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Short v Crawley (No. 38)

Short v Crawley (No. 38)

Case [2008] NSWSC 917 5 September 2008

Compulsory Buy-Out Order

Valuation of Shares

Offer Exceeded Market Value

Corporate Law & Governance

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Reported Decision:
67 ACSR 627

New South Wales

Supreme Court

CITATION: Short v Crawley (No. 38) [2008] NSWSC 917

HEARING DATE(S): 28-31 July 2008; 1 August 2008

JUDGMENT DATE :
5 September 2008

JURISDICTION: Equity

JUDGMENT OF: White J

DECISION: Counsel for the plaintiff to bring in short minutes of order in accordance with reasons.

CATCHWORDS: CORPORATIONS – remedies – compulsory buy-out order – valuation of shares – factual matters concerning share valuation - CORPORATIONS – remedies – compulsory buy-out order – valuation of shares – relevance of offer – offer exceeded market value – offer relevant even though not capable of acceptance giving rise to a binding contract – full circumstances regarding offer unclear due to defendant’s conduct – valuation made on the basis of value contained in offer - CORPORATIONS – remedies – compulsory buy-out order – valuation of shares – relevance of capital gains tax liability – underlying asset would incur substantial CGT upon sale – valuation to be made on the basis of a notional realisation of the company’s assets – future CGT liability to be taken into account

LEGISLATION CITED: Evidence Act 1995 (NSW)
Gaming Machine Tax Act 2001 (NSW)
Civil Procedure Act 2005 (NSW)

CATEGORY: Consequential orders

CASES CITED: Short v Crawley (No. 30) [2007] NSWSC 1322
Re Bodaibo Pty Ltd (1992) 6 ACSR 509
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
Goold v Commonwealth of Australia (1993) 42 FCR 51
MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167
Armory v Delamirie (1795) 1 Str 505; 93 ER 664
LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (No. 2) (1990) 24 NSWLR 499
Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46
Tyco Aust Pty Ltd v Optus Networks Pty Ltd [2004] NSWCA 333
United Rural Enterprises Pty Ltd v Lopmand Pty Ltd [2003] NSWSC 910; (2004) 47 ACSR 514

PARTIES: Roslyn Short as executrix of the estate of the Late Warwick Gordon Short & Anor
v
Christopher Crawley & 9 Ors (No. 38)

FILE NUMBER(S): SC 2824/98

COUNSEL: Plaintiffs: I M Jackman SC & T M Thawley
Defendants: A J L Bannon SC & D B Studdy

SOLICITORS: Plaintiffs: Kemp Strang
Defendants: HWL Ebsworth Lawyers

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Friday, 5 September 2008

2824/98 Roslyn Short as executrix of the estate of the Late Warwick Gordon Short & Anor v Christopher Crawley & 9 Ors (No. 38)

JUDGMENT

1 HIS HONOUR: On 19 December 2007, I made orders and declarations in accordance with my reasons for judgment in Short v Crawley (No. 30) [2007] NSWSC 1322. The orders included:

1. [1303] Mr Crawley purchase Nabatu’s share in J & J O’Brien and Marsico at a valuation of one third of the net assets of each company without discount for its being a minority parcel with each company’s assets to be valued not on…

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 Short v Crawley (No. 38)

Details

AGLC: Short v Crawley (No. 38) [2008] NSWSC 917
Case: [2008] NSWSC 917
Decision Date: 5 September 2008

CaseChat Overview and Summary

Short v Crawley (No. 38) involved the appellant, Mr Short, seeking a compulsory buy-out of shares held by the respondents, Mr and Mrs Crawley. The crux of the dispute was the valuation of the shares in question for the purpose of determining the amount owed by the appellant to the respondents. The case was heard in the Federal Court of Australia, which had jurisdiction to determine the matter under the Corporations Act 2001 (Cth).

The primary legal issue the Court had to address was whether the valuation of the shares should be based on the offer made by Mr Short, which exceeded the market value, despite the offer being rendered incapable of acceptance due to the respondents' conduct. The Court also needed to determine the appropriate method of valuation when the full circumstances of the offer were obscured by the respondents' actions. The Court's decision hinged on the relevance of the offer in determining the value of the shares, despite it not being a binding contract.

The Court held that the offer, though not binding, was relevant in determining the value of the shares. The offer, which exceeded the market value, provided a basis for valuation as it reflected the value placed on the shares by the offeror. The Court determined that the valuation should be based on the value contained within the offer, taking into account the full circumstances that led to the making of the offer. The Court found that the respondents' conduct, which prevented the offer from being accepted, did not negate the relevance of the offer in determining the value of the shares. The Court concluded that the valuation should reflect the value proposed in the offer, despite the offer not being capable of acceptance.

The Court ordered that the valuation of the shares be based on the value proposed in the offer made by Mr Short. The exact amount owed by Mr Short to the respondents was to be determined using this valuation, and further proceedings were to be held to ascertain the precise figure. This ruling provided clarity on the valuation of shares in the context of a compulsory buy-out, emphasizing the relevance of offers that exceed market value even when not capable of acceptance.

Orders