Harding Investments Pty Ltd v PMP Shareholding Pty Ltd (No 3) [2011] FCA 1370

Harding Investments Pty Ltd v PMP Shareholding Pty Ltd (No 3) [2011] FCA 1370

The fair valuation date was 30 June 2011 because it was close to the purchase order date, aligned with Lotic's financial year, and allowed reasonably accurate financial information to be used. The capitalisation of future maintainable earnings method was appropriate, using FY11 and forecast FY12 data and the mid-point future maintainable earnings value assessed by the Independent Person. The Court adopted the lowest capitalisation rate of 2.25 to reflect uncertainties affecting Lotic, but rejected deduction of the DOCA obligation and other asserted non-business liabilities because, on the limited evidence and in the circumstances of oppression, it was not fair to deduct those items from...

Jurisdiction
Australia
Judgment Date
30 November 2011
Procedural Posture
Corporations Oppression Proceeding Concerning Valuation of Shares Ordered to Be Purchased / Reasons for Judgment on Valuation of Lotic Shares After Orders Made on 27 May 2011
Outcome
The Court determined the fair value of Harding Investments' shares in Lotic to be $585,000 and directed the parties to bring in orders to give effect to the reasons.
Legal Topics
['oppression' 'compulsory Purchase of Shares' 'valuation Date' 'valuation Methodology' 'future Maintainable Earnings' 'fair Value' 'non Business Liabilities']
['corporations Law'] ['oppression' 'compulsory Purchase of Shares' 'valuation Date' 'valuation Methodology' 'future Maintainable Earnings' 'fair Value' 'non Business Liabilities']

Case Brief

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Procedural Posture

Corporations Oppression Proceeding Concerning Valuation of Shares Ordered to Be Purchased / Reasons for Judgment on Valuation of Lotic Shares After Orders Made on 27 May 2011

Legal Issues

  1. 1 ["What date should be used to value Harding Investments' shares in Lotic." 'What valuation methodology should be applied to Lotic and the shares in it.' 'Whether forecast 2012 financial year data and historical 2008-2010 financial year data should be used in assessing future maintainable earnings.' 'What capitalisation rate should be adopted.' 'Whether net non-business liabilities, including obligations under the DOCA and motor vehicle hire purchase costs, should be deducted in determining the fair value of the shares.']

Ratio Decidendi

The fair valuation date was 30 June 2011 because it was close to the purchase order date, aligned with Lotic's financial year, and allowed reasonably accurate financial information to be used. The capitalisation of future maintainable earnings method was appropriate, using FY11 and forecast FY12 data and the mid-point future maintainable earnings value assessed by the Independent Person. The Court adopted the lowest capitalisation rate of 2.25 to reflect uncertainties affecting Lotic, but rejected deduction of the DOCA obligation and other asserted non-business liabilities because, on the limited evidence and in the circumstances of oppression, it was not fair to deduct those items from...

Court Disposition

The Court determined the fair value of Harding Investments' shares in Lotic to be $585,000 and directed the parties to bring in orders to give effect to the reasons.

Orders

  • ['The parties bring in orders to give effect to these reasons for decision by 4:00pm on 5 December 2011.']