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Management Buy-Out: Causation and Assessment of Damages


Previously the corporate team looked at Vald. Nielsen Holding A/S and another v Baldorino and others [2019] EWHC 1926, in which it was decided that directors owe fiduciary duties to their shareholders only in very limited circumstances. However, the claimant shareholders were awarded 6.5 million pounds in damages for fraud in the transaction concerning the sale of a business to its management team.

Here the corporate team look at the causation and assessment of damages in light of this case.

Interestingly, this case did not concern the common claim of misrepresentation, usually alleged by the buyer towards the seller.  Rather, the claimants’ position was that, they as sellers were misled into selling their shares to the management team, the buyer.

Not surprisingly, the business was far more successful than that which the management team had led the shareholders to believe.  Jacobs J stepped back to evaluate the main principles in such a case.  The key points included: –


The main question on causation in relation to the shareholders claim was whether they as sellers would have sold their shares to the management team on the terms agreed, in any event.  This question on causation was resolved by applying the balance of probabilities.

Assessment of damages
In general terms, the measurement of damages in deceit cases is the difference between the contract price and the market value at the date of purchase.  However, authorities demonstrate that a different approach could be used if that is what is necessary to adequately compensate the claimant.

Jacobs J turned to Smith New Court Securities Ltd v Citibank NA [1997] AC 254 and contended the same approach should be used in the present case.  It was argued that it was inappropriate to consider any date other than the date of sale as the starting point for quantifying the shareholders loss.

Ultimately, the decision as to whether to award damages was calculated by (1) the market value of the shares and (2) the surrounding circumstances.  For that reason, it was appropriate to consider the chance of a sale at market value occurring, although carefully steering clear of a loss of chance analysis.

Jacobs J adopted a broad view and considered the chances of obtaining the true value of the shares were less than 100% and applied a discount of 25% to reflect the uncertainty.  The claimants were awarded 6.5 million pounds in damages.

The information contained in this article is for information purposes only and is not intended to constitute legal advice. If you require further information, our corporate team would be more than happy to assist you. Please contact us at [email protected] or call us on 029 2009 5500 to speak to one of our team. Alternatively, please submit a quote through our website at