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- Unreported Judgment
SUPREME COURT OF QUEENSLAND
Mishpocha Pty Ltd v Tyrepower Marketing (Qld) Limited & Anor  QSC 153
MISHPOCHA PTY LTD ACN 121 695 163
TYREPOWER MARKETING (QLD) LIMITED
ACN 010 118 153
TPQ INVESTMENTS PTY LTD ACN 132 133 343
SC No 383 of 2019
Supreme Court at Cairns
1 June 2020
29 May 2020
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PROCEDURAL ASPECTS OF EVIDENCE – COURT APPOINTED OR PARTIES' SINGLE EXPERT – where the plaintiff/ applicant seeks an expert be appointed to determine a just price for compulsory purchase of the applicant’s shareholding in each of the respondents/ defendants – where the applicant/ plaintiff submits that the appointment of a single expert will allow it to overcome alleged deficiencies in disclosure by the respondent/ defendants - where experts already engaged by each party – where topic of share valuation not currently within the scope of the experts currently retained – where expert evidence in relation to share valuation would only be required if the plaintiff/ applicant succeeded on the question of liability – where there is no common ground as of yet as to what basis the valuation of shares should be undertaken – whether an order that a single expert be appointed should be made – whether an order that a single expert be appointed is premature
Uniform Civil Procedure Rules 1999 (Qld), r 423(b), r 429G(2)
Tomanovic v Argyle HQ Pty Ltd  NSWSC 152, cited
John J Starr (Real Estate) Pty Ltd v Andrew (Australasia) Pty Ltd (1991) 6 ACSR 63, considered
M A Jonsson QC for applicant
P Tucker for respondents
O’Connor Law for applicant
Calvados + Woolf Lawyers for respondents
- In an application filed 1 May 2020 the plaintiff sought orders that:
- the defendants produce documents set out in their list of documents dated 1 April 2020; and
- an expert be appointed to determine a just price at which compulsory purchase of the applicant’s shareholding in each of the defendants might occur under ss 232 and 233 Corporations Act 2001 (Cth).
- By the eventual hearing of the application on 29 May 2020 the issues provoking the need for the first order had resolved. The defendants resisted the making of the second order. Whether and when such an order should be made requires some consideration of the pleaded case.
- The plaintiff (“Mishpocha”) and the first defendant (“Tyrepower”) entered into a sub-licence and dealer agreement under which Mishpocha operated tyre retail outlets in Cairns and Mackay, effectively as a dealer of Tyrepower. In consequence of the agreement, it appears Mishpocha came to hold 6,000 shares in Tyrepower and 26,007 shares in the second defendant.
- Mishpocha was unsuccessful in securing a renewal of the agreement for a further three years after December 2017. It contends the agreement was a franchise agreement with the consequence notices should have been given under the Franchising Code – see Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth). Such notices not having been given, Mishpocha asserts it was entitled to a further three-year term of the agreement. Tyrepower denies such an entitlement arose and denies the agreement was a franchising agreement. It also asserts in any event that there was a compromise of Mishpocha’s potential claim against Tyrepower.
- Mishpocha claims significant financial loss in the form of either three years lost revenue or the quantity of the diminution in capital value of its business. It also alleges the defendants’ conduct has been oppressive and that it would be just and equitable that the defendants be wound up or such other relief as is just under s 233(1) Corporations Act 2001 be ordered. One such form of relief contemplated in Mishpocha’s prayer for relief is a buy-out of its shares in the defendants.
- Such a buy-out, if ordered, would require the valuation of those shares, hence Mishpocha’s application for the Court to appoint a single expert for that purpose.
- One of the purposes of the Uniform Civil Procedure Rules 1999 (Qld) regarding expert evidence is said at r 423(b) to be to allow for the giving of expert evidence on an issue by a single expert. More specifically, r 429G(2) provides:
“If parties to a proceeding are not able to agree on the appointment of an expert, … any party who considers that expert evidence may help in resolving a substantial issue in the proceeding may apply to the Court for the appointment of an expert to prepare a report on the issue.”
- Further to that rule, Practice Direction 2 of 2005 relevantly provides:
“In any proceeding, or intended proceeding, where expert evidence will or may be called, early consideration must be given to the requirements of the Rules, particularly as to the appointment of an expert to be the only expert witness on a particular substantial issue in the proceeding.”
- While the rules and practice direction contemplate the prospect that the Court may appoint an expert in respect of a particular issue, with such expert to be the only expert to give evidence on that issue, the question whether or not such an order ought be made inevitably depends on the circumstances of the case. In the circumstances of this case Mishpocha’s counsel submits that if Mishpocha makes good its case for intervention, a share buyout would likely be preferable to a winding up order, making it in the interests of all sides that the order sought be made.
- Another limb to Mishpocha’s argument is that if the order is made it will likely make it easier for Mishpocha to overcome the disclosure challenges it says it has encountered in its dealings with the defendants. The defendants do not concede they have been obstructive. In any event, if they are obstructive, Mishpocha has more conventional remedies under the rules than an order for a single expert.
- The defendants object to the making of such an order on various grounds. Some of those grounds involve procedural points. They are not unimportant points but, in light of my view of the substantive issues, there is ample time for them to be resolved and I need not dwell on them.
- The defendants’ more substantive arguments are that the appointment of an additional accounting or business valuation expert as a single joint expert on share valuation “would serve only to introduce a further expert” and is, in any event, premature.
- As to the first of those arguments, the defendants emphasise that each side has already had to engage an expert to report on the alleged loss and damage. The import of their argument seems to be that it would be preferable for each side’s existing expert to also deal with the issue of share valuation, presumably because it would be more economical. However, it emerged in the course of the hearing that the process of share valuation would likely have no connection with the processes that the already engaged experts would be concerned with. It was, in effect, conceded by both sides that there would be no material overlap in the existing tasks of their existing experts and the task of share valuation. That apparent lack of overlap supports the argument that it is appropriate the Court appoint an expert to be the single expert in respect of the issue of share valuation.
- There is more substance to the defendants’ other argument, that it would be premature for the Court to decide to make the order sought. There are two limbs to their argument. The first is that the appointment would go to resolving an issue that may never need to be resolved. The defendants point out a buy-out order would not follow automatically from a finding of oppressive conduct. More particularly they emphasise the remedy of a share buy-out would only be arrived at in the event the plaintiff succeeds on liability, by proving the existence of oppressive conduct. While the conventional approach is that evidence relevant to liability and remedy is adduced collectively, the consideration of remedies arising under s 233(1) Corporations Act 2001 requires a determination of whether the remedy is “appropriate”. This can logically prompt a separation of the question of what type of remedy, if any, ought to be awarded from the question of what specific form that type of remedy ought take. So, for example, in John J Starr (Real Estate) Pty Ltd v Andrew (Australasia) Pty Ltd Young J concluded, rather than ordering a winding up, it was appropriate the majority purchase the plaintiff’s shares at fair value, to be determined by agreement or in default, by the court.
- The second limb to the argument that the order would be premature is that the order should address the appropriate basis or bases of the valuation and the court is not yet in a position to determine the appropriate basis or bases. For example, there is presently no common ground as to whether the valuation should take account of any discount for the acquisition of a minority parcel. In a similar vein, it remains to be seen whether the appropriate proposed date for determining the valuation is 31 December 2017, and, if it is, whether there will be a double compensation issue if any damages award is calculated as though Mishpocha continued to hold the shares for three years thereafter. An expert can of course be asked to value shares on more than one basis. Nonetheless the bases should be clearly identified.
- The above discussed aspects cause me to conclude on the one hand that the ordering of the appointment of a single expert to value shares will likely be of material assistance to the court and avoid unnecessary costs associated with the parties having to retain different experts for that singular purpose. On the other hand, I conclude it is premature to make such an order. That combination leads to the conclusion that the application should be adjourned rather than dismissed.
- It is uncertain when it would be desirable to finally determine the application. Much depends on the parties’ further decision-making in preparing for trial. It would, for example, be unsurprising if the parties in due course agree that the determination of share values for the purpose of a share purchase order pursuant to s 233(1) be considered by the court separately, after it is first determined whether the ordering of such a remedy is appropriate.
- In the circumstances the application should be adjourned to the date and time on which the parties seek the listing of the trial. Whether it should be determined then or at a later date remains to be seen. I will give liberty to apply in the perhaps unlikely event the parties wish to accelerate the determination of the application prior to that point.
- Costs should be reserved. I am conscious in reaching that conclusion the defendants ought arguably have their costs thrown away by the application being brought on prematurely. On the other hand I am not appraised of the merits of the other dispute which also prompted the application.
- My orders are:
- The application is adjourned part heard to the date and time on which the parties seek the listing of the trial.
- Costs reserved.
- Liberty to apply on the giving of five business days notice in writing.
- Published Case Name:
Mishpocha Pty Ltd v Tyrepower Marketing (Qld) Limited & Anor
- Shortened Case Name:
Mishpocha Pty Ltd v Tyrepower Marketing (Qld) Limited
 QSC 153
01 Jun 2020