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”. (Footnote: 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 Partners.

Tariq took steps to appeal the Judge’s order implementing his decision (“the Order”), joining Mahboob and Usman as respondents, as well as Mr Cunningham (Footnote: 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:

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.

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 of Asad to enable him to run the restaurant business with Mahboob. By 2016 Tariq had fallen out with all the other parties, including his wife and sons, and was removed as a director of the Company. Asad and Usman became directors of the Company and each received two shares from Nusrat’s holding, which was thereby reduced to 21 shares (Footnote: ⁴).

This resulted in Tariq commencing these proceedings against Mahboob, the Company, Nusrat, Mirza and his sons to (i) establish the existence of partnership between himself and Mahboob in respect of the Property and their shareholdings in the Company; and (ii) seek the dissolution and winding up of that partnership, with all necessary accounts and enquiries. Tariq also brought an unfair prejudice petition in respect of his position as minority shareholder in the Company.

On 28 August 2020, following a two-week trial (in which Usman did not participate), the Judge found that there was indeed a partnership between Tariq and Mahboob, the assets of which were the Property and their combined 50% shareholding in the Company, but that the partnership did not extend to interests in a second restaurant established in Perivale. The Judge further held that the relationship between Tariq and Mahboob had wholly broken down and that it was just and equitable to make an order for the dissolution of the partnership, for the partnership to be wound up and for a final account to be taken. The unfair prejudice petition was dismissed.

On 26 May 2021 the Judge handed down judgment on certain issues arising on the taking of the final partnership account. In particular, the Judge determined that the partnership assets should be sold, with a buy-out of Tariq’s share by Mahboob at the valuation set by the court (the reserve price) only if the sale process did not result in a sale. The Judge emphasised that the sale process should be undertaken with relative speed and relatively limited cost, directing that the mechanism should provide as follows:

The Judge further indicated (amongst other matters) that the mechanism should provide that, if the successful bidder was someone other than Mahboob and that bidder was unable or unwilling to complete within the specified timetable, Mahboob should be entitled to acquire the partnership assets at the reserve price without being held to any previous higher bid.

The Judge’s directions were incorporated by reference in an order dated 10 June 2021, which further provided for valuations of the Property and the Company to be undertaken and for those valuations to be final unless challenged by either of the Partners. The valuation reserve price was to be the property valuation plus half of the company valuation (reflecting the fact that the Partners’ held only 50% of the shares in the Company). The valuations were produced in relatively short order and neither of the Partners sought to challenge them. Those valuations resulted in a reserve price of £3.25m. The parties subsequently agreed that Mr Cunningham, a property consultant at Savills, should be appointed as the sale conductor.

The key provisions in the Sale Mechanism, for present purposes, are clauses 5.4 and 5.6, which provided as follows:

Bids were invited by the conductor on 11 September 2021 and on 20 September 2021 Mr Cunningham notified the Partners that Tariq had made the highest bid for the partnership assets (£8m, or £4m for Mahboob’s 50% share), Usman the second highest (£4.3m), followed by Mahboob (£3,824.005.08, or £1,912,002.54 for Tariq’s share). Tariq did not pay the required deposit, so Usman became the successful bidder. As stated above, he paid the required deposit on 27 September 2021 and was required to exchange contracts by 4pm on 4 October 2021.

Blacks had by this point prepared first drafts of contracts for the sale and circulated them to the Partners on 16 and 20 September 2021. Blacks did not provide the drafts to Usman, but Tariq’s solicitors did so on 24 September 2021.

Thereafter there were negotiations between the Partners as to the form of the contracts to be tendered to Usman. Blacks did not copy Usman into that correspondence, understandably in my view. Usman’s solicitors, Buckles, similarly took the view that there was no point doing anything until they had received drafts agreed between the Partners.

By Wednesday 29 September 2021 the SPA appeared to be agreed between the Partners and the Property contract was also agreed, save for a couple of minor issues.

On Thursday 30 September 2021 Buckles emailed Blacks, referring to the imminent date for exchange of contracts and complaining that nothing had been received from either the conductor or the solicitors for the Partners (although it is now clear that the latter point was not accurate). The email continued:

On Friday 1 October 2021 Tariq’s solicitors indicated that they would agree to extend time for Usman to exchange contracts, but Mahboob’s solicitors rejected the request in robust terms. They did, however, state that they were willing for Blacks to circulate working drafts of both contracts to Buckles for consideration by Usman, and to do so immediately. Blacks did send the drafts to Buckles during the afternoon of 1 October 2021, but making clear that Tariq did not agree certain specified provisions in each contract.

Also on 1 October 2021 Mahboob made a belated attempt to amend clause 9 of the SPA. Tariq rejected the amendment, which was withdrawn by Mahboob by the evening of Sunday 3 October 2021.

On Monday 4 October 2021 the Partners were still in negotiations as to the allocation of the proposed purchase price between the Property and the shares of the Company. Agreement was reached between the Partners in that regard at about 1pm.

As referred to above, at 1.21pm Blacks forwarded the revised draft Property contract and the draft SPA to Buckles, stating that they awaited the VAT/non-VAT split of the Property. The drafts were not engrossed for execution and did not contain the buyer’s details. At 14.01 Tariq’s solicitors requested that Blacks do prepare and provide engrossment copies to Usman so that it was possible to exchange if Usman was content with them, but Blacks declined to so until Usman had agreed that the drafts were in an acceptable form.

At 2.54pm Buckles provided Blacks with proposed revisions to the SPA. In addition to inserting Buyer’s details and making some minor drafting changes, Buckles proposed adding requirements that the Partners would:

Tariq’s solicitors responded to the above proposals at 3.46pm, agreeing to some but rejecting others. Mahboob’s solicitors did not respond until 5.04pm, stating that there was no point in commenting on Usman’s proposed revisions as the time for exchange had passed.

At 4.34pm on 4 October, after the 4pm deadline for exchange of contracts had passed, Buckles sent proposed revisions to the property contract. It is not suggested that these would have been controversial. As set out above, Tariq made an application in these proceedings the next day.

The Judge was satisfied that the Sale Mechanism was a contract between the Partners, Mr Cunningham and, in due course, any party who was accepted as a successful bidder [8]. The Judge also recognised at [42] that clause 5.4 of the Sale Mechanism “was not the clearest of provisions, in the sense that it simply provided in relatively sparse terms for exchange to take place 7 days after payment of the deposit”.

As for the proper construction of clause 5.4, the Judge recorded at [30] Tariq’s primary case that a bidder would only be in breach if he failed to exchange after being provided with a contract capable of exchange and being offered exchange with a reasonable time to do so. At [52] the Judge rejected that contention (although something appears to have gone wrong with the language used to describe it), holding that the opening words of the clause made it clear that the bidder was required to exchange contracts within seven days, adding that “[t]here is no gloss on that and no justification in my judgment for reading in words which are not there in the context of a case such as this.”

The Judge was nevertheless satisfied that this was a paradigm case for the implication of a duty of co-operation, stating at [50] that:

At [55] the Judge accepted that the position which Usman found himself in on Monday 4 October 2021 was not a particularly happy one and that in certain respects all three of the other parties were in part responsible for this.

The Judge went on to consider the delays caused by Mr Cunningham and Blacks in producing drafts later than they could and should have done and by Tariq and Mahboob in seeking amendments that they ultimately withdrew. But he concluded that any delay by those parties was not so serious as to be a breach of duty of co-operation and was not the cause of the problem which in the end befell Usman: [59] and [66].

In contrast, the Judge was highly critical of the approach of Usman and his solicitors in failing to start work on the drafts provided by Tariq on 24 September 2021, seeking an extension on 30 September 2021 rather than pressing for agreed drafts and, in particular, failing to accept and proceed to exchange on the basis of the drafts supplied at 1.21pm on 4 October. As for the revisions to the SPA proposed by Buckles that afternoon, the Judge stated at [63]:

At [64] the Judge expressed the view that by 2pm or thereabouts on 4 October 2021 it ought to have been possible for Usman’s solicitors to have confirmed that everything was agreed and to have stated that they were ready to exchange once they had clean agreed copies. The Judge further found at [65] that, whilst it would have been a tight timescale, exchange by telephone could have been achieved by 4pm.

The Judge concluded at [66] that:

The Judge added at [69] et seq. that it was not an appropriate situation to grant Usman an extension of time to exchange pursuant to the liberty to apply provision in the Judge’s order providing for the sale. Usman has not pursued that argument on this appeal.

The Judge recognised at [44] and [45] that there are two competing constructions of clause 5.4:

At [46] the Judge referred to a third “intermediate position”, where some mutual co-operation obligation is to be implied. In my judgment this approach led the Judge into error. The question of interpretation is (and must be kept) distinct from the issue of whether terms are to be implied into a contract. The process of implication involves a rather different exercise than that of interpretation and the express terms must be interpreted before one can consider any question of implication: see Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd. [2015] UKSC 72; [2016] AC 742 at [28-29] per Lord Neuberger (Footnote: ⁵).

In this case the Judge appears to have first concluded at [50] that this was a case for implying a duty of co-operation, before proceeding to prefer Mahboob’s construction of clause 5.4, the potential unfairness to the bidder in that construction being mitigated by the implied term of mutual co-operation [53]. In my judgment that approach wrongly used the assumed existence of an implied term to inform (if not decide) the interpretation of the express term. It also gave rise to the uncertainty in relation to the interrelationship and inter-action between the express absolute obligation on the bidder to exchange (as the Judge held) and the implied duty of co-operation. It is unclear whether a breach of the implied term would in some way alleviate the obligation on the bidder under the express term (and if so, how and to what extent) or whether it would only give rise to a claim for damages.

The appropriate course is first to interpret clause 5.4, carrying out the unitary exercise and adopting the iterative approach identified and explained in Wood v Capita Insurance Service Ltd [2017] AC 1181; [2017] UKSC 24 by Lord Hodge at [12], it being unimportant whether one starts with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract.

Starting with an analysis of the text of clause 5.4:

In summary, I conclude that the text of clause 5.4, and of the Sale Mechanism as a whole, favours the interpretation for which Tariq (and Usman) contends.

As regards the relevant context, the accomplished earlier judgments given by the Judge show that he very much had the measure of Tariq and Mahboob as litigants. He rightly recognised that what was envisaged by his order was a speedy process, not one which ought to become lengthy or complex in terms of either time or drafting [49]. However, there were other aspects of the context which, in my judgment, should be factored into the interpretation of clause 5.4:

It follows, in my judgment, that both the text and the factual matrix of the Sale Mechanism point clearly to the requirement on the bidder in clause 5.4 being to exchange contracts once presented with a contract in a form capable of being executed and exchanged: the words “within 7 days” in clause 5.4 must, in my view, be read as meaning within 7 days of such presentation. Otherwise, a term must be implied that the bidder has a reasonable time after such presentation in which to exchange.

Accordingly I would grant a declaration that Usman was not in breach of any obligation under clause 5.4, his deposit was not forfeit and the contract to sell the partnership assets to him did not become invalid. Further, he has 7 days from presentation to him of a contract capable of being executed and exchanged with the owner of the partnership assets in which to exchange.

The parties are in agreement that the Judge was right to find an implied duty of mutual co-operation, no matter which interpretation of clause 5.4 is preferred. Given my conclusion above, it is not strictly necessary to consider the Judge’s analysis as to which of the parties was in breach of this term, but as the Sale Mechanism is to be revisited, I would make the following observations:

Had it been necessary to do so, I would have allowed the appeal on the basis that the failure of the parties to exchange contracts on 4 October 2021 was due to the Partners’ failure to co-operate with Usman, requiring an appropriate extension of time for such exchange: see Elvanite Full Circle Ltd v AMEC Earth and Environmental (UK) Ltd. [2013] EWHC 1191 TCC.

The second limb of the relief sought by Tariq on the appeal was a declaration, binding on Mahboob, that Usman has a reasonable period following the provision of contracts (which are agreed between the Partners) in which to exchange and that his bid remains valid in the meantime.

Elisabeth Laing LJ, in considering the question of a stay on the papers, accepted Mahboob’s contention that such relief could not be obtained against Mahboob even if Tariq’s substantive argument was upheld on appeal because Usman himself had not appealed against the Order and that Tariq’s financial interest in a sale to Usman could be and should be protected by directions as to how monies should be held in the course of a sale to Mahboob at the reserve price.

In my judgment that analysis was wrong for the following reasons:

There is no doubt that the second limb of the relief sought by Tariq is properly before the court: Newey LJ granted permission to appeal in respect of it and Tariq has at no time withdrawn it. For the reasons set out above, Usman is entitled to support the appeal seeking such relief and, in my judgment, if such relief is granted, to further ask for a consequential order that the partnership assets be sold to him, notwithstanding that Tariq’s share of those assets has been sold to Mahboob in the interim.

If, contrary to the above, it was necessary for Usman to appeal himself (as opposed to supporting Tariq’s appeal), it is accepted by Mr Lawrence KC on his behalf that he was out of time to do so and would require relief from sanctions. In my judgment such relief would readily have been granted for the following reasons (addressing the three stages identified in Denton v TH White [2014] 1 WLR 3296, [2014] EWCA Civ 906):

Had it been necessary, I would also have granted Usman permission to appeal against the Order. But in view of my conclusion above that Usman was entitled to support Tariq’s appeal without himself appealing, neither an extension of time to serve a respondent’s notice nor belated permission to appeal need be granted.

If the above conclusions are correct, Tariq and Usman each have an extant contractual right (pursuant to a court-directed Sale Mechanism) to proceed to an exchange of contracts for the sale and purchase of the partnership assets pursuant to the Sale Mechanism. The fact that Tariq’s share of the partnership assets has, in the meantime, been sold by Tariq to Mahboob in itself presents no obstacle to enforcement of that contract: the assets are in the hands of one of the contracting parties and he could be required to transfer them to Usman on receipt of the agreed purchase price. The sum held in escrow by Blacks would then be released to Tariq by way of the balance of his share of the sale price. Alternatively, the sale of Tariq’s share to Mahboob could be set aside and the sale to Usman would proceed as originally envisaged in the Sale Mechanism.

Mahboob nevertheless contends that he should not be forced to sell the partnership assets to Usman. He refers to the well-established principles (i) that specific performance remains an exceptional remedy, which will only be granted where damages are not adequate recompense for the claimant and (ii) that the discretion to award it will not be exercised where it will cause injustice or unfairness to the defendant, for example by allowing the claimant to enrich itself at the expense of the defendant: see Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1988] AC 1 HL and Snell’s Equity 17-007.

In the present case there can be no doubt that the contract for the sale of the partnership assets, given effect by operation of the Sale Mechanism, is in principle liable to be enforced by (further) order of the court. The Judge has already determined that the Partners should sell the assets and has directed a mechanism for such sale. It is axiomatic that the court has power to give effect to its previous orders, and to the resulting Sale Mechanism, if one of the Partners refused to sell pursuant to their terms. Further, absent a relevant and significant change of circumstance, the court would have no hesitation in doing so. Mahboob did not seriously contend otherwise.

Mahboob’s case is that there has indeed been a relevant and significant change of circumstances such that he would suffer “overwhelming” injustice and unfairness and “irremediable prejudice” if he was now required to sell the partnership assets to Usman. He points to the fact that he was permitted by orders of this Court and of the Judge to purchase Tariq’s share of those assets in November 2021 (at the same time placing further funds on escrow in case Tariq was successful in this appeal) and since then has run the Restaurant, and improved it, during what were difficult times due to the coronavirus pandemic. Mahboob identifies the following factors by way of unfairness/prejudice if he is now required to sell to Usman:

It is unfortunate that as a result of an order of this court Mahboob was permitted to acquire Tariq’s interest in the partnership assets notwithstanding that Tariq had an extant arguable appeal against that outcome, an appeal that Usman was entitled to support. It has also complicated the position consequent upon the appeal being allowed. The result was that Mahboob may have been misled into believing that his ownership of the partnership assets was secure. Nevertheless, I do not consider that requiring Mahboob to sell the partnership assets to Usman is unfair to Mahboob, nor does it cause him undue prejudice, for the following reasons:

Accordingly I see no reason why the sale to Usman should not now be enforced according to its terms.

Mahboob submits that, if he is required to sell to Usman, such a sale should be conditional on Usman compensating him for the sums he has spent and the losses he has incurred as a result of purchasing Tariq’s share of those assets. Usman did make an offer to pay Mahboob’s losses to the extent that they were incurred as a result of his failure (if any) to engage with the appeal until 11 January 2022 or himself to appeal until March 2022.

For the reasons set out above, however, I do not consider that Mahboob has incurred costs or suffered losses for which Usman should be held responsible. Further, Usman was not out of time to support Tariq’s appeal and, even if he was required to appeal himself, he was not out of time to mount such an appeal when Usman completed the purchase of Tariq’s share of the partnership assets. I see no reason why Usman should be required to pay more than the £4.3m purchase price in order to acquire the partnership assets.

I do accept (as did Mr Lawrence KC for Usman) that Usman should be required, as a condition of proceeding with the purchase, to put up the funds required to pay the balance of the purchase price. Usman exhibited email exchanges that demonstrated that his then solicitors held those funds in their account on 13 October 2021 (just before completion would have occurred under the Sale Mechanism), but it is to be inferred from the careful wording of Usman’s evidence that those funds not retained. At the direction of this Court, on 4 July 2022 Usman filed witness statements from a representative of his current solicitors and from a solicitor acting for a proposed lender to Usman, each confirming that they held £2.5m for use in the purchase of the partnership assets by Usman in the event that he was successful in this appeal. In my judgment it should be a condition of the sale proceeding that Usman pay the balance of the purchase price to Blacks within 7 days of this Court’s order, to be held for the purposes of completing the purchase or otherwise to the order of the Judge or any other judge of the Business and Property Courts in Manchester.

I would further order that:

If Peter Jackson LJ agrees with me, I would allow the appeal and make an order as indicated above.

I agree.