Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2)

The case involved an appeal concerning orders made in oppression proceedings brought by Tomanovic and Australian Financial Services Corporation Pty Limited (AFSC) against Global Mortgage Equity Corporation Pty Ltd (GMEC) and others. The dispute centred on the valuation of shares in GMEC and Argyle HQ Pty Ltd for a buyout remedy and the associated costs and interest. The appeal was heard by Campbell, Macfarlan, and Young JJA of the Supreme Court of New South Wales.

The court was required to determine several legal issues, including the appropriate method for valuing shares in a buyout scenario, particularly concerning adjustments for litigation costs and the allocation of valuation expenses. It also had to consider the impact of accrued interest on a prior judgment debt on the buyout price and the extent to which parties could be restricted from incurring costs related to the valuation process. Furthermore, the court needed to address the remission of matters for the ascertainment of values and the liberty to apply for further orders.

The court reasoned that the valuation process for a court-ordered buyout is part of the working out of that order, and liberty to apply allows for necessary further orders. Regarding valuation adjustments, the court held that the purchase price should not be affected by the expenditure of company funds for litigation, and the subjects of the valuation should not bear the costs of the valuation process itself, except for costs incurred pursuant to specific court orders. The court also determined that while interest on a prior judgment debt would continue to accrue, the purchase price could be adjusted to effectively cancel out post-judgment interest from a specified date, reflecting the commercial reality of exclusive benefit from company value increases. The court found it impractical to order that the companies incur no costs or expenses in the valuation process, but stipulated that parties causing such expenses should reimburse the companies.

The appeal was allowed, and the orders of the court below were set aside and replaced with new orders. These orders provided for Kenneth Sayer to purchase shares in Argyle HQ from Zoltan Tomanovic, and for One Australia Pty Limited to purchase shares in GMEC from AFSC, at prices determined by a specific valuation process. The valuation was to be based on market value, adjusted for net liabilities, but not for oppressive conduct. A crucial adjustment was to ensure the net value of GMEC was not decreased by litigation expenses incurred by GMEC or its subsidiaries. The respondents were ordered to pay a portion of the appellants' costs at first instance, and to indemnify the appellants against liabilities arising from guarantees given for GMEC's obligations until their release. The judgment in prior proceedings was stayed pending the buyout, and amounts owing were to be set off. Liberty to apply was granted for various purposes, including the ascertainment of values, the winding up of GMEC in certain circumstances, and generally.