Harding Investments PL v PMP Shareholding PL (No 3) – oppression – date for valuation of shares

On 30 November 2011 Gordon J handed down her third judgment in the ongoing  and  acrimonious shareholders battle over the wastewater company Lotic Pty Ltd.

The first judgment in this dispute was a late and entirely unsuccessful security for costs application brought by directors Don Gordon and Paul Dick and their shareholder companies against the plaintiffs former director Steve Harding and his shareholder company. You can read her Honour’s 2 March 2011 security for costs judgment here.

The second was her Honour’s substantive judgment handed down on 27 May 2011 in the shareholders oppression action brought by Harding and company, against Gordon and Dick and companies. Her Honour found comprehensively in Harding and his company’s favour, as to shareholders oppression and breach of the shareholders agreement (in that case termed a “Business Succession Agreement”.   Gordon J ordered that the majority shareholder respondents purchase the Harding company’s shares in Lotic Pty Ltd and made orders as to the appointment of an independent valuer of those shares. In her Honour’s usual way, Gordon J sets out a useful distillation of the principles to be applied in a shareholders oppression case at paragraphs [5-10], and indeed I recommend the judgment to anyone practising in this area of law; it can be found here.

The judgment of 30 November 2011 related to the valuation of the shares and the appropriate date for their valuation to be assessed. I address here the latter issue. As usual, the respondents (who were ordered to purchase the shares) argued for dates which would result in a low valuation; the applicants for dates which would provide them a higher purchase price. In this case, the possible dates advanced by the parties as options, were –

  • 15 January 2010 – the date at which the oppression commenced,
  • 13 July 2010 – the date when Mr Harding was summarily, and wrongfully, dismissed as CEO and removed from the Board,
  • 30 September 2010 – the month these proceedings were issued,
  • 8 November 2010 – the date directors Gordon and Dick put Lotic into administration (sidenote – a Deed of Company Arrangement submitted by them and their companies was later approved by creditors),
  • 27 May 2011 – the date of the Court’s order compelling the share purchase by the majority shareholders.

The independent valuer appointed to value the shares in Lotic held by Harding Investments selected none of these dates, instead opting for 30 June 2011 as the relevant date for their valuation. He did so for these identified reasons –

  1. the date of the Court order compelling the share purchase was 27 May 2011,
  2. the share value should be at the closest possible date to the order to purchase date,
  3. Lotic’s financial year end is 30 June. Accordingly a full year financial performance of Lotic could be utilised in determining value, and
  4. 30 June 2011 was the closest possible date for which reasonably accurate financial information was available.

Her Honour accepted 30 June 2011 as the appropriate date on those bases. Her discussion of the legal principles to be applied as drawn from the authorities, and her application of them, is at paragraphs [8-16] of the judgment, which can be found here.

Gordon J directed the parties to make orders to give effect to her reasons by a certain date however, as has been a feature of this case throughout, the parties were unable to agree on anything at all, and her Honour handed down a fourth judgment on 8 December 2011 – here. In summary, her Honour made the orders proposed by the applicants Mr Harding and his company Harding Investments as to payment for the shares and delivery of the transfers. As with all the judgments in this sorry case, once again, the respondents were ordered to pay the legal costs of Harding and his company.

On a final note, the respondents Don Gordon and his company PMP Shareholding Pty Ltd and Paul Dick and his company Jashtra Holdings Pty Ltd have made a late decision to seek leave to appeal her Honour’s 27 May 2011 substantive shareholders oppression judgment referred to above. That application for leave to appeal will be heard later this week, on 16 December 2011. Watch this space.

One thought on “Harding Investments PL v PMP Shareholding PL (No 3) – oppression – date for valuation of shares

  1. Pingback: Harding Investments PL v PMP Shareholding PL – shareholders oppression – postscript/update | Carrie Rome-Sievers, Barrister

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