Allan Attwood and ors v Geoffrey Maidment

JurisdictionEngland & Wales
JudgeLady Justice Arden,Lord Justice Elias,Lady Justice Black
Judgment Date26 February 2013
Neutral Citation[2013] EWCA Civ 119
Docket NumberCase No: A3/2012/2091
CourtCourt of Appeal (Civil Division)
Date26 February 2013

[2013] EWCA Civ 119





[2011] EWHC 2186 (Ch)

Royal Courts of Justice

Strand, London, WC2A 2LL


Lady Justice Arden

Lord Justice Elias

Lady Justice Black

Case No: A3/2012/2091

In the matter of Annacott Holdings Limitedand in the matter of the Companies Act 2006

Allan Attwood and ors
Geoffrey Maidment

Mr Thomas Grant & Mr James Sheehan (instructed by MacFarlanes LLP) for the Appellant

Mr Andrew Clutterbuck (instructed by Cubism Law) for the Respondent

Hearing date: 30 January 2013

Lady Justice Arden

Mr Maidment now appeals certain of the directions ("valuation directions") given by HHJ Hodge QC in his judgments of 23 May 2012 ("the May judgment") and 16 July 2012 ("the July judgment") for ascertaining the fair value of the shares in Annacott Holdings Ltd ("the company") held by Mr Attwood, the respondent to this appeal. The judge had previously ordered Mr Maidment to purchase those shares following a successful petition brought by Mr Attwood for relief for unfair prejudice under section 994 of the Companies Act 2006. Mr Maidment and Mr Attwood had effectively been 50:50 shareholders. The petition succeeded principally on the ground that Mr Maidment as sole director had procured the company to transfer its entire portfolio of 46 properties to him at an undervalue.


The following valuation directions given by the judge are not appealed:

• That the valuation date ("the Valuation Date") should be 1 October 2005, which preceded the transfer of the properties.

• That there should be no discount to reflect the fact that the petitioner's shares represent a 50% shareholding or the fact that the respondent was sole director.

• That Mr Attwood should additionally receive an award of interest, referred to in this appeal as "quasi-interest", on the price for his shares from 1 October 2005 to compensate him for loss of the use of the money in the meantime.


However, the following valuation directions given by the judge are appealed:

i) That the company's business should be valued on a going concern and not a liquidation basis (referred to below as a "break up" basis) of valuation.

Issue: Mr Maidment contends that this valuation direction was inconsistent with the judge's holding on 22 September 2011 that, failing agreement with Mr Attwood, Mr Maidment should have put the company into liquidation, rather than procure the transfer of properties to himself at an undervalue.

My conclusion: For the reasons given below, there was no such inconsistency.

ii) That the contingent liability for corporation tax payable on the disposal of the company's properties should be valued at the amount actually paid as tax by the company on the disposal at an undervalue to Mr Maidment.

Issue: Should the judge instead have used the figure of £983,205.52, being an estimate of the tax which would be payable if the properties were sold at valuation?

My conclusion: For the reasons explained below, the judge was entitled to decide that the appropriate deduction was an amount equal to the tax actually paid.

iii) That there should be no discount for the likely reduction in the proceeds of sale if the company's properties were sold as a single portfolio.

My conclusion: I agree with the judge. There was no need to sell the properties as a portfolio.

iv) That there should be no deduction for the costs of selling the properties.

Issue: Would the deduction have been a windfall for Mr Maidment, as the judge appears to have thought?

My conclusion: As explained below, I consider that the deduction of the selling costs of the actual sales should have been ordered and would not result in a windfall to Mr Maidment.

v) That the rate for quasi-interest should be 2% over Bank of England base rate ("BBR") from 1 October 2005 to 31 October 2008 and 3% over BBR for the period from 31 October 2008 to 16 July 2012. The date in 2008 was chosen to coincide (approximately) with the considerable fall in BBR at that date.

Issue: Was this rate excessive given, for example, that there was no evidence that Mr Attwood had borrowed to buy his shares in the company?

My conclusion: For the reasons given below, I consider that the judge's decision to award interest at this rate cannot be set aside.


On all these points, I bear in mind that valuation directions concern the ascertainment of fair value. This calls for an evaluation of a number of factors, including the history of the events in issue in the litigation ( Re Bird Precision Bellows Ltd [1986] Ch 658). In those circumstances, an appellate court needs to be satisfied that the judge was clearly wrong before intervening. Of course, it is easier to surmount this hurdle if there has been a misdirection in law.

Issue 1: Inconsistency between direction as to going concern basis and judge's earlier reference to Mr Maidment's obligation to put the company into liquidation?


A going concern basis assumes that a company is to continue carrying on its business. By contrast, where shares are valued on a break up basis, the assets of the company are valued as if the company had been put into liquidation and the liquidator had sold its assets. The resulting valuation is generally lower than one conducted on a going concern basis.


The judge undoubtedly expressed the view that Mr Maidment should not have transferred the properties to himself without seeking Mr Attwood's agreement, or putting the company into liquidation, so that the disposal of its properties could take place properly. That view was entirely correct.


The main point made by Mr Thomas Grant, who appears for Mr Maidment with Mr James Sheehan, is that it was inconsistent with this holding for the judge to go on and direct a valuation of Mr Attwood's shares on a going concern basis. He also points to the fact that the judge held that the company was not a quasi-partnership at the date of the transfer of the properties. For these reasons, he submits, the valuation should have been on a break up basis.


We did not call on Mr Andrew Clutterbuck, for the respondent, on this ground.


A quasi-partnership is a company where there is a special relationship between the parties which imports equitable considerations derived from the law of partnership. It is unnecessary to say more about those obligations in this case.


As I see it, Mr Grant is effectively seeking to undermine the judge's previous direction that there should be no discount for the fact that Mr Attwood did not have a majority shareholding.


In any event, however, the judge had to fix a price which was fair. There is no inflexible rule that only in a quasi-partnership case can the court order a valuation on a going concern basis. If the company was valued on a liquidation basis, Mr Maidment (the purchasing member) would receive the difference between the going concern value of the entire company and its break up value. He would therefore receive a windfall at the expense of the outgoing member, Mr Attwood.


There was therefore no inconsistency. The judge had to decide whether this resulted in a fair value being fixed for Mr Attwood's shares. A valuation on a break up basis would ignore the fact that Mr Maidment had acquired the assets. As the judge explained:

"[66] It is true that I referred to what should have happened; but it does not follow from what should have happened that I should undertake a valuation of Mr Attwood's shares on a basis which assumes that that had in fact happened, closing my eyes to what in reality had happened, namely a transfer of the properties to Mr Maidment…."


The judge explained that he found support in the holding in Re Sunrise Radio Ltd [2010] 1 BCLC 367 that the court had to determine the most appropriate basis of valuation taking into account all the circumstances of the case. He also referred to CVC/ Opportunity Equity Partners Ltd v Demarco Almeida [2002] 2 BCLC 108, a quasi-partnership case in which the appellant had been excluded from management. The Privy Council, on appeal from the Cayman Islands, held that an offer to purchase his shares on a break up basis would not be a fair offer for his shares which would justify giving an injunction against the appellant to prevent him from presenting a winding up petition on the just and equitable ground. The Privy Council reached this conclusion although there was no provision in the Cayman Islands companies legislation which enabled the court to grant relief from unfair prejudice. The Privy Council held that it would not be fair for the respondent to carry on the company's business and pay the petitioner only the break up value.


Mr Grant's submission is that the judge should not have relied on Demarco because in the present case, unlike the position in Demarco, the company was formed to make capital profits through property disposal. In addition the company's days were numbered: to carry on business as a limited company made it more difficult for Mr Maidment to raise mortgage finance. Whether that is so in practice or not, that distinction seems to me to be irrelevant to the valid point which the judge was making. The fact was that Mr Maidment would derive a windfall from a valuation on a break up value even if he decided to realise it and liquidate the company, and became liable for tax on it. Accordingly, Demarco is relevant by analogy to the present case, and the judge was thus entitled to rely on it in that way.


There is nothing in the further point made by Mr Grant that Mr Attwood had before his...

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