DTS Succession Pty Ltd v Survco Pty Ltd [2021] QSC 283 [2021] 45 QLR

SUPREME COURT OF QUEENSLAND CITATION: DTS Succession Pty Ltd v Survco Pty Ltd [2021] QSC 283 PARTIES: DTS SUCCESSION PTY LTD ACN 614 803 235 (and others) (applicants) v SURVCO PTY LTD ACN 119 449 008 (first respondent) AND MMJ DEVELOPMENT CONSULTING PTY LTD ACN 119 564 073 (second respondent) FILE NO/S: 8993 of 2021 DIVISION: Trial Division PROCEEDING: Civil ORIGINATING COURT: Supreme Court DELIVERED ON: 4 November 2021 DELIVERED AT: Brisbane HEARING DATE: 2 November 2021 JUDGE: Freeburn J ORDERS: 1. A declaration that the valuation of Brian McDonald of Pilot Partners dated 26 May 2021 was prepared in accordance with clause 4 of the Deed of Separation and Release dated 1 March 2021 (the deed); 2. An order that the deed ought to be specifically performed and carried into execution; 3. The parties be heard on the form of the orders and on costs. CATCHWORDS: CONTRACT – VALUATION – FINAL AND BINDING – HONESTY AND IMPARTIALITY OF PROCEDURE – Where parties resolved their dispute through a mechanism whereby the applicants bought the respondents’ shares in the company – Where the compromise was recorded in a Deed of Separation and Release – Where Deed set out how valuation of the shares was to be undertaken – Where Deed appointed a -- 1 of 16 -- 2 valuer - Whether there is an error in the discretionary judgement of the valuer – Whether the valuation was carried out honestly and impartially. COUNSEL: Mr L Copley (Applicants) Mr G Sheahan (Respondent) SOLICITORS: Talbot Sayer (Applicants) ESJ Law (Respondent) REASONS Introduction/Background [1] The applicants and the respondents are shareholders in a group of companies that operate a surveying, town planning and urban design business in Brisbane. [2] The parties fell into dispute. They agreed to resolve their dispute through a mechanism that involved the applicants, who are the continuing shareholders, buying out the outgoing shareholders – the respondents. The compromise agreement they reached is documented in a Deed of Separation and Release (the ‘deed’). [3] That deed provided that the purchase price for the shares was to be the value of the shares as determined in accordance with clause 4. Clause 4 comprises what is commonly described as an expert determination clause. The parties agreed that, within two business days of the execution of the deed, they would appoint Brian McDonald of Pilot Partners as the valuer to value the shares. [4] Mr McDonald completed the valuation on 26 May 2021 and assessed the shares as having a value of $125.32 each. The respondents have refused to complete the sale of the shares at that price in accordance with the deed. The applicants seek specific performance, that is to compel the respondents, the outgoing shareholders, to transfer their shares at the price determined by Mr McDonald. [5] The substantive issues in this case turn on two propositions advanced by the respondent which I will summarise and then deal with in more detail. The first broad proposition is that Mr McDonald’s valuation does not qualify as a valuation under clause 4.3 of the deed. The second broad proposition is that Mr McDonald’s valuation was not fair or impartial. -- 2 of 16 -- 3 The Deed [6] Before dealing with the detail of those two broad propositions it is necessary to examine the relevant provisions of the deed. As McMurdo J emphasised in Vale Belvedere Pty Ltd v BD Coal Pty Ltd: … the respective arguments accepted that the extent to which error might vitiate an expert determination turns upon the proper interpretation of the contract by which the determination is required. In that exercise of interpretation, care must be taken in considering judgments where the outcome depended upon the terms of different contracts. In each case, the contract must be interpreted to see whether the expert determination is one by which the parties have agreed to be bound. That requires an assessment of what the parties agreed that the expert should do. Importantly, it also involves an assessment of what the parties agreed should be the consequence, if any, of the expert not doing everything which they had agreed he would do. They may have agreed, for example, to appoint a valuer upon the usual basis that the valuer would act with reasonable skill and care. But it does not follow that the agreed consequence of a negligent valuation is that they are not bound by it. That consequence or otherwise depends upon the terms of the contract upon their proper interpretation.1 [7] Here, the clause appointing Mr McDonald as the expert valuer is clause 4.2. The process of his valuation is specified by clause 4.3: 4.3 Process for valuation (a) The Valuer must determine the value of the Shares in accordance with the valuation standards, practices, and principles generally accepted in Queensland, Australia and must specifically have regard to the following: (i) current capital; (ii) future earnings; (iii) current assets; (iv) dividend payment history of the Company; (v) release of the Restraint Obligations; and (vi) the long-standing association of the Outgoing Shareholders as founding members of the Company. (b) The parties must use reasonable endeavours to ensure that the Valuer values the Shares within 30 days of appointment, unless otherwise agreed in writing by the parties. (c) Any party to this document may make written submissions to the Valuer in respect of the matters contemplated by sub-clauses 4.3(a)(i) to 4.3(a)(vi) and, if a party chooses to do so, it must provide the other parties with a copy of such submissions prior to provision to the Valuer. [8] Importantly, clause 4.4 expressly provided that the valuation is ‘conclusive and binding on the parties.’ 1 [2011] 2 Qd R 285 at [36]. -- 3 of 16 -- 4 [9] The parties are entitled to make written submissions to Mr McDonald in respect of the matters listed in clause 4.3 (current capital, etc.) They are obliged to provide a copy of any such submission to the opposite party before those submissions are provided to Mr McDonald. [10] The company (the sixth applicant) is also obliged to ensure that Mr McDonald has access to the records of the company and that the officers of the company given any information and explanations as are reasonably required by Mr McDonald. [11] As mentioned above, clause 4.4 of the deed provides that Mr McDonald’s valuation is ‘conclusive and binding on the parties.’ In agreeing that Mr McDonald’s valuation will be ‘conclusive and binding’ the evident intention of the parties2 is to limit the circumstances in which Mr McDonald’s valuation may be challenged. That is the evident purpose of the words ‘conclusive and binding’, as well as the choice of a specific valuer, who it must be assumed, has been chosen because of his expertise with the objective that he will apply his skill and judgment to the valuation task. [12] The process of valuation, as specified in clause 4.3 of the deed, does require Mr McDonald to determine the value of the shares ‘in accordance with the valuation standards, practices and principles generally accepted in Queensland.’ That requires that Mr McDonald’s valuation be prepared in accordance with ‘generally accepted’ valuation standards, practices and principles. It does not require that clause 4.3 be read as if it is a statute which must be strictly complied with. And it does not mean that any technical breach of the generally accepted standards has the result that the valuation ceases to qualify as valuation prepared in accordance with the deed. [13] There are a number of reasons for that view. The first is that, as explained above, some meaning and effect must be given to the words “conclusive and binding”. Those words signify that the parties did not intend that an error or defect in the valuation would necessarily disqualify the valuation from being a valuation prepared pursuant to the deed. [14] Second, the introductory words in clause 4.3 refer to a requirement that the valuer meet the standards, practices and principles generally accepted in Queensland. That wording, and particularly the use of the expression “generally accepted”, suggest that the parties were not contemplating that the valuer was to strictly and exactly comply with each and every standard, practice and principle. [15] Third, the words of clause 4.3 should be interpreted having regard to the following passage in Ecosse Property Holdings Pty Ltd v Gee Dee Pty Ltd: It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract. In a practical sense, this requires that the reasonable businessperson be placed in the position of the parties. It is from that perspective 2 As was the case in Vale Belvedere (supra) at [40]. -- 4 of 16 -- 5 that the court considers the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it.3 Thus, whilst a legalistic approach to the interpretation of clause 4.3 might produce a different result, a reasonable businessperson would merely require that the valuation be substantially in accordance with the generally accepted valuation standards, practices and principles. [16] Fourth, as explained below, the courts have interpreted similar expert determination clauses as not providing a remedy for the party disappointed by the valuation. A valuation which is the result of a mistaken application of the principles of valuation may still be regarded as a determination in accordance with the terms of the agreement. Challenging Expert Determinations [17] The words ‘conclusive and binding’ in the deed here are similar to the words ‘final and binding’ used in a number of cases. The frequent starting point for cases discussing the extent to which such an expert determination can be challenged is the reasons of McHugh JA in Legal and General Life of Australia Ltd v A Hudson Pty Ltd:4 In my opinion the question whether a valuation is binding upon the parties depends in the first instance upon the terms of the contract, express or implied. This was pointed out by Sir David Cairns in the Court of Appeal in Baber v Kenwood Manufacturing Co Ltd (at 181). A valuation obtained by fraud or collusion can usually be disregarded even in an action at law. For in a case of fraud or collusion the correct conclusion to be drawn will almost certainly be that there has been no valuation in accordance with the terms of the contract. As Sir David Cairns pointed out, it is easy to imply a term that a valuation must be made honestly and impartially. It will be difficult, and usually impossible, however, to imply a term that a valuation can be set aside on the ground of the valuer's mistake or because the valuation is unreasonable. The terms of the contract usually provide, as the lease in the present case does, that the decision of the valuer is ‘final and binding on the parties’. By referring the decision to a valuer, the parties agree to accept his honest and impartial decision as to the appropriate amount of the valuation. They rely on his skill and judgment and agree to be bound by his decision. It is now settled that an action for damages for negligence will lie against a valuer to whom the parties have referred the question of valuation if one of them suffers loss as the result of his negligent valuation: Sutcliffe v Thackrah [1974] AC 727; Arenson v Arenson [1977] AC 405. But as between the parties to the main agreement the valuation can stand even though it was made negligently. While mistake or error on the part of the valuer is not by itself sufficient to invalidate the decision or the certificate of valuation, nevertheless, the mistake may be of a kind which shows that the valuation is not in accordance with the contract. A mistake concerning the identity of the premises to be valued could seldom, if ever, comply with the terms of the agreement between the parties. But a valuation which is the result of the mistaken application of the principles of valuation may still be made in 3 [2017] HCA 12 at [16] (Kiefel, Bell & Gordon JJ). This passage was relied on by Jackson J in a similar context to this in Clarence Property Corporation Ltd v Sentinel Robina Office Pty Ltd [2019] 1 Qd R 144 at [144]. 4 (1985) 1 NSWLR 314 at 335. -- 5 of 16 -- 6 accordance with the terms of the agreement. 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. [emphasis added] [18] As McMurdo J pointed out in Vale Belvedere (at [24]) that reasoning has been consistently applied in Queensland. One example is the judgment of Muir J in Corpco No 23 Pty Ltd v JS Hemmingway Investments Pty Ltd.5 [19] In Holt v Cox6 Santow J said: Where a valuation is made as an expert, the issue of whether it is binding on the parties, depends on the terms of the contract. If the contract expressly or impliedly, provides that the decision of the valuer is ‘final and binding on the parties’, a valuation made in accordance with the terms of the contract will be binding as between the parties, even if made negligently, or in mistaken application of the principles of valuation including failing to consider relevant matters or misvaluing the asset. The question is not whether there is an error in the discretionary judgment of the valuer, but whether the valuation was made in accordance with the terms of the contract . [20] There are two threads that emerge from that line of cases. The first is that 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. The second is an implication that the valuation must be carried out ‘honestly and impartially’. Both threads are relied on by the respondents here. It is necessary to deal with each in turn. [21] The respondent/outgoing shareholders rely on the opinions of an expert accountant/valuer, Ms Jennifer Letts. Curiously, at the beginning of her critique of Mr McDonald’s valuation, Ms Letts notes that she had not been provided with all the information that was provided to Mr McDonald.7 However, that was not the subject of any criticism. Indeed, Ms Letts was not required for cross-examination. Engagement Letter [22] Ms Letts’ first criticism of Mr McDonald’s valuation is that Ms Letts has been unable to verify that Mr McDonald has complied with the requirements of the ‘APES 225 Valuation Services’ standard (‘APES 225’),8 regarding engagement letters. Specifically, Ms Letts says that: 5 [2003] 2 Qd R 32 at [18]. 6 (1994) 15 ACSR 313. 7 Ms Letts’ expert report at [10]. 8 The standard is produced by the Accounting Professional and Ethical Standards Board. There was no dispute that the standard was a relevant professional standard applying in Queensland. -- 6 of 16 -- 7 (a) she has been unable to verify that Mr McDonald has provided an engagement document in accordance with s 4 of APES 225; (b) she has been unable to verify that Mr McDonald has specified whether the valuation was undertaken as a Valuation Engagement, a Limited Scope Valuation Engagement or a Calculation Engagement;9 (c) Mr McDonald, contrary to s 5.2(a) of APES 225, has not identified the instructing party; and (d) contrary to s 5.2(n) of APES 225, Mr McDonald has failed to state which type of valuation his opinion of value relates to. [23] APES 225 contains nine separate sub-clauses specifying various matters required by the engagement. Some are mandatory professional and ethical obligations and some are discussions or explanations. They are to be read in conjunction with other professional duties and legal obligations that may apply.10 Some of those other professional standards are expressly referred to in s 4 of APES 225.11 Further, in applying APES 225, valuers are to be guided not merely by the words but also by the spirit of the standard and the Code (i.e. APES 110). [24] In fact, Mr McDonald did send an engagement letter to the sixth applicant company on 24 February 2021.12 That engagement letter does identify the work as a “Valuation Engagement”. [25] This disposes of Ms Letts’ first two complaints. Incidentally, it is unnecessary for me to decide the issue but it is doubtful that the absence of such an engagement letter would disqualify the valuation as a valuation under clause 4.3 of the deed. Clause 4.3 is directed to the valuer’s process in determining the valuation and not to his engagement at the outset to conduct the determination. That is why clause 4.3 refers to the determination of value being carried out in accordance with accepted valuation processes and expressly requires the valuer to have regard to current capital and the other listed valuation matters. Any problems with the engagement are outside the purview of clause 4.3. [26] Further, the engagement of Mr McDonald really occurred by means of the deed. By the deed the continuing shareholders and the outgoing shareholders agreed to the appointment of Mr McDonald as the expert valuer to value the shares and to do so in accordance with the process identified in clause 4.3. In those circumstances, given that the parties agreed to the appointment of Mr McDonald in the deed, and that Mr McDonald accepted that appointment, the step of requiring an engagement letter seems otiose. [27] Next, it is necessary to deal with Ms Letts’ complaint that contrary to clause 5.2(a) of APES 225, Mr McDonald did not identify the name of the party engaging him. The 9 Those are all defined terms in APES 225. 10 APES 225 at [1.1] to [1.9] 11 For example, APES 305 Terms of Engagement, Section 320 Professional Appointments of the Code, APES GN 20 Scope and Extent of Work for Valuation Services, and Sections 260 and 360 Responding to Non-compliance with Law and Regulations. None of these codes were in evidence. 12 Ex BM-3 to Mr McDonald’s affidavit. -- 7 of 16 -- 8 deed itself specifies that both the continuing and outgoing shareholders are to appoint Mr McDonald. The deed is attached to Mr McDonald’s report as Appendix A. [28] Further, Mr McDonald’s report is addressed to ‘The Shareholders, DTS Group QLD Pty Ltd (the sixth applicant).’ Mr McDonald’s report records that he has been appointed by the Outgoing and Remaining Shareholders pursuant to clause 4 of the deed.13 [29] Ms Letts’ next complaint is that, contrary to s 5.2(n) of APES 225, Mr McDonald did not communicate the specific valuation type undertaken.14 However, the engagement letter of 24 February 2021 is clear that the valuation type is ‘Valuation Engagement’.15 Of course, once the deed was executed on 1 March 2021, that agreement specified that Mr McDonald was to be engaged within two business days and that the process of valuation was to accord with clause 4.3 of the deed. [30] Mr McDonald asserted that APES 225 only requires ‘report by exception when undertaking a Limited Scope or Calculation Engagement.’ I am unable to find that in APES 225. In any event, the valuation was plainly to be carried out in accordance with the requirements of clause 4.3 of the deed. Those requirements were more detailed than the ‘Valuation Engagement’ as defined in APES 225. [31] Even if there was some validity to these criticisms of the engagement and the report, they are not substantive criticisms and they do not disqualify the valuation as a valuation report under clause 4.3 of the deed. Failure to “Have Regard to” [32] Ms Letts explains her next criticism of Mr McDonald’s valuation: [35] In respect of section 4.3(a)(i) [of the deed], the Valuer is to have specific regard to ‘current capital’. It is unclear and not defined within the Deed as to whether this is Share Capital or Working Capital. [36] The Valuer has made note of the Share Capital in section 1.1.2 and 7.1 of the Report. [37] The Valuer does not appear to have made any comments in the Report regarding Working Capital, which would be a failure to adhere to clause 4.3. [33] That reasoning has two flaws. The first is that, having identified the ambiguity that the expression ‘current capital’ in clause 4.3(a)(i) could refer to either share capital or working capital, Ms Letts concludes that it was inadequate for Mr McDonald to refer only to share capital. Ms Letts appears to assume that, despite the ambiguity, Mr McDonald ought to have referred to both share capital and working capital. At the least, Ms Letts does not explain her reasoning for concluding that it was inadequate for Mr McDonald not to refer to working capital. 13 See the valuation at clause 1.1.1 and 2.1.1. 14 ie Valuation Engagement, Limited Scope, Valuation Engagement. 15 At page 3 (Ex BM-3): “Please note we are performing a Valuation Engagement.” -- 8 of 16 -- 9 [34] The second is that Ms Letts reads clause 4.3 as requiring Mr McDonald to make specific reference in his report to working capital. In fact, clause 4.3 merely requires Mr McDonald to ‘have regard to’ the six items listed in that clause, including ‘current capital’. There is an important difference between a requirement of the deed that the valuer ‘have regard to’ a specific item and Ms Letts’ assumption that a valuer must expressly comment on the item in the valuation. [35] There may be very good reasons for an expert valuer to ‘have regard to’ an item but then not include express mention of the item in the valuation. The requirement to ‘have regard to’ a factor does require that it be given attention or, put another way, that it be the subject of an active intellectual process.16 But the requirement that the expert valuer have regard to a factor does not require the valuer to take the factor into account in a material way. A valuer might legitimately have regard to a factor but assess the factor as not relevant to value in the particular case. [36] In any event, Mr McDonald states that he did have regard to both share capital and working capital in undertaking the valuation.17 Mr McDonald was cross-examined for approximately two hours. It was not put to him that he did not have regard to those two issues. There is no reason for me to reject his evidence on this point. Work-in-Progress [37] Clause 4.3(a)(iii) of the deed requires the valuer to have regard to ‘current assets.’ It is common ground that work-in-progress is a current asset. Ms Letts’ says that Mr McDonald ‘does not appear to have included any “work in progress” in his calculations, despite having been advised that the company does hold work in progress (or WIP) in two instances in documents that I have reviewed.’18 [38] Mr McDonald’s response was as follows: When preparing my report, I was advised: WIP is not recognised on the balance sheet due to an inability to measure it reliably … In my view, in circumstances where there is an inability to reliably measure WIP, the asset does not meet the recognition criteria established by relevant Australian Accounting Standards. For this reason, current assets may be stated in accordance with relevant Accounting Standards despite WIP not being recognised on the company’s balance sheet. I am unable to consider any potential impact on my determination of value in the company unless it is able to reliably determine the amount of any unbilled WIP as at 31 December 2020. [39] The first answer to Ms Letts’ complaint is that, on any view, Mr McDonald did in fact have regard to WIP in conducting the valuation. He had regard to it but, because it was unable to be reliably measured, he acted in accordance with relevant accounting standards by not recognising WIP as a current asset. 16 See the discussion in O’Rourke Australia Construction v H & M Engineering & Constructions Pty Ltd [2010] NSWSC 818 at [38], [39]. 17 Ex BM-11 (page 2) to Mr McDonald’s affidavit. 18 See Ms Letts’ report (JRL-1) at [40]. -- 9 of 16 -- 10 [40] The second answer to Ms Letts’ complaint is that on Mr McDonald’s evidence on this point, which I accept, his decision not to recognise WIP accorded with the relevant accounting standards. As explained, Mr McDonald was obliged to conduct the valuation in accordance with the relevant professional standards. In fact, no contrary proposition was put to Mr McDonald in cross-examination.19 [41] The third answer is that the company itself had not included WIP as a current asset in any of its financial accounts for the financial years ending 30 June 2017, 2018, 2019 and 2020. For the FY20 financial statements, the directors of the company, including an outgoing shareholder (Mr Warnick), declared that the financial statements fairly presented the company’s financial position for that financial year. This was on the basis that WIP was not included as a current asset.20 [42] The notes to the FY20 financial statements say: “The directors have elected not to recognise revenue associated with the Work in Progress balances, given that the quantum of economic benefit is not sufficiently certain.”21 [43] Given the company itself had not recognised the WIP as a current asset for a number of years, there was a perfectly rational basis for Mr McDonald to do the same. The company’s reason for not recognising WIP related to the lack of reliability of any measurement. It was logical for Mr McDonald to adopt the same stance. Indeed, Ms Letts has not responded to this aspect of Mr McDonald’s evidence. [44] The fourth answer is that the absence of WIP from current assets may or may not affect the profit and loss component of the financial statements. If, for example, WIP was $1m at the beginning of FY20 and was $1m at the end of FY20 then WIP would have no effect on the profitability. And, as Mr McDonald explained, an assessment of WIP requires an opening balance for the year as well as a closing balance. The difference between the opening and closing balances is the relevant figure. Further, as Mr McDonald also explained, a positive WIP balance22 may have a commensurate negative impact on goodwill. [45] Mr McDonald was cross-examined about WIP in some detail by the respondents’ counsel. He agreed he had not seen the page of an excel spreadsheet that showed figures for WIP over an 18 month period on a month-to-month basis.23 It was submitted that Mr McDonald should have enquired and uncovered those WIP figures and that, contrary to what he was told by the company of the continuing shareholders, there were precise WIP figures that were available to Mr McDonald. [46] The problem is that precise figures are not necessarily reliable figures. As Mr McDonald explained, this surveying company’s WIP did not necessarily translate 19 For example, it was not put to Mr McDonald that he was wrong about the Accounting Standards, or that the Accounting Standards did not require non-recognition where WIP could not be reliably measured, or that the Accounting Standards still required WIP to be recognised. 20 See the Grant Thornton financial report (Ex LD-1 to Mr McDonald’s affidavit) at page 1. 21 Ibid at page 8. 22 That is, where the closing balance exceeds the opening balance. 23 This Excel page, which is part of a multi-page Excel document, became Ex 3. It is also Ex RJ-03 to Mr James’ affidavit. -- 10 of 16 -- 11 to invoices in the way that they might for a legal or accounting firm. A proportion of the business is billed on the basis of fixed price quotes.24 [47] There are, of course, many reasons why the management of a company might use WIP. However, that does not mean that a WIP will accurately translate into debtors. It follows that in my view it was open to Mr McDonald to take the approach to WIP that he did. The decision not to include WIP as part of the current assets was a decision that Mr McDonald was entitled to make. It was within his expertise as a valuer of businesses. [48] In any event, even if Mr McDonald was mistaken in his approach to WIP, that mistake does not mean that he has not performed the task entrusted to him by the deed. Plant and Equipment [49] Ms Letts criticises the way that Mr McDonald’s valuation deals with ‘plant and equipment’. Mr McDonald’s valuation states that there are no market valuations for the plant and equipment and so he has adopted the “book value” of the plant and equipment. Those are the values stated in the company’s financial statements. [50] Mr Letts notes that: (a) Section 4.5 of the APES 225 requires that the valuer gather sufficient and appropriate evidence by such means as inspection, inquiry, computation and analysis to provide reasonable grounds that the valuation report and the conclusions therein are properly supported; (b) Mr McDonald has no expertise in valuing plant and equipment; (c) She is unable to locate any request by Mr McDonald that a valuation of plant and equipment should be obtained; (d) She believes that a request for a plant and equipment valuation should have been put to the instructing party. [51] As can be seen, this criticism concludes with Ms Letts stating that her belief is that Mr McDonald should have requested a plant and equipment valuation. And so the first problem is that Mr McDonald’s valuation is criticised, not because it fails to meet any particular valuation standards, practices or principles generally accepted in Queensland, but because Mr McDonald has not conformed to what Ms Letts believes should have been done. [52] That is not a proper basis for criticising Mr McDonald’s valuation and it is not a proper basis for concluding that the valuation is not a determination carried out in accordance with the deed. [53] The second problem is that there is no evidence that what Mr McDonald did was negligent or contrary to any accounting standards, practices or principles. On the face of it, in the absence of valuations of the plant and equipment, it seems perfectly reasonable to adopt the “book value”, that is, the fair value attributed to those assets by the directors. 24 Transcript T1-25 line 31; T1-26 line 5. -- 11 of 16 -- 12 [54] The third problem is that in his evidence Mr McDonald explained that, as this was an ongoing company, the value of the plant and equipment was not so important. That is because the plant and equipment was not to be sold. Instead, it was going to continue to be used to generate income.25 [55] The fourth problem is a practical one. The deed envisaged a valuation within 30 days.26 The FY20 financial statements identify the property, plant and equipment as: • Buchanan Street property (ie land and buildings) • Leasehold improvements • Field equipment • Motor vehicles • Office furniture and equipment • Spectrum field equipment • Electroscan field equipment [56] The practicalities of obtaining valuations of all of those items within 30 days was not explored in evidence or submissions. However, it is notable that Ms Letts does not express the view that a valuation of all those items was reasonably practicable within the time constraints. Her complaint is quite narrow: that Mr McDonald did not request that a valuation of plant and equipment be obtained. Ms Letts does not say that the parties would have agreed to that step or the added expense and delay it would likely cause.. [57] In these circumstances, the outgoing shareholders have not established that Mr McDonald’s approach to the plant and equipment component of the valuation breached any particular valuation standards, practices or principles generally accepted in Queensland. And, even if it was a mistake for Mr McDonald not to suggest that a valuation of plant and equipment be obtained, that does not mean his valuation ceases to qualify as a valuation prepared pursuant to clause 4.3 of the deed. Impartiality [58] It can be accepted that the expert valuer was obliged to act honestly and impartially.27 The question is whether Mr McDonald failed to act impartially. [59] Again, there are numerous criticisms. [60] The first is that Mr McDonald was approached by, received instructions from, and was ultimately engaged by, Mr Ben Richardson, a director of the company without reference to the outgoing shareholders who had an obvious interest in the valuation. 25 Transcript T1-45 line 33. 26 See clause 4.3(b) of the deed. 27 See Vale Belvedere Pty Ltd v BD Coal Pty Ltd [2011] 2 Qd R 285 at [31]; Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 at 335. -- 12 of 16 -- 13 [61] It is true that Mr Richardson did approach and engage Mr McDonald. Mr Richardson engaged Mr McDonald on 2 March 2021, the day after the deed was executed. He engaged Mr McDonald through an email which forwarded to Mr McDonald a signed copy of an engagement letter which Mr McDonald had sent to the company a week or so earlier on 24 February 2021. [62] This was consistent with the obligation in clause 4.2 of the deed, which required the parties, that is both the continuing and outgoing shareholders, to appoint Mr McDonald as the valuer. [63] Curiously, the outgoing shareholders did not comply with their obligation to appoint Mr McDonald within two business days. They did not expressly join in the appointment but they did not complain that Mr McDonald had been engaged without their participation. [64] The likelihood is that the outgoing shareholders simply accepted that Mr McDonald had been properly appointed and they were content for him to proceed. Certainly, it appears that the solicitors for the outgoing shareholders were informed immediately that the appointment of Mr McDonald had occurred.28 Then, on 16 March 2021, one of the representatives of the outgoing shareholders, Mr Rodney James, wrote directly to Mr McDonald putting forward some submissions about the valuation.29 On 16 April 2021 Mr James emailed two representatives of the continuing shareholders, in effect, complaining that Mr McDonald’s valuation had not been completed within 30 days.30 [65] In these circumstances, it can be inferred that the outgoing shareholders were content to allow Mr McDonald’s appointment and for him to proceed whilst they stood on the sidelines. That is despite the fact that they had a positive obligation to appoint Mr McDonald. [66] The second complaint is that the valuer liaised with and met with Mr Ben Richardson and Mr Steve Gentle prior to undertaking the valuation. The essence of this complaint is that Mr McDonald was choosing to deal with the continuing shareholders in preference to the outgoing shareholders. [67] The problem with that complaint is that the deed contemplates two types of communications with Mr McDonald: (a) the parties were entitled to make written submissions to Mr McDonald regarding the matters listed in paragraph 4.3(a) of the deed;31 and (b) the company itself was obliged to ensure that Mr McDonald had access to the financial records of the company and that the officers of the company gave Mr McDonald any information or explanations reasonably required by him.32 28 Ex RD-2 to Mr Denovan’s affidavit. 29 Ex BM-5 to Mr McDonald’s affidavit. 30 Ex RD-3 to Mr Denovan’s affidavit. 31 See clause 4.3(c) of the deed. Both parties made submissions. They were obliged to copy in each other on those submissions (but it appears neither did this). 32 See clause 4.5 of the deed. -- 13 of 16 -- 14 [68] Mr Richardson was the Managing Director of the company and Mr Gentle was the Chief Executive Officer. Thus, in communicating with Mr Richardson and Mr Gentle, Mr McDonald was accessing the information of the company in accordance with subparagraph (b) above. In his evidence Mr McDonald said as much.33 [69] It follows that this was not a one-sided communication. This was the very communication of information contemplated by the deed. [70] An expert determination is no more than a private contractual mechanism to which the parties agreed. It does no more than create binding contractual obligations. It is not a process which resolves any dispute by the exercise of the judicial, quasi-judicial, administrative, statutory or other power jurisdiction.34 Given the express provisions of the deed, there is no room here for the implication or application of principles of procedural fairness.35 Indeed, I did not understand the respondents’ counsel to argue that those principles applied. [71] The third complaint is that Mr McDonald communicated with Mr Richardson and the remaining shareholders to the exclusion of the outgoing shareholders. This complaint is in the same category as the last. The two communications relied on36 were communications whereby the company engaged Mr McDonald pursuant to the obligations in clause 4.2 and whereby the company supplied relevant information in accordance with clause 4.5. [72] The fourth complaint is that Mr McDonald did not consider or address Mr James’ submission of 16 March 2021. However, the evidence is that Mr McDonald did in fact consider Mr James’ submission.37 [73] The fifth complaint is that Mr McDonald relied solely on the written submissions provided on behalf of DTS. In fact, Mr McDonald’s evidence is that he considered all four submissions.38 There is another underlying problem with this complaint. The complaint does not distinguish between submissions made by the parties, and the information supplied by the company (see paragraph [67] above).39 It also fails to appreciate that, in order to assess the value of the company, Mr McDonald was always going to have to rely on the financial records of the company. Thus, Mr McDonald did deal with the company and its officers. That was unavoidable given the nature of his task. The deed recognises this practicality in clause 4.5, and Mr McDonald’s evidence was that, whilst he did consider the submissions, the primary source of his assessment of value was the records of the company. Indeed he stated: I approached the company who hold the records to obtain the financial information so that I could make my assessment of value. The answers are factual based on, I want financial statements, tax returns, depreciation 33 Transcript T1-9 line 1. 34 Lainson Holdings Pty Ltd v Duffy Kennedy Pty Ltd [2019] NSWSC 576 at [59]. 35 cf John Nelson Developments Pty Ltd v Focus National Developments Pty Ltd [2010] NSWSC 150 at [206] (per Ward J) 36 They are Ex BM-4 and Ex BM-6 to Mr McDonald’s affidavit. 37 See Ex RD 28 to Mr Denovan’s affidavit. 38 Ex RD 28 to Mr Denovan’s affidavit. 39 See paragraph 43(e) and the footnoted information which lists all of the information supplied to Mr McDonald by the company. -- 14 of 16 -- 15 schedules. I make my assessment on the – of the value based on that information.40 [74] Thus, the problem with this complaint is that it conflates the information and explanations provided by the company with submissions made by the continuing shareholders. In any event, it is plain that Mr McDonald relied on the information supplied by the company, and that he considered the submissions of both the continuing and the outgoing shareholders. [75] The sixth complaint is in similar terms – with the same defects – namely that Mr McDonald and his staff sought further information solely from Mr Richardson and Mr Gentle to the exclusion of the outgoing shareholders. [76] The seventh complaint is that the information provided by Mr Richardson, to the exclusion of the outgoing shareholders, asserted that the WIP was not susceptible to a “reliable reporting metric”. Again, that is financial information which the deed contemplated the company was to provide. And, coincidentally, that information was consistent with the company’s financial statements for the prior four financial years. [77] The eighth complaint is that a request for further information on 21 April was requested of Mr Richardson and Mr Gentle without reference to the outgoing shareholders. For the reasons above that complaint is not a legitimate complaint. [78] The ninth and tenth complaints are in exactly the same category.41 [79] Therefore, there is no basis on which I can conclude that Mr McDonald breached his duty to act impartially. He was entitled to seek and obtain information from the company and its management. The deed contemplates that he would do so. That was not unfair. As Mr McDonald explained himself, the assessment of value required that he access the company’s financial records, particularly its financial statements, tax returns, depreciation schedules.42 That was central to the task he was to perform, and it was expressly authorised by clause 4.5 of the deed. [80] Both the continuing shareholders and the outgoing shareholders made submissions under clause 4.3(c) of the deed. In accordance with his obligations, Mr McDonald considered those submissions. [81] Finally, it is worth noting that it was not expressly put to Mr McDonald that he failed to act impartially. However, the thrust of the impartiality allegations were put.43 In particular it was suggested that he ought not to have just accepted information from one “side”. Mr McDonald’s consistent answer was that he needed the relevant information from the company itself – rather than one or other of the parties. In my view, the obligations of the principle in Browne v Dunn44 have been sufficiently discharged. 40 Transcript T1-18 line 32. See also T1-37 line 19. 41 See paragraph [43] of the respondents’ written submissions. 42 Transcript T1-18 line 32; T1-37 line 19. 43 See, for example, Transcript T1-9 at line 1 and line 32. 44 (1893) 6 R 67 (HL); see Heydon, Cross on Evidence 10 th ed at [17435]. -- 15 of 16 -- 16 Conclusions [82] For the reasons stated: (a) It is appropriate to make a declaration that the valuation by Mr McDonald of Pilot Partners is a valuation prepared in accordance with clause 4.3 of the deed; (b) The respondents have not shown that Mr McDonald breached any obligation of impartiality; (c) An order for specific performance ought to be made requiring the transfer of the shares in accordance with the deed. [83] I will hear the parties on the form of the orders and costs. -- 16 of 16 --