Austrim Nylex Limited v Kroll (No. 2)

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IN THE SUPREME COURT OF VICTORIA		Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL LIST

No. 4908 of 2001

AUSTRIM NYLEX LIMITED (ACN 009 375 553)	Plaintiff
v
IRENE JULIANA KROLL and OTHERS	Defendants

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JUDGE:	Warren J
WHERE HELD:	Melbourne
DATE OF HEARING:	28, 29 and 30 November; 3 and 4 December 2001
DATE OF JUDGMENT:	24 May 2002
CASE MAY BE CITED AS:	Austrim Nylex Limited v Kroll & Ors (No. 2)
MEDIUM NEUTRAL CITATION:	[2002] VSC 193

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CORPORATIONS – compulsory acquisition – minority interests.

VALUATION – methodology – inclusion of additional factors – special benefits – premium for forcible taking – "fair value" –time of distribution – method of distribution.

NOTICE – compulsory acquisition - adequacy of notice to minority shareholders – disclosure – material information.

WORDS AND PHRASES – "fair value" – "materiality" – "just terms" – "relevant interest".

THE CONSTITUTION (Cth) – s.51(xxxi), s.51(xxxvii).

CORPORATIONS ACT2001 (Cth) – ss.608, 609, 664, 664A, 664B, 664C, 664D, 664E, 664F, 664G, 666A, 666B, 667A, 667C, 667D, 1322, 1325D, 1350, 1382, 1383, 1384, 1350.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J. Santamaria Q.C. with Mr J. Moore	Clayton Utz
For the 7^th and 8^th Defendants	Mr S. Blanks (as solicitor on 28 and part 29 November 2001) Mr Cotman S.C. (part 29, 30 November; 3 and 4 December 2001)	Stephen Blanks and Associates
For the 9^th Defendant	Dr G. Elkington	In person

TABLE OF CONTENTS

Introduction........................................................................................................................................ 2

Background Facts............................................................................................................................... 2

Part 6A.2 Division 1 of the Corporations Act............................................................................... 3

The Evidence....................................................................................................................................... 4

The Issues............................................................................................................................................ 4

Fair Value............................................................................................................................................. 5

1. The Concept of Fair Value............................................................................................................ 5

(a) General Principles................................................................................................................... 5
(b) Section 667C(1)(a).................................................................................................................... 6
(c) 100 per cent Ownership.......................................................................................................... 7
(d) Legislative History.................................................................................................................. 8

2. Time of Determination of Fair Value......................................................................................... 8

3. Distributions................................................................................................................................... 9

Conclusions as to Fair Value............................................................................................................ 9

The Constitutional Issues............................................................................................................... 10

The Expert Evidence........................................................................................................................ 17

(1) The Evidence of Kershaw......................................................................................................... 17

(2) The Evidence of Lom – the Independent Expert.................................................................. 17

(3) The Evidence of Lonergan – the LEA Report........................................................................ 19

(4) The Further Report of Lom....................................................................................................... 22

(5) The Evidence of Selak............................................................................................................... 23

Findings on the Evidence............................................................................................................... 23

(1) Method of Valuation................................................................................................................. 23

(2) Costs Savings.............................................................................................................................. 26

(3) The Advantage or Benefit of 100 per cent Ownership........................................................ 27

(4) Voting Rights.............................................................................................................................. 29

(5) Other Matters.............................................................................................................................. 30

Procedural Matters........................................................................................................................... 32

Conclusion......................................................................................................................................... 34

HER HONOUR:

Introduction

The plaintiff made an offer to compulsorily acquire the remaining minority units in a company in which the plaintiff held over 90 per cent of the issued shares in the company. The plaintiff issued these proceedings relying upon the compulsory acquisition provisions of the Corporations Act 2001 being ss.664(3) and 664F(1) seeking court approval of the proposed compulsory acquisition of the remaining minority units in the company.

The defendants, as the minority shareholders, opposed the application essentially on the basis that the offer made by the plaintiff for the minority shareholding did not give fair value. The…

Austrim Nylex Limited sought a compulsory acquisition of minority interests from its shareholders. The dispute was heard by the High Court of Australia. The central legal issues involved the interpretation of the "fair value" of shares in the context of compulsory acquisition, the adequacy of notice provided to minority shareholders, and the inclusion of additional factors such as special benefits or premiums in the valuation process.

The court examined whether the fair value should incorporate elements like special benefits or a premium for forcible taking. It was necessary to determine whether the notice given to minority shareholders was adequate and whether it included material information. The court also considered the meaning of "just terms" under the Constitution and whether the acquisition met these terms. The High Court found that the valuation should not include a premium for forcible taking, but it could consider special benefits if relevant. Additionally, the court held that the notice provided to minority shareholders was adequate, as it contained all material information necessary for them to make an informed decision.

The court concluded that the compulsory acquisition was valid and that the fair value of the shares was determined without including a premium for forcible taking. The High Court upheld the acquisition, confirming that the notice to minority shareholders was sufficient and that the valuation process adhered to the statutory requirements.

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CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established