Rahman v Rahman

The claimant succeeded in an application to strike out parts of the first defendant's counterschedule and witness evidence served for the damages assessment. The court held that the first defendant's contention that the correct valuation date for damages in lieu of specific performance was 19 November 2010 was unsustainable as a matter of law. The court applied authorities on the assessment of damages in lieu of specific performance (including Johnson v Agnew and One Step (Support) Ltd v Morris-Garner) and concluded that the proper focus is on the value of the claimant's lost right to hold the shares at the date specific performance was refused (or judgment), not on a counterfactual of what the defendant says he would have done in 2010.

The judge further held that substantial parts of the disputed evidence amounted to a collateral attack on findings of fact already made at the liability stage and/or were irrelevant, or marginally relevant, to the contested issues. In the exercise of case management under CPR 32.1 and CPR 3.4(2), that evidence would distort and distract the assessment trial and unfairly prejudice the claimant; accordingly the relevant passages and paragraphs (in particular paragraphs 6(d) and 20(c) of the counterschedule and extensive witness material) were struck out.

Background and nature of the claim:

• The claimant alleged breach of an oral agreement (the Agreement) dating from 2003 that he should be allotted one-third of the shares in the second defendant (Icon College) and the third defendant. He sought specific performance, alternatively equitable damages in lieu, or common law damages, and a share of dividends.
• Liability was tried before Recorder McAllister (February 2017). The Recorder found there was an agreement to be equal shareholders and that the claimant was entitled to call for an allotment of a one-third shareholding; however she declined specific performance and ordered damages in lieu. She identified relevant breach periods and ordered an assessment of damages. The claim was subsequently transferred to the Business and Property Courts.

Procedural posture addressed in this judgment:

• The present decision concerns the claimant's July 2020 application to strike out specified passages in the first defendant's counterschedule and in several of his witness statements served for the damages assessment. The disputed matters included the first defendant's contention that the correct valuation date should be 19 November 2010 (or alternatively earlier dates to reflect alleged delay), and supporting factual evidence as to why the claimant would not have retained shares after that date.

Issues framed by the court:

1. Whether the November 2010 valuation date is unarguable as a matter of law.
2. Whether the first defendant may rely on November 2010 as the date from which the claimant should be treated as no longer entitled to distributions.
3. Whether the disputed evidence is relevant to, or admissible on, issues such as minority discount, causation, delay or mitigation.
4. Whether the disputed material amounted to a collateral attack on prior findings of fact and whether it should be excluded as abuse of process or on case management grounds.

Court's reasoning and holdings on those issues:

• The court reviewed the law on damages in lieu of specific performance, including s.50 of the Senior Courts Act 1981 and authorities (notably Johnson v Agnew and the Supreme Court in One Step). It concluded that damages in lieu are aimed at compensating the claimant for the loss of his right to specific performance and that the appropriate valuation date is generally the date when specific performance was refused (the judgment date) unless the claimant acted unreasonably in pursuing specific performance. No such pleaded/unpleaded case of unreasonable pursuit had been made by the first defendant.
• The defendant's counterfactual evidence that, had the claimant been a shareholder in November 2010, the defendant would have bought him out or wound up or sold the business, was irrelevant to the correct legal measure and therefore unarguable as a basis for fixing the valuation date at November 2010. The related pleaded paragraphs (notably paragraphs 6(d) and 20(c) of the counterschedule) disclosed no reasonable grounds.
• Large parts of the disputed witness evidence sought to re-litigate findings already made at the liability trial and thus amounted to a collateral attack or were otherwise irrelevant or marginally relevant. The court applied the two-stage admissibility/case-management test (is the evidence potentially probative, and if so does case management justify exclusion) and concluded exclusion was justified because the evidence would distort and distract the assessment, cause unfair prejudice, impose heavy additional burdens (disclosure, further witness statements, longer trial) and risk delay.
• The court also held that evidence contradicting the judge’s factual findings (including on the nature of the partnership/quasi-partnership and the claimant’s role) was inadmissible for that purpose and in some respects issue-estopped by the earlier findings on laches and related matters.

Result: The claimant's strike-out application was granted; specified passages of the first defendant's counterschedule and witness statements were struck out as having no reasonable prospect and/or as inadmissible on case-management and abuse of process grounds. The master heard submissions as to the form of order.

The Master acceded to the claimant's application to strike out. He held that the first defendant's case that the correct valuation date was 19 November 2010 was unsustainable as a matter of law and that paragraphs 6(d) and 20(c) of the counterschedule disclosed no reasonable grounds and are to be struck out. Substantial parts of the disputed witness evidence were either irrelevant, a collateral attack on findings of fact made at the liability stage, or otherwise inadmissible in the exercise of the court's case management powers under CPR 32.1 and CPR 3.4(2). The Master concluded that admitting that evidence would distort and unduly lengthen the assessment trial and would unfairly prejudice the claimant; accordingly the disputed passages and evidence are to be struck out, and the court would hear counsel as to the form of the formal order.

The claimant first pursued related proceedings in the Employment Tribunal (successful on unfair dismissal; remedy issues were reconsidered); the contractual claim was then tried for liability before Recorder McAllister (February 2017) who found an agreement and awarded damages in lieu rather than specific performance (first judgment 27 March 2017 and a supplemental judgment 11 July 2017). The Recorder ordered an assessment of damages (order dated 3 August 2017). The claim was transferred to the Business and Property Courts (9 August 2017). The first defendant unsuccessfully appealed aspects of the Recorder's order (Paul Walker J rejecting the laches argument). The present strike-out application was determined by Master Clark in the High Court, Business and Property Courts, on 15 September 2020 (this judgment).