Re SRW Nominees Pty Ltd (No 2) - [2020] VSC 323

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2017 00223

In the matter of SRW NOMINEES PTY LTD

BETWEEN:

LAURIENT HOLDINGS PTY LTD (ATF THE MICHAEL REINER FAMILY TRUST) AND MICHAEL JASON REINER	Plaintiffs
v
SOFTPRO AUSTRALIA PTY LTD (IN ITS OWN RIGHT AND ATF THE WAJSMAN DISCRETIONARY TRUST), BEN WAJSMAN AND SHAGIL PTY LTD	Defendants

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JUDGE:	Robson J
WHERE HELD:	Melbourne
DATES OF HEARING:	28, 29 and 30 January 2020
DATE OF JUDGMENT:	5 June 2020
CASE MAY BE CITED AS:	Re SRW Nominees Pty Ltd (No 2)
MEDIUM NEUTRAL CITATION:	[2020] VSC 323

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CORPORATIONS – Oppression proceedings under s 232 of the Corporations Act 2001 (Cth) – Defendants held to have oppressed the plaintiffs – Order in the proceeding that the defendants buy the plaintiffs’ shares in the Corporations conducted by the parties and the defendants pay compensation for profits not distributed to the plaintiffs by the defendants and interest on the profits withheld – Competing expert evidence on valuation of the Corporations – Resolution of issues – Orders made.

CORPORATIONS – Oppression proceedings – Consideration of authorities on principles to be applied when valuing an oppressed shareholder’s shares for the purpose of ordering the oppressor to purchase the oppressed shareholder’s shareholding – Including E S Gordon Pty Ltd v Idameneo (No 123) Pty Ltd (1994) 15 ACSR 536 and Dynasty Pty Ltd v Coombs (1995) 59 FCR 122.

INTEREST – Whether moneys payable under s 233 of the Corporations Act 1986 falls within ss 58 or 60 of the Supreme Court Act1986 – Victorian WorkCover Authority v Esso Australia Ltd (2001) 207 CLR 520 and Re Adaz Nominees Pty Ltd (No 6) [2019] VSC 14 applied.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr M Grady	Coterminous Legal
For the Defendants	Mr CM Archibald QC with Ms SM Hooper	Arnold Bloch Leibler

TABLE OF CONTENTS

Introduction.......................................................................................................................... 1
Hearing in January 2020..................................................................................................... 4
Applicable law..................................................................................................................... 5
Share value........................................................................................................................... 7
Valuation of SRW................................................................................................................ 8
Issue 1:What capitalisation rate should be applied to maintainable earnings of SRW to arrive at the enterprise value of SRW?..................................................................... 8
Issue 2:What adjustments (if any) should be made to the management fees paid to Mr Wajsman by SRW in FY2017 and FY2018?............................................................ 20
Issue 2A:What adjustments (if any) should be made to the vehicle expenses paid to or on behalf of Mr Wajsman in FY2017 and FY2018?.................................................... 23
Issue 3:What adjustments (if any) should be made to allow for the cost of an operations manager to be employed by SRW going forward?.............................................. 24
Issue 4:Should the rent paid by SRW to Wickham Commercial Properties for the use of the factory be adjusted to reflect market rent, in the manner so adjusted by Mr Jackson?...................................................................................................................................... 24
Issue 5:Which (if any) of the remaining disputed add-backs, being those set out in Schedule 3, should be made to EBITDA of SRW?................................................................. 25
Issue 5:IT fees................................................................................................................... 29
Issue 6:Should the ‘Net Related Party Loans’ be…

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: [2020] VSC 323
Decision Date: 5 June 2020

CaseChat Overview and Summary

The case of Re SRW Nominees Pty Ltd (No 2) involved proceedings for oppression under section 232 of the Corporations Act 2001. The plaintiffs, who were shareholders, brought the action against the defendants, who were also shareholders, alleging oppression. The proceedings were heard in the Supreme Court of Victoria. The plaintiffs sought an order for the defendants to purchase their shares, along with compensation for profits not distributed and interest on those profits.

The court needed to address several legal issues, including the appropriate valuation of the plaintiffs' shares for the purpose of the buy-out, and the calculation of interest on the withheld profits. The court considered previous cases such as E S Gordon Pty Ltd v Idameneo (No 123) Pty Ltd and Dynasty Pty Ltd v Coombs, which provided guidance on valuing shares in oppression proceedings. Additionally, the court had to determine whether the interest payable under section 233 of the Corporations Act fell within sections 58 or 60 of the Supreme Court Act 1986.

The court resolved these issues by examining expert evidence on the valuation of the corporation and the profits withheld. The court found that the defendants had indeed oppressed the plaintiffs. The court ordered the defendants to purchase the plaintiffs' shares and to pay compensation for the profits not distributed, along with interest. The court also considered the appropriate rate of interest, applying precedents from Victorian WorkCover Authority v Esso Australia Ltd and Re Adaz Nominees Pty Ltd (No 6). The court concluded that the interest should be calculated in accordance with section 60 of the Supreme Court Act 1986.

The final orders included the defendants purchasing the plaintiffs' shares at a value determined by the court, and the payment of compensation and interest as calculated. The court provided detailed reasoning for the valuation and interest calculation, ensuring that the orders were just and equitable in the circumstances.

Orders