Classic Property Developments (South East) Ltd v Islam & Ors

In these actions the Claimant (“Classic”) seeks to enforce an option agreement dated 6 August 2013 between the Claimant and the Defendants (“the Option Agreement”), in particular by obtaining an order for specific performance of an option to acquire the property referred to below as Mrs and Mrs Islam’s Property. The Defendants dispute that Classic is entitled to the relief sought on a number of different grounds.

Classic is a company within the Blendhall Group of companies. The Blendhall Group of companies is owned by the Mahboubian family. Farroukh Mahboubian and his wife, Enid Mahboubian, are the sole directors and owners of Classic. Classic is a single asset company, its only asset being the property referred to below as Classic’s Property. The day-to-day running of Classic’s affairs is conducted by Alexander Mahboubian, who is Farrroukh Mahboubian’s son. Alexander Mahboubian is a director of the main Blendhall company, and of several companies within the Group, but is not a director of Classic.

The First Defendant (“Mr Islam”) and the Second Defendant (“Mrs Islam”) are husband and wife. Before it was wound up in 2014, Redmist was a stone masonry company in the business of producing kitchen worktops and similar items which was owned and controlled by Mr and Mrs Islam. Redmist was wound up on the petition of Her Majesty’s Revenue and Customs by an order of Registrar Derrett dated 21 July 2014. The Third Defendant (“ANS”) is a company owned and controlled by Mr and Mrs Islam. ANS is a trading company which sells door fittings, and other fittings for dwellings. ANS occupies part of Mr and Mrs Islam’s Property, although it is not entirely clear on what basis.

Classic is the registered proprietor of the leasehold land registered at the Land Registry under title number AGL121123, being an underlease of 52 Standard Road, London NW10 6EU (“Classic’s Property”). Classic was so registered on 13 July 1993. The underlease was made between Dimegrange Ltd as lessor and London & Regional Properties Ltd as lessee on 1 August 1989 for a term of 999 years less one day commencing on 25 March 1987. Classic’s Property comprises grade B industrial accommodation on the Park Royal Industrial Estate. Classic’s Property is unencumbered.

Mr and Mrs Islam are the registered proprietors of the freehold land registered at the Land Registry under title number MX48963, namely 52-56 Standard Road, London NW10 6ED. Mr and Mrs Islam were so registered on 19 November 2004. On 30 November 2007 Mr and Mrs Islam charged the property registered under this title number in favour of Lloyds TSB Bank plc (“Lloyds”). The charge was registered against the title on 28 December 2007.

Mr and Mrs Islam are also the registered proprietors of the freehold land registered at the Land Registry under title number MX169717, namely 59 and 61 Minerva Road, London NW10 6HJ. Mr and Mrs Islam were so registered on 19 November 2004.

Mr and Mrs Islam are also the registered proprietors of the leasehold land registered at the Land Registry under title number AGL45409, namely 56 Standard Road, London NW10 6EU. Mr and Mrs Islam were so registered on 19 November 2004. The lease registered under this title number was made between (inter alios) MEPC plc as lessor and Venaglass Ltd as lessee for a term of 999 years from 25 March 1987. The lease is charged to Lloyds by the charge dated 20 November 2007.

I shall refer to the property described in paragraphs 5, 6 and 7 above as “Mr and Mrs Islam’s Property”. It will be appreciated that Mr and Mrs Islam own the freehold and headlease in respect of 52 Standard Road (and other property), while Classic owns the underlease of 52 Standard Road.

Classic has the benefit of two unilateral notices entered against the titles of Mr and Mrs Islam’s Property. The first, registered on 11 January 2012, is in respect of what was then a pending action brought by Classic against the Defendants in Willesden County Court for an injunction to enforce rights of way. The second, registered on 12 August 2013, is in respect of the Option Agreement.

On 20 July 2009 Classic granted Redmist a lease of Classic’s Property for a term of 10 years commencing on 25 December 2008 at an initial yearly rent, subject to review, of £46,000 (“the Redmist Lease”). The rent reserved by the Redmist Lease fell to be reviewed on 1 June 2011 (clause 1.8) and on 25 December 2013 (clause 1.22). The rent was increased as from 1 June 2011 to the sum of £64,500 per annum.

The rent reserved by the Redmist Lease was payable without any deduction or set-off by equal quarterly payments in advance on the quarter days in every year (clause 3.1). The quarter days were defined in the Redmist Lease as being 25 March, 24 June, 29 September and 25 December in each year (clause 1.18).

By clause 4.1 of the Redmist Lease, Redmist covenanted with the Classic to observe and perform the tenant’s covenants contained in schedule 3 to the Redmist Lease at all times during the term. Paragraph 1 of schedule 3 was a covenant to pay the rents reserved at the times and in the manner provided in the Redmist Lease without any deduction or set off, and also to pay interest on rent as provided in the Redmist Lease. Clause 5.3.1 of the Redmist Lease provided that, if default was made in the payment of money due to the Classic thereunder, the money should bear interest at the defined interest rate. The defined interest rate was 4% per annum above the base rate of Barclays Bank plc (clause 1.12).

The Redmist Lease contained a proviso for re-entry exercisable in the event (inter alia) of the whole or part of the rents reserved being unpaid for 21 days after becoming due whether demanded or not (clause 5.1.1). On 16 June 2014 Classic forfeited the Redmist Lease by peaceful re-entry for non-payment of the rent due on the December quarter day 2013 and on the March quarter day 2014.

It is common ground that the Option Agreement was entered into by the parties as a compromise of the proceedings in the Willesden County Court mentioned above. It was alleged by Classic in those proceedings that the Defendants had unlawfully interfered with rights of way that benefited Classic’s Property. Although Classic succeeded in having a preliminary issue determined in its favour in a judgment given by His Honour Judge Million on 22 April 2013 (permission to appeal against which was refused by Ryder LJ on 23 July 2013), that left certain issues outstanding. Following settlement negotiations, the parties entered into the Option Agreement and the proceedings were stayed by consent.

The purpose of the Option Agreement was to effect a clean break between Classic and the Defendants. The scheme of the Option Agreement is as follows: (1) to provide Mr and Mrs Islam with a First Option to acquire Classic’s Property from Classic at market value during the First Option Period as defined; (2) if Mr and Mrs Islam do not do so, to provide Classic with a Second Option to acquire Mr and Mrs Islam’s Property at market value during the Second Option Period as defined, and (3) if Classic does not do so, to provide Mr and Mrs Islam with a Third Option to acquire Classic’s Property during the Third Option Period as defined.

The First Option Period is defined in clause 1.1 of the Option Agreement. It commenced on the date of the Option Agreement, namely 6 August 2013. It expired on the earliest of the dates referred to in the definition, or at the latest on 10 January 2014. For the purposes of these proceedings, the relevant end dates are those defined by clauses 1.1(c), 1.1(d) and 1.1(e)(ii).

Clause 1.1(c) of the Option Agreement provides that the First Option Period would end if Redmist or Mr and Mrs Islam failed “to pay in full by cleared funds the sums referred to in clause 4, time being of the essence in each case”. One of the sums referred to in clause 4 of the Option Agreement is the Compensation Sum, namely £100,000, which Mr and Mrs Islam had to pay to the Claimant no later than 31 October 2013 (clause 4.1), time being of the essence (clause 4.3).

Clause 1.1(d) of the Option Agreement provides that the First Option Period would end if Redmist failed “to pay in full and by cleared funds the instalments of the rent reserved by the Redmist Lease (as reviewed) on 29 September and 25 December 2013, time being of the essence in each case”.

Clause 1.1(e)(ii) of the Option Agreement provides that the First Option Period would end if Mrs and Mrs Islam failed within 28 days of the Option Agreement, time being of the essence, to supply to Classic “written evidence …. that every chargee of [Mr and Mrs Islam’s Property] (or part of it) has consented to the grant of the Second Option and that in exercising any powers of sale or disposal under the charge such transaction will be subject to the Second Option”.

The Second Option Period is also defined in clause 1.1 of the Option Agreement. If the First Option is not exercised or lapses, the Second Option Period is the period of four calendar months commencing immediately after the expiry of the First Option Period.

The Option Agreement includes machinery for the valuation of Classic’s Property (referred to in the Option Agreement as “the Second Property”) and Mr and Mrs Islam’s Property (referred to as “the First Property”). Within five working days of the date of the Option Agreement Mr and Mrs Islam (referred to as “the First Owner”) must appoint the First Owner’s Valuer and notify Classic (referred as “the Second Owner”) and Classic must appoint the Second Valuer’s Owner and notify Mr and Mrs Islam (clauses 2.1 and clause 2.3). If Mr and Mrs Islam fail to comply with their obligations, the values of the Properties are to be determined solely by the Second Owner’s Valuer and if Classic fails to comply with its obligations the values are to be determined solely by the First Owner’s Valuer (clauses 2.2 and 2.4). If the difference between the valuations of either or both of the Properties produced by the two Valuers is greater than 20%, then the values are to be determined by a Third Valuer appointed by the President of the Royal Institution of Chartered Surveyors (“RICS”) (clause 2.7). If the First Option Period and the Second Option Period both expire without the options having been exercised, Classic can require a revaluation of Classic’s Property by written notice to Mr and Mrs Islam (clause 2.10).

Both the First Owner’s Valuer and the Second Owner’s Valuer are defined in clause 1.1 of the Option Agreement as being “a chartered surveyor who is a fellow or associate of the RICS …”.

It is common ground that:

That being so, it is Classic’s case that the First Option Period expired on:

It is therefore Classic’s case that it was entitled to exercise the Second Option at any time during the four month period commencing on 3 September 2013 alternatively 29 September 2013 alternatively 31 October 2013, and thereby acquire Mr and Mrs Islam’s Property at the price determined in accordance with the valuation machinery in the Option Agreement.

On 8 August 2013 Classic’s solicitors notified Mr and Mrs Islam that Classic had appointed Bryn Williams MRICS of DTZ as its valuer. Mr Williams subsequently produced valuations of Mr and Mrs Islam’s Property and of Classic’s Property in the sums of £1,445,000 and £980,000 respectively in two reports dated 30 September 2013.

On 12 August 2013 Mr and Mrs Islam notified Classic of the appointment of Robert Reiff of Dutch & Dutch as their valuer. It is common ground that Mr Reiff is not a fellow or associate of the RICS. Accordingly, it is Classic’s case that Mr and Mrs Islam did not appoint a valuer in accordance with clause 2.1 of the Option Agreement, with the result that the price to be paid by Classic for Mr and Mrs Islam is that determined by Mr Williams.

Mr Reiff subsequently produced valuations of Mr and Mrs Islam’s Property and of Classic’s Property in the sums of “between £1,875,000 … and £1,900,000 … little more, little less” and “between £800,000 … and £825,000 … little more, little less” respectively in two reports dated 10 September 2013. Mr Reiff’s reports were countersigned by Terence Firrell FRICS.

Classic exercised the Second Option by a letter dated 2 January 2014.

On Classic’s application, the President of the FRICS appointed John Stephenson FRICS as the Third Valuer. Mr Stephenson valued the Properties at £1,550,000 and £990,000 respectively in a report dated 31 January 2014. In the alternative to its case that it is entitled to acquire Mr and Mrs Islam’s Property at the price determined by Mr Williams, Classic contends that it is entitled to acquire it at the price determined by Mr Stephenson.

In addition to its claim for specific performance of the Option Agreement, Classic claims certain other heads of relief, and in particular payment of the Compensation Sum.

In answer to Classic’s claim that the First Option Period ended on 3 September 2013 as a result of Mr and Mrs Islam’s failure to provide written evidence of Lloyds’ consent, the Defendants contend that:

In answer to Classic’s claim that the First Option Period ended on 29 September 2013 as a result of Redmist’s failure to pay the rent due on that day, the Defendants contend that:

In answer to Classic’s claim that the First Option Period ended on 31 October 2013, the Defendants contend that:

The Defendants also contend that Mr and Mrs Islam accepted Classic’s repudiatory breach of the Option Agreement on 5 December 2013, and accordingly the parties’ obligations under the Option Agreement have been discharged, leaving them at liberty to restore the County Court proceedings.

In relation to the question of valuation, the Defendants contend that Mr and Mrs Islam validly appointed a valuer in accordance with the Option Agreement, since it was sufficient for Mr Firrell to countersign the valuation.

Finally, the Defendants contend that Classic is not entitled to an order for specific performance because it has not come to court with clean hands.

Classic’s witnesses were Farroukh Mahboubian, Alexander Mahboubian and Barry Samuels of Classic’s solicitors. Farroukh Mahboubian is now 82, and unsurprisingly his recollection of details was not very good. He was clear as to the key points to which his evidence was directed, however. Alexander Mahboubian was a straightforward witness for the most part, although he was incorrect about clause 3.1 of the Option Agreement and slightly defensive with regard to legal matters. Mr Samuels was a good witness. On the whole, I have no difficulty in accepting these witnesses’ evidence, and for the reasons given below I prefer it to the evidence of the Defendants’ witnesses on the principal disputed issues of fact.

The Defendants’ witnesses were Mr Islam, Mrs Islam, Arshad Mohammed, Mohammed Memon, Bharat Amin, Mohammed Harrath and Ishtaq Mohammed. Mr Islam was not a credible witness. Making full allowance for the fact that he mainly gave evidence though an interpreter, he was frequently evasive in answering questions. Furthermore, significant parts of his evidence were inconsistent or at variance with the documentary record or simply incredible. Mrs Islam’s evidence was more consistent and direct than that of her husband, but on the two main points which she addressed I am unable to accept it. Arshad Mohammed is a solicitor and a friend of Mr and Mrs Islam who advised them in relation to the negotiation of the Option Agreement. He was mostly a straightforward witness, but on the principal issue to which his evidence was directed his evidence was at variance with the documentary record and implausible as well as being contradicted by the evidence of Farroukh Mahboubian and Mr Samuels. Mohammed Memon was a director and 50% shareholder in Redmist from 2 June 1007 and 9 September 2009. He was a straightforward witness, but where his evidence conflicted with that of Farroukh Mahboubian and Alexander Mahboubian I found their evidence more convincing for the reasons explained below. Mr Amin, Ishtaq Mohammed and Mr Harrath are friends of Mr and Mrs Islam who offered them financial support in 2013. They were all straightforward witnesses and I accept their evidence.

Malcolm Bailey MRICS was instructed as a single joint expert. He set out his opinion in his report and answered written questions put to him by Classic. He was not required by either party to give oral evidence.

As noted above, it is common ground that the Defendants did not provide written evidence of Lloyds’ consent by 3 September 2013 (or at all). Accordingly, Classic contends that the First Option Period ended on 3 September 2013. As set out in paragraph 32 above, the Defendants advance a number of answers to this claim which I shall consider in turn.

Before turning to the Defendants’ claim for rectification of clause 1.1(e)(ii), I should note that the Defendants have also claimed for rectification of clause 3.1 of the Option Agreement. Clause 3.1 begins with the words “In consideration of the Compensation Sum paid by the First Owner to the Second Owner on the date of this agreement …”. The Defendants point out that the reference to the Compensation Sum being paid by Mr and Mrs Islam on the date of the Option Agreement in clause 3.1 is inconsistent with clause 4.1, which requires the Compensation Sum to be paid by no later than 31 October 2013. Classic accepts that clause 4.1 represents the parties’ true agreement, and that the inconsistent wording in clause 3.1 is erroneous. In the circumstances, I consider that the inconsistent words in clause 3.1 can be ignored as being repugnant; but if necessary, the clause could be rectified by replacing the words I have quoted with the words “In consideration of the promise by the First Owner to pay the Compensation Sum to the Second Owner in accordance with clause 4.1 of this Agreement …”.

The Defendants’ case. The Defendants’ pleaded case (in paragraph 6 of the Defence and Counterclaim in the first action) is as follows:

“(2)

It is averred that as a result of an error in the drafting of Clause 1.1 in the final form of the Option Agreement, and contrary to the true agreement of the parties, sub-clause [1.1](e)(ii) was retained in the final form Option Agreement, when in fact the parties had agreed that it would be deleted in its entirety from the Option Agreement.

(3)

In support of their averment of such error, the First and Second Defendants will refer to the agreement reached on or about 29 July 2013 between Mr Mohammed acting on behalf of the First and Second Defendants and Farroukh Mahboubian …. acting on behalf of the Claimant, whereby they agreed that the sub-clause should be removed in its entirety from the final form of the Option Agreement.”

On its face, this is a plea of common mistake. No case of unilateral mistake on the part of the Defendants is pleaded. Nevertheless, an agreed list of issues which was approved by Snowden J at a pre-trial review on 21 July 2015 included the following issues:

“5.

In respect of sub-clause 1.1(e)(ii) of the Option Agreement (Chargees’ written consent):

…

(2)

Were both parties mistaken as to the error of including a provision in the terms of sub-clause 1.1(e)(ii) (mutual mistake); or

(3)

Did C, not itself mistaken as to the drafting, know of the Defendants’ mistake or suspected such a mistake, but choose to ignore its suspicions (unilateral mistake)?”

Consistently with the agreed list of issues, in his skeleton argument for the trial counsel for the Defendants presented the case as one of common mistake, alternatively unilateral mistake. In his closing submissions, however, he abandoned the claim of common mistake and only pursued the claim of unilateral mistake. Although counsel for Classic submitted that this case was not open to the Defendants because it was not pleaded, in the circumstances I have outlined I do not accept this.

The Defendants did not lead any evidence in support of their pleaded case. Instead, the Defendants adduced evidence from Arshad Mohammed that, during a telephone conversation between Farroukh Mahboubian and Mr Mohammed on 12 July 2013, Mr Mahboubian said “… fine don’t worry about the consent, it is not necessary”. Even though the Defendants applied to amend their Defence in the second action on the second day of the trial, no application was ever made to amend the Defence and Counterclaim in the first action to bring the Defendants’ pleaded case on rectification into line with their evidence. In his closing submissions, counsel for the Defendants requested that the Defendants be treated as having amended the date of “on or about 29 July 2013” in paragraph 6(3) to “on 12 July 2013”. Counsel for Classic did not object to this.

I would make three observations about this. First, no explanation has been given as to why the Defendants’ case to the date of the alleged agreement changed from 29 to 12 July 2013, although it is fair to note that there was another telephone conversation between Farroukh Mahboubian and Arshad Mohammed on 29 July 2013 which concerned a different aspect of the Option Agreement. Secondly, simply changing the date of the alleged agreement did not suffice to bring the pleaded case into line with the evidence. As will appear, clause 1.1(e)(ii) of the Option Agreement did not exist on 12 July 2013 - whereas it did exist on 29 July 2013 - and what was under discussion on 12 July 2013 was a slightly different clause then numbered 5.2. Thirdly, for that reason and others that will appear, the change in the date has a significant impact on the Defendants’ case. Nevertheless, I shall consider the case presented in the Defendants’ evidence and submissions on its merits.

The law. There is no dispute as to the applicable principles. Rectification is available as a remedy for unilateralmistake if one party to a transaction knows that the instrument contains a mistake in his favour, but does nothing to correct it and seeks to take advantage of the other’s mistake: see Snell’s Equity (33^rd ed) at §16-019.

The facts. As noted above, the Option Agreement was concluded as a compromise of the Willesden County Court proceedings. For reasons that will appear, it is important to note that prior to 5 January 2012 the Defendants were represented in those proceedings by GH Law. On 5 January 2012 CLP Solicitors was instructed on behalf of the Defendants in place of GH Law. Arshad Mohammed was, and remains, one of the two partners in that firm. On 6 March 2012 the Defendants instructed Selva & Co in place of CLP Solicitors. On 17 May 2013 the Defendants instructed Bond Adams LLP in place of Selva & Co. Classic was represented by GSC Solicitors LLP (“GSC”), and in particular Mr Samuels, throughout.

The negotiation of the Option Agreement extended over a considerable period of time. All the negotiations were conducted initially on a without prejudice and subject to contract basis and latterly on a without prejudice save as to costs and subject to contract basis. Following a settlement meeting on 5 October 2012, a first draft of the Option Agreement was produced by Classic’s property solicitor (Nigel Skevington of DMH Stallard LLP) in late December 2012 or early January 2013. Alexander Mahboubian sent a copy of this draft by email to Mr Islam on 2 January 2013. In his covering email Mr Mahboubian stated:

“As I am not sure if you will use different lawyers to advise you on the documentation I am letting you have the draft document direct and no doubt you will let me [know] which firm you will be retaining. In this regard DMH Stallard have left the details to be inserted by you in the definition on page 2 ‘First Owner’s Solicitors’ and paragraphs [sic] 20.2.2. … Unless you tell me to the contrary by 28 December [sic] I shall instruct GSC Solicitors to send to this to Selva & Co later this week.”

On 23 January 2013 Selva & Co wrote to DMH Stallard to say that they had been passed the proposed agreement and setting out certain matters which their clients required to be agreed. At that stage, however, the negotiations quickly foundered, and the parties continued with the proceedings.

On 28 June 2013 there was a meeting between Farroukh Mahboubian, Alexander Mahboubian, Mr Islam and Mrs Islam at Farroukh Mahboubian’s home in Barnet to discuss settlement. According to Mr Islam, the Mahboubians suggested that Arshad Mohammed “should assist the two sides by using his good offices to help facilitate a settlement”. Furthermore, according to both Mr and Mrs Islam, the Mahboubians said that they did not want either Selva & Co or Bond Adams involved in the settlement discussions. Farroukh Mahboubian and Alexander Mahboubian both denied this.

On this issue I prefer the evidence of Farroukh Mahboubian and Alexander Mahboubian. It is plausible that they may have said something to the effect that they had found Arshad Mohammed’s approach to the dispute during the period that CLP Solicitors had been instructed more constructive than the approach subsequently adopted by Selva & Co and Bond Adams, since Alexander Mahboubian was candid that that was his view. Whether or not the Mahboubains said something to that effect, it is very probable that Mr and Mrs Islam said that they would ask Arshad Mohammed to represent them in the settlement discussions. I do not find it plausible that the Mahboubians tried to dictate to Mr and Mrs Islam who the latter should instruct with respect to the settlement negotiations, however, not least because (as the Mahboubians would have appreciated) there would have been nothing to stop Mr and Mrs Islam consulting Selva & Co or Bond Adams without informing Classic. Furthermore, both Mr and Mrs Islam changed their evidence on this topic when cross-examined and they were not consistent with each other. In his witness statement, Mr Islam merely said with regard to this meeting that the Mahboubians did not want Selva & Co or Bond Adams involved in the settlement discussions, whereas in cross-examination he claimed that they forbade Mr and Mrs Islam from even consulting those firms. (In a later passage in his witness statement he claimed that the Mahoubians “again voiced their insistence” that the Selva & Co and Bond Adams should not attend the meeting prior to the meeting on 8 July 2013 referred to below, and in that context alleged that the Mahboubians “made it clear” that the deal would be off if Selva & Co or Bond Adams were “involved at all”. This evidence cannot be true, however, since no such statement is contained in the emails to which Mr Islam referred in his witness statement, and he did not suggest that there was any telephone conversation at that time.) For her part, in her witness statement Mrs Islam said that Farroukh Mahboubian had stated during the meeting on 28 June 2013 that, if there was any involvement of Selva & Co or Bond Adams, he would not proceed, whereas in cross-examination she claimed that Mr Islam and herself had given the Mahboubains their word not to involve Selva & Co or Bond Adams. Still further, in my judgment the subsequent actions of Classic and Mr Samuels are inconsistent with the Mahboubians having imposed any such ban.

I would add that, even on Mr and Mrs Islam’s account, there was nothing to stop them instructing a different firm of solicitors to Selva & Co and Bond Adams. Mr Islam’s only answer to this point was to suggest that he did not have time to do so; but the Option Agreement was not signed until 5 August 2013, some five weeks after this meeting.

Furthermore, the draft Option Agreement specifically provided for Mr and Mrs Islam to appoint solicitors to act for them in connection with the exercising of the options and the valuation and purchase of the Properties, and, as will appear, Mr and Mrs Islam purported to appoint Jury O’Shea LLP to do so. In fact, it now appears that Jury O’Shea was instructed by a third party; but there is no suggestion that Classic was aware of that at the time.

On 1 July 2013 Mr Islam sent Alexander Mahboubian an email attaching a settlement proposal. In his covering email Mr Islam said, “My Solicitor friend made it very simple and he is happy to come with me”. As Alexander Mahboubian appreciated, the “solicitor friend” referred to was Arshad Mohammed.

On 2 July 2013 Alexander Mahboubian replied. He noted that the proposal was in principle the same as the proposal which Classic had made in January. He said that Classic was willing to resurrect the draft agreement, a copy of which he attached, and proposed a meeting between the parties and their respective solicitors to discuss it on or before 8 July 2013. He went on:

“Only qualified solicitors and principles [sic] are to be present in the meeting. Mr Barry Samuels of GSC Solicitors … will be acting on our behalf, please pass this to your solicitors to allow the solicitors to make contact prior to the meeting.

…

By the end of the meeting the new agreement is to be completed and signed for exchange to take place no later than the 12th July 2013.

…

Finally and most importantly, we would require confirmation in writing from Bond Adams (your other solicitors on record) that they are aware and happy for this meeting to take place without them being present.

…

I have attached a copy of the original agreement for you to forward to your solicitors.

…”

The reason for the deadline of (Friday) 12 July 2013 was that another hearing in Willesden County Court was scheduled for Tuesday 16 July 2013.

On 4 July 2013 GSC wrote to Bond Adams saying:

“Mr Islam has approached our clients direct wanting to resurrect the proposal our client made at the end of last year/beginning of this year. It has been suggested that there be a meeting with lawyers present within the next few days. Although the date has not yet been fixed, it is understood that Mr Islam intends to attend the meeting with a lawyer other than your firm.

As your firm are the solicitors on the record, please confirm that you are aware of this and/or have no objection to our meeting with our client in the presence of another lawyer …”

Later on the same day Arshad Mohammed sent Mr Samuels an email to arrange a meeting to discuss settlement of the matter in which he said, “Please note at this stage, I am only assisting Mr Islam with a view to settling this matter”. Mr and Mrs Islam claimed in their evidence that Arshad Mohammed’s role was to not to act as their solicitor, but to act as a mediator. Although Arshad Mohammed initially supported this claim, he quickly accepted that in fact his role was to assist and advise the Defendants, as is plain from the documentary record. The suggestion that Arshad Mohammed’s role was to act as a mediator rather than as their solicitor is a fanciful one which does Mr and Mrs Islam no credit. Indeed, Mr Islam himself described Arshad Mohammed at the time as “our solicitor”, albeit in a letter which he said was drafted on his behalf by Mr Amin. It is irrelevant that Arshad Mohammed did not have a formal retainer and was acting unpaid.

The Defendants have also placed reliance on the fact that Arshad Mohammed’s area of expertise is criminal law. I am unimpressed with this. The Defendants regarded his firm as capable of representing them in the Willesden County Court proceedings, albeit that they subsequently instructed other firms. More importantly, perhaps, the documentary record shows that Arshad Mohammed assisted his clients to extract a series of substantial concessions from Classic during the course of the negotiations over the Option Agreement and also suggested a number of detailed drafting changes. On the face of the documents, there is nothing to suggest that he acted otherwise than competently.

Mr Samuels replied to Arshad Mohammed on 4 July 2013 in two emails. In the first, he stated that any meeting would have to be cleared with Bond Adams and informed Mr Mohammed that he had written to Bond Adams to obtain their consent. In the second, he attached a copy of the draft Option Agreement. At that stage, clause 5.2 was in the following terms:

“If the First Property is charged the First Owner will supply written evidence to the Second Owner on or before the date of this agreement that the chargee has consented to the grant of the Second Option and that in exercising any power or sale or disposal under the charge such transaction will be subject to the Second Option.”

Following an acknowledgement from Arshad Mohammed, Mr Samuels sent a further email later the same day to both Mr Islam and Mr Mohammed saying that the meeting would have to take place or 5, 7 or 8 July 2013 failing which the hearing on 16 July 2013 would go ahead. Shortly afterwards it was agreed that the meeting would take place at the Eight Club (a private member’s club in the City of London operated by Blendhall Group) on 8 July 2013.

Later still on 4 July 2013 Rafique Patel of Bond Adams sent Mr Samuels an mail which stated that his firm had “no objection to such a without prejudice meeting [i.e. one at which they were not present] and have discussed the same with our client”. On 5 July 2013 Arshad Mohammed sent Mr Samuels an email saying that he understood that Bond Adams had been in communication with Mr Samuels to confirm that the meeting could proceed in their absence.

Farroukh Mahboubian, Alexander Mahboubian, Mr Samuels, Mr Islam and Arshad Mohammed duly met on 8 July 2013 and discussed the draft Option Agreement. During the course of the meeting, Classic agreed in principle to certain changes to the draft agreement. In particular, Classic agreed that the Compensation Sum payable by Defendants (which was to compensate Classic for unpaid rent under the Redmist Lease and costs incurred in the County Court proceedings) should be £100,000 rather than £200,000. At the end of the meeting it was agreed that Mr Samuels would revise the draft Option Agreement, with assistance from Mr Skevington, and send the revised draft to Mr Mohammed for review later that day or the following day.

On 9 July 2013 Mr Samuels emailed Arshad Mohammed a revised draft of the Option Agreement, noting that the deadline for exchange was Friday (12 July 2013). He asked Mr Mohammed to let him have a copy of the charge over the Standard Road property and “the details of the lawyers whom Mr Islam is going to retain to deal with the property aspects”. At this stage, clause 5.2 was in the following terms:

“If the First Property is charged the First Owner will on or before the date of this agreement:

5.2.1

supply to the Second Owner a copy of each and every charge over the First Property; and

5.2.2

supply written evidence to the Second Owner that every chargee has consented to the grant of the Second Option and that in exercising any power or sale or disposal under the charge such transaction will be subject to the Second Option.”

On 10 July 2013 Arshad Mohammed sent Mr Samuels an email saying that at first glance the revised draft appeared reasonable, but that he had “some concerns” about clause 5.2:

“* I am trying to obtain [a] copy of the charge from the Lloyds TSB. Mr Islam does not have a copy. This in itself is likely to take another week.

* In addition whilst Lloyds TSB should be able to provide consent to the property sold subject to the mortgage being redeemed, they will only consent to the grant of the Second Option after considering the Option Agreement. Once again this will take time.

I wonder whether we can do without this requirement. …”

As can be seen, Mr Mohammed’s concerns were purely as to timing.

On 11 July 2013 Arshad Mohammed sent Mr Samuels an email attaching documents which included a copy of the loan agreement with Lloyds. He said that he had considered the Option Agreement and could agree this as drafted except for clause 5.2. He asked whether Classic still required this clause in the light of the documents provided and Mr and Mrs Islam’s consent to priority being registered at the Land Registry by Classic. He also said that he was waiting for written consent from Lloyds to the prospective sale of the Standard Road property.

Later the same day Mr Samuels replied, saying:

“1.

please confirm that you have explained the content of the revised draft option agreement to the Islams and their companies and subject to the revisions referred to in this email they are content to proceed based on your advice as their lawyer;

2.

the only way we can agree to the removal of clause 5.2 is by a revision to the definition of the first option period (Clause 1.1 page 4) bringing it to an end if you fail to provide a copy of any of the charges over the First Property and the approval of the chargees to the Option Agreement within 28 days of the agreement;

….

4.

I also need to know the identity of the First Owner’s solicitors … ”

Later the same day Arshad Mohammed replied, saying:

“We are unclear as to why your client requires Lloyds TSB’s approval of the Option Agreement. The second option in the Agreement gives your client the right to purchase the property. If we obtain written confirmation from the bank that the property can be sold to your client at any time within the next 12 months, then surely this should suffice. Why does Lloyds TSB need to approve the Agreement?

To obtain Lloyds approval of the agreement will involve them in having to instruct lawyers to instruct lawyers which will inevitably lead to extra cost and delay. In these circumstances I cannot advise Mr Islam to enter into the Option Agreement when it is dependent upon Lloyds approving the agreement within 28 days. I believe this to be unnecessary.

Whatever your concerns may be I am confident we can address them by having other measures in place …”

As can be seen, Mr Mohammed’s concern was as to the expense and time it would take to obtain Lloyds’ consent.

Shortly afterwards, Arshad Mohammed emailed Mr Samuels a letter from Paul Brown of Lloyds dated 11 July 2013 agreeing to the sale or disposal of the Standard Road property to an unconnected third party provided the mortgage accounts were repaid at the time of completion. Mr Mohammed asked whether this letter would suffice and remove the need for clause 5.2.

On 12 July 2013 Mr Samuels sent Arshad Mohammed an email saying that he was waiting to speak to Mr Skevington, but his current view was that “ we wanted the bank to agree that any power of sale they exercise will be subject to Classic’s option”. Later the same day Mr Samuels sent Mr Mohammed a further email, saying that he had spoken to Mr Skevington, who had confirmed his view that “we must insist that the bank acknowledges the option and that if it seeks to enforce its security it can only do so subject to the option agreement”, and pressing for the agreement to be signed that day.

Later that day Arshad Mohammed replied that he had spoken to Mr Islam about Mr Samuels’s recent emails and continued:

“1.

Mr Islam is making preliminary enquiries from the bank in respect of obtaining their consent. I will revert back to you shortly on this point.

2.

I will similarly advise you who the property lawyers are later today.

3.

The £100k is being received from a third party and will not clear until Tuesday. This means you will receive payment on Wednesday. Is this acceptable?

4.

The Agreement (subject to clause 5.2) has been explained to both Mr and Mrs Islam and can be signed today.”

Shortly afterwards Mr Samuels sent Arshad Mohammed an email saying:

“I moved clause 5.2 into the First Option Date … I do not know if my clients will accept any further delay …”

Shortly after this Mr Mohammed replied, saying:

“Mr Islam’s enquiries from the bank were not fruitful and thus at this stage clause 5.2 is not accepted.

We cannot therefore proceed with the Agreement.

I have tried to make the arrangement work but it seems we have reached an impasse. Please inform your client (Mr Mehboobian [sic] Snr in particular) that I tried my best.

I am willing to resurrect the Agreement after Tuesday if either your clients or Mr Islam so desire.”

As can be seen, Mr Mohammed did not say that Lloyds had definitively refused to consent to the Option Agreement, only that Mr Islam’s enquiries as to whether it would consent had not fruitful and therefore clause 5.2 was not accepted at that stage, leaving open the possibility that it might be accepted at a later date.

In his witness statement Mr Islam asserted that he had spoken to Mr Brown by the time of this email and that Mr Brown had told him in no uncertain terms that Lloyds would not consent to the grant of the Second Option nor to any condition that in exercising any power of sale or disposal under the charge such transaction would be subject to the Second Option.

I do not accept this evidence for a number of reasons. First, in cross-examination Mr Islam was uncertain as to the date of his conversation with Mr Brown, saying that it was between 10 and 15 July 2013. The significance of this will become clearer below. Secondly, there is no evidence that a copy of the Option Agreement had been sent to Lloyds by this date. Thirdly, there is no documentary evidence that Mr Brown said what Mr Islam claims he said. Fourthly, Mr Brown was not called as a witness by the Defendants and no explanation was given as to why not. Fifthly, Mr Islam’s account is inconsistent with the terms of Mr Mohammed’s email. Sixthly, Mr Islam’s account is inconsistent with what happened subsequently.

Later on 12 July 2013 Mr Samuels reported the situation by telephone to Farroukh Mahboubian (Alexander Mahboubian being on holiday at the time). Farroukh Mahboubian said that he would telephone Arshad Mohammed. While he was on the telephone to Mr Mahboubian, Mr Samuels sent Mr Mohammed a short email to say that Mr Mahboubian would call Mr Mohammed and Mr Samuels had no objection. To Mr Samuels’ surprise, Mr Mahboubian immediately telephoned Mr Mohammed on another line while still on the line to Mr Samuels. Thus Mr Samuels could hear Mr Mahboubian’s end of the conversation, but not Mr Mohammed’s end of the conversation. Mr Samuels’ evidence was that he could hear what Mr Mahboubian said reasonably clearly. Mr Samuels did not inform Mr Mohammed of this (which he could have done by sending another short email). Mr Samuels explained that he did not think to do so, having been taken by surprise by Mr Mahboubian’s action.

In his witness statement Mr Mohammed claimed that, when he spoke to Mr Mahboubian, he informed Mr Mahboubian that Lloyds was “simply not prepared to give [its] consent” and accordingly the Option Agreement was not going to be completed, and that Mr Mahboubian “said ‘fine don’t worry about the consent, it is not necessary’”. Mr Mahboubian denied saying any such thing. His evidence was that he asked Mr Mohammed himself to try to get Lloyds’ consent the following Monday. Mr Samuels’ evidence was to the same effect.

I have no hesitation in preferring the evidence of Farroukh Mahboubian and Mr Samuels to that of Arshad Mohammed on this point for the following reasons. First, for the reasons given above, I do not accept that Mr Mohammed was in a position to inform Mr Mahboubian that Lloyds was simply not prepared to consent. Secondly, Mr Mohammed’s account changed in a material respect in cross-examination. He did not maintain that Mr Mahboubain had said the words “fine don’t worry about the consent, it is not necessary”, but only words to that effect. Thirdly, Mr Mohammed’s account of the conversation was deeply implausible even disregarding what happened subsequently, because he accepted that Mr Mahboubian had asked him, and he had agreed, to call Lloyds on the Monday to try to secure its consent; but he was unable to give any sensible explanation of what the point of doing so was if (a) he already knew that Lloyds was “simply not prepared to give [its] consent” and (b) Mr Mahboubian had said that such consent was not necessary. Fourthly, and in contrast with the previous point, Mr Mahboubian’s purpose in requesting Mr Mohammed to ask Lloyds for their consent is readily explicable. By this stage the Mahboubians had a considerable distrust of Mr Islam as a consequence of what they regarded as a long series of broken obligations and promises on his part. By contrast, Mr Mohammed was a solicitor, and one whom they regarded as having a more constructive approach than Selva & Co or Bond Adams. Fifthly, Mr Mohammed made no contemporaneous note of what Mr Mahboubian allegedly said, nor did he record them in any of the subsequent communications between the parties. On the contrary, his email of 15 July 2013 is inconsistent with Mr Mahoubian having said any such thing. Sixthly, Mr Mohammed’s evidence was that he took it that Mr Mahboubian meant that he was going to instruct Mr Samuels and Mr Skevington to exclude from the Option Agreement the requirement for obtaining the consent from Lloyds, but that is not what happened subsequently. On the contrary, what happened subsequently is inconsistent with Mr Mahboubian having said anything of the kind attributed to him by Mr Mohammed. Seventhly, Mr Mohammed’s credibility was further undermined by his evidence in relation to his email of 15 July 2013.

On 15 July 2013 Arshad Mohammed sent Mr Samuels an email saying:

“I spoke to Mr F Mehboobian [sic] on Friday. I was to call Lloyds TSB to enquire about their consent to the Option Agreement.

I have made my enquiries and the initial indications are that Lloyds would not be willing to agree to the Option Agreement.

As it stands therefore we cannot agree to the inclusion of clause 5.2 as the bank will not consent. Without this clause we can sign the agreement today.

Mr Islam will need two working days to transfer the £100k Compensation Sum to your client. I am not acting for Mr Islam on the conveyance or the litigation matter and would prefer he send the money directly to your clients.

…”

Three points should be noted above this email. The first is that, as indicated above, there is no mention of Mr Mahboubian having said that Lloyds’ consent was not necessary and the email is inconsistent with this. Secondly, notwithstanding what is said in the email, it was Mr Mohammed’s evidence that he did not fact contact Lloyds on 15 July 2013. Instead, he spoke to Mr Islam and relied on what Mr Islam told him. Thus it is possible that Mr Islam spoke to Mr Brown on 15 July 2013. Thirdly, even if Mr Islam did speak to Mr Brown on 15 July 2013, he plainly did not convey to Mr Mohammed, and hence Mr Mohammed did not convey to Mr Samuels, that Lloyds had definitely refused consent.

It is convenient to note at this juncture that counsel for the Defendants put it to Mr Samuels that it was obvious that Lloyds would never consent. Mr Samuels did not accept this, explaining that Lloyds’ security under its charge would not prejudiced because Classic could not get clear title without redeeming the charge, and that he had had experience of banks consenting to options of this kind before. I accept that evidence.

On 17 July 2013 Mr Samuels sent Arshad Mohammed an email saying:

“Clause 5.2 can only be deleted if the same rights are brought into the definition of the First Option Period which would now read as follows:

First Option Period: the period commencing on the date of the date of this Agreement and ending on the earlier of

…

(e)

the First Owner failing within 28 days of this Agreement to supply to the Second Owner:

(i)

a copy of each and every charge over the First Property; and

(ii)

written evidence to the Second Owner that every chargee has consented to the grant of the Second Option and that in exercising any power or sale or disposal under the charge such transaction will be subject to the Second Option; or

...”

For the avoidance of doubt, this is the wording which appears in clause 1.1(e) of the Option Agreement as executed.

Arshad Mohammed met Mr and Mrs Islam on Friday 19 July 2013. On Monday 22 July 2013 he sent Mr Samuels an email saying:

“I have confirmed with both Mr and Mrs Islam the terms of the agreement including your recent amendments as per your email of 17^th July.

Accordingly we are in a position to sign the Option Agreement and can proceed on this basis. I look forward to receiving the Option Agreement for signature.

…”

Mr Mohammed and Mr Islam both accepted in cross-examination that Mr Mohammed had indeed met with Mr and Mrs Islam and advised them as to the matters identified in his email dated 17 July 2013. It is not necessary or possible for me make any finding as to what advice Mr Mohammed may or may not have given Mr and Mrs Islam with respect to the clause 1.1(e) proposed by Mr Samuels at this meeting. Accordingly I record without comment, first, that Mr Islam stated in his witness statement that he and his wife understood from Mr Mohammed “that Mr Mahboubian was now agreeable to the deletion of clause 5.2 from the option agreement”, and secondly, that Mr Mohammed suggested in cross-examination that he had not properly understood the clause 1.1(e) proposed by Mr Samuels.

On 23 July 2013 Arshad Mohammed sent Mr Samuels an email stating “The conveyancing solicitor for Mr Islam will be: Oliver Harman Jury O’Shea LLP ….”.

On 25 July 2013 Arshad Mohammed sent Mr Samuels an email raising four drafting points on the draft Option Agreement and apologising for raising these late. Mr Samuels replied later the same day.

On 26 July 2013 Arshad Mohammed sent Mr Samuels an email saying that unfortunately the £100,000 payment Mr Islam hoped he would have would not be received for another two/three weeks because Mr Islam was borrowing this amount secured against another asset (not Standard Road) and the lender required a valuation of the asset to be charged.

Mr Samuels replied the same day, saying:

“Your last email has merely confirmed that the practice of Mr Islam in making promises and giving of assurances that are false continues.

Alexander Mahboubian met with Mr Islam on Tuesday this week and was assured by him that he already had the monies and he (i.e. Mr Islam) wanted to sign the agreement on Thursday of this week. This conduct of false statements cannot continue.

To bring this matter to a close and to ascertain whether Mr Islam has any intention of honouring the agreement, I am instructed as a final concession to make one final proposal …

The proposal is:

…

2.

The definition of the first option period be further refined to include a provision that if within 28 days from the date of the agreement the £100,000 compensation sum is not paid by way of cleared funds to my clients, the first option period will end and the second option period will continue … ”

On 29 July 2013 Arshad Mohammed sent Mr Samuels an email saying that the lender who was to loan Mr Islam the £100,000 had had a change of mind and accordingly that sum was no longer available. The Defendants’ evidence does not identify who the lender who or why he, she or it changed their mind.

According to Arshad Mohammed’s unchallenged evidence, Farroukh Mahboubian telephoned him later that day, and agreed that Mr Islam could have three months to raise the £100,000. Accordingly, Mr Mohammed sent Mr Samuels an email on 1 August 2013 saying:

“I believe an agreement has been reach as per the draft Option Agreement save for:

1.

Mr Islam having three months to pay the Compensation Sum.

2.

In addition I would ask for the First Option date to be Friday 10^th January 2014 rather than 31^st December 2013. … I hope your clients will agree.

3.

The deadline for the Agreement to be signed should be 4.00pm on Monday 5^th August. This will allow me time to discuss the matter with Mr and Mrs Islam …

Please confirm in a short email that I can proceed on this basis. I will then draft clauses for the Agreement as per our previous emails …”

Later the same day Mr Mohammed sent Mr Samuels an email summarising his understanding of the position with respect to a total of eight outstanding issues with respect to the draft Option Agreement, two of these being the Defendants’ proposals for payment of the Compensation Sum within 90 days and for the First Option period to end on 10 January 2014.

Later the same day Mr Samuels replied saying that he had taken instructions from Alexander Mahboubian and a result had revised the draft Option Agreement. He attached a PDF of the draft Option Agreement including his manuscript amendments and also proposed a new clause 22.11. None of these amendments affected clause 1.1(e) which had already been incorporated into the typed draft by this point.

Arshad Mohammed claimed in his witness statement that he understood from this email from Mr Samuels that “clause 5.2 had been taken out and that Lloyds’ Banks’ consent was not required”. It is correct that clause 5.2 had been taken out, but as Mr Mohammed knew, it had been replaced by clause 1.1(e)(ii) and that had been accepted by Mr Mohammed on behalf of Mr and Mrs Islam. There is nothing in Mr Samuels’ email to suggest that Lloyds’ consent was not required, and the attached draft Option Agreement shows that the contrary was the case.

On 2 August 2013 Arshad Mohammed sent Mr Samuels an email confirming that the revised Option Agreement was agreed and asking for a copy of the Agreement for signature.

Later the same day Mr Samuels emailed Arshad Mohammed a further draft of the Option Agreement. In his covering email Mr Samuels drew attention to a number of further small changes to the drafting, none of which affected clause 1.1(e). He went on:

“Can you please confirm that the property lawyer is happy with the property aspects of the draft and has approved the same to the Islams etc.”

Later the same day Mr Samuels sent Arshad Mohammed an email asking him to correct an error in the numbering of clause 4.5.

On 5 August 2013 Mr Samuels sent Arshad Mohammed an email asking him to confirm:

“(i)

you have changed the clause numbering on [sic] clause 4.5;

(ii)

let me have details of who will be signing for Redmist and ANS; and

(iii)

confirm the property lawyer has seen and approved the agreement so far as the conveyancing aspects are concerned.”

Later the same day Mr Mohammed replied:

“(i)

Yes. Done.

(ii)

Mr Islam will be signing for Redmist and ANS.

(iii)

I believe he has seen a previous draft but has not approved the Agreement. Time constraints have not allowed this to be possible. I am reluctant to delay the signature any longer for this to take place.”

In fact there is no evidence that any other solicitor was ever instructed to review the draft Option Agreement on behalf of the Defendants. Needless to say, Classic was not to know that at the time.

Mr Samuels replied:

“Thank you but of course Mr and Mrs Islam and their companies have had weeks to get advice on the agreement and we are entitled to rely on your firm to have taken responsibility for procuring them property advice.”

Later on 5 August 2013 both parties signed copies of the Option Agreement and the parties exchanged signature pages. The next day parties exchanged complete copies and agreed to date the Option Agreement 6 August 2013.

Mr and Mrs Islam both gave evidence that, just after they had signed the Option Agreement in Arshad Mohammed’s office, Arshad Mohammed told Mr and Mrs Islam that Farroukh Mahboubian had telephoned him and said that he “couldn’t believe that the Islams had signed the Option Agreement”, or words to that effect, and asked Mr Mohammed to fax him the signed Option Agreement so that he could see it for himself. Farroukh Mahboubian denied having done this.

On this point I prefer Mr Mahboubian’s evidence for the following reasons. First, Mr and Mrs Islam’s account was not corroborated by Arshad Mohammed. Secondly, their account does not make sense, since it involves Mr Mahboubian telephoning Mr Mohammed to say he could not believe that the Islams had signed the Option Agreement before they actually signed it. Thirdly, there is no evidence that Mr Mohammed did fax a copy of the Option Agreement to Mr Mahboubian.

In any event, as counsel for Classic pointed out, even if Mr Mahboubian had said words to the effect alleged, that would be entirely consistent with his not believing that Mr and Mrs Islam had signed the Option Agreement because of all the previous delays and difficulties caused by Mr and Mrs Islam.

On 8 August 2013 GSC wrote to Mr and Mrs Islam and to Jury O’Shea notifying them that Classic had appointed Mr Williams as its valuer under the Option Agreement. The letter reminded Mr and Mrs Islam that, under the definition of the First Option Period, they were obliged within 28 days of 6 August 2013 to provide (i) a copy of each and every charge over Mr and Mrs Islam’s Property and (i) written evidence that every chargee had consented to the grant of the Second Option to Classic etc. Mr and Mrs Islam did not reply denying that this was a term of the Option Agreement.

On 9 August 2013 Mr Patel sent Mr Samuels an email saying that he had been informed that, due to a conflict of interest, Mr Harman was unable to represent Mr and Mrs Islam and Bond Adams were now instructed in respect of the conveyancing matters.

On 23 August 2013 GSC wrote to Bond Adams and probably to Mr Islam as well (I say probably because the date of the letter to Mr Islam is unclear and could be 28 August) reminding them of the obligation to produce written evidence of every chargee’s consent to the Option Agreement by 3 September 2015. Neither Bond Adams nor Mr Islam replied denying that this was a term of the Option Agreement.

On 2 September 2013 GSC wrote to Bond Adams noting that they had no response to their letter dated 23 August 2013 and stating:

“Bearing in mind failure to comply with the Option Agreement will end the First Option Period and our letters have consistently reminded you of both of the deadline of 3 September and the fact that time is of the essence, we await hearing from you today.”

On 3 September 2013 Bond Adams replied to GSC’s letter dated 23 August 2013 saying:

“i.

We enclose a copy of the charge over the first property.

ii.

In relation to the consent of the chargee, our client states that he has notified the chargee and is awaiting their response. No objection has been made by the chargee thus far.”

The Defendants’ evidence is silent as to whether or not they did ask Lloyds for consent at this stage.

Later the same day GSC replied saying:

“… you response … ignores the fact that the provision of the written evidence of the chargee’s consent to the Second Option is clearly stated to be ‘of the essence’. The obligation is to produce this consent within 28 days of 6 August which is today, otherwise the First Option period will end. …”

Later that day Bond Adams replied:

“Our client instructs us that you were specifically advised that our client was not able to obtain the chargee’s consent. …

Our client states that Mr Arshad Mohammed made it crystal clear to your Mr Samuels in email correspondence that our client was not able to provide the chargee’s consent.”

I would make three points about this letter. First, Bond Adams made no attempt whatsoever to explain their clients’ volte-face from their position as set out in Bond Adams’ letter earlier that day. Secondly, there is no email from Arshad Mohammed to Mr Samuels which makes it crystal clear that Mr and Mrs Islam were unable to provide the chargee’s consent. Thirdly, there is no suggestion in this letter that Classic agreed to drop the requirement to obtain the chargee’s consent from the Option Agreement.

For completeness, I will set out GSC’s reply later on 3 September 2013:

“Mr Mohammed indicated that there may be difficulty in procuring consent but left the term in and your client signed the agreement. At no stage did either we or our clients agree to remove the obligation. This is therefore a matter between your client and Mr Mohammed and your client’s contractual liability remains. We should also remind you of both the obligation and time being of the essence. Your failure to raise the matter until the last date reflects the lack of attention being adopted by your client and your firm to this agreement.”

In the light of my findings of fact, this was an accurate statement of the position (except, perhaps, for the words “and your firm” in the last sentence).

Assessment. Counsel for the Defendants was right to abandon the Defendants’ claim of common mistake. Even if Farroukh Mahboubian had said words to the effect alleged on 12 July 2013, it would have been open to Classic to change its mind subsequently. Mr Samuels’ email of 17 July 2013 was crystal clear as to Classic’s position with respect to the chargee’s consent as at that date, and that position was expressly accepted by Arshad Mohammed on behalf of the Defendants in his email of 22 July 2013. This is one of the key reasons why the change in the Defendants’ case as to the date of the alleged agreement between Mr Mahboubian and Mr Mohammed from 29 to 12 July 2013 is significant.

The Defendants’ claim of unilateral mistake is equally hopeless. Even if Farroukh Mahboubian did say words to the effect alleged, and even if Arshad Mohammed misunderstood the effect of the wording set out in Mr Samuels’ email dated 17 July 2013 and wrongly advised his clients as to the effect of that wording, that wording was expressly agreed by Mr Mohammed on behalf of the Defendants. There is not a shred of evidence to show that Classic (whether through Mr Samuels or otherwise) knew that the Defendants were mistaken as to the effect of that wording. Furthermore, it was not even put to any of Classic’s witnesses that they were trying to take advantage of a mistake by the Defendants as to the effect of that wording. I am entirely satisfied that they were not attempting to do any such thing. On the contrary, Mr Samuels went out of his way to try to ensure that the Defendants were properly advised.

In any event, I have found that Farroukh Mahboubian did not say what he is alleged to have said on 12 July 2013. Furthermore, the Defendants’ case is predicated upon the assertion that Lloyds had flatly refused to consent by no later than 15 July 2013, but I am not satisfied that Lloyds had definitely refused its consent by then, or even by the time the Option Agreement was executed. Accordingly, the Defendants’ claim for rectification of clause 1.1(e)(ii) of the Option Agreement is dismissed.

The law. Again, there is no dispute as the applicable principles. It is sufficient for present purposes to refer to the opinion of Lord Hoffmann in Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10 [2009] 1 WLR 1988 at [21]:

“It follows that in every case in which it is said that some provision ought to be implied in an instrument, the question for the court is whether such a provision would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean. It will be noticed from Lord Pearson's speech that this question can be reformulated in various ways which a court may find helpful in providing an answer – the implied term must ‘go without saying’, it must be ‘necessary to give business efficacy to the contract’ and so on – but these are not in the Board's opinion to be treated as different or additional tests. There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?”

Assessment. The Defendants contend that it was an implied term of the Option Agreement that the Defendants were only obliged to provide “written evidence that every chargee … has consented to the grant of the Second Option and that in exercising any powers of sale or disposal under the charge such transaction will be subject to the Second Option” if such evidence existed. In support of this contention, counsel for the Defendants argued that it is to be presumed that a contract does not require performance of the impossible and that it was known to the parties at the time the Option Agreement was executed that Lloyds had flatly refused to give its consent.

I accept that it is to be presumed that a contract does not require performance of the impossible. I do not accept that the suggested term should be implied into the Option Agreement for the following reasons. First, as a matter of fact, it was not known to both parties that Lloyds had flatly refused to give its consent. Secondly, the term sought to be implied does not go without saying, nor is it necessary to give business efficacy to the Option Agreement. Thirdly, the term is inconsistent with the express words of clause 1.1(e)(ii), which positively require written evidence of consent to be supplied.

The law. Again, there is no dispute as to the applicable principles. Waiver by election is the abandonment of a right by making an election: it arises when a person is entitled to alternative rights inconsistent with one another and that person acts in a manner which is consistent only with his having chosen to rely on one of them: see Chitty on Contracts (31^st ed) at §24-007. A waiver by election may be made in writing, orally or by conduct.

The facts. I have set out the facts down to 3 September 2013 above. By that stage, GSC on behalf of Classic had reminded the Defendants several times that the First Option Period would come to an end on 3 September 2013 if evidence of Lloyds’ consent was not provided. Up to that point, therefore, Classic was clearly insisting upon its contractual rights. Furthermore, both sides had instructed their respective valuers, Mr Williams had inspected the Properties on 14 August 2013 and Mr Reiff had inspected the Properties on 30 August 2013.

On 9 September 2013 Mr Islam sent GSC an email saying that Mr and Mrs Islam’s valuation was due on 12 September 2013 and asking when Classic’s valuation would be ready. Mr Samuels replied the following day saying that Classic’s valuation would be ready by the end of the week and suggesting that the surveyors arrange to exchange reports. Mr Islam replied that his solicitor would exchange reports with GSC.

On 16 September 2013 Bond Adams asked GSC by email whether they were ready to exchange valuations. After some email correspondence from GSC explaining the delay on Classic’s side, the parties exchanged valuation reports on 30 September 2013.

After exchange, GSC sent Bond Adams an email on the same day noting that the Defendants’ valuation had been prepared by Mr Reiff and countersigned, stating that they considered this wholly inappropriate and reserving their client’s rights. GSC followed this up with a letter dated 7 October 2013 identifying a number of alleged deficiencies in the report prepared by Mr Reiff, but going on to state that, given that the valuations were more than 20% apart, they would be writing to the President of the RICS asking him to appoint a Third Valuer.

On 16 October 2013 GSC sent Bond Adams a letter which noted that Mr and Mrs Islam were in default of their obligations under the Option Agreement, including but not limited to their failure to produce a letter from Lloyds in accordance with clause 1.1(e)(ii), and reserving Classic’s rights in respect of this. The letter also reminded Mr and Mrs Islam’s solicitors that the time for paying the Compensation Sum expired at the end of the month.

On 21 October 2013 Classic applied to the President of the RICS to appoint a Third Valuer.

On 22 October 2013 GSC sent Bond Adams a letter stating that the First Option Period had come to an end, relying upon both Mr and Mrs Islam’s failure to provide written evidence of Lloyds’ consent and Redmist’s failure to pay the rent due on 29 September 2013. This was the first occasion on which Classic asserted that the First Option Period had come to an end.

Assessment. In these circumstances the Defendants contend that, by its conduct during the period from 4 September to 15 October 2013, Classic elected to treat the First Option Period as continuing and thereby waived its right to treat the First Option Period as having come to an end on 3 September 2013 by reason of Mr and Mrs Islam’s failure to provide written evidence of Lloyds’ consent. Counsel for the Defendants argued that Classic should have notified the Defendants that it contended that the First Option Period had come to an end within seven days of the event relied upon.

I do not accept this. No provision in the Option Agreement required Classic to notify Mr and Mrs Islam that it considered that the First Option Period had ended, still less to do so within any particular time after the event relied upon. The long stop date for the expiry of the First Option Period was not until 10 January 2014 and, once the Second Option Period commenced, Classic had four months in which to decide whether to exercise its option. Thus there was no particular urgency for Classic to decide whether it wished to treat the First Option Period as having ended. In such circumstances, a mere failure to enforce a right at the earliest opportunity does not amount to waiver by election.

Furthermore, Classic will obviously have wanted to receive and consider the valuations of Mr and Mrs Islam’s Property before deciding whether it wanted to exercise its option to purchase, and hence whether it wished to contend that the First Option Period had come to an end. Classic did not receive Mr Williams’ valuation until 30 September 2013 and valuations were exchanged on that day. It was only 15 days later that Classic reserved its rights under clause 1.1(e).

Furthermore, nothing which Classic did during the period 4 September to 15 October 2013 was consistent only with Classic having chosen to treat the First Option Period as continuing. In substance, all that Classic did during this period was to exchange valuation reports in respect of the two Properties, the instructions for the preparation of which had been given and the inspections for which had been carried out prior to 3 September 2015, and then to notify the Defendants of certain alleged deficiencies in the Defendants’ valuation reports, most of which were equally applicable to both reports. Classic needed to proceed with the valuation machinery in respect of Mr and Mrs Islam’s Property if it wished to exercise the Second Option. Even if it did not, the valuation of Classic’s Property was potentially relevant to the Third Option granted to Mr and Mrs Islam. This is unaffected by Classic’s right to a revaluation under clause 2.10.

Accordingly, I conclude that Classic did not waive its entitlement to contend that the First Option Period had come to an end on 3 September 2015.

The law. Again, there is no dispute as to the applicable principles, which have recently been reviewed by Hildyard J delivering the judgment of the Court of Appeal in Dixon v Blindley Heath Investments Ltd [2015] EWCA Civ 1023 at [72]-[102]. For present purposes, it is sufficient to refer to the following passage in that judgment:

“74.

The Judge began the relevant part of her Judgment by setting out the passage from Chitty on Contracts (31^st ed.) para 3-107 where the editors state that estoppel by convention arises when the parties have acted on an assumption:

‘the assumption being either shared by both or made by one and acquiesced in by the other. The parties are then precluded from denying the truth of that assumption, if it would be unjust or unconscionable to allow them (or one of them) to go back on it. Such an estoppel differs from estoppel by representation and from promissory estoppel in that it does not depend on any representation or promise. It can arise by virtue of a common assumption which was not induced by the party alleged to be estopped but which was based on a mistake spontaneously made by the party relying on it and acquiesced in by the other party.’

75.

The Judge reminded herself that the parties must have conducted themselves on the basis of the shared assumption and that the shared assumption must have been communicated between them. It is not sufficient for one or (even) both parties to have acted on the assumption if there is no communication of that assumption, but she pointed out, on the authority of The Vistafjord [supra at 533], that the necessary communication may be effected by the conduct of one party which is known to the other, provided that such conduct is

‘very clear conduct crossing the line … of which the other party was fully cognisant.’

She might well have added that such communication could, a fortiori, be effected when both parties conduct themselves towards each other on the basis of the assumption. She further reminded herself that the estoppel could only operate if it was unconscionable for one or other party to seek to rely on the true position contrary to the parties’ assumption.”

The facts. The Defendants rely upon the same facts in support of their argument of estoppel by convention as those relied upon in support of their argument of waiver by election.

Assessment. The Defendants contend that from 3 September 2013 to 15 October 2013 the parties operated under a common assumption that the First Option Period had not ended and that it would be unconscionable for Classic to be permitted to rely on the true position. I do not accept this. There is nothing to show that the parties had a shared assumption that the First Option Period had not ended, and certainly no conduct “crossing the line”. Furthermore, I do not consider that it would be unconscionable for Classic to be permitted to rely upon the true position. There is no reason to believe that the Defendants would have acted in a different way if Classic had make it clear that it was relying upon the failure to produce written evidence of Lloyds’ consent sooner than it did. Nor is there any evidence that the Defendants incurred additional costs as a result of Classic’s failure to do so.

In this regard, Ms Islam asserted in his witness statement that the Defendants “incurred extra legal costs as a result of instructing Bond Adams on conveyancing matters relating to [Classic’s Property]”. The schedule he referred to, however, covers a large amount of work done by Bond Adams in relation to the Properties (not all of which relates to the Option Agreement). It does not identify any specific work done by Bond Adams in relation to Classic’s Property during the period 11 September to 15 October 2013 which would not have been done if Classic had given notice by 10 September 2013 that it contended that the First Option Period had come to an end.

The law. Again, there is no dispute as to the applicable principles. Where, by his words or conduct, one party to a transaction (A) freely makes to the other (B) a clear and unequivocal promise or assurance that he will not enforce his strict legal rights, and that promise or assurance is intended to affect the legal relations between them (whether contractual or otherwise) or is reasonably understood by B to have that effect, and, before it is withdrawn, B acts upon it, altering his position so that it would be inequitable to permit A to withdraw the promise or assurance, A will not be permitted to act inconsistently with it: see Snell’s Equity (33^rd ed) at §12-108.

The facts. The Defendants rely upon the same facts in support of their argument of equitable estoppel as those relied upon in support of their argument of waiver by election and estoppel by convention.

Assessment. The Defendants contend that Classic impliedly represented that it would forbear to rely upon Mr and Mrs Islam’s failure to provide written evidence of Lloyds’ consent as an event determining the First Option Period. I do not accept this. In my judgment Classic made no such representation. Nor did Mr and Mrs Islam alter their position to their detriment for the reasons give above.

For the reasons given above, I conclude that the First Option Period came to an end on 3 September 2013 and Classic is not prevented from relying on this.

As noted above, it is common ground that Redmist did not pay the rent due on 29 September 2013 until after the first action was commenced. Accordingly, Classic contends that the First Option Period ended on 29 September 2013 if it had not already ended on 3 September 2013. As set out in paragraph 33 above, the Defendants advance a number of answers to this claim which I shall consider in turn. For these purposes I shall assume, contrary to my conclusion above, that the First Option Period did not come to an end on 3 September 2013.

The Defendants’ case. It is common ground that Classic did not send Redmist an invoice for the rental instalment in question prior to the due date. At common law, no demand for rent is necessary before the rent becomes due. Furthermore, the Redmist Lease did not require Classic to render an invoice (or make any other form of rent demand) to Redmist prior to each quarter day. Nor did clause 1.1(d) of the Option Agreement require Classic to render an invoice to Redmist prior to 29 September 2013. The Defendants nevertheless contend that it was an implied term of the Option Agreement that Classic would raise an invoice for payment of the instalment of rent due on 29 September and 25 December 2013 and send it to Redmist in good time (three to four weeks) before the quarter day to enable Redmist to effect payment of that instalment. The Defendants further contend that the rent was not paid due to Classic’s own default in not rendering an invoice prior to 29 September 2013.

In support of this contention, in the Defendants’ Defence in the first action, the Defendants rely upon a course of dealing between the parties with respect to the Redmist Lease whereby Classic had sent Redmist quarterly invoices. By an amendment to their Defence in the second action which I allowed on the second day of the trial, the Defendants rely in addition upon an alleged oral agreement in summer 2007. Although formally speaking this is not relied upon in support of the implied term, it is convenient to deal with it here. It is relevant to note that the first occasion on which the Defendants alleged the existence of this agreement was in a witness statement of Mr Islam dated 10 August 2015.

The facts: the alleged agreement in summer 2007. It is common ground that in about the summer of 2007 there was a meeting between Farroukh Mahboubian, Alexander Mahboubian, Dr Memon and Michael Gayed at Farroukh Mahboubian’s home in Barnet. Mr Gayed was a director of Quickgold Ltd. At that time Quickgold was the tenant of 52 Standard Road. According to Mr Islam, Quickgold’s business collapsed and he and Dr Memon formed Redmist in April 2007 to acquire Quickgold’s assets. Subsequently Quickgold went into voluntary liquidation in September 2007.

It is common ground that, at the meeting, there was discussion and agreement at least in principle over a new lease being granted by Classic to Redmist. Dr Memon’s evidence was that the following points were agreed: (i) Classic would grant Redmist a 10 year lease with a break clause after five years; (ii) the new lease would be a full repairing and insurance lease; (iii) rent would be paid quarterly by Redmist on receipt of an invoice from Classic; and (iv) Classic would provide Redmist with a written lease for signature.

Alexander Mahboubian accepted that points (i) and (ii) were agreed and that it was agreed that a written lease would be prepared. He did not accept that point (iii) was agreed or even discussed. His evidence was the Blendhall Group had many commercial leases in its portfolio and that details of that kind were a matter for negotiation between the parties’ solicitors during the drafting of the lease. Farroukh Mahboubian’s evidence was to similar effect, although he was a little more vague about the matter.

On this issue I prefer Alexander and Farroukh Mahboubian’s evidence. This is for three main reasons. First, I did not find Dr Memon’s account of the meeting convincing. Thus he confirmed that points (i) to (iv) were the entirety of what had been agreed, but when it was pointed out to him that they did not include the amount of the rent, he changed his story and said that that had also been agreed. Secondly, Dr Memon signed the Redmist Lease as a director and secretary of Redmist. He had no explanation as to why it was that, if it had been agreed that rent would be paid quarterly by Redmist on receipt of an invoice from Classic, no such term was included in the Redmist Lease. Thirdly, I consider that it is inherently probable that a detail of this kind would have been a matter for negotiation between the parties’ solicitors during the drafting of the lease.

For completeness, I would note three points which are mysterious, but do not appear to matter. First, a considerable period elapsed before the Redmist Lease was signed. Part of this delay is explained by the fact that a dispute between Classic and Redmist over an alleged encroachment by Redmist on Classic’s rights of way arose in early 2009 which was settled by a Supplemental Deed which was entered into on the same date as the Redmist Lease. The remainder of the delay has not been properly explained. The second point is that, as explained in more detail below, prior to the execution of the Redmist Lease, Classic rendered invoices to “Pad Partnership Ltd”. P.A.D. Partnership Ltd (“PAD”) is another company of which Mr Gayed was a director, but it was dissolved on 21 December 2004. The third point is that, although the Redmist Lease was backdated in its operation, it was only backdated to 20 December 2008.

The facts: the course of dealing. There is no dispute that Classic had a practice of sending invoices for the quarterly rent between three and four weeks before the due date, although it did not always do so. The earliest invoice in evidence is dated 3 September 2007 and is addressed to PAD. This followed by a sequence of invoices with the same addressee which ends with an invoice dated 1 December 2008. There is then a gap until three invoices all dated 27 July 2009 addressed to Redmist in respect of the quarters commencing on 25 December 2008, 25 March 2009 and 24 June 2009. It will be appreciated that these three invoices were sent shortly after the execution of the Redmist Lease. Thereafter there are invoices every quarter until 3 June 2013. There is then a gap until the invoices rendered under cover of the letter dated 9 May 2014 referred to below.

Assessment. In my view the contention that that it was an implied term of the Option Agreement that Classic would raise an invoice for payment of the instalments of rent due on 29 September and 25 December 2013 and send it to Redmist in good time before the relevant quarter day to enable Redmist to effect payment of those instalments is a hopeless one. No such express term was contained in the Redmist Lease. Nor is there is any basis for implying such a term into the Redmist Lease. Even if there had been an agreement in summer 2007 as alleged by the Defendants, it would not have been binding by virtue of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Even it had been binding, it would have been superseded by the terms of the Redmist Lease. It is not necessary to imply such a term to give business efficacy to the Redmist Lease, still less does it go without saying. The fact that Classic was in the habit of sending an invoice before the end of the quarter is neither here nor there. Furthermore, such an implied term would be inconsistent with clause 5.1.1 of the Redmist Lease.

Even if it were an implied term of the Redmist Lease, it would not be necessary to imply such a term into the Option Agreement to give it business efficacy, still less would it go without saying. The provision of the Option Agreement that the First Option Period would come to an end if the September or December quarter’s rent was not paid was a separate and distinct contractual provision to the underlying obligation in the Redmist Lease, and the Defendants entered into it less than two months before the rent was due on 29 September 2013.

I would add two points. The first is that it is not suggested by the Defendants that they forgot to pay the rent due on 29 September 2013; but if they had forgotten, they would only have had themselves to blame.

Secondly, at the time, the Defendants contended that Redmist needed to receive an invoice from Classic in order to be able to make the rent payments for accounting and/or VAT reasons. As counsel for the Defendants rightly accepted in his closing submissions, they were under a misapprehension in this respect. While Redmist may have found it convenient to have invoices rendered to it, it did not need them to produce accounts. Nor did it need them for VAT purposes, because no VAT was levied.

The Defendants contend that Redmist tendered the rent due on 29 September 2013. As I understand it, the Defendants now accept that this is a matter which goes only to costs. Nevertheless, it is convenient to deal with it here.

In support of this contention, the Defendants rely upon a series of emails and letters from Mr Islam and the Defendants’ solicitors dated from 24 October 2013 to 12 November 2013 in which requests were made for Classic to render an invoice for the rent. These communications do not show that Redmist tendered the rent. First, the earliest of these communications was nearly a month after the date on which the rent was due. Secondly, none of the communications contained an unconditional offer to pay the rent. Most of them contain no offer to pay it at all. The nearest to an unconditional offer is the Defendants’ solicitors’ email dated 31 October 2013 which stated that “Our client will pay the rent due as at 30 September 2013 on receipt of the quarterly rent invoice”. Thirdly, the overall tenor of the communications was that Redmist was not only not obliged, but also not able, to pay the rent unless and until Classic rendered an invoice. As indicated above, that stance was misconceived.

After the first action had been commenced on 13 December 2013, the Defendants’ stance initially remained the same. Thus on 31 December 2013 the Defendants’ solicitors sent Classic’s solicitors an email (which was arguably without prejudice, but no point has been taken on that) stating that the rent would be paid within two working days of an invoice being received. On 11 February 2014, however, the Defendants’ solicitors attempted to pay the sum of £16,500 into court in satisfaction of Classic’s claim for the rent due on 29 September 2013 and in partial satisfaction of Classic’s claim for interest thereon. Through no fault of the Defendants or their solicitors, the Court Funds Office repeatedly and wrongly refused to accept the payment in. Eventually, however, the payment in was accepted. On 23 June 2014 Master Price made an order by consent for payment out of the money to Classic.

The Defendants also rely on the fact that, on 9 May 2014, Classic rendered invoices for the three quarters of rent due on 29 September 2013, 25 December 2013 and 25 March 2014 endorsed with the statement “This pro-forma invoice does not constitute any admission that a demand for rent is pre-requisite to the payment of rent by Redmist International Ltd” and under cover of a letter which stated:

“Entirely without prejudice to that position and the contrary case on rent demands which has been pleaded in the Chancery Division action between us and without any admission whatsoever by us that service of a demand is a precondition to payment of rent (which of course we consider to be wrong and untenable at law) we are attaching pro forma invoices for that the last three items of rent.”

The Defendants say that Classic could have done this earlier. In my judgment that is correct, but irrelevant. As will be obvious from the chronology I have outlined, the Defendants attempted to pay the rent due on 29 September 2013 into court well before receiving this invoice. Thus it is not the case that the Defendants changed their stance upon receipt of the invoice. In any event, as I have said, that stance was misconceived. I would add that Classic was no doubt concerned to ensure that there could no argument as to Redmist’s liability to pay the following two quarters’ rent. In the event, those instalments were not paid despite the rendering of the invoices, and hence Classic forfeited the Redmist Lease. The Defendants’ evidence does not explain why those two instalments were not paid.

The Defendants’ case of waiver by election in relation to the non-payment of rent is essentially the same as their case in relation to the failure to provide written evidence of Lloyds’ consent, and my reasoning and conclusion is the same.

The Defendants’ case of estoppel by convention in relation to the non-payment of rent is essentially the same as their case in relation to the failure to provide written evidence of Lloyds’ consent, and my reasoning and conclusion is the same.

The Defendants put their case of equitable estoppel in two ways. First, they contend that, by the course of dealing between parties from at least 27 July 2009 to 3 June 2013, Classic impliedly represented that it would accept contractual performance in a different manner to that provided for in the Redmist Lease, namely that payment of each quarter’s rent would only be due after Classic had rendered an invoice or (which amounts to the same thing) that Redmist would only be required to pay a quarter’s rent following an invoice, and that it would be inequitable for Classic to be permitted to enforce its strict rights under the Redmist Lease.

I do not accept this. In my judgment Classic made no such representation, and even if it did, it would not be inequitable for Classic to be permitted to enforce its strict rights under the Redmist Lease. But even if I am wrong about that, it would not assist the Defendants. Clause 1.1(d) of the Option Agreement provides that the First Option Period ends if Redmist fails to pay the rent reserved by the Redmist Lease, not due under the Redmist Lease, on 29 September 2013. Furthermore, as I have already said, this is a separate and distinct contractual provision. There was no prior course of dealing between the parties with respect to clause 1.1(d) of the Option Agreement, and the course of dealing with regard to the Redmist Lease cannot have amounted to a an implied representation with regard to the Option Agreement.

Secondly, the Defendants contend that, by its actions during the period from 30 September to 21 October 2013, Classic impliedly represented that it would forbear to rely upon Redmist’s failure to pay the rent due on 29 September 2013 as an event determining the First Option Period. This is essentially the same argument as in relation to failure to provide written evidence of Lloyds’ consent, and my reasoning and conclusion is the same.

For the reasons given above, I conclude that, if the First Option Period did not come to an end on 3 September 2013, it come to an end on 29 September 2013, and Classic is not prevented from relying on this

As noted above, it is common ground that Mr and Mrs Islam failed to pay the Compensation Sum by 31 October 2013, or at all. Accordingly, Classic contends that the First Option Period ended on 31 October 2013 if it had not already ended on 3 or 29 September 2013. As set out in paragraph 34 above, the Defendants advance two answers to this claim which I shall consider in turn. For these purposes I shall assume, contrary to my conclusions above, that the First Option Period did not come to end on 3 or 29 September 2013.

It is convenient to set out the remainder of the factual background before turning to consider the Defendants’ contentions. I have set out the story down up to 22 October 2013 above. On 25 October 2013 Mr Islam replied directly to GSC’s letter dated 22 October 2013 in a letter which he gave evidence was drafted by Mr Amin (although this was not corroborated by Mr Amin). In his letter Mr Islam said:

“We do agree with your statement that we have committed a default under the Option Agreement.

We do not agree with your statement that the First Option Agreement [sic] has ended and [we are] now in the Second Option Agreement [sic].

You have inserted the clause in the Option Agreement we did not agree upon. In particular clause 5.2.

Mr Arshad Mohammed, [the] solicitor who negotiated on our behalf with your client sent an email to you dated 12 July 2013 clearly stated that the clause 5.2 was not acceptable and if not deleted than [sic] the Option Agreement would not proceed.

Mr Arshad Mohammed personally spoke to your client on the telephone with regards to Clause 5.2 and your client confirmed that he will instruct you to delete clause 5.2 and will not form part of the Option Agreement.

Contrary to your client’s undertaking you did not delete the clause 5.2.

Your client always sent us invoices for the quarterly rent demand and on receipt of the invoice we would pay the rent.

To date we have not received the quarterly rent invoice from your client. Accordingly we have not yet paid the rent.

…

Finally we wish to emphasise that we have every intention to exercise Option 1 and to comply with the agreed terms of the Option Agreement except clause 5.2.”

Mr Islam’s statement in this letter that clause 5.2 was not deleted is, on any view, inaccurate, since there is no clause 5.2 in the Option Agreement. As explained above, a slightly different provision is contained in clause 1.1(e). More importantly for present purposes, however, the letter did make it clear that the Defendants disputed that the First Option Period had come to end on 3 or 29 September 2013.

GSC responded to Mr Islam’s letter in a letter to Bond Adams dated 25 October 2013, maintaining that the First Option Period was at an end and the Second Option Period had commenced. Bond Adams replied by email dated 29 October 2013, saying:

“There is a fundamental dispute now in relation to this so called option agreement.

…

On that basis, you have our client’s position that we are still within the first option period and that rectification needs to occur. If you are not in agreement, we have a dispute and both parties should therefore go before the court for a declaration as to whether we are in the first option period, second option period or whether this agreement has in fact been frustrated or in fact was void from the outset, given that our client could not comply with it in any event and you were aware that they could not comply with it in any event.

…

Additionally, our client is holding the £100,000 in a separate account in readiness for the payment by 31 October 2013. We await confirm that either the option requires rectification due to the mistakes that have occurred or that in fact it was void from the outset. If you require us to hold it, please advise.”

Notwithstanding Mr Islam’s claim in his witness statement that at this time he had £100,000 in cleared fund available, the statement that Bond Adams’ clients were holding £100,000 in a separate account was untrue. In fact Mr and Mrs Islam were relying upon their friends to advance them the money. Counsel for the Defendants submitted that this was merely a matter of semantics. I disagree.

GSC replied at some length by letter later the same day. For present purposes it is sufficient to quote the following passage:

“14.

So far as the payment of the £100,000 is concerned this too has to be paid by 31 October and again payment is stated to be of the essence. If your clients fail to make payment of the same then again they will be in yet further breach of the terms of the Option Agreement.

15.

We note in this regard that you claim that your clients have this sum of £100,000 in a separate account and we invite you to produce evidence of the same bearing in mind previous assurances to Arshad and indeed to our clients that they held such a sum which turned out to be untrue. …”

On 31 October 2013 Bond Adams replied by email, saying:

“Our clients confirm that they are holding the £100,000 in a separate account. However, we require you to confirm that we are in the first option period and the agreement needs to be rectified first. The money can be paid over to ourselves, pending these matters.

Additionally, your client to date has not sent the quarterly rent invoice which has been the standard practice by your client for the last 4 years. Our client will pay the rent due as at 30 September 2013 on receipt of the quarterly rent invoice.”

GSC replied later the same day, saying:

“As to the payment of the £100,000 your clients’ obligations in that regard are also clear and the failure to comply is yet a further event triggering the end of the First Option period. We note your assertion your clients holding such sum in a separate account but that appears to solely based on what you have been told by your clients and you do not produce any evidence to support your clients’ statement. We need hardly remind you that your clients’ very much in issue here. Paying such sum to your firm is not acceptable; our clients will not agree to very the Option Agreement.”

There was no response from Bond Adams to this repeated challenge to produce evidence that Mr and Mrs Islam were holding £100,000. Nor did Bond Adams say that the true position was that Mr and Mrs Islam were relying upon friends to advance the money.

After a certain amount of further correspondence between GSC and Bond Adams, on 5 December 2013 Bond Adams sent Mr Stephenson email which was copied to GSC in the following terms:

“We are instructed that the basis of the instruction which emanates from GSC solicitors which is based on an alleged option agreement which is considered to be either void ab initio, voidable or has been frustrated and hence our client will not be granting any access facilities nor engaging in any valuation process.”

On 13 December 2013 Classic commenced the first action and applied for interim relief requiring the Defendants permitted Mr Stephenson to inspect the properties which Classic duly obtained. Mr Stephenson carried out his inspection on 2 January 2014.

The law. Again, there is no dispute as to the applicable principles. A contractual obligation is said to be “entire” when complete performance by one party (A) is a condition precedent to the liability of the other (B) to perform its obligation. In the usual case, B’s obligation is to pay a lump sum. In such a case, the lump sum is normally only payable by B upon complete performance by A. If A has only performed part of its obligation, A cannot recover anything under the contract (i.e. A cannot claim pro rata payment). It is a question of construction of the contract whether an obligation is entire or divisible. See Chitty on Contracts at §§21-028 to 21-031.

Assessment. The Defendants argue that Classic’s obligation to grant them the First Option to purchase Classic’s Property for the duration of the First Option Period was an entire obligation, that is to say, complete performance by Classic of that obligation was a condition precedent to Mr and Mrs Islam’s obligation to pay the Compensation Sum. The Defendants further argue that Classic only performed part of that entire obligation, because Classic wrongly asserted from 22 to 31 October 2013 that the First Option Period had come to an end.

I pay tribute to the ingenuity of this argument, but in my judgment it is without merit. By clause 3.1 of the Option Agreement Classic granted Mr and Mrs Islam the First Option to purchase Classic’s Property during the First Option Period. The duration of the First Option Period depended on the Defendants taking certain steps. If the Defendants took those steps, then the First Option Period would last until 10 January 2014. But if the Defendants failed to take one of those steps, then the First Option Period would end at an earlier date.

It is true that Classic’s grant of the First Option was in consideration of Mr and Mrs Islam’s promise to pay the Compensation Sum, but that does not mean that Classic was under any contractual obligation to perform, let alone an entire obligation, during the First Option Period (apart from its obligations in respect of the valuation machinery, which the Defendants do not contend Classic failed to perform). Classic had already granted the First Option by entering into the Option Agreement. Classic was not under any obligation complete performance of which was a condition precedent to any liability of Mr and Mrs Islam. Indeed, so far as clause 1.1(c) is concerned, Mr and Mrs Islam were not obliged to pay the Compensation Sum at all. (They were obliged to pay it under clause 4.1, but that is a different matter.) But if they failed to pay it, then the First Option Period would come to an end.

The fact that Classic contended from 22 to 31 October 2013 that the First Option Period had already come to end did not in any way prevent Mr and Mrs Islam from paying the Compensation Sum. As it was, they did not tender it, did not produce evidence that they had the funds when challenged to do so and did not say that they had friends who were willing it to advance the money.

Although it is immaterial to my conclusion, I cannot forbear from commenting that Mr Amin, Mr Harrath and Ishtaq Mohammed each gave evidence that he was prepared to lend Mr Islam both the rent due on 29 September 2013 and the Compensation Sum due on 31 October 2013. As I have said, I accept that evidence. Nevertheless, it is notable that the Defendants’ evidence fails to explain why it is that (i) the Compensation Sum was never tendered, let alone paid, (ii) why Redmist defaulted on the December 2013 and March 2014 quarter’s rent or (iii) why Redmist failed to pay the petition sum due to HMRC. As I see it, there are only two possible explanations. The first is that Mr and Mrs Islam chose not to avail themselves of these sources of finance. The second is that there is more to the story than has been explained.

The law. Again, there is no dispute as to the applicable principles. Where a party to a contract by his words or conduct evinces an intention not to perform the contract, he thereby repudiates the contract. The innocent party then has the option of affirming the contract or accepting the repudiatory breach as discharging the parties’ obligations under the contract. See Chitty on Contracts at §24-018.

Assessment. The Defendants contend that, by GSC’s correspondence from 22 to 31 October 2013, Classic evinced an intention not to perform the Option Agreement. I do not accept this. On the contrary, Classic was purporting to operate the contractual machinery under the Option Agreement. At best, from the Defendants’ perspective, there was a genuine dispute between the parties as to whether the First Option Period had expired. That does not amount to repudiation.

Furthermore, it is the Defendants’ own pleaded case that they affirmed the Option Agreement by Bond Adams’ email on 31 October 2013. That being so, Mr and Mrs Islam continued to need to pay the Compensation Sum if they wanted the First Option Period to endure.

Yet further, having affirmed the Option Agreement, it was not open to the Defendants to accept Classic’s alleged repudiatory breach thereafter. Nor in my judgment did Bond Adams’ email of 5 December 2013 amount to such acceptance. It did not even allege that Classic was in repudiatory breach, but alleged that the Option Agreement was void, voidable or frustrated.

For the reasons given above, I conclude that, if the First Option Period did not come to an end on 3 or 29 September 2013, it came to an end on 31 October 2013. Furthermore, Classic is entitled to judgment for the Compensation Sum.

As noted above, Classic contends that Mr and Mrs Islam failed to appoint the First Owner’s Valuer in accordance with clause 2.3 of the Option because Mr Reiff was not a member or associate of RICS as required by clause 1.1.

The Defendants contend that it is sufficient that the report was countersigned by Mr Firrell. I do not accept this for the following reasons. First, under clause 2.3 of the Option Agreement, Mr and Mrs Islam had to appoint their Valuer within five working days of the Agreement and give written details of that person to Classic. Thus the qualifications of the person appointed and notified fall to be tested as at that date. As at that date, the person appointed, namely Mr Reiff, was not a member or associate of RICS. It is fair to say that, later the same day, Mr Islam stated that Mr Firrell would sign the report, but that does not assist the Defendants because they did not appoint Mr Firrell. Counsel for the Defendants attempted to avoid this conclusion by suggesting that Mr and Mrs Islam had appointed Dutch & Dutch. That would make matters worse from the Defendants’ perspective, not better, because it is clear from the Option Agreement that the Valuer is to be individual not a firm and Dutch & Dutch is not a member or associate of RICS, nor can it be.

Secondly, even if it is legitimate to have regard to Mr Reiff’s report dated 10 September 2013, on the face of the report all the work has been done by Mr Reiff. There is nothing to indicate that any of the work was done by Mr Firrell. No doubt in countersigning the report Mr Firrell was indicating that he was, to that extent, prepared to put his name to the document, but it does not go any further than that. Nor is there is any evidence from either Mr Reiff or Mr Firrell which might throw a different light on the matter.

Thirdly, if and in so far as the matter is one for expert evidence, Mr Bailey’s evidence is supportive of Classic’s case.

The only matters relied upon by the Defendants as disentitling Classic from equitable relief are matters which I have already dealt with above. I do not accept that Classic is disentitled to equitable relief for any of the reasons alleged. Accordingly, Classic is entitled to an order for specific performance of the Option Agreement.

For the reasons given above I conclude that: