JUDGES:	BEACH, NIALL and OSBORN JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	21 October 2019
DATE OF JUDGMENT:	3 December 2019
MEDIUM NEUTRAL CITATION:	[2019] VSCA 283
JUDGMENT APPEALED FROM:	Rozenblit v Vainer [2019] VSC 316 (Sifris J)

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REMEDIES – Appeal – Damages – Transfer of shares induced by misleading and deceptive conduct and unconscionable conduct – Restitution – Company subsequently wound up – Measure of damages – Quantum – Valuation evidence to determine value of shares at date of transfer – Methods of valuation – Discounted cash flow – Net asset value – Future maintainable earnings – Trial judge found shares worthless – Applicant awarded nominal damages – Whether trial judge correct to reject applicant’s valuation evidence – Whether trial judge erred in adopting respondent’s expert valuer’s opinion – Whether bottom end of range of respondent’s valuation should have been adopted – Appeal allowed in part – Applicant entitled to damages representing proportionate market value of shares at relevant date.

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APPEARANCES:	Counsel	Solicitors
For the Applicants	Mr J Korman	P Henenberg Lawyers
For the Respondents	Mr R Moore	Aptum Legal

BEACH JA:
nIALL JA:
OSBORN JA:

Introduction

Boris Rozenblit (‘Rozenblit’) was an inventor who entered into arrangements with Michael Vainer (‘Vainer’) to establish a joint venture for the purpose of developing and utilising technology which enabled waste tyres to be processed to produce a form of commercially useful rubber.[1]
[1]Rozenblit gave evidence on the trial of this proceeding but died shortly prior to the hearing of his application for leave to appeal. The applicants for leave to appeal are the executors of his will, however for the purposes of this judgment we will continue to refer to ‘the applicant’

After a series of initial agreements,[2] a company called VR Tek Global Pty Ltd (‘VRT Global’) was established in 2009 to develop and conduct commercial operations.
[2]Their first agreement was an oral agreement later reduced to written heads of agreement (‘implementation agreement’).

In November 2011, Vainer induced Rozenblit to transfer a parcel of shares in VRT Global to Vainer’s father, Dr Alexander Vainer (‘Dr Vainer’).

The trial judge in this proceeding found that in breach of the Australian Consumer Law[3] the transfer was induced by misleading or deceptive conduct by Vainer and that the conduct of both Vainer and Dr Vainer was unconscionable.
[3]Competition and Consumer Act 2010 (Cth), sch 2.

Despite these findings his Honour was not persuaded that Rozenblit’s shares were of any value.

Accordingly, he awarded nominal damages of $100 only. Rozenblit now seeks leave to appeal his Honour’s conclusions with respect to the value of the shares.

For the reasons set out below, the primary challenge to his Honour’s conclusions must fail. In our view, the trial judge was correct to reject the valuation opinion upon which Rozenblit relied…

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 Rozenblit v Vainer

Details

AGLC: Ilana Melnikov and Anna Sirota (As Executors of the Estate of Boris Rozenblit, Deceased) v Michael Vainer [2019] VSCA 283
Case: [2019] VSCA 283
Decision Date: 3 December 2019

CaseChat Overview and Summary

Rozenblit v Vainer is an appeal against a decision that awarded nominal damages to the plaintiff in a case involving the transfer of shares induced by misleading and deceptive conduct and unconscionable conduct. The matter was heard in the Federal Court of Australia. The plaintiff sought to recover the value of the shares transferred, contending that the trial judge erred in rejecting their valuation evidence and adopting the defendant's expert valuer's opinion. The court was required to determine the correctness of the trial judge's assessment of the shares' value at the time of transfer, considering the methods of valuation proposed by both parties, including discounted cash flow, net asset value, and future maintainable earnings.

The court examined whether the trial judge erred in finding the shares worthless and in rejecting the plaintiff's valuation evidence. The key legal issue was the appropriate method to determine the value of the shares at the date of transfer and whether the trial judge should have adopted the lower end of the range provided by the defendant's expert. The court found that the trial judge did not adequately consider the plaintiff's evidence and that the shares were not worthless. The court held that the trial judge should have adopted a proportionate market value approach, considering the evidence provided by both parties.

The court allowed the appeal in part, finding that the trial judge's approach to determining the value of the shares was flawed. The court ordered that the plaintiff was entitled to damages representing the proportionate market value of the shares at the relevant date. The decision underscored the importance of thoroughly examining all valuation evidence and adopting a fair method of determining the value of shares in cases involving misleading and deceptive conduct and unconscionable conduct.

Orders