Mixed result for Securities Commission in pre-trial judgement

The Securities Commission has met with both defeat and victory in the latest pre-trial judgment in its insider trading case against former Tranz Rail directors and shareholders.

Justice Hugh Williams, sitting in the High Court at Auckland, has rejected an application by United States-based defendants Carl Ferenbach and the Berkshire Fund III to freeze proceedings until after a Court of Appeal hearing later this year.

A Wellington daily newspaper reported today that in a victory for the commission, Justice Williams ruled Mr Ferenbach and Berkshire must file and serve statements of defence within 28 days.

In a setback for the commission, however, he granted an application by David Richwhite and his and Sir Michael Fay's investment vehicle Midavia Rail Investments to strike out the regulator's claim against them for pecuniary penalties, potentially worth tens of millions of dollars.

Justice Williams will not issue orders on this issue until after a February 14 telephone conference with the parties' lawyers.

The latest judgment follows a December hearing in Auckland.

The case dates from October 2004, when the commission filed proceedings against six defendants, alleging the former Tranz Rail insiders sold shares in 2002 while in possession of information that, if publicly available, would have resulted in Tranz Rail's shares being lower than the prices at which they sold.

The commission sought a declaration that each defendant is liable for compensation of up to 40 per cent of the proceeds from selling their shares, plus court-imposed pecuniary penalties.

Mr Richwhite and Mr Ferenbach, both former directors, were accused of tipping Midavia and Berkshire to sell. Former Tranz Rail chief executive Michael Beard and ex-finance chief Mark Bloomer settled with the commission without accepting liability.

The remaining defendants - Mr Richwhite, Mr Ferenbach, Berkshire and Midavia - deny any wrongdoing.

- NZPA