Bitter feud precedes Elders settlement

By Deborah Hill Cone

Friday 16th July 2004

Elders Finance has resolved its name dispute with the former owners of the company in a confidential settlement that court documents show will not be finalised until the end of next year.

The deal was reached almost literally on the courtroom steps during hours of pressured negotiations on the day an application was due to be heard for an interim injunction stopping the Hanover subsidiary Elders from using the name.

The Eric Watson and Mark Hotchin-owned finance company was being sued by the company's former owners interests associated with Auckland businessmen Eric Spencer, Ian Wills and Stuart Chapman who claimed under the 1999 sale and purchase agreement they still own the name and logo.

The former owners say they have a licensing deal with Elders in Australia giving them the exclusive right to the Elders name and logo.

Elders Finance retorted this was a confusion-of-name case.

It claims it bought the goodwill attached to the name for $12.9 million at the time of the 1999 deal and that it developed any goodwill attached to it now.

Last month, Justice Rhys Harrison noted the parties reached a settlement on all outstanding issues, with terms of settlement not to be completed until December 31, 2005.

The two parties supplied a two-sentence statement to the National Business Review saying they had "satisfactorily" resolved the issue, which does not make it clear whether Elders Finance has secured long-term rights to the name and how much, if anything, it is paying to the plaintiffs.

But court documents obtained by NBR show how bitterly both sides were fighting for the brand.

They reveal how:

Elders Finance has spent $4.8 million building its brand but also argues its logo is not "artistic" enough to be protected by copyright;

Elders' former owners paid Elders in Australia a peppercorn rental of only $1 for rights to the Elders name while Mr Spencer said the figure was low because he took on liabilities of $20 million at the same time;

Mr Watson's accountant William Gibson, a friend of Mr Spencer's, played go-between;

Hanover chief executive Kerry Finnigan claims Mr Spencer approached him at a meeting last year to work in a new finance business with him while another version of events is that Mr Finnigan suggested in the future Mr Hotchin and Mr Watson would not be involved with Elders Finance; and

Mr Spencer's affidavit records how his relationship with Mr Watson and Mr Hotchin had become unworkable in 1999 after "allegations of a very serious nature concerning the conduct of [Fresha Holdings] business were made by Mr Watson and Mr Hotchin against Mr Wills and me. These allegations were unfounded and were eventually formally withdrawn. Given the gravity of the allegations made against me I was unwilling to continue any business relationship with [Mr Watson and Mr Hotchin] in any form."

In their statement of claim the plaintiffs Fresha Holdings, Elders Pastoral Holdings, Elders New Zealand and Elders Limited say Mr Watson and Mr Hotchin had rights to use the name for four years from the time of the sale.

For the first two years from the settlement date Elders Finance was "to use its best endeavours" to effect a change of name. It could request an extension for a further two years.

But the total period expired at the end of 2003, according to Fresha's court file.

It claims Elders Finance told Fresha at the beginning of 2001 it intended to phase in a new name, United Finance, over that year but that didn't happen.

Despite being told it was not entitled to use the name after December 2003, Elders Finance continued to do so, Fresha says.

As part of its case to prove Elders Finance was trading on the historical pedigree of the Elders name, Fresha commissioned a pilot survey of investors and investment advisers asking them what they thought of Elders Finance.

The survey, carried out by Phoenix Research, showed 11 out of 17 finance company investors said they could be attracted to invest with Elders Finance because they provide funds for the farming and rural sector.

In fact, its most recent annual accounts show just 5% of Elders' book goes to rural borrowers while 64% goes to property investors and developers.

Just one of the 17 investors identified correctly that Elders Finance began operating six years ago.

"Most other opinions have the company beginning in the first half of the 1900s," the survey found.

One out of 30 finance company investors knew Elders Finance was owned by the Hanover Group.

"Elders Finance was much more often assumed to be owned by either Elders New Zealand or Elders in Australia."

Twenty investment advisers were questioned, with five of those saying they would have recommended Elders to their clients within the past four or five months (to October 2003.)

Asked to rate the company on a scale of one-to-10, the average rating was 5.2, compared to 6.6 from the investors themselves.

"By comparison with investors, advisers are much less likely to see Elders Finance as a secure company where an investor can be sure they will get their money back [eight out of 20 advisers].

"Advisers are also less likely than investors to see Elders Finance as having a good reputation."

But the research company pointed out the study was from a small sample and the difference may reflect wide margins of error.

In its own court filings Elders Finance produced an affidavit from a marketing academic criticising the rigour of the study, which was carried out on a group of only 30 investors and 20 investment advisers.

For its part, Elders Finance claims the former owners from whom it bought Elders (P Spencer Family Trust, the Stewart Family Trust and the Bryan Family Trust) are different parties from the plaintiffs in the court action.

And so it claims the plaintiffs have not got an established name in the financial sector.

"There is nothing preventing a finance company trading with a similar name to an agricultural company," Elders' submissions say.

Meanwhile, a related case taken by Elders Finance and Hanover Financial Services against Mr Spencer and his lawyer Patrick Wilson (as trustees of the P Spencer Family Trust) as well as Evia Finance and Elders New Zealand, has also been settled, a note from Justice Warwick Gendall confirms.

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