Company - application for costs, interest on judgment debt and stay of payment
Before : |
A. R. Binnington, Esq., Commissioner, and Jurats Ronge and Christensen MBE |
Between |
Daniel John Pender |
Plaintiff |
And |
GGH (Jersey) Limited |
First Defendant |
|
Punter Southall Group Limited |
Second Defendant |
|
Simon Anthony John Davis |
Third Defendant |
|
|
|
Advocate R. S. Christie for the Plaintiff.
Advocate M. St. J. O'Connell for the Second Defendant.
judgment
the COMMISSIONER:
1. The Court sat on 10 April 2025 to hear a number of applications consequential to the Court's final decision on quantum, dated 2 April 2025.
2. The applications that we heard were:
(i) The Plaintiff's application for the costs of the proceedings generally.
(ii) The Plaintiff's application for interest on the judgment debt, both pre- and post-judgment.
(iii) The Second Defendant's application for a stay of payment of the judgment sum pending appeal.
3. In relation to the Second Defendant's application for a stay of payment of the judgment sum pending appeal, we gave judgment at the conclusion of the hearing, refusing the application. We did however require the Plaintiff to provide a written undertaking to the Court by which he undertook that the sum released would be invested by him in a portfolio with medium risk and a reasonable degree of liquidity. We further ordered that upon provision of that undertaking the £15 million lodged with the Court would be released and that within fourteen days of provision of the undertaking, the Second Defendant would pay the balance sum of £8,296,607, in satisfaction of the outstanding balance of the judgment award.
4. In light of the Court's refusal to grant a stay, the Second Defendant applied for leave to appeal that decision, which was refused. The Second Defendant thereupon applied for a stay of the order pending an application for leave to appeal to a single judge of the Court of Appeal. The Court granted the Second Defendant a period of fourteen days within which to renew the application for leave to appeal the release of the Judgment Sum, during which time the decision refusing the Judgment Sum Stay Application was to be stayed.
5. On 14 April 2025, the Second Defendant withdrew the renewal application and the stay of the order for the release of funds was lifted, at which time the undertaking to be given by the Plaintiff was varied by consent to read -that the funds paid to him pursuant to the order on 10 April 2025 will be invested with Coutts in a portfolio with no higher than medium risk and a reasonable degree of liquidity-.
6. The following is our decision on the remaining applications.
7. Before turning to the issue of costs generally, there is one additional matter, with which we now deal as a discrete issue, which is the question of the costs of an urgent application made by the Plaintiff for a payment on account of damages, judgment on which was delivered on 17 February 2025.
8. The urgency of the hearing arose as a result of the Plaintiff having had to file his UK tax return on 31 January 2025. He was required to declare in the return the amount that he expected to receive in this litigation, this being deemed, for tax purposes, to be the sum realised from the disposal of his interest in the First Defendant as a result of the Court's judgment on liability. The declaration would result in an immediate liability to CGT on the sum declared, the liability being approximately £8 million. Late payment interest would accrue on that sum at a rate of 7.5% from 31 January 2025, and a 5% late payment penalty would arise if the liability was not paid by 28 February 2025.
9. At the hearing the Plaintiff sought:
(i) the release of the £20 million paid into Court by the Second Defendant as security for the amount due under the buy-out order; alternatively
(ii) £18 million of that £20 million on the basis that this would amount to a total payment on account of approximately £32.4 million which, it was submitted, was well under the £33.1 million figure proposed by the Second Defendant's own expert; or
(iii) £8 million, being the amount of the Plaintiff's tax liability.
10. Prior to the hearing of the application on 13 February 2025, the substance of the application had been canvassed between the parties in correspondence. The Second Defendant had suggested that it was entitled to understand the basis for the claimed urgency, and for the sum sought. In particular, it had wished the Plaintiff to answer two questions, namely -
(i) Why, as a matter of UK tax law, did the Plaintiff say that he had to pay tax now, in respect of the tax year 2023-4, on a judgment sum that he had not yet received, and that had not yet been quantified?
(ii) How much money did he need, now, in order to pay any such tax?
11. In an email to Advocate Redgrave on 29 January 2025, Advocate Christie stated that -Providing a sufficient evidential basis for the HMRC debt is not a requirement, for the Court to order a payment on account, if the Court is satisfied that a further £8.5m is well under what will be ordered on 19 March 2025. It is a requirement to justify why an urgent application needs to be made, and why the Court needs to hear it urgently. This is a much lower bar-.
12. Advocate Christie maintained that it was unreasonable for the Second Defendant to request details of his client's personal tax advice but added that he would happily share a confidential affidavit with the Court, but stated that in his view this was -disproportionate in all the circumstances and given the relatively lower bar which the Court imposes in relation to demonstrating urgency to justify an urgent hearing".
13. When the matter came before me, the Plaintiff filed a confidential affidavit which was not disclosed to the Second Defendant, exhibiting the tax advice that he had received, and details of the payment made and those outstanding to HMRC in respect of the CGT charge.
14. The tax advice was clear that the tax payable was as described in the application and made clear that interest and penalties would arise if it was not paid by 31 January 2025 and 28 February 2025 respectively. It did however reveal that the Plaintiff had already paid part of the sum due out of his own funds, a fact that had not been made clear previously either to the Second Defendant or the Court.
15. In the circumstances, a sum of £5 million was ordered to be paid on account, this being the balance required to satisfy the tax liability.
16. The Plaintiff suggested that no order as to costs would be appropriate given that neither party wholly succeeded. The Second Defendant however sought an order that the Plaintiff should pay their costs as, had the Plaintiff provided information to answer the questions that it had posed, then the Second Defendant might well have agreed the release of the sum ultimately ordered by the Court.
17. The Court agrees with the submission of the Second Defendant. Whilst there may have been an understandable reluctance to disclose details of personal tax advice, it ought to have been possible for the Plaintiff's tax advisers to have produced more generic advice outlining the CGT tax treatment of awards made by the Courts in cases of this type, without revealing the specific tax advice given to the Plaintiff. Furthermore, the Plaintiff could have made clear to the Second Defendant that there was only a balance due to HMRC in respect of the tax charge rather than the full amount. In this respect, there was to a certain extent a lack of openness on the part of the Plaintiff and, in the circumstances, the Court orders that the Plaintiff pays the Second Defendant's costs of the application on the standard basis.
18. In a draft order submitted to the Court by the Plaintiff, he sought payment by the Second Defendant of the costs of the proceedings, in two tranches, namely up to and including the conclusion of the consequentials hearing on 17 June 2024, and from 18 June 2024 to date, all on the standard basis, to be taxed if not agreed. Somewhat unusually, rather than seeking a specific order, he also sought an order that he have liberty to apply for the costs incurred up to 17 June 2024 to be paid on the indemnity basis.
19. The Second Defendant, quite properly, accepted that costs follow the event and did not oppose an order that the costs of establishing liability and up to and including the consequentials hearing on 17 June 2024 would be paid by the Second Defendant, on the standard basis, to be taxed if not agreed.
20. The Court agrees that such an order is appropriate and orders that the Second Defendant pay the Plaintiff's costs up to and including 17 June 2024 on the standard basis. Given the substantial payment on account made by the Second Defendant in respect of the costs of the trial on liability and the fact that the costs have yet to be quantified, we are not persuaded that it would be appropriate for an order to be made that interest should be paid by the Second Defendant on those costs.
21. In relation to the Plaintiff's request for a further order that there might be liberty for him to apply for indemnity costs in respect of the period up to and including the hearing on 17 June 2024, whilst the Court notes that the proceedings were hard fought by the Second Defendant, it finds nothing in the conduct of the Second Defendant that would justify an application for an award of indemnity costs against it and accordingly the request for liberty to apply is denied.
22. The liability for the remaining costs was therefore an issue to be determined by the Court.
23. The Plaintiff sought an order for the costs from 18 June 2024 to date (-the Valuation Proceedings-) to be paid by the Second Defendant or alternatively that there should be no order for costs.
24. The Second Defendant submitted that in relation to the Valuation Proceedings, although the final amount ordered in the 2 April 2025 judgment (the "Final Quantum Judgment") far exceeded the valuation evidence of the Second Defendant's expert witness, the Second Defendant prevailed on a number of discrete issues in the most recent judgment, such as no model error and adjustments to cost of equity and expenses for the 2028 exit year. Accordingly, the Second Defendant submitted that there should be no order for costs in relation to the Valuation Proceedings.
25. We note that in the Valuation Proceedings, the Second Defendant's expert was required to apply a valuation methodology with which he did not agree, and the valuation adopted by the Court was roughly halfway between his valuation and that of the Plaintiff's expert, albeit that the Second Defendant's expert departed somewhat from the methodology ordered by the Court.
26. We also note that the Second Defendant prevailed in relation to a number of issues in the Valuation Proceedings.
27. In the circumstances the decision of the Court is that there should be no order for costs in respect of the proceedings from 18 June 2024 to date (save for the order in respect of the urgent payment on account hearing referred to above).
28. In the Prayer to his Order of Justice, the Plaintiff sought orders that:
-1. Punter Southall Group Limited and/or the Company -
1.1. purchase from the Plaintiff the Plaintiff's 100,000 A Preference Shares in the capital of the Company for a price to be quantified by expert evidence in due course;
1.2. purchase from the Plaintiff the Plaintiff's Waterfall Protection Payment Share in the capital of the Company for a price to be quantified by expert evidence in due course and
1.3. pay to the Plaintiff the sum equal to the fair value of his former holding of 1,800,000 Ordinary Shares in the capital of the Company.
1.4. Interest at the Court rate from the date of assessment of the orders made above until the date of judgment, or at such rate as the Court considers just.
1.5. Pay the Plaintiff's costs of and incidental to the proceedings.-
29. As the Second Defendant pointed out in its skeleton argument, it is not clear what period was intended to be covered by that pleading, given that the assessment of fair value and judgment occurred on the same date, namely 2 April 2025. However, on its face the pleading does not seek any type of return other than interest.
30. The general power vested in the Court to award pre-judgment interest in respect of claims for debts or damages is contained in Article 2(1) of the Interest on Debts and Damages (Jersey) Law 1996 (the -Interest Law-). Article 2(1) of the Interest Law provides as follows -
-Subject to paragraph (4), in any proceedings, whenever instituted, for the recovery of any debt or damages, the Court may, if it thinks fit, order that there shall be included in the sum for which judgment is given simple interest at such rate as it thinks fit on the whole or any part of the debt or damages in respect of which judgment is given, or payment is made before judgment, for the whole or any part of the period between the date on which the cause of action arose and -
(a) in the case of any sum paid before judgment, the date of the payment; and
(b) in the case of a sum for which judgment is given, the date of the judgment.-
31. However, in relation to unfair prejudice petitions, the Court has, under Article 143 of the Companies (Jersey) Law 1991, a wide discretion to "make such order as it thinks fit for giving relief in respect of the matters complained of".
32. In his skeleton argument the Plaintiff asserts that in relation to interest, he is entitled to an amount that would, when added to the judgment sum, in effect recognise the value of that sum now had he invested it on the valuation date of 19 July 2023, with his investment advisers Coutts, in a portfolio with a high risk-rating. In addition to submitting evidence from Coutts as to the performance of such a portfolio he also relied on evidence from a portfolio monitoring company, Asset Risk Consultants, showing the standard investment industry returns over that period.
33. On the basis of that evidence, Advocate Christie argued that the just approach would be for the Court to apply an interest rate of 14.9%, or -something close to it-. That, he submitted, was the closest that the Court could come to the requirement noted by this Court, at paragraph 20 of its judgment of 2 April 2025 (Pender v GGH (Jersey) Limited [2025] JRC 094), that "the award must reflect the financial loss caused by the unfair prejudice-. However, he submitted that if the Court was not satisfied that this was the right approach, a simple annual interest rate of 9.5%, being what he claimed was the industry average investment return for the period, provided a floor below which the Court should not descend.
34. The Jersey law position in relation to pre-judgment interest on standard civil claims for debts and damages was helpfully set out in the judgment of Master Thompson (as he then was) in Sheyko v Consolidated Minerals Limited [2021] JRC 186 at paragraphs 30 to 50.
35. At paragraph 47 of Sheyko, the Master referred to the approach taken in the English Courts, as summarised by the English Court of Appeal at paragraph 17 of its judgment in Carrasco v Johnson [2018] EWCA Civ 87, as follows:
-17. The guidance to be derived from these cases includes the following -
(1) Interest is awarded to compensate claimants for being kept out of money which ought to have been paid to them rather than as compensation for damage done or to deprive defendants of profit they may have made from the use of the money.
(2) This is a question to be approached broadly. The court will consider the position of persons with the claimants' general attributes, but will not have regard to claimants' particular attributes or any special position in which they may have been.
(3) In relation to commercial claimants the general presumption will be that they would have borrowed less and so the court will have regard to the rate at which persons with the general attributes of the claimant could have borrowed. This is likely to be a percentage over base rate and may be higher for small businesses than for first class borrowers.
(4) In relation to personal injury claimants the general presumption will be that the appropriate rate of interest is the investment rate.
(5) Many claimants will not fall clearly into a category of those who would have borrowed or those who would have put money on deposit and a fair rate for them may often fall somewhere between those two rates.-
36. The Master went on to say, at paragraph 48 of his judgment:
-48. This is the approach I have applied in this case. I also cannot see any reason why this approach should not be adopted and applied in this jurisdiction. Therefore, where a defendant's breach has caused a plaintiff to borrow money to have access to funds lost or wrongfully detained for that plaintiff's business, the rate of interest awarded is likely to be the borrowing rate. In personal injury and similar claims on the other hand the rate is likely to be a rate reflecting the funds having been placed on deposit from the date the cause of action accrued, or damage was suffered, if later. For financially sophisticated individuals who are wrongfully kept out of money due to them, the applicable rate is a figure somewhere between the cost of borrowing and money being on deposit. I stress however this approach will very much be the exception and for most individuals a fair rate will be the deposit rate for claims involving an addition to a plaintiff's assets.
49. Advocate Seddon argued that there was not enough evidence for me to be satisfied that the plaintiff was a sophisticated investor. I disagree. The plaintiff's description of his portfolio attached to his sixth affidavit is far removed from placing funds on deposit and far removed from the sort of investments the average individual might make. To award interest at 1 per cent over base would not provide fair compensation to the plaintiff. The nature of the investments held and the levels of return he has achieved (which he does not seek to claim) are clearly significant. Such returns require a certain degree of risk to be taken and an appreciation of the risks of losses that can occur applying an investment strategy of the kind the plaintiff adopted. It is only individuals in such a category who have sufficient surplus funds to be invested and who can demonstrate a track record of making more complex investments who should be entitled to recover a higher rate of interest than monies on deposit. The plaintiff falls within this category. I also do not need to go further and be satisfied what returns the plaintiff would have achieved, had he received the funds admitted to be due. It is enough for him to satisfy me, as his affidavit does, that he is within the category of a sophisticated investor and so should receive more than a rate of interest reflecting monies held on deposit. The plaintiff, by an award of interest at the rate of 3 per cent, is also not receiving any windfall or return based on speculation or a high-risk strategy which would not be appropriate or justifiable. The rate he seeks is also less than available rates set out in the evidence before me in terms of applicable borrowing rates.
50. Accordingly, for all these reasons, I declared that the plaintiff in respect of any sums found to be due to him is entitled to interest at the rate of 3 per cent over base from the date his cause of action accrued until the date of my declaration. Thereafter he is entitled to interest at the court rate of 2 per cent over base until payment.-
37. The rate suggested by Advocate Christie was based on affidavit evidence from the Plaintiff that he had approached Coutts in April 2023, around the time of the first draft judgment, in anticipation of receiving in due course a significant sum of money for which he would require investment management. Following the hearing in July 2024, he had re-visited Coutts and completed a risk-appetite questionnaire that assessed his risk appetite as -Very High- which, he said, was similar to a high-risk rating that he had been given in 2014 when he was assessed by an IFA. His evidence was that he would have selected the highest risk that he could with the Coutts discretionary portfolio service. On the basis of historic returns supplied by Coutts, the Plaintiff's evidence was that if he had received an amount of money similar to the judgment amount from a transaction on 19 July 2023 and had invested it with Coutts from 1 August 2023, it would have achieved a return of 23.5% over the period from that date to 28 February 2025.
38. Whilst it may well be that the Plaintiff has a high risk-appetite we note that he has no demonstrable track-record of investing in portfolios of that type.
39. The Second Defendant argued that it is clear that when considering the rate of interest pre-judgment, the Court does not award a sum that reflects potential, hypothetical investment returns; nor does it seek to compensate for an individual's lost investment opportunities. It simply increases slightly the interest rate in cases where there is a proven track record in relation to complex investments of other substantial assets by the plaintiff, but not to levels that might, in the passage cited above from Sheyko, amount to a "windfall or return based on speculation or a high-risk strategy which would not be appropriate or justifiable".
40. The Sheyko decision was however concerned with a claim in respect of a contractual payment due upon repudiatory breach of the plaintiff's contract of employment, rather than an unfair prejudice claim in which the Court has a wide discretion as to remedy.
41. Advocate O'Connell nevertheless pointed out that in unfair prejudice cases the approach of the Court was similar although they varied substantially in their treatment of interest, depending on the facts of each case, base rates at the relevant time and the remedy being granted. In many cases interest was awarded, typically at 1, 2 or 3% over base rate, but there were also cases in which no interest was awarded at all.
42. Advocate O'Connell drew our attention to a decision of the English Court of Appeal in Profinance Trust v Gladstone [2002] 1 WLR 1024, in which the Court of Appeal set aside an award of 45% -quasi-interest- on top of a valuation of the shares at the date of the petition. The Court of Appeal held that whilst an order for the equivalent of interest was not beyond the wide discretion of the Court in unfair prejudice proceedings, it was a power that should be exercised with great caution.
43. Robert Walker LJ said (at paragraph 32):
-It is however a power which should be exercised with great caution. Miss Newman has rightly drawn attention to the need for lawyers to be able to advise their clients as to the likely range of outcomes of s. 459 proceedings, in order to encourage compromise in an area in which litigation can be cripplingly expensive. If a petitioner seeking an order for the purchase of his shares contends (either as his only claim or in the alternative) that they should be valued at a relatively early date but then augmented by the equivalent of interest, he must put forward that claim clearly and persuade the court by evidence that it is the only way, or the best way, to a fair result. It should not be a last-minute afterthought (as it may have been, to some extent, in Re Bird Precision Bellows and Elliott v Planet Organic). Unless a petitioner is asking for no more than simple interest at a normal rate he should also put before the court evidence on which the court can decide what amount (if any) to allow. The exercise which the deputy judge undertook, as described in the last paragraph of his judgment, does not appear to have had a solid evidential basis.-
44. In Estera Trust (Jersey) Limited v Singh [2018] EWHC 1715 the High Court declined to award any interest in relation to the four-year period between the valuation date and the date of the order in an unfair prejudice claim, Fancourt J stating (at paragraph 636):
-The court has jurisdiction in these circumstances to award -notional interest- on the share value, in determining the price to be paid, to reflect the fact that the seller did not in fact receive the value of the shares at the valuation date. In this case I do not consider that notional interest is justified. First, the delay in receipt was the result of the petitioner's own deliberate delay. Second, interest rates have been at an historic low throughout the period of delay. Third, HS and Estera have in fact received significant dividends during that period. It is likely that an allowance in one direction for notional interest and a countervailing allowance for the dividends in fact received would approximately cancel each other out.-
45. In a subsequent decision in the same case (see Estera Trust (Jersey) Limited [2019] EWHC 873 (Ch) at paragraph 141) the Court awarded -modest interest- at the rate of 1% above Bank of England base rate to reflect the fact that there was further delay in the petitioners receiving the 2014 value of their shares, during which time the company had the benefit of their capital, but they had had no opportunity to share in the company's growth. That interest was awarded not as judgment interest but as a matter of discretion, under s.996 of the Companies Act 2006, as being -a fair and equitable basis on which the Petitioners should be bought out-.
46. A relevant factor will be, as noted in the Estera decision, whether the party buying out the claimant has been in receipt of dividends when the claimant has not. In the present case the Second Defendant has received no dividends within the relevant period and, to the contrary, has had to inject further capital, which the Plaintiff might well have had to do had he remained a shareholder.
47. The Second Defendant argued that no interest should be awarded, on the basis that in July 2023, when the first judgment was given, it was not possible to state the value of the company and that it is only now, in 2025, that the Court has said what the sum due is. The Second Defendant argued that the delay between 2023 and 2025 was not its fault and that the fair approach was, therefore, to add no interest.
48. There is, in our view, little support in the authorities for the Plaintiff's claim that he should be awarded interest that equates to the return that he would have obtained had he invested the sum awarded, on the valuation date, in a high-risk portfolio with Coutts. Neither do we regard it appropriate to make an award of interest linked to portfolio returns generally. We do however regard it as appropriate, and consistent with authority, for some interest to be awarded. Adopting the approach in Sheyko, we would equate the Plaintiff's position to that of a sophisticated investor. However, we recognise that base rates have been higher in the period to which interest is to be applied than they were when Sheyko was decided. Taking all these matters into account, we award interest on the amount of the Judgment Award outstanding from time to time between 19 July 2023 and 2 April 2025, calculated on a daily basis, at a simple annual rate equivalent to 1% above the Bank of England Base rate from time to time.
49. In relation to the period from 3 April 2025 to the date of payment, interest will run on the amount outstanding at the Court rate of 2% above base rate.
50. Our provisional view in relation to the costs of the consequentials hearing is that there should be no order as to costs.
Authorities
Interest on Debts and Damages (Jersey) Law 1996.
Companies (Jersey) Law 1991.
Pender v GGH (Jersey) Limited [2025] JRC 094.
Sheyko v Consolidated Minerals Limited [2021] JRC 186.
Carrasco v Johnson [2018] EWCA Civ 87.
Profinance Trust v Gladstone [2002] 1 WLR 1024.
Estera Trust (Jersey) Limited v Singh [2018] EWHC 1715.
Estera Trust (Jersey) Limited [2019] EWHC 873 (Ch).