Peregrine
Wines prides itself on award winning pinot noir wines from its central Otago
vineyard but red stains on the floor came from blood-letting between directors
after the High Court ordered majority shareholders buy out the minority at
$2.62 million, one million dollars more than the majority thought the shares
were worth.
Two directors of Peregrine Wines stood
toe-to-toe in early 2013 arguing over the value of a 25.14 per cent minority
interest held by Greg Hay’s family trust.
Mr Hay was looking to sell at $3.25 million. Fellow director Fraser McLachlan countered offering
to buy at $1.56 million.
The High Court was told each agreed to
follow buy-out rules in the company constitution with Mr McLachlan agreeing
majority shareholders would buy at “fair value” as fixed by a valuer appointed
by the Institute of Chartered Accountants.
Associate judge Matthews said Mr McLachlan later became aware that
Peregrine’s constitution would force him to buy at the valuer’s assessed fair
value, even if he didn’t agree with this figure. Mr McLachlan vigorously lobbied valuer Julie
Millar from BDO’s Christchurch office arguing the minority interest’s value
should be discounted since it did not give control of the company. She refused, saying Peregrine shares should
be valued as if the company were a quasi-partnership giving the 25.14 per cent
minority interest a value of $2.62 million.
Mr Hay sued, requiring Mr McLachlan buy at
the valuer’s assessed figure. Judge Mathews
ordered Mr McLachlan pay. He could not
challenge the merits of Ms Millar’s professional opinion. The assessed fair value was her professional
opinion even though she had taken legal advice before deciding there should be
no minority interest discount. Mr
McLachlan protested he had a contrary legal opinion saying there should be a
minority discount.
Hay
v. Peregrine Estate – High Court (5.09.16)
16.135