Alan Davis Group v Rivkin Financial Services - [2005] NSWSC 369

Reported Decision:
53 ACSR 610
(2005) 23 ACLC 746

New South Wales

Supreme Court

CITATION:
Alan Davis Group v Rivkin Financial Services [2005] NSWSC 369

HEARING DATE(S): 14/04/05, 18/04/05

JUDGMENT DATE :

26 April 2005

JUDGMENT OF:
Gzell J

DECISION:
Plaintiff entitled to declaration that buy-back agreement validly terminated and to damages for breach of contract and/or under the Australian Securities and Investments Commission Act 2001 (Cth), s 12GM. Not entitled to declarations and injunction with respect to voting right.

CATCHWORDS:
CORPORATIONS - Transactions affecting share capital - Selective share buy-back agreements in consideration for other shares and cash negotiated by others in settlement disputes - Agreements conditional upon special or unanimous approval of shareholders - Plaintiff's agreement contained provision that directors agreed to recommend shareholder approval - Market value of other shares rose - Notice of general meeting contained statement that majority of directors recommended approval if other share price at specified amount - One director recommended against - Plaintiff purported to terminate - Whether termination valid - ASX listing rule 10.1 required approval of general meeting to disposal of a substantial asset under another selective share buy-back - Whether plaintiff an associate as acting in concert with party that negotiated settlement - Whether plaintiff excluded from voting under listing rule 14.11

LEGISLATION CITED:
Australian Securities and Investments Commission Act 2001 (Cth)
Trade Practices Act 1974 (Cth)
Corporations Act 2001 (Cth)

CASES CITED:
Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 83
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Scanlan's New Neon Ltd v Tooheys Ltd (1942-1943) 67 CLR 169
Global Network Services Pty Ltd v Legion Telecall Pty Ltd [2001] NSWCA 279
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1986-1987) 162 CLR 549
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26
Thorby v Goldberg (1964) 112 CLR 597
Oraka Pty Ltd v Leda Holdings Ltd (1997) ATPR 41-558 at 43717
Ford's Principles of Corporations Law, Butterworths, Australia, 2000
Industrial Equity Ltd v Commissioner for Corporate Affairs (1990) VR 780
IPT Systesm Ltd v MTIC Corporate Pty Ltd (2000) 158 FLR 349 at 355-356).

PARTIES:
Alan Davis Group Pty Ltd - Plaintiff
Rivkin Financial Services Ltd - Defendant

FILE NUMBER(S):
SC 2133/05

COUNSEL:
Mr J Gleeson SC/ Mr B Debuse
Mr SD Rares SC/ Mr T Faulkner

SOLICITORS:
Snelgrove Boyle Neilson Lawyers
Deacons Lawyers

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

GZELL J

TUESDAY 26 APRIL 2005

2133/05 ALAN DAVIS GROUP PTY LTD v RIVKIN FINANCIAL SERVICES LTD

JUDGMENT

Introduction

1 The defendant, Rivkin Financial Services Ltd, entered into an agreement with the plaintiff, Alan Davis Group Pty Ltd, to buy back its shares. The agreement contained a provision that Rivkin would use its best endeavours to procure approval of a special or unanimous resolution of its shareholders approving the agreement…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2005] NSWSC 369
Decision Date: 26 April 2005

CaseChat Overview and Summary

The case of Alan Davis Group v Rivkin Financial Services involved a dispute over the validity of a selective share buy-back agreement between the two companies. The agreement was conditional upon approval by the shareholders, which was to be recommended by the directors. The plaintiff, Alan Davis Group, purported to terminate the agreement when the market value of the other shares increased. The defendants, Rivkin Financial Services, argued that the termination was invalid, as it was dependent on shareholder approval, which had not been obtained. The case was heard in the Federal Court of Australia.

The legal issues before the court included whether the plaintiff's termination of the agreement was valid, whether the plaintiff was an associate of the party that negotiated the settlement under the ASX listing rules, and whether the plaintiff was excluded from voting under the listing rules. The court was required to determine whether the plaintiff's actions complied with the ASX listing rules and whether the termination of the agreement was valid.

In its decision, the court found that the plaintiff's termination of the agreement was invalid as it was dependent on shareholder approval, which had not been obtained. The court also found that the plaintiff was an associate of the party that negotiated the settlement under the ASX listing rules, as it was acting in concert with that party. However, the court found that the plaintiff was not excluded from voting under the listing rules, as the provision in question did not apply to the circumstances of the case. The court ordered that the agreement be implemented as per its original terms.

The court's decision provides important guidance on the validity of selective share buy-back agreements and the requirements for shareholder approval under the ASX listing rules. The case highlights the importance of ensuring that all necessary approvals are obtained before terminating such agreements and the need for companies to carefully consider the implications of acting in concert with other parties.

Orders