Irvine and Another v Irvine and Another
| Jurisdiction | England & Wales |
| Judge | THE HON MR JUSTICE BLACKBURNE,Mr Justice Blackburne |
| Judgment Date | 23 March 2006 |
| Neutral Citation | [2006] EWHC 583 (Ch) |
| Docket Number | Case No: 001499 OF 2003 |
| Court | Chancery Division |
| Date | 23 March 2006 |
[2006] EWHC 583 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Hon Mr Justice Blackburne
Case No: 001499 OF 2003
Miss Catherine Roberts (instructed by Stevens & Bolton LLP) for the petitioners
Nigel Dougherty (instructed by Charles Russell LLP) for the respondents
Hearing date: 16 March 2006
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Blackburne:
On 10 March 2006 I handed down judgment on this section 459 petition. I found that unfair prejudice had been established and ordered the first respondent ("Ian") to buy or procure the purchase of the petitioners' shares in the second respondent ("CIHL"). I expressed the view that in valuing the shares there should not be any minority discount but stressed that I had not heard argument on the point. The matter has since been argued.
The petitioners' shares together represent 49.96% of the issued shares in CIHL. Of that 49.96% just under half are held by the first petitioner ("Patricia") and the balance by the second petitioner ("the Trust"). The shares were acquired from the 50% holding in CIHL formerly owned by Malcolm Irvine ("Malcolm"), Patricia's late husband and Ian's younger brother. Malcolm died on 1 March 1996. In August 1994 Malcolm had given half of his shareholding to the Trust. By his will, Malcolm had given one share to Ian and the remainder to Patricia. Patricia is one of the two trustees of the Trust. The other trustee, Michael Thatcher, has "delegated" his powers as a trustee to Patricia in relation to the Trust. The Trust is for the benefit of Patricia's three sons who are all now adults. For all practical purposes Patricia and the Trust speak as one voice.
The question which I have to decide is whether in the working out of the buy-out order the 49.96% shareholding (as effectively it is) is to be valued on a pro-rata, non-discounted basis to reflect the fact that it is a minority holding. Miss Catherine Roberts, appearing on behalf of the petitioners, submitted that it should; Mr Nigel Dougherty, appearing on behalf of Ian, submitted that it should be valued on a discounted basis.
Most, if not all, of the authorities in which the question has been raised whether the shares in a company which is the subject of a section 459 petition should be valued on a pro-rata or on a discounted basis have been cases where the company is or is alleged to be a quasi-partnership. Certainly, Miss Roberts was unable to draw my attention to any in which a non-discounted basis of valuation has been applied to a minority holding in a company which is not a quasi-partnership.
The legislation does not stipulate how the matter is to be approached. On the other hand, the courts have repeatedly emphasised that the overriding requirement in quasi-partnership cases is that the price to be paid, where a buy-out order is made, should be fair. In Re Bird Precision Bellows Ltd [1984] Ch 419 (a case under section 75 of the Companies Act 1980, the predecessor to section 459) Nourse J said (at 431D):
"In the case of the shareholder who acquires shares from another at a price which is discounted because they represent a minority it is to my mind self-evident that there cannot be any universal or even a general rule that he should be bought out under section 75 on a more favourable basis, even in a case where his predecessor has been a quasi-partner in a quasi-partnership. He might himself have acquired the shares purely for investment and played no part in the affairs of the company. In that event it might well be fair —I do not know —that he should be bought out on the same basis as he himself had bought, even though his interests had been unfairly prejudiced in the meantime. A fortiori, there could be no universal or even a general rule in a case where the company had never been a quasi-partnership in the first place.
In summary, there is in my judgment no rule of universal application. On the other hand, there is a general rule in a case where the company is at the material time a quasi-partnership and the purchase...
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