ILS Rehab Pty Ltd v Josephine Borg (as administrator of the estate of the late Damien Robert Borg) [2017] NSWSC 442

ILS Rehab Pty Ltd v Josephine Borg (as administrator of the estate of the late Damien Robert Borg) [2017] NSWSC 442

Clause 13, read in text, context and commercial setting, required the surviving shareholders to purchase the deceased director's shares and was not dependent on the deceased shareholder's legal personal representative serving a Sale Notice under cl 5. The expression "outgoing Shareholder" in cl 13 described the Respective Shareholder of the Director who died and was not the defined "Outgoing Shareholder" under cl 5. The relevant "immediately preceding financial year" for EBITDA was the financial year immediately preceding Mr Borg's death, namely the year ended 30 June 2014. Because EBITDA for that year was negative, the share was to be transferred for nominal consideration.

Jurisdiction
Australia
Judgment Date
21 April 2017
Procedural Posture
Equity Proceedings Concerning Construction, Rectification and Specific Performance of a Shareholders Agreement / Principal Judgment After Hearing
Outcome
Plaintiffs obtained rectification, declaratory relief and specific performance; the cross-claim was dismissed; costs reserved for argument.
Legal Topics
['construction and Interpretation of Shareholders Agreement' 'rectification' 'void for Uncertainty' 'implied Terms' 'specific Performance' 'oppressive, Unfairly Prejudicial or Unfairly Discriminatory Conduct Under S 232(e) of the Corporations Act 2001 (cth)']
['contracts' 'corporations'] ['construction and Interpretation of Shareholders Agreement' 'rectification' 'void for Uncertainty' 'implied Terms' 'specific Performance' 'oppressive, Unfairly Prejudicial or Unfairly Discriminatory Conduct Under S 232(e) of the Corporations Act 2001 (cth)']

Case Brief

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Procedural Posture

Equity Proceedings Concerning Construction, Rectification and Specific Performance of a Shareholders Agreement / Principal Judgment After Hearing

Legal Issues

  1. 1 ["Whether cl 13.1.1 of the Shareholders' Agreement should be rectified to reflect the parties' common intention about the price for a deceased director's shares." 'Whether the purchase price under cl 13 was to be calculated by reference to EBITDA for the financial year ended 30 June 2014 or 30 June 2015.' 'Whether cl 13 was void for uncertainty.' 'Whether a term should be implied that the relevant date for EBITDA was the date of service of a Sale Notice under cl 5.' "Whether the plaintiffs' attempt to compel transfer for nominal consideration contravened s 232(e) of the Corporations Act 2001 (Cth)."]

Ratio Decidendi

Clause 13, read in text, context and commercial setting, required the surviving shareholders to purchase the deceased director's shares and was not dependent on the deceased shareholder's legal personal representative serving a Sale Notice under cl 5. The expression "outgoing Shareholder" in cl 13 described the Respective Shareholder of the Director who died and was not the defined "Outgoing Shareholder" under cl 5. The relevant "immediately preceding financial year" for EBITDA was the financial year immediately preceding Mr Borg's death, namely the year ended 30 June 2014. Because EBITDA for that year was negative, the share was to be transferred for nominal consideration.

Court Disposition

Plaintiffs obtained rectification, declaratory relief and specific performance; the cross-claim was dismissed; costs reserved for argument.

Orders

  • ['Order that clause 13.1.1 of the Shareholders\' Agreement made between the plaintiffs and the late Damien Robert Borg be rectified so that it reads "The purchase price shall be equal to the percentage shareholding of the outgoing Shareholder multiplied by three times EBITDA".' "Declare that for the purpose of the...