Event and Time
Event Description
- Parties Involved: David Morgan Investments Pty Ltd and Emily McWaters Investments Pty Ltd (the Vendors) vs. Maggie Beer Holdings Ltd (the Purchaser).
- Date of Share Purchase Deed: 30 March 2021.
- Nature of Business: Hampers and Gifts Australia Pty Ltd, which operates “The Hamper Emporium” and “Gifts Australia”.
- Consideration: The Purchaser agreed to pay $20 million, shares in the Purchaser, and an “Earn Out Amount” to be calculated based on the Business's Earnings during a specified Earn Out Period (1 July 2022 - 30 June 2023).
- Dispute: Method of calculating the Earn Out Amount, particularly the "Earnings" to be used in its calculation.
Application and Claims
- Vendors' Position:
- Asserted their interpretation of clauses 2.1, 2.2, and 2.3 of Schedule 11 mandates that the "Earnings" must be calculated while accounting for past operational practices. - Presented a Vendors’ Report arguing for higher Earnings based on claims for additional profits expected from strategic initiatives not implemented by the Purchaser.
- Purchaser's Position:
- Contended that Earnings should be calculated strictly in line with clauses 2.1 and 2.2, without reference to the operational history as outlined in clause 2.3. - Argued against the classification of certain items in the Vendors’ Report as Contested Matters, asserting they should not be addressed by the Expert.
Judicial Decisions
- The court ruled that the Expert was required to calculate the Earnings as per the Vendors’ interpretation including the principles outlined in clauses 2.1, 2.2, and 2.3.
- Further, it decided that the Expert must determine all Contested Matters raised in the Vendors’ Report.