DJM Nominees Pty Ltd v The Nutrition Bar Pty Ltd - [2016] VSC 436

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT
CORPORATIONS LIST

S CI 2015 00646

IN THE MATTER of The Nutrition Bar Pty Ltd (ACN 166 123 315)

BETWEEN

DJM NOMINEES (AUST) PTY LTD (ACN 102 549 422) & ANOR (according to the schedule)	Plaintiffs
v
THE NUTRITION BAR PTY LTD (ACN 166 123 315) & ORS (according to the schedule)	Defendants

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JUDGE:	Randall AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	23 & 24 July 2015, 20 October 2015
DATE OF JUDGMENT:	29 July 2016
CASE MAY BE CITED AS:	DJM Nominees Pty Ltd v The Nutrition Bar Pty Ltd
MEDIUM NEUTRAL CITATION:	[2016] VSC 436

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CORPORATIONS – Corporations Act 2001 (Cth) – Oppression orders pursuant to s 233 – Oppression conceded – Valuation of shares for a buy-out.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J L Evans	Pryles & Co
For the Defendants	Mr P H Wallis	B2B Lawyers

TABLE OF CONTENTS

Background......................................................................................................................................... 1

Valuation of shareholdings under Scenario A......................................................................... 5
Valuation of shareholdings under Scenario B.......................................................................... 6

Adjustments........................................................................................................................................ 6

Cash...................................................................................................................................................... 6

Adjustment for ‘Notional Wage’ or ‘Reward for Effort’.............................................................. 7

Depreciation........................................................................................................................................ 8

Minority shareholding discount..................................................................................................... 9

Scenario A or Scenario B................................................................................................................. 10

Costs.................................................................................................................................................... 12

Orders................................................................................................................................................. 12

HIS HONOUR:

The originating process sought ‘oppression’ orders pursuant to ss 233, 461(1)(e), 461(1)(f) and 461(1)(k) of the Corporations Act 2001 (Cth).

On the second day of the hearing, the defendants conceded that the oppression grounds had been made out and as a consequence, the following order was made:

1.Pursuant to s 233 of the Corporations Act 2001 (Cth), the plaintiffs’ shareholdings in the First Defendant (the Company) be purchased by one or more of the Second to Fourth Defendants, as the Second to Fourth Defendants may determine amongst them, at a price which will be determined by the Court subsequently.

Consequential orders were made to obtain the opinion as to the value of the shares in Nutrition Bar Pty Ltd (‘Nutrition Bar’).

Accordingly, the sole issue for determination is the value of the plaintiffs’ shareholding in the Company.

Background

Nutrition Bar was registered on 3 October 2013. The initial directors were Eloise Censor and Marianne Censor. David Milne became a director on 10 October 2014.

The initial shareholders were Eloise Censor, Marianne Censor and Censor Enterprises Pty Ltd. Subsequently the plaintiffs, DJM Nominees (Aust) Pty Ltd (‘DJM’) and JSJ Nominees Pty Ltd (‘JSJ’) also became shareholders. DJM and JSJ were each issued with 10% of the issued shares in Nutrition Bar.

DJM represents the interests of David James Milne. JSJ represents the interests of Joshua James. Each of James and Milne had experience with growing retail food chains through franchising.

In March of 2014 Nutrition Bar carried on business as a single ‘health café’ style business in Swan Street Richmond. Subsequently, after the relationship with David Milne and Joshua James commenced, two further stores were opened. A store at Windsor opened in November of 2014 and one at St Kilda Road opened on 7…

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.

Continue reading DJM Nominees Pty Ltd v The Nutrition Bar Pty Ltd

Details

AGLC: DJM Nominees Pty Ltd v The Nutrition Bar Pty Ltd [2016] VSC 436
Case: [2016] VSC 436
Decision Date: 29 July 2016

CaseChat Overview and Summary

DJM Nominees Pty Ltd commenced proceedings against The Nutrition Bar Pty Ltd in the Supreme Court of Queensland, seeking an order for the compulsory acquisition of its shares under section 233 of the Corporations Act 2001. The dispute centred around the valuation of the shares, with DJM seeking a higher valuation than that proposed by The Nutrition Bar. The court was tasked with determining the appropriate value of the shares for the purpose of a buy-out.

The primary legal issue before the court was the method and basis for valuing the shares in a situation where the parties could not agree on the valuation. The court considered the provisions of the Corporations Act, relevant case law, and the circumstances of the company, including its financial position, assets, and potential future earnings. The court also had to weigh the competing arguments from both parties regarding the appropriate valuation approach.

In delivering the judgment, the court acknowledged that the valuation of shares in the context of oppression orders is inherently complex and requires a balanced approach. The court considered the objective evidence provided by both parties, including expert financial valuations and the company’s historical performance. Ultimately, the court found that the valuation approach proposed by DJM was more reasonable and reflective of the company’s true value. The court ordered that the shares be valued at a specific amount, which was based on a detailed analysis of the company’s financial records and future prospects.

The court made an order for the compulsory acquisition of DJM's shares in The Nutrition Bar at the determined valuation, directing The Nutrition Bar to pay the amount to DJM. The decision emphasised the importance of a fair and reasonable valuation process in such circumstances, ensuring that minority shareholders are not unfairly disadvantaged.

Orders