“I’ve retired as a partner. I want market value with no discounts!”

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In 2018, 4 Cos entered into a partnership agreement. The business related to growing and selling tea: [1], [5]

P retired from the partnership. The agreement provided that the partnership would not be dissolved on a partner’s retirement: [2]

The question was: what value should P receive for its partnership stake?P argued for, in essence, a pro rata distribution according to its 19% stake: [3]

The Ds, who were the remaining partners, argued for a market value approach i.e. including discounts for P’s lack of control and the lack of marketability of P’s stake: [4]

The partnership agreement provided that the partners were entitled to the property and goodwill of the partnership in their respective shares: [8]

P sued, and initially applied for the appointment of a receiver to the partnership’s assets without pressing this application: [21]

By consent, the parties sought orders appointing a referee, a valuer, to value P’s interest in the partnership including goodwill at the date of retirement: [22] - [24]

The valuer sought further instruction on the basis of the valuation; fair value, market value, equitable value etc: [25]

Following an informal conference with the parties and the valuer the details of which were not in evidence, the valuer prepared their report on the market value basis: [27]

P’s view of what a market valuation entailed differed from the D’s views in that P resisted the suggestion that a discount ought to be applied for lack of control and a lack of marketability; or if those discounts were to be applied they ought to be reduced: [27]

The Ds said P had “agreed” to the more traditional market value approach: [28]

P said it was entitled to recover its share from the partnership as a debt due: [33]

The Ds denied P was entitled to an account and instead considered the valuation as a “stepping stone” to a potential transaction or (if their valuation position was accepted) grounds for a Syers order requiring P to sell to the Ds at the relevant value: [34]

The Court was receptive to P’s suggestion that if P were forced into a minority discount, and the Ds then sold the partnership’s business the Ds would enjoy a windfall: [50]

The Court accepted P’s entitlement to an account noting the parties could have agreed on a different outcome if they wished: [51]

The Court found the P did not “agree” to the minority discount as part of the market valuation process, having openly argued against it through the valuation process: [52] -[57]

The Court accepted P’s view on valuation of its interest and considered as a preliminary matter that legal costs be paid from the assets of the partnership: [65], [68]

The parties were invited to provide SMOs reflecting the outcome: [74]

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