Fitton & Co Ltd v Dushyant Kohli
[2023] EWHC 3594 (KB)
Timothy McMonagle v Lee Harvey & Ors
6 October 2023
[2023] EWHC 2406 (Ch)
High Court
Two business partners fought over the value of one's shares in their company. An expert gave an opinion, but there was a disagreement. The judge mostly agreed with the expert but changed one number to make it fairer because one partner secretly controlled more of the company than it seemed.
Key Facts
- •Petition for the valuation of shares in Integrated Control Solutions (Eastern) Limited.
- •Previous liability trial determined the shareholders' rights ([2021] EWHC 1374 (Ch)).
- •Single joint expert, Mr. Stephen Reed, valued the company and shares.
- •Disputes arose regarding directors' salaries, accounting adjustments (VAT, warranties, bad debts), EBITDA multiplier, and minority discount.
- •Ms. Harvey's separate petition was settled.
Legal Principles
Share valuation is an art, not a science; courts retain wide freedom to disregard expert views and apply fairness.
Hollington on Shareholders' Rights (9th ed.), paragraph 8-45; Joiner v George [2003] B.C.C. 298; Re Bird Precision Bellows [1986] Ch. 658; Re Planet Organic Ltd [2000] B.C.C. 610 Ch D.
In share valuation, the court must consider a hypothetical willing buyer and seller; intermediate discounts may be applied but are rare.
Holt v Holt [1990] 1 WLR 1250; Re Lloyds Autobody Ringway Ltd [2018] EWHC 2336 (Ch), paragraph 113(5).
ACCA Technical Factsheet 167 provides guidance on minority discounts.
ACCA Technical Factsheet 167
Outcomes
No adjustments to EBITDA are needed based on Mr. Reed's expert opinion.
The court accepted Mr. Reed's approach to directors' salaries (market rate, not historical payments), accounting adjustments (VAT, warranty provisions, bad debts), and the reasons behind his chosen EBITDA multiplier.
A 15% minority discount is applied to Mr. Harvey's shares.
Mr. McMonagle effectively controls 50% of the shares, thus reducing the minority discount from the initial 30% proposed by Mr. Reed, aligning with ACCA guidance.
Mr. Reed's treatment of the director's loan account is accepted.
No errors of principle or calculation were found in Mr. Reed's approach.
Similar Cases
Sally Ann Gibbins v John Peter Francis Tierney & Ors
[2024] EWHC 2004 (Ch)
Yiannakis Chambi (also known as John Chambi) v Aristos Aristodemou (also known as Ari Aristodemou) & Anor
[2024] EWHC 1610 (Ch)
The Witz Company LLC & Anor v Edmund Truell
[2023] EWHC 2877 (Comm)
Stuart Wells v Paul Hornshaw & Ors
[2024] EWHC 970 (Ch)