MMAL Rentals Pty Ltd v Bruning

Case [2004] NSWCA 451

Reported Decision:

 63 NSWLR 167

Court of Appeal


CITATION: MMAL Rentals Pty Limited (ACN 008 293 490) & Ors v Bernard John BRUNING [2004] NSWCA 451
HEARING DATE(S): 27 & 28 September 2004
JUDGMENT DATE:
9 December 2004
JUDGMENT OF: Spigelman CJ at 1; Mason P at 226; Hodgson JA at 227
DECISION: Appeal dismissed; cross appeal allowed.
CATCHWORDS: CONTRACT - Meaning of "fair market value" - Share valuation - Use that may be made of evidence of an offer in a valuation exercise - Whether special potentiality or special value to one purchaser may be taken into account - Whether minority discount should apply - Whether minority shares have a 'greenmail' value - INDUSTRIAL LAW - Unfair contract - Jurisdiction under s106 - Relationship between s106 and oppression - Remuneration of managing director linked to share agreement - Disparity between expected financial benefit and benefit actually received
LEGISLATION CITED: Trade Practices Act 1974
Corporations Act 2000
Industrial Relations Act 1996
Jurisdiction of Courts (Cross Vesting) Act 1987
CASES CITED: Blefari v The Minister (1962) 8 LGRA 1
Boland v Yates Property Corporation Pty Ltd [1999] HCA 64, (1999) 74 ALJR 209
Brett Lees Norager v Charles Norager & Son Ltd (1999) NZCA 255
Bruning v Kingmill (Australia) Pty Limited (1988) 44 NSWLR 180
Caldwell v Minister of Transportation and Communications (1982) 23 LCR 286
Capricorn Diamonds Investments Pty Ltd v Catto [2002] VSC 105, (2002) 5 VR 61
Cattanach v Water Conservation and Irrigation Commission [1963] NSWR 304
Chen v Karandonis [2002] NSWCA 412
Commonwealth v Reeve (1949) 78 CLR 410
Coombs v Dynasty Pty Ltd (1994) 14 ACSR 60
Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd [2004] FCAFC 48
E S Gordon Pty Ltd v Idameneo (No 123) Pty Ltd (1994) 15 ACSR 536
Freestone v Parramatta City Council (1974) 34 LGERA 35
Gambotto v WCP Ltd [1995] HCA 12, (1995) 182 CLR 432
Geita Sebea v Territory of Papua (1941) 67 CLR 544
Goold & Rootsey v The Commonwealth (1993) 42 FCR 51
Gregory v Commissioner of Taxation (Cth) (1971) 123 CLR 547
Harris v Municipal Council of Sydney (1910) 10 SR (NSW) 860
Henderson v Armadio Pty Ltd (No 1) (1995) 62 FCR 1
Holt v Cox (1994) 15 ACSR 313
Hustlers Pty Ltd & Robert Reid Pty Ltd v Valuer General [1967] 2 NSWR 760, [1967] 4 LGRA 269
In the Marriage of Dah and J E Hull (1983) 9 FamLR 241
In the Marriage of K D and P A Reynolds (1984) 10 FamLR 388
Inland Revenue Commission v Clay [1914] 1 KB 339
Inland Revenue Commission v Clay [1914] 3 KB 466
James Patrick & Co Pty Ltd v Minister of State for the Navy (1944) Argus Law Reports 254
Marcus Clark and Co Ltd v Commissioner for Railways (1949) 29 LVR 98
Marks v GIO Australia Holdings Ltd [1998] HCA 69, (1998) 196 CLR 494
McDonald v Deputy Federal Commissioner of Land Tax for…

Continue reading MMAL Rentals Pty Ltd v Bruning

Sign in free to access the full text

Details
AGLC
MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451
Case
[2004] NSWCA 451
Decision Date

CaseChat Overview and Summary

MMAL Rentals Pty Ltd (the appellant) appealed to the Court of Appeal of New South Wales against orders made by the primary judge concerning the valuation of shares in MMAL Holdings Pty Ltd. The dispute arose from a share sale agreement between the appellant and Mr Bruning (the respondent), which stipulated that the shares would be valued at "fair market value" at a particular date. The primary judge had determined this valuation, and the appellant sought to overturn this decision.

The Court of Appeal was required to determine several key legal issues. These included the proper interpretation of "fair market value" in the context of a share valuation, specifically whether evidence of an offer to purchase the shares could be considered in the valuation exercise. Furthermore, the court had to consider whether a "special potentiality" or "special value" to a particular purchaser could be taken into account, and whether a minority discount should be applied to the shares, including whether minority shares possess a "greenmail" value. The court also considered the application of s 106 of the *Industrial Relations Act 1996* (NSW) regarding unfair contracts, and its relationship with oppression claims, particularly in relation to the remuneration of a managing director linked to the share agreement and the disparity between expected and actual financial benefits received.

The Court of Appeal reasoned that the primary judge had erred in their approach to the valuation of the shares. The court clarified that "fair market value" should be assessed on the basis of what a willing but not anxious purchaser would pay to a willing but not anxious vendor, considering all relevant factors. The court held that while evidence of an offer could be relevant, it should not be determinative and must be considered in light of the overall valuation. The court also found that the primary judge had incorrectly applied a minority discount, stating that such a discount should not be applied in circumstances where the shares had a specific value to the vendor, and that the concept of "greenmail" was not applicable in this context. The court further addressed the application of s 106 of the *Industrial Relations Act 1996* (NSW), finding that the primary judge had not properly considered the scope of this provision in relation to the share agreement.

Consequently, the Court of Appeal set aside the orders made by the primary judge on 3 March 2004.

Orders

Orders of the court

1. Set aside orders 1 and 2 made on 3 March 2004

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.