Stuart Wells v Paul Hornshaw
| Jurisdiction | England & Wales |
| Judge | Mr Justice Adam Johnson |
| Judgment Date | 31 July 2024 |
| Neutral Citation | [2024] EWHC 2019 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2019-LDS-000783 |
[2024] EWHC 2019 (Ch)
Mr Justice Adam Johnson
Case No: CR-2019-LDS-000783
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURT IN LEEDS
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF TRANSWASTE RECYCLING AND AGGREGATES LIMITED
AND IN THE MATTER OF THE COMPANIES ACT 2006
Leeds Combined Court Centre
1 Oxford Row, Leeds, LS1 3BG
Martin Budworth (instructed by Ward Hadaway LLP) for the Petitioner
Gabriella McNicholas (instructed by Milners Solicitors) for the Respondents
Hearing date: 30 July 2024
Approved Judgment
This judgment was handed down remotely at 2pm on Wednesday 31 st July 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
The Issue and My Conclusion
The issue on this application is whether the Respondents' Part 36 Offer, made on 4 August 2023, was still open for acceptance when the Petitioner sought to accept it on 22 April 2024. Answering this question depends on the proper analysis of CPR rule 36.12, which is headed “ Acceptance of a Part 36 Offer in a split-trial case”.
I have come to the view that the Part 36 Offer was no longer open for acceptance by 22 April 2024, because by then all the issues in the case had been determined and the case had been decided, even though a valuation process is still ongoing in relation to the Petitioner's shares. I will explain my detailed reasons below.
The Petition and Counterclaim
The proceedings take the form of an unfair prejudice Petition under s.994 of the Companies Act 2006. The Petitioner, Mr Wells, is a minority shareholder in a company called Transwaste Aggregates and Recycling Limited (“ TRAL”). The Respondents, Paul and Mark Hornshaw (“ the Hornshaws”), are the majority shareholders.
Early in the proceedings, on 17 August 2021, DJ Jackson (as she then was) gave directions for the disposal of the Petition. These contemplated a trial of the allegations in the Petition and of the Respondent's Counterclaim, and possibly a further trial. Thus, the Order of DJ Jackson directed that:
“… so far as relevant, and depending on the outcome of the first trial ordered above, there will thereafter be a further trial to ascertain the price to be paid for the Petitioner's shareholding and the other terms of that purchase, in accordance with the decisions of the court in the first trial.”
To summarise the background briefly, the parties had a Shareholders Agreement (“ SHA”), which included an agreed mechanism for valuing Mr Wells' shares on exit. This involved a valuation carried out by an accountant acting as expert. A valuation had in fact been carried out following Mr Wells' departure from the business, which in 2016 produced a figure for his shareholding of roughly £550,000. Mr Wells was unhappy with that figure, however, and so commenced his Petition proceedings. Part of his case was that he was not bound by the valuation mechanism in the SHA, because the conditions for its operation had not been satisfied, and/or because the parties had agreed to override it, and/or because it did not operate fairly. Mr Wells made a number of other allegations, some of them of serious wrongdoing by the Hornshaws, which if successful would have had the effect of boosting the value of his shareholding. The Hornshaws' Counterclaim, meanwhile, sought to hold Mr Wells to the original 2016 valuation.
The Part 36 Offer
That brings me to the terms of the Part 36 Offer, which are set out in a letter from Mr Wells' solicitors dated 4 August 2023. That was about 6 weeks before the start of the trial of the allegations in the Petition and of the Respondents' Counterclaim. That trial took place in September and October 2023.
The terms of the Part 36 Offer related both to the price to be paid for Mr Wells' shareholding, and to costs. As regards the former, in the version of the Part 36 Offer supplied to the Court for the purposes of this application, the relevant figure has been redacted by agreement. That is to allow the point of principle which arises at the present stage to be dealt with, but without the Court being told the precise financial terms of the Part 36 Offer. Depending on the outcome of the present application, that may be relevant when the Court comes to determine the costs of the proceedings; but I am not asked to do so yet. The parties have agreed that such matters should await the outcome of the valuation which is now being carried out.
Bearing all that in mind, the terms of the Part 36 Offer can be set out as follows:
“Our client is willing to settle the Proceedings (under reference CR-2019-LDS-000783) on a full and final basis and on the basis that each party releases and forever discharges all and any actions, claims, rights, demands and set offs, whether in this jurisdiction or any other, whether or not presently known to the parties or to the law, and whether in law or equity, that is any of them ever had, or may have or hereby can, shall or may have against the other party arising out of or connected with the Proceedings, to include any actual or proposed counterclaims, on the following terms:
1. Our clients to pay to your client in return for the transfer of his entire shareholding in TRAL, within 14 days of accepting this Offer, the sum of [REDACTED] (‘the Settlement Sum’)
2. In addition, our clients will be liable to pay your client's costs (save for those ordered to be paid by your client to our clients pursuant to the order of Judge Jackson dated 11 November 2020) on the standard basis, to be assessed if not agreed, up to the date of service of the notice of acceptance, if this offer is accepted by your client within the Relevant Period.
3. The Settlement Sum is inclusive of interest until the expiry of the Relevant Period.”
The “ Relevant Period” referred to was a period of 21 days from the date of the Part 36 Offer, namely the period up to and including 25 August 2023. The Part 36 Offer was of course not accepted during that period.
The Judgment, Order and Other Consequential Matters
Judgment following the 2023 trial was handed down in February 2024 (see [2024] EWHC 330 (Ch)). Amongst other matters, I held that Mr Wells was bound by the valuation mechanism in the SHA, which had been engaged at the relevant time and had not been overridden (see at [116]–[118]). Otherwise, Mr Wells' allegations of wrongdoing were dismissed (see [131]–[169]). The Counterclaim was also however dismissed: I was not satisfied that the valuation had been conducted in accordance with the agreed machinery (see [124]–[128]). I therefore held that there was unfair prejudice, but in the limited sense that Mr Wells's shares had not been valued in the required manner (see at [237]–[240]). That being the nature of the unfair prejudice, the remedy I ordered was a new valuation, to be carried out by an accountant acting as expert not as arbitrator, and following the contractual mechanism in the SHA (see at [243]–[244]). Obviously, that will not require a full second trial, of the type DJ Jackson's original Order thought might be needed, depending on the outcome of the first trial.
There was a consequentials hearing on 15 April 2024. The Order following that hearing dealt with a number of matters: (1) it contained a declaration that the valuation mechanism in the SHA had been engaged when Mr Wells left TRAL in September 2015 (para. 2); (2) it dismissed the Counterclaim (para. 3); and (3) it set out directions for the conduct of the fresh valuation (paras 4–10), including (para. 5) that the valuer should proceed on the basis of the findings made in the Judgment. Para. 10 then stated as follows:
“The Respondents shall pay the price determined in the expert valuation report and the Petitioner shall provide a duly executed share transfer form and the relevant share certificates within 42 days of the date on which the valuation report is provided to the parties.”
Paragraph 11 provided for the parties to have liberty to apply. Paragraph 12 reflected the position as to costs I have already referred to, namely that there should be a further hearing to determine liability for the costs of the proceedings after finalisation of the valuation.
Another matter considered at the hearing on 15 April, but not resolved then, was the question whether the Hornshaws should pay quasi-interest to Mr Wells on the price payable for his shareholding, once it is determined by the expert. In a Judgment dated 26 April 2024 ( [2024] EWHC 970 (Ch)) I said yes, but only for the period between April 2016 and June...
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