Former NZX chief executive Mark Weldon was under pressure from his board over the performance of acquisitions and over his own performance when he stopped funding for Clear Grain Exchange, the High Court at Wellington has heard.
Tim North, QC, counsel for Ralec, which sold the grain exchange to NZX in 2009, yesterday set out his client's counter-suit against NZX for A$14 million plus bonuses. Weldon had hoped to turn the marginally profitable business into an "Agri-Bloomberg" valued at A$750 million to A$1 billion but the deal soured when the grain exchange missed targets and the parties ended up in an acrimonious dispute. Ralec claims breach of contract which meant it failed to get the earn-outs that were due if the business had performed.
North cited a letter from the NZX board in August 2009 that approved and endorsed Weldon's Agri-portal strategy and committed to an investment of $100 million. But he said that funding was stopped by January 2010 amid concerns about NZX's own expansion plans.
There was underperformance in all of NZX's targeted acquisitions at that point, North said. Weldon "was under significant pressure from his own board about his own performance". "Weldon had been under real concern about the question of NZX's liquidity," North said. "He felt there was a need to put some form of freeze in place."
That freeze included getting rid of key Clear staff members including former owners Grant Thomas and Dominic Pym of Ralec and the grain exchange's chief financial officer, as well as halting technical development of the Agri-portal, North said.
Part of North's argument is that NZX then attempted to impose criteria on Ralec that were not part of the original agreement, such as making it a condition of funding the portal that Clear had won between 15 and 25 per cent of the grain trading market in Australia.
"There's no precondition to the provision of finances and resources for the Agri-portal that Clear achieve a market share of the grain market ... The portal was not dependent on the market. Those two parts were not interdependent, each can be successful without the other."
Ralec is attempting to make a claim against NZX under the Fair Trading Act, while arguing it cannot itself be sued under that law because it operated in Victoria, Australia.
NZX's lawyer for the counter-claim, David Cooper, said that before completion, the idea that the Agri-portal would be built off the success of the Clear grain exchange was shared between parties.
"It's for Ralec to prove non-compliance and loss resulting from that non-compliance, and that more resourcing would have resulted in targets being met," he said. "Everyone was embarking on uncharted territory. No one quite knew how it would turn out."
NZX is suing for A$20.7 million to A$37.6 million, claiming Thomas and Pym, and their companies Ralec Commodities and Ralec Interactive, misled NZX with "wildly inaccurate" forecasts.