McLean v Mangat & Ors

The Court of Appeal refused permission to appeal against the deputy judge's valuation arising from a petition under s.459 Companies Act 1985 (now ss.994–996 Companies Act 2006) alleging unfairly prejudicial conduct. The sole live issue at first instance was the value of the company as at 31 August 2005. The deputy judge accepted the valuer's account-based figure and, on the contested factual evidence, found that the company carried out about 200 jobs per day (c.75,000 per year) equivalent to approximately 40 full‑time drivers, producing turnover of about £230,000 with an additional c.£20,000–£25,000 from account sales. Credit card receipts were held not to be part of the company's turnover, and income from two vehicles run by a respondent produced an additional understatement of about £11,500 per annum, increasing the buy‑out price by £1,600 to £34,100 plus interest. The court refused to admit late evidence and concluded there was no real prospect of success on appeal.

Background and parties: The appellant, Ms McLean, brought a petition under s.459 Companies Act 1985 (now ss.994–996 Companies Act 2006) alleging the companys affairs were being conducted in a manner unfairly prejudicial to her interests. The appellant owned 25% of the issued shares on behalf of Mr Scotland; the first and second respondents owned 50% and 25% respectively. By the hearing the parties agreed the respondents would buy the appellant's shares for 25% of the value of the company at 31 August 2005; the only live issue was valuation.

Nature of the application: This was a renewed application for permission to appeal against the deputy judges valuation and against findings on diversion of income; the court also considered applications to adduce further evidence and to rely on amended grounds.

• Issues framed: (i) the correct measure of the company's turnover as at 31 August 2005; (ii) the number of full‑time and part‑time drivers and the appropriate method of deriving turnover from job records; (iii) whether account and credit card receipts formed part of company turnover; (iv) whether two cars run by a respondent had wrongfully diverted income; and (v) whether fresh evidence should be admitted on appeal.
• Courts reasoning and findings: The court endorsed the deputy judge's reliance on job records and on witness evidence that a full‑time driver did about five jobs per day (c.35 per week), concluding the business performed c.200 jobs per day and therefore employed the equivalent of c.40 full‑time drivers. On that basis the judge's figure for driver‑derived turnover (about 30,000–240,000 depending on allowances) and the additional c.20,000–25,000 from account sales were reasonable. There was no reliable basis to hold credit card takings were retained by the company. The judge accepted that two vehicles run by a respondent produced an understatement of turnover of about 11,500 per annum and increased the buy‑out price by 1,600. The court refused permission to admit late witness statements and other documents because they could have been obtained with reasonable diligence and would have been susceptible to challenge; overall the proposed appeal had no real prospect of success.

Procedural posture: The order appealed from was made by Mr Nicholas Strauss QC on 18 January 2012. Permission to appeal was previously refused on paper by Lewison LJ on 26 March 2012; the renewed oral application for permission to appeal to the Court of Appeal was refused and applications to adduce further evidence and to rely on replacement grounds were also refused.

Permission to appeal was refused. The Court of Appeal concluded that the deputy judges factual findings on job numbers, driver equivalents, account income and the limited diversion from two company cars were supported by the evidence and that the proposed amended grounds and late evidence could not be admitted because they could have been obtained with reasonable diligence; there was therefore no real prospect of success on appeal.

Appeal from judgment and consequential order of Mr Nicholas Strauss QC (High Court, Chancery Division) dated 18 January 2012. Permission to appeal was refused on paper by Lewison LJ on 26 March 2012. This renewed application for permission to appeal to the Court of Appeal was refused (neutral citation [2012] EWCA Civ 1776).