Forrest v Appleyard & Ors [2007] NSWSC 889

Forrest v Appleyard & Ors [2007] NSWSC 889

The referee made material errors of principle by valuing the Tomato Project by cost of acquisition less discount rather than by future cash flows known or contemplated at the valuation date, and by assuming recoverability of receivables without examination. However, the further evidence admitted under r 20.24(2) enabled the Court to determine the issues without remittal: no adjustment for irrecoverability was warranted, but the Tomato Project value should be reduced to $135,000, reducing the fair market value of the practice to $1,149,484. The report was therefore rejected only in respect of the Tomato Project valuation, varied accordingly, and otherwise adopted.

Jurisdiction
Australia
Judgment Date
31 May 2007
Procedural Posture
Equity Division Reference to Referee Concerning Fair Market Value of a Professional Practice / Motions Under (nsw) Uniform Civil Procedure Rules 2005, R 20.24 for Adoption, Rejection or Variation of Referee's Report
Outcome
Further evidence admitted; referee's report rejected in part, varied by substituting the Court's own valuation of the Tomato Project, and otherwise adopted.
Legal Topics
['reference to Referee' "adoption or Rejection of Referee's Report" 'leave to Adduce Further Evidence' 'fair Market Value of Professional Practice' 'valuation of Taxation Investment Product' 'recoverability of Receivables' 'restraint of Trade Assumption']
['procedure' 'equity' 'valuation'] ['reference to Referee' "adoption or Rejection of Referee's Report" 'leave to Adduce Further Evidence' 'fair Market Value of Professional Practice' 'valuation of Taxation Investment Product' 'recoverability of Receivables' 'restraint of Trade Assumption']

Case Brief

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Procedural Posture

Equity Division Reference to Referee Concerning Fair Market Value of a Professional Practice / Motions Under (nsw) Uniform Civil Procedure Rules 2005, R 20.24 for Adoption, Rejection or Variation of Referee's Report

Legal Issues

  1. 1 ["Whether leave should be granted under r 20.24(2) to adduce further evidence on the motions concerning the referee's report." 'Whether the referee erred in valuing the 1998 Tomato Project by adopting cost of acquisition less a marketability discount and by relying on information brought into existence in 2002.' 'Whether the referee erred by assuming usual restraint of trade contractual provisions in a hypothetical sale of the practice.' 'Whether the referee erred by assuming recoverability of receivables and related party loan accounts without examining recoverability.' 'Whether the report should be adopted, varied, rejected in part or remitted to the referee.']

Ratio Decidendi

The referee made material errors of principle by valuing the Tomato Project by cost of acquisition less discount rather than by future cash flows known or contemplated at the valuation date, and by assuming recoverability of receivables without examination. However, the further evidence admitted under r 20.24(2) enabled the Court to determine the issues without remittal: no adjustment for irrecoverability was warranted, but the Tomato Project value should be reduced to $135,000, reducing the fair market value of the practice to $1,149,484. The report was therefore rejected only in respect of the Tomato Project valuation, varied accordingly, and otherwise adopted.

Court Disposition

Further evidence admitted; referee's report rejected in part, varied by substituting the Court's own valuation of the Tomato Project, and otherwise adopted.

Orders

  • ['Grant leave to the first and third defendants, pursuant to r 20.24(2), to adduce on the present application the further evidence contained in the affidavits of Mr Finney, Ms Young and Mr Appleyard, which so far has been admitted only provisionally and subject to leave.' 'Order that the report of GCA Gower, dated...