We have been invited to recall our earlier judgment[1] dismissing the applicants’ application for leave to appeal to this Court. The recall application is advanced on the basis that our judgment did not engage appropriately with one of the applicants’ arguments. As will become apparent, we accept that we did not accurately capture that argument in our earlier judgment. But we are, nonetheless, satisfied that the right result was reached and accordingly we dismiss the recall application.
[1]Fong and Chong v Wong and Fong [2010] NZSC 120.
The argument in question was that the expression “fair value” in s 149(1) of the Companies Act 1993 is not tied to the professional valuation standard of “fair value” but rather is just an objective standard which is to be applied by the court. Accordingly counsel maintains that the result of a professional valuation of “fair market value” could be, and in this case was, a “fair value” for the purposes of s 149. That argument is advanced on the basis that s 149 does not prescribe exclusive use of a particular professional valuation standard.
In our original leave judgment we mischaracterised the applicants’ argument. We recorded it as being that the concepts of “fair value” and “fair market value” are the same. This was not correct. Rather it was that in this case, a fair market value approach produced a result which met the statutory test of “fair value”. And we also accept that this was the applicants’ case in the High Court and Court of Appeal.
The Court of Appeal plainly understood the argument.[2] But it saw difficulty in reaching a conclusion that the transaction as structured had led to a price that represented fair value when this was inconsistent with the views of the valuers whose opinions[3] were before the High Court. The applicants’ complaint was that in taking this approach, the Court was confusing the professional valuation standard of fair value with the statutory test. For reasons which follow, we disagree.
[2]Fong and Chong v Wong and Fong [2010] NZCA 301 at [35].
[3]In the form of the reports of the valuer who valued the shares but did not give evidence and the evidence of Mr Hagen.
In cases such as the present, where the shareholders in a closely held quasi-partnership company have fallen out, the primary alternative to one shareholder purchasing the other’s shareholding is a court ordered winding up; this on the basis of either oppression[4] or the just and equitable ground.[5] In the event of a winding up, the assets of a company are…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Fong v Wong

Details

AGLC: Fong v Wong [2010] NZSC 152
Case: [2010] NZSC 152
Decision Date: 13 December 2010

CaseChat Overview and Summary

The Supreme Court of New Zealand was asked to recall a previous decision dismissing an appeal by Neville Fong and June Chong against Christopher Shane Wong and Angela Kim Fong. The initial case revolved around the interpretation of the term "fair value" as used in s 149(1) of the Companies Act 1993, in the context of a quasi-partnership company. The applicants argued that "fair value" in the statute should be interpreted as an objective standard, separate from the professional valuation standard of "fair market value." They contended that the court should have accepted the professional valuation of "fair market value" as meeting the statutory requirement of "fair value." The court, however, had previously mischaracterised this argument, recording it as equating "fair value" and "fair market value," which was not the applicants' position. Instead, they argued that the fair market value approach used in their case met the statutory test of "fair value."

The court found that while the applicants' argument was more accurately characterised, it still did not provide a credible basis to challenge the Court of Appeal's conclusion. The court held that the statutory term "fair value" must be interpreted in light of the context in which it is used, which includes the quasi-partnership nature of the underlying company and the statutory requirement for a fair price as between vendor and purchaser. The applicants' argument was seen as circular, as the professional valuation practices around terms like "fair market value" and "fair value" are developed to conform to statutory or contractual requirements. The professional valuer in this case, PwC, did not establish a figure that was fair in the required sense, whereas the evidence of Mr. Hagen, the other valuer, did.

The Supreme Court ultimately dismissed the application for recall, agreeing with the Court of Appeal that the transaction as structured did not lead to a price that represented fair value, given the views of the valuers before the High Court. The court saw no basis to successfully challenge the Court of Appeal's conclusion on this matter. The applicants were ordered to pay the respondents' costs of $2,500.

Orders