Keown v Nahoor is a decision demonstrating the impact of the different burdens of proof applicable to different causes of action.
Relationships between the parties
Briefly, Mr Keown retained the services of Mr Nahoor for an agreed annual sum of £30,000 to act as accountant for his business. Nahoor was a signatory to the business bank account, authorised withdrawals, kept the books and ledgers, prepared the accounts, and paid the outgoings. Clearly, as the judge found, Keown trusted Nahoor.
Nahoor’s daughter and son in law (Mr and Mrs Hassan) helped him with the work with Keown’s agreement. Keown agreed to pay Nahoor £200 a week more for the help given by the Hassans. Nahoor was supposed to pay this over to them, but there was a dispute about how much he agreed to pay them and how much he did pay them. A key fact is that the Hassans were not retained or employed by Keown.
In the course of divorce proceedings, Keown’s wife instigated an investigation into the finances of his business. She could not accept how unprofitable it was said to be. Keown appears to have been unsuspecting until the results of the investigation showed that Nahoor had been helping himself to far more money than had been agreed: in excess of £700,000 more over a five year period. Once he learned this, Keown terminated Nahoor’s retainer.
Keown brought his claim against Nahoor on three bases: failure to account for sums appropriated by him in breach of fiduciary duty, unjust enrichment and constructive trust. Against the Hassans, the claim was for knowing receipt, unjust enrichment and “a proprietary claim to a constructive trust”.
Claims against Nahoor
The judge said that it was obvious that Nahoor was a fiduciary, and it was sensible of his counsel to concede that by the end of the trial. The fact that he was a fiduciary meant that it was he who had the burden of justifying the payments which had been made to him using his authority over the business bank account. He had taken over £700,000 more than the sums to which he was entitled and had been unjustly enriched thereby. Additionally, because he was a fiduciary who obtained the sums in breach of his duty of loyalty, he fell within the category of persons described as quasi trustees by Millett LJ in Paragon Finance v Thakerar (which was approved by the Supreme Court in Williams v Central Bank of Nigeria).
Claims against the Hassans
As to the Hassans, they were not in a direct contractual arrangement with Keown, nor were they fiduciaries. Mrs Hassan had admitted to receiving just over £13,000, which was in fact no more than Keown had paid Nahoor for her help, so no relief was granted against her. Mr Hassan had received nearly £13,000 more than Keown had paid Nahoor for his help, so the judge went on to consider the relief sought against him.
That consideration is what took the judge into his balancing act, looking carefully at where the burden of proof lay in respect of each claim. For the knowing receipt claim, following BCCI v Akindele, he asked himself whether Keown had satisfied him that it would be unconscionable for Mr Hassan to retain the benefit of the receipt. Mr Hassan had given evidence that Nahoor had agreed to pay him £340 per week, and the judge did not feel able to find that he was lying on that score.
For the unjust enrichment claim, once again it was Keown who bore the burden of proof, this time of showing that it would be unjust to allow Mr Hassan to retain the money, and the judge held that he had not discharged that burden.
Finally the judge turned to the proprietary claim. He held that the money paid by Nahoor to Mr Hassan was impressed with a constructive trust (as set out in his findings in the claim against Nahoor) and that it was Mr Hassan who bore the burden of showing that he was a bona fide purchaser for value without notice, so that the money was received by him free of that trust. Mr Hassan had failed to discharge that burden and the £13,000 continued to be impressed with the constructive trust in favour of Keown.
The court’s decision is a helpful illustration of who bears the burden of proof in claims for breach of fiduciary duty and constructive trust.
