Ajdari v Poursoltan

[2020] FCA 1470

FEDERAL COURT OF AUSTRALIA

Ajdari v Poursoltan [2020] FCA 1470

File number:	NSD 1828 of 2019
Judgment of:	BANKS-SMITH J
Date of judgment:	12 October 2020
Catchwords:	PRACTICE AND PROCEDURE - notice to produce - application to stay notice to produce - notice to produce served for purpose of seeking documents for use at pending mediation - stay granted
Legislation:	Federal Court Rules 2011 (Cth) r 30.28
Division:	General Division
Registry:	New South Wales
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Number of paragraphs:	27
Date of hearing:	12 October 2020
Counsel for the Plaintiffs:	Mr D Barlin
Solicitor for the Plaintiffs:	MJF Legal
Counsel for the Defendants:	Mr J Gooley
Solicitor for the Defendants:	Newhouse & Arnold Solicitors

ORDERS

NSD 1828 of 2019

BETWEEN:

SHAHNAM AJDARI

First Plaintiff

HEALTH CENTRE POINT DENTAL PTY LTD

Second Plaintiff

AND:

PAYAM POURSOLTAN

First Defendant

BEAUMONT HILLS DENTAL SURGERY PTY LTD

Second Defendant

ORDER MADE BY:	BANKS-SMITH J
DATE OF ORDER:	12 OCTOBER 2020

THE COURT ORDERS THAT:

1.The question of the production of documents pursuant to paragraphs 1(b), 2(b), 3(b), 3(d), 4(b) and 6 of the notice to produce dated 28 September 2020 be adjourned to a date after the determination of the defendants' Amended Interlocutory Application filed 19 August 2020.

2.Costs of the application relating to the notice to produce are reserved.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BANKS-SMITH J:

1. This morning I heard an application on short notice to stay the operation of a notice to produce dated 28 September 2020 (Notice to Produce) issued by the plaintiffs and in anticipation of a mediation which is scheduled before a Registrar of this Court on 14 October 2020.

2. At the end of the hearing, and to facilitate preparation for the mediation, I informed the parties that I would grant a stay and publish short reasons later today.

3. This matter commenced in November 2019 and was allocated to the Corporations List and to the docket of Markovic J.

4. The first plaintiff, Dr Shahnam Ajdari, is a general medical practitioner.  The first defendant, Dr Payam Poursoltan, is a dentist, and Dr Ajdari's brother‑in‑law.  They are co‑directors and equal shareholders in the second plaintiff, Health Centre Point Dental Pty Ltd (HCPD).  HCPD occupies a retail shop in Kellyville in New South Wales.

5. In summary, it is claimed in the proceedings that Dr Poursoltan relocated the services and equipment relating to HCPD to a shop in the same shopping centre and started trading under a different name.  It is claimed that Dr Poursoltan made a number of transfers from HCPD's company accounts to various entities, including to the second defendant, Beaumont Hills Dental Surgery Pty Ltd (BHDS).  BHDS is a company owned and controlled by Dr Poursoltan.  Dr Ajdari has no interest in BHDS.

6. The plaintiffs claim that by his conduct Dr Poursoltan breached his duties to HCPD under s 181, s 182 and s 183 of the Corporations Act 2001 (Cth). The plaintiffs seek declarations, injunctions, a winding up order, damages and other orders permitting access to financial records.

7. Dr Poursoltan denies the allegations.

8. The matter was listed a number of times before Markovic J and a statement of claim and defence have been filed.  It appears there was a private mediation in or around March 2020 which did not resolve the dispute.  According to counsel for the plaintiffs, a notice to produce was served at that time and some documents were produced.

9. It appears there were then attempts made between the parties to resolve the dispute without the involvement of their respective lawyers.  They purported to come to an agreement by way of a document which was signed on 2 June 2020 (June Document).  The June Document is headed 'Settlement Offer' and contains an offer said to be made by both parties.  It is signed by both Dr Ajdari and Dr Poursoltan.  The June Document provides that if the offer is accepted it will be formalised into a deed of settlement by both sets of lawyers.  A proposed deed of settlement was prepared and provided by the defendants' solicitors to the plaintiffs.  It has not been executed.

10. A dispute arose as to whether or not the June Document constitutes a binding contract.

11. On 16 July 2020 Markovic J ordered that the question of whether the June Document is binding be determined prior to and separately from all other questions in the proceedings (Agreement Dispute).

12. The determination of the Agreement Dispute has been allocated to my docket and is listed for hearing on 11 December 2020.  The parties have filed concise statements addressing the scope of the Agreement Dispute.  The documentary evidence said by the parties to be relevant to the resolution of that question has already been filed.

13. On 4 August 2020 and in the course of case managing the Agreement Dispute, I directed the parties to attend a mediation.  I said at the time that the fact that the parties have attempted to resolve the disputes between them previously suggests they may be able to do so again, and there has to be some hope that a mediation might be successful.

14. There were further case management hearings on 18 August 2020 and 10 September 2020.

15. The plaintiffs then issued the Notice to Produce.  That Notice came before a Registrar on 7 October 2020.  It is apparent that the defendants agreed to provide certain documents but the balance of the Notice to Produce was held over and remains in dispute.

16. On 7 October 2020 the defendants filed an interlocutory application seeking to have the Notice to Produce stayed. This is the application that was listed before me today. The plaintiffs assert the documents are required for the purpose of the mediation. They disavow reliance on the Notice to Produce for the purpose of the December 2020 hearing (should it be required) and accept that the requested information is not relevant to the Agreement Dispute. That gives rise to a question of whether r 30.28 of the Federal Court Rules 2011 (Cth) has any application in the circumstances, but it has not been necessary to resolve that question for the purpose of today's determination. The plaintiffs' legal representatives contend that they cannot advise their clients as to the potential value of shares in HCPD and other matters that might relate to the underlying dispute without certain accounting information and that, in effect, lack of access to such information limits the value of the mediation.

17. At this point it is appropriate to note the 'documents' that remain in issue under the Notice to Produce.  The plaintiffs seek production of the following documents or things:

    1All management accounts, for or in respect of the Period [1 June 2014 to 30 June 2019] of any of the following:

    …

    b.        Beaumont Hills Dental Surgery Pty Ltd.

    2All management accounts, for or in respect of the Period, of any of the following:

    …

    b.        Beaumont Hills Dental Surgery Pty Ltd,

    including any accounts contained on any MYOB data file, Oasis practice management system data file and or csv file for [relevantly Beaumont Hills Dental Surgery Pty Ltd].

    3        A user name and password for unrestricted access to:

    …

    b.The MYOB data file for Beaumont Hills Dental Surgery Pty Ltd for the financial years 1 June 2014 to 30 June 2019 inclusive.

    …

    d.The Oasis practice management system data file and or csv file for Beaumont Hills Dental Surgery Pty Ltd for the financial years 1 June 2014 to 30 June 2019 inclusive.

    4        A read only user name and password for access to:

    …

    b.The XERO data file for Beaumont Hills Dental Surgery Pty Ltd for the financial years 1 June 2014 to 30 June 2019 inclusive.

    …

    6The Excel spreadsheet used to calculate and pay contracting dentists working for Beaumont Hills Dental Surgery Pty Limited for the financial 1 June 2014 to 30 June 2019 inclusive.

18. It is readily apparent that the categories of documents sought are broad, relate to a lengthy period of time and on their face involve a considerable intrusion into the business records of the defendants.  I note in particular that requested items 3 and 4 require passwords for access to a broad range of data of BHDS.

19. The question is whether it is appropriate to require production of the documents and information ahead of a mediation to be conducted in two days' time.  I do not consider it appropriate and accordingly will stay the operation of the Notice to Produce for the following reasons.

20. Expressed generally, it is not necessary for parties to have all information relating to proceedings available to them prior to a mediation.  It is not uncommon for mediations to proceed before the exchange of evidence and before discovery.  They may be conducted even prior to the exchange of pleadings.  The timing and number of mediations depends upon the nature of the matter and the attitude of the parties.  The flexibility as to when a mediation may be conducted is one of its attractions and purposes.

21. In this case, an overarching concern is the question of the continued incurring of costs by the parties, who face one and potentially two contested hearings (to resolve the Agreement Dispute and potentially the underlying dispute) in circumstance where their prior conduct suggests a willingness to resolve their dispute regardless of access to any further documents.

22. The Notice to Produce was issued only after the matter was referred to mediation by me.  Prior discussions self-evidently proceeded between the parties without requiring the information now sought.  It has not been suggested that the mediation will be of minimal potential unless the information is available.

23. The parties seem to be at odds as to whether the scheduled mediation relates solely to whether or not the June Document is binding or whether it was intended to provide an opportunity for the parties to resolve the overall dispute.  In my view, an attempt to delineate the bounds of a mediation is artificial when there is in play a dispute about whether or not the matter has settled.  In this case the parties have attempted to resolve the underlying dispute before and so it seems a matter of common sense that they should try and resolve it again.  To do so may avoid the concomitant uncertainty and costs of at least one and potentially two contested hearings.  Whether that means attempting to agree some compromise about the particular terms of the June Document or whether it means approaching settlement from another angle is a matter for them.

24. The defendants submit that even if the documents were produced, the defendants would need to explain aspects of them by affidavit evidence and expert evidence.  They submit that there would be factual disputes.  They submit that the value to the plaintiffs of the information before the mediation is in any event circumscribed.  Although I accept that counsel raised this issue only by way of submission and not evidence, I do not doubt that production of and access to the type of information that the plaintiffs seek would require close consideration and attention by the parties, something that is unlikely to be possible prior to (or at) the mediation.  In other words, I accept that the value of the production of and access to the documents at this point in time is unclear, and does not outweigh the potential benefit by way of costs saving to the parties of proceeding with the mediation armed with the knowledge that the respective parties already have about both the circumstances of the June Document and the underlying dispute.

25. The defendants also submit that bearing in mind the nature of the relevant businesses, there are confidentiality issues to be addressed.  The plaintiffs offer to agree to confidentiality undertakings.  I do not consider that the scope of such an undertaking can be considered or determined properly in the short time period prior to the mediation and without the risk of disclosure of confidential information.

26. The appropriate order is that the question of production of the balance documents the subject of the Notice to Produce be adjourned to a date after the determination of the Agreement Dispute.  The documents may be relevant to the ongoing proceedings if they are not resolved, but I do not consider them sufficiently relevant to the mediation so as to persuade me that I should compel production.

27. I will reserve the question of costs.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Banks-Smith.

Associate:

Dated:       12 October 2020