By Chris Hutching
Friday 3rd October 2003
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The battle the longest in New Zealand corporate history neared its end this week after an Appeal Court ruling left Dunedin-based meat co-op PPCS with a 62% controlling stake in Richmond.
The next move is likely to be a takeover offer by PPCS for more Richmond shares. A Privy Council appeal by the Richmond parties is unlikely given the costs and that many disgruntled shareholders have sold out ironically to parties they thought would form a voting block against PPCS but who have also subsequently sold out.
In the latest ruling the Appeal Court judges looked beyond the litany of dirty tricks to the appropriate role of the judiciary in influencing market activities and they concluded penalties imposed by the High Court went too far.
Even so, the fallout for lawyers, accountants and executives involved in the affair is continuing. Several Richmond executives have quit over the past couple of years, the most recent being chief financial officer Simon Gibbs, who departed last week. He helped put together a capital notes issue in 1997 a move that frustrated PPCS chief executive Stewart Barnett, who viewed it as a device by the then Richmond directors to control the company's shareholding ahead of a stock exchange listing.
PPCS then arranged for nominees to buy Richmond shares without disclosing its interest and this required false substantial securityholder notices being lodged.
"The need for continuing pretence appears to have also led to unexplained departures from normal standards of governance by PPCS in its accounts," the Appeal Court said. "We acknowledge that the active resistance by Richmond's board and shareholders at times was provocative and that on two occasions it involved dubious conduct but that does not excuse what PPCS did."
Mr Barnett has come under pressure from his own board and shareholders this year as revelations about the corporate games came to light in a series of court cases.
PPCS legal counsel David Stock was criticised by High Court judge Willie Young and might yet face Law Society sanction, although he will argue that all representations were in the name of PPCS.
Former PPCS auditor Ken Fergus is facing disciplinary action from the Institute of Chartered Accountants over allegedly failing to state possible contingent liabilities in the accounts.
"Richmond itself was not acquiescent during this period. Its solicitor, [Andrew] Morrison, made an attempt to make PPCS an insider of Richmond, by sending the PPCS' chief executive a letter containing confidential Richmond information, in an attempt to invoke rules concerning insider trading under the Securities Act as a hindrance to efforts to acquire control," the Appeal Court said. "This dubious initiative failed."
They also highlighted the "entrapment" of a former Citibank employee by a Richmond employee who was subsequently disciplined by the company.
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