Background
Paul Andrew Whittaker owned approximately 25% of Dogwoof Ltd, a documentary-film company, while Bertha UK Limited owned approximately 40%. After Whittaker was dismissed as an employee and removed as a director, an obligatory-transfer provision in Dogwoof’s shareholders’ agreement was engaged. Separate litigation brought by Whittaker against Bertha had been struck out after he failed to comply with an order requiring a payment toward Bertha’s costs, leaving substantial costs unpaid.
On Bertha’s application, Deputy Master Jefferis made a suspended order for the sale of Whittaker’s 28,556 Dogwoof shares through an open bidding process, subject to a minimum price based on an independent valuation. Whittaker appealed on two permitted grounds. He argued that the judge had wrongly disregarded a proposed unfair-prejudice claim founded partly on alleged whistleblowing retaliation and that Dogwoof’s management had supplied information that artificially depressed the company’s valuation.
The Court’s Holding
Mr Justice Leech dismissed the appeal. The proposed unfair-prejudice claim was not properly before the lower court because Whittaker had not obtained the permission required by an extended civil restraint order. The lower court was therefore entitled to give that claim no weight when deciding whether to order an immediate sale. The High Court stressed that neither court could determine the proposed claim’s factual merits in these proceedings.
The Court also rejected the valuation challenge. Whittaker had not produced qualified expert evidence showing that the independent valuation was inaccurate, and his own calculations relied heavily on older, stronger trading years despite Dogwoof’s later fall in revenue. In any event, the lower court had not fixed the shares’ sale price at the independent valuation: it used that figure only as a floor and ordered open bidding, allowing the market to test the shares’ value. The High Court also refused Whittaker permission to bring the proposed unfair-prejudice petition under section 994 of the Companies Act 2006.
Key Takeaways
- A proposed claim requiring permission under a civil restraint order may properly be disregarded until that permission has been obtained.
- A shareholder challenging a professional company valuation generally needs qualified expert evidence, not a self-prepared valuation based on disputed assumptions.
- An open bidding process with a valuation-based reserve price was a permissible way to address concerns that shares might otherwise be sold below market value.
Why It Matters
The decision illustrates the breadth of the Chancery Court’s discretion when ordering the sale of shares and the difficulty of overturning such an order where the judge adopted a market-testing process rather than compelling a sale to one party at a fixed valuation.
It also underscores that allegations raised in contemplated unfair-prejudice proceedings cannot derail enforcement-related relief when the contemplated claim is not procedurally before the court, particularly after repeated failures to comply with time limits and court orders.