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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Sodi-Tech EDM Ltd & Anor v DJM Law Ltd [2025] EWHC 981 (Ch) (29 April 2025) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2025/981.html Cite as: [2025] EWHC 981 (Ch) |
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CHANCERY DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
____________________
(1) SODI-TECH EDM LIMITED (2) PETER EDWARD CAPP |
Claimants |
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- and – |
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DJM LAW LIMITED |
Defendant |
____________________
Ben Smiley (instructed by Kennedys Law LLP) for the Defendant
Hearing dates: 26 February 2025
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Crown Copyright ©
(i) Peter Capp (the second claimant) was (and is) director and shareholder of Sodi-Tech EDM Limited (the first claimant). The second claimant's co-shareholder was a Mr Uwe Moeller (Mr Moeller).
(ii) DJM Law Limited (the defendant) acted as the claimants' solicitor in the sale of a property owned by the first claimant (the Property) to the second claimant and his SIPP. Mr Moeller was not made aware of the sale of the Property at the time it occurred. The sale of the Property took place in the absence of any resolution as required by ss.190 and 195 of the Companies Act 2006.
(iii) By a letter of claim sent to the claimants, Mr Moeller raised a number of allegations, including concerning the sale of the Property. He threatened an unfair prejudice petition.
(iv) Following receipt of the letter the second claimant/his SIPP sold the Property on.
(v) Mr Moeller issued an unfair prejudice petition (the Petition). The Petition was settled on terms contained in a consent order and confidential schedule dated 22 April 2021 (the Order) pursuant to which Mr Moeller's shares were purchased and his costs were paid.
"a. the premium paid by [the first claimant] to [Mr Moeller] for his shareholding in [the first claimant] pursuant to the Order (calculated by giving credit for the true market value of the same in the sum of £1,415,250 from the sum paid to [Mr Moeller] of £1,887,000) in the sum of £471,750;
b. the total costs incurred by [the first claimant] and/or [the second claimant] in defending the Petition and dealing with [Mr Moeller's] costs claim in the sum of £559,196.14;
c. The total legal costs ordered to be payable by [the first claimant] and [the second claimant] pursuant to the Order including the interim sum of £260,500."
"alleged true market value of [Mr Moeller's] shareholding in the sum of £1,415,250 is calculated, computed or otherwise made up."
"4. …….
a. The offer made by [Mr Moeller] on or around 1st April 2021 to settle the Petition was for [the first claimant] to buy-back his shares in that company in the total sum of £1,887,000.00 and to pay his costs on the Petition ("the Offer").
b. The Offer was made on the basis that there would be no discount to reflect that his shares were a minority interest in [the first claimant];
c. The Offer was also made on the counter-factual basis that the Property had not been sold from [the first claimant's] ownership.
d. Utilising [Mr Moeller's] pro-rating methodology (which methodology was not admitted to be correct) [the claimants] accepted privately that the figure of £1,887,000.00 was either: (i) likely to be accepted by a Judge at trial as correct on a net asset basis; or (ii) advantageous to them since it was slightly lower than the correct net asset market valuation….
g. In the event that [Mr Moeller's] shares in the [first claimant] had been valued for an open market sale by him, as a willing purchaser, to another, as a willing buyer, on the same counter-factual basis as in 4(c) above, a minority discount would have been applied of at least 25%."
(i) of the principle that no discount should be applied to the valuation of a 50% shareholding in the event that an unfair prejudice petition succeeds; or
(ii) as evidenced by paragraphs 6.1 to 6.3 of the ACCA Technical Factsheet 167 (the Factsheet), prior to the acquisition of Mr Moeller's shares the open market value of the second claimant's 50% shareholding calculated on a net asset basis would have been discounted from their pro-rata value by in the region of 25% but the acquisition of Mr Moeller's shares would have eliminated that discount.
"endeavour to agree questions for their respective experts by 4pm on 29 April 2024 and, in default of agreement, all parties have liberty to apply".
"Utilising [Mr Moeller's] pro-rating methodology (which methodology was not admitted to be correct) [the claimants] accepted privately that the figure of £1,887,000.00 was tactically one that should be accepted in circumstances where (i)either: (i) likely to be accepted by a Judge at trial as correct on a net asset basis; or (ii) advantageous to them since it was slightly lower than the correct net asset market valuation. whilst higher than a (final) valuation report obtained by them dated 14 April 2021 it was not dramatically different, (ii) the significant brief fees for trial were shortly to be incurred by [the second claimant]; and/or (iii) [the second claimant] had successfully negotiated down from previous higher valuations/payment to [Mr Moeller] including (but not limited to) those where [Mr Moeller] had previously demanded unpaid dividends ."
"the amendments have been bought [sic] about as the original response was based on our clients' draft report dated 6 April 2021 as opposed to the final report dated 14 April 2021 which contained differing calculations for the purposes of the valuations."
"a. in particular paragraph 48(b) (in addition to paragraphs 48(c)(i), 48(f) and 48(g) as below):
(i) the true market value of [Mr Moeller's] shareholding at the point at which it was acquired by [the first claimant] is a matter for expert evidence and/or to be determined at trial. The correct date for the assessment of loss by [the first claimant] and/or [the second claimant] in this case is the date upon which the Tomlin Order was made resolving the unfair prejudice petition;
(ii) [the first claimant's] expenditure as a head of loss/in mitigation directly on [Mr Moeller's] shareholding was in the sum of £1,887,000 and the credit that should be appended to that mitigation expenditure (which does not in any event represent the totality since it is ignorant of related costs) can only be the true open market value of the [Mr Moeller] shareholding that was purchased following the exercise referred to in paragraph 22(a)(i) above.
(iii) [the claimants'] best estimate of the said delta between the mitigation expenditure and credit was and remains until expert evidence as set out in the calculation in paragraph 33(a) of the PoC ("the Calculation") but ultimately this recoverable loss and damage value is a matter for the trial judge.
b. in particular paragraph 48(c)(i), it is admitted that the Calculation was undertaken on the basis that [the first claimant] agreed to use it for the Tomlin Order in consequence of which it was to acquire [Mr Moeller's] shareholding, but it is not admitted (if properly alleged) that the net asset valuation was reflective of the true open market value of the acquired shareholding if sold on the open market to a hypothetical willing purchaser, which method would have been for a valuer or alternatively the judge following the liability trial in the Petition.
c. in particular paragraph 48(d)(ii), it is denied that the sums paid by [the first claimant] to [Mr Moeller] for [Mr Moeller's] shareholding represented the open market value of [Mr Moeller's] shareholding (in which respect paragraphs 22(a)(i) and (ii) above are repeated) and further it is specifically denied that [the defendant's] plea there properly frames the calculation of loss sustained by each of [the first claimant] and [the second claimant] (in which respect paragraph 22(a)(ii) above is repeated).
d. in particular paragraph 48€(ii)(1), it is denied that [the second claimant] became, following the Tomlin Order, the 100% holder of the shares of [the first claimant] as alleged since the same is predicated upon a misreading of the Tomlin Order and [the first claimant's] share register. Paragraph 26 of the PoC is repeated. [The second claimant] became the 100% shareholder of the issued share capital in [the first claimant] following the cancellation of [Mr Moeller's] shares that were themselves acquired by the Company.
e. In particular 48(f):
(i) the principle that [the second claimant] must give credit for that which was acquired by him in pursuit of mitigation is admitted and paragraphs 22(a)(ii) and (iii) above are repeated;
(ii) the appropriateness of a net asset valuation is not admitted and paragraph 21(b) above is repeated, and/or
(iii) in circumstances where [the second claimant] was a controlling mind of the board of [the first claimant] and/or intrinsically involved in and/or central to its operations and governance, it is specifically denied that the amount expended by [the claimants] in acquiring the [Mr Moeller] shareholding (which would also take case out of [the first claimant's] available reserves) was equivalent to, or less than, the increase in value of [the second claimant's] shareholding in the first claimant].;
f. in particular paragraph 48(g), whilst the principle that [the first claimant] must give credit for the value of the shareholding acquired by it pursuant to the Tomlin Order is admitted, the methodology by reference to the net asset valuation and the figures there pleaded are denied, in which respect paragraphs 21(b) and 22(a)-(c) above are repeated."
(i) claimants:
"Based on the information and documents provided to the Claimants' expert in the UP Litigation and the fact settlement was achieved on 28 April 2021:
1. On the assumption that the Property Sale was treated as never having taken place, what was the open market valuation of Mr Moeller's 50% shareholding in Sodi-Tech EDM Limited to a hypothetical willing third-party purchaser at arms' length immediately before 28 April 2021.
2. On each of the assumptions that (i) the Property Sale was not unwound and (ii) the Property Sale was treated as unwound, what was the value of Peter Capp's shareholding in Sodi-Tech EDM Limited assuming an open market sale to a hypothetical willing third-party purchaser at arm's length (a) immediately before 28 April 2021; and (b) immediately after 28 April 2021."
(ii) defendant:
"1. The net asset value of C1 as a whole at the time the Petition was settled, on the hypothesis that the Property Sale had been unwound.
2. On the assumption of a sale on the open market, what (if any) discount would have been appropriate for:
a. The valuation of Mr Moeller's shareholding at the time the Petition was settled.
b. The valuation of Mr Capp's shareholding (i) before and (ii) after the Petition was settled."
Legal principles - Amendments
"a) In exercising the discretion under CPR 17.3, the overriding objective is of central importance. Applications always involve the court striking a balance between injustice to the applicant if the amendment is refused, and injustice to the opposing party and other litigants in general, if the amendment is permitted.
b) A strict view must be taken to non-compliance with the CPR and directions of the Court. The Court must take into account the fair and efficient distribution of resources, not just between the parties but amongst litigants as a group. It follows that parties can no longer expect indulgence if they fail to comply with their procedural obligations: those obligations serve the purpose of ensuring that litigation is conducted proportionately as between the parties and that the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately is satisfied.
c) The timing of the application should be considered and weighed in the balance. … The timing of the amendment, its history and an explanation for its lateness, is a matter for the amending party and is an important factor in the necessary balancing exercise: there must be a good reason for the delay.
d) The prejudice to the resisting parties if the amendments are allowed will incorporate, at one end of the spectrum, the simple fact of being 'mucked around' to the disruption of and additional pressure on their lawyers in the run- up to trial and the duplication of cost and effort at the other. …
e) Prejudice to the amending party if the amendments are not allowed will, obviously, include its inability to advance its amended case, but that is just one factor to be considered. Moreover, if that prejudice has come about by the amending party's own conduct, then it is a much less important element of the balancing exercise."
(a) Permission should not be granted if the proposed claim would have no real prospect of success (see [48] and [69]-[70]).
(b) An amended pleading must be coherent and contain the properly particularised elements of the cause of action relied upon (see [48] and [70], relying on Elite Property Holdings Ltd v Barclays Bank plc [2019] EWCA Civ 204 at [42]).
(c) generally, except in the case of very late amendments, unless there is no real prospect of success, mini-trials are to be avoided and the merits should be determined at trial [75]-[77].
The claimants' submissions on the amendment
20. They said new [4d] should be permitted where:
(i) no new claim is introduced. Rather further particulars, based on factual material, are introduced in support of an existing pleaded point. Part 18 questions may be asked to clarify or to obtain additional information about matters in dispute. New 4d is a response by way of further factual information to such an enquiry;
(ii) where the factual position of the claimants is simply updated by the proposed amendment it cannot sensibly be objected to;
(iii) the real prospect of success requirement does not apply if the line of claim or defence is in the original pleading and will remain in issue if the amendment is not allowed;
(iv) amending a Part 18 answer should rarely fail the amendment test in principle. Such a pleading cannot introduce a new claim and the defendant's refusal to agree is unprincipled and is an attempt to fish for material that might be deployed in cross examination of the second claimant which approach has no rule-based support;
(v) the application for permission to amend is not late, in the sense of endangering a trial date;
(vi) it reflects the evidence the second claimant will give at trial and he should not be held to the former position where the claimants have said their factual position was based on an error and will be different at trial and the claimants' witnesses can be cross-examined at trial about the point.
The defendant's submissions on the amendment
(i) the claimants' only explanation for the new [4d] is an erroneous reference to a figure in the draft as opposed to final report of Mr Pym. That explanation makes no sense as the net asset valuation in each version of the report is the same, the variations are attributable to different values of the Property;
(ii) in the absence of an explanation the inference to be drawn is that the claimants wish to resile from a position pleaded in the POC and verified by a statement of truth which is problematic for their case;
(iii) the proposed amendments would result in confusion and lack of coherence:
(a) The POC plead that Mr Moeller had been paid a premium of £471,750 above "the true market value" of his shareholding in the first claimant. It was implicit from that that Mr Moeller had been paid a pro rata value for his shareholding without the application of a minority discount and the market value of the first claimant as a whole was therefore £3,774,000;
(b) that implicit position was confirmed by the Response confirming that £1.887m was either likely to be accepted by a Court or advantageous to the claimants as it was lower than the "correct net asset market valuation" and that the premium referred to in the POC was 25% of £1.887m;
(c) the Amended Response seeks to delete reference to "current market value" altogether and the Amended Reply avoids committing to a case as to value;
(d) the claimants have sought to justify their stance by saying that values are matters for expert evidence or the trial judge. But both the experts and the Court need to proceed by reference to the pleaded case.
Law- expert evidence
"Expert evidence shall be restricted to that which is reasonably required to resolve the proceedings."
"68…it is necessary to look at the pleaded issues and, unless and until a particular issue is excluded from consideration under CPR 3.1(2)(k), the court must ask itself the following important questions: (a) The first question is whether, looking at each issue, it is necessary for there to be expert evidence before that issue can be resolved. If it is necessary, rather than merely helpful, it seems to me that it must be admitted. (b) If the evidence is not necessary, the second question is whether it would be of assistance to the court in resolving that issue. If it would be of assistance, but not necessary, then the court would be able to determine the issue without it (just as in Mitchell the court would have been able to resolve even the central issue without the expert evidence). (c) Since, under the scenario in (b) above, the court will be able to resolve the issue without the evidence, the third question is whether, in the context of the proceedings as a whole, expert evidence on that issue is reasonably required to resolve the proceedings. In that case, the sort of questions I have identified in paragraph 63 above will fall to be taken into account…."
"63. [If expert evidence is not necessary, then in assessing whether it is reasonably required] … the court should, in my judgment, be prepared to take into account disparate factors including the value of the claim, the effect of a judgment either way on the parties, who is to pay for the commissioning of the evidence on each side and the delay, if any, which the production of such evidence would entail (particularly delay which might result in the vacating of a trial date)."
The claimants' submissions on expert evidence
25. Mr Strelitz invited me to return to first principles to identify the loss and damage the claimants might claim and how the principles concerning mitigation work. McGregor on Damages (22nd Ed.) at [10- 004-10-006] says this:
"10-004 The first and most important rule is that the claimant must take all reasonable steps to mitigate their loss consequent upon the defendant's wrong and cannot recover damages for any such loss which they failed, through unreasonable action or inaction, to avoid. Put shortly, the claimant cannot recover for reasonably avoidable loss.
10-005 The second rule is the corollary of the first. It is that where the claimant does take reasonable steps to mitigate the loss to them consequent upon the defendant's wrong they can recover for loss incurred in so doing; this is so even though the resulting damage is in the event greater than it would have been had the mitigating steps not been taken. Put shortly, the claimant can recover for loss incurred in reasonable attempts to avoid loss.
10-006 The third rule is that the claimant cannot generally recover for avoided loss. Where the claimant takes steps before or after the wrong, or a third party takes steps, that avoid the loss then this reduces the recoverable loss. The most common scenario is where the claimant takes ordinary or reasonably necessary steps to mitigate the loss to them consequent upon the defendant's wrong, and where these steps are successful. Then, the defendant is entitled to the benefit accruing from the claimant's action and is liable only for the loss as lessened; this is so even though the claimant would not have been debarred under the first rule from recovering the whole loss, which would have accrued in the absence of their successful mitigating steps, by reason of these steps not being ones which were required of them under the first rule. In addition, where the loss has been mitigated by other reasonably foreseeable means such as actions by third parties or actions by the claimant before the wrong, the claimant can again recover only for the loss as lessened."
(i) the position that the claimants were each in immediately before the Order was agreed and Mr Moeller was paid in order to work out the platform for assessing any debit or credit for mitigation;
(ii) the value of the claimants' shareholding immediately following settlement to assess the value of the benefit to the second claimant; and
(iii) the value of Mr Moeller's shareholding at the date of the Order, in circumstances where Mr Moeller was only able to force the sale of his shareholding at a premium because of the defendant's negligence rather than sell at market rate with a minority discount for his 50% shareholding.
(i) under values the second claimant's interest pre-settlement. The method of valuation is a matter for the trial Judge (as it would have been for the Judge hearing the Petition) and what the defendant is seeking to do is depress that pre-settlement value by using a net asset valuation. It should be for the experts to determine the proper methodology for the valuation rather than be tied now to a net asset valuation; and
(ii) does not engage with what the valuation figure is or would be in each of the three scenarios identified in [28].
Defendant's Submissions on Questions for the Expert
(i) an issue which might require expert evidence is the net asset valuation of the first claimant at the material time, to that end the defendant has sought to clarify the claimants' case as to the "correct net asset market valuation" in order to consider whether it might be able to agree that figure and render expert evidence unnecessary. If the claimants were willing to agree this figure as £3,774,000, the defendants are willing to agree it also.
(ii) the only further issues which would reasonably require expert evidence are: on the assumption of a sale on the open market, what (if any) discount would have been appropriate for: (i) the valuation of Mr Moeller's shareholding, at the time the Petition was settled; and (ii) the valuation of the second claimant's shareholding (i) before, and (ii) after the Petition was settled.
(i) the appropriate discount is plainly a question not of legal principle but of valuation on which the court will require the assistance of an expert;
(ii) the claimants' have provided no proper explanation by reference to the parties' pleaded cases why any other expert evidence is needed. Once the net asset valuation of the first claimant is agreed or the subject of expert evidence, then the relevant values of the shareholdings of each of Mr Moeller and the second claimant will be calculable from the discount.
(iii) Applying BA v Spencer, expert evidence is not necessary to resolve any other pleaded issue (see [68]), nor do the factors at [63] militate in favour of ordering it. The claimants' wide-ranging proposal would greatly increase the costs of the expert exercise by requiring a wholesale re-valuation on various different parameters, which do not have any basis in the pleadings.
(iv) since the expert evidence of Mr Pym in the Petition was that the net asset value of the first claimant was higher than its enterprise value and there was no reason to think that there was a difference in the value of the first claimant between the date of Mr Pym's valuation and that of the Order, the defendant was willing to agree the net asset valuation (either at Mr Pym's £3.25m or such higher figure as represented by the "correct net asset market valuation" referred to in the Response) provided that figure was identified by the claimants. Assuming such agreement could be reached all that the experts would need to give evidence about the value of is:
(a) Mr Moeller's shareholding in the first claimant on the open market; and
(b) the second claimant's shareholding in the first claimant on the open market immediately following the second claimant's acquisition of Mr Moeller's shareholding, in order to identify the credit the second claimant would need to give for the benefit obtained from the share buyback.
Discussion and Conclusions
(i) give permission to the claimants to Amend their Response by the inclusion of new [4d]; and
(ii) direct that the parties' experts are to answer questions in the form of the proposals made by the claimants.