Case No: A3/2010/2814

Neutral Citation Number: [2011] EWCA Civ 1287
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
John Randall QC
21407/2009
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 9th November 2011
Before :

LORD JUSTICE MUMMERY
LORD JUSTICE STANLEY BURNTON
and
LORD JUSTICE PATTEN
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Between :

	CREAM HOLDINGS LIMITED	Claimant/
Respondent	
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	STUART DAVENPORT	Defendant/Appellant	

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(Transcript of the Handed Down Judgment of
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
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Mr Davenport appeared in person
Mr Robin Hollington QC and Mr Sebastian Prentis (instructed by Marriott Harrison Solicitors) for the Respondent

Hearing date : 27th October 2011
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Judgment
Lord Justice Patten : 
1.	Until August 2004 Mr Davenport was a director of Cream Holdings Limited (“the Company”) and held just over 25% of its issued shares.  The Company was incorporated in October 1995 and carries on the business of a music and concert promoter.
2.	The circumstances in which Mr Davenport was removed from the Company are not relevant to this appeal.  What is common ground is that his departure triggered the operation of the pre-emption provisions contained in the Articles of Association under which an employee who is also a member is required to transfer his shares on leaving that employment.  Article 11.2 imposes an obligation on the employee to serve a transfer notice and, if he fails to do so within 14 days of the termination of his employment, he is deemed to have served such a notice.  As a consequence, Mr Davenport became obliged to offer his shares for sale to the remaining shareholders and to receive in return the fair value of the shares as defined: see Article 11.11.1.
3.	Fair value is defined in Article 2.1 to mean the price per share certified in accordance with Article 11.14.  This provides that: 
“In these Articles the term “Fair Value” shall mean the price per Share as agreed by the Board and the Transferor or failing such agreement as determined by the Third Party Accountant and certified in writing by the Third Party Accountant as being the price which, in their opinion, represents a fair value for such Share as between a willing vendor and purchaser of the same as at the date the Transfer Notice is given or is deemed to have been given in respect of such Share.  When giving such certificate, the Third Party Accountant shall not take into account whether the Shares concerned comprise the majority or a minority interest in the share capital of the company, nor the fact that the right to transfer such Shares is restricted by these Articles and shall assume that the entire issued share capital of the Company is being sold.  However, in so certifying the Third Party Accountant shall take into account such other facts as they, in their absolute discretion, shall consider appropriate including, if they so consider appropriate, the past and current performance of the Group and the apparent future prospects of the Group.  The Third Party Accountant shall act as experts and not as arbitrators and, in the absence of manifest error, their decision shall be final and binding on the Company and its members.  The costs of the Third Party Accountant in certifying the Fair Value shall be borne as the Third Party Accountant determines.”
4.	Article 2.1 defines Third Party Accountant as:
“… an independent firm of accountants chosen by the Transferor and the Board or failing agreement on such appointment within 7 days as chosen by the President from time to time of the Institute of Chartered Accountants.”
5.	The deemed date of service of the transfer notice was 24th September 2004.  In August that year Mr Davenport’s solicitors had requested information from the Company to enable them to assess the proper value of the shares.  Mr Davenport had already been offered £68,000 for his shareholding but had rejected it.  The information sought included a valuation of the Company which Mr Davenport believed had been carried out in 2001 prior to the acquisition of 48% of the Company by an investment fund.  The dispute about disclosure continued but on 1st April 2005 the Company wrote to Mr Davenport saying that it intended to proceed with the appointment of a Third Party Accountant (“TPA”) in accordance with Article 11.14.
6.	In response to this Mr Davenport’s accountants replied that:
“We are willing to accept any of the following firms to act in the role of third party accountant:
Grant Thornton
Pannell Kerr Foster BDO Stoy Hayward
We trust that on appointment of the third party accountant, we will be given the opportunity to present our views on the basis of valuation and draw to their attention the inherent value in the Intellectual Property Rights and Brand of the Cream name”.
7.	The Company then proceeded to ask BDO Stoy Hayward (“BDO”) to act as the TPA and on 16th May 2005 they forwarded to Mr Davenport a copy of a draft engagement letter for his comments.
8.	Mr Davenport had a number of reservations about the terms of this letter.  They included the proposed cap of £500,000 on liability and the provisions about costs.  These concerns were forwarded to BDO but rejected by them.  An engagement letter was then sent both to Mr Davenport and the Company for signature.  BDO quite understandably was not prepared to commence work on the valuation until the letter of engagement was signed.  The Company signed the letter but Mr Davenport refused to do so. 
9.	In December 2005 BDO issued a revised letter of engagement which again Mr Davenport was unwilling to sign until his solicitors were satisfied that they had received from the Company all the information necessary to present their case on valuation.
10.	The Company’s position was that it had disclosed to Mr Davenport all the relevant information in its possession.  It subsequently transpired that the 2001 valuation had never been in its possession and that it was unable to require its production by the investment fund or its bankers.  A copy was, however, eventually provided to BDO on the basis that it would not be shown to Mr Davenport.
11.	By June 2006 Mr Davenport was still refusing to sign the most recent letter of engagement or to take any part in the valuation process.  He also took a new point to the effect that Article 11 was not binding on him.  BDO, for its part, was prepared to proceed with the valuation but did not consider that it could do so as the TPA unless Mr Davenport signed the letter of engagement.
12.	This impasse was temporarily resolved by the Company asking BDO to issue a new letter of engagement to the Company on the basis that it had been “chosen” to act as the TPA within the meaning of Article 11.14.  BDO issued such a letter and proceeded to value the shares as of 24th September 2004 at £59.00 per share.  In response, Mr Davenport then applied to the Court for an injunction restraining the implementation of the transfer provisions based on this valuation.
13.	The issue in those proceedings was whether BDO had been chosen by the parties as required by the definition provisions contained in Article 2.1.  There was no doubt that BDO had been selected by both parties as an appropriate TPA but only one of them had signed the letter of engagement.  Was the signature of this letter by both parties a pre-requisite to a valid appointment under the Articles?
14.	This question was answered in the affirmative both by Ms Susan Prevezer QC at first instance (see [2008] EWHC 298 Ch) and by the Court of Appeal ([2008] EWCA Civ 1363).  They held that there had to be a tripartite agreement on the terms of engagement before the appointment could take effect.  Mummery LJ at paragraphs 34-36 said that:
“34.	In my judgment, the substantial difficulty for the Company on this point is that its construction produces consequences so surprising that it must be doubtful whether they can have been within the contemplation of the parties. The TPA's role is to produce an expert valuation of shares held in the Company by the person who is liable to be compelled to offer his shares for sale at that valuation to those who remain. The TPA also has power to decide who should bear the costs of the exercise. The firm of accountants appointed would also lay down the terms, such as limitation of liability, on which it would be prepared to act. 
35.	In those circumstances it would be very surprising if a firm of accountants could become the TPA solely as a result of nomination by the parties and without any agreement by both parties and the firm on the terms of engagement as the TPA. The constituting of the TPA, whether characterised in the Articles as being "chosen" or as "agreement on such appointment", is more realistically analysed as a process than as an event, such as nomination. In my judgment, the TPA process is not complete unless and until all parties and the accountants have reached an agreement on the TPA's terms of engagement. The Company and the shareholders may reach an agreement among themselves on the firm of accountants to be approached. But the selected or nominated firm may decline to act for a variety of reasons. Until a firm is found which agrees to act as the TPA there is no TPA. No firm is likely to agree to make a joint valuation without the agreement of both sides on the terms of engagement. The firm which agrees to act on the instructions of one of the parties would not be acting as the TPA. 
36.	Article 2.1 provides for what is to happen "failing agreement on such appointment". In my view, this pivotal provision must be read in the context of the earlier reference to being "chosen" and the later reference to "as chosen" by the President. In other words the provision should be construed as a whole, not word by word or in parts. Agreement between all concerned on the terms of the appointment is what is required. In my judgment, the selection of an agreed name from a list of 3 named firms would not in itself be sufficient to constitute the TPA. Mr Davenport did no more than indicate his willingness to accept any of 3 different firms acting in the role of TPA. That was insufficient to constitute agreement on an appointment. It was not an offer which was capable of acceptance so as to create a contract for an appointment between Mr Davenport and the TPA. There was no agreement between Mr Davenport and the Board or between him and BDO to their terms of engagement. BDO were not therefore the TPA.”
15.	Between the judgment at first instance and the hearing in the Court of Appeal, the Company asked the President of the Institute of Chartered Accountants to nominate a new TPA.  On 19th August 2008 the President appointed Mr Nicholas Whitaker of PKF.  It is common ground that the power of appointment vested in the President does not extend to settling the terms of the TPA’s engagement which remains a matter for the parties to agree.  The appointment therefore does no more than to resolve any issues about the identity of the nominee.
16.	Draft terms of engagement were therefore produced for consideration by Mr Davenport and his solicitors.  They were unhappy about three things: (1) the suggestion that there should be joint and several liability for the TPA’s fees; (2) any restrictions on the disclosure of the valuation report; and (3) the absence of full disclosure of financial information.  As a result of this, Mr Davenport said he was unable to say whether there should be a cap on the TPA’s liability for negligence and, if so, in what amount.
17.	Throughout the remainder of 2009 the Company disclosed various documents and other financial information.  They said that disclosure was complete or substantially complete.  Mr Davenport disagreed.  But in December 2009 the Company issued a Part 8 claim form seeking a declaration that the appointment of Mr Whitaker was now effective or alternatively would become effective on the settlement of his terms of engagement.  The Court was invited to settle the terms.
18.	The action came on for trial in November 2010 before Mr John Randall QC (sitting as a deputy judge of the Chancery Division): see [2010] EWHC 3096 (Ch).  Mr Davenport’s position remained that he was entitled to full disclosure of relevant material before he was required to sign the letter of engagement necessary to bring the appointment of the TPA into effect.  His objections to the proposed terms of engagement were therefore subsidiary but he continued to object to three matters:
(i)	a requirement that he should contribute to an advanced payment of Mr Whitaker’s fees;
(ii)	the imposition of a cap on liability of £500,000; and
(iii)	a restriction on his freedom to disclose the valuation report.
19.	The Company’s position was that Mr Davenport was acting unreasonably in refusing to agree to the terms of engagement until disclosure was complete. There was no contractual right to such disclosure under the Articles and any outstanding questions of disclosure were to be dealt with by the TPA giving directions at the outset of the valuation process.  The terms of engagement now issued by the TPA provide in Appendix 1 that: 
“(a)	Within 10 working days of the Expert Accountant accepting the Terms of Reference, the Seller shall provide to the Expert Accountant and to the Purchaser a list of the further documents which the Seller says he does not currently have and which he reasonably requires in order to be able properly to make submissions to the Expert Accountant for the purposes of his determination of the value of the Seller’s shareholding, together with such written submissions as to why such documents are so required.
(b)	Within 10 working days after receipt by it of such list and submissions, the Purchaser shall provide to the Expert Accountant and to the Seller its written response.
(c)	The Expert Accountant shall within 10 working days after receipt by him of such response, determine whether and if so what further documents are to be disclosed; and if so by when.
(d)	In any event, the Expert Accountant shall by the same date provide to the Parties the timetable for the subsequent conduct of the valuation.
(e)	The Parties shall each make a ‘written submission’ (“the First Submission”) on the Valuation to the Expert Accountant within such period as the Expert Accountant shall direct under paragraph (d).  The Parties shall each be entitled to provide such evidence in their written submissions to the Expert Accountant as they each consider relevant to the determination.  The First Submission from each party shall set out a reasoned valuation of the Shareholding including the information and evidence on which the Party relies in support of its view on the particular matter.
(f)	Immediately following receipt of the later of the two written initial submissions the Expert Accountant shall send one copy of the other Party’s written submission to each.
(g)	The Parties shall each be entitled to make written comments (“the Second Submission”) to the Expert Accountant on the written submission of the other Party, such written comments to be made as soon as reasonably practicable and in any event not later than 2 weeks from the date of receipt of the copy of the other Party’s written submission.  Immediately following receipt of the later of the two written comments the Expert Accountant shall send one copy of the other Party’s written comments to each.
(h)	The Parties shall each be entitled to make further written comments on the Second Submission (“the Third Submission”) to the Expert Accountant on the Second Submission of the other Party, such written comments to be made as soon as reasonably practicable and in any event not later than 2 weeks from the date of receipt of the copy of the other Party’s Second Submission.  Immediately following receipt of the later of the two Third Submission comments the Expert Accountants shall send one copy of the other Party’s written comments to each, for information only.
(i)	The Parties shall each supply to the Expert Accountant three copies of each Submission provided under paragraphs (e) to (h) above, and of any information, documentation or working papers obtained from third parties and any written submissions thereon under paragraph (j) below.
(j)	The Seller and Purchaser shall each provide the Expert Accountant with all information and assistance as the Expert Accountant reasonably requires.  For the avoidance of doubt, the Expert Accountant shall be entitled at his absolute discretion to request written clarification of any matters contained within the written material received from either of the parties, which the recipient shall supply within five working days of the Expert Accountant’s request.  The Expert Accountant will address such requests to the Seller and the Purchaser simultaneously copying to each party requests made to the other party.  For the avoidance of doubt and for use solely within the valuation exercise, the Expert Accountant shall provide to each Party copies of all documents disclosed by the other Party to the Expert Accountant; and to that end documents disclosed to the Expert Accountant shall be provided, if not electronically, then in duplicate.
(k)	Having received the Third Submissions the Expert Accountant will have a period of 3 weeks to raise matters and meet with one or more of the Parties, together or otherwise or not at all, before finalising his determination and issuance on the conditions referred to in the engagement letter.
(l)	The Expert Accountant reserves the right to refuse to accept any information other than that provided under these Terms of Reference.”
20.	Mr Hollington QC put four alternative submissions to the judge:
(i)	that the appointment of Mr Whitaker was effective by virtue of the President’s nomination coupled with the issuing of terms of engagement provided they were neither contradictory nor irrational;
(ii)	that it was an implied term of the Articles that terms of engagement issued by a TPA nominated by the President would be binding on the parties unless unreasonable;
(iii)	that the Articles should be read as containing implied terms that the transferor would co-operate in doing everything reasonably necessary to procure the appointment of Mr Whitaker as the TPA and would not unreasonably refuse to agree the terms of engagement if reasonable; and
(iv)	that if, contrary to submissions (i)-(iii), Mr Davenport was entitled to veto the appointment by refusing to agree the terms of engagement then the court should substitute its own machinery for that of Article 11.14 by carrying out the valuation exercise itself.
21.	The judge rejected Mr Hollington’s first and second submissions but accepted his third.  He also rejected the three criticisms of the proposed terms of engagement.  The Company had agreed to meet the advance payment of the TPA’s fees so that point had disappeared.  In relation to the cap on liability, he said that:
“118. Mr Tregear realistically accepts, as his client had already done in correspondence, that one would expect a reputable accountant accepting such an engagement to require some sort of cap. In my judgment, it is inherent in any such appointment as these articles contemplate, that some figure for such a cap is going to have to be determined before the transferor’s case on value et cetera is fully refined. I do not accept that Mr Davenport is in an impossible position in this regard, a fortiori since he has not even come out and so asserted in his witness statement. He has given no reasoned basis for why £500,000 is an unacceptable (presumably inadequate) figure, nor any reasoned basis in support of some other figure, because he has not put one forward. In these circumstances I accept Mr Hollington’s submission that in this regard Mr Davenport is withholding his consent to an appointment unreasonably. ”
22.	The third point about disclosure is only material to the possibility (however unlikely) that the other shareholders in the Company choose not to exercise their pre-emption rights once the valuation is known leaving Mr Davenport to have to deal with other prospective purchasers.  Condition 6.2 of the final Terms and Conditions in the engagement letter provided that: 
“You agree that, otherwise than with our prior written consent, such consent not to be unreasonably withheld, any advice, opinions, and statements, reports and other information that we provide in connection with the services (in whatever form or medium) or any document or statement which bears our name, (other than financial statements in the form in which they have been reported on by ourselves as auditors):
(a) 	will be held in strict confidence by you, your officers and employees and others engaged by you;
(b) 	will not be disclosed to any third party; and
(c) 	will not be used for any purpose except as provided for in this letter.”
23.	The words in italics are a subsequent addition made at the suggestion of the judge.  He said at paragraph 123 that:
“This is a point which I would very much prefer to see resolved consensually. Given the approach which the parties have invited me to take for today’s purposes, what, at this stage, I will rule is that were PKF/Mr Whitaker to modify General Term and Condition 6.2 for the purposes of this appointment, so as to add the words “(such consent not to be unreasonably withheld)” immediately after the reference to possible consent in 6.2, then there would then, in my judgment, clearly be no reasonable ground in relation to this condition for Mr Davenport to withhold his consent. ”
24.	On this appeal it is not contended that the judge was wrong to find that Mr Davenport’s objections to the advance payment of fees and to the restrictions on disclosure of the valuation had been resolved by the Company’s offer to meet the advance payment and the amendment to condition 6.2 of the terms and conditions.  The only point taken is one of timing: i.e. that these changes came very late and after Mr Davenport had raised his objections.  The judge was therefore wrong to say that Mr Davenport had acted unreasonably in taking those points when he did.
25.	But even if that is right his refusal to sign the letter of engagement until full disclosure had been given remained and this continues to be the central issue in the case.
26.	The real issue for the judge in dealing with Mr Hollington’s third main submission was whether Mr Davenport could effectively veto the appointment of the TPA regardless of whether the proposed terms were reasonable.  In my view, this really hinged on whether the Company was under an obligation to provide Mr Davenport with all relevant disclosure prior to him agreeing to the terms of engagement.  If no such obligation exists either under the relevant Articles or as a matter of the general law then Mr Davenport cannot rely upon the Company’s breach of that obligation to justify his own refusal to allow the TPA to proceed.  He has no right to the disclosure of such information other than in the valuation process itself.
27.	Mr Tregear QC (who appeared for Mr Davenport before the judge and has settled the grounds of appeal) found some difficulty in identifying any contractual basis for such an obligation.  Article 11.14 imposed no express obligation of disclosure and any implied duty to co-operate would be in relation to the engagement of the TPA.  He submitted that the absence of financial information was likely to render nugatory the provision in Article 11.14 for the price to be agreed and also made it impossible for Mr Davenport to express any informed view about the amount of the proposed cap on liability.  But that submission is based, in my view, on a misconception about the content and purpose of Article 11.14.  This defines what is meant by “Fair Value” as being one of two possible things: either the price which the parties agree or the price determined by the TPA on the valuation assumptions which follow.  Although the TPA will obviously require the relevant financial information about the Company in order to make his determination, there is nothing to suggest that the parties contemplated that such disclosure should be a condition precedent to any agreement on the price or to the settlement of the terms of engagement.  Article 11.14, properly construed, is in substance a default provision (“failing such agreement”) designed to specify the task for the expert valuer should there be no agreement.  It is not concerned with stipulating how or on what basis any such agreement should be attempted to be reached.  Still less is it directed to a resolution of any dispute about the terms and conditions of the TPA’s appointment.
28.	Mr Tregear attempted to bolster his position on prior disclosure by relying on Articles 11.1 and 11.2 as the source of a fiduciary obligation of disclosure based on the Company acting as the transferor’s agent in relation to the sale of his shares.  The judge’s rejection of this argument is one of the grounds of appeal.  The judge set out the now familiar quotation from the judgment of Mason J in Hospital Products v United States Surgical Corporation [1984] 156 CLR 41 at page 97 where he said:
“That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.”
29.	But, in my view, the argument can be disposed of on much narrower grounds.  The provisions of Articles 11.1 and 11.2 do not make the Company Mr Davenport’s agent for all purposes but only for the very limited purpose of being able to transfer and pass title in the shares.  There is nothing in those provisions to override the terms of Article 11.14 by imposing upon the Company in relation to the valuation exercise obligations which the contract does not itself impose.  The judge was therefore correct, in my view, to reject that argument and with it the submission that Mr Davenport is entitled to full disclosure as a condition precedent to the appointment of the TPA or to the settlement of his terms of engagement. 
30.	In these circumstances the only remaining issue is whether the judge was right to imply a term to the effect that Mr Davenport was under a duty to co-operate in doing what was reasonably necessary to procure the appointment of Mr Whitaker once he had been nominated by the President.  If, as I believe, Mr Davenport was not entitled to insist upon disclosure of the relevant financial information prior to his acceptance of the TPA’s terms of engagement, it must follow that he was acting unreasonably in refusing to sign on those grounds and he was therefore in breach of his duty to co-operate if such an obligation exists.
31.	One is therefore left with a rather arid dispute about whether it is right to imply such a term into the Articles and the slightly more fundamental question raised in the grounds of appeal as to whether the provisions of Article 11.14 are void and therefore unenforceable because they amount to an agreement to agree.
32.	Mr Davenport’s attack on the enforceability of Article 11.14 is perhaps surprising in the light of his counsel’s acknowledgment before the Court of Appeal in the first set of proceedings that it was probably necessary to imply into the Articles of the Company an obligation on the parties to co-operate in the agreement of reasonable terms of engagement.  Mr Tregear (who has helpfully settled the skeleton argument on behalf of Mr Davenport but has not appeared on this appeal) submits in that skeleton that there is nothing in Article 11.14 to identify how and on what terms the TPA should operate in relation to fees, the use of internal staff and outside advisers, the participation of the parties in the valuation process; and personal liability.  Yet, as a result of the earlier decision of the Court of Appeal, agreement on all those matters is essential before the appointment can take effect.
33.	The judge dealt with these submissions at paragraphs 54-61 of his judgment:
“54. 	It is to the first two parts of the stage 3 argument that I must turn, because Mr Tregear realistically accepts that if the claimant can establish its case on the first two there is no answer to the third. As I earlier summarised, the claimant contends for two implied terms, albeit covering similar ground here: firstly, a positive obligation to co-operate, often referred to by the name of the leading case Mackay v Dick, which supports the passages in Chitty which I have cited; secondly, an implied term that the transferor should not unreasonably withhold his consent to the appointment, or the relevant terms of engagement for an appointment, of the third party accountant. I have already dealt with the relevant legal principles.
55.	Mr Hollington points out that in the earlier case, Mr Tregear expressly acknowledged in his submissions to the Court of Appeal that firstly:
“The approach in this case will probably be to ask the court to declare that there are certain implied terms so that in making machinery work the transferor or the company are under an implied obligation to co-operate in the agreement of reasonable terms for the appointment of a valuer”;
	secondly:
“It can either be not unreasonably to withhold consent or positively to act in such a way to bring about an appointment on reasonable terms”;
	and thirdly (both to Ms Prevezer -see her judgment at paragraph 51 - and the Court of Appeal) that there would be an implied obligation not unreasonably to withhold consent.
56. 	Before me, in the changed forensic context, Mr Tregear submitted, first, that to imply the Mackay v Dick implied term on these facts would be to subvert the principle that an agreement to agree is not binding in English law; and second, that applying these implied terms and, in particular, the Mackay v Dick one, was going to be difficult and give rise to all sorts of problems on the facts, a submission which he developed by reference to three examples. He elegantly sought to draw the forensic sting from what he himself had submitted in the previous action by referring to his own submissions as “thinking aloud”.
57. 	I prefer the submissions Mr Tregear made in the previous proceedings to those which he made to me. There is no inconsistency, in my judgment, between the rule as to agreements to agree and implying either of these suggested implied terms. There is no essential term in the articles left to be negotiated and the subject of subsequent agreement. Some practical difficulties will remain in their working out, but that, as was stated by Slade LJ in Tett v Phoenix, is no sufficient objection to them.
58. 	The ut res magis valeat quam pereat principle is important. These implied terms are, in my judgment, necessary to imply, and do represent the minimum machinery necessary to make these articles work. I share the view expressed in the form of a question by Wilson LJ during the hearing in the Court of Appeal in the earlier action:
“Clearly neither party unreasonably to withhold consent to proposals as to the terms of an appointment put by the other.”
59. 	Whether or not the learned Lord Justice intended that to be a statement or a question, in any event it accurately reflects my view and judgment. I am satisfied that the implication of these two terms does give effect to the parties’ (i.e. here the shareholders’) reasonable expectations, objectively determined.
60. 	The implied term which the Privy Council (Australia) was willing to find, albeit in a somewhat different factual context, in Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 Lloyd's Rep 205 at 210 per Sir Robin Cooke, does support Mr Hollington’s submissions; its applicability is not negated by the different facts of that case.
61. 	As I have mentioned, these two terms do cover much the same ground. As the positive obligation is to co-operate, in seeking to establish breaches Mr Hollington would not be limited to the merits of individual points taken by the defendant as to the proposed terms of engagement of Mr Whitaker. As to the other suggested implied term, the burden would clearly lie on Mr Hollington to establish that consent was being unreasonably withheld; it would not be for Mr Davenport to prove that he was acting reasonably in withholding consent. I find for both these suggested implied terms.”
34.	Mr Tregear’s reliance of Article 11.14 as part of his argument, I think, mischaracterises the purpose and effect of that article.  This is a definition of fair value which sets out the basis of the valuation exercise in respect of the shares.  It carries with it, I think, an obvious implication that the TPA should give directions which enable him to provide a valuation on that basis.  But it is no part of its function to dictate still less to determine the conditions of his appointment in respect of fees, resources and methods of working.  Although, as this Court has held, agreement on those matters is a pre-requisite to his valid appointment and the commencement of the valuation process, that is the result of its construction of Article 2.1.
35.	Mr Davenport’s argument is that the process of agreeing the TPA’s terms of engagement is open-ended and that there is no framework and no specified criteria by which issues of reasonableness can be determined.  The imposition of an implied term of the kind found by the judge is therefore inconsistent with the express terms of the contract and should be rejected.
36.	I disagree.  Although the process of appointment contemplated by Article 2.1 does undoubtedly involve agreement on the terms of engagement, Article 2.1 is not directed in terms to the resolution of any disputes which may arise between the parties as to what those terms should be.  The process of engagement necessarily involves the TPA producing the terms upon which he is prepared to accept the appointment.  The parties are at liberty to negotiate changes in those terms but ultimately it is a matter for the TPA to decide the basis upon which he will agree to act and nothing in the Articles enables the other parties to compel him to do otherwise.
37.	The real issue which arises in respect of the Company and Mr Davenport is not what the terms of engagement should be (which is the open-ended question relied on by Mr Tregear) but whether they should be required to agree to the TPA’s appointment on the terms upon which he is prepared to act.  Assuming (as the judge has found) that those terms are reasonable and are consistent with the rights and obligations of the Company and Mr Davenport under the Articles, the implication of a term requiring the parties to co-operate in the valuation process by accepting the appointment on those terms is an obvious and necessary means of giving effect to the contract and the judge was right in my view so to hold.
38.	What I think is at the heart of Mr Davenport’s opposition to the appointment of the TPA is his belief that Mr Whitaker will be unable in the context of an expert valuation to deal adequately with his complaints that the Company has not made complete disclosure of all the financial and other material that will be relevant to the determination of the fair value of the shares.  Partly to make this good and partly to support his argument that he did not act unreasonably in refusing to agree to the terms of engagement, he has made an application to adduce new evidence on the appeal which includes the report of a forensic accountant.  We have indicated that we intend to dismiss this application not because the material will not be relevant in the valuation exercise but because it is irrelevant to the issues which arise on this appeal.  Accepting, as I do, that Mr Davenport will need to be given the opportunity of raising at the outset of the expert determination any issues about incomplete disclosure, those applications should be directed to the TPA who has made provision for that in the Appendix to his terms of engagement which I have quoted from earlier.  I have no reason to suppose that the TPA will not respond appropriately to any reasonable requests for additional information, although it will be for him to decide what he considers necessary to know in order to carry out the valuation of the shares.  Although Mr Davenport submitted that the valuation exercise was time and cost limited, that is not in fact the case.  The expert will be paid at an hourly rate for the work which it is necessary for him to do.  I therefore believe that Mr Davenport’s concerns in this respect are premature.
39.	I would therefore dismiss both the appeal and the application to adduce new evidence.  Although we are upholding the order of the judge, there is, however, one matter of detail which does, I think, require an amendment to the judge’s order.  This is in respect of clause 19.1 of the terms of engagement which are annexed to the order.  This contains a power of termination of the engagement exercisable by the parties which, as Mr Hollington pointed out, is clearly inconsistent with the terms and purpose of the Articles as construed by this Court.  The copy terms attached to the order should therefore be amended by the deletion of that clause.
Lord Justice Stanley Burnton :
40.	I agree.
Lord Justice Mummery :
41.	I also agree.