Dinglis v Dinglis & Ors

The court refused the respondents' application to permit a valuation adjustment for the effects of the Coronavirus pandemic occurring after the valuation date fixed by a prior order. The December 2019 order fixed the valuation date at 25 July 2019 and included a schedule of permitted adjustments. The respondents sought a variation so they could argue at the valuation trial for a downward adjustment to reflect pandemic-related falls in property values and rental income occurring between the valuation date and the valuation trial.

The judge held that the order fixing the valuation date was a final determination of an important part of the case and that the interests of finality and the risk allocation inherent in the parties' earlier positions precluded variation. CPR r.3.1(7) permits variation only sparingly, normally for a material change of circumstances or where original facts were misstated; the pandemic did not justify varying a final order here. Although the court recognised the wide remedial discretion under section 996 of the Companies Act 2006, that discretion did not permit adjustments based on events after an unappealed, final valuation date chosen after contested litigation. The respondents' application was therefore dismissed.

Background and parties:

• Paul Dinglis, the petitioner, is a minority shareholder in Dinglis Properties Ltd (DPL). Andreas Dinglis, the first respondent, controls the majority shareholding. DPL is a property holding and development business.
• Following case-management directions, the court conducted a split trial. After trial of the "First Issues" the court ordered that the respondents acquire the petitioner's shares because of unfairly prejudicial conduct: see [2019] EWHC 1664 (Ch). The appropriate valuation date for Paul’s shares remained contested.

Procedural posture:

• In a reserved judgment dated 5 December 2019 ([2019] EWHC 3327 (Ch)) the court fixed the valuation date as 25 July 2019 and set out permitted adjustments to the shares' value. No appeal was taken from that order.
• On 15 May 2020 the respondents applied (the "Coronavirus Application") for the December Order to be varied so they could advance, as a matter of law at the valuation trial, an adjustment downward to reflect adverse effects of the COVID-19 pandemic between 25 July 2019 and the valuation trial.

Issues framed by the court:

• Whether the December Order fixing the valuation date could properly be varied or interpreted so as to permit an argument for adjustments reflecting events after the valuation date.
• Whether CPR r.3.1(7) or the court's remedial discretion under section 996 of the Companies Act 2006 authorised such a variation or adjustment.

Court's reasoning and decision:

• The judge reviewed authorities on variation of orders and emphasised the distinction between interim and final orders: variation under CPR r.3.1(7) is available but to be exercised sparingly and finality is a primary consideration.
• The December Order fixing the valuation date was treated as a final determination of a significant issue. The respondents had sought and obtained an early valuation date and thereby accepted the risk of intervening adverse events.
• The COVID-19 pandemic, though an extraordinary event, did not justify revisiting a final order where the respondents had pressed for and obtained that order. Allowing the proposed adjustment would give the respondents a second bite at the cherry and undermine finality. Even the wide discretion under s.996 could not be used to permit adjustments based on events occurring after the unappealed valuation date.

Relief sought and disposition:

• The respondents' application to vary the December Order to permit a COVID-19 based downward adjustment of value was dismissed.

The respondents' application to vary the December 2019 order was dismissed. The court held that the December Order fixing the valuation date (25 July 2019) was a final determination of a substantial issue; principles of finality and the limited scope for variation under CPR r.3.1(7), together with the fact that the respondents had assumed the risk of post-valuation change when pressing for an early date, meant there was no basis to allow adjustments for events occurring after the valuation date. The wide discretion under section 996 of the Companies Act 2006 did not justify the proposed adjustment.

Procedural history described in the judgment: case management order of 29 January 2018 directed a split trial. The First Issues trial was heard in March 2019; the court ordered acquisition of the petitioner's shares in the judgment of June 2019 ([2019] EWHC 1664 (Ch)). A further reserved judgment dated 5 December 2019 ([2019] EWHC 3327 (Ch)) fixed the valuation date as 25 July 2019 and specified permitted adjustments. The present application to vary that December Order was heard and dismissed on 1 June 2020 ([2020] EWHC 1363 (Ch)).