Stuart Wells v Paul Hornshaw & Ors

In a successful unfair-prejudice petition, quasi-interest on the purchase price of shares is discretionary and depends on fairness, rather than following automatically from the valuation date. Where a petitioner has been deprived both of the shares’ value and of the purchase price for a substantial period, the court may award compensation equivalent to interest. The court must assess responsibility for the delay, including the petitioner’s conduct in pursuing unsuccessful issues and the respondents’ conduct in maintaining an untenable position. The award should be principled and proportionate. In the absence of evidence supporting a higher rate, simple interest at a cautious commercial rate may be appropriate.

Stuart Wells was a minority shareholder in Transwaste Recycling and Aggregates Ltd. After he indicated in September 2015 that he wished to leave, the company’s auditor produced a valuation of his shares. The valuation was later held not to be binding because it had not been prepared using the most up-to-date information.

Following the liability trial, the court ordered a new valuation using September 2015 as the valuation date. Most of Mr Wells’s wider allegations concerning dilution, corporate wrongdoing and the absence of a minority discount were rejected. The remaining issue was whether the Hornshaw brothers should pay quasi-interest on the eventual purchase price, and, if so, for what period and at what rate.

1. Quasi-interest was awarded. The court ordered compensation corresponding to interest on the amount eventually found payable for Mr Wells’s shares, at 1% above the Bank of England base rate from time to time, for the period 30 April 2016 to 30 June 2018.
2. The ordinary position is that a petitioner is not entitled to interest for a period before the sale price becomes payable, because the petitioner remains the owner of the shares and may derive value from them. That was the reasoning identified in Elliott v Planet Organic Ltd [2000] BCC 610.
3. That ordinary position is not invariable. Under s.994 of the Companies Act 2006, fairness may justify an award equivalent to pre-judgment interest where an early valuation date is fixed and the petitioner has been deprived of both the purchase price and the benefit of the shares. The court applied the approach in Profinance Trust SA v Gladstone [2001] EWCA Civ 1031, [2002] 1 WLR 1024.
4. The relevant assessment required consideration of how the delay arose. The respondents’ insistence that the auditor’s defective valuation was binding materially prolonged the dispute. Mr Wells’s pursuit of serious and ultimately unsuccessful claims concerning his shareholding, alleged wrongdoing and valuation methodology also increased the proceedings’ complexity and duration.
5. The principled middle course was to estimate the period that a more limited challenge to the defective valuation would have taken. On that basis, payment would probably have been received by June 2018, rather than approximately eight years later. The court therefore awarded quasi-interest only for the period corresponding to that avoidable delay.
6. The power to award quasi-interest must be exercised cautiously. As Mr Wells produced no evidence supporting a higher rate and merely sought a commercial rate, 1% above base rate was appropriate.

The judgment concerned a consequential issue following the court’s earlier liability judgment dated 19 February 2024. No appellate history was stated.