Legal Updates

Commercial Law – Share Valuation

In the case of Bruce v Carpenter & Others [2006], the parties (shareholders) had apparently agreed to sell and purchase a number of shares. The claimant was selling his shares and the defendant contested that he had agreed along with other existing shareholders to buy the claimant’s shares.

In the share sale agreement between the parties, the agreed terms of sale provided that the price for the shares was to be determined by an expert valuer (Valuer”) whose decision was to be ‘final and binding’. The Valuer had to agree on the price for selling the shares.

During the investigation, the Valuer (who was an accountant) found that she needed assistance in the interpretation of the said provision before reaching her final view as to a suitable price for the shares to be sold at. The Valuer claimed that the interpretation of this clause in the agreement was outside her capacity. She instructed the parties to obtain advice in this regard to enable her to complete the valuation.

One of the parties applied to the High Court for determination. It was held:-

§             …’that where an expert is appointed to, and takes on the task of, carrying out an expert determination as to valuation, it is the expert's role to form his or her own view and to make difficult decisions, even if they are outside the expert's area of expertise’.

An expert’s valuation is binding and could only be challenged if there was:-

§             a fraudulent valuation, or

§             a mistake made during the valuation.

Comment: If the parties believe that they may require their expert to consult a lawyer for clarification on certain points, then the parties have to make provision in the agreement for this. Otherwise the expert has to take a view, even if it is outside the scope of their capacity. The cost would have to be borne by the parties. There is therefore a risk of a dispute between the parties involved if they do not all agree on the valuation.

It must be noted that expert determinations are binding.

If there is no provision in a share sale agreement for the expert to seek legal advice, then the parties should thread cautiously before seeking a valuation from an appointed expert.

Please contact us for more information on assessing damages due under termination of a contract at


© RT COOPERS, 2007. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.


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