Rambaldi; in the matter of Philip Charles Weeden, a bankrupt v Weeden [2008] FCA 1597

Rambaldi; in the matter of Philip Charles Weeden, a bankrupt v Weeden [2008] FCA 1597

The shares were property capable of being bought and sold and had market value despite being small minority holdings in closely held family companies with restrictive articles and no dividend history. A hypothetical properly advised purchaser would take into account available oppression and winding up remedies, and a liquidation basis was appropriate because an earnings basis was not. The Court rejected substantial discounts for loan recoverability and time value of money, but applied a single 50 per cent discount for minority status, restrictive provisions, litigation risk and expense. On that basis the market values at transfer were $38,308 for Weeden Estates Pty Ltd, $32,762 for PCW...

Jurisdiction
Australia
Judgment Date
27 October 2008
Procedural Posture
Bankruptcy Application Seeking Orders Under S 120 of the Bankruptcy Act 1966 (cth), Alternatively S 121, Setting Aside Share Transfers / Separate Determination of a Preliminary Question Under O 29 R 2 of the Federal Court Rules
Outcome
Preliminary question answered in favour of market values substantially exceeding the consideration paid; respondents ordered to pay the applicants' costs of the preliminary question and substantive application adjourned for further directions.
Legal Topics
['transfer of Property Before Bankruptcy' 'market Value Under S 120 of the Bankruptcy Act 1966 (cth)' 'valuation of Minority Shareholdings in Proprietary Companies' "pre Emptive Rights and Directors' Refusal to Register Transfers" 'oppression and Winding Up Remedies' 'minority Discount and Litigation Risk']
['bankruptcy' 'corporations' 'evidence'] ['transfer of Property Before Bankruptcy' 'market Value Under S 120 of the Bankruptcy Act 1966 (cth)' 'valuation of Minority Shareholdings in Proprietary Companies' "pre Emptive Rights and Directors' Refusal to Register Transfers" 'oppression and Winding Up Remedies' 'minority Discount and Litigation Risk']

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Procedural Posture

Bankruptcy Application Seeking Orders Under S 120 of the Bankruptcy Act 1966 (cth), Alternatively S 121, Setting Aside Share Transfers / Separate Determination of a Preliminary Question Under O 29 R 2 of the Federal Court Rules

Legal Issues

  1. 1 ['Within the meaning of s 120(1)(b) of the Bankruptcy Act 1966 (Cth), what was the market value of the fully paid ordinary share held by Philip Charles Weeden in Weeden Estates Pty Ltd, PCW Estates Pty Ltd and BW Estates Pty Ltd at the time of transfer to Betty Weeden on 5 February 2007?' 'Whether the absence of an identifiable purchaser or deep market meant the shares had no market value.' 'Whether valuation on a liquidation basis was appropriate for small minority shareholdings in closely held proprietary companies.' 'Whether a hypothetical purchaser would value the shares by reference to oppression and winding up remedies.' 'What discounts should be applied for minority status, restrictive articles, litigation risk, recoverability of loans and time value of money.']

Ratio Decidendi

The shares were property capable of being bought and sold and had market value despite being small minority holdings in closely held family companies with restrictive articles and no dividend history. A hypothetical properly advised purchaser would take into account available oppression and winding up remedies, and a liquidation basis was appropriate because an earnings basis was not. The Court rejected substantial discounts for loan recoverability and time value of money, but applied a single 50 per cent discount for minority status, restrictive provisions, litigation risk and expense. On that basis the market values at transfer were $38,308 for Weeden Estates Pty Ltd, $32,762 for PCW...

Court Disposition

Preliminary question answered in favour of market values substantially exceeding the consideration paid; respondents ordered to pay the applicants' costs of the preliminary question and substantive application adjourned for further directions.

Orders

  • ['The preliminary question was answered: the market value of the fully paid ordinary share held by the first respondent in Weeden Estates Pty Ltd at the time of transfer on 5 February 2007 was $38,308.' 'The preliminary question was answered: the market value of the fully paid ordinary share held by the first...