Begum v Hossain & Anor

The Court of Appeal held that an independent valuer appointed under a Tomlin settlement had materially exceeded his mandate by disregarding handwritten takings that were expressly included within the companys books and records. The valuers obligation was to determine the fair value of the shares having regard to the books and records (including the handwritten takings) and, if necessary, to obtain assistance from other professionals. By directing himself to rely exclusively on the trading accounts used for VAT purposes and refusing to consider the contents of the handwritten takings (unless and until an independent forensic accountant were jointly instructed), the valuer misinterpreted the settlement terms and acted outside his instructions. The valuation was therefore set aside and the appeal allowed.

Background and parties: Ms Begum and Ms Hossain were equal shareholders in Sunam Tandoori Ltd. After a breakdown in their relationship Ms Begum presented an unfair prejudice petition under section 994 of the Companies Act 2006. The proceedings were settled by a Tomlin Order providing that Ms Hossain would purchase Ms Begums shares at a price fixed by an independent valuer.

Nature of the claim / relief sought: Ms Begum sought to challenge the valuers report, effectively seeking an order that the valuation be set aside on the basis that the valuer had materially departed from his instructions under the Settlement.

Issues framed by the court:

• Whether the valuer was required to consider the substance of the handwritten takings expressly included in the companys books and records;
• Whether the valuers decision to rely on the trading accounts used for VAT purposes, without substantive consideration of the handwritten takings or obtaining professional assistance, amounted to a departure from his instructions.

Courts reasoning and disposition: The court analysed the settlement terms, particularly clauses requiring valuation of fair value as at a specified date, granting the valuer discretion to seek assistance of other professionals, and expressly including handwritten takings within the books and records. The court held that the valuers role required him to consider the contents of those records; how much weight to give them was for his expert judgment but he could not exclude them entirely. If he lacked the necessary expertise to reconcile discrepancies, the settlement expressly permitted him to instruct an accountant at the parties expense. His refusal to engage with the handwritten takings therefore misinterpreted and exceeded his mandate. The valuation was set aside as not final and binding.

This was an appeal against the dismissal of a challenge to an expert valuation. The Court of Appeal allowed the appeal. The valuer had misinterpreted and exceeded his mandate by disregarding handwritten takings that were expressly part of the companys books and records; having the option to obtain expert assistance, he could not simply exclude those records. The valuation was set aside for that material departure from instructions.

Appeal from the High Court of Justice, Chancery Division, Companies Court, Mr Richard Sheldon QC (sitting as a deputy High Court Judge), [2014] EWHC 1235 (Ch). Permission to appeal was granted by Floyd LJ.