In the matter of ICB Medical Distributors Pty Ltd and The International College of Biomechanics Pty Ltd; ICB Gait and Posture Clinic Pty Ltd; Foot Steps Orthotics Pty Limited [2018] NSWSC 1415

Supreme Court New South Wales

Medium Neutral Citation: In the matter of ICB Medical Distributors Pty Ltd and The International College of Biomechanics Pty Ltd; ICB Gait and Posture Clinic Pty Ltd; Foot Steps Orthotics Pty Limited [2018] NSWSC 1415 Hearing dates: 21 – 22 February; 10 – 13, 17 – 20, 26 April 2018; 20, 27 – 28 June 2018, 10, 12 – 13 July 2018 (written submissions as to orders 12 September 2018) Decision date: 14 September 2018 Jurisdiction: Equity - Corporations List Before: Black J Decision: Directions made for the filing and service of expert and lay evidence on which each party relies as to the valuation of shares in the ICB Companies and to prepare the matter for further hearing. Catchwords: ORDERS – directions for the filing and service of expert and lay evidence. Category: Procedural and other rulings Parties: Abdul Rahman Najjarine (Plaintiff/Cross-Defendant) Rodney St John Kielt (Defendant/Cross-Claimant) Representation: Counsel: F P Carnovale (Plaintiff/Cross-Defendant) V Whittaker/D Birch (Defendant/Cross-Claimant)

Solicitors: Antunes Lawyers (Plaintiff/Cross-Defendant) Webb Henderson (Defendant/Cross-Claimant) File Number(s): 2015/354468

Judgment 1. On 29 August 2018, I delivered judgment ([2018] NSWSC 1315) ("Judgment") in respect of an application brought by Dr Najjarine for an order for winding up ICB Medical Distributors Pty Ltd ("ICB Medical") and several other companies within the ICB group of companies (together, "ICB Companies"). I also determined Mr Kielt's Cross-Claim, by which he sought an order that he buy out Dr Najjarine's shares in ICB Medical. 2. I held that a winding up order should not be made. I noted that, although Dr Najjarine's Second Amended Statement of Claim had sought an order that he purchase all of the shares of the other shareholder in those companies, Mr Kielt, he had placed primary emphasis in seeking a winding up order at the hearing and had made no submissions of substance in support of an order that he buy out Mr Kielt's shares. I also observed (at Judgment [222]–[223]) that, where a winding up order was not made, several factors supported an order that Mr Kielt should buy Dr Najjarine's shares, rather than the reverse, where I had found oppressive conduct by both Mr Kielt and Dr Najjarine. 3. I held that orders should be made, as Mr Kielt proposed, that he purchase Dr Najjarine's shares in the ICB Companies at the date of judgment, with the price to be calculated on a basis that made adjustments for several transactions that I had addressed in the Judgment. I observed (at Judgment [221]) that: "It seems to me that an order for Mr Kielt to buy out Dr Najjarine's shares in ICB Medical and the other companies in the ICB Group on that basis will sufficiently address the oppressive conduct that has been established without the adverse impacts on third parties, including employees, arising from a winding up, and without allowing Dr Najjarine to use a winding up order to advance his and his associated entities' adverse interests as trade competitors of ICB Medical. In principle, a valuation could be undertaken of Dr Najjarine's equity in the companies in the ICB Group, by reference to future cashflow, excluding the liabilities to which I have referred above, and having regard to income tax that would properly be payable on those future earnings. The financial adjustments that would be required to bring about a purchase of Dr Najjarine's shares at fair value, by excluding debt that I have held was not properly recorded as owed to Mr Kielt, his associated companies and members of his family, are relatively straightforward and Mr Kielt has proposed orders that would largely bring them about. There is no reason to think that those adjustments would not address all relevant matters, given the detail of the exploration of ICB Medical's financial affairs in these proceedings. Where an order of that kind can appropriately address the oppression, a winding up order should not be made." 1. I also noted (at Judgment [224]) that: "While I will make an order that Mr Kielt buy out, and Dr Najjarine sell, Dr Najjarine's shares in the companies in the ICB Group, I will not order the appointment of a single expert to value those shares as Dr Najjarine proposed. It seems to me that there is little or no prospect that the parties would agree common assumptions for such an expert, and the appointment of such an expert would be the precursor to a range of further disputes as to his or her instructions. I will instead make orders for each party to serve their respective expert evidence, based on assumptions they agree or otherwise adopt at their own risk, in respect of the valuation of those shares. There will then need to be a further hearing to determine the value of Dr Najjarine's shares, if the parties cannot agree that matter so as to avoid the costs of that further hearing. I should add, for completeness, that I do not consider it necessary to make orders in respect of amounts that would be credited to directors' loans accounts, as proposed by Mr Kielt, if Dr Najjarine does not consent to them, even to the extent that they would be in his favour." 1. I directed the parties to bring in agreed Short Minutes of Order to give effect to the Judgment within 14 days or, if there was no agreement, their respective draft Short Minutes of Order and submissions as to any differences between them.