Shafiq Malik v Henley Homes Plc
| Jurisdiction | England & Wales |
| Judge | Stuart Isaacs |
| Judgment Date | 20 October 2022 |
| Neutral Citation | [2022] EWHC 2611 (Ch) |
| Docket Number | Claim No: BL-2022-000169 |
| Court | Chancery Division |
[2022] EWHC 2611 (Ch)
Stuart Isaacs KC (sitting as a Deputy Judge of the High Court)
Claim No: BL-2022-000169
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Alexander Halban (instructed by Charles Russell Speechlys LLP) appeared on behalf of the Claimant.
Mr Fraser Campbell (instructed by Grosvenor Law) appeared on behalf of the Defendant.
Hearing date: 6 October 2022
Approved Judgment
This judgment was handed down by the judge remotely by circulation to the parties' representatives by e-mail and release to The National Archives. The date and time deemed for hand down is deemed to be 10.30am on 20 October 2022.
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Stuart Isaacs KC:
The claimant is a shareholder and, until his removal in October 2021, was a director of the defendant, which has grown from modest beginnings into a successful property development company. The other shareholders of the defendant, who remain directors, are the claimant's brothers-in-law, Tariq and Kashif Usmani. By an application notice dated 29 April 2022, the claimant applied for summary judgment on the defendant's liability to repay loans made by the claimant to the defendant in an amount of over £2 million and for an interim payment of what is said to be the undisputed amount of £2,362,152. Demands for repayment were made at the end of 2021 and the start of 2022 but liability was disputed in a letter dated 11 January 2022 from the defendant's solicitors to the claimant's solicitors on the ground of an alleged oral agreement.
The defendant's case is summarised in that letter:
“ Tariq Usmani, Kashif Usmani and [the claimant] were shareholders in certain special purpose vehicles. …
On liquidation of these SPVs, entrepreneurs' relief was obtained on the capital gains made. The three men decided that rather than receive this money in cash as shareholders in the SPVs, it would be retained by [the defendant] as shareholder loans for the business to reinvest to further grow shareholder value for mutual benefit. This is also evidenced by the fact that the bulk of the distributions on liquidations were in specie of stock, sundry debtors and intercompany accounts, i.e. already invested. The shareholders would draw on these loans to cover their expenses through monthly drawings from the loan account to cover their routine day-to-day living costs and, subject to the agreement of all three, any one off items providing cashflow permitted. There is nothing in writing on this but it is evidenced and represented by the actuality of how the three have accessed these loans. An example of this is when, as individuals, the shareholders have sought to purchase property in their own names – the obvious source to fund these purchases would be to draw on their shareholder loans but cashflows did not permit this, so they took out personal mortgages, personally incurring costs thereon.
This was agreed orally between the parties and, until [the defendant's] recent demands, has been the way in which the funds have been applied and treated since that time.
They are shareholder loans which are to remain in the business until such time as either all parties agree to vary the terms upon which they are held or liquidation. They are not, properly so analysed, directors' loans repayable upon demand as set out by you.”
It is common ground between the parties inter alia that loans were made by the claimant and the Usmanis to the defendant in order to fund the defendant; that the loans are repayable on demand; and that the defendant's indebtedness to the claimant and the Usmanis is substantial. The defendant's position that the loans are repayable on demand is premised on the agreement of all three lenders to that effect; the claimant's position is that a demand may be made by any one of them for the return of his loan.
In support of the application, the claimant advanced four broad arguments: (1) the defence of an alleged oral agreement is contradicted by the contemporaneous documents; (2) the defendant's evidence does not support the case advanced by it; (3) the court is in as good a position as would be a judge at trial; and (4) even if the alleged oral agreement was made, it would be commercially unworkable. In all the circumstances, the claimant submitted that the defendant has no real prospect of defending the claim and that, in application of the principles laid down by Lewison J in EasyAir Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15] which have been followed and applied in later cases, he was entitled to summary judgment.
For its part, the defendant submitted, also in application of those principles, that its defence has a real prospect of success and that summary judgment should therefore be refused.
In arguing against the existence of the alleged oral agreement, the claimant drew attention to various statements in the case-law, notably in O'Neill v Avic International Corporation [2019] EWHC 165 (QB) at [78], referring to Blue v Ashley [2017] EWHC 1928 (Comm) and Edgeworth Capital Luxembourg Sarl v Aabar Investments [2018] EWHC 1627 (Comm) which highlight the rarity nowadays of there being no form of electronic footprint for oral agreements and to the absence of a contemporaneous written record potentially counting heavily against the existence of an oral agreement. In O'Neill, it was said, referring to Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) and UBS AG (London Branch) v Kommunale Wasserwerke Leipzig GmbH [2014] EWHC 3615 (Comm), that the best approach for a judge to adopt in almost every commercial case is to be guided principally by the contemporary documents and the inferences which can be drawn from them and from known or probable facts rather than the oral evidence of witnesses.
The claimant submitted that the defence is contradicted by all of the contemporary documents. The company accounts, approved by the directors and certified by the defendant's auditors as giving a true and fair view of the defendant's...
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Mohammed Arshad Alam v Pervez Alam
...affairs, McCarthy v Tann [2015] EWHC 2049 (Ch) at [40] per Mr Registrar Briggs, cited with approval in Malik v Henley Homes plc [2022] EWHC 2611 (Ch) at [7] by Stuart Isaacs KC sitting as a Deputy Judge of the High Court. In this way, a director who approves company accounts can generally ......