Chaggar v Chaggar & Anor

A contract may be immediately binding even though the parties contemplate a later, more detailed agreement. The question is whether the agreed terms are workable and sufficiently certain without further agreement. A transaction should, where possible, be construed so that it is performed lawfully. An agreement for a company to acquire its own shares is not necessarily wholly invalid where a lawful mode of performance exists. Economic duress requires illegitimate pressure and causation; realistic practical alternatives are relevant evidence. A repudiatory breach must be clear and unequivocal, and an innocent party may affirm the contract by conduct. Mere delay or inactivity does not ordinarily establish promissory estoppel.

Balbir Singh Chaggar sued his brother, Raghbir Singh Chaggar, and Hi-Tech Autoparts Limited to enforce an Initial Settlement Agreement dated 25 April 2012. The agreement contemplated the purchase of Balbir and his wife’s shares in the company and Balbir’s interest in partnership property for £1.6 million, with staged payments and a later detailed settlement agreement.

Raghbir disputed liability on the grounds that the agreement was incomplete or an agreement to agree, unlawfully required the company to purchase its own shares, was procured by economic duress, had been discharged by Balbir’s repudiatory breach, and was subject to estoppel. The central issues were whether the agreement was binding and enforceable, whether it was void or unlawful under the Companies Act 2006, and whether any defence defeated enforcement.

1. Binding agreement. The ISA objectively demonstrated an intention to create legal relations. Clause 16 expressly stated that it gave rise to legally binding obligations notwithstanding that a detailed settlement agreement was to follow. The later agreement was intended to supersede the ISA, but its absence did not invalidate the existing agreement.
2. The court applied the principles in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601. The agreed matters were sufficiently certain and workable: the shares, price, payment structure and Delta property arrangements were identified. Outstanding matters were principally matters of detail. The court could enforce the ISA without making a new contract for the parties.
3. Company acquisition of shares. The ISA required the shares to be transferred to the Company, so it contemplated an acquisition of own shares. Payment by the Company would fall within the prohibition in section 658(1) of the Companies Act 2006. However, payment by Raghbir was within the exception in section 659(1), because the consideration was provided by a third party. The ISA could therefore be performed lawfully and was not wholly invalid.
4. The staged transfers did not breach section 691(2): one contract could specify separate completion dates, provided that each tranche was paid for on completion. The ISA itself did not constitute a reduction of capital and did not satisfy the statutory requirements for an off-market purchase by the Company, but those conclusions did not defeat the lawful contractual mechanism requiring payment by Raghbir.
5. Economic duress. Balbir acted in good faith in freezing the accounts because he had genuine concerns about the Company’s affairs. The buy-out proposal came from Raghbir. Raghbir had realistic alternatives, including seeking an injunction or accepting reasonable controls on payments. The pressure therefore amounted to commercial bargaining, not illegitimate pressure causing the ISA.
6. Even if the ISA had been voidable for duress, Raghbir had affirmed it by continuing to negotiate the detailed agreement, relying on it to treat Balbir as no longer involved in the Company, and indicating that he was content to proceed under its terms.
7. Repudiation and estoppel. Failure to conclude the detailed agreement could not be a repudiatory breach because the obligation was no more than an unenforceable agreement to agree. Balbir’s 18 June letter was materially inconsistent with the staged-payment terms, but, viewed in the context of continuing negotiations, it was not sufficiently unequivocal. In any event, Raghbir affirmed the ISA.
8. There was no clear representation that Balbir would not enforce his rights. His continued directorship and delay in seeking payment did not establish promissory estoppel. Judgment was entered for Balbir on liability. Further submissions were invited on the measure of damages, interest and costs.

First-instance decision. No appellate history was stated in the judgment.