Indignant PPCS tells court there was no 'tangled web of deceit'

By Chris Hutching

Friday 23rd August 2002

"Oh what a tangled web we weave when first we practise to deceive. These words of Sir Walter Scott from 1808, often wrongly attributed to Shakespeare, aptly summarise the culture of concealment and deception that has characterised the PPCS acquisition of shares in Richmond," Bill Wilson QC said in his summing up of a two-week court case, in its closing stages yesterday in the High Court at Christchurch.

Mr Wilson was concluding his representations on behalf of Hawke's Bay meat company Richmond in a case that has focused on technical aspects of securities law in a long-running dispute with its Dunedin-based rival, PPCS. Along the way there have been embarrassing moments for both sides with recantations of affidavits and revelations about secret share raids for control of Richmond.

The Richmond side has changed its tack as the case advanced, retreating from assertions that PPCS twice "warehoused" a key 34% stake of Richmond shares between 1997 and 2001 after it was forced to sell them for breaching Richmond's constitution.

But Richmond still maintains while PPCS was involved in funding third parties to buy the 34% stake, this created sufficient prospect for control to create a "relevant interest" in favour of PPCS over the shares (which PPCS subsequently rebought at a higher price).

Both sides outlined what might have occurred under various default scenarios and whether PPCS would have ended up with any pre-emptive rights over the shares.

Mr Wilson, summarising Richmond's position, said PPCS remained a "defaulter" under the terms of the Richmond constitution from the time in 1998 when the Meat Board sold the 34% and PPCS was involved in funding the purchase by third party HKM Associates.

Subsequently, PPCS bought the shares but was forced to sell them on a ruling by Richmond that it had breached its constitution. PPCS then arranged funding so the shares could be purchased by a subsidiary of Active Equities (PPCS will have 51% of Richmond in February 2003 under an option arrangement with Active Equities).

Supporting Mr Wilson's arguments was Robert Dobson QC, representing minority Richmond shareholder group R J Bell, which argues PPCS breached the Securities Amendment Act by retaining an undisclosed relevant interest in Richmond. Mr Dobson argued PPCS' inroads into the register required full disclosure from the outset.

James Farmer QC, on behalf of Active Equities subsidiary Hawke's Bay Meats, in his closing remarks yesterday, argued while PPCS provided an indemnity to Citibank (against any loss) in the funding of the 34% stake by Active Equities in mid-2000, this did not constitute any kind of guarantee or surety. For example, if Active Equities defaulted on its repayments to Citibank then PPCS would be in the position of a "bare trustee" with no rights or relevant interest over the shares as per section 6(1)(f) of the Securities Amendment Act. Much would depend on the situation, Mr Farmer said.

PPCS did not have domination or command over Citibank's ability to sell or not sell the Richmond shares. The vendor finance was irrelevant and in any case when Active Equities eventually sold the shares there were other bidders and Active Equities expects to make $20 million out of the arrangement.

Alan Galbraith QC, for PPCS, outlined a series of similar arguments that PPCS funding for the third parties who bought the Richmond shares did not create any legal rights over them.

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