England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Rolls Building, Fetter Lane, London, EC4A 1NL
		19 October 2017

HHJ Paul Matthews :

Introduction

1. This is my judgment on the trial as to quantum following a decision on liability in relation to a petition under the Companies Act 2006, section 994, complaining of conduct unfairly prejudicial to the interests of the petitioners, as to their shares in a company known as Addbins Ltd.
2. The judgment on liability was given by Edward Bartley-Jones QC, sitting as a deputy judge of the High Court, on 3 November 2015. I will refer to this in due course in more detail. In September 2016, Mr Bartley-Jones QC presided at the further trial in relation to quantum. He reserved his judgment. Very sadly, he died on 22 April 2017, without having delivered that judgment. It was therefore necessary, unfortunately, to hold a fresh trial as to quantum. The matter was relisted on 5 June 2017, for 16 to 18 October 2017. A letter dated 6 June 2017 was sent out to the parties by the court.

Concern about additional costs

3. In the meantime, the petitioners were very unhappy at the costs which they had incurred in relation to the first trial, and at least some of which would now be potentially thrown away. Their solicitors engaged in correspondence with the court, both at an administrative and a judicial level (both the Chancellor of the High Court and the Lord Chief Justice received emails or letters), but were in each case referred to the Ministry of Justice.
4. Under section 53 of the Administration of Justice Act 1985, the Secretary of State for Justice has the power (but not the obligation) to award payment out of central funds of "additional costs" incurred by a party to civil litigation where the judge presiding over that litigation dies or becomes incapacitated before its conclusion. On 17 August 2017 the Ministry of Justice responded to the enquiries of the petitioners' solicitors by letter stating that the Ministry could not make an assessment of what were the "additional costs" incurred until the conclusion of the retrial, and that, in any event, there was currently a cap of £8,000 for each party.
5. It is clear that the petitioners and their solicitors were unhappy at this response, and the solicitors continued to write to the Ministry of Justice, though apparently without response. But the point is that no preparations were made by the petitioners for the retrial, including the instructing of counsel for this purpose. Nor was any application made initially to the court for an adjournment of the retrial.

Events leading up to the re-trial

6. The petitioners told me in person on 16 October 2017 that they were only informed by their solicitors by email on 25 September 2017 that the retrial was to begin on 16 October. It does however appear, from the witness statement made by the petitioners' solicitor, Mr Dean Dunham, on 10 October 2017, in paragraph 15, that the petitioners' solicitors must have been aware of the relisted trial date at least by 22 August 2017. As I understood it at the hearing on 16 October, this is accepted by the petitioners. But, in any event, from the material provided by the respondents, exhibited to a witness statement of Joanne Gregory dated 12 October 2017, it appears that the petitioners' solicitors in fact knew of the date of the retrial as early as 14 June 2017. The solicitors concerned have not had the opportunity to comment, and therefore I cannot make any decision as to whether or not they only informed their clients of the relisted trial on 25 September 2017.
7. The petitioners told me that, after a conference with their counsel and their solicitor on 28 September 2017, they were left with the impression that they did not have to prepare for a trial on 16 October. Nevertheless, on 10 October 2017 the respondents' solicitors refused to consent to an adjournment of the trial, and the petitioners' solicitors issued a formal application for an adjournment. That application was supported by the witness statement from Mr Dunham, but opposed by the witness statement from Ms Gregory. The application was heard by Mr Justice Marcus Smith on Friday, 13 October 2017, when both sides were represented by counsel (but, in the case of the petitioners, not the counsel who appeared at the first trial).
8. The judge refused the application. I have not seen a transcript or a note of the judgment, but Mr Sinclair of counsel, who was present, tells me that the primary reason given was the delay in making the application, and a secondary reason was the prejudice to the respondents, who had incurred financial loss which they could not easily recover from the petitioners, because of their seeming impecuniosity. After the hearing, it appears that the petitioners' solicitors indicated that they could no longer act, apparently because they had not been put in funds for the trial, due to start the following Monday. I should say that, having checked the court file on the morning of 16 October 2017, there was no trace of any application by the solicitors to come off the record.
9. On Monday, 16 October 2017, I heard a further application from the two of the three petitioners acting in person (the first petitioner being out of the United Kingdom assisting a relative who was recovering from a fall some months earlier) for an adjournment of the trial. After reading an email from the first petitioner, and hearing from the second and third petitioners and counsel for the respondents, I dismissed that application, for reasons which I gave at the time.

Representation at the re-trial

10. At the hearing of the trial on Tuesday, 17 October 2017, all three of the petitioners were present in person. The respondents were represented by Mr Sinclair, instructed by solicitors, as before. At various stages in the hearing the petitioners had evidently agreed amongst themselves as to which of them would speak for all three. Most of the speaking was done by the third respondent, although the first respondent also participated. The second respondent did not address me, although he was present throughout. I also had the benefit of seeing copies of the written submissions prepared by the petitioners' then counsel at the first hearing of the quantum trial in September 2016. These included both skeleton argument and summary opening on their behalf and counsel's closing submissions for them. At the end of the hearing before me, I allowed the petitioners to prepare and hand in written closing submissions, to which Mr Sinclair did not seek to respond. I have taken all of these into account.

Background

11. The background to this matter is as follows. The petitioners and a Mr Matthew Giles proposed a business scheme by which businesses which attracted customers who smoked would agree to a cigarette bin being affixed to their premises and maintained without charge, on the basis that the company promoting the scheme would then be able to sell advertising on the bin. This was discussed at meetings in August and September 2007. An advertisement was placed in the Evening Standard on 19 September 2007, seeking expressions of interest by telephone from businesses who might join the scheme. A meeting was held later that day including the first respondent, at which it was agreed that a company should be formed to take forward the scheme. That company was Addbins Ltd.
12. In the event, 100 shares were issued, 16 to each of the five respondents, and the other 20 shared between the three petitioners and Mr Giles. The first petitioner had five, the second petitioner had seven and the third petitioner had one. That gave them 13% of the issued share capital. The first four respondents each invested £25,000 by way of loan to the company, and each became a director. But the fifth respondent, the three petitioners and Mr Giles did not put in any money beyond the par value of their shares, and did not become directors.
13. The first fourth and fifth respondents were all connected with the private hire company known as Addison Lee Limited ("ADL"). The first respondent was chairman of ADL until May 2013, and the fourth respondent was a director of ADL until the same time. The fifth respondent had been a director of ADL since 2002, but has been the chief operating officer of ADL since May 2013. ADL initially paid £5 per week per bin for its advertising on the company's bins. In June 2008 this was reduced to £1 per week, and in August 2008 to 50p per week. From March 2011 the company did not even invoice ADL for the advertising which it had, and ADL did not pay.
14. After March 2011 the fortunes of the company declined considerably. In March to April 2011 Westminster City Council prosecuted the company in respect of unauthorised advertising. It was successful and the company was fined. On 15 June 2012 the High Court (Edwards-Stuart J) made an order requiring the advertisements to be removed from bins in Westminster. On 20 December 2012 the High Court (Males J) made a further order finding the company, ADL and the first respondent to be in contempt of the earlier order. In May 2013 ADL was sold to the Carlyle Group. Despite refresher campaigns, by December 2014 ADL had concerns over the deteriorating physical condition of the bins and the ageing of the advertisements. On 12 February 2015 ADL required the company to remove its advertisements from the bins within 28 days. The company's business was thereafter effectively dead.

Judgment on liability

15. As I have already said, on 3 November 2015 the deputy judge gave judgment on the question of liability in this unfair prejudice petition. He accepted one strand in the petitioners' argument, namely, that the first respondent, who was a director of the company, but also the chairman of ADL, had preferred the interests of ADL to those of the company, in the way in which it had given advertising effectively free to ADL. The deputy judge made an order that the first respondent (and only he) purchase the petitioners' shares without any minority discount, at a valuation date of 12 February 2015, which was the date on which ADL had refused to advertise further on the bins. The judge further held that the valuation of the shares should be made at a subsequent hearing, on the basis of the findings of fact which he had made, and with certain adjustments, although without prejudice to any further findings or adjustments that the judge dealing with the question of quantum should consider appropriate.
16. There is of course a potential question as to the principles upon which the court embarks upon the rehearing of a trial which has proved to be abortive. For example, the judge at the first trial may have made interlocutory decisions about the reception and admissibility of evidence, or about other procedural matters. To what extent are those decisions binding on the judge who deals with the retrial? There was no debate about this before me, but my view is that decisions made by the deputy judge at the original trial on quantum as respects interlocutory matters are not binding upon me as the judge dealing with the retrial of the quantum question. I am considering the matter of quantum from the beginning, just as the deputy judge originally did himself. It would be possible for either party to adduce different evidence in relation to the second trial on quantum (albeit at the cost of some forensic comment), and it does not follow that therefore that an interlocutory decision made by the judge on the first quantum re-trial should be authoritative or binding in relation to a similar question arising potentially on different material at the second trial. Obviously this is not a question affecting decisions on liability after the first trial, which are, as between the parties, a matter of res judicata. Here I am only concerned with matters which affect the question of quantum.
17. In his judgment on liability, the judge made certain findings of fact which are relevant, indeed important, in connection with this trial on quantum. These findings are binding on the parties. They include the following, in my own summaries, prefaced by the relevant paragraph number of the judgment:

6. The first four of the respondents each invested £25,000 in the company to fund its business, by way of loan, which loan remains due from the company to these four respondents.

10. On the basis of the expert evidence at the liability trial, it was "crystal clear that, however attractive the business model may have looked initially, it was virtually doomed to failure". As a matter of fact, almost no third party advertising was ever obtained for any of the bins, and in default they were used throughout London to carry adverts for ADL.

40. By May 2011 at the latest, the first respondent appreciated that the company's business was a "dead duck" so far as third party advertisers were concerned.

45. On 12 February 2015 ADL's company secretary wrote to the company requiring the company to remove all the advertisements referring to ADL from all the bins within 28 days. The judge therefore held that this was the date on which ADL stopped voluntarily using the bins for its advertisement.

46. The company had no advertisements thereafter, and would be unable to obtain any. Effectively, therefore, the company's business was at an end with no hope of resurrection.

57. National advertising was never realistically available to the company from the beginning. The only sources of advertisements were either local advertisements or sponsorship.

60. Both expert witnesses called thought that the only hope for the company's business model was to obtain a sponsor, someone who would take all the bins for a lengthy period of time. In fact, ADL was that sponsor.

61. But a sponsor would require a considerable discount to reflect the benefits to the company in guaranteed future income, and lower costs both of sales and of changing the sites.

83. The business of the company ceased to be a viable going concern on 12 February 2015, when ADL notified it that it no longer wished to advertise on the bins.

18. In relation to the approach to be taken in valuing the interests of the petitioners in the company for the purposes of an order that the first respondent buy their shares in the company, the judge held in particular as follows (my summaries, giving paragraph numbers as before).

84. The appropriate valuation date was 12 February 2015.

86. At that date the company may have had contingent liabilities relating to the removal of the bins which would need to be taken into account in the valuation. That would be a matter for the court in dealing with the share valuation.

91. There should be no minority discount in the valuation of the petitioners' shares.

94. The valuation should be on the basis of the actual value of the petitioners' shares as at 12 February 2015 "with adjustments to be made to compensate the petitioners for the unfairly prejudicial conduct".

96. The judge left open to the court conducting the share valuation "any issue as to whether there should be an adjustment of the accounts to reflect costs charged to the company (or any fine paid by the company) in respect of the initial prosecution [brought by the City of Westminster] and the appeal".

98. However, there could be no question of a rewriting of the accounts in respect of costs or fines incurred by the company as a result of the first respondent's actions.

99. On the other hand, the accounts of the company as at 12 February 2015 had to be adjusted to reflect the income which it should have received from ADL for ADL's use of the bins. But the issue is whether it should have received more than it actually did, and not whether the amount actually received should be reduced.

100. It would be quite wrong to work out the amount that should have been received by reference to a simplistic equation of £X per bin per week multiplied by the number of bins in use from time to time. ADL was the sponsor and would have paid the rate appropriate for a sponsor. That rate would not have equated to a rate that a third party advertiser would pay. The sponsor would have expected a substantial discount on that.

101. What in an objective commercial negotiation ADL would have paid as a sponsor was left by the judge to the court dealing with the share valuation.

103. The upper ceiling for the price of such sponsorship could not exceed £0.50 per bin per week.

105. As to the number of bins used by ADL for advertising, by July 20,098 bins had been purchased, and 95% of the available bins were so used. But it might be that a sponsor would pay the same for an estate of 20,000 as for an estate of 30,000 bins.

The parties' cases

19. In their original statement of case, the petitioners proceeded to value their shareholding by adding back missing revenue on basis of a formula which can be conveniently expressed as "price per bin per week x number of bins x number of weeks". This valued the revenue at £3.47m, and the petitioners' 13% at £451,440.91. The judge said at paragraph 100 of his judgment that this was not the correct approach. Instead, the missing revenue should be valued on the basis of what a sponsor would pay.
20. In their amended points of claim of 26 August 2016, the petitioners purport to value the missing revenue on a sponsorship basis. But in fact, basing themselves on the report of their expert forensic accountant, they still claim a value for that revenue based on a similar formula, ie number of bins available x rate historically paid by ADL x number of weeks, albeit taking into account the amount that ADL would set aside for outdoor advertising and the "unique benefit" to ADL. Certain limited other costs would also be taken into account, but the directors' loan of £100,000 would not be repaid. In the present case, taking the highest value from the range put forward in the expert report, the claim was for £1.5m. This works out at £205,033 for a 13% shareholding.
21. The respondents' approach, as set out in their amended points of defence, is different. It is to value the amount to be paid by a sponsor for the entire estate (however many bins it was) for the entire period, considering whether ADL would have paid market rate from time to time. The respondents' expert evidence was that for this estate the market rate for a sponsor would be in the range of £50,000-£65,000 per annum. From this revenue stream would need to be deducted the running costs, and then when the business closed down the repayment of the directors' loan, the removal of the advertisements and/or the bins themselves, taxation and winding-up costs. According to the calculations of their expert, this gave the value of the company as Nil.

Hypothetical negotiations

22. In the present case, the judgment on liability (at [101]) requires the court now to value

"what, in an objective commercial negotiation, ADL (perceiving advertising on the bins to be of commercial value to it) would have paid as a sponsor from time to time and at any time…"

23. Questions of this kind have been considered in a number of authorities concerned with so-called "hypothetical negotiation damages". These are not cases of assessing the value of shares in companies for the purpose of unfair prejudice proceedings, but they provide a useful analogy for such proceedings. A wrong has been committed, and the remedy awarded is the purchase of the rights of the victims (or some of those rights). Thus, in Pell Frischman Engineering v Bow Valley Iran Ltd [2011] 1 WLR 2370, a decision of the Privy Council, Lord Walker described the hypothetical negotiation in this way:

"[49] It is a negotiation between a willing buyer (the contract breaker) and a willing seller (the party claiming damages) in which the subject matter of the negotiation is the release of the relevant contractual obligation stop both parties are to be assumed to act reasonably stop the fact that one or both parties would in practice have refused to make a deal is therefore to be ignored…"

24. Post valuation events are normally irrelevant, but the judge may depart from the norm where there is good reason: see Lunn Poly v Liverpool & Lancashire Properties Ltd [2006] EWCA Civ 430, [27]-[29]; Pell Frischman Engineering, [50]. It is also clear that the personal characteristics of the parties are to be disregarded in the hypothetical negotiation: Stadium Capital Holdings (No 2) Ltd v St Marylebone Property Co plc [2011] EWHC 2856 (Ch), [71]. However, the fact that one party held a "trump card" and could have stopped the other party obtaining any benefit is a relevant matter to take into account: Stadium Capital Holdings, [69].
25. The hypothetical negotiation may be for the purchase of a permanent right, or (as in this case) it may be for a temporary one. In principle, there is no reason why the model developed for the purchase of permanent rights should not be applied to the case of purchase of temporary rights, so long as the more limited nature of the exercise and the considerations relevant to negotiations for limited rights are taken into account: Eaton Mansions (Westminster) Ltd v Stinger Compania de Inversion SA [2013] EWCA Civ 1308, [15]. So you should not tribute to parties in the hypothetical negotiations a position or intention different from the one which they had when they committed the wrong in respect of which damages are being assessed: Eaton Mansions, [16]. But that does not mean bringing in all the personal characteristics of the parties by the back door.

The expert evidence

26. As I have already said, at the trial on liability, the judge made certain findings of fact, which are binding on the parties, and which form the foundation for my decision on quantum. As a result, no factual evidence was called at the hearing before me, just expert evidence. For the petitioners there was called Bee-Lean Chew, an expert in forensic accountancy (but not in advertising), For the petitioners there were called Royston Jeans, an outdoor marketing (ie advertising) expert, and Gavin Pearson, an expert in forensic accountancy. So in the field of outdoor marketing, the court heard evidence only from one expert. The question therefore arises what the court's approach should be in relation to the evidence of that expert.
27. The only authority cited to me on this topic was the decision of the Court of Appeal in Coopers Payen Limited v Southampton Container Terminal Ltd [2004] 1 Lloyds Rep 331. That was, however, a slightly different case, where there was a single joint expert rather than an expert instructed by one side only. Nevertheless, in that case Lord Justice Clarke (with whom Lord Justice Schiemann and Mr Justice Lightman agreed) said:

"42. All depends upon the circumstances of the particular case. For example, the joint expert may be the only witness on a particular topic, as for instance where the facts on which he expresses an opinion are agreed. In such circumstances, it is difficult to envisage a case in which it would be appropriate to decide this case on the basis that the expert's opinion was wrong. More often, however, the expert's opinion will be only part of the evidence in the case. For example, the assumptions upon which the expert gave his opinion may prove to be incorrect by the time the judge has heard all the evidence of fact. In that event the opinion of the expert may no longer be relevant, although it is to be hoped that all relevant assumptions of fact will be put to the expert because the court will or may otherwise be left without expert evidence on what may be a significant question in the case. However, at the end of the trial the duty of the court is to apply the burden of proof and to find the facts having regard to all the evidence in the case, which will or may include both evidence of fact and evidence of opinion which may interrelate."

28. Mr Justice Lightman (with whom Lord Justice Schiemann also agreed) added:

"67. Where a single expert gives evidence on an issue of fact on which no direct evidence is called, for example as to valuation, then subject to the need to evaluate his evidence in the light of his answers in cross examination his evidence is likely to prove compelling. Only in exceptional circumstances may the judge depart from it and then for a good reason which he must fully explain. But if his evidence is on an issue of fact on which direct evidence is given, for example the speed at which a vehicle was travelling at a particular time, the situation is somewhat different. If the evidence of a witness fact on the issue is credible, the judge may be faced with what, if they stood alone, may be the compelling evidence of two witnesses in favour of two opposing and conflicting conclusions. There is no rule of law or practice in such a situation requiring the judge to favour or accept the evidence of the expert or the evidence of a witness of fact. The judge must consider whether he can reconcile the evidence of the expert witness with that of the witness of fact. If you cannot do so you must consider whether there may be an explanation for the conflict of evidence or for a possible error by either witness, and in light of all the circumstances make a considered choice which evidence to accept. The circumstances may be such as to require the judge to reach only one conclusion.

68. In my judgment in the circumstances of this case and on the evidence before her, the judge could only properly have chosen to accept the evidence of the expert there was by the close of the trial known surviving alternative explanation for the trailer toppling over other than it was travelling at an excessive speed. No other explanation was put forward by the defendant's counsel in his closing submission and the judge held that none was shown. … In the circumstances there was no basis on which the evidence of the expert could be disregarded…"

29. The present is not a case of a single joint expert. Each side had permission to adduce evidence in the field of outdoor marketing. Only the respondents chose to avail themselves of this permission. The factual basis for the decision on quantum was not established by separate evidence called before me, but was instead found in the facts found by the judge in the earlier liability judgment. It seems to me that I am in much the same position as the judge before whom a single joint expert gives evidence. The expert evidence is there, and being relevant must be taken into account. There is no expert evidence to contradict it. It must be weighed up together with all the other evidence to reach a conclusion. Assuming that the expert evidence tendered is not based on wrong assumptions as to the facts, or incredible, it is not likely to be disregarded, but instead accepted.

The witnesses

30. My impressions of the expert witnesses are as follows. Mr Jeans was calm, knowledgeable and confident. Ms Chew was very thorough, very smart, but knew her limits and also followed her instructions. Mr Pearson was clear and also straightforward. All three expert witnesses did their best to assist the court. Mr Jeans and Mr Pearson were cross-examined by the petitioners in person (non-lawyers), but not to any great extent. Ms Chew was cross-examined by Mr Sinclair. I record here that the evidence of none of them was significantly diminished as a result. Where their evidence was in conflict, one with another, this was largely because of the point of view from which they were observing the situation, and the instructions on which they were acting, rather than because one was a more accurate expert witness than another.

The issues between the parties

31. The parties were agreed that the company had not paid any of the costs or fines incurred by the company as a result of the prosecution of the company by Westminster City Council and the following injunction and contempt proceedings. Accordingly there was no need to make any correction to the company's accounts in respect of these. The live issues between the parties are in effect five. The first is the question of the revenues of the company up to the date of valuation. This has two parts. One is a calculation of the actual revenues so far as they can be ascertained, and then the other is a calculation of the potential revenues run on a sponsorship basis. It is agreed between the parties that for the purposes of this exercise the higher of the two figures should be taken. Secondly, in calculating the value of the shareholding of the petitioners, should account be taken of the operational costs? If so, what are those costs? Fourthly, in calculating the value of that shareholding, what account should be taken of the loan by the directors? Lastly, what is the appropriate level of winding up costs? I address each of these in turn.

Revenues

32. The actual revenues are not in dispute. As to the hypothetical revenues, the petitioners argue that the judgment on liability made clear at paragraph 40 that the valuation should be based on the income that the company should have achieved. I do not think that paragraph 40 of the judgment says this. That paragraph is dealing with the question whether ADL considered that the advertising was beneficial to its business at that time. At the same time I agree that the valuation should be based on accounts adjusted to reflect the income which the company should have received from ADL for its use of the bins: see paragraph 99. The petitioners rely on this paragraph as showing that the question was not what third party would have paid, but rather what ADL would have paid. I do not think that this paragraph goes so far. As paragraphs 100 and 101 say, ADL would have paid the rate appropriate for a sponsor rather than what any ordinary advertiser would pay. It is concentrating not on the characteristics of ADL itself but on the characteristics of a sponsor.
33. The petitioners say that the judge fixed the price as £0.50 per bin per week ([103]), although he also said that he did not have the evidence to enable him to decide what ADL would have paid as a sponsor ([101], and they suggest this is contradictory. In my judgment, it is not contradictory. The judge was not fixing the price at all. He was giving what he called an "upper ceiling for the price of such sponsorship", or in other words the upper limit for a range for which there was no lower limit. He went further and referred to it as "a ceiling which sponsorship costs were unlikely to approach" ([103]).
34. The petitioners further argue that it was found by the judge that the advertising on the bins were of value to ADL. Mr Ashdown sought to cross-examine Mr Jeans on a spreadsheet setting out changes in cash and credit card bookings taken by ADL during a six-week period in 2013 at the beginning of which advertising for ADL on the bins was extended to new areas of London. The spreadsheet undoubtedly showed positive changes (an increase of over 23%) to ADL's turnover in the new areas of London over the same period in the previous year (2012), which were to some extent different from the rest of London. But Mr Jeans said that, in order to demonstrate that it was the advertising on the bins that made the difference in increasing turnover in the new areas, it would be necessary to know what had happened in the areas where there was no Addbins advertising, because other events and other factors might also play a part. For example, you would need to know what the weather was doing. For another, the period in question was one when a lot of people were on holiday, and therefore the base on which you are measuring the increase is not as big as it would be at other times of the year. A further point was that the position in the previous year may well have been affected by the presence of the Olympic and Paralympic Games in London, which this six-week period corresponded with. The evidence of Mr Jeans was that he would not have recommended clients to advertise on the bins on the basis of these figures.
35. I accept that ADL perceived some benefit from the advertising on the bins. But I do not consider that the petitioners have proved even roughly how much benefit there was to ADL. I accept Mr Jeans' evidence that the spreadsheet is inconclusive, and that more information would be needed. The question which the court must resolve is what would a sponsor pay for the entire estate during the relevant period. The judgment on liability excluded the approach of a price per bin x number of bins x number of weeks, although it set an upper limit on that sponsorship of what it referred to as a weekly rate of 50p.
36. So the problem for the court is that it only has the evidence of Mr Jeans as to the value of a sponsorship deal between the company and ADL. That evidence was that the overall value of the entire estate (whether there were 20,000 or 30,000 bins) to a sponsor would be in the range £50,000-£65,000 gross per annum. This evidence was not weakened by cross-examination. In accordance with the discussion above of Coopers Payen v Southampton Container Terminal Ltd, I must take that evidence into account, together with the facts found by the judge, but with no countervailing expert evidence from the petitioners. I can see no good reason for not accepting the evidence of Mr Jeans. The evidence of Ms Chew was of forensic accountancy, not of outdoor marketing. She has – as she freely and very properly accepted – no expertise to give an expert opinion on the level of sponsorship to be expected in the situation in the present case. I therefore find that the income which should have been received by the company from 2012 through to 2015 was £65,000 per annum gross.

Operational costs

37. The amended points of claim at [13]-[14] say that no costs should be taken into account because of what the liability judgment says at [98]. In my judgment this is a misinterpretation of that paragraph. That paragraph concerns only the costs associated with the Westminster City Council case. In any event, it is plainly right that the operational costs that would have been incurred in producing and processing the income stream should be taken into account.
38. The respondents' expert forensic accountant, Mr Pearson, gave evidence that the running costs of the company in years 2012 to 2015 would involve the employment of two persons to carry out bin maintenance and advertisement replacement, costing in the region of £45,000 per annum, a full-time manager or administrator at an annual salary of £28,450, office administration costs of £5000 per annum, and legal and professional fees at a cost of £3000 per annum. In addition, there would be commissions paid for further locations for bins to be placed in 2013 and 2014 (as further bins had actually been located in those years).
39. The petitioners' expert forensic accountant, Ms Chew, gave evidence that the running costs of the company from 2012 through to 2015 would be very low, as this would be a company servicing only one contract. In her report Ms Chew did not include any significant costs (except £5000 for winding up the company in 2015). At paragraph 3.4.20 she said

"I have not included further installation, repair or administrative costs, in accordance with the directions provided in the November judgment."

She also said, at paragraph 3.4.21,

"I have not included any provision for storage costs as my understanding is that the company was running low on bin stocks by 12 February 2015 which suggests any storage costs would have been insignificant. In any event, these costs were not included in the company's statutory accounts."

40. I do not understand what Ms Chew is referring to when she uses the words "the directions provided in the November judgment". But this does not matter, because in oral evidence Ms Chew explained her position more clearly. As to the commissions which Mr Pearson said would be paid for location sales, she said that the company did not need to sell itself in a hypothetical situation where it was entitled to an income stream from one client until the 28 February 2015. Her instructions had been that the company would run its existing estate and not do anything extra, such as carry out targeted campaigns. Of course, a real company would go out to grow its business, but that was not what she was asked to value. As to maintenance of the bins and advertisement renewal, she considered that there was not enough work to warrant employing two full-time equivalent persons, and that in rough terms (since to give an accurate figure she would first need to refer to statistics) it could have been outsourced at about £1000 per calendar month, or £12,000 per annum.
41. As to the employment of a manager or administrator, Ms Chew said that she had not been aware that the particulars of claim had been amended to accept the employment of a single administrator at a cost of £17,000 per annum. She had based her report on the earlier version. She considered that the figure of £5000 per annum for office administration costs and £3000 per annum for legal and professional fees put forward by Mr Pearson would be reasonable on the basis of the model that Mr Pearson was basing his calculations on. But that was not the model that she was instructed to value. That was why she had not included anything for these costs. On her model, they would not be incurred.
42. On the whole, I consider that Ms Chew is right in principle. The model which has to be valued here is hypothetical. The estate is as it is, there is a single customer, and a single income stream which is simply collected, and out of which limited costs are paid in order to maintain the income stream and administer it. Nonetheless, the petitioners' statement of case accepts the need for an administrator at £17,000 per annum, but not the need for any office accommodation. It also accepts the need for professional fees for the production of statutory accounts, at an estimate of £1500 per annum. On Ms Chew's evidence there would be a further approximately £12,000 per annum spent on maintenance of the bins. I also accept that on her model there would be no need to pay new location commissions.
43. That means the total operational costs between 2012 and 2015 would run at a rate of £30,500 per annum, and I so find. Deducting that sum from the notional income of £65,000 per annum, that produces a notional profit of £34,500 per annum.

Directors' loan

44. The loan to the company by the first four of the respondents, totalling £100,000, was properly made at the time that the company was set up, and at a time before there was any question of conduct unfairly prejudicial to the interests of the petitioners. That loan created a valid liability of the company. The petitioners say that it should not be taken into account in valuing their shareholding in the company. Reliance is placed on paragraph 94 of the liability judgment, where it is said that there should be "adjustments [to the actual value of the shares] to compensate the petitioners for the unfairly prejudicial conduct". In my judgment, this paragraph does not help the petitioners on this point. It is intended to deal with the case where the unfairly prejudicial conduct has caused the company financial loss. But the loan was not part of the unfairly prejudicial conduct, and it did not cause loss to the company. On the contrary, it was a benefit. Accordingly, in calculating the value of the petitioners' interests in the company, the value of this loan must first be deducted.

Winding-up costs

45. It is agreed that there would be some costs of winding up the business which should be taken into account. But there is disagreement as to what those costs are. The respondents argue that there would be a cost involved in removing the bins themselves, or at least the advertising from them, and also costs involved in winding up the company, making appropriate returns, and distributing any balance to shareholders. I accept that the latter costs would be incurred, but not the former. In order for the costs of removing the bins or the advertising to be taken into account, it must be shown on the balance of probabilities that this would be a liability of the company. No evidence was put before the court that the company would have the obligation to remove either the bins or the advertisements. Accordingly on this basis it is impossible to see that the liquidator of the company would be acting properly in allocating resources to performing this task, and therefore I do not take the costs of removing the bins or the advertising into account.
46. As to the quantum of winding up costs, the petitioners' expert, Ms Chew, put forward a figure of £5000, whereas the respondents' expert Mr Pearson put forward a figure of £15,000. The main reason for the difference in these estimate of costs is that Ms Chew was expressly considering the winding up costs of a small company such as this, and Mr Pearson was not. As forensic accountants, they are not directly concerned in liquidating companies, and thus were reliant on their colleagues for information. But Ms Chew had direct experience of two liquidations of small companies and gave evidence that there was significant competition at this lower level, leading to her view that the costs would not exceed £5000. It is correct that the petitioners (not being lawyers) did not directly challenge Mr Pearson on this when he gave his evidence. But in their written closing submissions they made the point that Mr Pearson had no direct experience of winding up, and Mr Sinclair did not ask for any opportunity to meet this point before I reserved judgment. In my judgment, Ms Chew's view is to be preferred, and therefore the costs of winding up to be taken into account are no more than £5000.

Overall

47. So there would be about three and a half years of a net notional profit, before tax, of £34,500 (about £118,000), against which there would be liabilities of £100,000 in repaying the loan, and £5,000 in winding up the company. Taking into account all the other matters, such as depreciation and interest of the loan from ADL itself (I do not know there would be tax as well), it is clear that if the company was in a negative position in 2011, it would not be restored to a positive one by the hypothetical sponsorship arrangement from 2012 to 2015.

Conclusion

48. As it seems to me, therefore, the shares in the company as at 28 February 2015 were worthless, or practically so, and therefore there is no value to be ascribed as the price for the purchase of the 13% represented by the petitioners' shares by the first respondent. Of course, I may have misunderstood the details of the company accounts. If my decisions on the items referred to above result in a positive outcome for the petitioners, I am sure that they will so inform me at or before the hand-down of this judgment.
49. I add a word about the form of the order. The petitioners are entitled to an order that the first respondent acquire their shares for a nil consideration. This is an order reflecting the relief sought in the petition and the order resulting from the trial on liability. The first respondent is not entitled to an order that the petitioners transfer their shares to him for nil consideration. The relief ordered is for the benefit of the petitioners, and they do not have to avail themselves of it. In other words, they can waive that benefit if they wish.