Sara Stockham Pty Ltd v WLD [2021] NSWCA 51

“Get me out, and value my units properly!”

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Two dentists worked together using a unit trust in which D1’s and D2’s entities held units. The relationship between all was governed by an agreement.

The agreement contemplated a unitholder exit for “fair market value”.

D1 sought to exit. The T'ee sought judicial advice regarding a valuer. D1 applied for a stay and failed. The T'ee got the advice that instructing a valuer would be OK and did so: [5]

D1 commenced further proceedings, and the parties asked the Court to separately determine the meaning of Cl 7.8 of the agreement: [5]

D1 appealed the determination that Cl 7.8 did not apply to the valuation.

Cl 7.8 prevented the T'ee from effecting decisions on “Major Policy” issues (like dealing with assets worth >$50K) without unanimous unitholder approval: [16], [17]

D1 said that a Major Policy decision made without unanimous approval was void pursuant to Cl 7.8, and so should not be part of a valuation: [19] - [21]

The Court disagreed, finding Cl 7.8 renders void the T'ee’s decision but not the resulting transaction: [26]

There may be a later dispute about the valuation, or breach of the T'ee's duties, but those issues were not raised in this litigation: [32], [33]

Appeal dismissed: [1], [10], [44]