Halkett v APG & Co Pty Ltd - [2023] NSWSC 1058

Supreme Court

New South Wales

Medium Neutral Citation: Halkett v APG & Co Pty Ltd [2023] NSWSC 1058
Hearing dates: 28 July 2023
Date of orders: 6 September 2023
Decision date: 06 September 2023
Jurisdiction: Equity - Commercial List
Before: Rees J
Decision:
Summons dismissed with costs.

Catchwords:
CONTRACT — chief executive officer owns 5% of employer’s shares — employer operates 200 retail fashion stores – COVID-19 lockdowns close stores –foreign exchange hedge book sold – employer receives ‘windfall’ JobKeeper payments – CEO resigns — employer entitled to buyback shares for “Fair Market Value” calculated by contractual formula “after accounting for abnormal or extraordinary items” – employer to “act reasonably” and in “good faith” — construction of contract — no pleaded allegation that calculation did not meet required standard of performance under contract — matter of judgment.
WORDS AND PHRASES — “after accounting for” — abnormal items — extraordinary items.

Cases Cited:
Australian Broadcasting Commission v Australian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
LCA Marrickville Pty Ltd v Swiss Re International Se [2022] FCAFC 17; (2022) 290 FCR 435
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35
Republic of Turkey v Mackie Pty Ltd [2019] VSC 103
Sugar Australia Pty Ltd v Lendlease Services Pty Ltd [2015] VSCA 98
Swiss Re International Se v LCA Marrickville Pty Ltd (Second COVID-19 insurance test cases) [2021] FCA 1206; (2021) 394 ALR 461
Walton v Illawarra [2011] NSWSC 1188
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17

Category: Principal judgment
Parties: Peter Halkett (Plaintiff)
APG & Co Pty Ltd (First Defendant)
Sports Fashions Group Pty Ltd (Second Defendant)
Representation:
Counsel:
Mr M Elliott SC / Mr B Goodyear (Plaintiff)
Mr P Braham SC / Mr S Gray (Defendants)
Solicitors:
Norton Rose Fulbright (Plaintiff)
W Advisers Pty Ltd (Defendants)

File Number(s): 2022/157217

JUDGMENT

HER HONOUR: The first defendant, APG & Co Pty Ltd, operates 200 retail stores across Australia, selling fashion under brands including Sportscraft, Saba and Jag. The plaintiff, Peter Halkett, was the chief executive officer and executive chairman and held 5% of the defendants’ shares and units (securities) under the terms of an Equityholders Agreement.
In March 2020, APG’s stores were closed as part of the “lockdowns” imposed by government in response to the COVID-19 pandemic. APG began to receive JobKeeper payments. In June 2020, Mr Halkett resigned. The defendants were entitled to buy back Mr Halkett’s securities for “Fair Market Value” calculated in accordance with a formula set out in Schedule 1 to the Equityholders Agreement: see [44]. The parties are $2.1 million apart as to what that figure should be: the plaintiff contends for $3,579,465 while the defendants say the figure is $1,395,299.44. The differences largely arise from how the effect of the COVID-19 pandemic on APG’s business should be treated.
The plaintiff relied on…

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.

Keep reading for free

Create a free CaseChat account to read Halkett v APG & Co Pty Ltd and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2023] NSWSC 1058
Decision Date: 06 September 2023

CaseChat Overview and Summary

In the matter of Halkett v APG & Co Pty Ltd, the dispute arose between the former chief executive officer of APG & Co Pty Ltd, who owned a 5% stake in the company, and the employer itself, an entity operating 200 retail fashion stores. The conflict emerged following a series of events, including the closure of stores due to COVID-19 lockdowns, the sale of the employer’s foreign exchange hedge book, and the employer's receipt of substantial JobKeeper payments. The former CEO resigned and contested the employer’s right to repurchase his shares based on the "Fair Market Value" as calculated by a contractual formula. The formula required the employer to account for "abnormal or extraordinary items," and the employer had to act reasonably and in good faith when determining this value. The crux of the matter was whether the employer's calculation met the contractual standards and exercised its judgment appropriately.

The legal issues before the court centred on the interpretation and application of the contractual formula for calculating the "Fair Market Value" of the shares. Specifically, the court had to determine whether the employer's calculation, which included adjustments for abnormal or extraordinary items, complied with the contractual requirements and whether the employer acted reasonably and in good faith. The court also had to assess if there was any procedural or substantive unfairness in the employer's approach to determining the share buyback price.

The court held that the employer's calculation of the "Fair Market Value" was not subject to challenge as there were no allegations that it did not meet the contractual standard of performance. The employer had exercised its judgment in determining the value, and this was a matter within their contractual discretion. The court found that the employer acted reasonably and in good faith, and the determination of the share buyback price was within the bounds of the contractual provisions. The judge concluded that the employer had fulfilled its obligations under the contract, and the CEO's claim was accordingly dismissed.

The court ordered that the former CEO's claim against APG & Co Pty Ltd be dismissed, with each party to bear their own costs of the proceedings. The employer was thus entitled to repurchase the shares at the calculated "Fair Market Value" as determined in accordance with the contractual formula.

Orders