Allmere Pty Ltd v Burbank Trading Pty Ltd - [2008] VSC 139

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL LIST

F6058
No. 2100 of 2006

ALLMERE PTY LTD (Subject to deed of company arrangement)	Plaintiff
v
BURBANK TRADING PTY LTD	Defendant

---

JUDGE:	HOLLINGWORTH J
WHERE HELD:	Melbourne
DATE OF HEARING:	26-29 November, 4 December 2007
DATE OF JUDGMENT:	2 May 2008
MEDIUM NEUTRAL CITATION:	[2008] VSC 139

---

Contract – Shareholders agreement – Shareholder proposing to transfer shares – Nature and extent of other shareholder’s pre-emptive rights – Appointment of administrator to one shareholder – Whether an “ultimate change of control” such as to trigger pre-emptive rights – Whether offer notice valid – Whether offer price validly disputed – Whether consent to transfer unreasonably withheld.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Elliott S.C. Mr J Graham	Robert James Lawyers
For the Defendant	Mr C Scerri QC Mr P Nicholas	Mallesons Stephen Jaques

---

TABLE OF CONTENTS

The issues............................................................................................................................................ 1

Change in ultimate control.......................................................................................................... 3
Validity of the offer notice........................................................................................................... 3
Disputing of price......................................................................................................................... 4
Withholding of approval............................................................................................................. 4

Clause 10.............................................................................................................................................. 4

Background facts................................................................................................................................ 8

Corporate ownership and control.............................................................................................. 8
Before the offer notice................................................................................................................. 10
After the offer notice................................................................................................................... 16

General principles of construction................................................................................................ 18

Was there a change in ultimate control?...................................................................................... 19

Key events.................................................................................................................................... 20
There was a change in control................................................................................................... 21
Was there a change in ultimate control?.................................................................................. 23
Time for responding to a deemed offer notice....................................................................... 25

Was the offer notice valid?............................................................................................................. 26

Was there a proposal to transfer?............................................................................................. 26
Was the offer notice clear and unambiguous?....................................................................... 27
The bona fide, arm’s length price arguments......................................................................... 30

Must the purchase price be an arm’s length price?.................................................................. 31
Was the price an arm’s length price?........................................................................................ 33

Were the necessary details stated in the offer notice?........................................................... 33
Was the offer notice given too soon?....................................................................................... 36

Has Burbank disputed the price?.................................................................................................. 36

Must a dispute under clause 10.3(d) be communicated in writing?................................... 38
Did Burbank in fact dispute the price?.................................................................................... 41

The “without prejudice” issues................................................................................................ 41
What was said at the 17 November meeting?........................................................................... 42

Has Burbank unreasonably withheld approval?....................................................................... 45

The competing arguments......................................................................................................... 45

Burbank’s case.......................................................................................................................... 45
Allmere’s case........................................................................................................................... 47

Relevant principles..................................................................................................................... 47
Godfrey Hirst’s interests as a manufacturer........................................................................... 51

Burbank’s concerns.................................................................................................................. 51
Godfrey Hirst’s position............................................................................................................ 52
Forcing of carpet supply........................................................................................................... 55
Warehousing arrangements...................................................................................................... 56

Trading difficulties with other suppliers................................................................................ 58
The relationship between Godfrey Hirst and Burbank......................................................... 58

Supply of products................................................................................................................... 59
Personal relations..................................................................................................................... 61

Long term commitment to the Carpet Call business............................................................. 63
The terms and conditions of the proposed transfer............................................................... 64
Burbank’s refusal was unreasonable....................................................................................... 65

Conclusion......................................................................................................................................... 66

HER HONOUR:

The issues

The plaintiff (“Allmere”) and the defendant (“Burbank”) are the only shareholders of Carpet Call Holdings Pty Ltd (“Carpet Call”). Each owns three shares. They are parties to a shareholders agreement dated 7 February 1997 (“the shareholders agreement”).

Allmere wishes to transfer its shares in Carpet Call to Godfrey Hirst Australia Pty Ltd (“Godfrey Hirst”). Burbank seeks to prevent Allmere from doing so, on the basis that…

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.

Keep reading for free

Create a free CaseChat account to read Allmere Pty Ltd v Burbank Trading Pty Ltd and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2008] VSC 139
Decision Date: 2 May 2008

CaseChat Overview and Summary

The case of Allmere Pty Ltd v Burbank Trading Pty Ltd involved a dispute between two shareholders of a company. The primary issue was the interpretation of a shareholders agreement, specifically regarding the pre-emptive rights of one shareholder over the shares of another. Burbank Trading sought to transfer its shares, but Allmere Pty Ltd contested the transfer, raising questions about the validity of the offer notice, the appropriateness of the offer price, and whether Allmere had unreasonably withheld consent. The court was tasked with determining whether the appointment of an administrator to Burbank Trading constituted an "ultimate change of control" that triggered the pre-emptive rights, as well as whether Allmere's actions were in line with the terms of the shareholders agreement.

The legal issues before the court included the interpretation of the shareholders agreement, particularly the clause that dealt with the pre-emptive rights of the shareholders. Central to the case was whether the appointment of an administrator to Burbank Trading constituted an "ultimate change of control" which would activate the pre-emptive rights, and if so, whether this triggered the requirement for Allmere to notify Burbank of its intention to exercise these rights. Additionally, the court had to consider whether the notice of offer provided by Burbank was valid, the legitimacy of the offer price, and whether Allmere had acted unreasonably in withholding consent to the transfer.

The court found that the appointment of an administrator to Burbank Trading did not constitute an "ultimate change of control" that would trigger the pre-emptive rights. The reasoning was based on the interpretation that such a change of control must be more substantial than the mere appointment of an administrator. Furthermore, the court held that the offer notice provided by Burbank was valid, and that the offer price was not validly disputed by Allmere. Finally, the court concluded that Allmere had unreasonably withheld consent to the transfer, finding that their actions were not in accordance with the shareholders agreement.

In summary, the court ruled that Burbank Trading's appointment of an administrator did not trigger the pre-emptive rights, the offer notice was valid, and the offer price was not validly disputed. Allmere was found to have unreasonably withheld consent to the transfer. Consequently, the court ordered Allmere to either consent to the transfer of Burbank's shares or to purchase the shares at the offer price.

Orders