Bromley Investments P/L v Elkington & Ors [2003] QCA 407

SUPREME COURT OF QUEENSLAND CITATION: Bromley Investments P/L v Elkington & Ors [2003] QCA 407 PARTIES: BROMLEY INVESTMENTS PTY LTD ACN 001 109 628 (applicant/respondent) v GORDON BRADLEY ELKINGTON (respondent/appellant) BOWPINE PTY LTD ACN 003 984 576 (respondent) ROBERT JOHN CHARLES CATTO (respondent/appellant) IAN FLETCHER (respondent) TOMMY HIRANO (respondent) MARIE FLORENCE KLUGE (respondent) ROSS TOWNSEND MARCHANT (respondent) HEIDI SCHUBERT (respondent) KELLIE ELIZABETH THOMAS (respondent) TIM TALTY THOMAS (respondent) WINPAR HOLDINGS LTD ACN 003 035 523 (respondent) PETER JOHN YOUNG (respondent) FILE NO/S: Appeal No 557 of 2003 Appeal No 559 of 2003 SC No 5317 of 2002 DIVISION: Court of Appeal PROCEEDING: General Civil Appeals ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 12 September 2003 DELIVERED AT: Brisbane HEARING DATE: 5 August 2003 JUDGES: Williams and Jerrard JJA and Holmes J Separate reasons for judgment of each member of the Court, -- 1 of 13 -- 2 Williams JA and Holmes J agreeing as to the orders made, Jerrard JA dissenting in part ORDERS: 1. Appeal No 557 of 2003 dismissed 2. Appeal No 559 of 2003 dismissed CATCHWORDS: CORPORATIONS – CORPORATE FINANCE – SHARES – VALUATION – where respondent owned 90 per cent of shares in a company and sought to compulsorily acquire remaining shares – where appellants objected – where experts’ report prepared to value shares and to determine a fair price at which to acquire them – where experts’ report accepted by learned trial judge – where compulsory acquisition approved by learned trial judge – whether experts sufficiently explained reasoning on which their conclusions were based – whether the learned trial judge could make a determination as to fair value based on expert report Corporations Act 2001 (Cth), s 664C, s 664F, s 667AA Supreme Court Act 1995 (Qld), s 283 Uniform Civil Procedure Rules 1999 (Qld), r 394 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705, referred to Pauls Ltd v Dwyer (2002) 43 ACSR 413; [2002] QCA 199; Appeal Nos 3262, 4152 and 4345 of 2001, 6 June 2002, cited Pauls Ltd v Elkington [2001] QCA 414; Appeal No 680 of 2001, 23 October 2001, cited COUNSEL: The appellant in Appeal No 557 of 2003 appeared on his own behalf The appellant in Appeal No 559 of 2003 appeared on his own behalf D J S Jackson QC, with P A Freeburn, for the respondent SOLICITORS: The appellant in Appeal No 557 of 2003 appeared on his own behalf The appellant in Appeal No 559 of 2003 appeared on his own behalf Corrs Chambers Westgarth for the respondent [1] WILLIAMS JA: The respondent, Bromley Investments Pty Ltd (“Bromley”), being the holder of at least 90 per cent of the issued ordinary shares in Carrington Cotton Corporation Ltd (“Carrington”), took steps to compulsorily acquire the remaining shares in Carrington pursuant to the provisions of Part 6A of the Corporations Act 2001 (“the Act”) at the price of $5.87 per share. Twelve shareholders held 9,752 of the 11,828,850 issued ordinary shares in Carrington; those 12 were named as respondents to the originating application. G B Elkington, the appellant in No 559 of 2003, and R J C Catto, the appellant in No 557 of 2003, together with 5 other shareholders who are not parties to either appeal, objected to that acquisition in accordance with s 664E(1) of the Act. Pursuant to s 667AA, ASIC nominated Price Waterhouse Coopers Securities Ltd to prepare a report for purposes of s 664C. R Higham and J Whiteman were the “experts” who actually -- 2 of 13 -- 3 prepared the report on behalf of Price Waterhouse Coopers. Thereafter Bromley applied to the Court for an order approving the acquisition pursuant to s 664F. [2] As its name suggests, Carrington grows cotton and, to a lesser extent, grain. The judgment under appeal records (and this was entirely unchallenged) that there were extremely comprehensive separate valuation reports for each of the four aggregations of rural real property on which Carrington grows cotton and grain. The experts’ first report, dated 11 April 2002, utilised each of a discounted cash flow, and an ordinary realisation of assets, method of valuation. The first method involved a calculation of the net present value of forecast future cash flows using a discount rate which reflected a required rate of return for investment in the business, adopted a discount rate of 9%, and produced a value per share of $3.79. The ordinary realisation of assets method resulted in a net realisable value of $4.77 per share. The experts concluded at that stage that that latter figure should be regarded as the upper limit of a reasonable valuation range for shares in Carrington. [3] By letter dated 7 October 2002, the experts revised some of the opinions they had originally expressed, having regard to the fact that projected cotton sales used in the first report were markedly lower than prices actually achieved on sales of cotton sold forward by Carrington prior to March 2002. Accordingly, a revised valuation on a discounted cash flow basis was made, which resulted in a value of $4.86 per share. The experts adopted that figure (in lieu of the $4.77 achieved by an orderly realisation of assets) as being the upper limit of a reasonable valuation range for Carrington shares, and repeated their originally expressed opinion that $5.87 per share, being well above $4.86, was a fair price. [4] Four of the seven shareholders who submitted notices of objection gave notice that they wished to be heard on the hearing pursuant to s 664F. To better enable the Court to deal with relevant issues a direction was made by the Court that any objector intending to appear should lodge a document stating grounds of opposition. [5] Elkington lodged a document stating that he intended “to oppose the application on the ground that the evidence filed in the proceedings in support of the application does not establish on the balance of probabilities that the price offered for the securities to be acquired is fair.” Catto lodged two documents setting out the grounds on which he sought to rely. The first document stated: “1. The Expert has not sufficiently addressed the matter of the worth of the water licences. 2. The Expert erred when he described the settlement price between the Panizza family and the company as being ‘arms length’. Both parties were at that time under significant duress, with the possibility of judgment leading to large costs orders against the losing party. The Panizzas were in danger of being locked into their shareholding which was ostensibly unmarketable. The Marchants, presumably not having the money themselves, needed a solution which allowed them to use the company’s money to see the end of the Panizzas. 3. The price was not fair, as compared to the Panizza/Marchant ‘agreed’ price because of the time value of money given that there were no interim dividends to shareholders and in the course -- 3 of 13 -- 4 of the six months between that settlement and the Application under Chapter 6A another cotton crop was harvested with obvious benefits to the company.” The second document was more in the form of a submission; it was in these terms: “I believe that the price proposed by Bromley will be shown to be ‘Unfair’ as a result of the valuer determining the value of the properties focussing in particular on the water licences of the group and the current market for such rights. I believe that the expert proffered by Bromley erred when he applied ‘a selling and marketing discount’ to the value of the company, as this legislation is in no way designed to cause a break-up of the company’s assets but merely a going forward situation where the company has one 100% owner as compared to a number of small owners and one 99% owner. I see as a ground for the determination of ‘unfairness’ as the contradictory position which is apparent in terms of the use of the company’s franking credits to enhance the value of the selective capital reduction to those shareholders who participated in that exercise, but that there is no comparable adjustment for those remaining shareholders who are now being asked to leave. The expert has not addressed this matter adequately. I believe that the expert’s view that he could say that the Panizza litigation conclusion was ‘an arms length’ transaction was incorrect in form as there were significantly higher stakes involved as there was clearly the benefit to both the Bromley and Panizza parties, in that the litigation could have been, and was concluded, without orders as to costs. There was a value there, in the form of the worth of conclusion of litigation, that the expert should concede. That value is in the form of the value to conclude the litigation without costs orders and without a determination as to suppression activities on the minorities by the Directors. There was also value in it to the Bromley Directors who could then get on with their lives. What is more, the conclusion was one in which the Bromley Directors were able to use the company’s money, rather than their own monies, to see the end of the Panizzas.” [6] After a contested hearing, Muir J approved the compulsory acquisition of the shares at a price of $5.87 per share which he determined was a fair value. From that decision both Elkington and Catto have appealed. Numerous grounds were stated in each notice of appeal. On the hearing of the appeal both Elkington and Catto appeared in person. [7] A matter which each appellant regarded as of particular significance throughout the proceedings was the relevance, if any, of the price offered in a ‘buy back’ scheme, entered into as part of the process of settling Supreme Court proceedings in which interests holding about 27% of the then issued shares in Carrington (described as the “Panizza” interests) had alleged oppression by the majority (Bromley was then the holder of about 70% of the shares). That litigation was settled by an offer to acquire -- 4 of 13 -- 5 that 27% shareholding at a price, $5.75, of which $2.05 was a fully franked dividend. That offer was extended to all shareholders other than the Bromley interests and was accepted by the Panizza interests and some others. That resulted in a reduction of share capital in Carrington. The appellants differed between themselves on this appeal as to whether no regard should be had to that transaction, or considerable regard. Mr Catto focused very much in argument on his proposition that Bromley, who in his submission had used the company’s money rather than its own to acquire the Panizza interest and other minority share holdings, had as a result increased the company’s level of debt and perhaps reduced thereby the value of the shares; he also argued that that share value was increased because an active and dissenting minority was excised from the company. [8] Elkington emphasised that it was the Court, and not the expert, who must determine the fairness of the acquisition price. He submitted that the experts did not sufficiently explain the reasoning upon which their conclusions were based. He pointed out that there was no evidentiary obligation on a minority shareholder and it was for the applicant seeking to compulsorily acquire the shares to satisfy the Court that an order approving the acquisition should be made. Elkington contended that the experts had “no relevant expertise in forecasting likely cotton yields or prices, and forecasts of yields and prices were obtained from others whose own relevant expertise was not revealed.” He also contended that the experts had no relevant expertise in choosing a discount factor which was critical to the discounted cash flow valuation. He submitted that there was no evidentiary basis upon which the Judge could satisfy himself that the discount factor was appropriately chosen. He also mounted an argument based on the fact that there was a franked dividend component in the original buy back, and that no attempt was made to determine the added value because of that. It was then contended that doubt had to be cast on the reliability of projections used by the valuers because projected yields and sales fell short of actual sales and prices realised soon after the projections were made. Finally it was said that there were such serious defects in the experts’ evidence as should have led to the Court concluding that the expert evidence did not establish that $5.87 was fair value for the shares. [9] A reading of the reasons for judgment of Muir J clearly establishes that he recognised that it was for the Court to determine the fairness of the offered price. In the course of those reasons the learned Judge was critical of the expert’s report, where, in his view, there was a deficiency; for example he said: “The evidence did not reveal that the experts had any relevant expertise in forecasting likely cotton yields or prices. Consequently, some basis for the experts’ assumptions in that regard had to be established. The experts, in preparing their Report, appear to have been paid little regard to these basic principles but, in fairness to them, they may not have adverted to the possibility that the Report would become the critical evidence in legal proceedings. It would seem that the deficiency in the Report was drawn to their attention and that this resulted in the preparation of a copy of the expanded Report ‘which identifies and merges the Report with the information which was relied on when compiling the Report’. The way in which it does so, however, is not entirely satisfactory. It is apparent that critical data and forecasts have been obtained from the management and directors of Carrington but the identities of the persons concerned and their relevant expertise are not revealed. This may be -- 5 of 13 -- 6 thought to be an oddly casual approach, having regard to the overall expense of the Report and the importance of the forecasts in the valuation process.” [10] Later he said: “I accept that parts of the Report … are not particularly clear and that the soundness of some of the conclusions reached cannot be verified by reference to other parts of the Report.” [11] No objection to admissibility of the affidavits verifying the reports was taken by either Elkington or Catto on the basis that Higham and Whiteman were not qualified to give expert accounting evidence. Further, given the provisions of the legislation, it was for ASIC to nominate the experts and it is at the stage of that nomination that the relevant expertise would be evaluated. Notwithstanding the observations quoted above which are critical of aspects of the Reports, Muir J concluded that the “experts are well qualified and it is not suggested that they departed from orthodox valuation practice.” Evidence given by both Higham and Whiteman as to their experience and expertise was not challenged by cross-examination, though Higham was cross-examined on other issues. The material before the Court established that both Higham and Whiteman were experienced accountants well qualified to value businesses. Higham asserted experience in preparing “numerous experts reports and valuation reports, across a wide range of industries, including agri-business and cotton”. [12] In their joint Report Higham and Whiteman said: “In order to discount the cash flows to a net present value (NPV), we have adopted a post-tax nominal discount rate of 9% based on our assessment of an appropriate weighted average cost of capital for Carrington. Our consideration of the assumptions underlying this discount rate are set out in Appendix B.” The methodology adopted was explained at some length in that Appendix. Some of the reasoning is rather difficult for a person not experienced in business valuation to fully comprehend, but nevertheless if read carefully even a lay person can follow what is being said. But in any event it is clear that the methodology adopted was that generally recognised by accountants as the appropriate way of valuing a business using the discounted cash flow method. The learned trial Judge was clearly not satisfied that an inappropriate discount factor had been chosen, and I can see no reason for rejecting the 9% adopted by Higham and Whiteman. [13] It is not without significance to note that the “orderly realisation value” was substantially higher than the value arrived at initially by applying discounted cash flow methodology. The price offered of $5.87 was much higher than the value arrived at by applying the orderly realisation method of $4.77. [14] Many of the submissions of Elkington both before the learned Judge at first instance and again on appeal went beyond the grounds specified in the grounds of objection, but nevertheless the learned Judge at first instance did take those matters into consideration. As already noted Muir J was critical of the experts for not clearly identifying the persons involved in the management of Carrington from whom information was obtained enabling the experts to make forecasts of likely cotton yields and prices. But as was pointed out by Senior Counsel for the respondent in the course of argument in this Court the material did indicate in broad terms the sources of that information and it was not specifically challenged at first instance. At worst for the respondent there was hearsay evidence of those matters before the -- 6 of 13 -- 7 Court, and the learned trial Judge had a discretion to admit it; he did so and it cannot be said that there was any error in the exercise of that discretion. [15] Muir J in his reasons addressed the question of any additional value by reason of the inclusion in the price of a fully franked dividend for a shareholder paying the top marginal rate of tax. It was obvious that the additional value would vary according to the circumstances of individual shareholders. Ultimately Muir J concluded that because the price offered, namely $5.87, was significantly higher than the value determined either by adopting the discounted cash flow method or the orderly realisation method, the questions raised as to the effect of a fully franked dividend were of little significance. The original buy back figure was $5.75 per share and that was only one of a number of considerations to be taken into account in determining a fair price for the compulsory acquisition. Elkington’s submissions tended to suggest that the circumstances surrounding the Panizza litigation would have led to a higher buy-back price being offered, but the price offered here was even above that. The learned trial Judge concluded that the franked dividend argument did not make the offer of $5.87 unfair and I can see no reason for doubting the correctness of that conclusion. [16] The point raised by Elkington that projected yields and sales fell short of actual sales and prices was not raised in the grounds of objection and as Muir J noted that deprived Bromley of the opportunity of preparing arguments in response. In situations such as this factors such as drought and prevailing market conditions can cause unexpected fluctuations. This issue was dealt with carefully by Muir J and I can see no reason for departing from the conclusion he reached. [17] Catto raised a number of arguments similar to those advanced by Elkington and I will not repeat what has already been said on those issues. He did however raise a number of different arguments which it is necessary to consider. [18] Catto submitted that the relevant statutory provisions provided for protection by the Court of minority shareholders and in the light of that it was his contention that the Judge at first instance had an inquisitorial role and was obliged to investigate fully all aspects of the expert’s report in order to be satisfied that the price offered for the shares was fair. A reading of the reasons for judgment of Muir J satisfies me that His Honour was aware that his task was to determine whether the price offered was fair. Some of Catto’s criticism appears to be dependent upon the significance attached by Muir J to the grounds of objection lodged in compliance with the Court order of 1 August 2002. Even though the minority shareholders do not bear any onus of proof, the role of the Judge is not inquisitorial. The essential task of the Judge is to determine whether the price offered is fair and that decision must largely be based on the report of the expert furnished pursuant to s 667AA. Of course, if at the end of the hearing the Judge was of the view that there were such deficiencies in the report that made it impossible to determine whether or not the price offered was fair, approval would be refused. But that does not mean that the report must be beyond criticism before the Judge could act on it and conclude that the price offered was fair. [19] Here, as already noted, the Judge was critical of some aspects of the report but nevertheless he was able to make a positive declaration that the price of $5.87 was fair. -- 7 of 13 -- 8 [20] If, in a case such as this, issues for consideration by the Judge at first instance were not defined in some way before the hearing commenced, there could be no end to the litigation. In the circumstances of this case it was appropriate for Muir J to seek to confine argument to matters made relevant by the grounds of objection. [21] In that regard it was not inappropriate for Muir J to have regard to the question whether the matter raised by the objector was seriously in dispute and whether strict proof would cause unnecessary or unreasonable expense. In that context it is true that he balanced the costs of strict proof against the relatively modest amounts involved. However Muir J did not go so far as contended by Catto; he did not have regard to the relative holdings of minority shareholders in determining whether the price offered was fair. [22] Catto also submitted that essentially Muir J admitted he could not follow the lines of argument and terminology advanced by the experts and that in consequence he should have concluded “that it was beyond his capability to positively determine ‘fairness’.” Again that is an overstatement of the true position. Muir J did allude to the fact that some parts of the report were “not particularly clear”, but it does not follow from that that it was “beyond his capability to positively determine ‘fairness’.” Catto contended that the judgment of Heydon JA in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 supported his argument. Those observations should be borne in mind when a Judge is evaluating expert evidence, but it does not follow that every time there is some difficulty in fully comprehending the reasoning of the expert the report should be rejected. [23] Much of Catto’s submission concentrated on what he described as the Panizza affair. His argument did not demonstrate that anything about that settlement indicated that $5.87 was not fair value for the shares. [24] It seems clear that Muir J was satisfied there was no inequality in bargaining power resulting in the offer of $5.75 per share being made. But ultimately he attached little weight to that buy-back price. A reading of the reasons as a whole establishes that the conclusion that $5.87 represented fair value was based upon a consideration of share value derived from a discounted cash flow valuation ranging from $3.79 to $4.86 per share, and an orderly realisation value resulting in $4.77, giving an “upper limit of a reasonable valuation range” of $4.86. The conclusion of Muir J was also based on and supported by three sales of shares effected between 9 August 2000 and 10 August 2001 at prices of $3.50, $3.45 and $3.80. [25] Catto also concentrated in his submissions on the proposition that an interim dividend should have been declared with respect to trading between October 2001 and April 2002. He contended that the experts had not taken that into account in determining fair value. Muir J concluded that there was nothing in the material before him which showed that failure to have regard to a possible dividend component made the price offered unfair. [26] Muir J dealt thoroughly with Catto’s concern about the value attributed to water licences and concluded that there was nothing in the material which led him to conclude that the valuer’s opinion should not be accepted. Nothing was said on the hearing of the appeal to cast doubt on that conclusion. [27] As in all valuation cases arguments can always be addressed in support of a contention that the figure arrived at by the valuer was either too high or too low. -- 8 of 13 -- 9 Valuation is not an absolute science. The value of shares in a company such as Carrington would vary from day to day, fluctuating with, amongst other things, the market price for its product. In those circumstances one can only realistically speak of a range of valuation. That is essentially how the experts here approached the question. Applying discounted cash flow methodology they initially arrived at a value of $3.79 per share which was significantly lower than the orderly realisation value of $4.77. A revised discounted cash flow calculation gave a figure of $4.86. The only sales during the relevant period were at $3.50, $3.45 and $3.80 per share. It was against that background that the experts determined that $5.87 was fair value for the shares on compulsory acquisition. The learned Judge at first instance was clearly entitled to accept that $5.87 was fair value even though some criticism could be levelled at the expert’s report. In those circumstances approving compulsory acquisition at $5.87 per share was clearly justified. [28] Having considered the submissions of each appellant I am not persuaded that there was any error in the reasoning of Muir J such as would warrant this Court overturning his decision. [29] Section 664F(4) provides: “The 90% holder must bear the costs that a person incurs on legal proceedings in relation to the application unless the Court is satisfied that the person acted improperly, vexatiously or otherwise unreasonably. The 90% holder must bear their own costs.” Applying that provision Muir J ordered Bromley to pay the costs of each objector, excluding costs of an appearance on 19 November 2002, to be assessed on the standard basis. [30] This Court in Pauls Ltd v Elkington [2001] QCA 414 (judgment delivered 23 October 2001) held that s 664F(4) did not extend to an appeal brought from an order at first instance approving the acquisition. That conclusion was followed and applied by this Court in Pauls Ltd v Dwyer (2002) 43 ACSR 413 at 429. (Cf also Elkington v Shell Australia Ltd (1993) 32 NSWLR 11). In the first of those cases the Court of Appeal concluded that the objector-appellant acted unreasonably, if not improperly or vexatiously, in appealing; in consequence the Court ordered her to pay the costs of the respondent. In the second case the Court of Appeal concluded that the objector-appellants did not act improperly, vexatiously or unreasonably in pursuing the appeals and in consequence made no order as to costs of the appeal. The Court also noted that “some of the questions which had to be resolved were novel and others had been the subject of conflicting decisions by judges at first instance.” [31] In this case most submissions on appeal simply repeated arguments which had failed before Muir J, but there were issues relating to the weight which should have been given by the Judge at first instance to the report of the experts which warranted further consideration by this Court. In the circumstances I have on balance concluded that there should be no order as to the costs of the appeal. [32] The orders should therefore be: Appeal Nos 559 of 2003 and 557 of 2003 are dismissed. -- 9 of 13 -- 10 [33] JERRARD JA: I have read and respectfully agree with the reasons for judgment of Williams JA and his proposed orders, subject to respectful disagreement about the order for costs in Appeal No 559 of 2003. I add the following comments. [34] Mullins J made an order on 1 August 2002 that those respondents who filed notices of appearance should serve on the applicant, by 22 August 2002, a statement setting out the grounds on which those respondents intended to oppose the application. Muir J varied that order on 6 September 2002 by extending the time to 13 September 2002, and further ordered that on the trial no respondent could rely on any ground not stated in a statement filed and served in accordance with the order. As His Honour reminded all parties during the trial, the point of those orders was to ensure that the parties would know the arguments which were to be advanced on either side, and so that a trial could be conducted sensibly and within proper parameters so as to arrive at a just result. Although both appellants are plainly extremely experienced both as investors and as parties to proceedings of this nature1, despite that extensive commercial and forensic experience, Dr Elkington effectively avoided compliance entirely in his response as described by Williams JA. [35] Mr Catto did advance particular grounds of objection, also described by Williams JA, and which are summarised in paragraph [27] of the judgment under appeal. As so summarised, Mr Catto has not made either the first, third, or fourth, of those grounds of objection the subject of any ground of appeal, but does make the second and fifth of those described points of objection as grounds of appeal, those being his grounds numbered four and five. Mr Catto’s grounds of appeal appear at AR 1863- 1864. Mr Catto’s appeal [36] Regarding his first ground of appeal, that it is for the trial judge to decide if an offer is fair, I agree with what Williams JA has written. The learned trial judge did so decide, and there is no unfairness in requiring experienced objectors to identify the matters they particularly put in issue. [37] Regarding his second ground of appeal, which complains that the trial judge ought to have admitted or encouraged the appellants to advance grounds of objection not previously filed and therefore raised in breach of earlier orders, I respectfully agree with what Williams JA has written. In any event, not only did the learned trial judge carefully consider Mr Catto’s filed objections, the judge also considered those raised by his senior counsel in the trial, which went well beyond those objections filed. In Mr Catto’s case, consideration of those “extra matters” appear in paragraphs [47]-[73] of the reasons for judgment, and for Dr Elkington in paragraphs [74]-[83]. That was actually a commendable indulgence by the learned judge, who would have been entitled to insist upon compliance with clearly understood orders, made for the purpose of clarifying the matters potentially identifying that the offered price was not fair. Dr Elkington, who had not filed any points of objection, asked no questions in cross-examination at all of the expert 1 This fact can be demonstrated simply by the number of reported judgments in the trial and appellate division of this court alone in which those two appellants have appeared as parties, and further regard could be had to the reported and unreported proceedings of like nature in which they have appeared in other jurisdictions throughout the Commonwealth. -- 10 of 13 -- 11 called to support the valuation, but made submissions in his final address which received explicit and careful consideration in the judgment. [38] Regarding Mr Catto’s third ground of appeal (that “The trial judged admitted that he did not understand significant aspects of the expert’s report and yet came to a conclusion as to fairness on the basis of materiality of the holdings of the objectors present”), I consider that perhaps unfairly mixes a description by the learned judge in [76] of the less easily comprehended parts of the expert report, (a topic on which I respectfully adopt the observations of Williams JA), with the remarks by the learned judge at [45] of the judgment. There the learned judge considered the relevance of the complaint that the proposed acquisition price unfairly failed to take into account the consequences of a failure to pay an interim dividend subsequent to the offer. [39] Mr Catto’s fourth ground appeared to assume that the learned judge had placed weight on the amounts of the buy back offer, whereas the learned judge quite clearly and accurately described in [41] of the reasons the existence of the buy back offer price as a relevant consideration albeit an important one that needed to be treated with some caution, having regard to the circumstances in which it was struck. Nothing submitted on the appeal demonstrated any error in that approach. [40] With regard to Mr Catto’s fifth ground, it perhaps offensively complains that the trial judge “preferred” not to understand the franking credit component of the buy back price and its consequences. The learned judge discussed those specific matters in [36]-[39], of the reasons and none of the submissions on appeal identified any error in the reasoning disclosed in those paragraphs. Those paragraphs describe arguments as to the value, to a share holder paying the top marginal tax rate, of the franked dividend and include the observations, not challenged on the appeal, that the benefit or value to each share holder of that franked dividend depended on a number of matters, including the marginal rate of tax of the individual share holder; his, her, or its, original cost of the share; and the resultant capital gain on a buy back at $5.75. [41] Mr Catto’s final ground of appeal complains that the judge did not apply the remarks of Heydon JA (as His Honour then was) in Makita v Sprowles, a topic which has been dealt with by Williams JA with whose judgment I respectfully agree. Dr Elkington’s Grounds of Appeal [42] These grounds of appeal appear at AR 1866. Dr Elkington complains that the learned judge erred in accepting evidence of data and forecasts from persons whose identities and expertise was not revealed. That matter is dealt with both by the learned trial judge and by Williams JA. Dr Elkington, of course, made no objections about any lack of expertise or identification and asked no questions. The judge was entitled to come to the view that those matters were not in fact seriously in dispute, and that strict proof of them would cause unnecessary or unreasonable expense, delay, or inconvenience, and then to apply s 283 of the Supreme Court Act 1995 and Rule 394 Uniform Civil Procedure Rules. Neither appellant identified any actual undisclosed error in any data or forecast relied on. [43] Dr Elkington’s second ground of appeal complains of the acceptance of evidence of a discount rate, when the basis for choice of that rate could not be verified by -- 11 of 13 -- 12 reference to other parts of the report. Again, this complaint may have had more apparent merit had there been any objection taken on that ground, any questions asked challenging in any way the basis for selecting the discount rate, or any evidence led that any other rate was more appropriate, or even any argument made in support of a different rate. None was; Dr Elkington declined to suggest one, submitting that the burden lay on the judge to be satisfied that the evidence identified one that could be relied upon. I respectfully consider that that attitude flew in the face of the endeavours by the judge to identify grounds for objections, valid or otherwise, and if that approach was valid Dr Elkington could raise matter after matter on appeal about which there had been no objection taken, no evidence led, no cross-examination, and no submission to the primary judge. This is little better than an actual abuse of the appellate process. [44] Dr Elkington’s third ground of appeal complained of the judge having regard to the size of the appellant’s and objectors’ share holdings, when determining the manner of reception and assessment of evidence. That ground refers to the determination that the learned judge would exercise the powers conferred by s 283 and Rule 394, when admitting and relying on that part of the experts’ report which obtained information from management and directors of Carrington without revealing the identities and entities of the persons giving that information. Again, that ground of appeal would have had more weight had any undisclosed error been pointed to by Dr Elkington; and the size of his share holding was relevant to determining whether unreasonable expense would be incurred if the judge did not act pursuant to s 283 and Rule 394. These holders of very small share holdings were apparently taking essentially procedural points on trial, and often for the first time and with no notice, without themselves adducing or even relying upon any relevant evidence as to the merits. All of that conduct and those matters were relevant to the ruling by the learned judge on the conduct of the proceedings, including his having recourse to s 283 and Rule 394. [45] As to the sixth ground of appeal, that the judge failed to consider matters which became known after the date of the report, the learned judge explained his reasoning on that submission to him in [71]-[73]. Those reasons stressed that share prices are affected by a great many factors, the applicant had been given no notice of the suggestion that subsequently occurring events should have been considered (there were of course no grounds of opposition advanced on the point), the experts had reconsidered their valuation on information available as at October 2002, and the objectors were apparently focusing on only those subsequently occurring events favourable to their position and not on unfavourable ones. Importantly, as His Honour observed (in [69]), there is a specified time for determining the value of a company as a whole; that being the date of the compulsory acquisition notice2. [46] Dr Elkington’s final complaint, that the trial judge ought not to have had regard to the absence of an effective challenge as a basis for accepting evidence which was otherwise incomplete and unsatisfactory, is really no more than a different way of stating the proposition that Dr Elkington and other appellant objectors should be entitled at trial to raise without prior notice an objection to the process by which expert opinions were arrived at, without even suggesting that any other or different opinion should be reached, or that a different process would produce a different 2 See Capricorn Diamonds Investments Pty Ltd v Catto (2002) 41 ACSR 376 and, inter alia, Energex Ltd v Elkington [2002] QSC 363 -- 12 of 13 -- 13 result. Those matters are essentially dealt with by the learned judge in paragraphs [52], [56], [57]-[59] and [73]-[76] of his judgment. The learned judge did not at any stage describe any of the evidence upon which he acted as either being unsatisfactory or incomplete in his opinion; and all that the appellant can say is that it is possible that some evidence was. That is not a sufficient ground of appeal. [47] As to costs of the appeal, I consider Dr Elkington should pay the respondent’s costs in his unsuccessful appeal, limited to a maximum of one-half of the costs of both appeals considered together and assessed on the standard basis. This is because the court should discourage appeals without merit at another party’s expense from those “willing to wound and yet afraid to strike”3. [48] HOLMES J: I have read and agree with what is said by Williams JA and Jerrard JA as to the substance of these appeals. I would not be prepared to differentiate between the two appellants when it comes to the question of costs. With some hesitation, I conclude that neither appeal was not so entirely unmeritorious as to warrant a different approach from that of this court in Pauls Ltd v Dwyer (2002) 43 ACSR 413, referred to by Williams JA; and I concur in his view that there should be no order as to the costs of the appeal. 3 Alexander Pope: Epistle to Dr Arbuthnot, published January 1735, line 203. -- 13 of 13 --