Liquor industry specialist Drink Tank Ltd was told to sue in Australia on its US$10.1 million claim for alleged negligence in a forced buy out of its minority interest in Sesion Tequila.
Hamilton-based Drink Tank Ltd was taken by surprise when told in 2019 its twenty per cent shareholding in Australia-based company Sesion Tequila Holdings Pty Ltd was being compulsorily purchased. Sesion majority shareholders allege Drink Tank failed to comply with a shareholders’ agreement, giving them the right to force out Drink Tank. The alleged failures have not been disclosed publically. Unbeknown to Drink Tank, Sesion Tequila’s majority shareholder hired Melbourne accountants Morrows Pty Ltd to value Drink Tank’s minority interest before issuing a compulsory buy out notice valuing Drink Tank’s shares at AU$34,000. Drink Tank cried foul. An earlier share placement had offered shares to a US investor at a price valuing Sesion at US$50 million, it said. On this basis, Drink Tank’s twenty per cent stake was worth US$10.1 million, it claims.
Drink Tank sued valuer Morrows in the New Zealand High Court, alleging negligence in its share valuation. Justice Gordon ruled the case should be heard in Australia. Sesion is an Australian company; the shareholders’ agreement is governed by New South Wales law. Morrows is based in Australia and its conduct is to be measured by Australian standards. Under Australian law, professionals can raise as a defence their compliance with ‘competent professional practice.’ The ‘competent professional’ defence was written into Australian law after a number of Australian judges persisted in substituting their personal views on what constituted proper professional practice over evidence of professional norms.
Drink Tank Ltd v. Morrows Pty Ltd – High Court (19.06.20)
20.106