[2016] NSWSC 1690

Edmund Ian John Hashman v Australian Medico-Legal Group Pty Limited

Ordered production of audited accounts and reports in accordance with previous directions made

Catchwords

PROCEDURE – case management – valuation of shares – no question of principle

Judgment

[1]
HIS HONOUR: On 27 November 2015, the Court by consent made orders and directions in accordance with the document entitled 'Minutes of Proposed Consent Orders' which provided inter alia as follows:
[2]
On 11 December 2015, the experts conferred as directed by email. The plaintiff's expert Ms Cusack sent to the defendant's expert Mr Katehos an email in which she said inter alia:
[3]
Mr Katehos responded:
[4]
Despite that apparent agreement, correspondence by the plaintiff's solicitor to the defendant's solicitor requesting provision of the audited financial statements for the years ended 2011 through 2015, on 14 December 2015, 29 January 2016, 3 February 2016 and 8 February 2016, went unanswered.
[5]
Today, the defendant essentially contends that audited accounts are not necessary to permit the valuation process to proceed. Had the issue arisen before the directions to which I have referred were made, I might well have agreed that audited financial statements, though desirable, are unnecessary to permit the valuation process to go ahead. While audited financial statements provide an additional level of comfort, valuations are commonly, and perhaps more often than not as Mr Katehos suggests, undertaken on unaudited rather than audited accounts.
[6]
But this matter does not commence with a clean slate. The directions to which I have referred were made by consent in order to progress the matter, and essentially sought to remove from the dispute between the parties, and entrust to their valuers, the question of agreeing on what was required to permit the valuation process to proceed. The valuers – in the correspondence to which I have referred – agreed that audited financial statements should be provided. The fact that Mr Katehos now says that they are not essential does not detract from the circumstance that an agreement of the type referred to in the orders was, on the evidence, made.
[7]
Moreover, the shareholders deed of agreement of 14 June 2011 apparently creates an obligation on the company, and a legal right in its shareholders, to have audited accounts prepared annually. There is evidence that the accounts for the years 2012, 2013 and 2014 have been substantially prepared and are merely awaiting "sign-off" by the auditors. Those for 2015 may not have been prepared but, as it seems to me, there is a legal obligation to prepare them, and given the normal timeframe for annual general meetings, they ought to have been prepared by now, or at least be in a very advanced state of preparation.
[8]
It seems to me that given what has already happened in the matter, the best way to progress the matter is to adhere to the directions made on the last occasion, and insist on the provision of audited accounts.
[9]
The Court notes that:
[10]
The Court orders that:
1. (1)
  By 18 March 2016, the defendants produce to the plaintiff audited accounts for the first defendant and the reports which accompany them, for the financial years ending 30 June 2011 to 30 June 2015;
2. (2)
  Subject to the due provision of those accounts and reports by 18 March, time for compliance with order (5) of the orders made on 27 November 2015 be extended to 22 April 2016;
3. (3)
  There be liberty to apply on seven days' notice in the event that the defendants are unable to provide accounts in accordance with order (1), and/or seek an extension of time in which to do so if the accounts are not provided in accordance with order (1);
4. (4)
  The directions listing for 26 February 2016 be vacated;
5. (5)
  The proceedings be adjourned to 29 April 2016 at 9.30am for further directions; and
6. (6)
  The defendants pay the plaintiff’s costs of today.