CMC Property Pty Ltd & Ors v Rankin Investments (Qld) Pty Ltd & Anor [2021] QCA 173

Andrew Orford, Sam Rafter, Mikayla Colak

Key takeouts

An opinion about the monetary value of something depends upon many factors, such as the method of valuation and the point in time in respect of which the value is said to hold. Where the value of a joint venturer’s interest is to be determined and the contract is silent as to the valuation date, the date which will produce the most relevant and current value should be preferred.

Facts

This case is another appeal concerning the joint venture agreement (JV Agreement) between Rankin Investments (Qld) Pty Ltd, a company owned by Bradley John Rankin (together, the Rankin interests) and CMC Property Pty Ltd, a company owned by Peter Thomas Kendall and David Spencer Ahern (CMC) in a project to redevelop the Big Pineapple in Queensland.

The corporate vehicle for the joint venture was Big Pineapple Corporation Pty Ltd (Big Pineapple Co) as trustee for the Big Pineapple Unit Trust (Big Pineapple Trust).  The Rankin interests and CMC each held 50% of the units in the Big Pineapple Trust.

In early 2020, CMC triggered the default buy-out rights in the JV Agreement and thereby began a process where the Rankin interests would sell their interest in and withdraw from the joint venture.  One of the steps in this process was the determination of the value of the departing joint venturer’s interest.

The JV Agreement provided that:

• where the parties failed to agree upon the value of the interest (as was the case here), a chartered accountant would be appointed as an expert to determine the value of the interest being sold; and
• the chartered accountant was also entitled to appoint two valuers to assist with the valuation.

The JV Agreement did not expressly provide for the point in time on which the value was to be determined. The issue in dispute was the contractually implied date when the value of the interests was to be determined. The parties agreed that it must be one of two points of time:

• the date on which the notice of sale is deemed to have been given (ie the date on which the buy-out rights were triggered); or,
• the date on which the chartered accountant actually determines the value of the interest (ie the current value as at the date of the valuation).

At first instance, Davis J concluded that the relevant point in time for the valuation was the second of the two options. CMC appealed against this decision. CMC argued that it was a matter of ‘commercial common sense’ that the value of an offer should be its value when it is made.  Further, it contended that because the chartered accountant was entitled to appoint two valuers to assist in reaching a valuation, there might be conflicting valuations and valuation dates, which would lead to uncertainty or absurdity.

Decision

The Court of Appeal dismissed the appeal, finding that Davis J had been correct in concluding that the correct point in time for the valuation was the date on which the chartered accountant expressed to the parties his or her opinion.

The court found no commercial reasoning to support CMC’s submission that the valuation had to be based on the date on which the buy-out rights in the JV Agreement were triggered. The role of the additional valuers was to assist the chartered accountant, and any conflict in their valuations would be resolved by the chartered accountant before a determination was made.

The sale process may be slow and the value of the withdrawing party’s interest may vary greatly over time.  While this is underway, the project must continue and its continuation might require Big Pineapple Co to take up capital, to accept loans, to incur liabilities and to discharge them.  As a result the liabilities of each joint venturer may change as the project proceeds.  To construe the contract as stipulating a purchase price that may not be relevant at the time of the actual sale and could lead to unfairness.  Instead, the court held that the Rankin interests should have available for consideration of an offer at a price representing the most relevant value of the interest – their current value.