Usman Hussain Malik v Mahboob Hussain

Hearing dates: 15 and 16 May 2023

Draft judgment circulated: 31 May 2023

APPROVED JUDGMENT

Remote hand-down: This judgment was handed down remotely at 10:30am on 14 June 2023 by circulation to the parties or their representatives by email and by release to The National Archives. I direct that pursuant to CPR PD 39A paragraph 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.

His Honour Judge Stephen Davies

A. Introduction and summary of my decision

I will refer to the parties involved in the applications which were argued before me on 15 and 16 May 2023 as follows:

(1) “ Usman”: Mr Usman Malik. The Claimant in the Part 7 action BL-2023-MAN-000016, formerly D30MA278 (“ the Part 7 claim”) and the Part 8 action CR-2023-MAN-000270 (“ the Part 8 claim”)

(2) “ Nusrat”: Mrs Nusrat Malik. The First Defendant in the Part 8 claim.

(3) “ Mahboob”: Mr Mahboob Hussain. The sole Defendant in the Part 7 claim and the Second Defendant in the Part 8 claim.

(4) “ The Company”: R N Restaurant (Stockport) Limited. The Third Defendant in the Part 8 claim.

This is the fourth substantive judgment I have given in this dispute. The most recent previous judgment, however, is that of the Court of Appeal handed down on 11 January 2023 ( [2023] EWCA Civ 2). The judgment of Phillips LJ (with whom Peter Jackson LJ agreed) contains, at paragraphs 9 to 15, a convenient summary both of the underlying facts and of the two substantive judgments which I gave (a) on liability in August 2020 ( [2020] EWHC 2334 (Ch)); and (b) on the taking of the partnership account in May 2021 ( [2021] EWHC 1405 (Ch)). The judgment of the Court of Appeal also explains that, contrary to my finding in my third substantive unreported judgment given in October 2021, Usman was indeed entitled to acquire the 50% shareholding in the Company of 50 shares (“ the sale shares”), held as to 25% each by Tariq 1 and Mahboob, pursuant to the operation of the court-ordered sale mechanism which followed my second substantive judgment.

As a result of that judgment and the consequential order of the Court of Appeal sealed on 12 January 2023 Usman was given 7 days from presentation of sale contracts capable of execution and

As will surprise no-one familiar with the history of this case, disputes did indeed arise and, pursuant to an application made by Usman on 27 January 2023, the matter came before me – as the judge nominated by the Court of Appeal to deal with such matters if I was available — on 15 February 2023. At that hearing it became apparent that the matters in dispute involved substantive and not merely drafting issues which could not fairly be dealt with without a further application, exchange of evidence and submissions. Accordingly, at the invitation of Mr Lawrence KC for Usman, I adjourned the hearing and gave directions to enable all such matters to be determined at this current hearing. The intention was to allow ample time and opportunity to enable all matters in dispute relevant to the conclusion of the sale process, procedural and substantive, to be determined at one hearing.

Perhaps also unsurprisingly, matters have mushroomed further since then and I must now determine the following applications:

(1) Usman's original application dated 27 January 2023 in the Part 7 claim, seeking a determination of the disagreements between Usman and Mahboob as to the form and contents of the sale contracts for the sale of the property and the 50 shares (“ Usman's sale contracts terms application”).

(2) Usman's application dated 1 March 2023 in the Part 7 claim, seeking declaratory relief in relation to Mahboob's holding of the 50 shares until Usman is registered as their holder (“ Usman's sale shares application”)

(3) Usman's Part 8 action dated 3 March 2023, seeking (in its amended form) declaratory and other relief as regards his claim to the legal ownership of the 2 shares currently registered in Nusrat's name (“ Usman's two shares application”)

(4) The application made by the Company in its acknowledgement of service in the Part 8 claim, seeking declaratory relief as regards the effect of and obligation to register the 50 shares in the Company currently registered in the names of Mahboob and Tariq (“ the Company's sale shares application”)

(5) The application made by Nusrat in her acknowledgement of service in the Part 8 claim, seeking declaratory and other relief as to her claim to the beneficial ownership of the two shares (“ Nusrat's two shares application”)

(6) The application dated 5 May 2023 made by Nusrat for injunctive relief in the Part 8 claim, seeking injunctive relief in the event that the Court accedes to the Usman two shares application so that the Company registers him as the holder of the 2 shares (“ Nusrat's injunction application”).

It is worthwhile beginning by explaining what, in my judgment, is really in play here. It is no secret that Mahboob, supported by Nusrat and by her other son Asad, as well as by the other members of the two families (and, thus, including the current directors who comprise Asad, Mahboob's son Mohammed Waqaas, and his son-in-law Mian Usman (“ Mian”)), are vehemently opposed to Usman taking control of the Company. Although there has been some attempt in submissions to persuade me that they have different positions and different interests and are not acting in concert, this is so clearly contrary to their position throughout and to the reality of their stance at the hearing that I am satisfied beyond any doubt that they are acting in concert. I will refer to this grouping collectively as the Mahboob faction. They appear to believe that Usman is now in league with Tariq, who they fear would be perfectly happy to see the Company fail for personal vindictive reasons. They also 2 appear to believe that the two Manchester businessmen who Usman accepts are providing him with financial support to acquire the sale shares will actively involve themselves in the running of the Company to its detriment.

The Mahboob faction have identified two ways in which Usman can be blocked in his undoubted desire to take control of the Company.

The first arises from Article 6 of the Company's Articles of Association which provides, so far as relevant, that: “Any share may be transferred by a member to his or her spouse or lineal descendant and any share of a deceased member may be transferred to any such relation as aforesaid of the deceased member. Save as aforesaid the Directors, in their absolute discretion and without assigning any reason therefor, may decline to register the transfer of any share whether or not it is a fully paid share….”

It is common ground that although Usman meets the lineal descendant qualification in relation to the 25 shares originally owned by Tariq (transferred to Mahboob, albeit wrongfully, as the Court of Appeal have now decided, pursuant to the forced sale which occurred between my third judgment and the successful appeal) he does not meet that qualification in relation to the 25 shares owned by Mahboob. Thus, although the Company's position as put forward by the directors is to suggest that it is neutral, it is plain beyond argument that the current directors will not register the transfer of Mahboob's 25 shares to Usman. On that basis, he will not have a voting majority of the Company shareholding and will not, therefore, secure control of the Company.

Usman acknowledges the difficulty in relation to the 25 shares posed by Article 6. He has, however, identified a way around that difficulty. He contends that once the sale contracts have been exchanged and completed and once payment has been made, then pending registration Mahboob will hold all of the 50 shares currently registered in his name on a bare trust for Usman as purchaser and must, therefore, comply with Usman's directions as to the exercise of all rights attaching to the...