Re Silber et al. and BGR Precious Metals Inc. [Indexed as: Silber v. BGR Precious Metals Inc.]

46 O.R. (3d) 255

[2000] O.J. No. 101

Docket No. C30367

Corporations -- Shares -- Valuation of shares of dissenting shareholders -- Fair market value of shares in closed-end investment holding company to be determined on basis of stock market price rather than through net asset valuation -- Net asset valuation not good measure of absolute value in case of closed-end investment fund since shareholders cannot redeem their shares and must trade them on open market.

NOTE: The catchlines above relate to a decision of Ferrier J. of the Ontario Court (General Division), reported at 1998 14690 (ON SC), 41 O.R. (3d) 147. An appeal of this judgment to the Court of Appeal for Ontario (Laskin, Rosenberg and O'Connor JJ.A.) was dismissed on January 20, 2000. The endorsement of the court is as follows:

Milton A. Davis and E. Christine Innes, for appellants. Michael S.F. Watson, for respondent.

[1] BY THE COURT: -- The appellants argue that the applications judge erred in using the market value approach, here an average of the quoted stock market trading prices, rather than the net asset value to arrive at the fair value of the shares of the respondent.

[2] The method to be used in ascertaining fair value depends on the facts of each case. The shares in this case traded at a discount from the net value of the underlying assets. Nevertheless, there was expert evidence that the fair value was best determined by the market price of the shares. This evidence was based in part on the nature of the respondent as a closed end investment fund, the gold bullion-related performance of its shares, and the illiquid nature of the some of the assets held by the respondent in its investment portfolio. The expert examined the trading history of the shares of the respondent and expressed the opinion that there was a sufficient volume of shares traded to render the trading price a reliable guide to the fair value of those shares.

[3] We were told that this case was presented to the applications judge on the basis that the shares should be valued by using either the market value or the net asset value approach. The opinions expressed by the opposing experts supported the valuation on the basis of one or other of these methods. There was no evidence supporting a valuation approach that used a combination of the two.

[4] In the circumstances, it was open to the applications judge to accept the evidence of the expert who valued the shares using the stock exchange trading prices.

[5] We are not persuaded that in accepting this evidence, the applications judge rejected the net asset value approach solely because the shares are not subject to redemption by the shareholders. Undoubtedly, the applications judge attached significance to this fact as did the expert upon whose opinion he relied. It was a relevant factor and, combined with the illiquid nature of some of the assets held by the respondent, provided a reasonable explanation why the shares would be valued by the market at less than next asset value. We see no error in the decision by the applications judge to adopt the market value approach.

[6] In the result, we would dismiss the appeal with costs.