Ashdown & Ors v Griffin & Ors

In valuing shares for an unfair-prejudice buy-out, the court must value the rights or interests actually acquired in the hypothetical transaction. Where the relevant right is temporary sponsorship, the valuation must reflect what reasonably acting parties would have agreed for that sponsorship, rather than a mechanical price-per-unit calculation. Valid company liabilities unrelated to the unfairly prejudicial conduct must be deducted. Operational and winding-up costs are relevant where supported by evidence. A liability to remove assets or advertising cannot be included without proof that it is the company’s obligation.

The petitioners brought proceedings under Companies Act 2006, section 994, concerning unfairly prejudicial conduct in relation to their shares in Addbins Ltd. Liability had previously been established, and the first respondent had been ordered to purchase the petitioners’ shares without a minority discount, at a valuation date of 12 February 2015.

The original quantum trial had to be reheard after the deputy judge who heard it died before delivering judgment. The central issues were the value of hypothetical sponsorship income, operational costs, the treatment of a £100,000 directors’ loan and winding-up costs.

1. Retrial. Interlocutory decisions made during the abortive quantum trial were not binding on the judge conducting the rehearing. The liability decision remained binding between the parties as res judicata.
2. Valuation. The valuation required an objective assessment of what the parties would have agreed for sponsorship of the estate. A mechanical calculation based on price per bin, number of bins and weeks was inappropriate. The evidence supported gross sponsorship income of £65,000 per annum for 2012 to 2015.
3. Expert evidence. Relevant, uncontradicted expert evidence had to be weighed with the other evidence and was not to be rejected without good reason. The outdoor-marketing evidence was accepted.
4. Costs and liabilities. Operational costs of £30,500 per annum were deducted. The £100,000 directors’ loan was a valid liability incurred before the unfairly prejudicial conduct and had to be deducted. Winding-up costs of £5,000 were allowed. Costs of removing the bins or advertisements were excluded because no evidence established that the company was liable for them.
5. Disposition. The shares were worthless or practically so. The first respondent was ordered to acquire them for nil consideration. The court could not order the petitioners to transfer them for nil consideration, since the relief was for their benefit and could be waived.

First-instance quantum decision following an earlier liability judgment by Edward Bartley-Jones QC, sitting as a deputy judge of the High Court, on 3 November 2015. The earlier decision’s citation was not stated in the judgment.