Usman Hussain Malik v Nusrat Malik

Hearing dates: 18–20 December 2023

Further written submissions lodged: 22 and 23 December 2023

Draft judgment circulated: 11 January 2024

APPROVED JUDGMENT

Remote hand-down: This judgment was handed down remotely at 10am on 22 January 2024 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

Introduction and summary of decision

In 2016 Nusrat Tariq Malik, the first defendant (“Nusrat”), transferred 4 of the 25 shares she held in a limited company, R N Restaurant (Stockport) Ltd, being the (nominal) third defendant (“the Company”). She transferred 2 shares to her elder son, Asad Malik (“Asad”) and 2 shares to her younger son, the Claimant, Usman Malik (“Usman”). At the time all three were agreed that this would assist them to achieve their common objective of removing Tariq Malik (“Tariq”), Nusrat's estranged husband and Asad and Usman's father, as director of the Company, with a view to saving the restaurant business operated through the Company and, thus, preserving the economic fortunes of the family. Subsequently, it is said by the other members of his family, Usman has separated himself from the rest of the family and aligned himself again with Tariq and/or with other external investors who they do not trust. The question of the beneficial ownership of these 2 shares in these changed circumstances has become a matter of great importance in the continued battle for ownership of the Company and its resolution is the objective of this trial.

There have been two previous trials before me, resulting in my first judgment [2020] EWHC 2334 (Ch) and my second judgment [2021] EWHC 1405 (Ch) respectively. There have also been a number of further contested hearings, including one appeal to the Court of Appeal, resulting in a judgment at [2023] EWCA Civ 2, and a further two day hearing before me in May 2023, itself leading to a further judgment at [2023] EWHC 1433 (Ch).

The first two trials related to the wider litigation, involving members of the Malik and the Hussain families, both of which have been involved in the ownership and operation of a large and highly successful restaurant business in Levenshulme, Manchester known as the Royal Nawaab. This wider litigation concerned the existence and assets of what I held was a partnership between the then claimant Tariq and the then second defendant, Mahboob Hussain (“Mahboob”). In my first judgment I held that the partnership owned the premises and also owned initially all 100, and then 50, of the 100 shares in the Company through which, as I held, the restaurant business was operated. (In 2009 Nusrat and Mahboob's wife, Mirza, had each been gifted 25 shares in the Company by their respective husbands for tax planning purposes in a transaction which, as I held in my first judgment, could not be impeached by Tariq.) In my second judgment I held that the premises and the partnership shares in the Company should be sold under an open market sale process.

In my third judgment I held that Usman, who had become the successful bidder, had failed to comply with the sale mechanism and had thus lost the opportunity to acquire the premises and the shares, thereby enabling Mahboob to do so instead. The final chapter in that litigation was when the Court of Appeal overturned that decision and held that Usman was after all entitled to acquire the premises and 50 shares.

Anticipating the possibility of further disputes, the Court of Appeal directed that I should deal with the same if I was available, given my knowledge of the background. Those disputes duly materialised and, following a 2 day contested hearing in May 2023, I held that the attempts made by Mahboob and the then directors of the Company to block Usman's acquisition of the 50 shares failed.

However, in 2021 and again in 2022 – at around the time that the appeal was proceeding in the Court of Appeal — Nusrat first advanced a contention that, following her transfer of 2 shares to Usman and his registration of the 2 shares in his name by the Company on 21 October 2016 (“the transfer”), she remained the beneficial owner of those 2 shares and/or that they ought to be re-transferred to her. Having requested the then directors of the Company to do so, they purported to re-register the 2 shares back to her on 9 August 2022, which action I held was wrongful and ineffective in my fourth judgment.

In the Part 8 claim issued by Usman in early 2023, seeking the determination of the disputes which had arisen, he sought declarations as to his legal and beneficial ownership of the 2 shares. Following the 2 day hearing in May 2023 I held that the registration by the Company of him as owner of the 2 shares was effective at law and the purported re-registration ineffective and, thus, ordered that he be re-registered as legal owner of the 2 shares. However, by this stage Nusrat had asserted her substantive claim to the 2 shares in her defence to the Part 8 claim and, following argument, I concluded that her case was sufficiently arguable to proceed to a final determination.

Accordingly, I gave directions for the trial of the counterclaim, concerning the beneficial ownership of the shares, and whether the transfer should be set aside. I also required Usman to give undertakings to restrict his use of the 2 shares pending the final determination of Nusrat's counterclaim.

Usman's case is that Nusrat gifted the 2 shares to him at the same time as she gifted a further 2 shares to Asad.

Nusrat's case is, as it is put by her counsel in their written opening submissions, triple tiered:

a. first, she transferred the 2 shares for a specific administrative purpose, without donative intent, so that Usman holds them on resulting trust for her;

b. second, further or alternatively, the transfer was as a result of misrepresentations by Asad and/or Usman, or a under a mistake and should be set aside; and

c. third if, contrary to the above, the transfer was effective in equity, then it was procured by Usman and/or Asad's actual or presumed undue influence over Nusrat.

Although the value of the 2 shares is, in itself, relatively modest, they are of substantial value in real terms in current circumstances because they make the difference between Nusrat and Mirza together having a 50% interest in the Company or only a minority 48% stake in the Company. If they have a 50% share, their ability to block any decisions taken by Usman as incoming owner of the other 50% share will be significant, if not decisive. If they only have a 48% share, their ability to do so will be very significantly reduced.

I am fully aware that it follows that the consequences of a finding in favour of Nusrat will not be conducive to the aim of achieving a clean break between the warring factions, as envisaged in my previous judgments and orders made in the previous litigation. If, however, Nusrat is entitled as a matter of law to the relief which she seeks, then she must have it, even if the result is likely to prolong this bitter, time and cost-intensive inter-family dispute.

I have been greatly assisted by the thorough and skilful presentation of the respective cases by counsel for Usman, Patrick Lawrence KC and Andrew Blake, and counsel for Nusrat, Alexander Learmonth KC and Amit Karia, who had to work to an expedited timetable and did so most effectively. I have borrowed heavily from their excellent written opening submissions for the non-controversial sections of this judgment.

I have not referred to all of the evidence and submissions in this judgment, nor dealt with each and every point raised, only those which are of direct importance to my decision.

In summary, my decision is that Nusrat effectively and unconditionally disposed of the entire legal and beneficial interest in the 2 shares to Usman and that there is no basis for that disposal to be reversed by the Court, so that her Part 8 counterclaim must fail and so that Usman is entitled to the relief which he seeks as regards his beneficial ownership of the 2 shares.

The issues

The issues are as follows:

Resulting Trust

Does Usman hold the 2 shares on trust for Nusrat?

This turns on the following issue: when Nusrat agreed to transfer 2.5 (later reduced to 2) of her shares to each of Asad and Usman, did she do so for a specific purpose of allowing them to be appointed directors of the Company and/or to use the votes to remove Tariq as a director (the “specific purpose”),...