Queensgate Place Limited v Solid Star Limited & Ors (No 3) (Consequential Matters)

In assessing a buy-out remedy for unfair prejudice, the court may make a reasonable allowance for corporation tax which would have arisen in the counterfactual circumstances, even where the available accounting evidence is incomplete. The court may adopt a broad but evidence-based estimate.

An approved costs budget may be departed from at detailed assessment to reflect a later remedies hearing whose scope was not apparent when the budget was approved. After the relevant hearing has concluded, the trial judge should generally leave the detailed revision to the costs judge.

A successful petitioner remains entitled to the general costs rule where it establishes substantive breaches, even if an allegation that the breaches were dishonest fails. Exceptional conduct may justify indemnity costs.

Queensgate Place Ltd petitioned under section 994 of the Companies Act 2006 concerning the affairs of Solid Star Ltd. Earlier judgments determined liability for unfair prejudice and the remedy, including a counterfactual purchase price for QPL’s shares.

After the Remedies Judgment, the court considered the appropriate corporation tax deduction, revision of QPL’s approved costs budget, liability and basis of assessment for costs, payment on account, and continuation of freezing orders. The consequential issues were determined on written submissions.

1. Corporation tax. The counterfactual sale of SSL’s properties would have generated corporation tax. A deduction was therefore required when calculating the amount payable for QPL’s shares. The evidence did not justify either eliminating the deduction or adopting the chargeable-gain percentages advanced by Prakash. The court adopted a 30% estimate of the chargeable gain and applied the agreed 19% corporation tax rate. The purchase price was consequently reduced, and the parties’ liability percentages and share-holding consequences were adjusted.
2. Costs budget. The petitioner’s revised budget was filed extremely late, contrary to the requirements of CPR 3.15A. It was not appropriate for the trial judge to approve amendments after the remedies trial. However, the costs judge could depart from the approved budget at assessment to reflect the additional remedies hearing, whose scope was not clear at the original costs hearing. This approach was adopted from National Museums and Galleries on Merseyside Board of Trustees v AEW Architects and Designers Ltd.
3. Costs liability. QPL had substantially succeeded and was entitled to its costs under the general rule. The unsuccessful dishonesty allegation against Minesh did not justify a costs departure because the substantive breaches of fiduciary duty had been established. Thakkar v Mican and Clutterbuck v HSBC were distinguishable because the substantive claims in those cases had failed.
4. Indemnity costs and payment on account. Prakash’s concealment of the property sales and the Lazuli litigation was conduct sufficiently outside the norm to justify indemnity costs up to and including the Liability Judgment. The respondents were ordered to pay £500,000 on account of QPL’s costs, jointly and severally.
5. The existing freezing orders were renewed as a precaution. The parties were directed to agree and submit a final order.

This was a first-instance consequential decision following earlier judgments in the same proceedings, including the Liability Judgment and Remedies Judgment. No appeal was determined in this judgment.