Dirty tricks charges fly in Richmond, PPCS case

By JANE DUNBAR

Allegations of covert action, deception and concealment were made against one of New Zealand's biggest meat companies in the High Court at Christchurch yesterday.

Hawkes Bay-based Richmond and Dunedin-based farmer co-operative PPCS are seeking a judicial declaration on the legal status of PPCS' shareholding in Richmond.

They are joined by a small group of Richmond shareholders seeking a ruling that PPCS should forfeit some or all of its Richmond shares.

In opening submissions for Richmond, Bill Wilson, QC, said "a pattern of deception and concealment on the part of PPCS" was of such seriousness that Richmond, in addition to seeking a declaration, now supported "the granting of relief" to the shareholders group.

Outside the court, a representative of the group, Robin Bell, said members were looking for PPCS "to forfeit as many shares as the judge thinks fit, and that could be up to 100 per cent".

PPCS owns 51 per cent of Richmond which, depending on the outcome of the case, would give it control of its North Island rival.

In a summary of Richmond's allegations against PPCS, Wilson said that "PPCS has acquired shareholdings in Richmond, and retains its existing and contemplated shareholding in Richmond, in a manner that breached the disclosure requirements of the Securities Amendment Act 1988".

After a legal tussle two years ago, a committee of independent Richmond directors ruled that PPCS had improperly acquired 35 per cent of Richmond. Those shares were therefore declared defaulter securities and PPCS was required to dispose of them.

But, Wilson said, "PPCS failed to dispose of all its defaulter securities ... with the consequence that it remains a defaulter in terms of Richmond's constitution".

"PPCS's breaches of the act and failure to dispose of all defaulter securities were a deliberate attempt to covertly gain control of Richmond in furtherance of PPCS's strategic objectives, without the knowledge of Richmond shareholders or the independent members of the Richmond board."

Opening for the small shareholders' group, Robert Dobson, QC, said PPCS's actions were "at the most serious end of the scale of cases involving breach of the disclosure requirements".

Reasons it was serious included: the strategic importance of the target company; the potentially controlling size of the share parcels and their value; and "the extent of deliberate misrepresentation involved in the face of clear hostility to the acquirer".

The plaintiffs' case was that "a substantial level of forfeiture of Richmond shares is required first to compensate, and also to deter".

Among the reasons compensation was due was that Richmond's business strategies had been exposed to the risk of compromise because it was forced to share those strategies and business secrets with a competitor.

"It would never have been exposed to that risk had the act been complied with," said Dobson.

PPCS' presence had been seriously divisive for the Richmond board, "a distraction for senior management, and created an adverse perception among suppliers and disaffection with shareholders".

"The seriousness of these breaches must be recognised as being amongst the most serious that could occur," said Dobson.

"If the outcome is a fine by court orders that is no more than a significant additional cost of the hostile acquisition of a significant stake, then the law if ineffective.

"Given the stakes involved, forfeiture amounting to a fine of anything up to $15 million to $20 million would, however unpleasant, still be a justifiable additional cost in PPCS's strategy for control of Richmond."

The hearing is expected to last at least nine days.