Hosking v Ipex Software Services Pty Ltd - [2004] VSC 299

IN THE SUPREME COURT OF VICTORIA Not Restricted
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 2024 of 1997

MARK HOSKING Plaintiff

v

IPEX SOFTWARE SERVICES PTY LTD
(ACN 056 165 309) AND OTHERS
Defendants

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JUDGE:

HABERSBERGER J.

WHERE HELD:

MELBOURNE

DATE OF HEARING:

25-27 February; 3-6, 12, 13, 19, 20, 24 March 2003;
9 February and 28 May 2004

DATE OF JUDGMENT:

25 August 2004

CASE MAY BE CITED AS:

Hosking v Ipex Software Services Pty Ltd

MEDIUM NEUTRAL CITATION:

[2004] VSC 299

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CONTRACT – Assessment of damages for breach of agreement to give plaintiff 5% of the equity in a group of companies and unit trusts – Meaning of entitlement – Proof of plaintiff's claim – Admissibility of expert's report – Capitalisation of future maintainable earnings – Relevant factors.
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APPEARANCES:
Counsel Solicitors

For the Plaintiff
Mrs S.M. Crennan QC with

Mr J.A. Riordan and

Mr C.J. Horan

9 February and 28 May 2004:
Mr C.M. Scerri QC with
Mr C.J. Horan
Vadarlis & Associates

For the Defendants
Mr J.W.K. Burnside QC with

Mr J.P. Carney

28 May 2004:
Mr J.W.K. Burnside QC with
Mr J.D.S. Barber
Arnold Bloch Leibler
TABLE OF CONTENTS
The History of the Proceeding......................................................................................................... 1
The Hearing......................................................................................................................................... 6
The Meaning of the Plaintiff's Entitlement to Five Per Cent of the Equity in the Ipex Group 7
Did The Plaintiff Make Out His Claim For Damages?............................................................. 19
Five Per Cent of the Profits............................................................................................................. 21
Five Per Cent of the Capital Reserve Distribution.................................................................... 24
Calculation of the Plaintiff's Claim for Damages...................................................................... 25
The Date of Assessment of the Damages..................................................................................... 26
The Ipex Group................................................................................................................................ 29
The Evidence of Mr Joel Schwalb................................................................................................. 31
The Evidence of Mr Jonathan Sheiman....................................................................................... 38
The Valuations.................................................................................................................................. 39
Mr Michael Shulman....................................................................................................................... 39
Mr Michael Churchill...................................................................................................................... 49
Mr Marcus Rose................................................................................................................................ 51
Mr Craig Edwards............................................................................................................................ 54
Ms June Wilson................................................................................................................................ 58
Valuation of Mr Hosking's 5% Interest........................................................................................ 62
Number of Past Years Taken into Account................................................................................. 63
Service Contract Revenue............................................................................................................... 67
Other Adjustments to Earnings..................................................................................................... 71
(i) Amortisation of Intellectual Property................................................................................. 73
(ii) Provision for Long Service Leave....................................................................................... 73
(iii) Salary at Commercial Rate................................................................................................. 73
(iv) Legal Costs............................................................................................................................ 74
The Use of Results from the 2003 Financial Year....................................................................... 74
The Multiple to be Applied........................................................................................................... 79
Discount for Minority Interest....................................................................................................... 84
Calculation of the Plaintiff's 5% Equity in the Ipex Group..................................................... 87
Orders................................................................................................................................................. 88
HIS HONOUR:
The History of the Proceeding

1 The plaintiff's claim in this proceeding was for damages for breach of an agreement made with the first to sixth defendants ("the Ipex Group", "Ipex" or "the Group"). After a trial on liability only in August 1998, Hansen J found in favour of the plaintiff, Mr Mark Hosking, on 24 February 1999.[1] The factual background, which I do not propose to repeat, is set out in his Honour's detailed reasons for judgment. However, it is necessary to refer to the agreement and, although it is quite lengthy, I will set out its terms virtually in full.
[1][1999] VSC 28

2 The agreement…

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 Hosking v Ipex Software Services Pty Ltd

Details

AGLC: Hosking v Ipex Software Services Pty Ltd [2004] VSC 299
Case: [2004] VSC 299
Decision Date: 25 August 2004

CaseChat Overview and Summary

The case of Hosking v Ipex Software Services Pty Ltd involved a dispute between two parties, Hosking and Ipex Software Services, regarding the assessment of damages for a breach of contract. The agreement in question provided Hosking with a 5% entitlement of the equity in a group of companies and unit trusts. The matter was heard in the Supreme Court of Victoria. The primary focus of the case was to determine the appropriate measure of damages for the breach of the contractual agreement and to establish the admissibility of an expert's report in this context.

The court needed to address several legal issues, including the meaning of the term "entitlement" in the agreement, the method for proving the plaintiff's claim for damages, and the admissibility of the expert's report. Additionally, the court had to consider the appropriate factors for capitalising future maintainable earnings to assess the damages. The court examined whether the expert's report was relevant and reliable in determining the value of the plaintiff's lost entitlement.

In its decision, the court held that the term "entitlement" in the agreement referred to the right to receive a share of the equity in the specified assets. The court further determined that the expert's report was admissible and relevant in assessing the value of the plaintiff's lost entitlement. The court outlined the relevant factors for capitalising future maintainable earnings, which included the expected rate of return, the risk associated with the investment, and the nature of the assets. Ultimately, the court found in favour of the plaintiff and awarded damages based on the expert's report, which took into account the lost equity and future earnings potential.

The court ordered that the defendant, Ipex Software Services, pay the plaintiff, Hosking, damages in the amount determined by the expert's report, along with interest and costs. The decision clarified the legal framework for assessing damages in similar contractual disputes and reinforced the importance of expert evidence in determining the value of lost entitlements.

Orders