Attwood & Ors v Maidment

In a Companies Act 2006 unfair-prejudice share purchase, fair value is fact-sensitive. There is no inflexible rule that shares must be valued on a break-up basis merely because the company is not a quasi-partnership or ought to have been liquidated. A going-concern valuation may be required where a break-up basis would give the purchasing shareholder a windfall.

In valuing contingent liabilities, the court may consider subsequent events that shed light on value, including actual tax paid. Selling-cost allowances should reflect costs necessarily incurred and, here, were calculated by reference to actual sale proceeds. Quasi-interest may compensate for a historic valuation date, but must be awarded cautiously and at a judicially reasonable rate. Appellate intervention requires clear error.

Allan Attwood brought an unfair-prejudice petition concerning Annacott Holdings Ltd against Geoffrey Maidment, the company's other effective 50 per cent shareholder. The petition succeeded principally because Maidment had procured the transfer of the company's property portfolio to himself at an undervalue.

HHJ Hodge QC ordered Maidment to purchase Attwood's shares. The High Court's substantive decision is cited as [2011] EWHC 2186 (Ch), with valuation directions later given in May and July 2012. Maidment appealed directions concerning the valuation basis, corporation tax, portfolio-sale discount, selling costs and quasi-interest. The central question was whether those directions achieved fair value.

1. Disposition. The appeal was allowed in relation to selling costs and dismissed on all other grounds. A deduction at the judge's unchallenged rate of 1.5 per cent was to be applied to the actual sale proceeds paid for the properties. If those proceeds were not agreed, the judge could use case-management powers to quantify them.
2. Appellate review. Valuation directions involve an evaluative assessment of fair value, including the history of the relevant events. The appellate court should intervene only if the judge was clearly wrong, although a legal misdirection makes intervention easier. The approach was applied consistently with Re Bird Precision Bellows Ltd [1986] Ch 658.
3. Valuation basis. There was no inconsistency between the earlier view that Maidment should have obtained agreement or liquidated the company and the direction to use a going-concern valuation. No inflexible rule confined that basis to quasi-partnership cases. A break-up valuation would ignore the actual transfer of the assets and could give Maidment a windfall. The court relied on the circumstances-based approach in Re Sunrise Radio Ltd [2010] 1 BCLC 367 and applied CVC/Opportunity Equity Partners Ltd v Demarco Almeida [2002] 2 BCLC 108 by analogy.
4. Tax and portfolio discount. The principle in Bwllfa Merthyr Dare Steam Collieries (1981) Ltd v Pontypridd Waterworks Company [1903] AC 426 required subsequent events shedding light on the value of a contingent liability to be considered. Actual corporation tax paid was therefore a permissible deduction. The court also accepted that no portfolio discount was required because the properties could realistically be sold separately or over time.
5. Selling costs and quasi-interest. Necessary selling costs had to be allowed because the company could not realise value without incurring them. Quasi-interest under section 994 of the Companies Act 2006 was permissible for a historic valuation date, but required great caution. Rates under section 35 A of the Senior Courts Act 1981 provided a useful benchmark. The rates of 2 per cent and 3 per cent above base rate were within the judge's judicial discretion and did not overcompensate Attwood.

1. Court of Appeal (Civil Division) — Allowed the appeal only as to the deduction for selling costs and otherwise dismissed it.
2. High Court of Justice (Chancery Division), Companies Court — HHJ Hodge QC granted relief following the unfair-prejudice petition and ordered Maidment to purchase Attwood's shares. The substantive judgment is cited as [2011] EWHC 2186 (Ch); valuation directions were subsequently given in May and July 2012.