Mr Chawda and his wife jointly owned a residential property which they charged to secure a loan, part of which refinanced the original purchase loan. The case concerned the balance of about 78,000 pounds. Mr Chawda and his brother carried on business together. The sum of 78,000 pounds had been used to refinance the purchase of a property which had been jointly purchased by Mr Chawda and his brother and in which Mrs Chawda had no interest. The brothers converted it into flats and business premises which they let. They received the rental income. It was re-mortgaged to raise andpound;285,000 which was used to make payments to businesses run by one or both of the brothers and to make a personal payment to Mr Chawda’s brother and his wife. The property was later sold for 690,000 pounds, resulting in a very substantial capital profit. After paying off the secured loan, the proceeds were applied in making a variety of payments. 10,000 pounds was paid to a company run by Mr Chawda, of which Mrs Chawda was the sole director. Its business was subsequently sold. A total of some 68,000 pounds out of the proceeds of sale was paid to the joint account of Mr and Mrs Chawda and spent for the benefit of themselves and their family.
Held: The circumstances of the case negated any inference that the equity of exoneration should apply in favour of Mrs Chawda. The transactions had to be seen ‘in the context of the Chawdas functioning as a family unit as many, perhaps even most, modern families do’. In her evidence, Mrs Chawda more than once referred to ‘us’ and ‘we’ when discussing their affairs. Other factors also established that they ‘operated as one’: Mrs Chawda worked in her husband’s business, initially without pay for seven days a week; they did not have separate bank accounts but operated and had joint control over joint bank accounts, into which they paid all their income from all sources; they both took the benefits of the ups and the burdens of the downs of Mr Chawda’s businesses. The benefits included a half-share in a house bought for 925,000 pounds, the monies totalling 68,000 pounds received from the sale of a business, and family holidays, leading the Chief Registrar to comment that ‘the parallels between the circumstances of the Chawda and the Pittortou families are clear’ He concluded: ‘It seems to me that in the circumstances in which a husband and wife operate as the Chawdas have, pooling their earnings and profits, administering their financial affairs jointly and enjoying together a prosperous life, if not an extravagance one such as that of the Pagets. It is as unattractive as it is artificial for one of them to take the benefits while at the same time seeking to enforce an individual right in one respect only to the disadvantage of the other spouse (or in this case his creditors).’
Judges:
Chief Registrar Baister
Citations:
[2014] BPIR 49
Jurisdiction:
England and Wales
Cited by:
Cited – Armstrong v Onyearu and Another CA 11-Apr-2017
Exoneration of partner’s equity on insolvency
The court considered the equity of exoneration, where property jointly owned by A and B is charged to secure the debts of B only, A is or may be entitled to a charge over B’s share of the property to the extent that B’s debts are paid out of A’s . .
Lists of cited by and citing cases may be incomplete.
Equity
Updated: 04 May 2022; Ref: scu.581748
