Rahman v Rahman

Ms Recorder McAllister (“the judge”) after a five-day trial in February 2017 at Central London County Court. The appellant, Mr Azizur Rahman, was the first defendant in the proceedings below. The respondent, Mr Habibur Rahman, was the claimant in the proceedings below. They share the same surname, but are not related. I shall refer to them as “Aziz” and “Habib” respectively.

Aziz, as sole director and shareholder of two joint venture companies, was obliged to “allot”, in the sense of “procure the allotment of”, a one third shareholding to Habib. All avenues of challenge to these findings have been exhausted. I shall accordingly refer to the contract made in 2003 as “the 2003 agreement”.

he, Aziz, and Dr Nabi, had agreed in 2003:

as to the second defendant in the proceedings below, Icon College of Technology and Management Limited (“Icon College Ltd”):

as to the third defendant in the proceedings below, Icon Technology (UK) Limited, which I shall refer to as “Icon Technology Ltd”:

Habib is and has at all material times been ready and willing to accept an allotment of shares in both Icon College Ltd and Icon Technology Ltd; and

notwithstanding, among other things, a written demand dated 6 May 2015 (“the

sought specific performance of his agreement with Aziz for allotment to him of 1/3 of the capital of both Icon College Ltd and Icon Technology Ltd, and also sought the rectification of the registers of those companies;

said additionally that by reason of Aziz’s refusal to allot shares, Habib had suffered loss and damage, and sought “equitable damages in addition to or in

alternatively said he was entitled to recover back, as having been paid on a consideration that had wholly failed, the contributions to Icon College which he had made; and

sought interest, to be calculated in various alternative ways, including claims that “in the case of any dividends declared” interest should be paid from the date or dates of payment by Icon College Ltd or Icon Technology Ltd to Aziz.

he was the sole director and shareholder of both Icon College Ltd and Icon Technology Ltd;

while Habib had been appointed company secretary of Icon College Ltd on 1 October 2003, he was removed from that post on 14 October 2008;

Aziz had setup Icon Technology Ltd in 2001 as an IT training and support company;

Habib had been company secretary of Icon Technology Ltd from 11 October 2001 until 14 October 2008;

while Icon Technology Ltd became lessee of the premises from which the college operated, the lease was now held in the name of Icon College Ltd;

Habib’s alleged 2003 agreement was denied;

Habib’s alleged 2003 agreement was insufficiently certain to be legally enforceable;

while it was accepted that Icon College Ltd was incorporated on 18 September 2003, this was not done with the intention that Aziz, Habib and Dr Nabi would eventually be equal shareholders and directors;

Aziz denied telling Habib that Habib could not become a member of Icon College Ltd because Habib did not at that time have permanent leave to remain in the United Kingdom;

Habib was not involved in the management of the college at all, but by contrast generally dealt with administrative matters and provided support where needed;

while certain payments by Habib were admitted, others were not admitted, and none was made pursuant to a contract to allot shares;

as to Habib’s claim in relation to Icon Technology Ltd, there had been no promise to allot 1/3 of its shares to Habib, the amended particulars of claim failed to plead that Habib provided any consideration for this alleged promise, and in any event the agreement alleged by Habib in that regard was

while the demand made in the May 2015 letter was admitted, Habib was not entitled to what was demanded;

Aziz denied Habib’s claim to be entitled to specific performance, denied that Habib had suffered loss and damage, and denied Habib’s claim of total failure of consideration, along with Habib’s claims to interest;

Without prejudice to Aziz’s primary contention:

The acts on the part of the first defendant of which the claimant complains took place in or soon after September 2003. At the latest the claimant knew of the existence of all the matters pleaded in the particulars of claim by early 2004 (being both a reasonable time and a “short while” after Icon College was incorporated in September 2003).

The claimant alleged in his Employment Tribunal claim against Icon College dated 20 October 2010 that he would be a shareholder in Icon College “within a short period” of the company being established in September 2003 and that he raised this issue in meetings with the first defendant in March 2006 and March 2008, and that he had an argument about “his shares” with the first defendant in April 2009 during which the first defendant allegedly told him that he could go to the courts to resolve the dispute.

The claimant referred to taking legal advice regarding a claim for recognition of his alleged share in Icon College in his complaint to the Employment Tribunal dated 20 October 2010.

Icon College’s response to the Employment Tribunal claim (signed by the first defendant as director of Icon College) dated 19 November 2010

After resolution of the Employment Tribunal claim on 5 May 2014 nothing further was heard from the claimant in respect of the subject matter of this claim until three weeks before commencement of this action.

Since September 2003 the first defendant has expended time and effort in growing the business of Icon College, for example:

The claim for equitable compensation in paragraph 3 of the prayer for relief is time-barred as the cause of action accrued more than 6 years before this claim was brought and is therefore barred by Sections 5 and 36 of the Limitation Act 1980.

The alleged causes of action for damages for breach of contract in paragraph 14 and paragraph 3 of the prayer for relief, and for restitution in paragraph 15, accrued more than 6 years before this claim was brought and are therefore barred by section 5 of the Limitation Act 1980.

Milestones

The relevant milestones, chronologically, are as follows:

In April 2003 the alleged contract on which C sues is said to have been made.

On C’s case, by March 2006 (within 3 years of the alleged contract) C was raising the issue of a one third shareholding with D1 [C w/s paragraph 32].

5th January 2007 is the date of the first of the various handwritten notes which appear to evidence (assuming in C’s favour, for argument’s sake, that they are reliable) the question of shares being discussed in conversations between C, D1 and Dr Nabi [p.330].

In March 2008, according to C in his Grounds of Complaint in the employment Tribunal proceedings which he later brought against D2 [at paragraph 24, p. 517, Tab 104] D1 was avoiding the issue of share distribution, and C therefore called a meeting “for my share distribution” on 6th March 2008.

Consistently, C’s main witness, Ashraf Mahmud, states that the dispute between the parties started in 2008 [AM w/s paragraph 12].

On 14 October 2008, C was removed as company secretary of D2 and D3.

On 24 April 2009, according to C in his ET Grounds of

Complaint, C and D1 “had a big argument and during that argument he told me if I wanted I could go to the courts” (paragraph 27; p.518).

(Note: the above milestones all occurred more than 6 years before the present proceedings were issued).

On 22 July 2010, D2 terminated C’s employment [p.353].

On 18 July 2011, C demanded by letter [p,359] that “my investment and share matters” by resolved.

On 19 July 2011 D2 replied that C’s claim was vexatious and frivolous [p.360].

In 2012 D2 nearly collapsed, but was rescued in late 2012 by D1 introducing a new business model based on UK home students [D1 w/s paragraph 56-7].

On 6 May 2015 C’s solicitors Gunner Cooke alleged an agreement that C was entitled to a one third shareholding in D2 and demanded it.

On 27 May 2015 this claim was issued ...

As to paragraph 39 and the numbered sub-paragraphs thereof:

Sub-paragraph 39 (1) is denied. The claimant makes no complaint about anything that the First Defendant did in September 2003 or in 2004. Almost six years later, on 3^rd June 2009, the parties were in discussions evidenced in a writing signed by the Claimant, the first Defendant and Dr Nabi, about their respective contributions.

As of 3^rd June 2009, the First Defendant had still not intimated in any way to the Claimant that he did not consider himself bound by the agreement reached in September 2003, rather the contrary.

As to sub-paragraph 39 (2), in April 2009 the First Defendant had not repudiated the agreement reached in September 2003. Indeed, he did not unequivocally do so at any time before 21^st May 2015 when his solicitors, Pennington Manches answered the letter of claim sent by the Claimant’s solicitors on 6^th May 2015.

The Claimant’s cause of action accrued not when the parties’ agreement was made but only upon breach, which, the Claimant contends by way of his primary case, was not until 21^st May 2015.

By way of the Claimant’s secondary case, even on 3^rd June 2009, the First Defendant had not committed a repudiatory breach; see further sub-paragraph (7) below. The claim form herein was issued on 27^th May 2015.

Sub-paragraph 39 (3) is admitted, so far as it goes.

Sub-paragraph 39 (4) is denied, at any rate if the word “refuted” is to be taken as bearing its natural and ordinary meaning of “disproved”. If on the other hand the word “refuted” is to be taken as meaning no more than “denied”, the denial is noted, and issue is joined upon it, but the Second Defendant, Icon College was in any event the subject of and not a party to the agreement reached in September 2003.

Even if the second defendant Icon College’s response to the claimant Employment Tribunal (“ET”) claim is to be taken as a repudiation of the agreement reached in September 2003, the claimant’s cause of action accrued no earlier than 19^th September 2010.

Sub-paragraph 39(5) is admitted, so far as it goes. The claimant will however also say that proceedings in the ET were compromised by a written settlement agreement made on 5^th May 2014 (“the Compromise”). The combined effect of clauses 1.2, 4.5 and 5.5 of the compromise is to preserve the claimant’s right to claim for one-third of the shares in the second defendant.

As to subparagraph 39(6) the claimant admits that since September 2003, the first defendant has expended time and effort growing the business of the second defendant. So however have Dr Nabi and the claimant, until the first defendant wrongfully excluded the claimant from the second defendant’s business.

So far as alineae (i), (ii) and (iii) of subparagraph 39(6) are concerned, the claimant is unable to admit them, since they aver matters outwith his personal knowledge, so that the first defendant is required to prove them.

Unless moreover the first defendant gave a personal guarantee to HSBC, which the claimant notes is not suggested, the matters alleged at alinea (iii) of subparagraph 39(6) would not even if true support the plea that the first defendant took on further risk as a matter of law, alternatively a mixed question of fact and law.

a slip: what was intended was 19 November 2010, which was in fact the date on which Icon College Ltd lodged its response to Habib’s Employment Tribunal claim.

damages in respect of missed or unpaid distributions (namely distributions made to or for the benefit of others by the second defendant but not made to the claimant), on the following footing:

the claimant and the first defendant entered a contract in September 2003 under which they agreed that the claimant would eventually be granted a one third shareholding in the second defendant and third defendant;

the first defendant was in continuing breach of his obligation to allot shareholding from approximately June 2009 onwards and he ultimately repudiated the contract on 19 November 2010 upon service of his “ET3” response form in proceedings in the Employment Tribunal (case number 3203565/2010); and

“distribution” has its ordinary meaning under section 829 of the Companies Act 2005 save that Dr Nabi and Mahmuda Rahman (the first defendant’s wife) are to be treated as “members” of the second defendant for this purpose.

dated 7 December 2017, noted that an extensive volume of documents and authorities had been placed before him, including a full transcript of the entire trial and subsequent hearing. Aziz’s main ground of appeal sought to attack the finding that there had been a contractual agreement. It noted that Habib’s claim concerned oral discussions which took place fourteen years earlier. It asserted that the judge had failed to apply relevant guidance when considering the credibility of witnesses. Mr Justice Spencer rejected the contention that this was an arguable ground of appeal, saying that it relied on citations from the March 2017 judgment which had been taken out of context.

This left two remaining pleaded grounds of appeal, which I shall call “the laches ground” and “the Icon Technology ground”. Mr Justice Spencer refused permission on the Icon Technology ground, which had not been addressed in oral argument before him.

…although by no means overwhelming, there is at least a real rather than fanciful prospect of the appeal [on limitation] succeeding.

The legal argument in relation to limitation is closely entwined with the legal issues raised in the grounds of appeal in respect of the judge’s conclusion that the claim for equitable relief was not barred by laches. In my judgment the issues are so closely entwined that I should grant permission on the laches ground as well. Had it stood alone the position might have been different. If, however, the court were to conclude at the full appeal that there is merit in the limitation argument barring the common law claim for contractual damages for failing to allot shares to Habib, that might also have an important bearing on whether the judge’s conclusion in relation to laches could properly stand.

Habib was granted permanent residence in the United Kingdom in 2004; Aziz in 2003.

the period from 1995/1996, when Habib and Aziz met, and Aziz started working as a computer systems engineer at Integrated Business Computer Systems Ltd (“IBCS”), a London based computer company providing IT hardware and

the period from 1999, when Aziz, Habib and Dr Nabi were associated in various ways with a non-profit making company set up by IBCS and called Millennium Advanced Technology Training (“MATT”), through to 2003 when MATT was

developments during 2003, when an original idea of developing an IT training and support company, using Icon Technology Ltd, evolved over the summer of 2003 to the point where Icon College Ltd was incorporated in September 2003 and the college, under Dr Nabi as Principal, enrolled its first students in February 2004;

conflicting accounts as to what was said or not said in relation to share holdings and directorships in the period 2003 to 2006;

a marked divergence between denials by Aziz and Dr Nabi, prior to trial, of any agreement and of any management role involving Habib, and acceptance in oral evidence that Habib, Aziz and Dr Nabi were co-founders and business partners.

in paragraph 32, the long hours worked by each of Habib, Aziz and Dr Nabi in the early years, and their differing roles:

also in paragraph 32 an initial period when the co-founders took no salary, after which:

in paragraph 33, common ground that by 2006, if not before, Habib was

findings upholding Habib’s case as to what was agreed in 2003;

a description of an acceptance by Aziz in oral evidence that the only reason for not registering Habib and Dr Nabi as shareholders at the outset was because of particular difficulties they faced;

a discussion of events after 2005 which, the judge said, were:

findings rejecting the defence of laches.

…a further and important meeting… in June 2009 when it was clear… that the matters were still being discussed and promises made to [Habib] that things would be sorted out.

…and indeed I have already reached this conclusion…

hearing on the question whether an order for specific performance, as envisaged in the March 2017 judgment, should be replaced by an order for damages in lieu of specific performance. The judgment concludes that it should.

findings, noted in sections C1 and C3 below, as to when:

a conclusion, discussed in section C5 below, that:

An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.

Aziz makes two challenges to this conclusion. Aziz’s primary challenge asserts that

Aziz’s breach of contract occurred, and Habib’s cause of action accrued, in 2004. Aziz’s alternative challenge is that the breach, and consequent accrual, occurred in

I deal with the judge’s primary conclusion, and Aziz’s challenges to it, in sections C3.3 to C3.8 below. In those sections I also deal with two suggested answers advanced by Habib. The first, described by Habib as “Analysis 1”, was said to be concerned with “waiver”. The second, described by Habib as “Analysis 2”, was that “a reasonable time” for performance by Aziz was not exceeded until after the June 2009 meeting.

Further or alternatively, the judge erred in law in her further judgment (dated 11 July 2017) in rejecting the defendant’s defence that C’s claim was statute barred. If, as C gave evidence and the judge found: (a) the contract upon which C relied was concluded in 2003 and included a term that C would receive his shareholding as soon as the question of his permanent residency was resolved; and (b) a dispute arose between the parties in 2006 as to C’s entitlement, then the cause of action for breach thereof accrued at the latest:

in April 2004, when that question was resolved (on C’s own evidence) and C sought his shares from D1 (on C’s own evidence), or alternatively;

in 2006 when a dispute arose (on C’s own evidence).

The judge erred in law in holding that D1’s duty to procure the issue of the shares to C was a continuing one and that the cause of action continued to accrue until 2010.

C’s claim became statute barred, therefore, either in April 2010 or by 2013. This action was commenced on 27 May 2015, on any basis years out of time.

resolution of Habib’s permanent residency, said to have occurred in April 2004 (paragraph 6(a) and 6(1) of the amended grounds of appeal);

Habib seeking his shares from Aziz, also said to have occurred in April 2004 (paragraph 6(a) and 6(1) of the amended grounds of appeal); or

a dispute between the parties as to Habib’s entitlement which is said to have occurred in 2006 (paragraph 6(b) and 6(2) of the amended grounds of appeal).

MR GRAHAM: … so as far as limitation is concerned, there are clearly fundamental issues for any contractual claim brought by the claimant in respect of contractual claims. I set out at para 74 of the skeleton the relevant chronological milestones and the cut off point is after para 7 which you can see on p. 15. The limitation cut off point appears underlined after that because the claim was issued on 27 May 2015. Before that one has four pieces of evidence where the claimant claims---- well, three important ones perhaps for this purpose where the claimant claims that the dispute had arisen before that date, so item 4 under 74, March 2008, grounds of complaint to the Employment Tribunal, in that document he says in March 2008 he had demanded his share distribution. Then you have got the evidence of Mr Mahmud. Actually, on reflection, I am not going to rely on anything Mr Mahmud says save insofar, of course, as it is inconsistent with the claimant’s own case but it is notable that he does say that. The dispute started in 2008. Then 7, 24 April, 2009, the next important date, again in the ET grounds of complaint he says that he and Aziz had a big argument and during that argument, “He told me if I wanted I could go to the courts”, so it could not be clearer. If that is right, then any contractual claim is dead, save for a specific performance claim.

MR GRAHAM: Everything up to item 7, if found to be the relevant date, puts the relevant claim, the claim for damages, outside the limitation period because those all occurred more than six years before proceedings were commenced.

THE RECORDER: It was May 2015, was it?

MR GRAHAM: May 2015. The key ones, and these all derive from the claimant’s own evidence or his claims in the Employment Tribunal proceedings, are 4, 5, 6 and 7.

In March 2008, according to C in his grounds of complaint in the Employment Tribunal…”—at that point – “D1 was avoiding the issue of share distribution, and C therefore called a meeting ‘for my share distribution’ on 6 March 2008.”

So, on the claimant’s own case, that was clearly a demand for the distribution of shares. So that’s a clear demand whereby he seeks the distribution of his shares. That demand is clearly not acceded to and that it is the date, the first date one can take as the date of the breach of contract on which the claimant relies. At that point, if you make your demand and it’s refused, you can’t just sit back and say “Well, I’ll think about making a claim.” The clock is ticking. The clock is ticking and you’ve got your six years, which is no short time.

That is consistent (item 5 in that milestone list) with what Mr Mahmud said when he said in his witness statement, and your Honour seemed to accept Mr Mahmud’s evidence generally, that the dispute between the parties started in 2008. We also have the fact (item 6 not directly relevant) that he was removed as the company secretary in 2008.

Then one has item7:

“on 24 April 2009, according to C in his Employment Tribunal grounds of complaint, C and D1 ‘had a big argument and during the argument he told me if I wanted I could go to the courts.’”

So that is a crystal-clear rejection of the claimant’s claim for shares. So one has the demand in March 2008, which was clearly not acceded to, and one has at the very latest, on 24 April 2009, on the claimant’s own evidence, a big argument and the defendant saying in crystal clear terms, “Go to court if you want to make that claim”. The clock is clearly running at that point. There is no question but that the limitation clock is running there. …

Habib and Aziz became very close from the early days of their friendship, and were, to use Habib’s term, more like brothers than friends. In 1997 or 1998 Aziz helped Habib find accommodation through a housing association. In 2001 Aziz bought a house in Stratford. Habib lived with him, on and off, until 2004. They considered themselves, and acted as, equals.

The discussion relating to the setting up of Icon Technology took place in September 2001. In his witness statement Habib stated that he paid 50 pence in respect of the only £1 share. In evidence he resiled from this, but maintained that it was agreed at the outset that he would be a shareholder and director as soon as the question of his permanent residency was resolved.

By 2006, if not before, Habib was pressing for his share-holding and his directorship to be formalised. There is an issue as to whether the issue was raised formally at a meeting on 12 March 2006 (as he claims) or on 8 April 2006 as Aziz and Dr Nabi claimed. There is a written record of what seems to have been discussed on 8 April 2006, but no record of any earlier meeting. I have seen the original diaries and notebooks kept by Aziz and Habib for these years. They show (amongst other things) the wide ranging nature of tasks carried out by Habib in dealing with students and in all aspects of the administration of the college. I bear in mind that it is at least possible that some of the entires were not made on the dates given. For example, there appears to be a note in Aziz’s diary of a meeting with Habib on 13 March 2007 which says, at the bottom of the page, ‘Secretary position to be withdrawn’ ‘authorised signatory position to be withdrawn’. This does not sit easily with other notes made later that year and later when it is clear that the issue of the directorship and shares are still being discussed.

Habib’s evidence is that Aziz agreed in March 2006 to make him a director formally and to deal with the allocation of shares. Informally, in any event, it is clear that he was treated as a director by the others and by the staff. By the way of example, as late as January 2010, a letter of resignation from Mithra Dulloo was addressed to Aziz as managing director and director of admissions, Dr Nabi as principal and director of studies, and Habib as director and student counsellor.

Aziz’s evidence on this is that he accepted that he considered Habib to be a director. In notes of meetings, he referred to the three as ‘directors’. But, said Aziz, he was treated as director ‘internally’, ie within the organisation only.

…

The notes of the meeting on 8 April 2006, made by Aziz, describe Habib as a director. They also purport to show that, by reference to what each had put into the business, the shares would be as follows: Dr Nabi 34.92%; Aziz 53.96% and Habib 11.11%. There is no dispute but that each paid in different amounts. There is an issue as to the exact amount paid by Aziz and Dr Nabi, and the dates when these sums were paid. There is no proper paper trail relating to these. Aziz’s evidence is that the figures are based on a notebook/ledger which Habib kept, but which he denies having, and refer to payments made early on, by the end of 2003. When the student revenue began to come in, and the college obtained a loan, it was not necessary for them to continue spending their own money.

A number of other meetings took place between Aziz, Habib, and Dr Nabi between April 2006 (if not earlier) and March 2010 (when a letter was written dismissing him). It is clear from the (unsigned) notes of the meetings that the issue of shares and directorships was constantly discussed. The same percentages appear in later notes. Habib’s case is that there is no link between the monies they each paid towards the setting up of the college and the agreement that they would be equal shareholders. Each was fully repaid for the monies initially paid.

A source of tension and disagreement arose from the fact that, as Habib was on a salary (and did not take out money by way of loanreimbursement) the college had to pay tax and NI. The reason for this was to allow him to bring his wife from Bangladesh. There was a clear disagreement about how this difference in payment/reimbursement should be dealt with. Other difficulties also arose: Aziz and Dr Nabi clearly took the view that Habib had taken more time off than he should have done, and that his time keeping was not as good as it could have been. Relations between Habib and Dr Nabi were also strained. In evidence, Aziz stated that Dr Nabi was not pressing for a share, and difficulties would have arisen if Habib had been given one.

Habib was removed as company secretary of both Icon College and Icon Technology on 14 October 2008. There is a disagreement as to the reasons for this: Habib says he was told that the law had changed, Aziz said that it was because Habib had become increasingly arrogant. Further meetings took place in April 2009, but again no resolution was reached. The notes of a meeting on 7 April 2009 made by Habib refer to a ‘director’s meeting’. On April 28 2009 a further note in Aziz’s writing states ‘once the accounts are agreed, shareholding will be discussed.’ The notes (kept variously by both sides) and the evidence bear out Habib’s evidence that there was a reluctance on Aziz’s part to conclude matters, in spite of the fact that he was being repeatedly pressed to do so.

The final substantive meeting between the parties took place on 3 June 2009. Habib made a note of this. The note states: ‘solve old calculation. Share allocation. Directorship issue’. An agreement was reached that Habib owed £700.00 to Icon College (in relation to the tax issue) but that he would not need to pay it. All three were to sign a calculation sheet. The note then reads ‘next meeting will solve about share and directorship’ and ends with ‘Aziz raised new issues’. A sheet was signed by all three showing what each had received from the college by way of salary and loan repayment. These figures do not tally with the spreadsheets referred to earlier. Aziz had received a total of £147,000 odd; Dr Nabi £115,000 and Habib £47,000 odd. The first dividend was paid out, I believe, in 2008/9. Dr Nabi was receiving dividends, he stated, through Aziz.

Once Aziz accepted in evidence, as he did, that the founding members were equals, and that the only reason for not registering Habib and Dr Nabi as shareholders at the outset was because of particular difficulties they faced, many of the points taken against Habib fall away. Put another way, the reason given for not registering Habib’s shareholding is an implicit admission that he had a right to be registered.

Moreover, the contention that no discussion took place as to the amount of shares each would have become very difficult to accept. If no such discussions took place, it seems to me that this was only because each understood, and acted on the basis that, they would be equal shareholders. There was nothing, at the time, to justify departing from the obvious conclusion that they were equal shareholders from the outset, who would be allotted shares in due course.

In any event, it seems to me highly improbable that no discussions as to shares took place at a time when the three individuals came together to set up a new venture. The three met over the summer on a number of occasions. All had been made redundant. All needed to borrow money to invest. All did invest. In Habib’s case the investment was in both companies. Although each had a different role, the plan was to pool their respective strengths. This was a partnership of equals. I accept Habib’s evidence on this point. I found Aziz a less impressive witness. Dr Nabi, I suspect, is someone who takes offence easily and has a very strong sense of amour proper. He is someone who, to my mind, can adopt firm, even belligerent, views on matters dependant more on his mood than on an accurate recollection of facts.

In this case I am satisfied that the three founding members of the college agreed at the outset that they were equal shareholders and would each be directors. This was a joint venture from the outset. Aziz was never intended to be the sole shareholder and director. The formality of allotting shares would take place in the case of Habib on the resolution of his immigration status, and in the case of Dr Nabi when the shadow of the MATT fraud investigation was lifted. The agreement, in so far as Habib is concerned, related both to Icon Technology and Icon College. The discussions, sometime later, about the respective contributions of the three founding members relate to the question of how much each should and did take by way of salary and loan repayment. This is a separate question from the initial agreement that they would be all equal shareholders and directors.

The limitation point

This relates to the claim for damages which it is said arise by reason of the fact that the defendants failed to allot a share to the claimant. This issue touches on the time sequence in this case, and it is said on behalf of the defendants that on the basis of the time line prepared in the skeleton argument it is too late now for the claimant to bring a claim for contractual damages. I have dealt with that in my judgment by finding that the time line goes further forward than that relied on by the defendants and it seems to me right (without going back over the whole history of the matter) to restate that there was a further and important meeting between the claimant and the first defendant in June 2009 when it was clear, as I have said, that the matters were still being discussed and promises made to the claimant that things would be sorted out. This is dealt with in paragraph 41 of my draft decision, where I noted what was recorded at the meetings, and in particular the note which reads ‘Next meeting will solve about share and directorship’. It seems to me that if one were to look at this, in the context of the history, the breach of the initial promise to allot a share to the claimant occurred within a reasonably short time after that. The precise date does not matter, since the proceedings were issued within 6 years of the June meeting.

…

This is a case where the first defendant was continuing to make promises and was assuring the claimant that in due course matters would be sorted out and that there was no clear and unequivocal denial of this until very much later, when the employment tribunal action began. The relevant date, on this analysis, is 19 December 2010 [a slip for 19 November 2010: see section C1 above].

I find therefore that there is no limitation bar in this case (and indeed I have already reached this conclusion) preventing the claim for contractual damages being pursued by the claimant in this case.

…included a term that [Habib] would receive his shareholding as soon as the question of his permanent residency was resolved.

[Aziz] was to transfer a one third shareholding in [Icon College Ltd] to [Habib].

The obligation was conditional on [Habib] first arranging his immigration status.

refer to what is contemplated by this submission as “the Habib natural course implied term”. No such implied term was suggested at the hearing below. Habib’s March

2018 skeleton suggests that the “correct analysis” of paragraph 59 of the March 2017 judgment includes the Habib natural course implied term. Aziz points out, however, that there is no reference in the March and July 2017 judgments to any need for “Habib to notify Aziz… and to call for his shares”.

In the absence of an express date for compliance, a contractual obligation will either be required to be fulfilled within a reasonable time or upon demand.

Q…you say, I think, that you started asking for a distribution of shares in about 2006.

A I think we discussed - I raised the question to Mr Aziz in 2004 when

I got my permanent residence and Mr Aziz say ----

Q 2004 you started ----

A Yes, I raised the question, very normal, but not like pressing him, just normally asking can he sort this problem, he said, “Okay, wait until”, because company is not viable condition, Mr Nabi still has a problem, so let Dr Nabi’s name to be clear, then we include your name and distribute the share.

The fact there may have been continuing discussions between the parties from time to time in relation to shareholdings after April 2004, or even March 2006, is neither here nor there for the purposes of the limitation defence.

What had been happening over the years was that whenever the Respondent raised the question of his shares there was a conversation with the Appellant which resulted in the Respondent giving the Appellant more time.

In legal terms the Respondent was being successfully persuaded to waive or defer his right under the Agreement to call for his shares and was allowing the Appellant more time to perform.

The Appellant’s alternative, to the effect that there was a breach in 2004 and for the next 5 years the Respondent failed to enforce his contractual right is not a realistic interpretation of the events. Whatever was happening between 2004 and 2009, it was clearly consensual. The two parties were running the business together, attending directors’ meetings together and at times living together. To conclude that one was in continuing breach of a contractual duty to the other is unrealistic. The obvious conclusion is that the requirement to perform had been consensually put on hold pending a final demand from the Respondent.

the March judgment, at paragraphs 11 and 59, held that Habib’s entitlement to allotment of shares arose on the resolution of Habib’s immigration status. It was not open to Habib to put forward a different interpretation which was neither pleaded nor argued below.

Analysis 1 and Analysis 2 both involved matters neither pleaded nor argued below, and inevitably not explored in evidence or supported by any relevant findings of fact by the judge; alternatively if the judge made findings on these points, then Aziz had not had a proper opportunity of meeting them and the judge had in effect “gone on a frolic of her own” on points which, if they had been raised, would at the very least have given rise to arguments in respect of which the judge would have had to make specific findings.

If, as C claims, there was ever any requirement for a demand by C, such demand was made soon after C acquired permanent residency: see para.9(6) of D1 Skel 1.

C made a demand by March 2006 at the latest. The Judge found that “By 2006, if not before, [C] was pressing for his shareholding and his directorship to be formalised” [J1/para.33]. That ruling reflected, inter alia: C’s claim in the ET proceedings that he raised the issue of share distribution in a meeting with D1 in March 2006 [ET1, para.14; F3/T64/p.998]; and C’s assertion in C w/s para.32 [F2/T42/p.936] that at a meeting on 12 March 2006 C stated that the parties needed to formalise their equal shareholdings and register C and Dr Nabi as directors and shareholders.

C’s own uncontested evidence and that of his main witness, both otherwise accepted by the trial judge (and emphasised in D1’s submissions), which show that any breach had clearly occurred prior to 27 May 2009:

Even as late as the meeting of 3/6/09 [F3/T59/p. 973-4], said in J2 para.5 to show “the matters still being discussed and promises made to the Claimant that things would be sorted out, and in the discussions that followed, all that C’s diary entry of that meeting said was “Next meeting will solve about share and directorship” and, taken in conjunction with the discussions leading up to this meeting, C’s own evidence pointed to escalating discord between the two: C’s witness statement paras. 42-43, 46-47, 50-51 [F2/T42/pp.937-939]: said nothing about any assurances being given to him by D1; in C’s crossexamination C said nothing about assurances being given to him but rather referred to difficulty and difference between them at that meeting. C was asked in cross-examination about his 3/6/09 Note (p.342-3 in the trial bundle; p.973 in the appeal bundle) [Transcript, Day 2, F1/T22/p.282]:

“Q It appears from that note that not all issues were resolved, so those calculations were resolved, but not all issues were resolved.

A No.

Q Was the issue that was raised there about your conduct and attitude and commitment to the company?

A We have some problem, we have some argument obviously, but not relevant to this, you know. We have dissatisfaction. I mean, if I go that I will probably have to bring all employment discussion here.

Q So it might have been that issue.

A We have difference, at that moment we are obviously not good situation with each other.” (emphasis added [by Aziz]).

Aziz and Habib were working so closely together against a background in which Aziz was literally in breach of contract all long. In these circumstances, submitted Habib, the judge’s findings in paragraphs 38 onwards of the March 2017 judgment and paragraph 5 of the July 2017 judgment were findings of constant discussions involving promises that things would be sorted out, and that during those discussions, albeit with some impatience on Habib’s part, there was either a waiver by Habib of his entitlement to an immediate transfer, or both were consensually extending the time for performance.

… a promise writ in water, it amounts to nothing.

Habib made no complaint about anything that Aziz did in September 2003 or in 2004;

Almost six years later, on 3 June 2009, the parties were in discussions.

March 2006, and the period from 2006 to March 2008, as well as the period from March 2008 to April 2009 which Aziz focussed on in his closing submissions. In particular:

in paragraph 56 of the March 2017 judgment the judge noted Aziz’s admission in evidence that the only reason for not registering Habib and Dr Nabi as shareholders at the outset was because of particular difficulties they faced. As set out in section C3.4 above, Habib had explained what happened in 2004 when he obtained permanent residence: Aziz asked him to wait until Mr Nabi was cleared. Aziz’s own account, as recorded by the judge, effectively acknowledges a willingness of the co-venturers not to register shareholdings at the outset and the reasons for it. It is impossible to see how Aziz can dispute what is said in paragraph 56 of the March 2017 judgment. That is a complete answer to the assertion in the grounds of appeal that a cause of action accrued when, or shortly after Habib’s own difficulties were resolved – for at that stage Dr Nabi’s difficulties had not been resolved.

Habib duly waited. As set out in paragraph 33 of the March 2017 judgment, in 2006 if not before, Habib was pressing for his shareholding to be formalised. In the context of co-venturers who are working together, the natural meaning of this is that Habib was pressing to move away from a position where the coventurers were deferring the allocation of shares. The March 2017 judgment notes, at paragraph 33, Habib’s evidence that in response Aziz agreed to deal with the allocation of shares. Reflecting this, paragraph 38 of the March 2017 judgment commented on the overall position from 2006 to 2010 saying that it was clear that the issue of shares “was constantly discussed”.

It is also said on behalf of the claimant that this is a case where there is a continuing breach of the duty to allot a share to the claimant and my attention was drawn in particular to the case of Tomlinson v Pickup [2014] EWHC 495 which is a decision in the High Court in which the judge considered the question of limitation in a case not dissimilar to this and found that there was a continuing obligation to allocate a share to the claimant in that case.

that the case cited by the judge, Tomlinson v Pickup, had applied an earlier High Court decision, Midland Bank v Hett, Stubbs & Kemp [1979] Ch 384.

regrettably, the judge had not been referred to a more recent decision of the Court of Appeal, Capita (Banstead 2011) Ltd v RIFB Group Ltd [2015] EWCA Civ 1310, [2016] QB 835. In the Capita case the Court of Appeal noted that the Midland decision was incompatible with the decision of the Court of Appeal in Bell v Peter Browne & Co [1990] 2 QB 495. The approach which the court must adopt is set out in the judgment of Nicholls LJ at pages 500 to 501 in Bell:

within a reasonable time and a “short while” after Icon College Ltd was incorporated in September 2003, by early 2004 Habib knew of the existence of all matters pleaded in the particulars of claim;

Habib admitted (in his Employment Tribunal claim) that he had raised the issue of “his shares” in meetings with Aziz in March 2006 and March 2008, and that he had an argument in that regard with Aziz in April 2009 during which Aziz allegedly told him that he could go to the courts to resolve the dispute.

In his complaint to the Employment Tribunal in October 2010, Habib had referred to taking legal advice in relation to his alleged share in Icon College Ltd.

Icon College Ltd’s Employment Tribunal response in November 2010 denied that there was an agreement that Habib would be a shareholder in Icon college Ltd or Icon Technology Ltd.

the Employment Tribunal claim was resolved on 5 May 2014, but nothing further was heard from Habib in respect of the present claim until three weeks before commencement of this action.

Aziz had expended time and effort in “growing the business” of Icon College Ltd since September 2003. Three examples were given. The first concerned

As to particular (1) Habib said that he made no complaint about anything that Aziz did in September 2003 or in 2004. Habib added that: almost six years later, on 3 June 2009, the parties were in discussions…about their respective contributions. As of 3 June 2009, [Aziz] had still not intimated in any way to [Habib] that he did not consider himself bound by the agreement reached in September 2003, rather the contrary.

as to particular (2), Habib said that in April 2009 Aziz had not repudiated the agreement reached in September 2003. Habib said that his cause of action accrued only upon breach of the September 2003 agreement. His primary case was that such breach did not occur until May 2015. By way of secondary case, Habib said that even on 3 June 2009 Aziz had not committed a repudiatory breach. If Icon College Ltd’s response in the Employment Tribunal were taken as a repudiation of the September 2003 agreement, then Habib’s cause of action accrued no earlier than 19 September 2010.

particular (3) was admitted, “so far as it goes”.

particular (4) received a response which is not material for present purposes.

particular (5) received a response which is not relied on for present purposes.

As to particular (6), Habib admitted that since September 2003 Aziz had expended time and effort growing the business of Icon College Ltd. Habib added that he had also done so until Aziz wrongfully excluded him from the business. Aziz was put to proof of the examples given in particular (6).

Aziz’s particulars of laches and the response in Habib’s amended reply. I deal with those submissions in sections D4 and D5 below.

I come therefore to the question of laches. Laches is established when two conditions are fulfilled. There must be an unreasonable delay in the commencement or prosecution of proceedings for specific performance, and, secondly, in all the circumstances the consequences of delay must render the grant of relief unjust. Aldous LJ in the Court of Appeal in Frawley v Neil [2000] CP Rep 20 stated: ‘The more modern approach should not require an inquiry as to whether the circumstances can be fitted within the confines of a preconceived formula derived from earlier cases. The inquiry should require a broad approach, directed to ascertaining whether it would in all the circumstances be unconscionable for a party to be permitted to assert his beneficial right’. This statement was approved in two subsequent Court of Appeal decisions: Patel v Smith [2005] EWCA Civ 157 and Re Loftus [2007] 1 WLR 591. This investigation is necessarily fact specific.

Mr Graham submitted that Habib delayed unreasonably in not making his claim, and that in any event the prejudice to Aziz is manifest. Aziz took on personal debt; Icon College took on a loan (secured by debenture) of £80,000, and, most significantly, Icon College came close to collapse in 2012 due to legislative changes which significantly affected the overseas student market. Aziz and Dr Nabi created, it is said, an entirely new business model which, as a result of their hard work, has proved to be successful. The claim relates to shares in a small trading company, the value of which is volatile as it depends to a large extent on factors outside its control. A number of cases were cited. It seems to me, however, bearing mind the test set out above, that these cases do no more than illustrate the principle that each case turns on its own facts.

Mr Khan submits that specific performance is the appropriate remedy and that the defence of laches is not made out. He points first to the fact that Aziz does not come to the court with ‘clean hands’. The Employment Tribunal found that Habib had been wrongfully dismissed on the basis of fabricated allegations. He did not leave the college of his own volition. The litigation in the Tribunal took some three and a half years. Habib had made it clear before and during the proceedings that he intended to pursue his claim in relation to the shareholding issue. Attempts have been made since that date to resolve this issue.

It is true, of course, that the college has continued to grow, but this has been very much to Aziz’s advantage. And while the college suffered a serious setback in 2012, it did no more than many businesses do by adapting to changing regulatory circumstances. The essential model remains the same. The principal has not changed. The courses may have increased, but the disciplines are broadly similar. The trading name, reputation and good will are all the same, and in each case, have been built on the hard work of all three co-founders.

I agree with these submissions. The conduct of Aziz in the Employment tribunal, together with the fact that he was aware of the claim in relation to the share both before and after those proceedings, are highly relevant factors. This is not a case where it can be said that Habib stood back to see ‘which way the wind blew’.

paragraphs 2 and 3 of the grounds of appeal asserted that the judge ignored legal principles relied on in Aziz’s February 2017 skeleton;

in particular, the judge had ignored case law where it had been held to be inequitable that a claimant should stand by, thereby avoiding exposure to risk, while the defendant has undertaken the work and risk involved in running a business;

paragraphs 2 and 3 added that the judge had erred in law when applying relevant principles to Habib’s pleaded case;

paragraph 4 asserted that “the trading business changed fundamentally as a result of the change in student immigration rules”, and identified five features of that change, which for ease of reference I set out below as (a) to (e):

paragraph 4 added:

paragraph 5 made two further complaints about the March 2017 judgment. For ease of reference I set them out below as grounds of appeal 5(a) and 5(b):

The legal argument in relation to limitation is closely entwined with the legal issues raised in the grounds of appeal in respect of the judge’s conclusion that the claim for equitable relief was not barred by laches. In my judgment the issues are so closely entwined that I should grant permission on the laches ground as well. Had it stood alone the position might have been different. If, however, the court were to conclude at the full appeal that there is merit in the limitation argument barring the common law claim for contractual damages for failing to allot shares to Habib, that might also have an important bearing on whether the judge’s conclusion in relation to laches could properly stand.

the second sentence, identifying Aziz’s conduct in the Employment Tribunal as a “highly relevant” factor, and (in the first sentence) agreeing with Habib’s submission that Aziz had not come to the court “with clean hands”, and that the Employment Tribunal found that Icon College Ltd had put forward fabricated allegations;

the second sentence, identifying as a “highly relevant” factor, the fact that Aziz was aware of the claim in relation to Habib’s share both before and after the Employment Tribunal proceedings, and (in the first sentence) agreeing with Habib’s submission that before and during the Employment Tribunal proceedings Habib had made it clear that he intended to pursue his claim in relation to the shareholding issue;

the third sentence, concluding that this was not a case where it could be said that Habib stood back to see “which way the wind blew”;

the first sentence, agreeing with other submissions made by Habib and recorded in paragraph 63 of the March 2017 judgment;

3A. In the circumstances of this claim, equity under its doctrine of laches requires at least as much promptitude in the pursuit of the claim insofar as it may not be governed by s.5 Limitation Act 1980 as s.5 would have required had it been applicable.

No doubt the circumstances which gave rise to a particular result in decided cases are relevant to the question whether or not it would be conscionable or unconscionable for the relief to be asserted, but each case has to be decided on its own facts applying the broad approach.

all these difficulties, Habib was stoutly maintaining his entitlement to a one third shareholding.

Conclusion

that the judge was wrong in her decision on limitation and (ii) that by reason of the effect of s.5 of Limitation Act 1980, laches is a bar to an award of damages in lieu of specific performance and in consequence (iii) it is determined on the appellant’s appeal to set aside the existing award of damages or part of it….