Gillatt v Sky Television

Gillatt v Sky Television [2000] 1 All ER (Comm) 461

Clause requiring valuation by accountant essential and integral to contract

Facts

The respondent (S) transferred shares in a private company (TAS) to a wholly owned subsidiary. The appellant (G) was the founder of TAS. A contract was made in relation to the shares under which G (by virtue of his sole ownership of a company, M) was entitled to 55% of the market value of TAS.

Issues

The contract provided for the determination by an independent chartered accountant of the share value. G made a claim against S which was dismissed on the basis that he had failed to appoint an accountant. The court held that the requirement to appoint an accountant was an essential and integral part of the contract and the court could not intervene. G appealed. On appeal, G relied on the case of Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444 and argued that the mechanism for the ascertainment of the purchase price was a subsidiary and non-essential part of the contract.

Decision/Outcome

The Court of Appeal dismissed G’s appeal. The ordinary meaning of the relevant clause suggested that valuation by an accountant was an essential and integral part of the definition of the payment to which M (and therefore G) was entitled on the sale of the shares in TAS. The decision as to the most appropriate basis of valuation was within the discretion of the appointed accountant. Accordingly, valuation by the accountant was not simply a fall-back mechanism in the case of dispute resolution. This was not a case where the mechanism for the ascertainment of the purchase price had broken down as between the parties and therefore the case of Sudbrook should be distinguished.

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