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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Profinance Trust SA v Gladstone [2001] EWCA Civ 1133 (2 July 2001) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2001/1133.html Cite as: [2001] EWCA Civ 1133 |
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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ORDER OF MR K LEWISON QC
(Sitting as a Deputy High Court Judge)
Strand London WC2 Monday, 2nd July 2001 |
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B e f o r e :
LORD JUSTICE ROBERT WALKER
____________________
PROFINANCE TRUST SA |
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GLADSTONE |
____________________
Smith Bernal Reporting Limited, 180 Fleet Street,
London EC4A 2HD
Tel: 0171 421 4040
Official Shorthand Writers to the Court)
MR PUSHPINDER SINGH (Instructed by Robbins Olivey of Woking Surrey) appeared on behalf of the Respondent
____________________
Crown Copyright ©
Profinance
SA ("
Profinance")
and the respondent was Mr Paul
Gladstone.
Profinance
owned 40 per cent of the shares in the company called Americanino Ltd to which the petition related. Mr
Gladstone
owned the other 60 per cent. The judge's order was that Mr
Gladstone
should purchase
Profinance's
40 per cent holding in the company for £46,000. He arrived at that sum as 40 per cent of £80,000 being the agreed value of the entirety of the company's shares as at December 1997, the date of the petition. But the judge then uplifted that sum by 45 per cent in order to provide for the delay in payment. In that way he arrived at an aggregate sum of £46,000.
Gladstone
should purchase
Profinance's
40 per cent holding for its value as at March 2000, the date of the eventual hearing of the petition. The result is that the sum Mr
Gladstone
has to pay is increased to £86,000. It is agreed that the appeal must be allowed with costs in this court.
Profinance;
on the contrary, he ordered
Profinance
to pay half of Mr
Gladstone's
costs of the petition. The judge took as his guidance, in the first place, Ord.44,r.3 of the Civil Procedure Rules and, in the second place, a well-known and important passage in the speech of Lord Hoffmann in O'Neill v Phillips [1999] 1 WLR 1092, 1106-8. The same passage is also reported at [1999] 2 AER 961, 974-6.
Gladstone's
solicitors sent a letter headed "Without prejudice as to costs", making an offer in the first instance to purchase the 40 per cent shareholding for £40,000. We know, with hindsight, that that offer exceeded the value of £80,000 eventually agreed for the whole share capital of the company as at the date of presentation. In the alternative (and so far as the deputy judge was concerned, more importantly) the letter also offered to purchase the shares at a sum arrived at by an independent valuation. The letter made proposals as to how the costs of independent valuation should be borne.
Profinance's
solicitors wrote indicating a willingness to accept the proposal for independent valuation but subject to four conditions which were, first, that certain overdue statutory accounts should be filed; secondly, that those accounts should be accepted by
Profinance
itself as giving a true picture of the company's financial position; thirdly, that more recent management accounts should be provided; and fourthly, that those more recent management accounts should be accepted by
Profinance
as representing the true financial position of the company. By 3rd March it became apparent that
Profinance
was not willing to agree that an independent valuation should be binding on it in any way. By that time directions given in the Companies Court had provided for experts' reports to be prepared on each side and filed. So already a substantial escalation of costs was occurring.
Profinance
has referred to what Lord Hoffmann said in his speech in O'Neill v Phillips about equality of arms. He said:
"Fourthly, the offer should, as in this case, provide for equality of arms between the parties. Both should have the same right of access to information about the company which bears upon the value of the shares and both should have the right to make submissions to the expert, though the form (written or oral) which these submissions may take should be left to the discretion of the expert himself."
"[Lord Hoffmann] does not say that the information must actually be in the possession of the Petitioner before the Petitioner is in a position to evaluate the offer. Indeed, since the offer is an offer to have the value determined by an independent valuer, there would in the ordinary case be no need for the Petitioner to have the information relating to the value of the company before agreeing that the value should be determined by an independent valuer. The need for information may arise later on in the process, at the time when the Petitioner and the Respondent wish to make submissions to the independent valuer, as Lord Hoffmann envisages."
Profinance's
solicitors to extract detailed information from the other side which bore on the position of the company's finances. Nevertheless, in due course a good deal of information was produced. It was the foundation of the agreed values which it must be noted had built into them an adjustment to provide for the prejudicial conduct on which the petition was based. Nevertheless,
Profinance
consistently rejected offers which have, as we now know with hindsight, been shown to have exceeded the market value at the times those offers were made, that is at different times during 1998. With one exception, no counter offer was forthcoming from
Profinance.
Profinance
to sell its 40 per cent shareholding for the sum of £105,000. That offer was made at the end of August 1998. It was accepted subject to contract and very nearly resulted in a concluded contract. It foundered for reasons which have not been fully explained but which certainly included a requirement imposed by
Profinance
in mid-September 1998 for a further £21,000 to purchase the shares in another company called Sound Storage Ltd which was then, it seems, of little or no value.
Profinance was encountering in obtaining information. Nevertheless, proceedings were on foot and it was a reasonable expectation that all that information would have been made available to an independent valuer. It was on the offer to go to an independent valuation rather than by reference to subsequent offers in particular sums that the judge largely based his decision. However the subsequent history of offers tends to confirm the same result. There will no doubt be hard feelings whatever result is reached on costs because the litigation has been so lamentably expensive.