Rahman v Rahman & Ors

Damages awarded in substitution for specific performance are ordinarily assessed at the hearing date, rather than automatically at the date of breach. That approach may be displaced where the claimant acted unreasonably in pursuing specific performance, but the defendant bears the burden of establishing that point. A counterfactual based on conduct inconsistent with the claimant’s continuing entitlement to the contractual right is impermissible. Evidence cannot be used to reopen factual findings already determined at an earlier stage. The court may also exclude otherwise admissible evidence where it is marginally probative, collateral, prejudicial, inadequately pleaded or likely to disrupt a fair and proportionate trial.

The claimant sought damages in lieu of specific performance following a finding that the first defendant had breached an agreement to allot him one-third shareholdings in two companies. The claim proceeded to an assessment of damages. The first defendant relied on a November 2010 valuation date and sought to introduce extensive evidence about the parties’ relationship, the claimant’s conduct and alleged delay. The claimant applied to strike out parts of the Counterschedule and exclude the disputed evidence. The central issues were whether the proposed valuation and dividend cut-off dates were legally arguable, whether the evidence amounted to a collateral attack on earlier findings, and whether it should be excluded under the court’s case-management powers.

1. The application was allowed. Paragraphs 6(d) and 20(c) of the Counterschedule were struck out, and the disputed evidence was excluded.
2. Under Senior Courts Act 1981, s 50, damages in substitution for specific performance are assessed on compensatory principles. Johnson v Agnew established that the default position is assessment at the hearing date, rather than the date of breach. That position may be displaced where the claimant acted unreasonably in pursuing specific performance, but the first defendant had neither pleaded nor established such conduct.
3. One Step (Support) Ltd v Morris-Garner confirmed that damages in substitution compensate for what was lost by withholding the equitable remedy and need not invariably be measured in the same way as common-law damages. The proposed November 2010 valuation assumed that the agreement had ended or that the claimant would have sold his shares. That assumption was inconsistent with the finding that the claimant remained entitled to the shares until judgment.
4. The same reasoning applied to distributions. The valuation date treated the claimant’s entitlement to the shares as ending when it was replaced by financial compensation. An argument that he would not have received distributions after November 2010 was therefore inconsistent with the basis of the first head of damages.
5. Evidence which sought to contradict findings already made on liability, including findings that the venture was a partnership of equals and that the claimant contributed to its goodwill, was inadmissible as a collateral challenge. The first defendant was also issue estopped from asserting that the claimant deliberately delayed issuing proceedings, contrary to the earlier finding.
6. The court applied the two-stage approach to evidence: whether it was potentially probative, followed by whether case-management considerations justified exclusion. The disputed material was lengthy, contentious, largely collateral or marginally relevant, insufficiently particularised, prejudicial and liable to double the trial length. Maintaining the listed trial date and achieving a fair and proportionate determination justified exclusion.
7. Evidence concerning the claimant’s conduct could in principle be relevant to a minority discount, but the company’s quasi-partnership character had already been determined. The late and unparticularised reliance on conduct made exclusion appropriate.

The liability judgment was previously appealed unsuccessfully. Paul Walker J held that the trial judge was entitled to find that there had been no unreasonable delay in pursuing the claim. The present decision concerned the subsequent assessment of damages and an application to strike out pleaded material and exclude evidence.