Tx Australia Pty Ltd v Network Ten Pty Ltd; Network Ten Pty Ltd v Tx Australia Pty Ltd

[2018] NSWSC 559

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:	TX Australia Pty Ltd v Network Ten Pty Ltd; Network Ten Pty Ltd v TX Australia Pty Ltd [2018] NSWSC 559
Hearing dates:	05 April 2018
Decision date:	01 May 2018
Jurisdiction:	Equity - Commercial List
Before:	Stevenson J
Decision:	Declare that the plaintiff is required by the shareholders agreement to register the transfer of the first defendant’s shares in the plaintiff to the second and third defendants
Catchwords:	CONTRACTS – construction – shareholders agreement – mechanism for compulsory disposition to remaining shareholders or third party in certain events – whether compulsory disposal mechanism triggered – provision for expert determination of price at which shares to be purchased by remaining shareholders – whether determination can be impugned – whether expert entitled to determine methodology by which price to be determined – whether price means market value or fair and reasonable value of the shares – whether expert erred in adopting market value – whether expert made determination of the kind specified in the shareholders agreement – whether compulsory disposition mechanism void for uncertainty
Legislation Cited:	Corporations Act 2001 (Cth)
Cases Cited:	Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd (2015) 90 NSWLR 367; [2015] NSWCA 275 Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 Fitzgerald v Masters (1956) 95 CLR 420 MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451 Spencer v The Commonwealth of Australia (1907) 5 CLR 418; [1907] HCA 82 State of New South Wales v Banabelle Electrical Pty Ltd (2002) 54 NSWLR 503; [2002] NSWSC 178 Triarno Pty Ltd v Triden Contractors Ltd (1992) 10 BCL 305
Category:	Principal judgment
Parties:	TX Australia Pty Ltd (Plaintiff/First Cross-Defendant) Network Ten Pty Limited (First Defendant/Cross-Claimant) Nine Network Australia Pty Limited (Second Defendant/Cross-Defendant) Seven Network (Operations) Limited (Third Defendant/Cross-Defendant)
Representation:	Counsel: A S Bell SC with D F C Thomas (Plaintiff/First Cross-Defendant) A Leopold SC with A Hochroth (First Defendant/Cross-Claimant) K Williams SC with R Mansted (Second Defendant/Cross-Defendant) D Sulan (Third Defendant/Cross-Defendant)   Solicitors: Herbert Smith Freehills (Plaintiff/First Cross-Defendant) Corrs Chambers Westgarth (First Defendant/Cross-Claimant) DLA Piper (Second Defendant/Cross-Defendant) Addisons Lawyers (Third Defendant/Cross-Defendant)
File Number(s):	SC 2018/39929

Judgment

1. TX Australia Pty Ltd (“TXA”) owns and operates television transmission and retransmission infrastructure in five mainland metropolitan cities.

2. On 14 December 1999 each of TXA and the defendants, Seven Network (Operations) Ltd, Nine Network Australia Pty Ltd, and Network Ten Pty Ltd executed a “Shareholders Agreement”.

3. By the Shareholders Agreement, each of Seven, Nine and Ten agreed to subscribe for one third of the shares in TXA. They did so, and each of Seven, Nine and Ten has at all material times been the registered owner of one third of the issued share capital of TXA.

4. Pursuant to the Shareholders Agreement, each of Seven, Nine and Ten agreed to transfer to TXA the transmission and retransmission facilities that they had hitherto operated separately, together with various licences relevant to those operations.

5. Clause 10.3 of the Shareholders Agreement provides that “under no circumstances” is any of Seven, Nine or Ten entitled to a retransfer to it of the assets it transferred to TXA at the outset of the Shareholders Agreement.

6. On 14 June 2017 the directors of Ten resolved to appoint voluntary administrators pursuant to s 436A of the Corporations Act 2001 (Cth).

7. On 30 June 2017 receivers and managers were appointed to the assets of Ten.

8. The administrators and receivers and managers have since retired.

9. TXA took the view that by reason of the appointment of the administrators and receivers and managers, events of default had occurred under cl 10.1 of the Shareholders Agreement so as to engage what amounts to a compulsory disposal mechanism in cl 10.2 (a) of the Shareholders Agreement. The effect of the disposal mechanism, if engaged, was that Ten was obliged to sell its shares in TXA to Seven or Nine or a third party if neither Seven or Nine wished to purchase the shares.

10. The Shareholders Agreement provides that the “price for the defaulting Shareholder’s” shares would be “a price determined and agreed by the defaulting Shareholder” and TXA or, in the absence of such an agreement (there was none), “a price determined by [TXA’s] auditor” who is to act as an expert and whose decision “will be final and binding” (cl 10.2(b)(i) and (ii)).

11. On 13 July 2017 TXA requested its auditor, PricewaterhouseCoopers Australia (“PwC”), to “determine the price of Ten’s relevant shareholding pursuant to the Shareholders Agreement”.

12. On 30 August 2017 PwC sent TXA a letter headed “Engagement Letter - valuation of Ten Network shares in [TXA]”. I will refer to this as the Engagement Letter.

13. On 10 January 2018 PwC produced a document “Valuation of Network Ten Pty Ltd’s shareholding in TX Australia Pty Ltd as at 30 June 2017”. I will refer to this as the PwC Report.

14. Each of TXA, Nine and Seven contend that the PwC Report determined that the value of Ten’s shareholding in TXA was nil as at 30 July 2017.

15. On 29 January 2018 TXA, as agent for Ten, offered Ten’s shares in TXA to Seven and Nine for a total price of $1 (50 cents each).

16. On 6 February 2018 Seven accepted the offer. On 16 February 2018 Nine accepted the offer.

The issues

17. Four questions arise.

18. First, was the compulsory disposal mechanism in cl 10.2 of the Shareholders Agreement triggered by the voluntary administration and receivership of Ten?

19. Second, was PWC entitled to proceed on the basis that “price” in cl 10.2 refers to the “market value” of Ten’s shares (as TXA, Seven and Nine contend) rather than the “fair and reasonable price” for the shares (as Ten contends)?

20. Third, did the PwC Report “determine” the price of Ten’s shares in accordance with cl 10.2(b)(ii) of the Shareholders Agreement and, if so, for what amount?

21. Fourth, is cl 10.2(b)(ii) of the Shareholders Agreement void for uncertainty?

Decision

22. In my opinion, the answers to those four questions are:

1. Yes;

2. Yes;

3. Yes, $0;

4. No.

First issue – was cl 10.2 triggered?

23. Clause 10.1 of the Shareholders Agreement provides:

“DEFAULT

10.1   If:

(a)   a Shareholder is in breach of any obligation to be observed and performed by it under this Agreement and that Shareholder fails to rectify that breach within 30 days of receiving notice from the other Shareholders requiring rectification;

(b)   an order is made or a resolution is passed for the winding up of the Company except for the purpose of reconstruction or amalgamation with the consent of the Shareholders which consent will not be unreasonably withheld;

(c)   the Company ceases or threatens to cease to carry on the Business or goes into liquidation whether voluntarily or otherwise or is wound up or if a liquidator (whether provisional or otherwise) is appointed to it;

(d)   a receiver or receiver and manager is appointed to any of the Company’s assets or undertaking;

(e) the Company is placed under official management or an administrator is appointed under or pursuant to the provisions of the Corporations Law, or the Company enters into a composition or scheme of arrangement with its creditors or with the creditors of the Company;

(f)   an order is made or a resolution is passed for the winding up of any one of the Shareholders except for the purpose of reconstruction or amalgamation with the consent of the other Shareholders, which consent will not be unreasonably withheld;

(g)   any of the Shareholders goes into liquidation whether voluntarily or otherwise or is wound up or if a liquidator (whether provisional or otherwise) is appointed to it;

(h)   a receiver or receiver and manager is appointed to any of the assets or undertaking of any one of the Shareholders;

(i) any one of the Shareholders is placed under official management or an administrator is appointed under or pursuant to the provisions of the Corporations Law or any one of the Shareholders enters into a composition or scheme of arrangement with its creditors;

(j)   the Shareholders agree unanimously in writing to wind up the Company

then the provisions of Clause 10.2 will apply.”

24. Clause 10.2 provides:

“10.2 (a)   If any one of the events referred to in Clause 10.1 occurs (except for the events described in Clauses 10.1(b), 10.1(c), 10.1(d), or 10.1(e)) then the defaulting Shareholder is irrevocably deemed to have given to the non-defaulting Shareholders and the Company a transfer notice pursuant to Clause 9(b) for the sale of the defaulting Shareholder’s Relevant Proportion.

(b)   The price for the defaulting Shareholder’s Relevant Proportion will be:

(i)   a price determined and agreed by the defaulting Shareholder and the Company (acting as agent for the non-defaulting Shareholders); or

(ii)   in the absence of an agreement on the price within 7 days of the date when the transfer notice is deemed to be given, a price determined by the Company’s auditor who will act as an expert and whose decision will be final and binding.

(c)   As soon as a price for the defaulting Shareholder’s Relevant Proportion has been determined pursuant to Clause 10.2(b), the non-defaulting Shareholders may purchase the defaulting Shareholder’s Relevant Proportion in their respective Relevant Proportions or may procure a third party to purchase the defaulting Shareholders Relevant Proportion, within 30 days of such determination.”

25. Clause 10.2(a) refers to “a transfer notice pursuant to Clause 9(b)”.

26. Clause 9(b) provides:

“Except where the transfer is made pursuant to paragraph (e), the person proposing to transfer any share (the ‘proposing transferor’) must give notice in writing (a ‘transfer notice’) to [TXA] that the proposing transferor desires to transfer the share. That notice must specify the sum price for the share and will constitute [TXA] the agent of the proposed transferor for the sale of the share to the remaining Shareholders of [TXA] in their Relevant Proportions (the ‘purchasing Shareholders’) at the price so fixed. A transfer notice may include several shares and in that case will operate as if it were a separate notice in respect of each. A transfer notice is not revocable except with the sanction of the Directions.”

27. Clause 9(f) provides:

“If no Shareholder wishes to purchase the share, the proposing transferor at any time within three months afterwards is at liberty to sell and transfer the share (or where there are more than one share those not placed) to any person and at the same price as that offered to the purchasing Shareholders. At the expiration of that 3 month period the proposing transferor must serve a fresh transfer notice pursuant to Clause 9(b) if the proposing transferor desires to transfer the share.”

28. It is common ground that the events in cll 10.1(h) and (i) occurred with respect to Ten.

29. Thus, on the face of it, cl 10.2 was engaged. That is because cl 10.1 provides that “if” an event of the kind described in cll 10.1(a) to (j) occurs “then” cl 10.2 applies.

30. Correspondingly, cl 10.2(a) provides that “if any one of the events” referred to in cl 10.1 occurs (except cll 10.1(b), (c), (d) and (e), which are events concerning TXA itself) the “defaulting Shareholder” is “irrevocably deemed” to have given to the “non-defaulting Shareholders” and TXA a transfer notice pursuant to cl 9(b).

31. However Ten submits that on the proper construction of the Shareholders Agreement, cl 10.2 is only triggered if two requirements are satisfied; namely, first, that an event under cl 10.1 occurs in respect of a shareholder; and second, that shareholder is “in breach of any obligation to be observed and performed by it” under the Shareholders Agreement and that shareholder “fails to rectify that breach within 30 days of receiving notice from the other Shareholders requiring rectification” for the purpose of cl 10.1(a).

32. Thus Ten submits that “the preferred construction” of cl 10.1:

“…is to add the words ‘; and’ after cl 10.1(a), such that cl 10.2 is engaged only where there is both an unrectified breach of the Shareholders Agreements and one of the enumerated events in cl 10.1(f)-(j)”.

33. Ten submits that cl 10 of the Shareholders Agreement is infelicitously drafted. In particular, Ten points to cl 10.1(j) which provides that cl 10.2 applies if “the Shareholders agree unanimously in writing to wind up [TXA]”. As Ten points out, in that circumstance the compulsory disposal mechanism in cl 10.2 could not operate as each of Seven, Nine and Ten would necessarily be involved in a unanimous agreement to wind up TXA.

34. So much may be accepted. It may be that at this point in the Shareholders Agreement “something has gone wrong with the language” (to adopt the words of Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 at [25]) and that the Court would construe the Shareholders Agreement to endeavour to “avoid absurdity or inconsistency” (as did the High Court in Fitzgerald v Masters (1956) 95 CLR 420, especially per Dixon CJ and Fullagar J at [426]-[427]); for example by including a reference to cl 10.1(j) in the parenthetical exceptions in cl 10.2(a)). But that hypothetical circumstance is not before the Court.

35. In any event, I do not see how this infelicity of language compels the conclusion that cl 10, as a whole, should be construed as Ten contends.

36. I think TXA is correct to submit that Ten’s argument finds no reflection in – and is contrary to – the text of cl 10.

37. Ten’s argument involves reading cl 10.1 as if:

1. the words in cl 10.1(a) were incorporated into a chapeau to the clause (commencing with the word “if”);

2. the word “and” was added to the end of that chapeau;

3. cll 10.1(b) to (j) were changed to cll 10.1(a) to (i); and

4. the word “or” was added to the end of each of the (new) cll 10.1(a) to (h).

38. Thus, for Ten’s construction to be correct, cl 10.1 would have to be read as follows:

“10.1   If a Shareholder is in breach of any obligation to be observed and performed by it under this Agreement and that Shareholder fails to rectify that breach within 30 days of receiving notice from the other Shareholders requiring rectification; and

(a)   an order is made or a resolution is passed for the winding up of the Company except for the purpose of reconstruction or amalgamation with the consent of the Shareholders which consent will not be unreasonably withheld; or

(b)   the Company ceases or threatens to cease to carry on the Business or goes into liquidation whether voluntarily or otherwise or is wound up or if a liquidator (whether provisional or otherwise) is appointed to it; or

(c)   a receiver or receiver and manager is appointed to any of the Company’s assets or undertaking; or

(d) the Company is placed under official management or an administrator is appointed under or pursuant to the provisions of the Corporations Law, or the Company enters into a composition or scheme of arrangement with its creditors or with the creditors of the Company; or

(e)   an order is made or a resolution is passed for the winding up of any one of the Shareholders except for the purpose of reconstruction or amalgamation with the consent of the other Shareholders, which consent will not be unreasonably withheld; or

(f)   any of the Shareholders goes into liquidation whether voluntarily or otherwise or is wound up or if a liquidator (whether provisional or otherwise) is appointed to it; or

(g)   a receiver or receiver and manager is appointed to any of the assets or undertaking of any one of the Shareholders; or

(h) any one of the Shareholders is placed under official management or an administrator is appointed under or pursuant to the provisions of the Corporations Law or any one of the Shareholders enters into a composition or scheme of arrangement with its creditors; or

(i)   the Shareholders agree unanimously in writing to wind up the Company

then the provisions of Clause 10.2 will apply.”

39. This amounts to a major rewriting of the clause that cannot be justified.

40. Ten also points to:

1. the acknowledgment in cl 2.30 of the Shareholders Agreement that each of Seven, Nine and Ten had made initial capital contributions to TXA of an excess of $2.1 million;

2. statements in Ten’s 1999 Annual Report that Ten would “share with the other commercial broadcasters in the benefits of merged transmission and tower facilities” to be managed by TXA; and

3. a statement in Seven’s 2000 Annual Report that the involvement of Seven, Nine and Ten in TXA “allows all three networks to avoid duplication of essential infrastructure and provides economies to the industry as a whole”.

41. In those circumstances Ten submits:

“These contemporaneous statements of the commercial genesis of the Shareholders Agreement make it quite clear that the parties perceived there to be real commercial importance in the transfer of towers and transmitters to the joint venture company, following which the three networks would together share in the benefits of ‘merged transmission and tower facilities’. That being so, the parties should not lightly be taken to have intended that a Shareholder who became subject to the control of administrators and/or receivers, where, as here, a serious attempt at financial rehabilitation was on foot…would, without more, be a ‘defaulting Shareholder’ which was unconditionally obliged to dispose of all its shares in TXA, thus depriving it of the valuable rights, conferred by clause 2.32, to the merged transmission and tower facilities.” (Emphasis in original.)

42. I do not see how the statement in Ten’s 1999 Annual Report or the statement in Seven’s 2000 Annual Report can be received to construe the Shareholders Agreement. Although the statement in Ten’s 1999 Annual Report was made a few days before the Shareholders Agreement, it was a statement made by Ten to its shareholders. The statement in Seven’s 2000 Annual Report was made after the date of the Shareholders Agreement.

43. Nor is there evidence before me that “a serious attempt at financial rehabilitation [of Ten] was on foot” when the administrators and receivers were appointed”, although none of TXA, Seven or Nine objected to the submission on that basis; presumably because it is common ground.

44. Even if the material is available to construe the Shareholders Agreement, and accepting that each of Seven, Nine and Ten saw a “real commercial importance in the transfer of towers and transmitters to the joint venture company”, I do not see how it could be inferred that the parties intended the compulsory disposal mechanism in cl 10.2 might not operate, in accordance with its terms, in the event one of the parties went into administration or receivership.

45. As TXA submits, the appointment of an administrator or receiver would confer a right on those persons to appoint different representative directors to the board of TXA in circumstances where those directors would, by reason of cll 5.3 and 6.1 of the Shareholders Agreement, have a veto power over a range of business decisions to be taken by the board.

46. TXA also submits:

“Further, a shareholder’s administration and receivership could result in that shareholder changing entirely in character and ownership by virtue of that insolvent restructuring. This has in fact occurred in Ten’s case by virtue of a Deed of Company Arrangement and an order pursuant to s 444GA of the Corporations Act 2001, with the result that Ten is now wholly owned by a new owner, CBS International Television Australia Pty Ltd, and has been delisted from the ASX”.

47. I was not directed to any evidence establishing the matter in the second sentence. However Ten did not object to the submission on that basis; again, presumably because it is common ground.

47. Ten also submits that the parties should not lightly be taken to have intended that a shareholder that goes into administration be deprived of the “valuable rights” conferred by cl 2.32 (see [41] above).

48. But that clause does not give Ten any right “to the merged transmission and tower facilities” referred to in those submissions. It merely gives Ten a right of access to the relevant “Sites” and “Leasehold Sites” to ensure that its broadcast signal is being transmitted free of technical problems.

49. Ten also submits that the phrase “defaulting Shareholder” in cl 2.2 is congruent only with the circumstance described in cl 10.1(a) and not with the other circumstances contemplated by cl 10.1 (especially 10.1(h) (the appointment of a receiver and manager) or cl 10.1(i) (the appointment of an administrator)).

50. I see no such incongruity. I accept Nine’s submission that the phrase “defaulting Shareholder” is simply a convenient shorthand description of a shareholder in respect of whom an event in cll 10.1(a), (f), (g), (h) or (i) has occurred. Further cl 10.3(c) refers to each of the events enumerated in cl 10 as being “an event of default”.

51. In those circumstances, I see no reason to give cll 10.1 and 10.2 a meaning other than their natural meaning. The appointments of administrators and receivers are events of default. The compulsory disposal mechanism in cl 10.2 is engaged.

Second issue – the meaning of “price”

53. The Shareholders Agreement speaks of “the price for the defaulting Shareholder’s” shareholding in TXA.

54. TXA, Seven and Nine contend that, in this context, “price” means the “market value” of the shares. Ten contends that “price” means the “fair and reasonable price” of the shares.

55. In a sense, the point is moot.

56. That is because, by cl 10.2(b)(ii) of the Shareholders Agreement, the parties agreed that “price” would be determined by TXA’s auditor, PwC, who would “act as an expert” and “whose decision would be final and binding”. The parties made no provision in the Shareholders Agreement as to the standard or methodology by which “price” was to be determined. They left that task to PwC.

57. PwC expressed its conclusions by reference to “market value” rather than a “fair and reasonable” price. I explain below how that came about. TXA, Seven and Nine contend that, on the proper construction of the Shareholders Agreement, PwC was correct to do so. Ten contends it was not.

58. But Ten does not suggest the course PwC adopted was one that was unavailable, let alone irrational. And, provided PwC carried out the task entrusted to it – to “determine” a “price” - the fact that it may have erred or taken irrelevant matters into account does not alone “render the determination challengeable” (Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd (2015) 90 NSWLR 367; [2015] NSWCA 275 at [74] (Bathurst CJ, with whom Beazley P and McColl JA agreed).

59. Further, as Cole J said in Triarno Pty Ltd v Triden Contractors Ltd (1992) 10 BCL 305 at p 5, in these circumstances “it is a matter for either agreement between the parties, or determination by the independent experts as to the procedures to be followed” and, “if the parties have not by their deed agreed the procedures to be followed upon an expert determination, that is not a void the court can fill”.

60. Where the parties have not directed an expert to adopt a particular methodology, it is not for the Court to interfere in an expert’s decision as to the methodology to be adopted.

61. For those reasons, it matters not for practical purposes whether, on the proper construction of the Shareholders Agreement, “price” should be construed as meaning “market value” or “fair and reasonable price”.

62. However, in deference to the detailed submissions of the parties directed to this question, I will deal with it. My opinion is that on the proper construction of the Shareholders Agreement, “price” means “market value”. It follows, for what it is worth, that my opinion is that PwC was correct to adopt this construction.

63. Ten did not direct attention to any cases dealing with the meaning of “fair and reasonable price”. Indeed, it made no positive case for construing “price” as meaning “fair and reasonable price”. Rather, it advanced the negative proposition that unless the Shareholders Agreement be so construed, cl 10.2(b)(ii) would be void for uncertainty.

64. Determination of a “fair and reasonable price” on any given date involves consideration of what price is “fair” or “reasonable” in light of the individual circumstances of the vendor and purchaser.

65. Indeed, in its submissions, Ten accepts that in circumstances where cl 10.2 is engaged “it may well be appropriate to consider the value of the shares to the seller as an input (albeit not a determinative input) in to what is fair and reasonable in the circumstances” (emphasis added).

66. But what is “fair” and “reasonable” might also involve consideration of the value of the shares to the purchaser.

67. In circumstances where the purchasers are the other shareholders in TXA, those circumstances may not be the same for each purchaser.

68. If neither of the “non-defaulting Shareholders” wishes to purchase the shares, the “defaulting Shareholder” may sell their shares to a third party. In that instance, the defaulting shareholder must sell those shares “at the same price as that offered to the purchasing Shareholders” (cl 9(f), see [27] above).

69. In that event, the circumstances of that third party shareholder would, or at least might, have to be considered.

70. This could give rise to a very wide ranging enquiry and lead to a circumstance where the “price” to be paid to the defaulting Shareholder might, on any given day, vary depending upon the individual circumstances of the defaulting shareholder, the non-defaulting shareholders, or the third parties in question.

71. It appears to me unlikely that the parties would have intended this result.

72. It also appears to me that it would be unlikely that, had the parties intended that “price” have this meaning, they would have chosen TXA’s auditor to make a final and binding expert determination about the matter.

73. TXA’s auditor is well suited to determine independently the market value of a defaulting shareholder’s shares in TXA because it would have detailed understanding of the financial position of TXA.

74. In contrast, TXA’s auditor is less suited to conducting the more wide-ranging task of determining the “fair and reasonable price” of the shares which, as I have mentioned, would involve having regard to the particular circumstances of the shareholders, and possibly that of a third party; in respect of whom TXA’s auditor may well have no knowledge at all.

75. In MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451 (Spigelman CJ, with whom Mason P and Hodgson JA agreed) made a similar point in respect of an expert determination by an auditor and chartered accountant of the “fair market value” of the shares in question.

76. Spigelman CJ said (at [59]):

“In the present contractual context, the intrusion of the word ‘market’ between ‘fair’ and ‘value’ points away from a process of determining what is just or equitable between the parties, towards an objective standard. That that is so in the present case is strongly suggested by the decision-maker nominated in cl 11.2.3. The decision is to be made jointly by the company’s auditor and a chartered accounted nominated by the vendor and, failing agreement, by a nominee of the President of the Institute of Chartered Accountants. Persons with such a background are not generally suited to determining what is just or equitable in all the circumstances. Their expertise is appropriate for determining exchange value.”

77. The Chief Justice was dealing with a different expression (“fair market value”) than that under consideration here (“fair and reasonable price”). However the Chief Justice’s point carries even greater weight in the circumstance before me.

78. It is far more likely the parties intended TXA’s auditor would apply an objective standard of valuation. The “market value” is such a standard.

79. This construction of “price” is consistent with the use made of the word “price” in other clauses of the Shareholders Agreement.

80. For example, cl 10.3(b) provides that if any of the events specified in cll 10.1(b) to (e) occurs (being events concerning TXA itself, such as the passage of resolution for its winding up), then cl 10.4 shall apply. In that event, the shareholders must appoint a liquidator to TXA and cause the liquidator to sell TXA’s business “at a price and on terms acceptable to the Shareholders”. What must there be contemplated is that the shareholders cause the liquidator to sell the business. This would occur at whatever price acceptable to the shareholders that could be achieved in the market. This would not necessarily be at a “fair and reasonable price”.

81. Further the reference to “price” in cl 9, especially in cl 9(f) which deals with the possible sale to a third party, could only be a reference to an objectively ascertained market price.

82. For those reasons, my opinion is that the auditor was correct to determine “the price for the defaulting Shareholder’s Relevant Proportion” on the basis of market value, and not the “fair and reasonable” price that could be attributed to those shares.

Third issue – did PwC “determine” the price of Ten’s shares and, if so, in what amount?

83. Ten submits that PwC did not, in the PwC Report, “determine” a “price for the defaulting Shareholder’s Relevant Proportion” and that PwC’s purported determination is open to review on that basis.

84. As Bathurst CJ explained in Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd, to which I have already referred, the question of whether a determination is “open to review” depends (relevantly to this case) on “whether or not the expert has carried out the task which he or she was contractually required to undertake”. A determination can only be set aside “if the expert [has] not performed the task contractually conferred on him or her, but rather performed some different task, or carried out his or her task in a way not within the contractual contemplation of the parties, objectively ascertained” (at [74] and [75]).

85. Ten submits that PwC has not “carried out the task which it was contractually required to undertake” for a number of reasons:

1. first; PwC had specified two preconditions which had to be met for it to provide a determination, which were not met;

2. second; PwC did not put forward the PwC Report “as a determination”;

3. third; PwC did not determine “a price” for the defaulting Shareholder’s Relevant Proportion, as required by cl 10.2(b)(ii); and

4. fourth; PwC wrongly accepted TXA’s instruction to determine price by reference to market value.

86. Consideration of these points requires examination of some circumstances leading up to the PwC Report. In the correspondence to which I next refer, I have emphasised passages which are relevant to the various points made by Ten.

Background to the PwC Report

87. As I have mentioned, on 13 July 2017 TXA instructed PwC to “determine the price of Ten’s relevant shareholding pursuant to the Shareholders Agreement.

88. On 31 July 2017 PwC provided a draft engagement letter (dated 28 July 2017) which said:

“Scope and purpose of valuation

You have asked us to prepare an assessment of the Fair Value, as defined below, of a 33.3% shareholding in the Company as at 30 June 2017 (the Valuation Date) and a report thereon (together, the Services).

…

Fair Value reflects the intention to determine a value that is equitable to both parties. This is not an open market value. To determine this it is necessary to consider the circumstances of the transaction and the situation of each party before and after the transaction.” (Emphasis added.)

89. On 1 August 2017 TXA replied:

“We are unsure as to why you refer to instructions said to have been received from us in respect of concepts of “Fair Value” and “open market value.” For clarity, your task is confined to a determination of price as set out in the Agreement – nothing more.

We have no view, and have not instructed you, one way or the other, as to what methodology ought to be applied and at what date the shareholding ought to be valued.

If concepts of Fair Value and open market value are relevant to your task then you should provide comment, however, how you determine the price of the shareholding and the date on which the shareholding is to be valued ultimately is a matter for you.” (Emphasis added.)

90. On 7 August PwC wrote to TXA:

“As discussed our ability to undertake this work would depend upon the following:

1.   Receiving legal advice on the appropriate interpretation to be placed upon the term ‘price’ in clause 10.2 of the Shareholders Agreement. As you know we are not parties to that agreement and the concept of ‘price’ could have many different interpretations in a valuation context, depending on the parties’ intention. We would then undertake any valuation adopting a methodology that was consistent with the legal advice that was provided to us.

2.   The receipt of information from TXA relevant to the application of the methodology upon which we would rely for the purpose of the valuation (the methodology having been determined based on legal advice). For instance, it may be the case that information as to the cost of any ongoing broadcasting services that would be provided to Ten on an arm’s length basis will be relevant. Any setting of price for services would be a matter for management. It would not be a matter for the firm.

As discussed, we will be unable to undertake the engagement should these two conditions not be met.” (Emphasis added.)

91. On 21 August 2017 TXA replied:

“With respect to the first point made in your letter, you are requested to assume that ‘price’, as used in clause 10.2 of the Shareholders Agreement, refers to market value – namely, the amount which a willing and knowledgeable, but not anxious, purchaser would pay a willing and knowledgeable, but not anxious, vendor for the asset in question, in accordance with the principles in Spencer v The Commonwealth (1907) 5 CLR 418. In determining the market value of the ‘defaulting Shareholders’ Relevant Proportion’, you are otherwise to exercise your professional expertise.

With respect to the second point made in your letter, TXA will endeavour to provide you with any information in its possession which you reasonably require in order to carry out your engagement. We invite you to identify that information without delay.” (Emphasis added.)

92. On 28 August 2017 TXA wrote to PwC:

It is a matter for PwC, in the course of undertaking its expert determination of the price of Ten’s shares, to decide upon the methodology, together with any other processes that PwC is of the view ought to be adopted. Our letter dated 21 August 2017 sought to assist you in respect of the determination of ‘price’. If you are of the view that any different methodology ought to apply, then you should adopt that methodology, with appropriate reasoning.” (Emphasis added.)

93. On 30 August 2017 PwC sent TXA the Engagement Letter, which stated:

“Scope and purpose of valuation

You have asked us to prepare an determination of the price, as defined below, of a 33.3% shareholding in [TXA] as at 30 June 2017 (the Valuation Date) and a report thereon (together, the Services).

The purpose of the determination is to address various exit provisions in the shareholder’s agreement relating to an alleged default of one of the parties. PwC expresses no opinion on the legal aspects of this default allegation.

We understand the shareholders agreement refers to ‘the price of a proportionate share’ which is not a recognised valuation term. In the absence of this recognition, we have sought to rely on your instructions as to the appropriate basis of value to apply. You have informed us that Market Value is the basis we should apply.

We will utilise the following commonly used definition of Market Value:

‘the price that would be negotiated at the Valuation Date in an open and unrestricted market between a knowledgeable, willing but not anxious buyer and a knowledgeable, willing, but not anxious seller acting at arm’s length.’

The concept of Market Value does not take into account the particular circumstances of any specific purchaser or seller. It therefore excludes any special strategic value that may be placed on the business by one particular purchaser. Accordingly, the actual market price achieved in a transaction may be higher or lower than our Market Value depending upon the circumstances of the transaction, the relative negotiating position of each party and the level of synergies the purchaser may be able to realise.

By its very nature, valuation work cannot be regarded as an exact science and the conclusions arrived at in many cases will, of necessity, be subjective and dependent on the exercise of individual judgment. There is, therefore, no indisputable single value and we normally express our conclusion as falling within a likely range. However, to comply with the requirements of this engagement, we will provide you with a single point estimate, being a figure within that likely range.” (Emphasis added.)

94. On 20 November 2017 TXA wrote to PwC:

“We are disappointed that you have advised you are unable to determine a price for TEN’s shares in TXA as a single point figure despite your agreement to do so in your engagement letter dated 30th August 2017.

At our meeting, we discussed the share price and the ongoing commercial arrangement with TEN being intrinsically linked. We both agreed to try to find a way forward, however, you maintained that this was impossible without knowing the most likely ongoing commercial arrangement with TEN to use as an input to the valuation.

Therefore, in order to enable you to provide the agreed deliverable of a single point figure, TXA has calculated the most likely annual fee using a variation of the building block methodology (currently used in Australia in the regulation of infrastructure services) to account for the fact that this is not an arms’ length transaction, based on the following assumptions:

[TXA set out a number of assumptions].

…

Based on this approach, a national (5 metro markets) managed service fee of $3.2m + GST p.a. indexing annually at CPI + power costs to be recharged separately, is the most likely commercial arrangement. A 20-year contract term would be appropriate to reflect the expected future life of terrestrial transmission as the distribution method for free to air television.” (Emphasis added.)

The PwC Report – covering letter

95. PwC submitted its report to TXA under cover of a letter of 19 January 2018. I will refer to it as the Covering Letter.

96. In that letter PwC stated:

“Some matters relevant to the engagement

Prior to entry into the engagement we identified two conditions to be met (our letter of 7 August 2017). Those conditions were:

1.   Receipt of legal advice obtained by TXA on the appropriate interpretation to be placed upon the term ‘price’ in clause 10.2 of the Shareholders Agreement, which we would then use to undertake the valuation adopting a methodology that was consistent with that legal advice.

2.   Receipt of information from you relevant to the application of the methodology, upon which we could rely for the purpose of the valuation. We mentioned at the time and subsequently that information as to the cost of any ongoing broadcasting services that would be provided to Ten on an arm’s length basis would be relevant.

As to the matters in 1 above, you advised us on 21 August 2017 that for the purpose of the valuation ‘the price of a proportionate share’ was to be determined by us applying Market Value (namely the amount which a willing and knowledgeable but not anxious purchaser would pay and a willing and knowledgeable but not anxious vendor would sell in accordance with the principles in the decision Spencer v The Commonwealth (1907) 5 CLR 418). We had understood this to reflect legal advice you had obtained. Only recently (your email of 30 November 2017) you have advised us that this was an assumption you wanted us to adopt, rather than being a reflection of any legal advice TXA may have received.

As to the matters in 2 above, and as we have discussed, the nature of the future arrangements between Ten and TXA is a crucial element in any valuation. The current circumstances existing between TXA and Ten appear to be such that agreement as to those arrangements has not been reached as yet. As a result, by letter dated 20 November 2017 you instructed us to proceed on a particular basis as to ongoing arrangements. We queried whether this basis would reflect arm’s length arrangements, following which you told us you were unable to confirm whether that would be the case. As a result, we have used the quote provided to ABC [to Australian Broadcasting Corporation] by TXA, because it represented the only available evidence of which we were aware of an arm’s length arrangement involving TXA. We have also provided details of an outcome using your proxy as part of our sensitivity analysis.

Engagement variation

As a result of the two points above, we have not been able to provide a valuation which, in our view, satisfies the purpose of our original engagement letter. The valuation work we have been able to do, its outcomes and our approach is set out in this deliverable.” (Emphasis added.)

The PwC Report

97. The PwC Report adopts an orthodox definition of market value. PwC assessed such value on a discounted cash flow basis after considering a range of alternative valuation methodologies. There is no dispute that PwC was correct to adopt this methodology. Nor would any such dispute be relevant: see [58] and [59] above.

98. Under the heading “[a]t a glance – our view” PwC stated:

“Our valuation of Ten’s share is based on a number of assumptions and represents one of what may be a number of possibilities”.

…

“Valuation summary

●   Given the unique nature of TXA’s business we analysed the potential buyer pool and considered the various valuation outcomes. We considered that the main potential purchasers are a combined Seven and Nine consortium under the shareholding agreement or Ten or the holder of Ten’s TV licence (potentially CBS). Discussion of our work on this aspect is set out in the Approach section.

●   We considered what each potential purchaser would consider paying and possible outcomes, which we have summarised below.

Seven and Nine:

●   In the event Seven and Nine purchase the Shareholding we consider that there are two likely operating scenarios:

i.   Ten ceases to be a customer of TXA and therefore Seven and Nine will bear all the excess operating costs and capital expenditure.

ii.   Seven and Nine negotiate a long term commercial contract with Ten.

●   Under the first scenario, given a current negative equity position of TXA no additional value would be received by Seven and Nine in holding additional shares in TXA.

●   If a commercial contract was put in place with Ten as a customer, it is likely that Seven and Nine would be willing to pay for the incremental net present value (NPV) of this additional contract. Based on the fee proposal provided to ABC which is the only evidence provided of an arm’s length arrangement for similar services ($7.3m for a period of 20 years) this would result in a value of $42.9m.

●   On 20 November 2017 you advised us of an alternative arrangement of $3.2m per annum plus power costs recharged separately however you were not able to confirm that this reflected your estimate of an arm’s length transaction. If an alternative arrangement was in fact agreed which more closely aligned with $3.2 per annum, it would result in a value of $15m.

●   Note, as Ten’s share of power costs has not been provided it has also not been included in the calculation and annual inflation has not been included. This is consistent with the ABC proposal.

Ten or the holder of Ten’s TV Licence:

●   In the event Ten or the holder of Ten’s TV licence had the opportunity to purchase the Shareholding, we consider that they would pay up to the amount it would cost them to procure the same service at an arm’s length rate adjusted for any net negative equity positions. They would do this only in the circumstances that the current shareholders agreement remained in place.

●   Based on the fee proposal provided to ABC, this would result in a value of $42.9m.

●   Again, if the commercial arrangement was in line with the alternative arrangement you provided on 20 November 2017 of $3.2m per annum, it would result in a value outcome of $15m.

●   We consider the most likely outcome to be that Ten or the holder of Ten’s TV Licence would purchase the Shareholding or no transaction at all would occur.

●   This report assumes that the commercial rate that would be charged to Ten would be in line with the ABC fee proposal.

●   If the holder of Ten’s TV licence acquires the share the current fee arrangements would be expected to remain intact.

●   To the extent the commercial contract that is put in place is different, this would impact our valuation. We have performed a sensitivity analysis on the commercial contract arrangements to demonstrate the sensitivity of our value on this key assumption. This sensitivity addresses a range of values including values encompassed by the fee arrangement advised to us by you on 20 November 2017.

Sensitivity analysis (AUD’000s)
Contracted annual fee ($’000)	Equity Value
994	(0)
2,000	6,838
4,000	20,433
6,000	34,028
7,313	42,953
8,000	47,624
10,000	61,219
12,000	74,814

Note: all values above assume no inflation for first 20 years consistent with ABC proposal”. (Emphasis added.)

99. Later in the Report, under the heading “[p]otential scenarios and valuation outcomes” PwC expressed various “value outcomes” depending on a range of “[p]otential ownership structures” and “operating scenarios”.

100. Relevantly, that part of the report reads as follows:

“Seven 50%/Nine 50% (Seven and Nine purchase the holding)

Seven/Nine only major users: Ten ceases to be a customer. Seven and Nine continue to be on a cost recovery basis

This would occur if Ten was forced out and agreement was not reached on a fee that was considered acceptable to Ten. Seven and Nine would be required to cover costs and capex.

Value outcome: $0”

(Emphasis in original.)

101. Later in the Report PwC stated:

“Valuation of business ‘as is’

●   In order to initially assess the value of the business ‘as is’ we have utilised management’s cash flow forecast and applied a discounted cash flow methodology.

●   As there are third-party minority shareholders in Gold Coast Translators Pty Ltd (GCT) and Combined Translator Facilities Pty Ltd (CTF) we have separately assessed the MV implied by the income approach for each of the businesses (TXA, GCT and CTF of which TXA has a 75% shareholding) (refer to Appendix 3 for detailed calculations) in order to assess the enterprise value of TXA.

●   We have then deducted net debt of $14.1m to determine the Equity Value of TXA. This consists of $15.5m of interest bearing debt housed entirely in TXA and $1.3m of cash, which excludes 25% of the cash held by GCT and CTF.

●   The following pages set out the key valuation assumptions.

●   Based on our analysis, there is currently a negative equity value due to the large proportions of debt. We estimate the value for the Shareholding to be negative $3.4m. We consider that there would be no value in the equity under this scenario.”

102. Immediately following, PwC stated:

“Valuation of business for Financial Purchaser

●   As per our analysis we consider a financial purchaser would seek to buy the Shareholding in the event a long term contract was put in place with Ten at a commercial rate.

…

●   We consider this as an unlikely scenario as it would not be in the best interests of Seven and Nine for commercial arrangements to be changed and therefore they would likely purchase the shareholding to prevent this event occurring.”

103. In appendix 3 to the Report, PwC prepared a “discounted cash flow analysis”.

104. In that part of the Report PwC expressed the opinion that the market value of Ten’s shareholding in TXA “as is (Ten retains its shareholding)” and if “Ten exists and does not use the services [of TXA]” as nil, in each case.

105. PwC continued:

“Valuation of business for Seven and Nine

●   As per our analysis we consider Seven and Nine would be willing to pay up to the value they would receive for the services on commercial terms from Ten providing the agreement was long term in nature.

●   We have again estimated the commercial fee based on the ABC proposal reduced for the current estimated contributions by Ten and have assumed that amount paid would be reduced by the negative equity position under the ‘as is’ scenario.

●   We did not include discounts for lack of marketability or control as it represents the cash flow uplift that Seven and Nine would receive.

●   Under this scenario we estimate the value received by Seven and Nine by purchasing the Shareholding to be $42.9m.”

106. I turn now to Ten’s four points (see [85] above).

Did PwC specify two preconditions which have not been met?

107. Ten submits that PwC had specified two preconditions to their ability to make a determination as to a “price” for Ten’s shares as at 30 June 2017, that neither precondition had been met, and that therefore PwC had not made any determination of price.

108. Ten points to the statement in PwC’s letter of 7 August 2017 (see [90] above) that their ability to “undertake this work” would depend upon, first, “receiving legal advice on the appropriate interpretation to be placed upon the term ‘price’” in cl 10.2 of the Shareholders Agreement, and second, receipt of information from TXA “relevant to the application of the methodology upon which [PwC] would rely” including information “as to the cost of any ongoing broadcasting services that would be provided to Ten on an arm’s length basis”.

109. As to the obtaining of legal advice, on 21 August 2017 TXA requested PwC to assume that “price” meant market value: see [91] above. The Engagement Letter and the PwC Report itself show that PwC did make this assumption for the purposes of the PwC Report.

110. In the Covering Letter, PwC said that it had understood that TXA had obtained legal advice about that matter. That may have been a reasonable assumption for PwC to make. But TXA did not say it had received such legal advice. In any event, as PwC stated in the Covering Letter, on 30 November 2017 TXA “advised [PwC] that this was an assumption [TXA] wanted [PwC] to adopt, rather than being a reflection of any legal advice TXA may have received”.

111. I will deal later with the significance of PwC’s adoption of the assumption. But I do not see PwC’s 7 August 2017 statement that its ability to undertake this work was dependent upon legal advice being received, as amounting to an unfulfilled condition precedent to PwC making the determination requested.

112. Until 30 November 2017 PwC (wrongly it seems) assumed that TXA had received legal advice about that question. Once the true position emerged, PwC proceeded to produce the PwC Report.

113. I see no unfulfilled condition precedent.

114. As to PwC’s second request concerning the cost of any ongoing broadcasting services to be provided to Ten, PwC reiterated in the Covering Letter that “the nature of the future arrangements between Ten and TXA is a crucial element in any evaluation”.

115. PwC’s point was that, assuming Ten was no longer a shareholder of TXA, the amount (if any) it agreed to pay TXA for the provision of the transmission services would affect the value of its shares in TXA as at 30 June 2017.

116. It is common ground that there was no long term commercial contract in place between TXA and Ten at 30 June 2017.

117. PwC recorded that fact in the Covering Letter when it stated:

“The current circumstances existing between TXA and Ten appear to be such that agreement as to those arrangements has not been reached as yet”.

118. Indeed, on 24 November 2017 Ten’s solicitors wrote to TXA:

“No agreement for broadcasting services has been discussed by Ten and TXA, let alone agreed”.

119. For that reason, on 20 November 2017 TXA wrote to PwC with an estimate of “the most likely annual fee” that Ten might pay TXA for the transmission services should Ten seek, and TXA agree to provide, them. The estimate was $3.2 million per year plus GST.

120. As PwC records in the Covering Letter, it did not use that figure in its calculation because TXA was not able to confirm that that figure “reflect[ed] arm’s-length arrangements”. Instead, PwC used a quotation that TXA had evidently given the Australian Broadcasting Corporation for the provision of transmission services “because it represented the only available evidence of which [PwC was] aware of an arm’s length arrangement involving TXA”.

121. I discuss the significance of this below. The point for present purposes is that PwC was not specifying a condition precedent to its ability to express an opinion as to the price of Ten shares. It was explaining why, and on what basis, it ultimately expressed a range of opinions rather than the “single point estimate” that it had foreshadowed in the Engagement Letter; see [123] to [130] below.

122. For these reasons, my conclusion is that there were no unfulfilled conditions precedent.

Did PwC put its report forward as a “determination”?

123. Ten submits that PwC did not put forward the PwC Report “as a determination”.

124. In that regard, Ten relies upon the statement made by PwC at the conclusion of the Covering Letter that:

“Engagement variation

As a result of the two points above, we have not been able to provide a valuation which, in our view, satisfies the purpose of our original engagement letter. The valuation work we have been able to do, its outcomes and our approach is set out in this deliverable.”

125. PwC did not there state that it had been unable to “provide a valuation” of the kind called for by cl 10.2(b)(ii) of the Shareholders Agreement.

126. What it said was that it had not been able to provide a valuation which “satisfies the purpose of our original engagement letter”.

127. As I have mentioned, PwC had stated in the Engagement Letter that there is “no indisputable single value and we normally express our conclusions as falling within a likely range” but that:

“…to comply with the requirements of this engagement, we will provide you with a single point estimate, being a figure within that likely range”.

128. I read PwC’s statement at [124] above to mean that, notwithstanding what it had said in the Engagement Letter, PwC did not feel able to provide a “single point estimate”.

129. Hence, PwC concluded the Covering Letter:

“The valuation we have been able to do, its outcomes and our approach, is set out in this [Report].”

130. I do not read that statement as signifying that PwC had not made a determination in the PwC Report itself.

131. Analysis of the PwC Report makes clear that it did.

Did PwC “determine” a price for Ten’s shares?

132. Clause 10.2(b)(ii) of the Shareholders Agreement requires PwC to determine “a price” for Ten’s shares.

133. Ten submits that a determination of “a price” should be construed to mean “a single price for those shares”. Further, that “from reading the PwC Report, however, there is no objective indication of any single figure which PwC has decided as the price of Ten’s shares”.

134. It is true that PwC expressed a number of outcomes as to the market value of Ten’s shares depending on what it described as various “scenarios”.

135. The first scenario is on the basis of TXA “as is”. That is, if “Ten ceases to be a customer of TXA and therefore Seven and Nine will bear all the excess operating costs and capital expenditures” of TXA. PwC opined that in that circumstance “given a current negative equity position of TXA no additional value would be received by Seven and Nine in holding the additional shares in TXA” (see [98] above at the fourth bullet point) and that Ten’s shares would have no value (for example see [100] above).

136. PwC did consider an alternative “scenario”; namely “if a commercial contract was put in place with Ten as a customer”. In that event PwC opined that Ten’s shares would have a market value of $42.9 million (assuming it paid $7.3 million per annum for 20 years; the ABC figure see [98] above) or $15 million (assuming it paid $3.2 million per annum for 20 years; TXA’s estimate of “the most likely annual fee”, see [94] above).

137. I do not think it follows from the fact that PwC put forward a range of “scenarios” that it failed to reach a “determination”.

138. The relevant determination will, as it were, self-select depending on the facts.

139. It is common ground that the first scenario reflects the facts; namely, the “as is” position.

140. On my reading of the PwC Report, that is the relevant “determination” that PwC made.

Did PwC wrongly accept instructions from TXA to determine price by reference to market value?

141. As I have described, PwC sought guidance from TXA as to the meaning of “price” in the Shareholders Agreement. Initially it requested that legal advice be obtained as to the meaning of “price” in the Shareholders Agreement. In response, TXA requested PwC to assume that price meant market value (see [91] above).

142. Shortly thereafter, TXA emphasised that that request was meant to “assist” PwC but that if PwC was “of the view that any different methodology ought to apply, PwC should adopt that methodology with appropriate reasoning”. PwC made clear in the Engagement Letter that “[TXA] have informed us that Market Value is the basis we should apply” (see [92] and [93] above).

143. Consistently with the Engagement Letter, PwC stated in the Covering Letter that it had proceeded upon that basis.

144. It was for PwC to select the methodology it would apply in determining “a price”. It sought guidance from TXA about that matter. It was not bound to accept that advice. Any error PwC made in adopting TXA’s suggestion cannot provide a basis to impugn its determination: see [58] and [59] above.

145. In any event, in my opinion PwC adopted the correct methodology.

Fourth issue – is cl 10.2(b)(ii) void for uncertainty?

146. Ten submits, although without great enthusiasm in oral address, that because cl 10.2(b)(ii) contains no formula and specifies no criteria to enable PwC to carry out the task of determining “a price”, PwC was left to determine “price” in a “contractual vacuum” and that because an “essential machinery provision” was lacking the clause was uncertain; State of New South Wales v Banabelle Electrical Pty Ltd (2002) 54 NSWLR 503; [2002] NSWSC 178 at [70] (Einstein J).

147. But here there is no “contractual vacuum”. The parties have left it to PwC to determine the methodology to be adopted.

148. In any event, as Nine submits, the mere fact that there is a dispute about the meaning of “price” in cl 10.2(b)(ii) does not render the clause void for uncertainty. The clause is not completely devoid of meaning.

149. For the reasons I have outlined, my opinion is that “price” should, in the context in which it appears, be construed as meaning “market value”. So read there can be no suggestion that cl 10.2(b)(ii) is void for uncertainty.

Conclusion

150. For those reasons I propose to make a declaration to the effect sought by TXA; namely that TXA is required by cll 9 and 10 of the Shareholders Agreement to register the transfer of the shares of Ten in TXA to the Seven and Nine in their relevant proportions.

151. I will hear the parties as to costs.

**********

Decision last updated: 01 May 2018