Global Energy Horizons Corporation v Gray

Assets must be valued as at the relevant valuation date by reference to the price which a willing buyer and willing seller would have agreed, using information reasonably available at that date.

Later information may assist by showing what was then knowable or by cross-checking assumptions, but it cannot substitute for the value at the valuation date. The court must value the actual asset, taking its liabilities, encumbrances, business structure and commercial circumstances as it finds them. It must avoid speculative projections and unreliable comparables. Expert evidence assists the court, but does not replace its own judgment.

The claimant had obtained declarations that the defendant had breached fiduciary duties and was liable to account for specified interests in Petrosound and its international ultrasound technology business. A further hearing was ordered to determine the value of those assets as at 28 July 2015, on the basis of the earlier factual findings and further expert valuation evidence.

The court considered the documentary evidence, the competing valuation methods and the effect of the inconsistency between the earlier findings and the later evidence concerning the structure of the international business. The central issues were the proper valuation date, the use of post-date information, the reliability of comparable transactions and discounted cash-flow projections, and whether either asset had any value.

1. Valuation basis. The Assets were to be valued as at 28 July 2015 at the price which a willing buyer and willing seller would have agreed in the light of information reasonably available at that date.
2. Later information. Documents post-dating the valuation date could be used where they contained information likely to have been available at that date, or to cross-check the reasonableness of assumptions and inferences. They could not be used simply to substitute the present value for the value at the specified date. The approach in Re Thoars [2002] EWHC 2416 (Ch) and Lindsley v Woodfull [2004] EWCA Civ 165 was accepted.
3. Reality principle. The asset had to be valued as it actually existed at the valuation date. The court could not value a hypothetical operational company divorced from the liabilities and financial position of Sonoplus. The valuation exercise required the valuer to take the relevant aspects of the world as found and stand back to ask whether the result made commercial sense, applying the guidance in Chilukuri v RP Explorer Master Fund [2013] EWCA 1307.
4. Petrosound interest. The 2012 VIYM transaction was not a reliable comparable. It involved materially different debt, control, profitability and timing circumstances. The Tatarstan joint venture was also not a reliable indicator of value because the contemplated investments had not been made and the venture generated no material profits.
5. International business. The court valued the international licensing business actually carried on through Sonoplus, rather than a hypothetical separate operating company. The Resero Business Plan was too optimistic and unreliable to support a discounted cash-flow valuation. The business was burdened by debt and had no realistic prospect of receiving material income from Vibrant.
6. Outcome. The court gave substantially greater weight to Mr MacGregor’s evidence, while retaining responsibility for the valuation itself. The value of all the Assets at the Valuation Date was nil.

The judgment describes earlier first-instance decisions in the same proceedings:

• High Court (Chancery Division): Vos J’s judgment dated 21 December 2012, referred to as [2012] EWHC 3703 (Ch), resulted in declarations of breach and liability to account.
• High Court (Chancery Division): Asplin J’s judgment dated 28 July 2015, referred to as [2015] EWHC 2232 (Ch), identified the Assets and directed a further valuation hearing.
• High Court (Chancery Division): The present court conducted the valuation hearing and assessed the Assets at nil.