Case Study 1: Shareholder Disputes – Building Company

Dolman Bateman have conducted numerous forensic accounting investigations into disputes involving partners, directors, or shareholders in property developments.

When a property developer approached Dolman Bateman, they were engaged in litigation with a partner company over a large multi-million dollar residential development. As the project was coming to an end, a dispute emerged in relation to the costs incurred in the building’s development.

Dolman Bateman needed to establish whether the costs being charged were appropriate for the development, and also had to identify – amongst the accusations being leveled by each party – the relevant issues in regards to the dispute.

Dolman Bateman identified the following issues as being relevant to the dispute:

  1. There were no written partnership or shareholders’ agreement that clearly set out the responsibilities, duties, remuneration for work, profit sharing and capital requirements. Where a written agreement did exist, the agreement has not been complied with by one or more of the partners.
  2. Only one partner or director had access to the payment of accounts whether by cheque or electronic internet banking.
  3. There existed unauthorised payments to partners or directors or to creditors/suppliers.
  4. No distinction was made between the work activity (that is, the salary component) of the partners and directors compared to the profit sharing of the development.
  5. There existed confused or inequitable situations regarding borrowings, guarantees and securities offered over borrowings.

The outcome of these findings was that Dolman Bateman presented a report with the assistance of a chartered surveyor. As a result of the report, a clear finding in regards to the responsibility of each party was established. This led to a reconciliation between the parties out of court.