Tomanovic v One Australia Pty Ltd - [2015] NSWCA 11

Court of Appeal
Supreme Court

New South Wales

Case Name:	Tomanovic v One Australia Pty Limited
Medium Neutral Citation:	[2015] NSWCA 11
Hearing Date(s):	28 August and 4 September 2014
Decision Date:	16 February 2015
Before:	Bathurst CJ at [1]; Barrett JA at [220]; Emmett JA at [221]
Decision:	(1)Leave to amend the notice of appeal refused; (2)Appeal dismissed; and (3)Appellants to pay the respondents’ costs of the appeal.
Catchwords:	APPEAL – civil - pleadings - amendment - grounds of appeal - refusal to allow amendment - amendment sought shortly prior to hearing - opportunity to raise ground at hearing - evidence could have been led at hearing EVIDENCE – sufficiency - weighing conflicting evidence - expert opinions - evidence of value of company - experts using different methods - valuation accepted by primary judge significantly lower than book value of company - whether primary judge erred in accepting valuation or whether valuation plainly erroneous
Legislation Cited:	Corporations Act 2001 (Cth), ss 232 and 1305
Cases Cited:	Abrahams v The Federal Commissioner of Taxation [1944] HCA 32; (1944) 70 CLR 23 Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Limited [1947] HCA 10; (1947) 74 CLR 358 Emerald Quarry Industries Proprietary Limited v Commissioner of Highways (South Australia) [1979] HCA 17; (1979) 142 CLR 351 Gold Coast Selection Trust Ltd v Humphrey (Inspector of Taxes) [1948] AC 459 Gregory v Commissioner of Taxation of the Commonwealth of Australia [1971] HCA 2; (1971) 123 CLR 547 Mallet v Mallet [1984] HCA 21; (1984) 156 CLR 605 McCathie v The Federal Commissioner of Taxation [1944] HCA 9; (1944) 69 CLR 1 Perpetual Trustee Company (Limited) v The Federal Commissioner of Taxation [1942] HCA 4; (1942) 65 CLR 572 Re Global Mortgage Equity Corporation Pty Ltd (ACN 105 108 469) [2013] NSWSC 1586; (2013) 97 ACSR 30 Spencer v The Commonwealth of Australia [1907] HCA 82; (1907) 5 CLR 418 The Commonwealth v Milledge [1953] HCA 6; (1953) 90 CLR 157 The Commissioner of Taxation of the Commonwealth of Australia v St Helens Farm (ACT) Proprietary Limited [1981] HCA 4; (1981) 146 CLR 336 Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) 84 ACSR 121 Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256; (2011) 86 ACSR 119 Zoltan Tomanovic v Global Mortgage Equity Corporation Pty Ltd (NSWSC, unreported, 17 May 2010)
Category:	Principal judgment
Parties:	Zoltan Tomanovic (First appellant) Australia Financial Services Pty Limited (ACN 003 647 925) (Second appellant) One Australia Pty Limited (ACN 003 179 199) (First respondent) Kenneth Sayer (Second respondent)
Representation:	Counsel: R J Ellicott QC and V R W Gray (First and second appellant) M B J Lee SC and E Cowpe (First and second respondent) Solicitors: Corporate & Civil Legal (First and second appellant) Harris Freidman Lawyers (First and second respondent)
File Number(s):	2014/3845
Decision under appeal:
Court…

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: [2015] NSWCA 11
Decision Date: 16 February 2015

CaseChat Overview and Summary

The appeal concerned a dispute between Tomanovic and One Australia Pty Ltd, heard by the Court of Appeal of New South Wales. The primary judge had made findings regarding the valuation of the company, which the appellants sought to challenge.

The legal issues before the Court of Appeal included whether the appellants should be granted leave to amend their notice of appeal to introduce a new ground of appeal shortly before the hearing, and whether the primary judge had erred in accepting a valuation of the company that was significantly lower than its book value, considering the conflicting expert evidence presented.

The Court refused leave to amend the notice of appeal, finding that the proposed new ground could have been raised at the hearing and that evidence in support of it could have been led at that time. Regarding the valuation, the Court held that the primary judge was entitled to accept the valuation presented by the respondent's expert, even though it differed from the book value and other expert opinions, as the judge had properly weighed the conflicting evidence and applied appropriate legal principles in reaching their conclusion.

Consequently, the appeal was dismissed, and the appellants were ordered to pay the respondents' costs of the appeal.

Orders

Orders of the court

(1)Leave to amend the notice of appeal refused;

(2)Appeal dismissed; and

(3)Appellants to pay the respondents’ costs of the appeal.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

The notes also explain that the basis upon which the commissions are brought to account is a matter for the judgment of the directors:“Key judgments – Trailing commissionsThe Company receives trailing commissions from lenders on settled loans over the life of the loan based on the loan book balance outstanding to which the group is entitled. The Company also makes trailing commission payments to other brokers and branches based on the loan book balance outstanding.The fair value of trailing commissions receivable and the corresponding payable to other brokers and branches is determined by using the discounted cash flow valuation technique. These calculations require the use of assumptions. The key assumptions underlying the fair value calculations of trailing commissions receivable and the corresponding payable to other brokers and branches at balance date include the average loan life and the discount rate. These assumptions are determined by management based on internal data and comparisons with similar companies.” The financial effect of the change was also set out in the notes:“2 Financial effect of change in accounting policiesRecognising trailing commission receivable & payable at fair value on loan settlement has:increased net assets at 30 June 2008 by $17,393,600 after providing $7,934,400 for deferred taxreduced commissions received by $6,325,000 and reduced commissions paid by $2,387,000 for 2009consequently increased the loss before tax for 2009 by $3,938,000 and $2,756,600 after taxreduced commissions received by $2,787,000 and reduced commissions paid by $1,147,000 for 2010consequently decreased the profit before tax for 2010 by $1,640,000 and $1,148,000 after tax.” The accounts disclose a current liability with respect to borrowings of $7,050,000. The notes to the accounts contain the following comments in relation to that liability:“The Bank facility provided by the Commonwealth Bank of Australia is supported by the value of future trailing commissions and is subject to a repayment schedule linked to the value of this future trailing commission. On 28 October 2010 the Group entered into an agreement with the Commonwealth Bank of Australia whereby in addition to the capital repayment of $500,000 made on 20 August 2010 an additional capital repayment of $550,000 would be made on 29 October 2010. The Group will also make minimum monthly repayments of $100,000 to ensure that the facility is fully repaid by 30 June 2015. The amended facility is initially for a period of 364 days, when the balance is due for repayment, unless the facility is extended for further periods of 12 months by the Commonwealth Bank of Australia at the request of the Group. The Bank facility is secured by a guarantee provided by members of the Group and the Director, Kenneth Sayer.The Notes to Paladin Mortgage Trust No 1 are provided by The Commonwealth Bank of Australia as part of a $230 million Warehouse Facility which on 29 October 2010 was extended until 14 April 2011 unless extended for a further period at the request of the Group.”

Ratio Decidendi

Legal Principle Established

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