Mohammed Arshad Alam v Pervez Alam & Anor
[2023] EWHC 1460 (Ch)
Usman Hussain Malik v Mahboob Hussain
14 June 2023
[2023] EWHC 1433 (Ch)
High Court
A family fought over a restaurant business. A judge decided one brother (Usman) gets most of the shares, but another family member (Nusrat) can still try to prove she owns some. Usman has to promise to be careful not to sell the shares until the court decides everything.
Key Facts
- •Usman Hussain Malik sought to acquire a 50% shareholding in R N Restaurant (Stockport) Limited.
- •Disputes arose regarding the sale contracts and share ownership.
- •Mahboob Hussain, Nusrat Malik, and others opposed Usman's takeover.
- •Article 6 of the Company's Articles of Association allowed directors to refuse share transfers.
- •A dispute arose over two shares registered in Nusrat's name, previously transferred to Usman.
- •The Court of Appeal previously ruled in Usman's favour regarding the 50% shareholding.
- •The current directors of the company, aligned with Mahboob, refused to register the transfer of shares to Usman.
Legal Principles
Upon formation of a valid contract for sale, the vendor becomes a trustee for the purchaser.
Lysaght v Edwards (1876) 2 Ch D 499, Michaels v Harley House (Marylebone) Ltd [2000] Ch. 104, Musselwhite v CH Musselwhite & Son Ltd [1962] Ch. 964
Following payment for shares, the vendor is a bare trustee for the purchaser.
Wall v Bright (1820) 1 Jac. & W. 494, Re Piccadilly Radio plc [1989] BCLC 683
A transfer under seal, coupled with delivery, constitutes the transferee the beneficial owner, pending registration.
In re Rose [1952] 1 Ch. 499
Members have a statutory right to remove directors (s.168 Companies Act 2006).
Companies Act 2006, s. 168
Directors must exercise powers only for the purposes for which they are conferred (s.171 Companies Act 2006).
Companies Act 2006, s. 171
No notice of any trust shall be entered on the register of members (s.126 Companies Act 2006).
Companies Act 2006, s. 126
Rectification of the register can only be brought where the applicant has a right to registration by virtue of a valid transfer of legal title.
Nilon Limited v Royal Westminster Investments SA [2015] UKPC 2
The court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other.
American Cyanamid Co v Ethicon Ltd [1975] AC 396, National Commercial Bank Jamaica Ltd v Olint Corpn Ltd [2009] 1 WLR 1405
Where a party's stance in earlier proceedings was a reason for the judgment, and it would be unjust to resile from that position, the court will hold the party to that position.
LA Micro Group (UK) v LA Micro Group [2021] EWCA Civ 1429, Malik v Malik [2023] EWHC 59 (Ch)
Outcomes
Usman is entitled to declarations that Mahboob holds the 50 shares as bare trustee for Usman and must exercise voting rights as Usman directs.
Upon payment, Mahboob becomes a bare trustee for Usman, obligated to comply with Usman’s directions.
A power of attorney will be included in the share sale contract, limited to necessary actions.
Necessary to avoid delay and ensure compliance with Usman's rights.
The Company's application for declarations regarding Article 6 is partially granted (declaration 2, amended).
Clarifies which shares are subject to the directors' discretion under Article 6.
The register should be rectified to show Usman as the legal owner of the two shares.
The board had no proper basis for altering the register; Nusrat's claim is a separate matter.
Nusrat's claim regarding beneficial ownership of the two shares will proceed to trial.
Raises a serious question to be tried, despite inconsistencies with previous statements.
No injunction granted against Usman, but he must give undertakings to the court.
Balances the risk of harm to Nusrat with Usman's rights as legal owner; undertakings provide sufficient protection.
Mahboob to pay 80% of Usman’s costs for the sale contracts and sale shares applications.
Usman was the substantially successful party, but Mahboob's arguments warranted some cost reduction.
Costs in Nusrat's two shares application to be reserved.
Fair given both parties achieved some success; final determination will resolve the matter.
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