Attwood v Maidment & Ors

In valuing shares bought out under an unfair-prejudice remedy, the court must select the basis that is fair between the parties and reflects what has actually happened to the company. A liquidation or break-up valuation is inappropriate where the company has not been wound up and the purchaser continues to hold its assets. The court may therefore exclude discounts for lack of marketability and for sale of the assets as a single portfolio. In assessing compensation described as quasi-interest, the appropriate basis depends on the justice of the case and the evidence. Where the claimant left the money invested in the company and proves no borrowing loss, interest should be assessed on an investment or lending basis.

The petitioner held half the shares in Annacott Holdings Limited and had previously succeeded in an unfair-prejudice petition. The court had ordered the respondent to purchase the petitioner’s shares, valued as at 1 October 2005, and reserved the determination of the purchase price and quasi-interest.

This hearing determined the outstanding valuation issues, including mortgage borrowings, property values, discounts for condition, assured shorthold tenancies, portfolio sale and marketability, selling costs, and the rate and basis of quasi-interest. The Court of Appeal had dismissed an application for permission to appeal the substantive unfair-prejudice decision.

1. Valuation basis. The valuation had to remedy the unfair prejudice and achieve fairness between the parties, having regard to the company’s actual circumstances. The fact that liquidation would have been an appropriate course in the past did not require the shares to be valued as if liquidation had occurred.
2. Discounts. A liquidation or break-up basis was rejected because the company had not in fact been broken up and the respondent had acquired and retained its properties. No further discount was allowed for lack of marketability or for sale of the properties as a single portfolio. Such a discount would undervalue the two equal shareholdings in aggregate and would be inconsistent with the purpose of the buy-out remedy. The court relied on CVC/Opportunity Equity Partners Ltd v Demarco Almeida [2002] UKPC 16, reported at [2002] BCC 684.
3. Property valuation. The court accepted mortgage borrowings of £155,455.38 at the valuation date. It preferred the evidence of Mr Mason to that of Mr Roe. It indicated a general 2.5 per cent condition discount, a 7.5 per cent discount for assured shorthold tenancies, and, if a portfolio discount were relevant, 5 per cent rather than 10 per cent. Selling costs were assessed at 1.5 per cent in aggregate.
4. Quasi-interest. The authorities did not establish that borrowing rates were invariably appropriate. Jaura v Ahmed [2002] EWCA Civ 210 was distinguished because the evidence there involved actual borrowing loss. Here, the petitioner had left his money invested in Annacott and had produced no evidence of borrowing. The appropriate basis was lending or investment. The court allowed 2 per cent above base rate up to 31 October 2008 and 3 per cent above base thereafter.
5. The share valuation expert was directed to revisit the figures mathematically in light of the judgment, including any appropriate allowance for corporation tax actually arising on property transfers.

• Court of Appeal: An application by Mr Maidment to appeal the substantive unfair-prejudice decision was dismissed with costs on 7 February 2012.
• High Court (Chancery Division): The present hearing determined the reserved valuation and quasi-interest issues and gave directions for the expert to revisit the figures.