'Under pressure' Weldon froze funding for Grain Exchange that led to losses, court hears

Thursday 5th May 2016

Former NZX chief executive Mark Weldon was under pressure from his board over the performance of acquisitions and over his own performance when he stopped funding for Clear Grain Exchange, Wellington's High Court has heard.

Tim North QC, counsel for Ralec, which sold the grain exchange to NZX in 2009, today set out his client's counter-suit against NZX for A$14 million plus bonuses. Weldon had hoped to turn the marginally profitable business into an 'Agri-Bloomberg' valued at between A$750 million and A$1 billion but the deal soured when the grain exchange missed targets and the parties ended up in an acrimonious dispute. Ralec claims breach of contract which meant it failed to get the earn-outs that were due if the business had performed.

North cited a letter from the NZX board in August 2009 that approved and endorsed Weldon's Agri-portal strategy and committed to an investment of $100 million. But he said that funding was stopped by January 2010 amid concerns about NZX's own expansion plans.

There was underperformance in all of NZX's targeted acquisitions at that point, North said. Weldon "was under significant pressure from his own board about his own performance."

"Weldon had been under real concern about the question of NZX's liquidity," North said. "He felt there was a need to put some form of freeze in place."

That freeze included getting rid of key Clear staff members including former owners Grant Thomas and Dominic Pym of Ralec and the grain exchange's chief financial officer, as well as halting technical development of the Agri-portal, North said.

Weldon had sent an email in January about getting rid of Thomas, describing a potential replacement he had met as "exactly the right guy to run Clear."

Part of North's argument is that NZX then attempted to impose criteria on Ralec that weren't part of the original agreement, such as making it a precondition of funding the portal that Clear had won between 15 and 25 percent of the grain trading market in Australia.

"There's no precondition to the provision of finances and resources for the Agri-portal that Clear achieve a market share of the grain market, or that the exchange generate a level of proprietary data which was greater than that generated at completion," North said. "The portal was not dependent on the market. Those two parts were not interdependent, each can be successful without the other."

Ralec is attempting to make a claim against NZX under the Fair Trading Act, while arguing it can't itself be sued under that law because it operated in Victoria, Australia, not New Zealand.

NZX's lawyer for the counter-claim, David Cooper, said before completion, the idea that the Agri-portal would be built off the success of the Clear grain exchange was shared between parties.

"It's for Ralec to prove non-compliance and loss resulting from that non-compliance, and that more resourcing would have resulted in targets being met," Cooper said. "Everyone was embarking on unchartered territory. No one quite knew how it would turn out."

NZX is suing for between A$20.7 million and A$37.6 million, claiming Thomas and Pym, and their companies Ralec Commodities and Ralec Interactive misled NZX when it bought the commodities trading platform with “wildly inaccurate” forecasts.

BusinessDesk.co.nz

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