Convictions
of two Apple Fields’ directors for failing to file audited financial statements
have been upheld by the High Court.
Fines of $30,000 stand against each of Mark Schroeder and Justin Prain.
The two directors argued failing to file
was beyond their control. The accounts
could not be signed off without consolidation of information from a “deemed”
subsidiary and management of this subsidiary refused to provide the required
information. The High Court ruled they
had not taken all reasonable and proper steps to get Apple Fields’ accounts
completed. They had not taken any advice
on how to overcome the issue, using the problem as an excuse not to complete
financial statements that were likely to get a “going concern” qualification
from an auditor.
Apple Fields started life in the 1980s as
an apple grower and exporter. By the
late 1990s it was a property developer.
Problems arose with a Yaldhurst Road subdivision in Christchurch owned
by Noble Investments Ltd. Apple Fields
contracted to manage the development, with an entitlement to share in final
profits. Mr Gordon Stewart was then a
director and shareholder of both companies.
The relationship between Noble and Apple Fields was such that Noble was
considered a “deemed” subsidiary of Apple Fields and was required to be
consolidated into Apple Fields’ financial statements. Evidence was given that
the two jont venture partners fell out: Apple Fields became tied up in
litigation against owners of adjoining land, caveats were lodged against the
Yaldhurst subdivision and this stymied the joint venture’s ability to obtain
finance. Mr Stewart flatly refused Apple
Fields’ auditors any access to Noble Investments’ financial records, recording
his frustration in one email that Noble “has now completely run out of money”
and that any audit of Noble was a “fairly low priority”.
Mr Schroeder and Mr Prain were convicted
as directors of Apple Fields for failing to file on time audited financial statements
for the 2011, 2012 and 2013 years.
Schroeder
v. Financial Markets Authority – High Court (11.01.16)
16.028