Tariq Mahmood Malik v Mahboob Hussain JR
| Jurisdiction | England & Wales |
| Judge | Lord Justice Phillips,Lord Justice Peter Jackson |
| Judgment Date | 11 January 2023 |
| Neutral Citation | [2023] EWCA Civ 2 |
| Docket Number | Case No: CA-2021-000080 |
| Court | Court of Appeal (Civil Division) |
[2023] EWCA Civ 2
Lord Justice Peter Jackson
and
Lord Justice Phillips
Case No: CA-2021-000080
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
BUSINESS LIST (Ch D)
HHJ STEPHEN DAVIES
D30MA278
Royal Courts of Justice
Strand, London, WC2A 2LL
James Mather and Mark Wraith (instructed by Viceroy Law Ltd) for the Appellant
Lesley Anderson KC and Tina Ranales-Cotos (instructed by Clarion) for the First Respondent
Patrick Lawrence KC (instructed by Needle Partners Ltd) for the Second Respondent
The Third Respondent did not appear and was not represented
Hearing dates: 4 and 5 July 2022
Approved Judgment
This judgment was handed down remotely at 2 pm on Wednesday 11 January 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives
Introduction
The second respondent (“Usman”) was the successful bidder, pursuant to the operation of a court-ordered sale mechanism (“the Sale Mechanism”), for the assets of a dissolved partnership. The partnership was between the appellant (“Tariq”) and the first respondent (“Mahboob”), together referred to below as “the Partners”. 1
Usman's bid was £4,300,000 for the partnership's interest in the Royal Nawaab Manchester restaurant (“the Restaurant”), namely, the freehold interest in the Restaurant's premises at 1008 Stockport Road, Levenshulme, Manchester (“the Property”) and 50% of the issued shares in the company that ran the business, RN Restaurant (Stockport) Ltd. (“the Company”).
On Monday 27 September 2021, pursuant to the Sale Mechanism, Usman paid a 10% deposit (£430,000), whereupon he became required to exchange contracts with Tariq and Mahboob within 7 days, namely, by 4pm on 4 October 2021. The Sale Mechanism provided that if Usman failed to exchange, the deposit would be forfeit and (as there was no other valid bid apart from Mahboob's own lower bid) Mahboob would be entitled to purchase the partnership assets at the specified reserve price of £3,250,000.
It was not until 1.21pm on 4 October 2021 (about 2.5 hours before the deadline for exchange of contracts) that drafts of the Property sale contract and the sale and purchase contract (“the SPA”), agreed between the Partners, were sent to Usman's solicitors, Buckles. Buckles responded at 2.54pm with proposed amendments to the SPA, but contracts were not exchanged by the contractual deadline of 4pm. Indeed, by that time neither side had executed their parts of the contracts, let alone offered to exchange. At 5.04pm that afternoon Mahboob's solicitors asserted that the time for exchange had been and gone and that no extension of time would be granted.
The following day Tariq applied for declarations that, on a true construction of the Sale Mechanism: (i) a successful bidder who had paid the required deposit but had not exchanged contracts within 7 days was not to have their bid treated as invalid and the deposit forfeited, as no contracts in a form which it was possible to exchange had been provided to the bidder; and/or (ii) a successful bidder was to be afforded a reasonable time (namely 7 days) following the provision of contracts in a form which it is possible to exchange to effect such exchange. Tariq consequentially sought further declarations that Usman's bid had not become invalid at 4pm on Monday 4 October 2021, that his deposit had not been forfeited and that he had a further period of seven days from the provision of contracts in a form which it is possible to exchange in which to do so. Tariq's application was supported by Usman but opposed by Mahboob. The sale conductor under the Sale Mechanism (“Mr Cunningham”) was joined as a respondent to the application, but did not appear and was not represented.
On 14 October 2021 HH Judge Stephen Davies (“the Judge”), sitting as a High Court Judge, delivered an ex tempore judgment dismissing Tariq's application. The Judge held that the burden was on Usman to make sure that he did everything to get the
contracts exchanged within seven days, but he had failed to do so, in particular because the amendments to the SPA his solicitors requested on 4 October 2021 were not justifiable. Whilst there was a duty of co-operation on the other parties to the Sale Mechanism, they were not in breach of such a duty as exchange could have taken place on the basis of the drafts that had been agreed between the PartnersTariq took steps to appeal the Judge's order implementing his decision (“the Order”), joining Mahboob and Usman as respondents, as well as Mr Cunningham 2. Tariq sought declarations that (a) Usman's bid is not invalid and his deposit is not forfeit and (b) Usman has a reasonable period, which is 7 days, following the provision of contracts which are agreed between the Partners, in which to exchange. Thereafter:
i) On 26 October 2021 Elisabeth Laing LJ refused Tariq's application to stay the Order. She further directed that, pending determination of permission to appeal and any subsequent appeal: (i) on completion of the sale of the partnership assets to Mahboob, Mahboob do pay Tariq's share of the difference between the reserve price Mahboob was paying and the price Usman had bid into an escrow account of Blacks, solicitors instructed by the Partners to act for them as sellers of the partnership assets 3; and (ii) Blacks do continue to hold Usman's deposit of £430,000 in the escrow account. Elisabeth Laing LJ's reasons included that Usman had not appealed against the Order and so Tariq's interest in the appeal could be protected by the directions she gave without delaying the sale of the partnership assets to Mahboob.
ii) Tariq nevertheless refused to execute and exchange contracts for the sale of the partnership assets to Mahboob, resulting in an application by Mahboob to the Judge. On 3 November 2021 the Judge made an order, to which Tariq consented, authorising Blacks to execute and exchange contracts on behalf of Tariq and to complete the transaction, which they did the next day.
iii) On 18 November 2021 Newey LJ granted Tariq permission to appeal. By a separate order of the same date Newey LJ directed that Tariq's interest in the £430,000 deposit paid by Usman be held as security for Mahboob's costs of the appeal.
iv) On 11 January 2022 Usman filed a skeleton argument in the appeal, adopting Tariq's arguments (and taking a further point based on a liberty to apply provision, which point was not ultimately pursued) but also contending that, if Tariq's appeal succeeded, the court should direct that the sale to Mahboob should be unwound, alternatively that the deposit should be returned to Usman.
v) In a supplementary skeleton filed on 14 February 2022 Mahboob objected to Usman seeking the additional relief referred to in his 11 January 2022 skeleton argument, pointing out that Usman had not appealed the Order, nor served a Respondent's Notice indicating an intention to do so. Mahboob contended that Usman lacked any standing to argue for such relief.
vi) On 8 March 2022, just one week before the date set for the hearing of the appeal, Usman's new legal team filed and served a supplementary skeleton accepting Mahboob's procedural complaint but applying for (i) permission to serve a Respondent's Notice out of time appealing the Order and seeking the relief previously indicated and (ii) seeking permission to cross-appeal and (iii) seeking permission to rely on the supplementary skeleton.
vii) On 9 March 2022 King LJ stood the appeal out of the list, to be re-fixed with a revised time estimate, and gave directions that Usman's applications be listed with the appeal.
viii) On 3 May 2022 I gave further directions for Mahboob to file and serve evidence of the prejudice he claimed he would suffer if the sale to him was unwound and for Usman to file and serve evidence of his ability to compensate Mahboob in respect of such matters.
ix) We heard the appeal on 4 and 5 July 2022, sitting as a two-judge court due to the indisposition of the other member of the constitution.
At the hearing of the appeal Mahboob maintained his opposition to (i) Tariq's appeal, (ii) Usman's application for permission to appeal by way of Respondent's Notice out of time and (if Usman was permitted to appeal), the grant of the substantive relief sought by Usman. Mahboob did, however, make an open offer (subject to the agreement of Tariq) that if Usman did not obtain the relief he sought, the deposit should nonetheless be returned to Usman, whether or not Tariq was successful in his appeal.
The background facts
In early 2003 Tariq and Mahboob opened the Restaurant, a large-scale buffet style establishment with wedding and banqueting facilities, at the Property. The Property was jointly owned by Tariq and Mahboob and they each held 50 of the Company's 100 issued shares until 2008, when they each transferred half of their shareholding to their respective wives, Nusrat and Mirza. Usman is Tariq's younger son. Tariq's elder son, Asad, had married one of Mahboob's daughters in 2002.
Usman, who was 16 at the time the Restaurant opened, worked there part-time from the outset (along with Asad and Mahboob's son Mohammed Waqaas), including during holidays whilst he was studying for a degree in Business Management in London. His evidence was that, after obtaining his degree, he worked full-time on family businesses, including the Restaurant, and became a manager, continuing to work there until he was dismissed in late 2021. Mahboob asserts that Usman overstates his role at the Restaurant.
By 2006 relations between Tariq and Mahboob, which had initially been close, had deteriorated and Tariq executed a power of attorney in favour...
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