Court ruling clears the way for PPCS to raise its shareholding in Richmond

By Chris Hutching

Friday 21st June 2002

High Court judge Willie Young this week amended an injunction to allow PPCS to buy more Richmond shares but preventing it from selling a key 34% parcel that is the subject of a main court hearing in August.

Three weeks ago Justice Young forbade PPCS from all trading in Richmond shares when he granted an ex parte injunction to the two plaintiffs in the dispute - Richmond itself and a shareholder group controlling 2.1% of Richmond shares.

The judge said the position of plaintiffs would not be disadvantaged by allowing PPCS to buy more shares but PPCS would have to make a
commercial decision given the uncertainties arising from the litigation.

It is possible that further shares acquired might also come under the jurisdiction of the court depending on the outcome of the main hearing in August.

In addition to the disputed 34% stake, PPCS has also has nearly 17% of Richmond, acquired separately on the market.

This means PPCS will have about 52% of Richmond but not until February 2003 when a put option is exercised with Active Equities, which is at the centre of allegations that it has been "warehousing" the 34% stake for PPCS.

In his ruling, Justice Young accepted evidence from Richmond and the shareholder group revealing PPCS was involved in financing arrangements for third parties on two occasion.

The first was in February 1999 and involved Westpac providing funding for Hawke's Bay Meats to buy 34% of Richmond from the Meat Board (PPCS then bought HKM shares). The second occasion was when PPCS was ordered to sell the 34% and it chose Active Equities as a preferred buyer. PPCS gave funding assistance by paying Active Equities $12.5 million for redeemable preference shares and supported a cash shortfall indemnity in the form of a loan from Citibank.

Justice Young noted a statutory declaration provided by Active Equities principal Paul Collins. Other directors of Active Equities declined to provide declarations.

Mr Collins says in his affidavit the only arrangements that existed between PPCS and Active Equities were a sale and purchase arrangement and the issue of redeemable shares.

"Unmentioned was the guarantee ... I am a little surprised that the guarantee (or an arrangement that it be given) were not referred to in the declaration," Justice Young said.

In the absence of any representation from Active Equities there might be "an explanation for the declaration which has not occurred to me," he added.

When PPCS lawyer Adam Ross of Chapman Tripp sought to overturn the injunction at a hearing a fortnight ago he described the injunction as "draconian." It would give unfair advantage to PPCS's rivals seeking to control ownership of Richmond shares and would lock up $110 million worth of securities.

Mr Ross highlighted the irony of Richmond taking the action when its main shareholder was PPCS itself. If PPCS were found innocent at trial in August then it would have the privilege of paying 51% of the damages to itself.

"This is the tail of Richmond - the plaintiffs representing 2% of Richmond - wagging the dog, the other shareholders," Mr Ross said.

Comments from our readers

No comments yet