PAGE v McKENSEY and ORS [1995] NSWCA 351

PAGE v McKENSEY SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

PRIESTLEY, HANDLEY and SHELLER JJA 17 February 1995, 28 February 1995

[1995] NSWCA 351

PARTNERSHIP: — valuation of goodwill The appellant and the respondents were partners in a firm of chartered accountants, Forsythes. On 27 May 1993, Windeyer J had, by consent, declared that the partnership was dissolved on 30 June 1992 and that the assets of the partnership at that date included but were not limited to goodwill and the value of the shares in the two companies, which were defendants but were not joined as parties to the appeal. A number of questions were referred to a referee for enquiry and report pursuant to Pt72 of the Supreme Court Rules. When the reference proved abortive and the report not such that it could be adopted, his Honour agreed to determine the only question referred which had not been agreed on; namely the question of goodwill.

His Honour accepted Mr Rodgers' (the respondents' valuer) evidence that the value of the name without covenants was $150,000 and treated that as the value of the goodwill.

The appellant sought to have his Honour's determination of the value of the goodwill set aside and substituted in an amount of $2,523,126.

As Windeyer J's judgment was interlocutory, the appeal required leave of the Court. Leave was not opposed by the respondent and was granted.

The success of the appeal depended on the Court accepting that Windeyer J had erred in wholly rejecting Mr Hawkey's (the appellant's valuer) evidence of the value of the goodwill. Mr Hawkey's valuation of the accounting part of the business was assessed on the basis of the sale of a going concern with full covenants including restraint covenants. His Honour considered that Mr Hawkey's valuation was not made in accordance with well established principles; Trego v Hunt [1986] AC 7; David v Matthews [1899] 1 Ch 378; Hookham v Pottage (1872) LR 8 Ch App 91.