This is the continuation of a case brought by liquidators against Caroline Stanbury. The goodwill of a profitable business had been transferred to her for a nominal £1 relatively shortly before an insolvency event.

The judge was critical of the case brought by the liquidators: they had been careless in losing records and not finding out basic facts. There was a long delay in bringing the proceedings and the judge stated that there was no adequate explanation for this.

The judge also stated: “read as a whole, the correspondence in evidence exchanged between the parties on the issue of access to documents casts the applicant and his solicitors in an extremely poor light.”

He also described this as an extremely lazy and unhelpful way of conducting litigation.

Judges do not use purple prose: these must therefore be viewed as major criticisms.

Each side appointed business valuation experts: they fared very differently both in the witness box and in the written decision.

The expert appointed on behalf of the liquidators did not fare well in the witness box (he was clearly not helped by the conduct of the liquidators and their solicitors). His report did not stand up to close scrutiny and he had no persuasive answers to a number of key questions put to him in cross examination. The written decision included the comment:

“One of his responses in cross examination was so astonishing that he had to be reminded by the court that he was giving evidence under oath and that the court process was 'not a game'. He twice apologised to the court for his answer after that intervention.”

The expert attempted to defend his position by stating that his valuation was done at a high level and that he did not go into extensive detail given his instructions and budget. He also stated that there had not been an in-depth analysis of various valuation metrics and that his evaluation models were not detailed or comprehensive. Some of his evidence was described as “utter and total nonsense.”

The judge was scathing in his criticism: “…[the expert’s] report was an unimpressive, results-driven piece of work. His attempts to defend it in oral testimony were entirely unpersuasive. In my judgement, very little weight can be placed on [the expert’s] written and oral expert evidence.”

The expert appointed on behalf of Ms Stanbury used fair market value as the basis of value. The reason for this choice is not stated.

The judge’s comments about the evidence of this expert were in the greatest contrast to the above criticisms. He presented as an entirely credible witness with a keen awareness of his oath and his duty to assist the court. His report was described as being extremely thorough.

The expert for the liquidators did not address the personal nature of the goodwill in Ms Stanbury’s fashion styling business. He also, very surprisingly, failed to include any amount for the notional remuneration of Ms Stanbury.

The judge referred to some earlier cases in respect of goodwill: firstly, an extensive quote from one of the seminal business valuation cases: Inland Revenue Commissioners v Muller and Co's Margarine [1901] AC 217:

'What is goodwill? It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom…'

In the Scottish case of Reid v Reid 1938 SLT 415, it was recognised that goodwill in businesses such as surgeons, artists or advocates was likely to be personal to the individual. This case then reached back further into the dusty tomes of history to the case of Drummond v Assessor for Leith (1886, 13 R 540), which made a similar point.

The written decision then considered a more recent case of Sofra Bakery Limited [2013] EWHC 1499; this is a case of considerable interest. The business was sold for a price including goodwill. The goodwill proceeds were paid to Mr Ucar, the Turkish baker, not the company. The court held that the goodwill was personal to Mr Ucar and that he had granted the company an implied licence to use that goodwill (there had been no accounting for goodwill on the incorporation of the trade into the limited company).

The judge decided that the goodwill generated by Ms Stanbury’s styling business were at all material times personal goodwill. The transfer had therefore not been at an undervalue.

The judge was evidently not enamoured of the conduct of the liquidators and their legal advisers in the litigation. He commented on closing: “it is most regrettable that [Ms Stanbury] and her family have been put through the stress of these proceedings.” Strong words indeed.