Drinkwater v Caddyrack Pty Limited [1999] NSWSC 851

Drinkwater v Caddyrack Pty Limited [1999] NSWSC 851

The Court preferred the expertise and methodology of Mr Griffiths to that of Mr Pritchard. In the circumstances, it was artificial to assume that Caddyrack Pty Limited's continued use of the intellectual property would be restrained, and misleading to characterise the company as having a history of losses where only three years were considered and one loss resulted from an extraordinary item. A valuation confined to net tangible assets disregarded goodwill and the underlying reality of the buy-back ordered by Young J. The appropriate method was capitalisation of future maintainable profits, leading to a certified value of $41,495 per ordinary share.

Jurisdiction
Australia
Judgment Date
26 August 1999
Procedural Posture
Valuation of Shares for Buy Back Under the Corporations Law / Inquiry to Ascertain and Certify the Value of Shares Pursuant to Order 6 of Orders Made on 28 November 1997
Outcome
The value of the shares in Caddyrack Pty Limited was certified at $41,495 a share, and the Master expressed the view that the plaintiffs were entitled to their costs of the enquiry from the fifth and sixth defendants.
Legal Topics
['share Valuation' 'buy Back of Shares' 'capitalisation of Future Maintainable Profits' 'net Tangible Assets Valuation' 'expert Evidence' 'goodwill and Intangible Assets']
['corporations Law' 'equity'] ['share Valuation' 'buy Back of Shares' 'capitalisation of Future Maintainable Profits' 'net Tangible Assets Valuation' 'expert Evidence' 'goodwill and Intangible Assets']

Case Brief

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Procedural Posture

Valuation of Shares for Buy Back Under the Corporations Law / Inquiry to Ascertain and Certify the Value of Shares Pursuant to Order 6 of Orders Made on 28 November 1997

Legal Issues

  1. 1 ['What valuation method should be adopted to determine the fair value of the shares in Caddyrack Pty Limited as at 25 September 1997.' 'Whether the capitalisation of future maintainable profits was appropriate notwithstanding asserted trading losses and uncertainty about intellectual property rights.' 'Whether the valuation should include intangible assets and goodwill rather than only net tangible assets.' 'What value should be certified for each ordinary share in Caddyrack Pty Limited.']

Ratio Decidendi

The Court preferred the expertise and methodology of Mr Griffiths to that of Mr Pritchard. In the circumstances, it was artificial to assume that Caddyrack Pty Limited's continued use of the intellectual property would be restrained, and misleading to characterise the company as having a history of losses where only three years were considered and one loss resulted from an extraordinary item. A valuation confined to net tangible assets disregarded goodwill and the underlying reality of the buy-back ordered by Young J. The appropriate method was capitalisation of future maintainable profits, leading to a certified value of $41,495 per ordinary share.

Court Disposition

The value of the shares in Caddyrack Pty Limited was certified at $41,495 a share, and the Master expressed the view that the plaintiffs were entitled to their costs of the enquiry from the fifth and sixth defendants.

Orders

  • ['I certify the value of the shares in Caddyrack Pty Limited at $41,495 a share.' 'I express the view that the plaintiffs are entitled to have the fifth and sixth defendants pay the costs of the plaintiffs of the enquiry referred to in order 6 of the orders made on 28 November 1997.']