Cream Holdings Limited v Davenport [2011] EWCA Civ 1287
Davenport's departure from Cream triggered pre-emption provisions under which he had to offer his shares for sale to Cream's other shareholders. Under the articles, the fair value of the shares was to be determined by agreement or if not agreed by a third party accountant. Davenport refused to sign the accountant's letter of engagement, principally because of alleged absence of full financial disclosure by Cream. The High Court Judge rejected Davenport's argument that he was entitled to full financial disclosure as a condition precedent to the appointment of the accountant. He held that a term should be implied into the articles and that the transferor of shares would cooperate with the appointment of an accountant and not unreasonably refuse to agree the terms of engagement. Davenport appealed.
The Court of Appeal dismissed the appeal. The real issue was whether Davenport could effectively veto the accountant's appointment regardless of whether the proposed terms of engagement were reasonable. There was nothing in the relevant article to suggest that the parties had contemplated that disclosure of financial information should be a condition precedent to any agreement on the price or terms of engagement. The implication of the term requiring Davenport to cooperate in the valuation process by accepting the appointment on the accountant's terms (assuming that they were reasonable) was an obvious and necessary means of giving effect to the contract.
The decision was perhaps inevitable but it does show that a person may have difficulty in defeating the clear object of a contract by being difficult over matters which are not covered but which are clearly necessary to make the provisions of the contract work.
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