Kohli v Lit & Ors

A number of points have been raised for clarification; plus there is a further application for permission to appeal. I will deal with the application for permission to appeal first.

Mr Griffiths seeks permission to appeal on the basis that interest on costs should not be at the judgment rate of 8 percent. Mr Hanke resists that application and justifies the 8 percent further, as he did during the course of argument, by saying that the conventional figure of 1 percent over base applicable to commercial borrowers is inappropriate in the case of Miss Kohli as a retail borrower, and that 8 percent is much more likely to be closer to what is appropriate in her case. It seems to me that this is ultimately an exercise of discretion and that there is no basis for an appeal. Permission to appeal is accordingly refused.

I am also asked by Mr Hanke to confirm the figure of £200,000 as a payment on account. Mr Griffiths, for the purposes of today, does not seek to persuade me that £200,000 is an inappropriate figure, though he would wish me to deduct from it £20,000, being a very rough and ready estimate of what the costs are that are likely to be recoverable from Miss Kohli under existing orders. I consider, however, that the figure of £200,000 is sufficiently safe to cover that £20,000 as well, and accordingly the order for payment on account is in the sum of £200,000.

I am asked to clarify one point in my judgment. I adjusted the Kismat valuation down to nil. This was because in her valuation Ms Hindson had added back management charges. I have not, however, deducted management charges from the Sunrise valuation, i.e. management charges payable by its subsidiaries, including Kismat.

Mr Hanke accepted during argument that, assuming the management charges were not, as Mr Griffiths was seeking to argue, deductible, they should, in order to avoid double counting, be taken out of the Kismat valuation, which reduced the Kismat valuation to nil. That did not, however, explain why I did not deduct the management charges.

Ms Hindson in her report said:

As Ms Hindson points out, generally management charges reflect the cost of the provision of management time. Mr Griffiths speculated, probably correctly, that Ms Hindson was not talking simply about the directors. That must be so, because the directors in some of the years that she was considering did not receive any remuneration. She was probably including Dr Lit, and other management as well. But a significance of Sunrise shedding many of its subsidiaries is that the cost of the provision of management time will no longer be a cost that Sunrise need incur, which means that its management team can either be slimmed down, thus reducing its costs, or can devote their time to increasing, even beyond the level of maintainable earnings that I have found, the profitability of Sunrise.

There is simply no evidence that the cost which is provided for as management time will now have to be incurred on the hypothetical valuation that I was undertaking. Taking out the management charges, therefore, which is logical, should also be met by taking out the corresponding cost, so that if management charges come out, the costs go down, and the maintainable income is unaffected. Accordingly, it is not necessary, on the evidence I heard, to deduct the management charges, because the cost savings would correspond to the deduction. That again is a fact-finding exercise based on relatively slender evidence. It was, however, the evidence that came from Sunrise’s side. If they wished to maintain that there would still be the same level of costs if the management time was deducted, it was for them to put forward evidence to that effect.

JUDGE PURLE QC: The parties are agreed that the arithmetical consequences of my rulings are that the share value is now (ignoring pence) £562,105. As I have said previously, valuation is not an exact science. It seems unlikely to me that in any course of negotiation the parties would stumble upon a figure of such preciseness. I shall round the figure down to £560,000.

The details of the valuation are shown in the attached schedule, prepared since this judgment was delivered .