Paul Dinglis v Andreas Dinglis
| Jurisdiction | England & Wales |
| Judge | Adam Johnson |
| Judgment Date | 05 December 2019 |
| Neutral Citation | [2019] EWHC 3327 (Ch) |
| Date | 05 December 2019 |
| Docket Number | Case No: CR-2016-002904 |
| Court | Chancery Division |
Adam Johnson QC SITTING AS A DEPUTY HIGH COURT JUDGE
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST
IN THE MATTER OF DINGLIS PROPERTIES LIMITED
AND IN THE MATTER OF THE COMPANIES ACT 2006
Rolls Building, Fetter Lane
London EC4A 1NL
David Peters (instructed by Ingram Winter Green LLP) for the Petitioner
Daniel Lightman QC and Eleni Dinenis (instructed by BDB Pitmans LLP) for the Respondents
Hearing date: 11 October 2019
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.
Adam Johnson QC
Introduction
This is my further Judgment in these unfair prejudice proceedings, following my Judgment dated 28 June 2019 [2019] EWHC 1664 (Ch) (“ the June Judgment”), in which I determined that the Petitioner's unfair prejudice claim was made out. In light of that Judgment I made an Order requiring the First and/or Second Respondents to acquire the Petitioner's minority (12%) shareholding in the Third Respondent, at a price to be determined and subject to a minority discount.
I also gave directions for an exchange of further statements of case between the parties, in order to try and provide greater definition to the issues going to valuation which separate them, and to prepare the way for a later valuation trial. The parties have now exchanged Schedules of Issues, and have produced a helpful composite Table of Issues. I am now asked to deal with a number of questions disclosed by the parties' Schedules and by the Table, which broadly are as follows:
i) What should be the date for valuation of the Petitioner's shares? This point was expressly excluded from the earlier phases of this litigation, which resulted in the June Judgment. The parties have very sensibly agreed that it should now be determined, so that the valuation exercise to be conducted can be carried out with a fixed date in mind, and not a range of possible dates.
ii) Insofar as the parties argue that the value of the Petitioner's shareholding should be adjusted (and various adjustments are suggested both by the Petitioner and by the First and Second Respondents), which of the proposed adjustments should be allowed to proceed to a valuation trial?
iii) What is the correct approach to the calculation of the intended minority discount? A number of points are raised under this heading, including the question of the continued relevance in terms of valuing the Petitioner's shareholding of the circumstances in which he originally came to acquire it.
In the remainder of this Judgment I will adopt the definitions used in the June Judgment, and so will refer to the Petitioner as Paul, to the First Respondent as Andreas, and to the Third Respondent (a corporate vehicle controlled by Andreas) as MHGL. The Third Respondent, in which Paul is a 12% shareholder, is DPL.
Background
The present Judgment should be read in conjunction with the June Judgment. For convenience, however, I will attempt to summarise those aspects of the overall story which are particularly relevant to the present issues.
Paul's Shareholding
DPL was established in the late 1980s, as a vehicle for Andreas to extend his existing business operations more extensively into the area of property ownership. It is one of a number of companies through which the Dinglis family businesses were run and assets (mainly property assets) were held.
Paul became involved in about September 1989, in order to support the business and to learn the ropes. To begin with, Andreas retained 99 of DPL's 100 issued shares, with the remaining share held by his wife, Iris. But later, in 1991, and consistent with Andreas' general desire to provide for his family, he transferred from his holding of 99 shares a further 11 shares to Iris, 12 to Paul, and 12 to Cheryl, Paul's sister. There have been various changes in the configuration of the shareholdings since then, but not in Paul's case: he has always held, in his own name, a 12% minority stake.
When cross examined at trial, Andreas confirmed the evidence given in his Witness Statement that the gifts he made of shares in DPL were intended to provide the relevant family members with “ financial security”, and that by that he meant “ security to the equivalent of 12% of the company's value”.
Dividends
As stated at [61] of the June Judgment, it was common ground between the parties that there was a high degree of flexibility in the way in which the affairs of DPL, and the other Dinglis family companies, were managed. This included flexibility in relation to the payment of salaries and dividends. At [63] of the June Judgment, I summarised Paul's evidence as to the treatment of dividends. This was to the effect that the dividend amounts received by the various family members never tallied with their percentage entitlements based on their shareholdings. Instead:
“ … what happened in practice is that at the end of each financial year, the family companies would each declare a total dividend equivalent to the total monies paid out that year to all family members. For tax return purposes, the family members would then each declare as income their percentage entitlement of the overall dividend declared by each company. If, in the case of a particular family member, there was a difference between that amount and the sums he or she had actually received, that would be accounted for either as a gift received by that family member from the others (if the family member received more than his or her strict entitlement), or conversely as a gift from that family member to one or more of the others (if the family member received less than his or her strict entitlement).”
I then went on at [64] to say that this was close to the position as described by Andreas, whose evidence was that there was considerable flexibility in the way in which individuals received remuneration, either in the form of salary or dividends. Andreas in his evidence described his “ policy”, which:
“ … was and is that to the maximum extent possible the profits of the businesses would be reinvested for the long term benefit of the family and that drawings should be limited to what I considered to be necessary for a reasonably comfortable lifestyle”.
Mortgages & Guarantees
During the course of the life of DPL, Paul took a number of steps which he now says are relevant to the valuation of his shareholding. Specifically:
i) At some point in about 1991 (see June Judgment at [43]), he personally acquired two properties to be used in DPL's business and in order to do so took out a mortgage or mortgages in his own name. The properties were rented out by DPL, and Paul's mortgage payments were met each month from rental income provided by DPL. Eventually, in 1997, DPL refinanced the mortgages and the properties were transferred from Paul to DPL at cost. The overall effect was that DPL (rather than Paul) benefited both from the profit generated from the rental income on the properties (it retained sums in excess of the amounts required to meet the monthly mortgage payments), and from the increase in the capital value of the properties between 1991 and 1997. In the meantime, however, Paul was personally liable under the relevant mortgages.
ii) In 1998, the year in which he became a director of DPL, Paul gave an unlimited personal guarantee in respect of DPL's indebtedness to its bankers, Bank of Cyprus (June Judgment at [54]). Paul's evidence was that there might have been earlier guarantees, but in any event, it was common ground that from 1998 onwards Paul gave a number of personal guarantees to secure DPL's indebtedness, and certain of those remained in place until June 2016, when they were finally released.
The Maremonte Companies
Andreas relocated to Cyprus in 2002, and over time engaged in new property ventures there, principally through three companies known as the Maremonte Companies (June Judgement at [72]). He also established a further Cypriot company, Gatemark, which from about 2006 came to acquire a number of valuable property assets in England ( ibid.).
The Maremonte Companies used borrowings from NBG (i.e., National Bank of Greece) to fund property ventures in Cyprus, but these ventures ran into serious financial problems in the wake of the 2008 financial crisis (June Judgment at [267]). This became a serious problem for Andreas too, since he had personally guaranteed the indebtedness to NBG. From 2010 onwards, Paul was also a shareholder in the Maremonte Companies. He held 24%, and Cheryl another 24%. In his Witness Statement for trial, Andreas gave his explanation of the background, as follows:
“I remained the sole shareholder of the Maremonte Companies until around 2010. At that point, because I was worried about my personal liabilities to National Bank of Greece, I told Paul and Cheryl that I would transfer each of them 24% of the shares while I kept 52%. I asked them to give me powers of attorney and I used these to complete the share transfer paperwork. They did not pay anything for the shares and I told them that if I was successful in my battle with NBG, which I eventually was, I would expect them to give me back these shares for free. By doing this I hoped to protect assets for the benefit of my family. I am currently the holder of 76% of the shares in each of the Maremonte Companies because Cheryl transferred her shares back to me following the settlement I reached with her last year by way of a gift.”
DML
Meanwhile as regards DPL,...
To continue reading
Request your trial
-
Ming Shu Hung, Ronald v J F Ming Inc.
...26 [2021] EWCA Civ 1135. 27 [1991] BCLC 959 at p 1006c-d. 28 [2001] EWCA Civ 1031; [2002] 1 WLR 1024 (Robert Walker LJ) at [60]. 29 [2019] EWHC 3327 (Ch) at 30 [2012] 1 BCLC 410. 31 [1986] Ch 658. 32 [1959] AC 324. 33 [1999] 2 BCLC 30. 34 [2018] EWHC 1715 (Ch), [2019] 1 BCLC 171. 35 A......
-
Ming Shu Hung, Ronald v J F Ming Inc.
...26 [2021] EWCA Civ 1135. 27 [1991] BCLC 959 at p 1006c-d. 28 [2001] EWCA Civ 1031; [2002] 1 WLR 1024 (Robert Walker LJ) at [60]. 29 [2019] EWHC 3327 (Ch) at 30 [2012] 1 BCLC 410. 31 [1986] Ch 658. 32 [1959] AC 324. 33 [1999] 2 BCLC 30. 34 [2018] EWHC 1715 (Ch), [2019] 1 BCLC 171. 35 A......