Legal eagle keeps Air NZ flying high

By FRAN O'SULLIVAN

When Air New Zealand's acting chairman, Jim Farmer, calls his board together early next week he will march straight into a new public furore.

Six directors who resigned on the eve of the $885 million Government bailout of the national flag carrier are eligible for large golden parachute payments under the company's rules.

Dr Farmer may have swapped his black Maserati for an Alfa - the well-earned booty from his successful legal career - but with the state now back in business, symbolism is also back in play.

Directors who have presided over New Zealand's biggest corporate loss - $1.4 billion - can draw three times their annual fees as retirement benefits.

Finance Minister Michael Cullen is frothing at the prospect of New Zealand-based directors being eligible for big payments, like $480,000 for former chairman Sir Selwyn Cushing and $270,000 for Philip Burdon, when 1000 to 1500 airline staff stand to lose their jobs.

Mr Burdon, a multi-millionaire and former National cabinet minister, was quick to stymie public wrath by saying he would not take such a payment.

But this did not stop Dr Cullen yesterday from having another savage whack at the "dysfunctional board", saying: "These kinds of payments would set a very bad example from the top."

The retirement benefits will quickly go the way of the remaining Air New Zealand directors' hefty $90,000 annual fees once Dr Farmer convenes his meeting, probably on Monday or Tuesday.

But the controversy will ensure he is once again back on our television screens, piping up on early morning radio shows and filling newspaper space.

It will also keep him even further away from resuming his career as New Zealand's foremost commercial barrister and specialist in competition law.

Dr Farmer is the Queen's Counsel of choice for companies such as Telecom, which seek him out when they have huge legal battles to mount to protect their commercial patches. They are battles which enable Dr Farmer to name his own price - frequently in the multi-millions.

For the past 40 years, Dr Farmer has quietly built a stellar legal career.

Blessed with an acutely sharp mind - he won a scholarship to Auckland's King's College - he later notched up a string of first-class degrees, culminating with a doctorate at Trinity College, Cambridge, in 1968 where he was awarded the Yorke Prize for his PhD thesis in law.

He was a partner in Russell McVeagh, at the time deservedly known as New Zealand's premier corporate law firm. He was made Professor of Competition Law at Auckland University and trod a brilliant path once he set out as a barrister and QC.

Dr Farmer represented the statutory manager in the Equiticorp case. where he took action against the Government, leading a legal brinkmanship game which ultimately resulted in a big payment for creditors. He represented Brierley Investments in the Winebox tax-dodging inquiry. He has fought highly technical and intellectually demanding competition cases.

Now Farmer is a household name.

Other directors of a more emollient persuasion might have buttoned their lips this week as Dr Cullen and Prime Minister Helen Clark delivered the board yet another roasting in the process of building voter support for their decision effectively to re-nationalise the national flag carrier.

No skilled commercial party seriously believes the Government will keep a hands-off stance. It has too much cash at stake and will itself be subject to political risk if Air New Zealand slashes provincial routes, particularly as election year approaches.

In a wodge of interviews, Dr Farmer has staunchly gone to bat for the Air NZ board, defending directors' reputations - particularly that of his predecessor, Sir Selwyn, who "honourably" stood down as chairman when a proposal surfaced that would have benefited major shareholder Brierley Investments - which Sir Selwyn also chaired.

In the past 48 hours, Dr Farmer has also directly - and very publicly - contradicted Dr Cullen on the thorny subject of whether Air New Zealand and its failed offshoot Ansett could have survived if the Government had quickly endorsed the board's request to lift the foreign ownership cap. Under this proposal Singapore Airlines could have lifted its 25 per cent holding to 49 per cent and led a recapitalisation of the airline.

Since May, Dr Farmer's independent directors' team - former ASB Bank managing director Ralph Norris, Sir Ron Carter of Beca Carter, and Liz Coutts, a highly respected professional director - has battled with Singapore Airlines and Brierley, Governments and regulators in New Zealand and Australia, bankers, creditors and an increasingly furious public, first to try to stop Ansett Australia falling over, then when that did not work, to get a bailout for Air NZ to stop it following Ansett to the wall.

Six weeks ago Dr Farmer was fighting off a bad cough which had developed into a chest infection as the inevitable stress of the long negotiations over the bailout continued.

"I don't think it's any wonder that all of us have been getting sick at some stage or other," he said.

He had taken time out to race his yacht Georgia at the Hamilton Island races in mid-August, but Australia's warm weather had not lessened his physical discomfort.

His partner and fellow barrister, Gillian Macmillan, had organised a surprise party for his 60th birthday. But by August 31, Dr Farmer was once again locked in negotiations and the "surprise" had to be quietly relayed to him to ensure that he turned up for his own celebrations.

His practice has been completely disrupted. The lucrative Southern Cross case in front of the Commerce Commission was recently deferred, though he found time to represent the Montana Group this year against Lion Nathan's takeover attempt.

In the past, Dr Farmer has railed against the 60-hour week, regarded as a norm in legal firms, which he said burnt out some of the best legal brains in the country. He has done 60 hours a week, and more, on Air NZ for much of this year.

More importantly, the six months effectively as full-time executive chairman have been at no extra charge: "I've done it all on my annual director's fee, $90,000 a year."

For a man who, publicly at least, professes he is "just a lawyer", Dr Farmer had the necessary skills to chair Air New Zealand through its crisis.

He skilfully used gambits, such as refusing to acknowledge the airline's liabilities for the Ansett Australian workers' entitlements, as part of his legal arsenal to force a quick commercial settlement.

To the Australian public it looked brutal when he said Air NZ had no moral or legal obligation to the workers, but in reality no cash is left to pay anyone, until the Government's first $300 million instalment is paid.

During the Equiticorp case's marathon 198-day hearing, Dr Farmer hired a counsellor to help meld his 10-strong team, complete with bristling legal egos, into a non-combative force.

He said that was like keeping a huge juggernaut on the road.

Ideal training for Air NZ.

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