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Goodfellows lose share case

By Duncan Bridgeman

Friday 20th December 2002

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The High Court yesterday ordered companies owned by the wealthy Goodfellow family to pay $2.5 million plus interest on shares once held by a long-term employee.

The 51-page judgment by Justice Paul Heath upheld entirely a claim from John Glaister, son of the late Grahame Glaister who worked for Amalgamated Dairies and related companies for 66 years.

The dispute arose after Mr Glaister snr's death in 2000 when the shares, part of the Kelso Trust, were bought back by Amalgamated in line with a 1976 deed of transfer.

The trust, led by Mr Glaister jnr, contended Amalgamated had unfairly discounted the shares. The shares then accounted for 3.5% of Amalgamated capital.

Amalgamated, an investment company formed by dairy entrepreneur (Sir) William Goodfellow in 1927, was valued at $359 million in 2000 and paid a $70 million dividend the previous year. Its share portfolio alone is valued at $240 million. The chairman is Sir William's surviving son, 85-year-old Douglas Goodfellow.

At the heart of the dispute was a valuation from accounting practice Deloitte Touche Tohmatsu in 2000, based on the 1976 deed of transfer and Amalgamated's constitution, which discounted the share value by 20%, or $2.5 million, to achieve what it described as "fair value."

In court, Deloitte chairman John Hagen ­ the accounting partner responsible for quality control ­ defended the valuation of a colleague. This was overturned in Justice Heath's decision but the judge added he was "entirely satisfied that independent minds were brought to bear on this issue" by Mr Hagen and the person who prepared the valuation.

"It is important that any adverse impressions of Mr Hagen's, or more generally Deloitte's, conduct be dispelled," the judge said.

But the judge said the use of phrases "fair value" and "fair market value" were often used by share valuers as "terms of art."

"Generally, 'fair value' encompasses the need to do justice among people who have been involved in a closely held company where there is little or no market for the sale of shares to an arms-length third party."

Justice Heath noted that in recent times it had become more common for valuation instructions to be drafted in greater detail.

"I suggest that tendency has emerged as a result of problems thrown up by cases such as this in which the drafting instructions have proved difficult to interpret because of a latent or patent ambiguity," he said.

For example, he said, no minority discount would be applied if a valuation, on a "fair value" basis, was undertaken for the purpose of a takeover or a compulsory acquisition governed by the Takeovers Code.

Amalgamated Dairies was no longer involved in the dairy industry but it had substantial interests in fishing, with a 45% stake in listed fishing company Sanford and a 50% stake with joint-venture partner Talley's Fisheries in Amaltal Corporation.

Part of the case questioned whether fishing quota should be classified as a tangible asset or, as Amalgamated argued, as an asset of an "intangible nature" ­ which would exclude it from the valuation.

With evidence from Sanford managing director Eric Barratt, who said fishing quota could be calculated at any time, the judge formed the view that fishing quota should not be regarded as an intangible asset.

Justice Heath will rule on the amount of interest Amalgamated should pay on February 20.

The case is likely to become a precedent in the valuation of shares in unlisted companies.

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