Platt v Platt & Anor

In a misrepresentation claim, damages are assessed at the date of the transaction and must restore the claimant to the position that would have existed without the misrepresentation. A company may be valued on an asset basis while still being treated as saleable as a going concern. In that event, the valuation may assume that a purchaser takes the undertaking and its employment obligations, but pays no more than the net realisable value of the assets. A separate deduction for redundancy costs is therefore unnecessary where the evidence supports that valuation hypothesis.

Two shareholders transferred preference shares in a family company to their brother after he made misrepresentations about the urgency of BMW’s concerns and promised to return the shares if a sale did not occur. A deputy judge found liability for negligent misrepresentation and awarded damages based on a company valuation of £220,000. The appellant challenged both liability and valuation. The Court of Appeal considered whether the pleaded misrepresentations had been established and whether the valuation should include a further deduction for realisation costs, including potential redundancy liabilities.

1. Misrepresentation. The appeal court accepted that the trial judge’s findings were inadequately expressed and did not precisely correspond with the pleaded allegations. Nevertheless, the evidence entitled the court to make the necessary findings itself. Keith’s cross-examination amounted to an admission of the representation that the dealership would otherwise be terminated, and the judge had expressly found the further representation concerning return of the shares. The claimants therefore succeeded in misrepresentation. The court did not determine the alternative fiduciary-duty claim.
2. Damages and valuation. Damages had to put the claimants in the position they would have occupied had the misrepresentations not been made. The relevant share value was the value at the date of transfer. The court upheld the use of an asset-based valuation, including the adjustment for the profit shown in management accounts and the allowance of £110,000 for contingent liabilities. The judge was entitled to take subsequent events into account and to strike a balance between competing evidence.
3. Realisation costs. The Vice-Chancellor would have deducted £135,963 for redundancy and other realisation costs, treating the valuation as one involving dissolution of the business. Chadwick LJ and Latham LJ disagreed. The majority held that an asset valuation could proceed on the hypothesis that a purchaser would acquire the business as a going concern, assume the transferred employment obligations under the Transfer of Undertakings (Protection of Employment) Regulations 1981, and pay no more than the value of the assets. On that basis no redundancy deduction was required.
4. The majority dismissed the appeal and upheld the valuation. The Vice-Chancellor’s contrary view would have substituted a value of £83,000.

• Court of Appeal (Civil Division): dismissed the appeal by a majority, upholding the finding of misrepresentation and the valuation of the company at £220,000.
• Deputy judge of the Chancery Division: judgment for the claimants for damages for misrepresentation, assessing the company’s value at £220,000: [1999] 2 BCLC 745.