McLean v Mangat & Ors

On a renewed application for permission to appeal, permission should be refused where the proposed grounds have no real prospect of showing that the first-instance judge erred. Appellate courts will generally respect findings based on witness evidence, business records and reasonable inferences where there is material capable of supporting them. Fresh evidence should not be admitted where it could with reasonable diligence have been obtained for trial, particularly where its late admission would deprive the respondents of an opportunity to test it. In an unfair-prejudice buy-out, once relevant conduct is established, the court must determine the resulting prejudice and share value; that task is not left exclusively to a valuation expert.

Ms McLean brought a petition under s.459 of the Companies Act 1985, now ss.994–996 of the Companies Act 2006, alleging unfairly prejudicial conduct in the affairs of the respondent company. It was agreed that the other shareholders would buy her shares at 25% of the company’s value as at 31 August 2005. The deputy High Court judge valued the shares at £34,100 plus interest, allowing for limited diversion of income from two company cars but rejecting the wider turnover case.

Permission to appeal was refused on paper. The appellant renewed the application, proposed amended grounds and sought to adduce further evidence. The central issues were whether any proposed ground had a real prospect of success and whether the additional evidence should be admitted.

The applications were refused. Kitchin LJ gave the judgment, with which Black LJ agreed.

1. Permission to appeal. The appellant had no real prospect of persuading the Court of Appeal, on a full appeal, that the deputy judge had erred on any original or proposed amended ground.
2. Assessment of evidence. The deputy judge was entitled to prefer oral evidence, use the company’s job records as a starting point, and rely on evidence that a full-time driver would undertake approximately four to six jobs per day. Those materials provided a proper basis for estimating the number of full-time-equivalent drivers and the company’s turnover. The judge was also entitled to make a reasonable estimate of net income from account and credit-card sales and to make a limited allowance for no-show reimbursements.
3. Company cars and prejudice. The judge was entitled to treat the use of the two company cars, with the income retained by Mr Mangat, as causing prejudice. Once that finding had been made, he was required to determine the extent of the prejudice and its effect on the value of the shares. The valuation expert’s report did not displace that judicial responsibility.
4. Fresh evidence. The proposed witness statements and Public Carriage Office material were refused. The appellant had not shown that the evidence could not have been obtained with reasonable diligence for the trial. Its admission at the appeal stage could also have deprived the respondents of a proper opportunity to investigate and challenge it.
5. The proposed ground concerning the interpreter was without substance. Permission to appeal and the applications to adduce further evidence were refused.

1. Court of Appeal (Civil Division) — The renewed application for permission to appeal, proposed amended grounds and applications to adduce fresh evidence were refused: [2012] EWCA Civ 1776.
2. Court of Appeal (Civil Division) — Lewison LJ refused permission to appeal on paper on 26 March 2012.
3. High Court of Justice, Chancery Division — Mr Nicholas Strauss QC, sitting as a deputy judge, determined the unfair-prejudice petition on 18 January 2012 and ordered the purchase of the shares for £34,100 plus interest.