ReSolution: In Brief
5 ReSolution | Nov 2017
The process for fixing fair value if an expert is appointed is intended to be expeditious, final and binding. Unlike an arbitration, there is no right of recourse to the court for error of law in the event that either party is dissatisfied with the price fixed by the expert. However, because the expert undertakes his or her task as an expert, not as an arbitrator, he or she is not immune from suit for negligence. The plain intention is that the parties will be bound by the price fixed by the expert as the fair value of the shares for the purposes of the sale.
After analysing the relevant authorities, the Court observed at [33] that the critical question is always whether the valuation has been carried out in accordance with the terms of the particular contract. Errors on the part of the expert in carrying out the valuation assessment will not invalidate the determination unless the error was one the expert was not entrusted to make.
At [41] the Court observed:
In the present case the expert’s mandate under the constitution was to fix fair value as between the shareholders, not fair market value or current market value. No particular valuation approach was prescribed. Nor were any particular valuation principles specified. The only requirement in the mandate was for the expert to assess the fair value of the particular shares. The parties entrusted the expert to carry out the valuation and agreed to be bound for the purposes of the share transfer by the fair value assessed in the exercise of the expert’s independent skill and judgment, acting honestly and in good faith. If the valuation was carried out incompetently, the affected party would have a remedy against the expert but no right to resist the share transfer at the price fixed.
The Court, while noting that PEL may have grounds to disagree with the valuer’s analysis and conclusion, found that the valuer did not step outside her mandate under the constitution and that Associate Judge Mathews was correct to find that PEL had no arguable defence to the Trustee’s claim. The appeal was dismissed accordingly.
The Peregrine judgments provide important guidance for both the lawyers drafting expert determination clauses in shareholder agreements, and experts themselves in discharging their valuation mandates. To quote the authors of the earlier article “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.”
A cautionary tale
Once again, the English courts have confirmed that non-payment of an arbitrator’s fees, delaying issue of the award, is not an acceptable excuse to justify missing the deadline to challenge the award under section 69 of the UK Arbitration Act 1996. In Squibb Group v Pole 2 Pole Scaffolding the Court declined to exercise its discretion to extend time for making an application for permission to appeal an award in circumstances where the delay was caused by no reason other than the parties’ failure to pay the arbitrator’s fee leading to a delay in the parties uplifting the award.
O’Farrell J referred to the principles applicable to the court’s discretion to extend time identified by Popplewell J inTerna v Al Shamsi [2012] EWHC 3283(Comm), the primary factors being:
Ireland’s Mediation Act
On 2 October 2017, Ireland signed its Mediation Act 2017 (the Act) [link to legislation on NZDRC website] into law, but it is yet to come into force.
The Act serves to reinforce existing provisions recognising mediation in the Irish High and Commercial Court, as well as in the Rules of the Superior Courts, providing a requirement for parties to litigation to consider mediation and to confirm to the Courts that they have done so.
A court may invite the parties to the proceedings to consider mediation, whether of its own motion, or on application of a party to the proceedings. The Act provides costs sanctions where parties unreasonably refuse or fail to engage in a mediation process following such an invitation.
The Act excludes disputes that are being investigated or mediated before the Workplace Relations Commission from its scope, however it will apply to other claims arising from the workplace, such as claims for personal injuries or breach of contract.
Family Dispute Resolution – it’s not happening (much)
Nigel Dunlop, one of the FDR Centre’s highly skilled family mediators working in the area of child care and contact disputes has written recently on the FDR mediation process and the reasons why it has seen limited uptake.
You may read Nigel’s full article in the Family Advocate here [link].
Family Mediation – Why would you try it?
Barbara McCulloch, another of FDR Centre’s highly sought after mediators has also written on the topic of family mediation, setting out the reasons why the mediation process can be so effective for those individuals who find themselves embroiled in highly personal disputes.
You may read Barbara’s full article here [link].