Searson v Salmon

Case [2014] FCA 748

FEDERAL COURT OF AUSTRALIA

Searson v Salmon [2014] FCA 748

Citation: Searson v Salmon [2014] FCA 748
Parties: DAVID STANLEY SEARSON and KARILLA HOLDINGS PTY LTD (ACN 125 482 966) v CHRISTOPHER JOHN SALMON & ORS (ACCORDING TO THE SCHEDULE)
File number: NSD 1584 of 2013
Judge: RARES J
Date of judgment: 14 May 2014
Legislation: Australian Securities and Investments Commission Act 2001 (Cth)
Corporations Act 2001 (Cth)
Evidence Act 1995 (Cth)
Federal Court Rules 2011 (Cth)
Cases cited: Australian Competition and Consumer Commission v dataline.net.au Pty Ltd (2006) 236 ALR 665 applied
Yeo v Damos Earthmoving Pty Ltd;  in the matter of Beachwood Developments Pty Ltd (in liq) [2011] FCA 1129 applied
Sanko Steamship Co Ltd v Australia Gloria Energy Group Pty Ltd [2012] FCA 798 applied
Calderbank v Calderbank [1976] Fam 93 referred to
Ariix LLC v Mahilall (No 2) [2014] FCA 494 applied
Hamod v The State of New South Wales [2011] NSWCA 375 applied
Sony Entertainment (Australia) v Smith (2005) 215 ALR 788 referred to
Nine Films & Television Pty Limited v Ninox Television Limited [2006] FCA 1046 referred to
Avetmiss Easy Pty Ltd v Australian Skills Qualifications Authority (No 2) [2014] FCA 444 referred to
Date of hearing: 14 May 2014
Place: Sydney
Division: GENERAL DIVISION
Category: No catchwords
Number of paragraphs: 44
Counsel for the First Applicant: Mr R Dalgleish
Solicitor for the First Applicant: Mr Mark C Hennessy
Counsel for the Fourth, Fifth and Sixth Respondents: Ms S Furlonger
Solicitor for the Fourth, Fifth and Sixth Respondents: Colin Biggers & Paisley

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1584 of 2013
BETWEEN:

DAVID STANLEY SEARSON
First Applicant

KARILLA HOLDINGS PTY LTD (ACN 125 482 966)
Second Applicant
AND:

CHRISTOPHER JOHN SALMON & ORS (ACCORDING TO THE SCHEDULE)
Respondents

JUDGE:

RARES J

DATE OF ORDER:

14 MAY 2014

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Order 2 made on 17 April 2014 be set aside and in lieu thereof order with effect from 15 May 2014 that:

“1.On or before 12:00 pm of 12 June 2014, the fourth and fifth respondents purchase the 250,000 shares held by the second applicant in the fourth respondent by paying the applicant the sum, being their fair price, of $398,241, together with interest of $29,353 calculated for the period between 8 April 2013 and 15 May 2014.

2.On or before 12:00 pm of 12 June 2014, the sixth respondent, as trustee of YPP Property Trust, redeem the 250,000 units held by the second applicant in YPP Property Trust at the sum, being their fair price, of $257,318, together with interest of $13,561 calculated for the period between 29 July 2013 to 15 May 2014.

3.On or before 12:00 pm of 12 June 2014, the sixth respondent pay the second applicant the sum of $14,288.82, together with interest of $795.36 calculated for the period between 11 July 2013 to 15 May 2014.

4.In the event that any of the sums is not…

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AGLC
Searson v Salmon [2014] FCA 748
Case
[2014] FCA 748
Decision Date

CaseChat Overview and Summary

The case of Searson v Salmon was heard by the Federal Court of Australia, which was required to adjudicate on the fair value of shares and units held by the applicants in two separate entities. The applicants sought a determination of the fair value of 250,000 shares in K-Lite and 250,000 units in the YPP Property Trust, as well as the payment of a debt owed by YPP Properties to Karilla. The respondents, who had defaulted in opposing the orders, included K-Lite, YPP Properties, and the trustee of the YPP Property Trust. The applicants argued that the fair value of the shares and units should be determined based on specific financial statements and adjustments, and that the respondents had failed to redeem the units and pay the debt as required by their agreements and the law.

The court examined the financial statements, the shareholders agreement, the trust deed, and relevant correspondence to determine the fair value of the shares and units. The court found that the fair value of the 250,000 shares should be $398,241, adjusted from a previous valuation by subtracting certain losses and write-offs. For the units in the YPP Property Trust, the court accepted the applicants' valuation of $257,318, noting the trustee's inaction as part of the oppressive conduct that led to the default judgment against the respondents. Additionally, the court ruled that the debt of $14,288.82 owed by YPP Properties to Karilla was undisputed and should be paid with interest.

The court ordered the fourth and fifth respondents to purchase the 250,000 shares for $398,241 plus interest, and the trustee of the YPP Property Trust to redeem the 250,000 units for $257,318 plus interest. It also ordered the payment of the debt plus interest by YPP Properties to Karilla. In the event of non-compliance, the court would appoint liquidators to the defaulting respondents. The respondents were further ordered to pay the applicants' costs on an indemnity basis. The matter was listed for further directions to manage the implementation of these orders.

Orders

Orders of the court

1. Order 2 made on 17 April 2014 be set aside and in lieu thereof order with effect from 15 May 2014 that:

“1. On or before 12:00 pm of 12 June 2014, the fourth and fifth respondents purchase the 250,000 shares held by the second applicant in the fourth respondent by paying the applicant the sum, being their fair price, of $398,241, together with interest of $29,353 calculated for the period between 8 April 2013 and 15 May 2014.

2. On or before 12:00 pm of 12 June 2014, the sixth respondent, as trustee of YPP Property Trust, redeem the 250,000 units held by the second applicant in YPP Property Trust at the sum, being their fair price, of $257,318, together with interest of $13,561 calculated for the period between 29 July 2013 to 15 May 2014.

3. On or before 12:00 pm of 12 June 2014, the sixth respondent pay the second applicant the sum of $14,288.82, together with interest of $795.36 calculated for the period between 11 July 2013 to 15 May 2014.

4. In the event that any of the sums is not paid by the respective respondent referred to in Order 1, 2 or 3 made today, the applicant file and serve an affidavit as to the facts by 4:00 pm on 12 June 2014 and cause the matter to be restored to the list on 13 June 2014 for the purposes of appointing liquidators to the respective respondent in default of the order for payment pursuant to s 233(1)(a) of the Corporations Act 2001 (Cth).

5. The fourth, fifth and sixth respondents pay the costs of the applicants on an indemnity basis in respect of the proceedings generally so far as they relate to those respondents, including the costs of the interlocutory application filed on 28 February 2014, fixed in the sum of $55,000.”

2. The matter be listed for further directions on 16 May 2014.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

The orders of 17 April 2014, that are to come into effect tomorrow through the defaulting respondents’ non-opposition to them, provided that the Court could determine a fair price for each of the 250,000 shares and units.Conclusion I am satisfied, on the material in the statement of claim and, to the extent that explanation or supplementation was required, from the terms of the shareholders agreement, trust deed and correspondence to which I have referred, that it is appropriate to fix the value of the 250,000 shares held by Karilla in K-Lite at $398,241 based on the 30 June 2012 financial statements as adjusted in the manner pleaded in pars 127 and 128 of the statement of claim. That is, the short form valuation by Hall Chadwick of 8 April 2013 should be further adjusted by the deduction or writing back of the $732,000 year to date loss to February 2013 and the elimination of the impairment write-offs for the three loans that I have discussed above. I infer that K-Lite was aware, from no later than the date of Hall Chadwick’s short form valuation of 8 April 2013, that the value of Karilla’s 250,000 shares should have been arrived at as being $398,241 and that it should have paid that sum at that time in accordance with the agreement the parties had earlier made, as identified in the statement of claim. Interest on that sum should be payable at Court rates in accordance with practice note CM16 from that time. The applicants calculated the interest on that sum as at today as $29,353. The value I have found, based on the pleading in the statement of claim, is significantly more than the offer made by the applicants in their letter dated 29 July 2013. However, that offer was a transfer notice given as at 29 July 2013, being over a year after the date at which the statement of claim alleged that the valuation was made. There is no apparent dispute as to the value of the 250,000 units in the YPP Property Trust. While the trustee had a discretion under the trust deed to accept or reject the request for redemption, it did neither. It made no response at all to the applicants’ solicitors’ letter of 29 July 2013. The trustee’s conduct is pleaded in the statement of claim as part of the overall conduct amounting to oppression that must be deemed to be admitted by the defaulting respondents, including the trustee, YPP Properties, by reason of the default judgment against them. In my opinion, on the material pleaded in the statement of claim, the offer, based on the trustee’s valuation to sell the 250,000 units in the applicants’ solicitors’ letter of 29 July 2013, should have been accepted as at that date. Accordingly, I fix the value of the 250,000 units in the sum pleaded of $257,318. The applicants have calculated that the interest due on that sum at Court rates, in accordance with practice note CM16, is $13,561. Finally, there is no defence to the claim made in the applicants’ solicitors’ letter of 11 July 2013 for the payment of the debt of $14,288.82 due to Karilla by YPP Properties. Interest on that sum should be added from 11 July 2013 in the sum of $795.36, as sought.

Ratio Decidendi

Legal Principle Established

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