Geoffrey Alan Holt and Anor v Robert Hedley Cox

(1997) 23 ACSR 590; [1997] NSWSC 144

Supreme Court of NSW

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Interrogate

Catchwords

1. Companies
2. › Shares
3. › Valuation by auditor
4. › Pre-emption provisions in articles of association
5. › Appropriate method of valuation
6. › Whether valuation in accordance with contract
7. › Whether 'a fair price'
8. › Whether auditor erred in failing to consider possibility of future winding up
1. Contract
2. › Expert determination
3. › Valuation clauses
4. › Judicial review of expert valuations
5. › Whether valuation binding on parties
6. › Whether error of methodology takes valuation outside contractual requirement
7. › Whether qualifying words such as 'fair' permit court to review factors considered
1. Contract
2. › Construction
3. › Implied terms
4. › Whether pre-contractual negotiations relevant to valuation exercise
5. › Parol evidence rule
6. › Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24

Quick Take

Where a contract requires an expert to determine 'a fair price' for shares, the valuer must have regard to all the shares' existing advantages and possibilities, including the real prospect of future events such as winding up, even if those events are not imminent. A valuation that entirely ignores a real possibility attaching to the shares — particularly one supported by the stated intentions of controlling shareholders and the instructions placed before the valuer — may not constitute 'a fair price' within the meaning of the contract, notwithstanding that the valuer acted honestly and impartially. The majority and dissent differ on whether the word 'fair' in a valuation clause permits the court to review the factors the valuer considered.