BL-2022-002117 - [2025] EWHC 2794 (Ch)

If the Claimants had succeeded in establishing liability, they would have been entitled to a sum that would put them in the position they would have been if there had been no breach. Assuming that that means the transaction would have completed, the comparison is between (i) the consideration they would have received if they had sold the shares, and (ii) the value of the shares that they in fact retained.

Mr Davidson says, and the Claimants do not dispute, that the liquidation of the Company rendered the value of the Claimants’ shares in its parent valueless. The liquidation was caused by the ESFA terminating its contract with the Company (thereby ending its main source of revenue), and there is no suggestion in these proceedings that it was not entitled to do so.

The Claimants’ case is that their shares had already been devalued before then by the Decision Letter. They say the Decision Letter had a sudden and catastrophic impact on the value of their shares because they were thereafter unsaleable. This is premised on Mr Khan’s evidence that the Decision Letter would have had to be disclosed to any future buyer of 3AAA and would have put them off risking time and money into developing an alternative proposal. In cross-examination he explained that his view was that the reasons given in the Decision Letter were not Sir Peter’s real reasons for not approving the change of control, that there was “something else going on”, and that knowing these circumstances he personally would not have got involved in trying to find another purchaser.

This case is flawed.

Firstly, the Decision Letter did not prevent a sale of the shares. The SFA’s blessing of the sale was not required. Anyone who wished to buy the Company could not be prevented by the SFA from buying the Company. There was therefore a market for the shares.

Secondly, the Decision Letter was not at the time regarded as either a bar to obtaining the SFA’s blessing or as having made the company unsaleable. Trilantic were not initially put off from proceeding with the sale, and Mr Khan, Mr Cohen and Ms McEvoy-Robinson could see clearly that what seemed to be required to get the SFA’s blessing was a business plan to meet Sir Peter’s pessimistic scenario and a commitment on the part of Trilantic not to walk away in a disorderly exit if it came to pass. It was for Trilantic to assess how likely that pessimistic scenario was, and whether it wished to provide those commitments. It did not, but another purchaser might have.It is apparent from the documents relating to Star Capital that Mr Marples himself did not think that the business had been rendered permanently unsaleable and in April 2017 had placed an enterprise value on the business of £115 million (greater than Trilantic had agreed to pay) and between March and October 2017 was engaging with Star Capital’s potential interest.

Thirdly, I accept Mr Davidson’s expert evidence that the Decision Letter had “no effect on the value of the business” because “the marketplace for the sale of the Company was unchanged from before to after the refusal letter”. I accept his expert evidence that the value of the company was the same before and after the Decision Letter. That is an opinion which accords with common sense. The business was as profitable the day before the Decision Letter as it was the day after. The market was unchanged. Trilantic’s perception of the risks may have been changed, but the risks facing the business before the Decision Letter were the same as those it faced after the Decision Letter.

Fourthly, a key element of the pessimistic scenario in the Decision Letter had disappeared by December 2017 when the Non-Levy Cap was dropped. A prospective purchaser who was shown the Decision Letter in due diligence would have reasoned that the outlook had changed since the letter had been written and there was more certainty as to the availability of non-levy funding. Mr Khan’s personal reluctance to get involved in another sale because there was “something else going on” with Sir Peter would not have held back other middle men who had no such personal knowledge, but in any event it was public knowledge by the Spring of 2017 that Sir Peter was retiring in November 2017. Any special factor because of Sir Peter’s leadership of the SFA ceased to have effect on the value of the Company’s shares after his retirement.

If the Claimants had succeeded in establishing liability, I would have found that they had not established that the Decision Letter rendered their shares unsaleable and had not established an entitlement to damages calculated on that basis.

Quantification of damages does not therefore arise, but for completeness I set out my observations on three areas on which there was argument.