Tranz Rail ruling no turf war, says court

The Court of Appeal decided yesterday to put the news media straight over coverage of one of the initial skirmishes in the Tranz Rail insider trading case.

In a decision written by Justice Robert Chambers, the court said news reports had depicted "a turf war" between Auckland and Wellington over where the case should be held.

Not so, said the court.

Rather, a decision on where the Securities Commission's case should be heard would depend on interpreting part of the Judicature Act 1908, which included some "arcane" provisions in the High Court rules.

The upshot of yesterday's decision is that defendant David Richwhite can try again to have the case put on the commercial list in the High Court at Auckland.

However, he must still file a statement of defence in Wellington.

"This preliminary skirmish between the Securities Commission and the respondents has received a degree of publicity in the popular and financial press," the ruling said.

"It has been portrayed as a dispute between Auckland and Wellington, with an Auckland-based judge saying the proceeding should be determined in Auckland while a Wellington-based judge has held that the proceeding was correctly commenced in Wellington.

"Despite the impression, it is not a turf war between New Zealand's commercial centre and capital at all.

"Rather this round in what threatens to be a fifteen-rounder is concerned with whether or not the commission's proceeding is eligible for the High Court's commercial list and, if so, the correct way procedurally for it to be entered on that list."

The commission brought the case against former Tranz Rail executives and directors over $83 million of share trades made in 2002.

Richwhite's lawyers want the hearing in Auckland, which they say is convenient for them and overseas-based defendants.

The commission wants Wellington, where it filed proceedings last October and where it is based.

Yesterday's judgment overturns a ruling last month in the High Court at Auckland from Justice Hugh Williams. He said Richwhite's lawyers had succeeded, under High Court rules, in transferring the case to Auckland by endorsing the words "commercial list" on their statement of defence, filed in Auckland.

But the commission appealed.

It claims that the six defendants avoided losses of up to $33 million by selling shares, or tipping their companies to sell, when they knew Tranz Rail had unpublicised problems.

Richwhite and business partner Sir Michael Fay's company Midavia Rail Investments is first defendant.

Other defendants are Richwhite, formerly a Tranz Rail director, American investment fund Berkshire Fund III, its former managing director and ex-Tranz Rail director Carl Ferenbach, and former Tranz Rail finance chief Mark Bloomer.

All deny the allegations.

The sixth defendant, former Tranz Rail chief executive Michael Beard, settled a $155,691 claim against him on December 23 without admitting liability.

The story so far

* October 2004: Securities Commission files insider trading allegations in Wellington against six former Tranz Rail directors and executives.

* December 2004: Defendant David Richwhite files statement of defence in Auckland accusing the commission of abuse of process and using misleading information.

* February 2005: In a victory for Richwhite, Justice Hugh Williams rules the case should be heard in Auckland.

* March 2005: Court of Appeal rules out attempt to transfer the case to Auckland, but says they can try to obtain a court order that would transfer the case to Auckland.