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Wain v Drapac (No 2)

Wain v Drapac (No 2)

Case [2013] VSC 381 31 July 2013

Oppression

Standing

Specific Performance

Corporate Law & Governance

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

CORPORATIONS LIST

S CI 2010 01061

IN THE MATTER OF

ENDOLINE PTY LTD (ACN 051 437 499)

BETWEEN

ASHLEY JOHN WAIN & ORS	Plaintiffs
v
MICHAEL JOHN DRAPAC & ORS	Defendants

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JUDGE:	FERGUSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	3, 4 April 2013
DATE OF JUDGMENT:	31 July 2013
CASE MAY BE CITED AS:	Wain & Ors v Drapac & Ors (No. 2)
MEDIUM NEUTRAL CITATION:	[2013] VSC 381

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CORPORATIONS – Oppression – Orders for purchase of shares and units – Complex corporate structure – Entities to be taken into account in setting price to be paid – Corporations Act 2001 (Cth) ss 232, 233.

PRACTICE AND PROCEDURE – Pleadings – Necessity to plead matters to be taken into account for fair valuation of shares and units in oppression proceeding – Prayer for relief seeking orders for purchase of specific shares and units at fair value.

APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr I G Waller SC with Mr H L Redd	Isakow Lawyers
For the Defendants	Mr P B Murdoch QC with Dr A P Trichardt	B2B Lawyers

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Do the pleadings limit the case of the Plaintiffs to the entities in which they directly hold shares and units?............................................................................................................................................. 2

Legal principles for valuation....................................................................................................... 14

What should be taken into account in setting the price to be paid?...................................... 18

Conclusion......................................................................................................................................... 30

HER HONOUR:

Introduction

The Drapac Group is comprised of a number of companies and trusts.[1] It operates a property development and investment business and is ultimately controlled by Michael Drapac. Two former Drapac Group employees, Ashley Wain and Adam Murchie and their companies (who are the Plaintiffs), sought orders for the purchase of shares and units that they own in entities within the Drapac Group. They relied on ss 232 and 233 of the Corporations Act 2001 (Cth) which empower the Court to grant relief where there has been conduct which is oppressive to, unfairly prejudicial to or unfairly discriminatory against a shareholder. After a trial on all but two issues, Mr Drapac and entities that he controls (“the Drapac parties”) were ordered to purchase the Plaintiffs’ shares and units at a value to be determined by the Court.[2] After that initial trial, the only remaining issue is the valuation of the shares and units. A number of directions hearings were conducted in advance of a trial on that issue. As part of that process, orders were made that the proceeding be listed for hearing on the question of the entities within the Drapac Group to be taken into account in determining the value of the Plaintiffs’ interests.[3] This question arises because, in essence, the Plaintiffs say that the value to be attributed to their shares and units should reflect that the profits from the various entities in the Drapac Group as a whole were intended to flow through to the entities in…

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 Wain v Drapac (No 2)

Details

AGLC: Wain v Drapac (No 2) [2013] VSC 381
Case: [2013] VSC 381
Decision Date: 31 July 2013

CaseChat Overview and Summary

The appeal in Wain v Drapac (No 2) involved the parties, Wain and Drapac, in a complex corporate structure. The dispute pertained to the valuation and purchase of specific shares and units within the entities, raising issues under the Corporations Act 2001. The case was heard in the Federal Court of Australia, where the primary concern was the fair valuation of shares and units in an oppression proceeding.

The central legal issues before the court involved determining the appropriate entities to consider in setting the price to be paid for the shares and units, as well as the necessity for specific pleadings regarding the fair valuation in the context of oppression proceedings. The court was tasked with interpreting sections 232 and 233 of the Corporations Act, particularly in relation to the fair value of shares and units in the oppression context. Additionally, the court had to decide whether the plaintiff was required to plead the matters to be taken into account for the fair valuation in the prayer for relief.

The court concluded that the fair value of the shares and units should be determined by considering the value of the assets of all the entities in the corporate structure. It held that the plaintiff did not need to plead the matters to be taken into account for the fair valuation in the prayer for relief, as these considerations were matters for the court to determine in the context of the overall oppression proceeding. The court found that the fair value was best determined by the court at the time of making the order, rather than by requiring the plaintiff to plead specific valuation matters in the prayer for relief.

The final orders of the court affirmed the need to consider all entities in the corporate structure when determining the fair value of the shares and units, and clarified the pleading requirements for oppression proceedings. The court emphasised that the fair valuation was a matter for judicial determination, and that the plaintiff was not required to plead specific valuation matters in the prayer for relief. This decision provided clarity on the scope of considerations in oppression proceedings and the procedural requirements for seeking orders for the purchase of shares and units.

Orders