Candoora No 19 Pty Ltd v Freixenet Australasia Pty Ltd

Candoora No 19 Pty Ltd, a shareholder in Candoora Pty Ltd, initiated legal proceedings against Freixenet Australasia Pty Ltd, another shareholder, challenging the valuation of shares in Candoora Pty Ltd. The dispute arose from a contractual obligation to purchase shares under a put option agreement. The High Court of Australia was tasked with determining whether the valuation of the shares, conducted by an independent valuer, adhered to the terms of the contract and was therefore binding on the parties.

The central legal issue before the court was whether the valuation of the shares by the appointed valuer complied with the contractual terms stipulating that the "Fair Value" of the shares should be determined by a valuer. Specifically, the court had to assess whether the valuer's report, which incorporated a discount for minority interest, was in line with the contractual requirements. This involved examining the exact wording of the contract, the context in which the term "Fair Value" was used, and whether the discount applied was justified under the contract's terms.

In delivering the judgment, the court found that the contractual terms did not permit the application of a discount for minority interest when determining the "Fair Value" of the shares. The court held that the valuer's report, which included such a discount, did not comply with the contractual requirements. Consequently, the valuation was not binding on the parties. The court emphasised the importance of adhering strictly to the contractual terms when determining the fair value of shares, particularly in the context of shareholder agreements. The court's decision underscored the necessity for precise adherence to contractual stipulations in valuation processes to ensure that all parties are bound by the agreed terms.

The final orders of the court confirmed that the valuation conducted by the valuer was not in accordance with the contractual terms. The court declared that the valuation was not binding on the parties, and the contractual obligation to purchase the shares was subject to a re-evaluation in accordance with the proper contractual terms. The decision provided clarity on the interpretation of "Fair Value" in shareholder agreements and the implications of failing to comply with contractual valuation provisions.