In the matter of Global Mortgage Equity Corporation Pty Limited [2013] NSWSC 1586

In the matter of Global Mortgage Equity Corporation Pty Limited [2013] NSWSC 1586

The appropriate method to determine the market value of the shares in GMEC is an earnings-based valuation using a combination of capitalisation of earnings and discounted cashflow methodologies, as these properly reflect the value a hypothetical, informed, but not anxious purchaser would pay, and adjustments for costs, liabilities, and impairments should be made to arrive at a fair market value. Asset-based valuations relying strictly on book value are not appropriate without adjustment to reflect market realities and actual recoverability of assets.

Jurisdiction
Australia
Judgment Date
01 November 2013
Procedural Posture
Corporations List Oppression Proceedings / Post Remitter Quantification of Value for Buy Out Orders
Outcome
Judgment for valuation of GMEC shares; parties directed to bring in agreed minutes of order for buy-out and adjustments.
Legal Topics
['share Valuation' 'oppression Remedies' 'market Value Determination' 'expert Evidence']
['corporations Law' 'equity'] ['share Valuation' 'oppression Remedies' 'market Value Determination' 'expert Evidence']

Case Brief

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Procedural Posture

Corporations List Oppression Proceedings / Post Remitter Quantification of Value for Buy Out Orders

Legal Issues

  1. 1 ['What is the correct market value of the share capital of GMEC as at 30 June 2010 for the purpose of buy-out orders?' 'Should the valuation be based on an earnings-based or asset-based methodology?' 'How are specific adjustments such as legal liabilities, inter-company loans, and set-offs to be applied in the calculation?']

Ratio Decidendi

The appropriate method to determine the market value of the shares in GMEC is an earnings-based valuation using a combination of capitalisation of earnings and discounted cashflow methodologies, as these properly reflect the value a hypothetical, informed, but not anxious purchaser would pay, and adjustments for costs, liabilities, and impairments should be made to arrive at a fair market value. Asset-based valuations relying strictly on book value are not appropriate without adjustment to reflect market realities and actual recoverability of assets.

Court Disposition

Judgment for valuation of GMEC shares; parties directed to bring in agreed minutes of order for buy-out and adjustments.

Orders

  • ['Net market value of GMEC as at 30 June 2010 fixed at $2.9 million (midpoint of range determined by accepted expert).' 'Adjustments for liabilities to Mr Sayer and for legal costs to be applied as specified.' 'Buy-out price of 45% of net value set at $1,305,000 subject to further arithmetical adjustments for...