Insider trading claim settled

Former Tranz Rail managing director Michael Beard has settled an insider trading claim for $155,691 - without any admission of liability on his part.

Beard, who faced allegations that he sold a parcel of 35,248 shares while having inside information, has agreed to assist the Securities Commission with its action against five remaining defendants in the Tranz Rail case.

Four defendants - Midavia Rail Investments (owned by David Richwhite and Sir Michael Fay), Richwhite, Berkshire Fund III and Carl Ferenbach - have indicated they will contest the commission's claims against them over share sales. But it is unclear whether former Tranz Rail chief financial officer Mark Bloomer has the resources to withstand a lengthy court battle.

Justice John Wild, who considered the Beard settlement agreement in the High Court at Wellington yesterday, approved the deal in the "public interest".

The court was told that Beard "was or may have been" in possession of inside information when he traded the shares. As a result, the commission had a case against him, to which he considered he had a defence and to which he admitted no liability.

A memorandum said: "Apart from that limited trading to fund payment of a tax liability arising from the issue of the shares to him, [Mr] Beard did not sell any of his other holdings in Tranz Rail.

"After the sale of the small parcel of shares in March 2002, he in fact continued to accumulate shares and options in Tranz Rail until October 2003, when he accepted the takeover offer made by Toll Holdings, suffering a significant loss."

A press statement showed Beard had 270,496 shares in March 2002, but by the takeover six months later, his holdings had swelled to 513,000 shares, 790,000 options and 1,200,000 redeemable preference shares.

The settlement is $67,000 less than the commission's claim for compensation of up to $55,691.84 and penalties of up to three times that amount, with interest and costs.

Justice Wild said that Beard would not have agreed to assist the commission by providing information and evidence unless there had first been a settlement.

"Given his position in Tranz Rail at the material time, the third defendant's offer to assist in that way is likely to assist the commission with its case."

Midavia's lawyers rejected the notion that Beard's move had any bearing on the position of the other parties.

"He was plainly between a rock and a hard place because of the personal and financial cost of defending the proceedings - proceedings which we say should never have been issued," said Roger Partridge, of Bell Gully.

"His decision to extract himself from the proceedings has nothing to do with the merits of the commission's claims."

Proceedings against Beard will halt once the settlement figure is paid into a trust account at Toll NZ, the owner of Tranz Rail.

Judge backs Wellington venue for high-profile hearing

Senior High Court judge John Wild has put his oar into the jurisdictional spat over whether the high-profile Tranz Rail insider-trading case should be heard in Auckland or Wellington.

Midavia Rail Investments - an investment vehicle owned by Sir Michael Fay and David Richwhite - caused controversy when it filed its defence in Auckland's Commercial List instead of the High Court at Wellington where the action was originally laid.

Justice Wild yesterday upheld the Securities Commission's decision to again resort to the Wellington court for its settlement proceedings with alleged insider Michael Beard saying the plaintiff was Wellington-based and that share trading took place in "what was at the material time" a Wellington-registered company.

Midavia's lawyers want the case heard by the vastly experienced Justice Hugh Williams in the Commercial List. But Justice Wild noted that once the commission's action was filed, the case was promptly assigned to a "commercially very experienced judge".

That judge, Forrest Miller, has been on the Bench only 12 months but he has a wide experience in commercial litigation, specialising in securities, regulatory and competition law. He has also been chairman of the board of Chapman Tripp.

The dispute will be settled in the New Year.