Plaintiff v Defendants

(a) Is the determination final and binding, or does Toll have a contractual right to have the share value determined by arbitration?

(b) Even if the determination is final and binding, has Toll established the existence of an arbitrable dispute as to whether the determination is impeachable (on the basis it did not take place in accordance with the agreement)?

7 If Toll succeeds in relation to either of those two matters, then questions as to the appropriateness and form of any injunctive relief would need to be considered.

8 Kawasaki, P & O and Mr Miles were jointly represented, and offered the only substantive opposition to Toll's claim. Although PrixCar has filed a defence, it did not participate at trial and will abide by the court's decision. Strang appeared at the trial only to clarify one factual matter raised in Toll's evidence; it otherwise has indicated that it will also abide by the court's decision. A reference in these reasons to "the defendants" is a reference to those who played an active role at the trial.

9 This proceeding does not require the court to decide whether Toll's shares are in fact worth more or less than the determination, or whether Deloitte did in fact perform the task required under the shareholder agreement. Nor is the court required to resolve any factual disputes, as the material facts are essentially agreed.

10 The shareholder agreement dated 31 March 1995 sets out the mutual rights and obligations of the shareholders, including in relation to the disposal of shares. PrixCar was not a party to the original shareholder agreement, but is a party to the amending deed, dated 26 June 1996, the principal purpose of which was to govern the issue of new shares in PrixCar.

Transfer of shares

11 Clause 5 of the shareholder agreement contains a specific procedure for the transfer of shares. It relevantly provides:

5.1 It is acknowledged and agreed between the Shareholders that:

(a) A person desiring to transfer any shares in the Company shall give a Transfer Notice to the Directors and the Directors and the proposing transferor shall proceed to establish the Fair Value of the shares within 28 days after the Transfer Notice is given;

(b) If the proposing transferor does not wish to transfer the shares at the Fair Value, it may withdraw the Transfer Notice within 7 days after the Fair Value of the shares is determined and notified in writing to the proposing transferor;

(c) If the proposing transferor does not withdraw its Transfer Notice the Directors shall proceed to offer the shares to the other Shareholders in the same proportion, as nearly the circumstances admit, as the shares held by them at the time of the offer bear to the total number of shares held by all Shareholders, excluding the shares held by the proposing transferor;

(d) Offers made pursuant to clause 5.1(c) shall remain open for acceptance wholly or partially for a period of 30 days and the proposing transferor shall, upon being notified of any acceptances, execute transfers of any shares accepted in favour of the person accepting;

(ii) 'Fair Value' means the amount per share which is the fair selling value of the share as between a willing purchaser and a willing vendor as agreed between the Directors and the proposing transferor or failing agreement within 30 days after the Transfer Notice is given to the Directors, to be fixed by the Company's auditors upon the application of either the Directors or the proposing transferor. In determining the Fair Value pursuant to this clause, the Company's auditors will act as an expert and not as an arbitrator ...

(iii) any reference to Directors shall be to the Directors other than the Directors appointed by the proposing transferor;

(vi) if a proposing transferor fails to execute any document or do any act to give effect to the provisions of this clause, the Chairman of the Board of Directors ... will be deemed to be the duly appointed attorney of the proposing transferor with full power to execute any document or do any act in the name of and on behalf of the proposing transferor and to receive and give a good discharge of any purchase money received on behalf of the proposing transferor in order to give effect to the provisions of this clause.

12 If the other Shareholders do not take up the offer of the proposing transferor's shares under clause 5.1(d) within 30 days from the date of offer under clause 5.1(c), those shares not accepted will be offered to each of the Shareholders who accepted the whole of their entitlement, again on a pro rata basis (clause 5.1(e)). If purchasers have not been found for all the shares after this process within 60 days from the date of offer, the Directors may offer the shares (at the Fair Value) to anyone else they consider appropriate (clause 5.1(f)). If shares remain unsold after a further 30 days, the proposing transferor may sell the shares (at a price not less than the Fair Value) to any person, however the Directors are entitled to veto the prospective purchaser on the basis that the sale is not bona fide or the prospective purchaser is a competitor of PrixCar (clause 5.1(g)). If any shares remain unsold 30 days after the last step, then the proposing transferor is to withdraw its Transfer Notice and transfer the shares at a price not less than the Fair Value to a person nominated by the Directors (clause 5.1(h)).

Dispute resolution

13 Clauses 13 and 14 ("the dispute resolution clauses") provide:

Any substantial dispute or difference of opinion arising between Shareholders relating to the interpretation or operation of this Agreement shall first be referred for settlement to the appropriate professional advisers to the Company as nominated by the Directors and in the event that the Shareholders are still unable to agree upon the settlement of such dispute or difference of opinion, the same shall, be referred to arbitration in accordance with clause 14.

The validity interpretation and performance of this Agreement shall be governed by the law of the State of Victoria and any dispute that may arise under or in relation to this Agreement, including its validity interpretation and performance which is not resolved in accordance with the procedure set out in clause 13 shall be determined by arbitration in Melbourne under the provisions of the Commercial Arbitration Act (as amended) for the State of Victoria.

14 "Dispute", "substantial dispute" and "difference of opinion" are not defined in the shareholder agreement.

15 I do not accept Toll's submission that clauses 13 and 14 should be read as effectively providing two different procedures for referral to arbitration, or that clause 14 somehow enlarges the type of disputes in clause 13.

16 It is true that there are some differences of wording between the two dispute resolution clauses:

(a) Clause 13 refers to "substantial dispute or difference of opinion", whereas clause 14 refers only to "dispute"; and

(b) Clause 13 refers to disputes "relating to the interpretation or operation of [the shareholder agreement]", whereas clause 14 refers to "any dispute that may arise under or in relation to [the shareholder agreement] including its validity interpretation and performance."

17 But the two clauses clearly relate to the same disputes. Clause 13 envisages that a dispute of the type described in clause 13, which is not settled by PrixCar's "appropriate professional advisers", shall be referred to arbitration "in accordance with clause 14". Clause 14 says that it applies to disputes "not resolved in accordance with the procedure set out in clause 13". Thus, a reference in clause 14 to "dispute" can only mean a "substantial dispute or difference of opinion" which has arisen under clause 13, and which has not been settled by agreement.

18 The two clauses play different roles. Clause 13 identifies the types of dispute and two dispute resolution processes. Clause 14 nominates both the governing law of the agreement (as the heading suggests), as well as the choice of jurisdiction (namely, arbitration in Melbourne under the provisions of the relevant State Act).

19 The shareholder agreement governs many aspects of the relationship between shareholders. There is a wide range of matters that might be the subject of dispute between shareholders (and therefore governed by the dispute resolution clauses), which have nothing to do with clause 5 .1 and the transfer of shares.

20 There are two other features of the dispute resolution clauses which should be noted at this stage, as they assume some significance later in these reasons. The first is that they do not provide for automatic referral to arbitration. Before any such referral can occur, the dispute must first have been referred to PrixCar's "appropriate professional advisers", who are to attempt to achieve (presumably by facilitation or mediation) a settlement between the shareholders. Toll's primary case, namely that the shareholder agreement provides for a three-stage process for the determination of Fair Value, largely ignores that aspect of clause 13.

21 The second important feature is that the dispute resolution clauses only apply to disputes "arising between Shareholders". This will be important when one comes to characterise the nature of Toll's complaints about the determination.

The facts

22 On 9 June 2006, Toll gave PrixCar a Transfer Notice in respect of its total shareholding of 725,283 shares, under clause 5.1(a) of the shareholder agreement.

23 On 6 July 2006, PrixCar informed Toll that the non-Toll directors had determined the Fair Value of Toll's shares to be $11,665,000. Toll believed that figure to be about one half of the true value.[2]

24 Toll requested the matter to be referred to PrixCar's auditor, KPMG, for determination of the Fair Value under clause 5.1(j)(ii) of the shareholder agreement. KPMG considered it had a potential conflict of interest, as it also acted as auditor for the Toll Group, and declined to participate in the valuation process. Accordingly, PrixCar and its shareholders agreed upon the appointment of Deloitte, in substitution for KPMG, to assess Fair Value.

25 Deloitte confirmed its appointment by way of a detailed engagement letter, dated 18 September 2006, in which Deloitte noted, amongst other things, that in performing its valuation it would be acting "as an independent expert rather than an arbitrator". Each of the shareholders signed the engagement letter.

26 Deloitte invited and received submissions from all shareholders, and circulated a draft determination (without figures) for comment as to factual matters. On 25 October 2006, Deloitte provided the determination, in which it advised that, in its opinion, Toll's shares were worth between $17.2 million and $18.8 million. Deloitte nominated the "most likely value" of the shares at the mid-point of $18 million, as it considered "there is no evidence that the most likely value is towards the high or low end of the range". In arriving at its conclusion, Deloitte applied both a discounted cash flow method and a capitalisation of future maintainable earnings method.

27 By letter to PrixCar dated 1 November 2006, Toll stated that it did not consider that the determination had assessed the Fair Value of its shares in accordance with the shareholder agreement. Toll's primary objection at that time was that the valuation contained an opinion by Deloitte as to a possible valuation range of the "current fair market value" of the Toll shareholding, rather than an actual Fair Value under the shareholder agreement; however, that is not an objection which was pressed at trial. Toll's letter also alleged in general terms the existence of a number of "other deficiencies in the methodology" Deloitte used to reach its opinion., including failure to have regard to certain matters set out in Toll's submissions of 29 September 2006.

28 Toll also asserted that, because Fair Value had not been assessed under the shareholder agreement, the seven-day period during which it was entitled to withdraw its Transfer Notice under clause 5.1(b) had not started to run. Toll asked PrixCar to instruct Deloitte to prepare a valuation which determined Fair Value in accordance with the shareholder agreement. PrixCar refused Toll's request, and considerable correspondence followed in relation to the determination and Toll's objections to it.

29 The directors of PrixCar, maintaining that the Fair Value of Toll's shares had been validly determined, offered the shares to the other shareholders on a pro-rata basis, in accordance with clause 5.1(c). Each of the other shareholders accepted the offer within the time limit imposed by clause 5.1(d).

30 On 5 December 2006, PrixCar delivered share transfers in favour of the other shareholders to Toll for execution. Toll refused to execute the transfers and Mr Miles indicated that if the transfers were not executed by Toll by close of business on 20 December 2006, he would execute them as Toll's attorney using the power granted by clause 5.1(j)(vi) of the shareholder agreement.

31 Toll commenced this proceeding on 18 December 2006 and on 20 December 2006 obtained an interim injunction restraining Mr Miles and PrixCar from executing the transfers. That injunction was subsequently extended until trial or further order.

32 In so far as any of the steps described above were not taken or completed within the strict time periods provided for in clause 5.1 of the shareholder agreement, that appears to have occurred by consent. Certainly, no party sought to argue that such non-compliance had any consequence in this case.

Is there a contractual right to have Fair Value determined by arbitration?

33 Toll argues that the determination of Fair Value is a three-stage process. Stage 1 involves an attempt to reach agreement between the transferor and the Directors. If that is unsuccessful, stage 2 is the determination of Fair Value by the auditors acting as an expert, not an arbitrator. Then, if either the proposing transferor or the Directors dispute the expert determination, stage 3 is said to be the determination of Fair Value by arbitration pursuant to the dispute resolution clauses. The defendants dispute that the shareholder agreement provides for such a third stage.

34 As mentioned earlier, Toll's three-stage process ignores the requirement in clause 13 that there be no referral to arbitration until after PrixCar's professional advisers have attempted to facilitate or mediate a settlement. If the dispute resolution clauses apply, then the determination of Fair Value is actually a four-stage process.

35 Clause 5.1(j)(ii) of the shareholder agreement provides that the auditor is to undertake the task of determining Fair Value "as expert not arbitrator". What, if anything, flows from that?

36 Toll seeks to draw comfort from the use of the phrase "expert not arbitrator", in the following manner. It says that the words confirm the existence of a three-stage process; that is to say, the agreement specifically provides that, in determining Fair Value, the auditor is not to act as an arbitrator, because arbitration is available as the third step, if required. But that argument ignores the fact that "expert not arbitrator" is a well-established phrase, which is used for a specific reason, namely in order to exclude the operation of the Commercial Arbitration Act 1984 and its equivalents. It also ignores the fact that "expert not arbitrator" can be used in a contract in which there is no arbitration provision at all.

37 As McHugh JA commented in Legal & General Life of Australia v A Hudson Pty Ltd:[3]

Those words [expert not arbitrator], which have been commonly used in agreements since the Common Law Procedure Act 1854 serve the purpose of excluding the provisions of the Arbitration Act 1902. They avoid the necessity for the valuer to hear evidence and the parties and to determine judicially between them. They enable him to rely on his own investigations, skill and judgment ... Indeed they reinforce the view that the parties, as between themselves, rely on the honest and impartial skill and judgment of the valuer.[4]

38 In contrast with an expert, an arbitrator exercises a quasi-judicial function in deciding between the competing contentions of the parties and in accordance with natural justice.[5] The mere fact that a contractual provision labels the decision-maker as "expert" or "arbitrator" is not necessarily conclusive as to capacity - one needs to look at the process the designated person is to follow in order to arrive at a decision. However, in this case, there is no dispute that Deloitte acted, and was required to act, only as an expert.

39 Clause 5.1 does not say that the expert's determination is final and binding. However, it is common ground that the absence of words such as "final and binding" is not of itself determinative; instead "the question whether a valuation is binding upon the parties depends in the first instance upon the terms of the contract, express or implied".[6] In other words: are the terms of the agreement such that it should be presumed that the parties intended to accept the expert's determination as final?

40 Toll accepts that the effect of an agreement that a decision is to be made by an independent valuer, in the absence of any indication in the contract to the contrary, will generally raise an inference that the parties intended that the expert's determination would be final and binding.[7] But Toll argues that to draw such a conclusion here (either as a matter of construction or implication) would be inconsistent with the dispute resolution clauses. I will consider some specific features of clause 5.1 before considering the dispute resolution clauses.

41 Toll urged the court to ask, how would an honest businessman understand clause 5.1? In making this submission, it relied upon a recent Court of Appeal decision, AGL Victoria v SPI Networks & Anor,[8] and urged the court to consider the terms of the shareholder agreement "against the matrix of facts" underpinning the agreement and to ask whether the parties, as "honest businessmen", would have understood that a determination under clause 5.1(j)(ii) could be the subject of arbitration.[9] For the reasons which follow, I am not persuaded that an honest businessperson would have reached such a conclusion.

42 Clause 5.1(j)(ii) defines Fair Value as the amount "as agreed between the Directors and the proposing transferor or failing agreement ... to be fixed by the Company's auditors." The clause does not contain additional words to the effect of "or as otherwise determined in accordance with this agreement." Had the parties intended there to be third (and/or fourth) stage to the determination of Fair Value, they could easily have included such a reference in clause 5.1.

43 Clause 5.1 provides a specific and detailed regime for the quick and efficient transfer of shares and the resolution of share value by an independent expert, as follows:

(a) The proposing transferor serves a Transfer Notice (clause 5.1(a));

(b) The proposing transferor and the non-transferor directors attempt to agree the Fair Value (clause 5.1(a));

(c) If they cannot reach agreement, Fair Value is to be "fixed" by an expert (clause 5.1(j)(ii));

(d) If the proposing transferor is not happy with the expert's determination, it may withdraw its Transfer Notice within 7 days after receiving the determination (clause 5.1(b); and

(e) If the other shareholders are not happy with the expert's determination, they can choose not to purchase the shares at that price. In that case, the shares will eventually be sold - to the other shareholders or an "outsider" - pursuant to clauses 5.1(e) to (h).

44 Toll's position is not analogous to that of a person facing compulsory acquisition of its shares. As a matter of contract, it cannot be forced to sell its shares at Fair Value; if it does not accept the expert determination, it can simply choose not to sell at that price. The problem Toll faces here is that it has chosen to give undertakings to the ACCC to dispose of its PrixCar shareholding in order to secure ACCC approval for a corporate takeover. But that is a matter extraneous to the shareholder agreement and its construction.

45 Clause 5.1(a) requires that Fair Value be established within a limited number of days after the proposing transferor gives a Transfer Notice. It seems highly unlikely that the parties contemplated that all of the following could occur within such a tight timeframe: negotiation between the proposing transferor and the Directors, expert determination, negotiations between the shareholders (assisted by "appropriate professional advisers") and, if applicable, determination by arbitration.

46 Before turning to the dispute resolution clauses, a few observations will be made about the cases to which the court was taken. Most of the cases are distinguishable on the basis that the relevant contract did not contain a general dispute resolution clause, and thus the court was not required to consider the effect that such a clause would have on whether the expert determination was final and binding. However, in WMC Resources Ltd v Leighton Contractors Pty Ltd[10], there were both arbitration and expert determination clauses. Pursuant to the contract, one of the contractual parties (the appellant) was required to value variation works in a mining operation. The valuations were to be made "in the sole discretion" of the appellant. The contract did not state that such valuations were "final and binding". There was a general arbitration clause which allowed either party to appoint a single arbitrator agreed by the parties "in the event of a dispute between the Parties in respect of any aspect of [the] Agreement or its performance or non-performance".[11]

47 Notwithstanding the breadth of the arbitration clause, the Full Court of the Supreme Court of Western Australia held that the appellant was the sole person empowered to made the discretionary judgment necessary to value the variations.[12] A valuation by the appellant was to be final and binding, even though the contract did not contain such words. The arbitration clause only gave the arbitrator power to make whatever orders would fall within the jurisdiction of a court, and did not give the arbitrator power to open up and review the appellant's valuation.[13] That meant that the arbitrator could only consider whether the valuation complied with the contract.

48 It is true that clause 5.1(j)(ii) of the shareholder agreement does not use the same expression as in WMC Resources, namely that the determination is to be in the "sole discretion" of one of the parties, so the case is not directly on point. But it is analogous in the following respects: clause 5.1(j)(ii) entrusts the task of "fixing" Fair Value to a specified person, and provides that, in executing this task, the person shall "act as an expert and not as an arbitrator". As in WMC Resources, the determination of Fair Value admits of no one answer and allows for the valuer to apply a discretion to various factors about which a wide range of legitimate opinions may be held. Thus, WMC Resources is more supportive of the defendants' argument than Toll's.

49 Toll argues that the dispute resolution clauses in the shareholder agreement are drafted in broad terms, appear to have general application to all disputes "that may arise under or in relation to" the shareholder agreement (clause 14), and mandate the resolution of disputes by arbitration through use of the word "shall".

50 Toll referred me to a number of authorities dealing with the general approach that courts should take to contractual arbitration provisions, such as PMT Partners Pty Ltd v Australian National Parks and Wildlife Service[14]:

Contracts will only be construed as limiting the right of parties to pursue their remedies in the courts if it clearly appears that that is what was agreed. However, where (as here) the dispute resolution clauses provide that "all disputes or differences ... shall be decided" in accordance with specified procedures, the starting point must be that the parties are taken to have provided exclusively and exhaustively as to the procedures to be followed, unless something makes it plain that that is not the case. That is not simply because in a context dealing with rights and obligations, the word "shall" ordinarily involves a mandatory aspect. There is also the important consideration that [the relevant dispute resolution clause] is concerned with dispute resolution. Disputes are not readily resolved if there are parallel proceedings permitting of different outcomes. Nor are they readily resolved by procedures which can be set at nought if one party elects to pursue some other course of action.[15]

51 In approving the principles set out in PMT Partners, Gleeson CJ said in Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd[16]:

Where the parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference of opinion arising out of the agreement, their agreement should not be construed narrowly. They are unlikely to have intended that different disputes should be resolved before different tribunals, or that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument.[17]

52 These are undoubtedly correct as statements of general principle. But it is still necessary for the court in each case to consider the specific contractual provisions before it.

53 A significant difficulty which Toll faces here is that clause 13 only applies to a relevant dispute "arising between Shareholders". Under clause 5.1, the question of Fair Value is a matter to be established as between the proposing transferor and the Directors (being the directors other than those appointed by the proposing transferor). If they cannot reach agreement, then Fair Value is to be fixed by PrixCar's auditors "upon the application of either the Directors or the proposing transferor" (clause 5.1(j)(ii)). The fact that some or all of the Directors may have been appointed by specific Shareholders does not mean that a dispute between the Directors and the proposing transferor is a dispute between Shareholders. Indeed, clause 5.1 specifically refers in a number of places to "Shareholders", so the fact that the word "Directors" and not "Shareholders" is used in the setting of Fair Value should not be ignored.

54 Clauses 5.1(c) to (e) provide other Shareholders with certain rights to purchase the shares before they are offered to other persons. Other Shareholders who are not satisfied with the Fair Price, can choose not to buy the shares (just as the proposing transferor can choose not to sell the shares if it is not satisfied with the Fair Price). But the shareholder agreement does not provide for the other Shareholders to have any role at all in the determination of Fair Value. Given that fact, it seems highly unlikely that the dispute resolution clauses were intended to provide for a review as between Shareholders of an expert determination of Fair Value.

55 Toll accepts that clause 13 only refers to disputes and differences of opinion between Shareholders, but urged me to accept that clause 14 widens the scope of dispute to include those raised by, or involving, PrixCar or the Directors. For the reasons given earlier, I am not persuaded that clause 14 deals with any disputes other than those which have failed to be resolved under clause 13.

56 Although each of the parties to the shareholder agreement was required to agree to the appointment of Deloitte in substitution for PrixCar's auditor (as that constituted some sort of variation to the shareholder agreement), there is no dispute arising out of the fact of substitution or variation.

57 Furthermore, Deloitte in fact chose to invite each of the shareholders to provide it with information and factual comments for the purpose of preparing the determination. No doubt that was a prudent thing to do given the nature of the task and the speed with which it was required to act, but it was not obliged to do so under the shareholder agreement, and the fact that it did so does not have the consequence of extending the operation of the dispute resolution clauses to its determination.

58 For all of these reasons, I conclude that the determination of Fair Value under clause 5.1 is final and binding, and the dispute resolution clauses do not permit Toll to have Fair Value determined by arbitration.

Toll's alternative argument

59 Even where an expert determination is otherwise final and binding, parties will not be required to abide by that determination if the expert has not acted honestly and impartially in reaching their conclusions, or where the determination is not made in accordance with the contract. In relation to the latter point, a useful statement of the principle is found in the judgment of McHugh JA in Legal & General:

In each case the critical question must always be: Was the valuation made in accordance with the terms of a contract? If it is, it is nothing to the point that the valuation may have proceeded on the basis of error or that it constitutes a gross over or under value. Nor is it relevant that the valuer has taken into consideration matters which he should not have taken into account or has failed to take into account matters which he should have taken into account. The question is not whether there is an error in the discretionary judgment of the valuer. It is whether the valuation complies with the terms of the contract.[18]

60 Further, the court's decision as to impeachability does not affect the rights of a contracting party to take action against the expert for negligence, where the party has suffered loss as a result of the valuation.[19] Here, this right could extend to a cause of action by one or all of the defendants against Deloitte, in the event Deloitte failed to comply with the terms of the engagement letter.

61 A mere mistake or error in a valuation will not be sufficient to vitiate reliance upon it, as "a mere mistake in the valuation will ordinarily not ...[constitute] a departure from the contract".[20] The court can only intervene where that mistake results in the valuer "departing from the question which was referred to him",[21] so as to render the resulting valuation beyond anything the parties may have been supposed to have intended to be final and binding.[22]

62 The mere application of too much or too little weight to certain factors, or the use of an incorrect method by a valuer by itself is generally insufficient to impugn an expert determination,[23] however valuation on a "wholly erroneous principle" has been held to do so.[24] Again, the ultimate question of impeachability resides in an examination of the terms of the contract, including whether the contract required the expert to take into account certain matters in reaching his or her determination.[25] For example, valuation of property on a "break up" basis where the contract specifically requires the valuation to proceed on a "going concern" basis may be sufficient to render the valuation impeachable.[26]

63 The nature of the task to be performed may also be relevant. For example, the calculation of adjustments based on the amount of gas supplied through a pipeline[27] or the certification of interim payments due under engineering contracts,[28] involve objective (although potentially complex) arithmetical or mechanical processes. On the other hand, the valuation of a property "involves a discretionary judgment or contains discretionary elements,"[29] where qualified valuers may reasonably and validly apply any one or more of a range of recognised valuation methods to come to a result.[30] Exactly the same considerations would apply to a valuation of a business or shares in a company. The question of whether the valuation is impeachable is made more difficult where no fixed or readily available standard criteria exist to assist the expert in arriving at their valuation; in fact, such circumstances are conducive of different valuers each legitimately arriving at different conclusions.[31]

64 It has also been said that, where the contract fails to provide the expert with direction and merely asks the expert to value the asset, an inference may be drawn that the method to be used was left to the valuer, and as such "any mistakes of methodology are mistakes in the course of doing what the contract required".[32]

Toll's alleged grounds of impeachment

65 Here, there is no suggestion that Deloitte has not acted honestly and impartially, only that the determination was not made in accordance with the shareholder agreement.

66 Toll's objections to the determination have evolved over time and are still not entirely clear. Toll's initial objections were matters entirely within the discretionary judgment of Deloitte and therefore unimpeachable. However, at trial, Toll's senior counsel indicated that Toll's case rests upon the argument that the determination is impeachable, in so far as Deloitte adopted a particular approach to the value of its minority shareholding, which will be discussed shortly. Toll acknowledged that the minority discount point (or points) were of a "different species" to its other objections.

67 It is important to note that the court is not being asked to decide whether, in fact, the determination was made in accordance with the shareholder agreement. Toll seeks no such declaration or other relief. Rather, Toll seeks to establish that there is a genuine dispute as to impeachability, which is capable of and ought to be resolved in accordance with the dispute resolution clauses.

68 Many of the cases to which I was taken relate to the meaning of concepts such as "fair" in valuations. Toll sought to rely on them to establish that what Deloitte had done was not "fair". But it is not necessary for me to consider whether Deloitte did in fact determine Fair Value in accordance with its meaning in clause 5.1,[33] because that would involve my determining the merits of the impeachment argument.

69 Toll must establish that the dispute is a real one, but its reality depends "not on views which a court might hold as to the merits of the dispute, but on whether the divergent views of the parties are in reality entertained by them".[34] The way in which Toll's objections to the determination have changed and developed over time is rather unsatisfactory and, at times, confusing. But I am not able to conclude on the evidence that its criticisms are not genuine and bona fide. There is, nevertheless, some difficulty in identifying exactly what it says is "the dispute".

70 The principal thrust of Toll's submissions at trial seems to be that Fair Value has not been determined because of the way that Deloitte treated its shares:

(a) In performing a discounted cash flow analysis, Deloitte applied a discount rate to reflect Toll's minority shareholding ("the minority discount"), when Toll says it should not have;[35] and

(b) Deloitte failed to apply a control premium to reflect the fact that the other shareholders (in particular, Kawasaki) may be prepared to pay an amount in excess of market value for Toll's shares in order to increase their shareholding in and ability to control PrixCar, or of the "special value" to the other shareholders in ensuring Toll's shares remained in the hands of existing shareholders.

71 The shareholder agreement does not fetter the expert's discretion in choosing the valuation methodology to be employed, nor does it require the expert to take into account particular factors when determining Fair Value. It is clear that Deloitte did in fact consider the appropriate valuation treatment of Toll's minority shareholding, and expressly turned its mind to the possible application of both a minority discount and a control premium. Deloitte explained why it chose to apply the former and reject the latter. These appear to be matters falling fairly and squarely within its discretion and involving value judgments about which different minds may reasonably differ. Given that Deloitte considered how Toll's minority shareholding should be valued, it is difficult to see how Toll's criticisms can be characterised in a way which might lead to impeachment (in accordance with the principles set out in the cases discussed earlier). They appear to be essentially criticisms as to the weight to be given to various facts and the correctness of Deloitte's conclusions.

72 Even if the dispute resolution clauses are intended to apply to an impeachment dispute,[36] Toll has not satisfactorily established the existence of an arbitrable dispute as to whether the determination is impeachable.

73 Even if Toll's criticisms could be characterised in a way which might lead to impeachment, it would be inappropriate to grant the permanent injunctive relief which it seeks, namely injunctions "at large". I agree with the defendants that such relief would not have the affect of "quelling the controversy" between the parties.

Conclusion

74 It follows that Toll's claim must fail. I will hear from the parties as to the precise form of orders and as to costs.

[1] Paragraph 24.

[2] Toll's letter of 14 July 2006 advised that it believed the shares to be worth not less than $23,000,000, or not less than $23,915,750 if a particular compensation payment was taken into account. In its submission to Deloitte dated 29 September 2006, Toll proposed a value of $25,939,232.

[3] (1985) 1 NSWLR 314.

[4] Ibid at 336; cited with approval in Holt v Cox (1994) 15 ACSR 313 at 332, and by the Court of Appeal per Mason P, Holt v Cox (1997) 23 ASCR 590 at 596 and 605.

[5] Holt v Cox (1994) 15 ACSR 313 at 332; Thomas Cook Pty Ltd v Commonwealth Banking Corporation (1985-6) ANZ ConvR 598 at 602-3; AMP Society v OTC [1972] 2 NSWLR 806 at 825.

[6] Legal & General op cit at 335; see also Strang Patrick Stevedoring Pty Ltd v James Patrick & Co (1993) 32 NSWLR 583 at 588, in which the court cited a number of cases in which expert determinations have been upheld despite the fact that the relevant contracts did not specifically state the determinations were to be final and binding on the basis of the principle enunciated by McHugh J in Legal & General.

[7] Legal & General, ibid; see also Strang Patrick Stevedoring, ibid at 587 and Holt v Cox (1997) 15 ASCR 313 at 333_._

[8] [2006] VSCA 173.

[9] Ibid at [80]. Whilst the relevant contract in AGL contained an arbitration clause, it did not apply to the decision the subject of the dispute, and was therefore not relevant to the court's "honest businessman" comment.

[10] [1999] WASCA 10.

[11] Ibid at [14].

[12] Ibid at [71].

[13] Ibid at [74].

[14] [1995] HCA 36; (1995) 184 CLR 301.

[15] Ibid per Brennan CJ, Gaudron and McHugh JJ at 311.

[16] (1996) 39 NSWLR 160.

[17] Ibid per Gleeson CJ at 165.

[18] Op cit at 336.

[19] Ibid at 335; see also Kanivah Holdings Pty Ltd v Holdsworth Properties Pty Ltd [2001] NSWSC 405; (2001) 10 BPR 18,825 at 18,844.

[20] WMC Resources, op cit at [37].

[21] Legal & General, op cit at 331.

[22] Holt v Cox [1997] NSWSC 144; (1997) 23 ACSR 590 at 597; referred to in AGL at [51].

[23] See generally Legal & General, op cit at 335 as cited in paragraph 59 hereof; and Karenlee Nominees Pty Ltd v Gollin [1983] VicRp 61; [1983] 1 VR 657 at 671.

[24] Karenlee Nominees, ibid at 669.

[25] Strang Patrick Stevedoring, op cit. One of the parties claimed the valuation was impeachable because, amongst other things, the asset (a crane) was valued on an ex-situ, not in-situ, basis. The court determined the valuation could not be impeached because the contract did not require the crane to be valued on an in-situ basis (cf Jones v Jones [1971] 2 All ER 737; see footnote below).

[26] As in Jones v Jones [1971] 2 All ER 737; cited in Karenlee Nominees, op cit at 669.

[27] AGL, op cit.

[28] WMC Resources, op cit at [15]. The comment was made obiter by Ipp J by means of contrast with the valuation process in that case, which could not "be described in any way as "mechanical", or as involving simple or straight forward factual questions based on fixed or standard criteria" (at [32]).

[29] WMC Resources, op cit at [26]. See also Karenlee Nominees, op cit at 669 and Email Ltd v Robert Bray (Langwarrin) Pty Ltd [1984] VicRp 2; [1984] VR 16 at 21.

[30] See also WMC Resources, ibid at [23].

[31] Ibid at [23].

[32] Holt v Cox (1994) 15 ACSR at 333, citing Strang Patrick Stevedoring, op cit at 592.

[33] Namely, "the amount per share which is the fair selling value of the share as between a willing purchaser and a willing vendor."

[34] Reservoir Hotel Pty Ltd v E S Clementson (Victoria) Pty Ltd [1961] VicRp 111; [1961] VR 721 at 725.

[35] The minority discount is described in the valuation as being in the range of 15% to 20% at the enterprise value level, and equivalent to a discount of approximately 20% to 30% at the equity level.

[36] Which may be doubted, for the reasons expressed earlier.