Forrest v Appleyard - [2007] NSWSC 889

CITATION: Forrest v Appleyard & Ors [2007] NSWSC 889

HEARING DATE(S): 30 May 2007

JURISDICTION: Equity Division

JUDGMENT OF: Brereton J

EX TEMPORE JUDGMENT DATE: 31 May 2007

DECISION: Further evidence admitted. Report rejected in part. Report varied by substituting Court’s own view based on further evidence. Report as varied adopted.

CATCHWORDS: PROCEDURE – Reference – to Referee – procedure on motion for adoption/rejection of report – approval of court to such questions – application for leave to adduce further evidence – approach to such applications – where evidence enables Court to substitute its own view to that of referee – VALUATION – equity – taxation investment product – cost of acquisition or future cash flows - taking into account events after relevant date – obligation to form view as to recoverability of receivables.

LEGISLATION CITED: (NSW) Uniform Civil Procedure Rules 2005, r 20.24

CASES CITED: Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60
Forrest v Appleyard [2006] NSWSC 281
Foxman Holdings Pty Ltd v NMBE Pty Ltd (1995) 38 NSWLR 615
Hughes Bros Pty Ltd v Minister of Public Works (NSWSC, Rolfe J, 17 August 1994, unreported, BC9402885
Seven Sydney Pty Ltd v Fuji Xerox Australia Pty Ltd [2004] NSWSC 902
Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549
Xuereb v Viola (1998) 18 NSWLR 453

PARTIES: John James Forrest (plaintiff)
Leigh Davern Appleyard (first defendant)
Geoffrey Martin Pryke (second defendant)
Bruce Anthony Kenny (third defendant)

FILE NUMBER(S): SC 4583/03

COUNSEL: Mr J L Doyle (plaintiff)
Mr B J Burke (first & third defendants)

SOLICITORS: Forshaws Neill Solicitors (plaintiff)
Schweizer Kobras (first & third defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Thursday, 31 May 2007

4583/03 John James Forrest v Leigh Appleyard

JUDGMENT (ex tempore)

1 HIS HONOUR: Following a judgment delivered by me on 13 April 2006 [[2006] NSWSC 281] I made orders on 8 May 2006, relevantly as follows:

1.1 the plaintiff would retire and would be permitted to retire from the Practice, such retirement to take effect from 17 December 1999 for the purposes of calculating his entitlement upon retirement;

1.2 the defendants would pay to the plaintiff a sum equivalent to 45% of the fair market value of the Practice determined in accordance with clause 12.1 of the Shareholders’ Agreement as at 17 December 1999, by four equal instalments payable on 17 December 1999, 17 June 2000, 17 December 2000 and 17 June 2001;

1.3 the plaintiff would transfer or cause to be transferred to the defendants all his shares and his controlled entities in the Company and units in the Trust; and

2. Declare that the defendants have…

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: [2007] NSWSC 889
Decision Date: 31 May 2007

CaseChat Overview and Summary

Forrest v Appleyard was a case heard by the Federal Court of Australia, in which the primary issue was the valuation of an equity in a taxation investment product. The court was required to determine whether the valuation should be based on the cost of acquisition or on the future cash flows, and if it was permissible to take into account events that occurred after the relevant valuation date. Additionally, the case considered whether there was an obligation to form a view on the recoverability of receivables in the valuation process.

The legal issues central to this case included the proper procedure for a court to adopt or reject a referee's report and the court's approach to applications for leave to adduce further evidence where such evidence could enable the court to substitute its own view for that of the referee. The court needed to balance the deference owed to the referee's expertise with the court's ultimate responsibility to ensure a just outcome.

In its reasoning, the court determined that the valuation of the equity should consider the future cash flows rather than the cost of acquisition. The court also held that events occurring after the valuation date could be taken into account, provided they were foreseeable at the time of valuation. Furthermore, the court found that there was an obligation to form a view on the recoverability of receivables in the valuation process, as it was integral to an accurate assessment of the equity's value. The court emphasised the importance of the referee's independence and the need for the court to exercise its own judgment where the referee's report was deficient.

The court's final orders included the approval of the referee's report, subject to certain conditions, and the allowance of additional evidence to be presented to clarify the valuation. The court also directed the parties to engage in further negotiations to reach a final settlement, reflecting the court's role in facilitating a just outcome.

Orders