Richards & Anor v I P Solutions Group Ltd

For valuation of shares held by a wrongful-dismissal “Good Leaver”, the contractual valuation provision must be applied according to its wording. Market value is assessed by reference to the shares actually held, including class-based restrictions affecting their realisable value, unless the agreement expressly requires those restrictions to be ignored. A provision giving an expert final authority on valuation does not prevent the court from construing the contractual framework, although the valuation consequences are ordinarily for the expert. Pre-judgment interest on damages and costs may be awarded at a commercial rate, while judgment interest runs from the order quantifying the judgment sum where quantification is deferred.

The claimants had previously obtained judgment that they were wrongfully dismissed. This further judgment determined consequential issues concerning damages and costs. The court considered whether a further contractual bonus was payable during the notice period, the valuation date for the claimants’ shares as “Good Leavers”, and whether the articles’ investor redemption premium affected that valuation. It also determined the applicable approach to pre-judgment interest, judgment interest, costs and payment on account.

1. Q4 bonus. The claimants were not entitled to further bonus damages. Applying the company’s bonus model to the competing calculations, the court rejected the proposed adjustments as wrong in principle or based on false premises. A rent deposit was properly treated as presently unavailable cash rather than an exceptional item. A correction for Vodafone overpayments was properly included, but an audit adjustment that did not affect 2015 cash movements was excluded.
2. Valuation date. The claimants qualified as “Good Leavers” because their employment had been wrongfully terminated. Under the articles, the relevant Leaving Date was therefore the date on which their contracts were terminated, 29 July 2015, rather than the end of the contractual notice period.
3. Share valuation. The expression “market value of the Leaver’s Shares ... as if the entire issued share capital ... were being sold in accordance with these Articles” required the class of shares to be taken into account. The claimants held Class C shares whose realisable value was subordinated by Article 13.3 to the priority return of the Class A and B investors. A purchaser would acquire subject to that restriction. The court declined to read down the clear wording because the result appeared commercially unattractive. Article 13.3 was therefore relevant to the valuation.
4. Interest and costs. Pre-judgment interest on damages and costs was awarded at 2% above base. Judgment interest under section 17 of the Judgments Act 1838 ran at 8% from the order quantifying the judgment sum. Costs up to and including the first trial followed the event and were payable by the defendant. The final costs order for the further hearing and payment on account remained to be determined.