Ralec's Pym says Clear hoped rebates would lure major grain buyers

Monday 20th June 2016

The former owners of the Clear Grain Exchange believed that providing rebates to major buyers would put the business on a stronger financial footing even though they would have eaten through most of the fees generated from trading, the High Court in Wellington heard.

NZX bought Clear for A$7 million in October 2009, with two earn-outs of A$7 million tied to performance. The stock market operator is suing Dominic Pym, Grant Thomas, and their companies Ralec Commodities and Ralec Interactive for between A$20.7 million and A$37.6 million, and say they provided “wildly inaccurate” forecasts prior to NZX buying the Australian grain trading platform in 2009. Ralec's A$14 million counterclaim says NZX and former chief Mark Weldon under-funded the business which meant it couldn't meet earn-out targets.

Counsel for Weldon, Alan Galbraith QC, took 45 minutes to cross-examine Pym on Friday. He signalled his intended brevity to Justice Robert Dobson before beginning, to which Dobson responded that "nobody in this case need apologise for being short." The trial began on May 2 and is expected to last 11 weeks in total.

Galbraith ignored Pym's criticism of Weldon's management style and claims about the former NZX boss's aggressive behaviour, instead focusing on the rebate Pym wanted to give one of the largest grain buyers, Glencore, of A$2 per metric ton of grain traded for one million tons of grain. Clear's trading fee was A$2.50 per metric ton.

In his brief, Pym said NZX had stopped Clear from being able to encourage growers to sell through the platform by not allowing the rebate. Pym said he had thought other buyers and sellers, not knowing about the rebate, would see the volume traded on the platform and that would encourage them to use Clear.

Galbraith said that looking at the numbers, that extra volume "would almost net out" and would not materially change the financial result for a 12-month period.

Pym agreed, but said the increased volume would "encourage other traders to trade and create more volume which then impacts the financial numbers."

Galbraith also asked Pym about a document relating to NZX's planned Agri-portal, which he said "does make it quite explicit that it's the Clear Grain Exchange and another market which is seen as the integral foundation for the success of the agri-business portal."

Pym disagreed, saying that while the success of the Agri-portal would "no doubt be directed by the success of the markets within it and by the data available", he thought that the phrase 'integral part' meant the agri-portal would leverage those markets should they be successful, rather than its success being dependent on the markets.

After his cross-examination concluded, Pym was re-examined by the Ralec lawyers, which will continue today.

BusinessDesk.co.nz

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