The High Court has ordered each side to bear its own costs in a dispute over the valuation and buyout of a shareholder’s stake in Kush Seafarms Limited.
In a costs judgment delivered on 24 March 2021, Mr Justice Mark Sanfey said the court’s order would be perfected to reflect terms the parties had agreed for the share acquisition. The only issue remaining for the court was costs. The judgment does not set out the agreed acquisition formula.
The costs decision followed a substantive judgment delivered in February 2020 under section 212 of the Companies Act 2014. The court had decided that a multiplier of four should be applied to the company’s EBITDA to complete its valuation. The judge said he had criticised both valuation experts’ methods and departed from their evidence in reaching that figure.
The applicant, Flor Harrington, and the first respondent, John Harrington, are brothers, directors and equal shareholders in the company. The court described their dispute as long-running and said they had recognised that they would need to part ways. The valuation was intended to establish the price for John Harrington to buy Flor Harrington’s shares.
In submissions on costs, Flor Harrington argued that neither side had been entirely successful and that he should receive costs for the period after the substantive judgment, saying he had been put to additional expense while the buyout was delayed. The respondents argued that their earlier offers to arrange an independent valuation and have each side bear its own costs, together with the valuation outcome, favoured an award of costs to them.
The judge noted that the respondents’ earlier offers concerned how the valuation would be carried out, not a specific purchase price. He also noted that an application by the first respondent to have an independent valuer appointed had been refused by Allen J in 2018, with the costs of that application awarded against the first respondent. The judge said Flor Harrington had been entitled to refuse an independent valuation and that the court could not know what value such an expert would have reached.
Although the judge said he had leaned more towards the respondents’ expert, he had criticised both experts and departed significantly from the respondents’ expert’s views. He also accepted that the first respondent had faced genuine, unforeseeable difficulties raising finance after the substantive judgment, and rejected the applicant’s contention that he had failed to make best efforts to complete the purchase.
The court therefore made no order as to costs. It did not award Flor Harrington the costs incurred between the substantive judgment and the costs decision.