Court resolves dispute between partners in restaurant business
The High Court has settled a dispute between two partners who had worked together for many years in a restaurant business.
Tariq Mahmood Malik and Mahboob Hussain Junior had opened a restaurant known as the "Nawaab" in 2003. They were equal joint owners of the property in which it was situated and equal joint shareholders in the company through which it was run (the Stockport Road company).
In 2006 they entered into a partnership deed, but by the following year their relationship had soured and in 2009 they each disposed of half of their shares in the company to their respective wives.
In 2013, a second restaurant was opened (the Perivale Nawaab). It was run by another company (the Perivale company) whose directors and shareholders included Malik's sons and Hussain but did not include Malik.
In 2016, the relationship between the two men broke down irreversibly and Malik was removed as a director of the Stockport Road company.
He claimed that the partnership deed confirmed a pre-existing partnership between himself and Hussain, which encompassed the Stockport Road restaurant business and property and envisaged the opening of further "Nawaab" restaurants. He also claimed that the Stockport Road company was a trading vehicle for the partnership, and that he had been promised half of the shares in the Perivale company.
The High Court ruled that, given the breakdown of their relationship, it was appropriate to dissolve the partnership.
It then ruled that Malik did not have any claim in relation to the Perivale Nawaab. Hussain had not said that Malik would receive a share of the Perivale company; rather, Hussain had made it clear that he could no longer work with him.
Further, there was no basis for a finding that the establishment of the Perivale Nawaab amounted to conduct that was unfairly prejudicial to Malik such as to merit buy-out relief.
The Perivale Nawaab had obtained a relatively modest and short-lived benefit from the use of the Nawaab name and reputation. However, there was no meaningful competition between the two restaurants and Malik had consented to the establishment of the Perivale Nawaab as a separate venture in the expectation that a benefit would thereby be conferred upon his sons and, indirectly, upon himself.
That was an effective consent in his capacity as a partner and shareholder in the Stockport Road company.
Please contact Sing Li if you would like more information about the issues raised in this article or any aspect of partnerships and company law.