Ashdown & Ors v Griffin & Ors

This is a first instance unfair prejudice petition under Companies Act 2006, section 994, concerning valuation and buy‑out of minority shareholdings. The deputy judge had found liability on 3 November 2015 and ordered that the first respondent purchase the petitioners' shares without a minority discount as at valuation date 12 February 2015. On the retrial as to quantum the court applied the hypothetical negotiation approach to value the missing income as sponsorship revenue rather than a simple per‑bin × bins × weeks calculation, held that interlocutory rulings from the aborted earlier quantum hearing were not binding, and accepted the respondents' outdoor‑marketing expert evidence that a sponsor value for the whole estate was in the range £50,000–£65,000 per annum and adopted £65,000 as the notional gross income. After deducting accepted operational costs (£30,500 pa), repaying the directors' loan (£100,000) and reasonable winding up costs (£5,000), the court concluded the petitioners' shares had no value at the valuation date and ordered the first respondent to acquire the petitioners' shares for nil consideration.

The petitioners (three minority shareholders holding 13% of Addbins Ltd) brought a petition under section 994 of the Companies Act 2006 alleging conduct unfairly prejudicial to their interests arising from the preferential treatment of ADL as sponsor/advertiser. The deputy judge found liability on 3 November 2015 and ordered the first respondent to buy the petitioners' shares without a minority discount at a valuation date of 12 February 2015; valuation was reserved for a later hearing.

The retrial on quantum became necessary after the judge who heard the earlier quantum hearing died; the petitioners were unrepresented by counsel at the retrial and unsuccessfully sought adjournments. The central legal task was to value the petitioners' shares at the valuation date taking into account the liability findings. The court framed the issues as: (i) actual and hypothetical revenues to the company (choice of the higher), (ii) operational costs to be deducted, (iii) treatment of the directors' loan, and (iv) winding up costs.

The court explained that valuation must follow a hypothetical commercial negotiation model as discussed in authorities cited in the judgment, that post‑valuation events are generally irrelevant save for good reason, and that personal characteristics are to be ignored except insofar as a party held a practical 'trump card'. The court accepted the respondents' outdoor marketing expert evidence that the sponsoring value of the entire estate lay between £50,000 and £65,000 per annum and adopted £65,000. On costs it preferred the petitioners' forensic accountant's restrained model for a single‑client operation, finding operational costs of £30,500 per annum. It held the directors' loan of £100,000 was a valid company liability to be deducted. Winding up costs were fixed at £5,000. After applying these adjustments, the court concluded the shares were worthless at the valuation date and made an order that the first respondent acquire the petitioners' shares for nil consideration, while noting the petitioners could elect not to accept that benefit.

First instance: the petitioners are entitled to an order that the first respondent acquire their shares for nil consideration. The court reached this conclusion by valuing the company on the hypothetical sponsorship model required by the liability judgment, accepting the respondents' outdoor‑marketing expert on sponsor value (adopting £65,000 pa), deducting reasonable operational costs (£30,500 pa), treating the £100,000 directors' loan as a company liability to be repaid, and allowing winding up costs of £5,000, such that the shares had no positive value at the valuation date.

Liability was decided at first instance by Edward Bartley-Jones QC (sitting as a deputy judge) on 3 November 2015. A further quantum hearing in September 2016 was heard but judgment was reserved; the judge who heard that hearing died before handing down judgment, necessitating this retrial on quantum (relisted June 2017 and heard October 2017).