In the circumstances, the High Court rejected PEL’s argument. Because (as discussed above) the Valuer had not exceeded her mandate there was no basis to conclude that the Valuer had not determined the “fair value” of the Trust’s shares. In turn, there was no basis not to enforce her valuation for the purposes of s 149. As Matthews J noted: “… The short and, quite frankly, simple point is that the Act requires the shares to transfer at fair value. It is not open to the parties to agree that they transfer at a value assessed on any other basis, or that they transfer at a price which later turns out not to be fair value … [82] In the present case the parties have not agreed to assess the value on any basis other than fair value, and have not agreed on a figure at all, whether it be by reference to fair value or not. They have agreed in the constitution, and reiterated by the subsequent shareholders’ agreement, that shares will be transferred at fair value, and no other figure. I do not discern any basis on which fair value should be said to bear one meaning for the purposes of the constitution, yet another for the purposes of s 149. Fair value is a well-recognised concept of valuation and the same phrase appears in both the constitution and s 149.” 6 In turn, the High Court distinguished a position where specific performance would be unavailable if that would involve a breach of s 149. In Peregrine, however, the High Court was “not being asked to do something which is unlawful. It is being asked to enforce an independent assessment of fair value, as required by s 149, undertaken in accordance with a process provided for in the company’s constitution. Asher J was referring to the agreement in Fong v Wong, which was to assess fair market value, not fair value. That did not comply with s 149. The material difference between that position, and the present case, is evident.”7 This finding has important practical consequences. As demonstrated on the facts of Peregrine, it means that parties to an expert determination cannot use s149 as a backdoor route to re-litigating a fair value determination. The High Court has confirmed the final and binding nature of expert determinations with respect to share valuations, and therefore should find support from the commercial community.
Concluding observations Peregrine highlights the main feature of expert determination, which is its final and binding nature. This means greater commercial certainty for the parties to the process; a faster process by reducing avenues of challenge to excess of mandate; lower costs; and flexibility and certainty over timing. However, it is precisely because of its binding nature that parties should be aware that once a share valuation process is underway, there is little way back—even if there is fundamental disagreement with the valuer’s conclusions. Current media reporting indicates that the High Court’s decision may be appealed, and so any future developments in this case will be watched with interest.
End Notes
[1] Hay & Hollows v Peregrine Estate Ltd [2016] NZHC 2097 [2] Ibid at [31]. [3] Ibid at [32], referring to Waterfront Properties (2009) Ltd v Lighter Quay Residents’ Society Inc [2015] NZCA 62, [2015] NZAR 492 at [29] (emphasis added). [4] Ibid at [35], citing Shoalhaven City Council v Firedam Civil Engineering Pty Ltd [2011] HCA 38, (2011) 244 CLR 305 at [25]. [5] Ibid at [45]. [6] Ibid at [81]-[82]. [7] Ibid at [85].