Moqsud Ahmed Khan v Abdul Malik & Anor

An oral agreement to offer a future lease is not necessarily an agreement for a lease. Where the future tenant is not yet a party and the agreement provides for the possibility that no lease will be granted, the technical rule requiring certainty as to the commencement of a term of years does not apply.

Contractual certainty is assessed by construing the agreement in its commercial context. A future event may identify the commencement date, and the identity of a future nominee may be sufficiently certain. The court will uphold an agreement where it can give it sensible content.

Reliance damages may include expenditure reasonably contemplated as part of the transaction and wasted by breach, unless the contract validly excludes that recovery.

The appeal arose from an order of HHJ Backhouse in the County Court at Mayors & City of London dated 15 November 2022. The order gave effect to findings in favour of Abdul Malik and Adnan Malik against Moqsud Khan under an alleged oral agreement made on 8 August 2016.

The agreement concerned the acquisition of shares in a restaurant company, refurbishment of the restaurant property and the proposed grant of a 20-year lease to a new entity controlled by the Malik family. It also provided for payment for refurbishment works if the lease was not granted. The County Court found the agreement sufficiently certain, found breach, and awarded damages including the cost of acquiring shares and refurbishment expenditure.

The High Court considered whether the agreement was void for uncertainty and whether the cost of acquiring the shares was recoverable as reliance damages. The respondents also sought to rely on restitution, but that cause of action had been expressly abandoned before trial.

1. Disposition. Permission to appeal was granted, but the appeal was dismissed. The parties were directed to agree an order, including costs.
2. The agreement made on 8 August 2016 was not an agreement for lease. It was an agreement by the defendant to offer a future lease to a new entity. The new entity did not exist and was not a party, and the agreement recognised that the lease might not be granted. Section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 was therefore not engaged.
3. The rule in Marshall v Berridge and Harvey v Pratt requiring certainty as to the commencement of a term of years did not apply to this different type of agreement. Extending that principle to an agreement to offer a future lease would be impermissible.
4. In any event, the agreement was sufficiently certain. Its commercial scheme was clear. The proposed lease was to be granted to a new entity controlled by Fahmida Malik, and the commencement date could be inferred as the date on which that entity was formed. A lease could be granted within a reasonable period. The existing draft lease and the surrounding commercial context supplied sufficient content. The agreement was substantially performed and it was not legally or practically impossible to give it sensible content.
5. The provision for payment for refurbishment works if no lease was granted was not a guarantee of another person's debts. It did not exhaustively define the remedies for breach.
6. The cost of acquiring the Moitree shares was recoverable as reliance damages. The correct questions were whether the expenditure was reasonably contemplated, whether it was wasted by the breach, and whether the agreement precluded recovery. Each question was answered in the claimants' favour. The acquisition was a contemplated precursor to the proposed lease, became wasted when the defendant granted the lease to another person, and was not excluded by the contractual provision concerning refurbishment costs.
7. The court could not affirm the result on the basis of restitution because that cause of action had been abandoned before trial. Substituting a different cause of action on appeal could have altered the evidence and factual findings.

• High Court, Chancery Appeals: permission to appeal granted on Grounds 1 and 3, but the appeal dismissed. Permission on Ground 2 had previously been refused by Joanna Smith J on 20 February 2023.
• County Court at Mayors & City of London: HHJ Backhouse's order dated 15 November 2022 gave effect to judgment for the claimants under the oral agreement.