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You are here: BAILII >> Databases >> The Judicial Committee of the Privy Council Decisions >> Alexiou & Anor v. Campbell (The Bahamas) [2007] UKPC 11 (26 February 2007) URL: https://www.bailii.org/uk/cases/UKPC/2007/11.html Cite as: [2007] UKPC 11 |
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Alexiou & Anor v. Campbell (The Bahamas) [2007] UKPC 11 (26 February 2007)
Privy Council Appeal No 63 of 2006
(1) Emanuel Alexiou
(2) Anthony Ferguson Appellants
v.
James A Campbell Respondent
FROM
THE COURT OF APPEAL OF
THE COMMONWEALTH OF THE BAHAMAS
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JUDGMENT OF THE LORDS OF THE JUDICIAL
COMMITTEE OF THE PRIVY COUNCIL
Delivered the 26th February 2007
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Present at the hearing:-
Lord Bingham of Cornhill
Lord Scott of Foscote
Baroness Hale of Richmond
Lord Carswell
Lord Brown of Eaton-under-Heywood
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[Delivered by Lord Bingham of Cornhill]
"It should be made very clear that, at the request and instruction of the Shareholders of CFG and in conformity with our engagement letter, this Estimated Appraisal Value has been determined using approximation techniques in order to quickly determine such value. We refer to this approach as a "back-of-the-envelope" calculation. As such, the Estimated Appraisal Value should not necessarily be considered as reliable as it might otherwise be had it been determined in the normal fashion, and cannot be assumed to be free of a material difference compared to what a full actuarial appraisal would have revealed. In any event, such value is only as reliable as the assumptions upon which it is based and a different set of assumptions would generate a different value."
A number of caveats were appended to the letter, the first two of which were:
"(1) This is a back-of-the-envelope calculation. As such, certain assumptions and estimates are made which in a normal more scientific and detailed approach may not be required.
(2) A more scientific approach of determining the appraisal value of Colina would have taken at least two to three months, and would have cost several hundreds of thousands of dollars. The purpose of performing the back-of-the-envelope calculation was to avoid this lengthy and expensive process."
On this basis Eckler Partners, using a net discount rate of 10.75%, put forward an estimated appraisal value of CIC of £57.3 million, giving a value of $2.32 per CHBL share.
"IT IS HEREBY ORDERED BY CONSENT that:
1. [Mr Alexiou and Mr Ferguson] do purchase the shares of [Mr Campbell] (held by PJ Enterprises Ltd) in [CFG] at its fair market value;
2. Graham Garner, Ishmael Lightbourne and Craig (Tony) Gomez ("the Experts") do convene a meeting no later than 25 August 2005 for the purpose of agreeing the fair market value of the interest of PJ Enterprises in [CFG], such agreement to be concluded by 10 September 2005, all parties be at liberty to make representations to the Experts;
3. In the event the Experts are unable to agree the question of the fair market value, the matter of fair market value shall be referred to a single arbitrator agreed to by Counsel for the parties whose decision shall be final and binding on the parties;
4. Pursuant to paragraph 1 of this Order [Mr Alexiou and Mr Ferguson] do pay an initial sum of $3,500,000.00 on or before Wednesday 3 August 2005 and a further sum of $9,000,000.00 on or before Wednesday 31 August 2005;
5. Upon payment of the sum of $3,500,000.00 [Mr Campbell] shall:
(a) Release to [Mr Alexiou and Mr Ferguson] the duly endorsed share certificate representing the interest of PJ Enterprises in [CFG] and the duly endorsed share certificate representing [Mr Campbell's] interest in Sentinel Bank and Trust Ltd.
(b) Provide his resignations in the various companies in and related to Colina Group of Companies in which he currently serves as Director or Officer.
6. Subject to the determination of the fair market value as provided for in paragraphs 2 and 3 hereof any outstanding balance due to [Mr Campbell] pursuant to paragraph 1 hereof (after payment of the $12,500,000.00 referred to in paragraph 4 above) shall be paid by [Mr Alexiou and Mr Ferguson] to [Mr Campbell] on or before the 31 December 2005, such balance to bear interest at the rate of 10% from the 1 September 2005. [Mr Alexiou and Mr Ferguson] shall provide to [Mr Campbell] a guarantee of a commercial bank to secure the payment of the balance.
7. All parties shall bear their own costs on this application.
8. That all parties have liberty to apply.
"24. Having carefully examined the language of the Consent Order, I am of the view that the parties meant and did say that [Mr Alexiou and Mr Ferguson]were to purchase [Mr Campbell's] shares in [CFG] at fair market value estimated at a minimum of $12,500,000.00 to be paid in two instalments, with any outstanding balance due to [Mr Campbell], in accordance with the determination by the Experts of the fair market value, being paid thereafter, but on or before 31 December 2005.
25. From a reading of the Consent Order, the parties clearly intended the matter to be resolved quickly, and with as little rancor as possible. That is why, in my view, they made time of the essence, providing for the payment of $3,500,000.00 to [Mr Campbell], the release of his shares and the submission of his resignations within nine days of the Consent Order, and the payment of the balance of the agreed minimum within a month thereof. Further, any balance found to be due, was to be paid after the payment of the initial sum and within five months of the Consent Order. Obviously, the parties intended this matter to be wrapped up as quickly as possible in the interest of [CFG]".
"12. The situation in the present case, as we see it, is that the parties have, in their bargain, gone a considerable way in settling the price to be paid for the shares. They have agreed as evidenced by the terms of the order, that it will be no less than $12.5 million. In effect, what the experts have been asked to determine, and this is perfectly possible given the basic fundamentals of the formula agreed on, is the extent to which the price exceeds that sum.
13. It seems quite plain to us, that the payments to be made in paragraph 4 pursuant to paragraph 1 were intended to be on account of or toward the purchase price of [Mr Campbell's] shares. That purchase price was determinable, based on the valuation of certain entities which had been mutually agreed on. Those valuations would necessarily have been an indispensable component of whatever formula the experts would use for arriving at the fair market value. More particularly, the Eckler valuation of CHB as at 31 December 2004, mutually agreed on for the consent order, had been inextricably locked into that formula. The valuations mutually agreed on, had suggested a determinable purchase price for the shares which as indicated above, would be no less than $12.5 million and judgment was entered for that sum pending a final determination of the purchase price. The experts were not only aware of the values agreed on, but in the context of the order, they are bound to act on them in determining the fair market value of [Mr Campbell's] shares."
"In our opinion, the consent order was clearly intended to be a judgment for an amount of not less than $12.5 million based on the mutually agreed valuations at the date of the order. This explains why no provision was included to cover the eventuality of the fair market value of the shares being less than that sum. In our view [Mr Alexiou and Mr Ferguson] cannot at this stage call into question the obligation to make the further payment."
(1) The fair market value of the shares held by PJ Enterprises Limited in Colina Financial Group Limited is to be agreed or determined as of 30 June 2005.
(2) The sum of $12,500,000 agreed to be paid under paragraph 4 of the consent order dated 25 July 2005 is not a minimum sum.
(3) The parties did not agree that valuations of group entities agreed between them and their experts in the period April-July 2005 should be contractually binding.
(4) If the fair market value of the shares held by PJ Enterprises Limited in Colina Financial Group Limited should be agreed or determined in any sum less than $12,500,000, any difference between that sum and the fair market value as agreed or determined should be reimbursed forthwith by Mr Campbell or PJ Enterprises Limited to Mr Alexiou (or his company) and Mr Ferguson.