Ceneavenue Pty Ltd v Martin

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SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

CENEAVENUE PTY LTD & ORS v MARTIN & ORS

[2008] SASC 158

Judgment of The Full Court

(The Honourable Justice Duggan, The Honourable Justice Debelle and The Honourable Justice Anderson)

18 June 2008

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - SUMMARY JUDGMENT

Appeal against order granting summary judgment – whether no reasonable basis for defending claim – relevant principles – appeal allowed – order for summary judgment set aside – application for summary judgment dismissed.

CORPORATIONS - SHARE CAPITAL - SHARES - VALUATION

Shares – proprietary company – shareholder’s agreement – shares to be valued by company’s accountant before transfer – whether implied term that valuer should act impartially – relevant principles.

Corporations Act 2001 (Cth) s 181, s 182, s 1317H; Supreme Court Rules 2006 r 119, r 232, r 233; Supreme Court Rules 1987 r 25; Supreme Court Rules 1947 O 10, O 14; Federal Court of Australia Act 1976 (Cth) s 31A; Uniform Civil Procedure Rules 1999 (Qld) r 292; Civil Procedure Rules (UK) Part 24, referred to.
Arenson v Arenson [1977] AC 405; Baber v Kenwood Manufacturing Co Ltd [1978] 1 Lloyds Rep 175; Campbell v Edwards [1976] 1 WLR 403; Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; Gray v Morris [2004] 2 Qd R 118; Holt v Cox (1997) 23 ACSR 590; Swain v Hillman [2001] 1 All ER 91; Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1, applied.
Bernstrom v National Australia Bank Ltd [2003] 1 Qd R 469; Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232; JT Nominees Pty Ltd v Macks (2007) 97 SASR 471, not followed.
Agar v Hyde (2000) 201 CLR 552; Australian and International Pilots Association v Qantas Airways Ltd (2006) 160 IR 1; Beevers v Port Phillip Sea Pilots Pty Ltd [2007] VSC 556; Belchier v Reynolds (1754) 3 Keny 87; 96 ER 1318; Bolton Pharmaceutical Co 100 Ltd v Doncaster Pharmaceuticals Group Ltd [2006] EWCA Civ 661; Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720; Dey v Victorian Railways Commissioners (1949) 78 CLR 62; Duke Group Ltd (in liq) v Arthur Young (White J, judgment no 2238, unreported, 20 April 1990); Ford Motor Co of Australia Ltd v Jefferson Ford Pty Ltd (2007) ATPR 42-167; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; Grimwade v Beresford (1974) 9 SASR 157; Hickman & Co v Roberts [1913] AC 229; Hicks v Ruddock (2007) 156 FCR 574; Jones v Sherwood Computer Services Plc [1992] 1 WLR 277; Jewiss v Deputy Commissioner of Taxation (2006) 65 ATR 222; Lawrence v Griffiths (1987) 47 SASR 455; Lawrenson Light Metal Die Casting Pty Ltd (in liq) v Cosmick Pty Ltd [2006] FCA 753; Leasefin…

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Details
Case
[2008] SASC 158
Decision Date

CaseChat Overview and Summary

In the case of Ceneavenue Pty Ltd v Martin, the primary appeal concerns the granting of summary judgment in relation to the valuation of shares in the Renniks Group of Companies. The case was heard in the Supreme Court of South Australia, and the appeal was against an order granting summary judgment to the plaintiff, Ceneavenue, on the issue of share transfer. The dispute centres around the valuation of shares in the Renniks Group, particularly in relation to a shareholder’s agreement which stipulated that shares were to be valued by the company’s accountant before transfer. The central legal issue was whether the company’s accountant should be considered to have an implied duty to act impartially in the valuation of the shares.

The court considered the principles relevant to the selection of an appropriate Earnings Before Interest and Tax (EBIT) multiplier and the valuer’s role in the valuation process. The judge concluded that the selection of the appropriate EBIT and multiplier involved questions of judgment and that the criticisms made by Gillmar did not provide a reasonable basis for defending the claim. The court held that the valuation process and the valuer’s role did not necessarily imply an obligation to act impartially unless such an obligation was explicitly stated in the shareholder’s agreement. As the agreement did not contain such a term, the court found that there was no reasonable basis for defending the claim.

The appeal was allowed, and the order for summary judgment was set aside. Consequently, the application for summary judgment was dismissed, leaving the issue of the share valuation to be determined at a trial. This decision highlights the importance of explicit terms in shareholder agreements, particularly regarding the valuation of shares and the role of the valuer. The court's ruling emphasises that implied duties, such as impartiality in valuation, are not automatically assumed unless clearly stipulated in the agreement.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

ANDERSON J
In my view, the judge was correct in describing the selection of the appropriate EBIT and multiplier as involving questions of judgment and the criticisms advanced by Gillmar on this aspect of the matter do not provide a reasonable basis for defending the plaintiffs’ claim.Conclusion I agree with Debelle J’s analysis of the effect of r 232 and, for the reasons which I have given, I am of the view that Ceneavenue has not made out a case for summary judgment on the share transfer issue. DEBELLE J: This is an appeal against an order granting the plaintiff’s application for summary judgment. The issues concern the Renniks Group of Companies. The following summary of the facts is taken from the reasons of the judge below. In January 2004, the Renniks Group comprised the following companies:Renniks Assets Pty Ltd (“Renniks Assets”)Renniks Trading Pty Ltd (“Renniks Trading”) ACN 101163419 Pty Ltd (“Renniks Employment Old”)It is convenient to call these companies “the original Renniks Group”. Four companies were later added to the group. They are Wavals Trading Pty Ltd (“Wavals”)Renniks Exhibitions Pty Ltd (“Renniks Exhibitions”)Renniks Employment Services Pty Ltd (“Renniks Employment”)Party Hire Warehouse Pty Ltd (“Party Hire”)In January 2004 the plaintiff, Ceneavenue Pty Ltd (“Ceneavenue”) had acquired two thirds of the shares issued in each of the three companies in the original Renniks Group from people called Forster for a price of $2.7 million. As Ceneavenue already held one third of the shares in each company in the original Renniks Group, Ceneavenue thereby held all of the shares in those companies. Ceneavenue is controlled by Mr R A Bertram and his wife Mrs L G Bertram. From 16 January 2004 Andrew David Martin (“Mr Martin”) was employed as the Chief Executive Officer of the Renniks Group. He is the first defendant in this action. The appellant, Gillmar Holdings Pty Ltd (“Gillmar’) is the second defendant. It is a company controlled by Mr Martin’s wife, Janine Beverley Martin (“Mrs Martin”) who is the fourth defendant. Mrs Martin was also an employee of the Renniks Group. The third defendant, Music Men (Aust) Pty Ltd is a company controlled by Mr and Mrs Martin. It has no relevance for the purposes of this appeal. The Shareholder’s Agreement On 16 January 2004, the day on which Mr Martin was employed by the Renniks Group, an agreement was entered into between the three companies in the original Renniks Group, Ceneavenue, Gillmar and Mr Martin. The agreement is called “the Shareholder’s Agreement”. It is alleged that, although dated 16 January 2004, it was not executed until July 2004. It is said that in that period the parties were negotiating the terms of the agreement. The Shareholder’s Agreement defines the three companies in the original Renniks Group as “the Companies”. Among other things, the Shareholder’s Agreement provides for the sale of 25 per cent of the shares of the companies in the original Renniks Group to Gillmar for a price of $1,137,500. The parties agreed that the whole of the purchase price together with stamp duty on the transaction was to be advanced by Ceneavenue to Gillmar by an interest free loan. The agreement contemplated that the loan would be repaid by deductions from dividends payable to Gillmar upon the shares in the companies.

Ratio Decidendi

Legal Principle Established

Established by: ANDERSON J

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