Summary

The court determined the valuations of assets held by a company in which a minority shareholder had been unfairly prejudiced so that the shareholder could realise the value of his shares.

Facts

The court was required to determine the valuation and manner of disposal of shares in a company held by the petitioner (D). The court had found that D had been unfairly prejudiced as a minority shareholder in the third respondent family company and that either it or the first respondent (C) should purchase D's shares. The company held three properties: a freehold commercial property, a long lease leasehold property and a short lease leasehold property. The parties' experts had agreed that the long leasehold property was worth £1.1 million but no agreement was reached as to the value of the other properties. The company also traded as a wholesaler of womens' clothes.

Held

(1) With regard to freehold commercial property the estimated rental value of it was £3.9 million (see paras 16-29 of judgment). If an alternative method of valuation was used, assuming a sale with vacant possession on a price per sq ft basis, the value of the property was slightly over £4 million (paras 30-36). Any attempt at a precise figure was specious, so having regard to the results arrived by applying both methods of valuation the open market value of the freehold commercial property was £4 million (para 37). (2) Applying the investment method of valuation to the short lease leasehold property and making the appropriate deductions it had a value of £515,000 (paras 38-43). (3). An adjustment had to be made to the open market values of the properties where there was a contingent tax liability. D's shares were not being sold on the open market but were being acquired either by C directly or by the company which C controlled. If the company purchased the shares, it had no need to liquidate its property assets to fund the price since its accounts show that it had close to £2.5 million in cash. Although it had long-term creditors of about £1.6 million, that figure was accounted for by a very long-standing loan to the company by C's brother-in-law for which no interest had ever been charged and which there was apparently no pressure at all to repay. There was no evidence from C that he had any intention that the company should sell the freehold property. As the balance of the lease of the short lease leasehold property was under eight years, the prospect of the company selling the residue of that lease, which provided a useful income stream, seemed even more remote. Accordingly on the facts a break-up valuation of the properties was not appropriate, Goldstein v Levy Gee (A Firm) (2003) EWHC 1574 (Ch), (2003) PNLR 35 applied. The appropriate reduction to reflect contingent tax liability as regards the short lease leasehold property was 10 per cent and with regard to the freehold property was 20 per cent (paras 50-52). (4) The reasonable value of the company's wholesaling business was at the valuation date £102,000 (para 45). (5) In the light of the determinations made it was appropriate for the parties to re-calculate the price that should be paid for D's shares (para 60).

Judgment accordingly