Kohli v Lit & Ors

Permission to appeal against the interest rate applied to costs was refused where the issue was an exercise of discretion and no arguable basis for an appeal was shown. In a valuation exercise, management charges should not be deducted without corresponding consideration of the management costs saved or avoided by the company’s restructuring. The court may make a rounded valuation figure where valuation is not an exact science and undue precision would be artificial.

This was a supplemental judgment following earlier proceedings concerning the valuation of Ms Kohli’s shareholding in Sunrise Radio Ltd. The court addressed an application for permission to appeal concerning interest on costs, clarified the treatment of management charges in the valuation, confirmed a payment on account of costs, and recorded the resulting share valuation.

The central issues were whether there was a proper basis for appealing the discretionary interest decision and whether the valuation should deduct management charges without also accounting for corresponding cost savings.

1. Permission to appeal. The application concerning interest on costs was refused. The applicable rate was ultimately a discretionary matter, and no basis for an appeal had been established.
2. Payment on account. The court confirmed the payment on account at £200,000. The figure was considered sufficiently safe to cover a suggested deduction of £20,000 for costs likely to be recoverable under existing orders.
3. Management charges. The court had reduced the Kismat valuation to nil because management charges had been added back in that company’s valuation. It had not deducted corresponding management charges from the Sunrise valuation. The evidence indicated that the charges generally reflected management time and that, following the disposal of subsidiaries, the corresponding costs would no longer necessarily be incurred. Deducting the charges without also reducing the associated costs would therefore create an artificial reduction and risk double counting. On the evidence, no further deduction from the Sunrise valuation was required.
4. Valuation outcome. The arithmetical result was a share value of £562,105, ignoring pence. Since valuation was not an exact science, the court rounded the figure down to £560,000.

The judgment records a further application for permission to appeal from the earlier judgment. Permission to appeal was refused.