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'Just the facts ma'am' approach wins in Bendon case

By Deborah Hill Cone

Friday 6th June 2003

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The woman who wanted to take over lingerie company Bendon, Josephine Grierson, yesterday won her Appeal Court case against Eric Watson's Cullen Investments and Pacific Retail Group.

Ms Grierson was granted summary judgment by the three-member bench, which found she was entitled to an $886,727 fee from Cullen after it succeeded in its takeover of the lingerie company, a transaction she had promoted to them.

The Appeal Court zeroed in on the crux of the case, the wording of two documents, one of them a March 29, 2001 agreement between Ms Grierson's company Jowada Holdings and Cullen Investments, which is wholly owned by Mr Watson.

Cullen's managing director Phil Newland and Ms Grierson had agreed to jointly go ahead with a type of transaction, later referred to as an "amalgamation squeeze-out," which was a way to buy Bendon without risking any assets except those of Bendon itself.

It was a scheme worked out by Ms Grierson, an economist and company director, and her then business partner David Hayde.

Ms Grierson and Mr Newland signed the March 29 agreement which stated Jowada would get a fee if Cullen went ahead and bought 51% or more of Bendon without Jowada.

Cullen did go ahead and buy Bendon but did not use the amalgamation technique, making a straightforward takeover bid.

In a nutshell, the case is about whether Cullen Investments was liable to pay the fee or whether the transaction hat went ahead was different from that referred to in the March 29 contract.

Cullen, represented by Chapman Tripp's Adam Ross, argued the transaction referred to in the March 29 agreement was limited to an acquisition using amalgamation.

Cullen acquired Bendon by a straightforward takeover offer, so the fee was not payable.

Mr Ross also said the March 29 agreement had been abandoned and even if it did remain in force, a January 11 letter offering Jowada the chance to take part in its takeover discharged Cullen's obligations.

The Appeal Court went to great lengths to emphasise it was not going to get caught up in the emotional issues of the credibility of Ms Grierson and Mr Newland.

It steered clear of the evidence in the affidavits in which the parties made criticism of the other.

"It is impracticable for the court in particular to address the assertions by Ms Grierson regarding the motives and conduct of Mr Newland," Justice John McGrath, delivering the decision, said.

"We emphasise that we make no assumptions, let along findings, concerning those matters."

But the court, analysing the exact wording of the 29 March document, found the word "transaction" had a general meaning and did not refer to a specific takeover mechanism.

The parties agreed that the fee would be payable if a takeover by Bendon by Cullen proceeded in any manner that resulted in the acquisition of more than 51% of the shares.

The court did not accept that the parties had abandoned the March 29 agreement.

Cullen's Mr Ross had argued that the company had offered Jowada, in a January 11 letter, a chance to participate in the takeover.

The court disagreed, saying: "We have no doubt that, considered objectively, the letter was written to present a proposal to make a significant equity investment, but one which would have the practical result of discouraging [Jowada] from doing so."

Cullen expected Jowada to fund its share of up to $20 million in equity without promising any access to Bendon's cash reserves, which was not offering Jowada a chance to take part "on proportionately equal terms," the Appeal Court found.

Justice McGrath also noted that the way Cullen eventually pulled off the takeover of Bendon was different from the way it was proposing in the January 11 letter to Jowada.

The court said it had sympathy for Cullen, which wanted the case to be fully heard so it could answer allegations against it in Jowada's affidavits, but said those allegations were not pertinent to the factual matter at the heart of the case.

Jowada was entitled to the fee and it was unnecessary to determine any other aspect of the case, Justice McGrath said.

Cullen Investments' Mr Newland was not available for comment but it was considered likely Cullen and PRG would appeal the judgment to the Privy Council.

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