Burbank Trading Pty Ltd v Allmere Pty Ltd - [2009] VSCA 82

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No 3782 of 2008

BURBANK TRADING PTY LTD (ACN 011 066 934)	Appellant
	v
ALLMERE PTY LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) (ACN 078 028 583)	Respondent

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JUDGES:	DODDS-STREETON and WEINBERG JJA and WILLIAMS AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	12 and 16 February 2009
DATE OF JUDGMENT:	30 April 2009
MEDIUM NEUTRAL CITATION:	[2009] VSCA 82

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CONTRACT – Construction of shareholders’ agreement – Appellant and respondent equal shareholders in joint venture company – Whether appointment of voluntary administrator to respondent constituted a ‘change in ultimate control’ triggering appellant’s pre-emptive rights pursuant to deemed offer notice – Whether subsequent offer notice valid – Whether adequate disclosure – Whether dispute as to price notified – Whether multiple concurrent notices permitted under pre-emptive clause – Whether consent to transfer unreasonably withheld.

Words and phrases – ‘change in ultimate control’.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr C M Scerri QC	Mallesons Stephen Jaques
Mr S R Senathirajah
For the Respondent	Mr J D Elliott SC	Robert James Lawyers
Mr J S Graham

DODDS-STREETON JA:

Introduction

The issue in this appeal is whether the appellant, Burbank Trading Pty Ltd (‘Burbank’), is entitled to prevent the respondent, Allmere Pty Ltd (‘Allmere’), from selling its share in a company in which they are the sole equal shareholders to a third party pursuant to the pre-emptive provisions of their shareholders’ agreement.

The appellant appeals from the following declarations and orders of a judge of the Trial Division made on 2 May 2008:

1.Burbank has unreasonably withheld its approval of Godfrey Hirst Australia Pty Ltd (‘Godfrey Hirst’) as transferee of the three shares of the respondent, Allmere (subject to a deed or company arrangement) in Carpet Call Holdings Pty Ltd.
2.Subject to the transfer of the shares to Godfrey Hirst being upon terms and conditions no more favourable than those disclosed in the letter to Burbank dated 19 October 2006 from the Administrator of Allmere, Burbank approve Godfrey Hirst as transferee of the shares and procure that the board of Carpet Call approve the transfer.
3.Burbank pay Allmere’s costs of the proceeding, including reserved costs.

The respondent and the appellant are the only shareholders of Carpet Call Holdings Pty Ltd (‘Carpet Call’), in which each holds three shares. They are parties to a shareholders’ agreement dated 7 February 1997 (‘shareholders’ agreement’). Carpet Call conducts a large carpet retailing business as a joint venture by its shareholders.

Clause 10 of the shareholders’ agreement prohibits the parties from selling their shares in Carpet Call save in accordance with its provisions. Clause 10 provides, broadly, that if either party (as ‘offeror’) wishes to sell its shares or undergoes a change in ultimate control, the other party (as ‘offeree’), will obtain pre-emptive rights to the shares, to be exercised as specified, failing which the offeror is entitled to transfer the shares to a third party on certain conditions, including the approval (which shall not be unreasonably withheld) of…

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: [2009] VSCA 82
Decision Date: 30 April 2009

CaseChat Overview and Summary

Burbank Trading Pty Ltd, an appellant, and Allmere Pty Ltd, a respondent, were equal shareholders in a joint venture company. Burbank Trading brought an appeal against the decision of the primary judge that its pre-emptive rights under a shareholders' agreement were not triggered when Allmere Pty Ltd appointed a voluntary administrator. Burbank Trading sought an order for the sale of Allmere Pty Ltd's shares to it at a price determined by the court, or an order for specific performance of the pre-emptive rights. The court was required to determine whether the appointment of a voluntary administrator to Allmere Pty Ltd constituted a 'change in ultimate control' that triggered Burbank Trading's pre-emptive rights. The court was also required to determine whether the offer notice Burbank Trading issued was valid, whether there was adequate disclosure, whether there was a dispute as to the price notified, whether multiple concurrent notices were permitted under the pre-emptive clause, and whether Burbank Trading's consent to the transfer of shares was unreasonably withheld.

The court held that the appointment of a voluntary administrator to Allmere Pty Ltd did not constitute a 'change in ultimate control' that triggered Burbank Trading's pre-emptive rights. The court found that the phrase 'change in ultimate control' referred to a change in the majority of the shareholders or the board of directors, and not to a change in the management of the company. The court also found that the offer notice issued by Burbank Trading was not valid as it did not provide adequate disclosure and there was a dispute as to the price notified. The court held that multiple concurrent notices were not permitted under the pre-emptive clause, and that Burbank Trading's consent to the transfer of shares was not unreasonably withheld as it had not provided adequate disclosure.

The court dismissed the appeal and held that Burbank Trading's pre-emptive rights were not triggered. The court found that the appointment of a voluntary administrator to Allmere Pty Ltd did not constitute a 'change in ultimate control' that triggered Burbank Trading's pre-emptive rights. The court held that the offer notice issued by Burbank Trading was not valid as it did not provide adequate disclosure and there was a dispute as to the price notified. The court also found that multiple concurrent notices were not permitted under the pre-emptive clause, and that Burbank Trading's consent to the transfer of shares was not unreasonably withheld as it had not provided adequate disclosure. Burbank Trading was ordered to pay Allmere Pty Ltd's costs of the appeal.

Orders