Premier Telecom Communications Group Ltd & Anor v Webb

This appeal concerned a challenge to an expert valuation produced pursuant to a letter of engagement. The central legal principles were those governing the finality of expert determinations: the expert’s decision is binding unless he has acted outside his remit or departed from his mandate, and the court must construe the expert’s instructions to determine the scope of that mandate. The court held that Grant Thornton had acted within their remit in applying the International Valuation Standards Board definition of market value and in assuming that the informal relationships in place on 30 June 2012 would continue. The judge further held that the alleged numeric or methodological errors (including the treatment of cash) were matters of valuation judgment within the valuer’s expertise and did not demonstrate a departure from mandate. The appeal was therefore dismissed and the Part 24 summary judgment for the respondent was upheld.

Background and parties:

PTCG (the company) was jointly owned by Mr Ridge (60%) and Mr Webb (40%). Following the termination of Mr Webb’s employment and related disputes (including an Employment Tribunal claim and contemplated unfair prejudice proceedings under section 994 of the Companies Act 2006), the parties agreed a compromise in which the company and Mr Ridge would buy out Mr Webb’s shares. Because the business relied on informal personal relationships, the parties appointed Grant Thornton as expert valuers under a letter of engagement to determine the fair value of Mr Webb’s shareholding.

Nature of the application:

• The appellants (PTCG and Mr Ridge) sought to overturn Grant Thornton’s valuation produced in March 2013.
• The respondent (Mr Webb) applied for summary judgment under CPR Part 24, contending that the claim had no real prospect of success.

Issues framed by the court:

• How to construe the letter of engagement and the scope of the valuer’s mandate.
• Whether Grant Thornton acted outside that mandate by (a) applying the IVSB definition of market value and adopting the ‘‘willing seller’’ concept in a manner that ignored the actual precarious contractual position of Mr Ridge, (b) misconstruing the instruction to assume that relationships in place on 30 June 2012 would continue, or (c) committing legal errors or procedural failings in their treatment of particular balance-sheet items (notably cash) or in departing from the Factual Memorandum.
• Whether any such errors were of a kind that invalidated the expert determination or simply gave rise to a negligence claim against the valuer.

Reasoning and decision:

The court adopted established authorities on expert determinations and emphasised that the critical task was the construction of the contract (the letter of engagement) to define the valuer’s remit. The valuer’s use of IVSB market-value concepts and the formulation about a ‘‘willing seller’’ did not show a material departure from mandate; the passage criticised related to the hypothetical willing seller rather than to the assessment of a willing buyer and was within the valuer’s expertise. The instruction to assume that relationships in place on 30 June 2012 would continue was construed to require Grant Thornton to attribute a degree of stability to the business despite its informal arrangements, and the report showed that they applied that assumption. The disputed treatment of cash and various other adjustments were matters of valuation judgment that the parties had left to the valuer; they did not show a procedural failure to follow the Factual Memorandum or a material departure from mandate. Having concluded that the valuer had acted within his remit and that no legal error invalidated the determination, the court found no real prospect of success at trial for the appellants and dismissed the appeal.

Procedural context: The Court of Appeal decided these issues on appeal from a Part 24 summary judgment given by His Honour Judge Havelock-Allan Q.C. in the Mercantile Court, Bristol.

This is an appeal from a Part 24 summary judgment given in favour of the defendant. The Court of Appeal dismissed the appeal. The court held that (i) the scope of Grant Thornton’s mandate was determined by the letter of engagement; (ii) the valuer acted within that mandate in applying IVSB market-value principles and in assuming that the informal relationships existing on 30 June 2012 would continue; (iii) the contested numerical and methodological choices (including treating bank cash as an add-back) were matters of valuation judgment within the valuer’s remit rather than material departures or legal errors that would invalidate the determination; and (iv) therefore the appellants had no real prospect of succeeding at trial and the Part 24 judgment for Mr Webb was correctly granted.

Appeal from the High Court of Justice, Queen's Bench Division, Bristol District Registry, Mercantile Court (His Honour Judge Havelock-Allan Q.C.), in which judgment was given for the defendant by summary judgment under CPR Part 24. The Court of Appeal (Moore-Bick LJ, McFarlane LJ, Floyd LJ) heard the appeal and dismissed it.