(first) Ronald Somerville, (second) Charles Shaw And(third) Nick Felisiak Against David Mcguire
| Jurisdiction | Scotland |
| Judge | Lord Clark |
| Neutral Citation | [2020] CSOH 70 |
| Date | 10 July 2020 |
| Docket Number | CA120/18 |
| Court | Court of Session |
| Published date | 10 July 2020 |
OUTER HOUSE, COURT OF SESSION
[2020] CSOH 70
CA120/18
OPINION OF LORD CLARK
In the cause
(FIRST) RONALD SOMERVILLE, (SECOND) CHARLES SHAW and
(THIRD) NICK FELISIAK
Pursuers
against
DAVID McGUIRE
Defender
Pursuers: McIlvride QC; Harper Macleod LLP
Defender: Thomson QC; TC Young LLP
10 July 2020
Introduction
[1] The pursuers and the defender are shareholders in a private limited company.
Relations broke down and as a consequence they entered into a contract to have the
defender’s shares independently valued, with a view to the defender being bought out. An
expert was appointed. The present dispute is about: (i) which of the exchanges between the
pursuers and the defender constitute the terms of that contract; (ii) what those terms mean;
and (iii) whether the expert is barred from continuing in that post, as a result of apparent
bias. The case called for a proof before answer.
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Background
[2] The pursuers and the defender are shareholders in 5 PM Limited (“the company”),
which was incorporated in 1999. In rounded figures, the respective shareholdings of the
parties are as follows: first pursuer, 35.4%; second pursuer, just under 20%; third
pursuer, 7.7%; defender, 35.4%. Thus, together the parties own over 98% of the shares. The
remaining shares are held by two others. The first and second pursuers and the defender
are the directors of the company. Since 1992 the defender has been a non-executive director.
The executive directors are the first and second pursuers.
[3] From around January 2012, the pursuers and the defender have been in dispute
about certain issues relating to the affairs of the company. The defender raised proceedings
against the company and the present pursuers in the sheriff court. The parties came to
recognise that the dispute could be resolved by the defender relinquishing his shares in the
company at a fair price. The first and second pursuers proposed purchasing the defender's
shares at a price determined by a valuation conducted by Johnston Carmichael, chartered
accountants. The defender did not accept the proposal. The first and second pursuers and
the defender then jointly instructed Grant Thornton, chartered accountants, to provide a
valuation of the defender's shares. Grant Thornton issued their letter of engagement on
22 March 2013 (“the Grant Thornton letter”). Their valuation was issued on 16 July 2013.
They subsequently agreed to withdraw that valuation and offered the parties an
opportunity to make representations on any of the factual matters upon which they
intended to rely. The defender declined that opportunity. No further valuation was made
by Grant Thornton.
3
[4] As at 8 November 2016, there was pending before Glasgow Sheriff Court a summary
application by the defender, raised by him against the company and the present pursuers.
He sought interdict against his removal as a director of the company or, alternatively, an
order in terms of section 996 of the Companies Act 2005 that the company or the first and
second pursuers purchase his shares in the company or, alternatively, an order for the
winding up of the company. The defender’s claims were opposed by the pursuers. By letter
dated 8 November 2016 (“the offer”), the pursuers’ solicitors wrote to the defender’s
solicitors making certain proposals to settle the dispute between the parties. One of the
proposals was for the purchase of the defender’s shares based on what was described as
“the Method 2 valuation”. This was a valuation of the defender’s shares by an independent
expert in accordance with the methodology identified in article 10.2 of the company's
Articles of Association. It was a condition of the offer that if the defender elected that his
shares were valued in accordance with Method 2 he would thereafter use all reasonable
endeavours to instruct and cooperate in such an expert valuation.
[5] Article 10.2 of the company's Articles of Association provides, so far as relevant, that
the price payable to the defender for his shares is to be such price as "the Expert shall certify
to be their fair value" and that
"The Expert will value the shares on a going concern basis as between a willing seller
and a willing buyer ignoring any reduction in value which may be ascribed to the
[shares] if they represent a minority interest and assuming that the [shares] can be
freely transferred."
Article 10.2 further provides that “The Independent Expert's decision on the Sale Price shall
be final and binding”. "The Expert" for the purposes of article 10.2 is
"an independent chartered accountant (who shall act as an expert and not as an
arbiter) nominated by the parties concerned or, in the event of disagreement,
appointed by the President of the Institute of Chartered Accountants of Scotland”
(“ICAS”).
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