Attwells v Jackson Lalic Lawyers Pty Ltd

Supreme Court of NSW|2021-12-13|Before: Rees J, Mr J, Black J

Solicitors: Brown Ward King (Plaintiff) Piper Alderman (Second Defendant) File Number(s): 2021/235721

Judgment

HER HONOUR: These proceedings are an oppression suit, where the plaintiff, Greemblue Pty Ltd, and second defendant, Scott Mendelsohn, are shareholders in the first defendant, Natural Raw C Pty Ltd (the Company).
On 17 September 2021, Black J made orders by consent, to value the Company and for Mr Mendelsohn to buy-out Greemblue (the Orders). Mr Mendelsohn now seeks to enforce a settlement, including by seeking declarations that the settlement agreement contained various implied terms or, alternatively, that further orders be made "by way of working out and implementing the Agreement". Against this, Greemblue seeks to set aside the Orders or, alternatively, proposes different orders to complete the valuation process.

FACTS

In June 2019, the Company, Greemblue and Dennis Ghetto executed an Exit Deed. According to the recitals, Mr Ghetto was then a director of the Company, having been appointed by Greemblue. Under the Exit Deed, Mr Ghetto agreed to resign as a director of the Company; a service arrangement between Mr Ghetto, Greemblue and the Company was terminated. Clause 9 of the Exit Deed recorded that Greemblue was then considering selling its shares in the Company and, "For the purposes of valuing the Shares, the parties agree that the Company will arrange for a valuation of the shares in the Company at the Company's costs by appointing an independent accountant … to value the shares in the Company and fix a fair price for the Shares. …"
According to Greemblue's solicitor, Robin King, the parties sought to engage a valuer for the purposes of undertaking the valuation described in the Exit Deed but no joint valuation was ultimately agreed upon or undertaken. Both parties obtained their own valuation reports to value the business conducted by the Company. The two valuations produced different results and the parties were unable to agree further.
In 2021, the Company commenced proceedings in the District Court of New South Wales, apparently against Greemblue.

The proceedings

On 18 August 2021, Greemblue commenced these proceedings seeking: 1. a declaration that the affairs of the Company had been conducted in a manner which was oppressive vis a vis Greemblue; 2. an order that Mr Mendelsohn buy-out Greemblue's shares in the Company for some $2.17 million or, alternatively, that an accountant be appointed to undertake a fair market value of the shares (Order 3) or, alternatively, that Greemblue buy-out Mr Mendelsohn's shares in the Company by either means; 3. an order pursuant to section 233(1)(f) of the Corporations Act 2001 (Cth) that the Company discontinue the District Court proceedings; 4. in the alternative to a buy-out, that the Company be wound up under section 233(1)(a) or 461(1)(k) of the Corporations Act; and 5. that Mr Mendelsohn pay Greemblue's costs of the proceedings.
On 26 August 2021, Mr Mendelsohn's solicitor, Jonathan Hidayat, wrote to Greemblue's solicitor expressing surprise at the commencement of proceedings but noted that Mr Mendelsohn "broadly consents" to buy-out Greemblue's shares, with various amendments, and proposed that the proceedings to be adjourned "to allow for the … process to take place." The parties agreed to vacate an upcoming directions hearing for one week, informing the associate to Black J that "the parties are in discussions". His Honour made orders accordingly.
On 2 September 2021, Greemblue responded to Mr Mendelsohn's offer, noting that Greemblue was amenable to exploring the proposal, "subject to including the necessary machinery to ensure that there are no residual issues for disagreement between the parties during the process." A set of orders, directions and notations was proposed, including ensuring that the Company's accounts were audited before submission to a valuer. On 3 September 2021, Mr Mendelsohn's solicitor proposed short minutes of order for the upcoming directions hearing, comprising an abbreviated version of Mr Mendelsohn's earlier proposal and Greemblue's counter-proposal. On 6 September 2021, Black J simply made the following notations: 1. Note that the second defendant has offered to consent to an order in the form of Order 3 sought by the plaintiff, being an order contemplating a fair market valuation of the shares held by the plaintiff in the first defendant, and the second defendant purchase the plaintiff's shares in the first defendant for the price determined by that valuation. 2. Note that the parties will discuss the mechanism that might be adopted to give effect to such an order, if the plaintiff proceeds in that manner. His Honour stood the matter over until 20 September 2021.
On 14 September 2021, Mr Mendelsohn signed the audited financial statements for the Company for the year ended 30 June 2021.

The Orders

On 15 September 2021, Greemblue's solicitor proposed orders containing a regime for the valuation of Greemblue's shares and a buy-out "with ancillary orders to ensure the free flow of information to the valuer … with additional machinery to avoid a dispute emerging as to the valuation process." On the same day, Mr Mendelsohn's solicitor advised that he did not see any need for additional orders to be made, but made three offers said to provide a procedure for the valuation to take place. In the first offer, the parties agreed that the valuer would be provided with specified material as proposed by the plaintiff, being: The parties must provide the valuer full and unimpeded viewing access to all books, records and accounts (including to the accounting system) (whether electronic or in hard copy) of the first defendant and direct access to Commonwealth Bank of Australia (CBA) to access all accounts, compliance certificates and records submitted to and received from CBA in relation to the first defendant, and as otherwise may be required or requested by the valuer.
In the second offer, the parties were also entitled to provide "any submissions they wish" to the valuer, noting "As you aware, previously the parties have been unable to agree on any valuation process as your client was unwilling to agree on what submissions could be made to the valuer." In the third offer, the valuation would take place in accordance with the rules for expert determinations.
On 16 September 2021, Greenblue's solicitors provided proposed short minutes of order reflecting the first offer, with minor changes. Mr Mendelsohn did not agree, in particular, to a proposed order, "All communication with the valuer be in writing and by agreement between the solicitors for parties". Mr Mendelsohn's solicitor advised "as you are aware, this has been a point of contention for some time in that your client would not agree to what submissions could be provided to the valuer. Our client will not agree to such an order and the valuer should be left to liaise with the parties as he/she sees fit."
Greemblue's solicitor then proposed that "All communications between the valuer and the parties must be in writing and copied to the solicitors for both parties", to which the parties agreed. On 17 September 2021, signed consent orders were provided to the associate to Black J, who made the Orders in chambers, being: 1. Experts Direct to appoint an expert with experience in valuing businesses in the fast-moving consumer goods industry to undertake a fair market valuation engagement of the shares held by the plaintiff in the first defendant as at 29 June 2021. 2. The costs of the independent valuer appointed in accordance with order 1 be borne by the parties in equal shares. 3. The parties must provide the valuer full and unimpeded viewing access to all books, records and accounts (including to the accounting system) (whether electronic or in hard copy) of the first defendant and direct access to Commonwealth Bank of Australia (CBA) to access all accounts, compliance certificates and records submitted to and received from CBA in relation to the first defendant, and as otherwise may be required or requested by the valuer. 4. Each party to be provide[d] contemporaneously with copies of all information provided to the valuer. 5. A copy of these Orders to be provided to the valuer. 6. All communications between the valuer and the parties must be in writing and copied to the solicitors for both parties. 7. The second defendant purchase from the plaintiff all of the shares held by the plaintiff in the first defendant for the price as determined by the valuation conducted in order 1, within 30 days of the making of that determination. 8. Upon payment of the purchase price by the second defendant as determined in accordance with order 7, the plaintiff execute a transfer of its shares in the first defendant and deliver such executed transfer to the second defendant. 9. The proceedings be adjourned for directions (Corporations List) at 10.00am on 25 October 2021. 10. The parties be granted liberty to restore the proceedings on 2 days' notice by email to the Associate to Black J, specifying the relief sought. 11. Costs reserved.
It will be immediately observed that the Orders anticipated that the valuer would have four sources of information to attend to the assigned task: 1. the books, records and accounts of the Company; 2. records held by the Company's bank, including compliance certificates and records submitted to the bank in relation to the Company; 3. information or records "required or requested by the valuer"; and 4. a copy of the Orders.
The Orders did not envisage that the parties may separately, or independently, proffer information or documents to the valuer absent the valuer's request. As I read Order 4, the obligation for each party be provided contemporaneously with copies of information provided to the valuer anticipated that this would be done in respect of information "required or requested by the valuer" but did not anticipate that the parties may unilaterally proffer such material absent a request. Such a construction is consistent with the inter partes communications preceding the Orders. In particular, whilst the parties did not require that communications with the valuer must be by agreement between the solicitors for the parties, the valuer was to be "left to liaise with the parties as he/she sees fit". That is, it was the valuer who was to identify further information or records that were needed, and not the parties.

Appointment of expert

On 11 October 2021, Experts Direct appointed David Mullins as expert. Experts Direct requested the parties to provide a letter of instruction and any relevant material they required the expert to review. Further, "Mr Mullins has noted that he will be able to better understand if he can accommodate the timeframe of 25 October 2021 once he has received the materials."
On 20 October 2021, Greemblue's solicitor wrote to Experts Direct, noting that the parties did not intend to provide a letter of instructions as the Orders provided the relevant instructions, being that the expert provide a fair market valuation of the shares as at 29 June 2021. The expert's attention was drawn to Order 3. Mr Mullins was asked to liaise with the parties in relation to what he would need. Contact details were provided for the bank and MYOB records. The expert was reminded that any communication with any of the parties must be in writing and copied to the solicitors for each party. That is, the expert was asked to confine himself to the four sources of information referred to in the Orders.
On 23 October 2021, Experts Direct advised, "Mr Mullins would like to know if you are able to provide a copy of the Statement of Claim, Defence, and any other materials that have been filed in the Proceedings." Greemblue's solicitor forwarded a proposed response to the solicitors for the Company and Mr Mendesohn, being to provide the originating process and supporting affidavit of Mr Ghetto, that being the only pleadings and evidence to have been filed in the proceedings thus far. On 27 October 2021, the Company's solicitor advised that he had no objection to this course.
Mr Mendelsohn's solicitor objected, "We are of the view that the provision of the court documents filed in the proceedings are unnecessary and will only add to the cost of the preparation of a valuation." Instead, it was suggested that the valuer be provided with the Company's audited 2021 accounts together with the valuation reports already obtained by the parties. Greemblue's solicitor did not agree to this course, advising, "Our instructions are that the valuer should be provided only with information requested by him … [I]t would not serve the purposes of an independent valuation engagement to provide valuations previously obtained by either party". An alternative draft email to the expert was proposed, to which the parties agreed.
On 29 October 2021, Greemblue's solicitor sent the agreed email to Experts Direct, advising that the parties were of the view that providing the documents filed in the proceedings was unnecessary, would not assist with the preparation of an independent valuation and would only add further cost to the parties. The expert was to undertake the valuation in accordance with the Orders, which provided for him to be given full and unimpeded access to the material described. Unfortunately, it appears that Experts Direct did not forward this email to Mr Mullins at the time.
As I read the Orders, the parties were in fact obliged to provide Mr Mullins with the Originating Process and Mr Ghetto's affidavit. It is perfectly obvious why Mr Mendelsohn did not want the expert to have this material where, to that point, pleadings and evidence had been filed by Greemblue alone. This may give the valuer a one-sided picture and thereby influence his valuation in some way. Likewise, it was perfectly clear why Greemblue did not want earlier valuations obtained by the parties to be provided to a joint valuer. The purpose of the exercise was to obtain an independent valuation. Providing work done by earlier valuers based on the instructions provided by each of the parties may detract from this process. Presumably for similar reasons as to why Mr Mendelsohn did not want the valuer to see the Originating Process and Mr Ghetto's affidavit, Greemblue did not want the valuer to have the earlier valuations.
On 2 November 2021, Mr Mullins wrote to the parties, apparently not having received the agreed email sent by Greemblue's solicitor to Experts Direct on 29 October 2021. Mr Mullins advised, "Prior to starting work on the matter, it would be good to understand the nature of the dispute. Other than being asked to assess the 'fair market value' … I have no other background or context." Mr Mullins again asked to be provided with the pleadings and any relevant affidavits filed.
To this request, Greemblue's solicitor circulated a proposed response to the parties for comment, being along the lines of the earlier response which, it would appear, the parties did not appreciate had yet to be forwarded by Experts Direct to the expert. Mr Mendelsohn's solicitor again proposed instead that it would be beneficial for the expert to be aware of the existence of the audited 2021 accounts and earlier valuations, as well as the Company's 2019 and 2020 financial reports, "however, it will be a matter for him if he wishes to request those documents." An alternate draft email was proffered, asking the expert whether he would like these documents, with the valuation report said to provide detailed background information on the Company and its business.
The Company's solicitor agreed with the course. Greemblue's solicitor did not. Following a discussion with the parties' legal representatives on 10 November 2021, Greemblue's solicitor replied: (emphasis in original) As [Mr Mendelsohn's solicitor has] previously stated, the orders are specific as to what information should be made available to Mr Mullins. Mr Mullins should be led no further by the parties as to what information he may require to complete his valuation. … If the valuer needs to ask a question, we will respond accordingly as required. … Further, it would not serve the purposes of an independent valuation engagement to provide valuations previously obtained by either party. Furthermore, as discussed this morning, the valuations prepared by [the parties' respective valuers] were not prepared using the same materials/information, so it would not be appropriate to provide them to the valuer. As such, we believe our proposed response to Mr Mullins … is sufficient without leading Mr Mullins any further as to what information may be available to him over and above what is set out in the orders. The parties' responses were sought as soon as possible, with Greemblue reserving the right to bring the matter before Black J, if it became necessary to do so.
Mr Mendelsohn's solicitor advised that he was instructed to send an email to the expert as he had proposed, noting that his proposed email "simply lists out the documents which are likely to be relevant to Mr Mullins' engagement and it is a matter for Mr Mullins as to whether he wishes to request those documents or not. We do not see how the email would lead Mr Mullins in any way …".
There was an air of unreality to the email from Mr Mendelsohn's solicitor. It was reasonable to apprehend that the valuer would be interested to have a copy of the documents enumerated in the proposed email, in particular, where the valuation reports were tantalisingly described as providing "detailed background information on the Company and its business" and where the parties, by agreement, had declined to provide him with the pleadings and affidavits to enable him to "understand the nature of the dispute".

Proffering documents to the expert

Shortly afterwards, without waiting to hear from Greemblue's solicitor, Mr Mendelsohn's solicitor forwarded his proposed email to the expert. Unsurprisingly, the expert promptly replied stating that the documents listed "would be of assistance".
On 11 November 2021, Greemblue's solicitor endeavoured to retrieve the position, informing the expert that the email sent by Mr Mendelsohn's solicitor had not been agreed between the parties and, in the circumstances, no further information should be provided until it was agreed between the parties or otherwise as directed by the Court. Mr Mendelsohn's solicitor rejoined that the Orders did not require the parties to agree on correspondence to be sent to the valuer. Further, it was said to be unclear how his email had led to the expert being compromised, where the email was said to simply put the valuer on notice of the existence of the documents listed. The valuer having now requested the documents, the parties were obliged to provide the material to him in accordance with Order 3. Further discussion and emails ensued between the solicitors. Greemblue maintained its objection to the earlier valuations being provided to the expert.
Whilst some of the documents proffered by Mr Mendelsohn's solicitor fell within the first category of documents to which the valuer was entitled to have regard, the valuations obtained by the parties did not. It was plain that these valuations were contentious documents. Although Mr Mullins had requested a copy of the pleadings and any relevant affidavits, he had not requested valuations obtained by the parties. Telling the valuer of the existence of such valuation reports, and thereby soliciting a request from the valuer for such reports, undermined the process which the parties had agreed. It may well be that such valuation reports would provide Mr Mullins with useful information or accelerate the completion of his task. But that is not the process which the parties had agreed would be followed to ascertain the value of the Company's shares. It was all downhill from there.

Expert stops work

On 12 November 2021, the expert wrote to the parties noting that he had first been contacted in respect of the matter on 27 September 2021 but, since then, "no information regarding the company or its affairs has been provided or, it seems following objections to providing information raised [by Mr Mendelsohn's solicitor] will be provided. … [A] cost is involved in accessing minimal accounting information. In the circumstances it is not possible to prepare a meaningful valuation of the business or to conduct this matter in an efficient manner. As such, I … will no longer be acting on the matter."
Mr Mendelsohn's solicitor contacted Greemblue's solicitor noting that he intended to send the financials and the valuation report obtained by the defendants to the expert at 11.00 am that day. Greemblue's solicitor advised that his client objected to the material being provided: As previously stated on numerous occasions, our client objects to any previous valuations being provided to Mr Mullins. Provision of any previous valuations to Mr Mullins has the potential to affect his independent valuation. The only reason Mr Mullins has requested the valuations is because Mr Mullins was advised of their existence despite our client's objection to you doing so.
As to the provision of 2021 audited accounts, material discrepancies in the audited accounts had been noted by the client. Provision of the 2019 and 2020 financial reports was said to be unnecessary where the valuer had access to the records held by the bank and MYOB. There were also said to be clear discrepancies between the audited accounts and the financials previously provided to the bank and between the defendants' valuation and the audited accounts. If Mr Mendelsohn's solicitor proceeded to provide Mr Mullins with the defendants' valuation, Greemblue's solicitor was instructed to apply to the Court for the appointment of an alternative valuer. "In order to save time and cost, we strongly suggest an agreed approach to Mr Mullins' email rather than the course of action you have indicated …"
Notwithstanding these entreaties, Mr Mendelsohn's solicitor promptly provided the expert with the 2021 audited accounts, financial reports for 2019 and 2020 and the defendants' valuation report noting, "We will leave it to Mr King to provide the valuation prepared for his client." The expert was asked to reconsider his position and, if he required any further documents, to contact the parties. The defendants' valuation report comprised 44 pages and included a considerable amount of information and detail on the Company and its operations which one would not expect to be available from the other information sources referred to in Order 3.
Greemblue's solicitor endeavoured to retrieve the position again. The solicitor wrote to the expert advising that the provision, at least, of the defendants' valuation report, or any other valuation report, was disputed. The expert was asked not to review it, noting that Greemblue intended to bring the matter before the Court. The expert replied that he would not look at the valuation report but asked if the parties could agree that he rely on the audited financial statements, in which case he was prepared to undertake the valuation, "MYOB and bank account records won't be needed in circumstances where I have access to audited financial statements."
Mr Mendelsohn's solicitor protested to Greemblue's solicitor, stated that the Orders "do not restrict your client making submissions in relation to the material provided and it appears that your client is simply trying to delay and hinder the valuation process in breach of the orders of the Court." The Company joined with Mr Mendelsohn. Mr Mendelsohn's solicitor wrote to the expert, suggesting that he proceed to value the shares "and there is no reason as to why you should wait whatsoever."
Of course, the Orders did not envisage Greemblue "making submissions" in relation to the material provided to the valuer. Mr Mendelsohn's solicitor may have had the second offer in mind (see [11]), being an offer which did not form the basis of the Orders. It was unfair to suggest that Greemblue was in breach of the Orders. Rather, Mr Mendelsohn had acted contrary to the agreed process, as earlier described at [14]. One wonders how Mr Mendelsohn's solicitor would have considered the matter if the 'shoe was on the other foot' and Greemblue had provided the expert with the Originating Process and affidavit in support, notwithstanding the objection of Mr Mendelsohn.
On 14 November 2021, Mr Mullins wrote to the parties advising, "I do not wish to be in the middle of a dispute between the parties", but suggested some work which he could undertake that was not dependent on the information provided to date. Mr Mullins sought confirmation that he should progress that aspect of his work. Greemblue's solicitor replied that Greemblue was of the firm view that he should review the bank and MYOB records "not least to test the veracity of the audited reports which you have been provided. That said, we will revert to you as soon as possible with an update as to how to proceed." Mr Mendelsohn's solicitor replied that this email was "alarming" given the Orders, "To be clear, neither party has any scope under those orders to tell you how you should (or should not) proceed with your valuation or what documents you should or should not consider." The valuation was sought "without further delay". Further, Mr Mendelsohn's solicitor wrote to Greemblue's solicitor, suggesting that the communications with the expert were a breach of the Orders "and an attempt by your client to undermine and manipulate the valuation process." This was perhaps a surprising suggestion in circumstances where Mr Mendelsohn's solicitor appears to have done precisely that.
Mr Mendelsohn's solicitor sought to relist the proceedings, sending an email to the associate to Black J: We are instructed to seek to have the matter relisted as soon as possible and to seek the following orders: 1. The plaintiff and its solicitors must not communicate with the independent valuer appointed pursuant to order 1 of the Court's orders on 17 September 2021 (Valuer) purporting to direct the Valuer as to what he may or may not do and what documents he can or cannot view or use in his valuation. 2. For the avoidance of doubt, the Valuer is at liberty to review all documents provided to him by the parties to date. 3. The plaintiff to pay the defendants' costs of the listing on an indemnity basis. That is, not only had Mr Mendelsohn undermined the agreed process documented in the Orders, Mr Mendelsohn now sought to injunct Greemblue's efforts to retrieve the situation.
On 16 November 2021, Experts Direct sought confirmation from the parties that Mr Mullins could proceed with the work outlined in his email of 14 November 2021. Mr Mendelsohn's solicitor replied that, under the Orders, "the parties do not have any right to tell Mr Mullins when he should or should not proceed with work. In accordance with order 1, Mr Mullins should be working to prepare that valuation and there is no need for the parties to provide written confirmation." Experts Direct replied that Mr Mullins would commence work on the matter. Greemblue's solicitor replied that Mr Mullins had agreed not to consider any valuation reports obtained by the parties and that matter remained in dispute. Greemblue's solicitor also suggested to Mr Mendelsohn's solicitor that Mr Mullins be provided with any other financial records of the company which were in the spirit of the Orders made on 17 September 2021 which he may request but the valuation reports ought not be used. To clarify, our client's objection was to the valuer being provided with copies of the valuations obtained by our respective clients. Those reports were partisan and were commissioned for the purposes of the dispute between our respective clients. The valuation reports were also the subject of disagreement between out clients, which is why an independent valuation was sought. The objection was, in essence, the same objection as your client raised in respect of the Originating Process and our client's supporting affidavit (notwithstanding that the valuer had requested them). That objection was understandable as we understood that documents of that nature should not be allowed to taint the independence of the valuer or his process. For that reason, we accepted your client's objections. Similarly, our client considers that the parties' respective valuation reports ought not be provided as those were documents obtained by the parties in the course of their dispute. The valuation should be truly independent and free from any influence from either party. …
Whilst this explanation was, with respect, compelling, Mr Mendelsohn's solicitor advised that he did not agree, "your client only wants the valuer to be provided with documents and be given access to documents that your client approves of … it is not for your client to tell him what he is to do." This rather ignored the reality of the situation, which was that Mr Mendelsohn wished the valuer to view a contentious document which was not part of the agreed process, which Greemblue did not agree should be included in the process and which Mr Mendelsohn provided over Greemblue's objection.
On 22 November 2021, the matter came before Black J. His Honour observed: HIS HONOUR: ... What is almost inevitable is that I will instead vacate the orders that I made; you have wasted whatever costs you have paid on this process and you will need to either prove the proceedings in a substantive way or, alternatively, effectively admit the matters that are necessary for the Court to make a valuation order and prove valuation by a contested basis. It seems to me that there is no way these orders can stand in circumstances that one does not have a valuation process that is proceeding on an agreed and co operative basis, still less if one has one party in effect exercising a right of veto on what may be made available to the valuer in a way that plainly has the potential to affect the outcome of the valuation.
After hearing from Counsel briefly as to standing the matter down to consider those observations, his Honour continued: HIS HONOUR: Well, let me take that course. If at the end of 15 minutes you ultimately decide that because of the need to take instructions because of the need to do any modelling that you may need to do, then you need further time, l will certainly give you that further time but at the moment I have to say it seems to me I cannot think of any circumstances in which I would allow this process to go forward as a mandated Court process without having confidence that both parties were committed to the way in which it was proceeding. The matter was adjourned to permit the parties an opportunity to reach agreement on how to proceed with the valuation.
The next day, Mr Mendelsohn's solicitor wrote to the expert again, providing instructions and documents in answer to a request for information issued by the expert on 20 November 2021. On 24 November 2021, the expert advised that he had now received final information requested and was in a position to finalise his report.
On 25 November 2021, Greemblue's solicitor wrote to his colleagues noting that Greemblue did not agree with the information made available, and representations made, to the expert in recent days in circumstances where the parties were directed to attempt to agree the process for instructions and information to be given to the expert for him to perform his valuation. Greemblue also had substantial concerns as to the accuracy of some of the information provided to the valuer prior to that time, which may have impacted upon the valuation process. Further, on 23 November 2021, Mr Mendelsohn's solicitor had sent a considerable amount of information to the expert before any further attempt to reach agreement between the parties had been made, making agreement less likely. In the circumstances, it was suggested that the joint valuation process could no longer proceed and the Orders should be vacated and the proceedings to continue in an orthodox manner. Proposed orders were provided.
Also on 25 November 2021, the expert provided some details on the information which he had taken into account in preparing the valuation, being the MYOB information, information provided by the bank, the audited financial statements and tax returns, information obtained from Mr Mendelsohn's solicitors on 23 November 2021 in respect of shareholdings and a 'payables' report in respect of payments made to a former shareholder. On 26 November 2021, Greemblue's solicitor advised the expert that Greemblue was concerned that some of the information provided to him may be factually incorrect or incomplete. Nor had the expert been provided with a considerable amount of information on documents which would be pertinent such as earlier audit reports, business information, abnormal one-time adjustments and business forecasts.
Greemblue's solicitor is instructed and believes that Greemblue has genuine concerns that the information provided to the expert does not provide a complete picture of the Company and that financial reports and documents which Greemblue wishes to provide the expert has not been provided. Some of the information provided to the expert to date may be inaccurate or incomplete. The parties are unable to agree upon what information should be provided to the expert to complete his valuation engagement, including in relation to matters such as "add backs".

SUBMISSIONS

The second defendant sought a declaration that these proceedings were settled by agreement between the parties on terms set out in Orders. In making those Orders by consent, judgment was said to have been entered to give effect to a compromise agreement between the parties and resolving the proceedings between them. Rule 36.1A(1) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) provides that "[t]he court may … give judgment, or order that judgment be entered, in the terms of an agreement between parties in relation to proceedings between them". The Order facilitated the enforcement of the compromise, but it was the agreement of the parties that settled its terms: Attwells v Jackson Lalic Lawyers Pty Ltd (2016) 259 CLR 1; [2016] HCA 16 at [62]. Section 73 of the Civil Procedure Act 2005 (NSW) permits effect to be given to a settlement agreement by order in the proceedings that are settled, without the parties being required to commence separate proceedings to enforce that settlement agreement: Katter v Melhem (2015) 90 NSWLR 164; [2015] NSWCA 213 at [84]-[86]; Gorczynski v Bendigo and Adelaide Bank Ltd [2016] NSWCA 170 at [6]. The scope of the power in section 73 was discussed by Basten JA in Gorczynski at [6]-[8].
The second defendant submitted that the correspondence exchanged between the parties, constructed objectively, made plain that they intended to resolve the proceedings on terms which they reduced to writing in the form of the Orders, which are sufficiently certain. The Orders set out an agreed process for a valuation to occur by an independent valuer following which he was obliged to purchase the plaintiff's shares in the Company for the price determined. A commercial bargain was reached between the parties and the Court will endeavour to give effect to a contract reached between businesspeople, even if its terms are not fully or well stated: In the matter of Leslie Muir Holdings Pty Ltd [2019] NSWSC 1519 at [38]. In these circumstances, it was submitted that the Court did not have power to set aside the Orders. While a power exists to set aside a judgment or order "if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith" (UCPR rule 36.15(1), or if the parties to the proceedings consent (UCPR rule 36.15(2)), that was not this case. Further, even if the Orders were set aside, the underlying settlement agreement was said to remain binding.
The second defendant sought consequential orders to deal with the problems encountered thus far. The Orders did not expressly provide an ability for the parties to identify to the valuer a list of documents they considered relevant to the financial affairs of the Company and the valuation of shares, or for the parties to make submissions to the Valuer in respect of the valuation being undertaken. The second defendant submitted that such terms could be implied to bring business efficacy to the underlying settlement agreement reached, or because they are necessary for the purpose of implementing and giving effect to the Orders.
The second defendant noted that Black J granted the parties liberty to apply. Such liberty is exercised to assist the parties to work out the finality of the valuation: Australian Hardboards Ltd v Hudson Investment Group Ltd (2007) 70 NSWLR 201; [2007] NSWCA 104 at [50]-[54]. The second defendant submitted that the Orders contemplated the parties communicating with the valuer and the valuer being provided with documents relevant to the valuation exercise. Order 3 required the parties to provide the valuer full and unimpeded viewing access to all books, records and accounts of the Company. It was said to be self-evident that the valuer will not know what documents exist unless the parties told him. Order 6 provided that all communications between the valuer and the parties must be in writing and copied to the solicitors for both parties. The regime contemplated the parties communicating with the valuer without the consent of the others. The consequential orders were said to be necessary to give effect to the settlement regime agreed between the parties set out in the Orders. The terms proposed were said to be so obvious that they 'go without saying' because the interested parties need to be able to identify the Company's documents and make submissions to the valuer. The terms proposed were said to avoid an unworkable situation where the valuer is left in the dark as to what documents exist, and is left to work it all out himself without assistance by the parties by written submissions.
Greemblue submitted that the Orders should be vacated as the Orders cannot stand in the absence of an agreed and cooperative basis for the valuation to proceed. The matter can then proceed on an orderly, contested basis. Rather than the Orders recording a settlement between the parties, the Orders were interlocutory in nature and could be set aside pursuant to the Court's inherent power to suspend, vary or discharge earlier orders - including consent orders - where circumstances arise which warrant the cessation of the continuance of the earlier order: Hutchinson v Nominal Defendant [1972] 1 NSWLR 443 at 447 per Isaacs J; Douglas v John Fairfax & Sons Ltd [1983] 3 NSWLR 126 at 134 per Hunt J; Morgan v 45 Flers Avenue Pty Ltd (1987) 11 NSWLR 573 at 578-579 per Kirby P, with whom Hope and Priestley JJA agreed. Further, rule 36.16(3) of the UCPR provides: In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it - (a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or (b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief.
The Order did not constitute a determination of a claim for relief, or question arising on a claim for relief. No evidence was led by the parties, no hearing was conducted and neither party was heard; the Court did not "determine" any relief, or questions arising. As such, the Court can set the Orders aside. Circumstances have arisen since the making of the Orders which "warrant ... a cessation of the continuance of the order as earlier made", being the breakdown in cooperation between the parties as to the valuation process: Hutchinson at 447.
The plaintiff submitted that the competing interlocutory process filed by Mr Mendelsohn is predicated on the necessity of the Court intervening in the matter, to impose upon the parties a regime of Mr Mendelsohn's invention, over Greemblue's opposition. That includes provision for submissions to the valuer, being the very "point of contention" noted by Mr Mendelsohn as having divided the parties "for some time" prior to the making of the Orders. The Court would have no confidence that a continuation of the process will produce a working, cooperative process between the parties. If the Court were to accede to Mr Mendelsohn's application, the resulting orders would be an amalgam of the original regime arrived at by consent, together with further machinery designed by one of the parties and imposed upon the other over its opposition. Further interlocutory skirmishes would likely ensue. The appropriate course was to abort the process and channel the parties' resources into resolving the question of valuation (if the prerequisites to the making of an order are conceded by the defendant) by contested hearing.

CONSIDERATION

Having regard to the pre-Order correspondence (described at [7]-[13]) and the terms of the Orders, I am not satisfied that the declaration sought by the second defendant should be made nor that the powers conferred by section 73 of the Civil Procedure Act ought be exercised. Whilst the Orders were not entirely clear, the Orders did not pretend to be dispositive of the proceedings. The Orders did not, for example, provide that on completion of the valuation and buy-out, the proceedings were dismissed. Nothing was said on the subject of Greemblue's application for declaratory relief, nor its application for an order in respect of the District Court proceedings, nor costs, which were reserved. It appears to have been envisaged that, if the valuation and buy-out went smoothly, what remained of the proceedings may be otiose, but nor did this necessarily follow as a buy-out of Greemblue's shares had no implications for the District Court proceedings. The Court may still need to determine whether there has been oppression such that the Company should be required to discontinue to those proceedings. The question of costs remained to be resolved.
On 20 October 2021, Black J adjourned the proceedings for directions on 22 November 2021, noting that the parties had commenced the engagement of an expert to undertake a valuation of the shares, and the adjournment being "intended by the parties to facilitate the finalisation of that process." Again, the notation did not suggest that completion of the valuation and buy-out would resolve the proceedings. Rather, the Orders bear the hallmarks of interlocutory orders which the Court may vary or discharge where the circumstances warrant the cessation of the continuance of the Orders.
Thus, I do not consider that the Orders gave effect to a settlement of the proceedings, nor was judgment thereby entered to give effect to a compromise agreement. Nor do I consider that the implied terms proffered by the second defendant meet the requirements described in the authorities. It cannot be said that the plaintiff would have agreed to such terms if the parties had turned their minds to it at the time. Given the history of disagreement between the parties, the Orders were carefully framed to identify and limit the sources of information on which the valuer could rely. The implication of a term permitting the parties to proffer other information to the valuer was at odds with that process. Nor did parties consider that they could make submissions to the valuer, this being the "second offer" which was specifically rejected: see [11]. Neither of these terms are so obvious that 'it goes without saying'.
True it is that Mr Mullins has refrained from reading the defendants' valuation. But nor has he reviewed the documents which he did request at the outset, being the Originating Process and Mr Ghetto's affidavit. The working out of an independent valuation was disrupted, at an early stage. It is difficult to see how the figure arrived at by Mr Mullins can now quell the dispute between the parties in the circumstances. This has been a waste of time and money, and the second defendant has only got himself to blame. I do not consider that it is the Court's obligation to craft further orders to retrieve the position created by the parties' failure to adhere to their agreed process.
None of this, of course, is the fault of Mr Mullins nor Experts Direct, who have endeavoured to advance completion of their assigned task notwithstanding the breakdown in the arrangement agreed by the parties. The parties remain obliged to share equally the fees charged by Mr Mullins for his work. Mr Mullins is entitled to be paid in a timely manner.
It may be that, in the circumstances, the parties can agree that the costs should be borne differently. An appropriate course may be for Mr Mendelsohn to pay Mr Mullins costs in the first instance, those costs to thereafter be Mr Mendelsohn's costs in his cause. However, I did not hear from the parties on this topic when their respective interlocutory processes were heard and it is appropriate that they be given an opportunity to resolve the matter or proffer orders to deal with this aspect.

ORDERS

For these reasons, I make the following orders: 1. Dismiss the interlocutory process filed by the second defendant on 7 December 2021. 2. Vacate the orders made on 17 September 2021, save for Order 2. 3. Order the second defendant to pay the plaintiff and first defendant's costs of both the plaintiff and the second defendant's interlocutory processes filed on 7 December 2021. 4. List the matter for directions on 14 February 2022, including as to whether Order 2 made on 17 September 2021 should be varied.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 December 2021

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