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  • Tahilram v Trustees of the Lukamber Trust and Another (845_2020) [2021] ZASCA 173; 2022 (2) SA 436 (SCA) (9 December 2021)

Tahilram v Trustees of the Lukamber Trust and Another (845_2020) [2021] ZASCA 173; 2022 (2) SA 436 (SCA) (9 December 2021)

When parties agree to refer a matter to a valuer, the valuer's decision is final and binding on them once communicated. The valuer is then functus officio, meaning they are not permitted to unilaterally withdraw or amend their valuation.

Author

Ross Shepstone
March 22, 2024

The case involves a dispute between Mr. Rajkumar Tahilram (the appellant) and the Trustees of the Lukamber Trust (the first respondent) regarding the purchase consideration for Mr. Tahilram's shares in A & A Dynamic Distributors (Pty) Ltd (the second respondent). The Lukamber Trust holds 70% of the company's shares, while Mr. Tahilram holds 30%. The shareholders' agreement stipulated that in the event of a shareholder's employment termination, the shares must be offered to the other shareholders at a fair value determined by auditors.



Mr. Tahilram's employment with the company was terminated, triggering the offer of his shares to the Lukamber Trust. Disagreement arose regarding the fair market value of Mr. Tahilram's shares, leading to the involvement of auditors to determine the value. The auditors' valuation was communicated to the parties, with Mr. Tahilram initially disagreeing but later accepting the valuation.

However, the Lukamber Trust sought to deduct alleged amounts owed by Mr. Tahilram from the purchase price. Mr. Tahilram demanded payment based on the auditors' valuation, leading to court proceedings. The High Court initially held that the auditors could modify their valuation, but Mr. Tahilram appealed this decision.

"Once therefore the valuer’s valuation had been communicated to the parties, the valuation validly issued cannot, in the absence of a contractual provision to the contrary, or agreement or waiver by the parties, be withdrawn or cancelled by the valuer to correct mistakes of fact or value in it."



The appeal focused on whether the auditors, once issuing their valuation, could unilaterally withdraw or amend it. The court considered the principles of finality, certainty, and the binding nature of expert valuations in contractual agreements. The court ultimately ruled in favor of Mr. Tahilram, upholding the auditors' initial valuation and ordering the Lukamber Trust to pay the specified amount plus interest and costs.

The core legal principle underlying the decision is that, in the absence of a contractual provision to the contrary or agreement by the parties, when parties agree to refer a matter to a valuer, the valuer's decision is final and binding on them once communicated. The valuer is then functus officio, meaning they are not permitted to unilaterally withdraw or amend their valuation. Only a court has the power to interfere with the valuer's decision in review proceedings, and such interference is limited to specific grounds as established in the court's jurisprudence. This principle upholds the values of finality, certainty, and the binding nature of contractual agreements.

The court relied on the case of Transnet National Ports Authority v Reit Investments (Pty) Limited [2020] ZASCA 129 in its reasoning process.