The brother set up a new company and purchased the parking lot. The other Brother sought to have this reduced. The brother argued that his brother came to learn of this opportunity in the course of their business and that it was an opportunity which their business would have taken – it was argued that their was a duty of loyalty which was broken. The Court reduced the transaction and stated that this property purchase had to go to the investment vehicle as the brother had breached his duty of loyalty in buying it behind his brother’s back, ‘... the appellants in the instant case had, at the material time, one capacity and one capacity only in which they were carrying on business, namely as directors of the Company. In that capacity, they were in a fiduciary relationship with the Company. At the material time, the Company was still trading, albeit that negotiations (ultimately unsuccessful) for a division of its assets and business were on foot. As Inderjit accepted in cross-examination, it would have been "worthwhile" for the company to have acquired the Property. Although the reasons why it would have been "worthwhile" were not explored in evidence, it seems obvious that the opportunity to acquire the Property would have been commercially attractive to the Company, given its proximity to Springbank Works. Whether the Company could or would have taken that opportunity, had it been made aware of it, is not to the point: the existence of the opportunity was information which it was relevant for the Company to know, and it follows that the appellants were under a duty to communicate it to the Company. The anxiety which the appellants plainly felt as to the propriety of purchasing the Property through Silvercrest without first disclosing their intentions to their co-directors – anxiety which led Inderjit to seek legal advice from the Company's solicitor – is, in my view, eloquent of the existence of a possible conflict of duty and interest... I therefore agree with the judge when he said (in paragraph 272 of his judgment) that "reasonable men looking at the facts would think there was a real sensible possibility of conflict". Parker LJ.
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.