Thakrar v Thakrar & Ors

A valuation of shares on a willing buyer and willing seller basis is an exercise in informed judgment, not a mechanical or arithmetical exercise. A judge is not narrowly tied to one earnings multiple, valuation method or supposed comparator. The judge may assess broader market evidence and the company’s prospects. An appellate court should interfere only where the judge was plainly wrong or accepted evidence that could not properly be accepted. A different arguable valuation does not satisfy that threshold.

The applicant held 21.78 per cent of a successful family company. Under a consent order, the other shareholders were to buy his shares at a valuation of the whole business on a willing buyer and willing seller basis. The parties’ accountants could not agree, and the proposed third expert was not appointed. His Honour Judge Boggis QC therefore determined the value himself after hearing extensive expert evidence and cross-examination.

The applicant challenged the multiple used in calculating the company’s value. Permission had already been granted on a separate issue concerning interest. The present application concerned whether the judge had adopted an impermissibly high multiple and whether the Court of Appeal should intervene in his valuation judgment.

1. Application dismissed. Lord Justice Buxton delivered the judgment, with Lord Justice Henry agreeing. The application for permission to appeal on the valuation issue was dismissed.
2. Nature of the valuation exercise. The judge was not simply exercising a discretion, but was required to exercise informed judgment after considering the accountants’ reports, hearing their cross-examination and assessing the evidence about the company’s business prospects. The valuation was therefore a broad evaluative exercise, rather than a mechanical or arithmetical calculation.
3. Use of valuation evidence. The judge was not required to adhere narrowly to the EBITDA or price/earnings calculations, or to the two listed companies selected as comparators. It was open to him to consider that those companies operated in a different market and to take account of the company’s position, brand and prospects. An accountant could also use wider market evidence to adjust the starting comparator multiple.
4. Appellate intervention. In a valuation of this kind, the Court of Appeal would interfere only if the judge had gone plainly wrong or had accepted evidence that he could not properly accept. The criticism of the higher multiple did not show a fatal flaw in the expert’s reasoning, unacceptable evidence, or an unreasonable exercise of judgment.
5. Final order. The application for permission to appeal was dismissed.

• Court of Appeal (Civil Division): In [2001] EWCA Civ 262, the court dismissed the application for permission to appeal on the valuation issue.
• High Court, Chancery Division: On 17 October 2000, His Honour Judge Boggis QC determined the value of the applicant’s shares after the parties’ valuation experts failed to agree.