NZX Ltd v Ralec Commodities Pty Ltd
[2016] NZHC 2742
•15 November 2016
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2011-485-1299 [2016] NZHC 2742
BETWEEN NZX LIMITED
Plaintiff/First Counterclaim Defendant
AND
RALEC COMMODITIES PTY LIMITED First Defendant/First Counterclaim Plaintiff
RALEC INTERACTIVE PTY LIMITED Second Defendant/Second Counterclaim Plaintiff
GRANT DAVIS THOMAS Third Defendant
GRANT THOMAS NOMINEES PTY LIMITED
Fourth Defendant
DOMINIC LUKE PYM Fifth Defendant
PYM FAMILY PTY LIMITED Sixth Defendant
NZX HOLDING NO 4 LIMITED Second Counterclaim Defendant
MARK RHYS WELDON Third Counterclaim Defendant
Hearing: 2-6 May; 9-13 May; 16-20 May; 23-27 May; 30 May-2 June;
7-10 June; 13-17 June; 20-24 June; 27-30 June; 11-13 July 2016
Counsel:
B R Latimour, D J Cooper, B M Cash, R D H Massey, J P T Danaher, L R Hardcastle and E J Couper for plaintiff/counterclaim defendants (except Mr Weldon)
T J North QC, J K Scragg, C V Nicholson, G S J Berlic,
C R Gubb and T A V McKeown for defendants/counterclaim plaintiffs
A R Galbraith QC and D J Cooper for third counterclaim defendant
Judgment:
15 November 2016
NZX LTD v RALEC COMMODITIES PTY LTD [2016] NZHC 2742 [15 November 2016]
RESERVED JUDGMENT OF DOBSON J
Contents
Introduction and summary............................................................................................................... [1] A brief history .................................................................................................................................... [7] The Australian grain market in 2009 ............................................................................................ [33] The evidence .................................................................................................................................... [49] NZX’S CLAIMS .............................................................................................................................. [52] Alleged misrepresentations ............................................................................................................. [53] The pre-contractual dealings.......................................................................................................... [62] Assessing the alleged representations ............................................................................................ [77] Support representations............................................................................................................... [83] Alliance representations ............................................................................................................ [103] Volume representations .............................................................................................................. [111] Costs representations ................................................................................................................. [143]
No disputes representation ........................................................................................................ [151] Did any of the representations constitute misrepresentations? ................................................. [154] Support, alliance, volume and costs representations................................................................ [156]
No disputes representations....................................................................................................... [184] Inducement ................................................................................................................................ [200] Second cause of action: Fair Trading Act .................................................................................... [215] Jurisdiction ................................................................................................................................ [217] Was Clear “in trade” as contemplated by s 9?.......................................................................... [230] Were the representations misleading or deceptive? .................................................................. [232] Claims against third to sixth parties ......................................................................................... [234] Third cause of action: breach of warranties ............................................................................... [240] Interpretation of the warranties ................................................................................................ [242] Breach of warranties ................................................................................................................. [250] Limits on scope of the warranties, and time limit on claims for breach .................................. [254] Inducement/reliance .................................................................................................................. [266] Fourth cause of action: key shareholder guarantees .................................................................. [273] Fifth cause of action: extended liability under s 11 CRA ........................................................... [283] Summary as to liability on NZX’s claims .................................................................................... [292] RALEC’S COUNTERCLAIMS .................................................................................................. [294] Earn-out targets ............................................................................................................................ [299] First cause of action: post-completion conduct of the businesses.............................................. [308] Clause 9.6(c) – interpretation.................................................................................................... [310] “reasonable opinion” ............................................................................................................ [319]
“have regard to”.................................................................................................................... [326] Conclusion on interpretation ................................................................................................. [336] Did NZX breach clause 9.6(c)? ................................................................................................. [339] Alleged breach of cl 9.6(a) and (b), and cl 18.10...................................................................... [350] Ralec’s criticisms of NZX’s conduct of the businesses ............................................................. [357] Repudiation?.............................................................................................................................. [379]
Second cause of action: breach of duty of care ........................................................................... [383] Third and fourth causes of action: misleading and deceptive conduct, pre-contractual misrepresentations ........................................................................................................................ [392]
First representations: NZX committed to spending $100 million ............................................ [395]
Second representations: immediate and independent commitment to build the Agri-Portal .. [420] Third representations: extent of NZX’s support for the businesses ......................................... [435] Fifth cause of action: breach of fiduciary duty ........................................................................... [446] Sixth cause of action: knowing involvement by NZX4 and Mr Weldon ................................... [458] Summary as to liability on Ralec’s counterclaims ...................................................................... [460]
DAMAGES .................................................................................................................................... [461] Can NZX make out recoverable loss? ......................................................................................... [461] Approach to assessing loss ........................................................................................................ [466] Assessing the evidence on loss .................................................................................................. [476] Was expectation loss made out? ................................................................................................ [480] Was reliance loss made out?...................................................................................................... [488] Was NZX or NZX4 the appropriate claimant?........................................................................... [520] Can Ralec make out recoverable loss? ........................................................................................ [529] Ralec’s evidence ......................................................................................................................... [534] NZX’s evidence .......................................................................................................................... [543] Influences on NZX’s management of the business .................................................................. [555] The forces at work ..................................................................................................................... [569] Different strategies .................................................................................................................... [595] Prospects for an Agri-Portal ..................................................................................................... [629] COSTS............................................................................................................................................ [643]
Glossary of Abbreviations and Terms
Witness summary
Introduction and summary
[1] These proceedings involve:
(a) Claims by the plaintiff (NZX) alleging:
· misrepresentations that induced it to enter into a sale and purchase agreement (SPA) for the purchase of businesses from the defendants (Ralec), and
· breaches of warranty and false or misleading statements in breach of the Fair Trading Act 1986 (FTA) arising in the same transaction.
(b) Claims by NZX against the third to sixth defendants as guarantors of
Ralec’s liability, or as assignees of the benefits under the SPA. (c) Counterclaims by Ralec alleging:
· breaches by NZX of its post-acquisition obligations to resource the businesses in a way that compromised the prospects of Ralec earning additional consideration payments (earn-outs) for their sale; and
· pre-contractual misrepresentations and breaches of the FTA.
(d)Counterclaims by Ralec against NZX Holding No 4 Limited (NZX4), the NZX subsidiary that operated the businesses in Melbourne, and against Mr Weldon, NZX’s chief executive officer throughout the relevant period. Those claims allege breach of a tortious duty of care, breach of fiduciary duty and knowing involvement in NZX’s breaches of the FTA.
[2] For the reasons set out below, I have found that NZX has made out a number of the alleged misrepresentations. I have also found, on the basis that NZX is not liable to make further payments under the SPA, that it cannot make out recoverable loss flowing from those misrepresentations.
[3] On Ralec’s counterclaims, I have found that NZX breached its contractual obligation to assess what was required to adequately resource the businesses by having regard to the earn-out targets. However, Ralec cannot establish that, if adequately resourced, the businesses would have met the earn-out targets. On Ralec’s alternative claim for loss of the chance of being paid the earn-outs, it cannot make out a real and substantial prospect of meeting the performance thresholds required.
[4] The counterclaims against NZX4 and Mr Weldon cannot be made out.
[5] Both sides bolstered their claims with additional causes of action. None of the further grounds for claim or counterclaim alter the outcomes.
[6] I address the matters required to determine the various claims and counterclaims in the sequence listed in the index above.
A brief history
[7] Mr Weldon was the chief executive officer and a director of NZX from around the time of its demutualisation and listing as a public issuer in 2002. He left that position in 2012, after the events directly relevant to these claims and the
commencement of these proceedings. Mr Weldon led initiatives for NZX to expand the nature of its business, away from its core functions of operating the stock exchange for New Zealand listed equities and debt securities, and regulating the conduct of market participants. In the period up to 2009, NZX had some substantial successes with such initiatives, as well as some less successful new ventures.
[8] In mid 2009, NZX was actively looking for new business opportunities in the provision of information relevant to production and trading of agricultural commodities, the facilitation of trading for such commodities and settlement of transactions once commitments were made. NZX adopted the mantra “IMI”, meaning “information/markets/infrastructure”. In assessing the prospects for such new businesses, Mr Weldon likened the opportunity to an “Agri-Bloomberg”, and proposed the development of a business for global markets in agricultural data, news and intelligence similar to that which Bloomberg operates in and from the United States in securities and currencies. Mr Weldon considered that a successful global data and markets agri-business portal would be worth at least one per cent of the value of the Bloomberg businesses, thereby valuing the initiative at between NZ$750 million and NZ$1 billion.1
[9] Mr Weldon’s vision was for an electronic online platform by which those seeking access to the information (both proprietary and collated from other sources), and to the markets that might be operated, would access the various components of such businesses on-line. This strategy was subsequently called the Agri-Portal. By mid 2009, NZX had acquired a number of news services and publications servicing the New Zealand agricultural sector.
[10] NZX appointed one of its executives, Rachael Cross, to the role of head of acquisitions. She was charged with seeking out business opportunities in Australia that might constitute parts of the proposed Agri-Portal.
[11] On 14 July 2009, in an email to Mr Weldon, Ms Cross described the Ralec businesses as a potential acquisition for NZX. The Ralec businesses were, up to
completion of the SPA, operated as two companies called Clear Commodities
1 Common Bundle (CB) 6/04761.
Limited and Clear Interactive Limited. A condition of the sale of assets was that those companies would change their names. Because of the extent to which the pre- acquisition businesses are referred to as “Clear” in the evidence, I will maintain the distinction, referring to them as Clear until completion of the SPA, and as Ralec thereafter.
[12] The Clear businesses comprised, first, Clear Interactive Limited, which employed a “tech team” with expertise in designing and writing software for applications such as the operation of an electronic market for buying and selling commodities. The personnel in the tech team had a track record for successfully developing such software systems, including for an online real estate market.
[13] The second business, Clear Commodities Limited, was an embryonic electronic grain exchange. It would enable Australian growers of wheat and other grains, or their agents, to identify the location, amount and grade of grain they had available for sale, to place offers for its sale, and for buyers to make bids. The features included settlement facilities to process payment for grain transacted, and to transfer title to it.
[14] In 2008, the Australian Wheat Board (AWB) had lost monopoly control over trading in bulk grain for export from Australia. The monopoly over domestic grain sales, and export sales of packed grains, had previously been removed over a number of years. The founders of Clear saw this change in the grain market as an opportunity to introduce new means of facilitating trades in grain. At its inception, the new business had input from people with substantial experience in the Australian grain market, but those contributors had parted company with Clear by mid 2009.
[15] Mr Weldon was immediately enthusiastic. He responded to Ms Cross’s email, “I am 100 per cent there”. Matters progressed relatively quickly. Mr Weldon met the two principals of Clear, Mr Grant Thomas and Mr Dominic Pym (the third and fifth defendants) in Melbourne on 17 July 2009, and promptly established a team within NZX to complete due diligence on the proposed acquisition. Messrs Thomas and Pym travelled to Wellington for due diligence meetings on 30 and 31 July 2009. Tranches of information to assist with the due diligence were provided in the last
week of July and early August 2009. NZX retained external experts to assess the fitness for purpose of the software that had been designed by Clear, and also on the prospects for the electronic grain exchange to succeed.
[16] Both sides were exceptionally keen to consummate a deal. It was a case of a very willing seller, and a very willing buyer. This probably contributed to both sides materially overstating their position in pre-contractual dealings with the other.
[17] For Clear, Messrs Thomas and Pym had nurtured an exciting new business opportunity, which they treated as having excellent prospects, but which required a substantial injection of capital beyond the resources that were available to them. Clear’s shareholders had funded very substantial software development costs, plus the costs of researching the mechanics of the existing grain market. Their electronic grain exchange had been launched in the 2008/2009 grain season, but had failed to generate any significant revenue and incurred substantial losses. The businesses had accumulated losses of some $4.2 million by the time of this transaction.2 They projected substantial increases in trading on the exchange. The explanation by Messrs Thomas and Pym in evidence for this was their assumption that NZX would commit substantial further funding to promote the embryonic grain exchange. However, that expectation was not reflected in their projection of the level of expenses necessarily incurred to produce the projected revenue.
[18] Mr Weldon’s enthusiasm for using a successful grain exchange as the cornerstone for a much larger combination of agri-businesses extended to a representation that NZX was committed to spending up to $100 million on such ventures.
[19] A terms sheet was signed on 4 September 2009,3 and final terms of the SPA
were then negotiated. It was signed in Wellington on 2 October 2009, and later dated
5 October 2009. The transaction was completed on 30 October 2009.
2 All monetary amounts are in Australian dollars, except where specifically stated in different currencies.
3 CB12/09403.
[20] The acquisition was of the assets of the businesses, including a modest allocation for goodwill. The initial consideration was $7 million, which was paid on completion. Thereafter, Clear would become entitled to the first of the earn-outs of a further $7 million if the grain exchange traded more than 1.5 million tonnes4 of grain by 30 June 2010 or, alternatively, larger and somewhat more complicated earn-out targets set for the two ensuing years.
[21] The SPA provided for a separate earn-out to which Clear would be entitled if, by 31 October 2012, the businesses had completed the development of an operating Agri-Portal to NZX’s satisfaction. What would be involved in that was detailed in a schedule to the SPA.
[22] Both the Clear companies completed the SPA as vendors. NZX’s obligation under the SPA was to make payments to Clear Interactive as agent for the vendors, but the SPA also recognised Clear Interactive’s obligation to account for the sale proceeds to defined categories of “consideration recipients”. Those were, first, shareholders whose only interest was their equity in the shares held and, secondly, current staff shareholders. Different entitlements were recognised in schedules to the SPA for the different categories of consideration recipient, in relation to each of the potential earn-out payments.5
[23] Clear was required to give warranties as to the accuracy of the information provided to NZX during due diligence. The scope and application of those warranties is in issue in the proceedings. Messrs Thomas and Pym, and companies controlled by them that held their respective shareholdings in Clear, also guaranteed (on somewhat limited terms) certain matters relating to the performance of Clear’s obligations under the SPA. If its primary claims were made out, NZX also sought judgment under those guarantees, including against the fourth and sixth defendant
companies.
4 Metric tons.
5 The status of the consideration recipients was relevant to NZX’s fifth cause of action which sought to extend liability to them under s 11 of the Contractual Remedies Act 1979 (CRA). See [283]–[291] below.
[24] In covenants that were to apply after completion of the SPA, NZX was required to ensure that the businesses were resourced and financed6 to an extent which, in NZX’s reasonable opinion, was appropriate, having regard to the criteria that had to be met for the earn-out payments to be made. The scope and application of that commitment is at the heart of Ralec’s counterclaims.
[25] Ralec also claimed that NZX misrepresented the extent of its commitment to provide additional resources for the businesses. These counterclaims also gave rise to the additional claims against Mr Weldon and NZX4 for breach of tortious or fiduciary duties, and as parties to NZX’s breach of the FTA.
[26] The grain exchange performed very poorly. The volume of grain traded on the exchange in the 2009/2010 season was 204,052 tonnes, amounting to some
14 per cent of the projected 1.5 million tonnes. This meant that the business failed to generate more than a tiny fraction of the revenue that was anticipated.
[27] Mr Weldon’s view, which I find was conveyed to Messrs Thomas and Pym when NZX was considering the acquisition, was that the exchange would need to conduct trades for around 15-20 per cent of Australian grain before the data collected in the course of facilitating those trades would have proprietary value. The records of the trading volumes produced by an NZX witness for the years since its acquisition showed that the trading on the exchange represented 0.75 per cent of the total Australian grain crop in the 2009/2010 season and 0.94 per cent in the
2010/2011 season, reaching approximately 1.5 per cent in each of the 2011/2012,
2012/2013 and 2013/2014 seasons.7 Those figures were challenged in some respects by Ralec. I am satisfied that they were substantially correct, and that the estimated percentages deducted from total tonnages received by GrainCorp (a handler and storage provider) for reasons making the grain unavailable for listing on the grain exchange were realistic and conservative. Those statistics were certainly not
incorrect to an extent that gave a misleading impression of the pattern of trading.
6 Although the obligation is expressed as requiring support discretely in the forms of resource and
finance, I will refer to both forms simply as “resources”.
7 Storey BoE, schedule 2. Mr Storey estimated the percentages of grain that were actually transacted on the grain exchange, of the volumes with GrainCorp that were potentially available for listing on the grain exchange, at between 2.36 per cent and 7.07 per cent over that period.
[28] The volumes of grain traded were vastly below the trajectory towards a sufficient percentage of the Australian market that NZX perceived was necessary to give the trading data that was generated any material value as a market indicator. Because NZX treated data on the grain market as a cornerstone of the Agri-Portal, it claimed that the poor performance of the grain exchange led to a revision of its proposals for development work on the Agri-Portal.
[29] Following acquisition, the personal relationship between Messrs Weldon and Thomas deteriorated relatively quickly. Mr Weldon and senior management of NZX were concerned at Mr Thomas’s performance, seeing that as contributing to the poor performance of the grain exchange. Mr Thomas was presented with an adverse performance review in April 2010, and resigned. He and Mr Weldon agreed terms for his severance. Subsequently, Mr Thomas sued NZX in Victoria for failing to honour its commitments on his severance. NZX conceded that claim.
[30] Mr Pym also had serious difficulties in getting on with Mr Weldon from early
2010. He perceived that it was he, rather than Mr Thomas, who was likely to be fired. However, Mr Pym continued in a somewhat reduced role until June 2011 when his employment was terminated.
[31] The businesses did not achieve the targets for the grain market earn-out, nor was the Agri-Portal developed to qualify the vendors for the separate Agri-Portal earn-out.
[32] NZX commenced the present proceedings in July 2011, and Ralec filed its counterclaims after unsuccessfully protesting the jurisdiction of the New Zealand High Court.
The Australian grain market in 2009
[33] To understand the context in which the dealings between the parties occurred, it is necessary to describe in a little detail the state of the Australian grain market in
2008 and 2009. The parties presented extensive evidence on this topic. NZX called Mr Ron Storey, who has been employed either part-time or full-time as a consultant for NZX in relation to its Australian businesses since 2009 when NZX acquired his
business, Australian Crop Forecasters (ACF). Prior to acquiring ACF in 2005, Mr Storey was a senior executive with the AWB for 18 years. Mr Storey had established AWB’s commercial grain trading division in the early 1990s in response to deregulation of domestic grain trading.
[34] NZX also called Mr Philip Holmes who is a director of his own consulting business providing commodity marketing advisory services to Australian agri- businesses. Mr Holmes’ relevant experience includes 11 years as general manager of marketing for the Queensland Grain Growers Association, and as a principal of FarMarCo Australia Pty Limited (FarMarCo), a price risk management and market consultancy firm. From 2009 until 2013, Mr Holmes was a director of Grain Trade Australia, an industry body that sets commercial rules, trading standards and industry codes for the Australian grain industry.
[35] Ralec called Mr Mitchell Morison, a Melbourne-based director of a private company providing services to horticultural and grain sectors in Australia. Mr Morison had relevant experience as a commercial manager with Cargill Australia Limited, a significant trader of grain in Australia. In that capacity, he had responsibility for a turnover of $1,100 million, and in excess of five million tonnes of traded grain and oilseed. He had previously been in the commodity management division of the AWB.
[36] The documents in evidence also included an independent report by FarMarCo, commissioned by NZX when it was researching the possible purchase of Clear.8 Although intended to be part of NZX’s due diligence research, the report was not received until after the SPA was signed.
[37] There were numerous differences of emphasis in the evidence from these witnesses on the state of the grain market, but it is unnecessary to make definitive findings on matters of background. They also expressed some very different opinions on the prospects for the grain exchange to achieve the earn-out targets specified in the SPA, and on the resources that they considered would have been
necessary to do so. I will return to those different opinions in dealing with Ralec’s
8 CB20/15423.
claims on the prospects for achieving the earn-out targets, as an aspect of its counterclaims.9
[38] I intend no disrespect to any of those witnesses in dealing relatively summarily with the state of the market and focusing selectively on the aspects that I consider relevant to the contested issues on the pre-contractual representations by Ralec, and the resourcing of the businesses after acquisition by NZX.
[39] Wheat is the predominant grain crop in Australia, with significant but smaller crops of oil seeds and pulses also grown. Grains are grown in the southwest of Western Australia, and in parts of South Australia, New South Wales and Queensland. Climatic conditions, and in particular drought on the east coast of Australia, cause significant fluctuations in the size of the crop. Mr Holmes’ distillation of official statistics cited an average for Australia’s total grain production in the five seasons up to 2008/2009 at 34.42 million tonnes, with the highest volume of production being 45.6 million tonnes and the lowest being 19.77 million tonnes. The seasons since 2008/2009 have seen a slight increase in the average total grain production.10 FarMarCo’s indication of the scale of the wheat industry suggested that at an average port price of $200 per tonne, the annual revenue generated was approximately $4.5 billion.11 There were reasonably substantial fluctuations in the volume of wheat exported.
[40] Until the late 1980s, the Australian grain industry was regulated to an extent that growers simply delivered grain to relevant state or federal statutory boards. Grain was pooled and growers shared the returns that were generated by the statutory boards. Government control over the domestic wheat market stopped in 1989 and thereafter growers, either on their own or with the assistance of brokers, could pursue their own marketing of grain for domestic consumption. The statutory
control over sales of wheat exported in bulk remained until 2008.12
9 See [534]–[554] and [597]–[628] below.
10 Holmes BoE, tables 2 and 3.
11 CB20/15455.
12 Export of wheat in bags and containers could occur outside the single desk system from the
1990s, although the AWB had a right of veto. Marketing arrangements for that sector of the market were freed up in 2007: CB20/15423 at 15445.
[41] Although there has been an increase in growers using storage facilities either on farms or locally, the predominant mode of storing harvested grain was with bulk handling companies (BHCs). These firms have very substantial grain storage facilities at aggregating points and at ports and bulk transporting facilities to transport growers’ grain. In addition, as part of the warehousing facility, the BHCs grade and weigh the grain, and issue receipts to the growers for the grade and weight of grains stored at particular locations. Those receipts are treated in the industry somewhat like bills of lading for carriage of goods by sea, so that growers could pass title to their grain by transferring receipts for the grain held by the BHCs.
[42] There is a dominant BHC in each of the major growing areas: GrainCorp on the east coast, Co-operative Bulk Handling (CBH) in Western Australia, and ABB/Viterra in South Australia. The dominant position of the BHCs in controlling port terminals and associated facilities was recognised in the Wheat Export Marketing Act 2008, which required the BHCs to afford access for third parties to those facilities on competitive terms before they would qualify for export accreditation.
[43] In addition to the storage and handling businesses, the BHCs also operated trading divisions which bought and sold bulk grain, both for export and, to an extent, for domestic use.
[44] Trading in grain is also facilitated by brokers. Some brokers focus on advising growers on the best means of selling their grain, with those brokers having links with trader brokers and traders. Other brokers focus on providing services to traders who rely on the brokers’ up-to-date knowledge of the state of the market to trade in grain.
[45] Both brokers and the trading arms of BHCs utilise business development managers (BDMs) who maintain personal contact with growers in each region (if they were servicing growers), or a mixture of growers and traders (if they were servicing those sectors of the market). The costs of the more traditional mode of doing business as brokers or traders included the infrastructure costs of maintaining the BDMs and those supporting them.
[46] In mid 2009, Clear concluded a grain integration agreement (GIA) with GrainCorp, the dominant BHC on the east coast. The GIA facilitated the listing of growers’ grain on the exchange once it was entered in GrainCorp’s system. Growers could elect whether or not to have grain that was being handled by GrainCorp listed and, once listed, could place offers to sell to any buyers accessing the grain exchange. GrainCorp required exclusivity of this service within its area of operations, so that Clear could not seek a similar arrangement with any other BHC on the east coast. GrainCorp’s trading division could transact on the exchange, but was not obliged to do so.
[47] The grain industry had settled methods of allocating transport costs and the risk of shrinkage, with some regional differences. The established industry also relied heavily on personal relationships with brokers or advisers and BDMs.
[48] At its inception, the Clear grain exchange had input from Mr Bob McKay and Ms Emma Weston, who were founding shareholders. Both of them had held senior positions with the AWB and had extensive knowledge in the workings of the grain industry. Clear designed the business of its exchange to operate on terms that were distinct in several respects from the normal established practices. The significance of those distinctions is a matter to be considered in dealing with Ralec’s counterclaims.
The evidence
[49] The evidence occupied 38 hearing days. The main protagonists, Messrs Weldon and two NZX directors, Messrs Paviour-Smith and Harmos, and Messrs Thomas and Pym for the Ralec parties, were all cross-examined at substantial length.13
[50] NZX called 12 witnesses and Ralec called 15. In addition, NZX consented to the admission of two formally verified briefs from Ralec witnesses who were not required for cross-examination. By the end of the hearing, I had been provided with
a full outline of the history of the businesses, and the potential and actuality of their
13 Mr Weldon’s evidence occupied 4.25 days, Mr Thomas 3.75 days and Mr Pym 4.5 days.
operation. I also gained an insight into the working relationships between the main protagonists. It is unnecessary to describe the evidence of each witness. Attached at the end of the judgment is a summary of the names and positions of all the witnesses. To the extent it becomes relevant, I will describe findings on the evidence of relevant witnesses as they arise in the course of dealing with the issues.
[51] Both sides criticised the other for not calling potentially relevant witnesses. There were pre-trial issues about the terms of NZX’s contact with existing or former employees of the businesses, which arguably discouraged contact with Ralec’s legal team in inappropriate terms. There were also pre-trial issues as to the entitlement of Ralec to issue trans-Tasman subpoenas to witnesses, including former and current employees of the businesses, and the appropriateness of such witnesses appearing by AVL. As the evidence played out, I am satisfied that none of the concerns raised adversely affected the quality of the comprehensive evidence that I heard.
NZX’S CLAIMS
[52] NZX’s first claim alleged pre-contractual misrepresentations under the CRA. A second cause of action pleaded misleading and deceptive conduct under the FTA against Ralec and against Messrs Thomas and Pym personally. Thirdly, NZX alleged breach by Ralec of contractual warranties as to the truth, completeness and accuracy of information provided in the due diligence process, and non-disclosure of material circumstances. NZX separately claimed against Messrs Thomas and Pym and their companies pursuant to their guarantees of certain of the vendors’ liabilities under the SPA. Finally, NZX made an additional claim for damages from Messrs Thomas and Pym and their companies under s 11 of the CRA, as persons entitled to benefits under the SPA.
Alleged misrepresentations
[53] NZX pleaded that various components of the information provided by Clear during due diligence amounted to misrepresentations of five types. The alleged misrepresentations form the basis for each of NZX’s causes of action.
[54] The first category alleged that Clear misrepresented the extent of support that the grain exchange had from grain industry participants, including buyers of grain and BHCs (the support representations).
[55] The second category alleged that Clear misrepresented the nature of its relationship with GrainCorp (the alliance representations). NZX alleged that Clear wrongly represented this relationship as being likely to result in one million tonnes of grain traded through the grain exchange in the then current (2009/2010) season.
[56] The third category alleged was as to the volume of grain that Clear anticipated trading on its exchange in the current year (the volume representations). NZX alleged that Clear represented that it was reasonable, realistic and attainable to forecast that it would trade 1.5 million tonnes of grain through its exchange in the
2009/2010 harvest.
[57] The fourth category alleged was as to the level of costs the business would incur in generating the projected revenue (the costs representations). The financial projection provided during due diligence reflected a modest profit, suggesting that the anticipated level of revenue could be achieved on the level of expenses that were also projected.
[58] The fifth category alleged was as to the absence of any disputes that had arisen in the course of the conduct of the business (the no disputes representations). Clear represented that there were no such disputes. However, NZX attributed relevance to disputes that had arisen between Mr McKay and Ms Weston, as original shareholders of the business, and those in charge of Clear at the time of the negotiations for sale.
[59] NZX’s pleading cited numerous written statements and oral comments on behalf of Clear during meetings in Wellington at the end of July 2009, and in and from Melbourne thereafter, as contributing to the alleged misrepresentations. The fifth amended statement of claim (5ASOC) then distilled the essence of what NZX treated as the five different categories of misrepresentation. For instance, the alleged volume misrepresentations were summarised in the following terms:
106.The Volume Representations were present statements of fact that the forecast of 1.5 million tonnes to trade through Clear during the
2009/2010 harvest (that being a “conservative” estimate) was
reasonable, realistic and attainable and followed logically from the state of the Clear business at the time the forecast was given.
[60] NZX pleaded that such representations amounted to misrepresentations because they were not reasonable, realistic and attainable and did not follow logically from the state of the Clear business at the time. Numerous particulars were pleaded as to why that was so.
[61] Ralec criticised the terms in which the alleged representations were pleaded as “conglomerates”, in the sense that none of them were alleged to be single statements expressed in precise terms as used on a particular occasion. Rather, they were the impressions said to have been gained from numerous sources during the due diligence process, all conveyed in a variety of contexts. Having that diffuse character does not preclude such representations being actionable, but can add materially to the burden on NZX in proving their existence, their terms, an intention that they be relied on, and the reasonableness of NZX’s reliance.
The pre-contractual dealings
[62] To assess the existence of the representations and understand the context in which they are alleged to have been made, it is necessary to describe the pre-contractual dealings in a little detail.
[63] After Ms Cross’s initial meeting with Messrs Thomas and Pym on 14 July
2009, NZX moved promptly and Mr Weldon travelled to Melbourne on 17 July 2009 to meet Mr Thomas. Each formed a very positive impression of the other as a result of that meeting. Mr Weldon’s impression was that Mr Thomas had a thorough appreciation of the Australian grain market, and that Clear’s IT team had developed an IT platform that was “world class”.
[64] For his part, Mr Thomas recalls emphasising to Mr Weldon that it would take around $5 million to properly market and commercialise the grain exchange. Mr Weldon has no recollection of this statement being made to him by Mr Thomas,
either at the 17 July 2009 meeting or during the due diligence process that followed.14
[65] The next business day, 20 July 2009, Messrs Thomas and Weldon exchanged emails on a timetable for a due diligence process, and NZX provided a first list of information that it wanted from Clear.
[66] On 25 July 2009, Mr Thomas forwarded by email to Ms Cross a 38 page
written response to NZX’s questions (written due diligence response or WDDR).15
Thereafter, there were numerous email exchanges with NZX seeking further information and Clear (principally Mr Pym) providing answers by email.
[67] An email from Mr Thomas to Ms Cross providing more information on
28 July 2009 included comments:16
·FY2010 is a benchmark year and we expect small profit or break even.
·This will be the 1st full year of trading and as such we are endeavouring to be very conservative with our revenue forecasts.
·We have prepared 12 month P&L forecasts and we will be more than happy to bring these with us and discuss with you when we are there. We do not anticipate any significant capex in the following
12 months and you will be able to see from our forecasts that our anticipated opex is reasonably stable based on current trading.
[68] Messrs Thomas and Pym, accompanied by their external advisers, Messrs Butler (accountant) and Rich (solicitor), travelled from Melbourne to Wellington for due diligence meetings on 30 and 31 July 2009. By that time, Mr Weldon had assembled an NZX due diligence team, which he described to Mr Thomas as comprising “… a lawyer, 3 strategy analysts, a finance person, an IT person, and a data person …”.17
[69] Clear provided additional information on 3 August 2009. This included a range of documents that had been prepared between September 2008 and June 2009
14 Weldon BoE at [4.10]–[4.14].
15 CB7/05137.
16 CB8/06334.
17 CB6/04253.
variously for discussions with GrainCorp, for sending to a provider of telecommunication services and to give to potential investors. NZX’s due diligence team undertook analysis of the information provided to that time, and a number of them contributed to a board paper recommending that, subject to further due diligence, NZX should acquire Clear. The board of directors of NZX met on
6 August 2009 and gave its approval to proceed with the acquisition. The following day, Mr Weldon despatched a non-binding offer to purchase Clear. The suggested consideration was $15 million, made up of a mixture of cash and NZX shares, with parts deferred and dependent on the business meeting certain earn-out targets.18
[70] The NZX due diligence team travelled to Melbourne to conduct due diligence between 2 and 4 September 2009. Up to that point, Clear representatives had resisted provision of any detailed financial forecasts or projections, citing among other reasons that because the grain exchange was a start-up business, it was not possible to provide any reliable projections for any periods into the future.
[71] A projected profit and loss statement (projected P&L) for the financial year ending June 2010 was provided by Mr Butler to Mr Taylor during that visit.19 It contained a monthly breakdown of two sources of income:
· handling fees earned on the Clear grain exchange; and
· “technology projects” which reflected charges to be made for work by the
tech team on software development projects for third parties.
[72] The projected P&L also contained some 37 lines of projected expenses that the business would incur. As to the expenses, those preparing the projection had the actual experience of the operation of the company in the previous year, and for the
first two months of the 2009/2010 financial year.
18 CB10/07914.
19 CB29/22399.
[73] The projected P&L was accompanied by a page of “key assumptions”, which contained 11 notes providing explanatory detail for some of the items in the projected P&L. The projection was for a net profit before tax of some $166,000.
[74] At the conclusion of the NZX due diligence team’s trip to Melbourne, the
parties completed a terms sheet, as the pre-cursor to a formal SPA.
[75] Mr Weldon reported on progress with due diligence and negotiations with Clear to a further NZX board meeting on 23 September 2009. The board approved a transaction to buy Clear on the basis of Mr Weldon’s further paper. It contemplated paying $6 million up front, $7.6 million for the success of the grain market, and
$7 million for delivery of the Agri-Portal by October 2012.20 The minutes of the
board’s approval also record the prospect of paying Clear $1 for every $1 of revenue
in excess of $3 million earned from grain trading, if the tonnes traded exceeded
1.5 million in the current harvest.
[76] On 1 and 2 October 2009, Messrs Thomas and Pym made a further trip to Wellington. During that visit, the final terms of the SPA were negotiated and it was executed. The signed document was left undated because of the need to annex a schedule defining the Agri-Portal. That was done and the document was subsequently dated 5 October 2009.
Assessing the alleged representations
[77] The written sources of information conveyed by Clear to NZX included the
WDDR dated 24 July 2009, emails from Mr Thomas to Ms Cross on 27 and 28 July
2009, provision by Mr Thomas on 3 August 2009 of copies of documents that had been produced previously, and further documents provided during the NZX due diligence trip to Melbourne between 2 and 4 September 2009 (in particular, the projected P&L).
[78] In addition, NZX relied, at least as matters of context, on oral statements made at the various meetings. These included Ms Cross’s initial discussion on
20 CB14/10705.
14 July 2009, the Clear representatives’ visit to Wellington on 30 and 31 July 2009, the NZX due diligence team’s trip to Melbourne between 2 and 4 September 2009 and various telephone discussions that occurred between the participants during that period.21
[79] Ralec’s defence included denials that:
· many of the oral statements alleged to have been made were in fact made;
· information conveyed in writing was subject to disclaimers or had been taken out of context so that meanings attributed to the information by NZX cannot be sustained;
· statements made were honestly held opinions as to what might occur in the future; and
· in any event NZX did not rely on the information conveyed because it made its own independent enquiries and had available to it inconsistent information and views on the future prospects for the grain exchange.
[80] In Ralec’s closing submissions, Mr North QC raised individual challenges to particular components of the pleaded representation. He argued that each could be discounted on one or more of the grounds cited for Ralec, and more generally that any alleged “conglomerate” effect could not be made out if the alleged representations were not actionable when assessed in isolation.
[81] The dealings occurred between an extremely keen vendor and purchaser of the assets comprising embryonic businesses in a novel field, where written and oral communications flowed in quite substantial volume over some two months. Accordingly, the appropriate course is to assess the combined impact of oral and written statements on relevant topics, making appropriate allowance for the context in which particular items of information and opinions were conveyed, and for the
qualifications, warnings and disclaimers to the extent that they suggested the
21 5ASOC at [91]–[97].
statements should not be relied on. To the extent that Ralec’s defence included denials that alleged oral statements had been made, it is sufficient to assess the competing evidence of their existence, in the wider context of what information was conveyed, and in what circumstances.
[82] Because of the extent of overlap between the alleged representations about support, alliance and volume, I defer my findings on the extent to which they are made out, until the end of my review of the evidence about these three categories.
Support representations
[83] The first type of alleged representations related to the extent of support that Clear claimed its grain exchange enjoyed from potential users in the Australian grain industry. The summary of numerous pleaded misrepresentations was that they constituted statements of fact that Clear had the support of grain industry participants, including almost all buyers and the BHCs.22 Each of the statements considered below was pleaded as contributing to the support misrepresentations.
[84] The WDDR included, in response to a request for a monthly breakdown of the volumes of grain that had been traded since its launch in November 2008, the following comment:23
There is no doubt that the timing of the Clear grain exchange launch on the cusp of harvest compromised its initial success and support. However, despite the late launch, the founders have been pleased with the support nationally, with the lion’s share of trades occurring in WA and SA.
The WDDR then provided the detail of the volumes of grain that had been listed on the Clear exchange, and the volumes that had been traded.
[85] In response to a question as to competitive threats to the service provided by
Clear, the WDDR stated:24
There are no serious competitive threats that we are aware of.
22 5ASOC at [100].
23 CB7/05148.
24 CB7/05164.
The most significant threat to liquidity seems to be the traditional way of doing business in the industry using telephones and faxes which is supported by agents, brokers and consultants that provide an inferior service (it is more personal – but that impacts scale) and sometimes they charge less for it (not always). We do not see these as major direct threats however growers already trust them and may be habitual in their grain marketing.
[86] Because of the context of other content addressing positive aspects of Clear’s relationship with GrainCorp, and Clear’s projections of the level of trading that might occur, NZX alleged that these statements in the WDDR amounted to a representation that Clear enjoyed strong support from the grain industry nationally in Australia. That representation was arguably bolstered by statements subsequently provided to NZX, including copies of pre-existing documents that were provided to NZX by Mr Thomas on 3 August 2009.
[87] The earliest of the pre-existing documents was a confidential information memorandum that had been prepared in September 2008 (the 08 IM). That memorandum, running to 37 pages, contained broadly-worded disclaimers that:
· it was distributed in confidence;
· Clear did not warrant that any information or opinions were accurate, reliable, complete or current;
· any statements as to the past or current performance did not represent future performance; and
· it did not constitute a disclosure document or prospectus for the purposes of the Australian Corporations Act 2001.
[88] The latter statements were likely intended to avoid any liability for breaches of Australian securities law. The descriptions of the business suggest that Clear was in its very early stages.
[89] Under a heading “Customer Acceptance” the 08 IM stated:25
25 CB9/07114.
A principal risk identified by CLEAR is the actual level of customer take-up. CLEAR management has actively targeted key growers and grower brokers shoring up their commitment and support for CLEAR.
[90] There was no argument as to what this statement ought reasonably to have conveyed to an interested reader. It is at least open to the interpretation that Clear was doing the “shoring up”, as well as “actively target[ing]” growers and grower brokers. Given the age of the comment, the context in which it appeared, and the somewhat equivocal meaning that reasonably arises, I do not treat this as adding to a representation as to the extent of support the business enjoyed from the grain industry.
[91] The next of the pre-existing documents was an information memorandum update, dated February 2009 (the 09 IM). This was intended to be read in conjunction with the 08 IM, and stipulated at the outset that all the disclaimers in the
08 IM, in particular as to the limited responsibility for the content and that it was not a prospectus, remained unchanged. An italicised introductory statement was:26
CLEAR is no longer just the “future” of grain marketing, CLEAR is here
“now” – facilitating over $10m of grain trading in Feb 2009.
[92] Under a heading “Key Partnerships”, the 09 IM stated:27
As a technology company and new market participant, CLEAR has been well supported by local and national industry bodies, financial institutions, nearly all Australian grain buyers and our key business partners, …
The support CLEAR has received from the grains industry, grower co-operatives, state affiliates, industry thought-leaders and grain buyers alike has been a critical ingredient in delivering on a promise of a truly independent, national, forward-thinking and scalable online grain exchange in such a rapid timeframe. …
[93] The 09 IM also included statements about the support Clear was enjoying from all major BHCs, which it engaged to ensure smooth delivery of electronic
ticket information following growers nominating Clear for their grain.28
26 CB9/07135.
27 CB9/07140.
28 CB9/07141.
[94] The 08 IM and the 09 IM were presented to NZX for consideration at the same time, and a reasonable reader in that context might treat both as reflecting the developing story of the grain exchange business. However, the 08 IM was too old and too distanced in its context to add materially to representations made during due diligence. The 09 IM (even although it was to be read in conjunction with the
08 IM) was sufficiently closer in time and context to the due diligence disclosures for the content identified by NZX to add to the representations made during due diligence about the support Clear had from the grain industry. The passages I have considered were consistent with and bolstered the representations made in the WDDR that Clear enjoyed a strong level of support from the grain industry, including buyers.
[95] Another of the pre-existing documents was a paper prepared jointly by Clear and GrainCorp executives in May 2009 for consideration of a proposed alliance between the two firms by the GrainCorp board. Although principally relied on by NZX as a source of representations about the alliance between Clear and GrainCorp, that board paper also had content consistent with other assurances about the level of support that Clear enjoyed from the grain industry more generally. The board paper stated:29
Clear has been well supported by Australian and international grains industry
participants …
And:
There is no doubt that the timing of the Clear Grain Exchange launch on the cusp of harvest compromised its initial success and support. However, despite the late launch, the founders have been pleased with the support nationally ….
[96] The original audience for that paper was the board of GrainCorp, who can reasonably be assumed to be knowledgeable and discerning when considering a new initiative in the grain industry. Overstatement by Clear of its position might well have been counter-productive, and providing the board paper to NZX in the course
of due diligence between three and four months after it had been presented to the
29 CB9/07047, 07048.
GrainCorp board made it legitimate for NZX to see it as a source of information they could have regard to in the due diligence process.
[97] The passages identified on the extent of support that Clear was enjoying in the industry would be unlikely to constitute actionable representations standing on their own. However, because they are consistent with others, they add to the totality of representations to the effect that Clear enjoyed widespread support from throughout the grain industry.
[98] The final pre-existing document was an overview of the Clear companies dated 2 June 2009. It had been produced at that time for a provider of telecommunication services to Clear, identified in the document as Primus Telecommunications. The document specified its purpose at the outset:30
The purpose of this document is to provide a business overview of the CLEAR Group of Companies to support the business case being presented to Primus management, including an indication of expected web traffic for large-scale consumer websites owned and/or operated by CLEAR. All commercial information and forward looking indicative traffic estimates and hosting requirements are provided to Primus as commercial in confidence and are non-committal. The intention is to provide Primus with comfort in a long-term relationship with CLEAR over the coming years so that Primus may be able to better forecast future income estimates to support the provision of planned excess traffic credits.
[99] That document included the following comments:31
CLEAR Grain has been well supported by Australian and international grains industry participants, with every major Australian grain handler and almost every Australian and international grain trader on board (over 100 leading grain trading companies, including several of the largest private and publicly listed companies in the world).
There is no doubt that the timing of the launch on the cusp of the 2008 harvest compromised initial success and impacted traffic to the website. However, despite the late launch, the founders have been pleased with the support nationally. …
…
… At the time of writing alliance negotiations are still underway with the other parties. A favourable outcome is expected to lead to more than
10 million metric tonnes being traded on CLEAR within the next 2-3 years.
30 CB9/07185.
31 CB9/07186.
This is more than 200 times the current volume levels and we would expect website traffic and hosting requirements to reflect that magnitude of increase and scale.
[100] The meaning that can reasonably be taken from passages in the document prepared for Primus that were cited by NZX must be tempered by its purpose, which was to alert the service provider to the very substantial growth prospects, as those running Clear considered it appropriate to portray them. If the document was assessed in isolation, then reliance would be inappropriate. Here, it was provided by Mr Thomas as a further document that had been written in the relatively recent past. The quoted passages could legitimately be seen as corroborating, or reinforcing the representations that NZX claims to have received during due diligence. These passages can therefore contribute to a representation that Clear enjoyed strong support from both selling and buying interests in the grain industry. That additional impact is made out, even although the statements would be unlikely to constitute actionable representations if considered on their own.
[101] Materially on the extent of industry support that Clear enjoyed, the June 2009 document prepared for Primus confirmed that Clear was pleased with the level of support it enjoyed nationally. So far as the prospects for the buy side of the exchange were concerned, the statement that “almost every Australian and international grain trader [was] on board …” conveys an impression that there was a widespread intention for major traders in the grain industry to participate on the exchange.
[102] The statements made about the level of support Clear was enjoying were closely connected to statements about Clear’s most significant contractual arrangement with another industry participant, namely the GIA.
Alliance representations
[103] NZX pleaded that representations about Clear’s relationship with GrainCorp
comprised a present statement of fact that:
· GrainCorp fully supported the alliance, and would actively promote and encourage its customers to use the Clear exchange;
· GrainCorp would itself trade on the exchange during the 2009/2010 harvest;
· GrainCorp had advised Clear that GrainCorp expected to trade one million tonnes through the exchange; and
· representations to this effect were reasonable, realistic and attainable.32
[104] The WDDR made a number of references to the effect of the GIA. These are cited by NZX as a component of the alleged representations about the nature of that “alliance”. The WDDR included:33
It is expected that the recently announced integration agreement with GrainCorp will provide access to up to 6m metric tonnes of grain on the east coast of Australia this harvest. GrainCorp are targeting volumes of lm tonnes to trade via CLEAR this harvest (quite an improvement on our first harvest).
…
The new integration agreement with GrainCorp provides real-time access to warehouse information for all grain stored in GrainCorp sites on the east coast of Australia. A grower will be able to see their grain in CLEAR at the same time they can see it in GrainCorp’s warehousing system.
[105] Later in the WDDR, there was a further reference to the GIA as follows:34
The integration agreement with GrainCorp … prevents GrainCorp from developing a competing solution or indeed supporting any other competitor or engaging in transactions outsides [sic] of CLEAR (essentially to develop liquidity, but also a tactical competitive advantage).
[106] A copy of the GIA was provided with the WDDR. Clear pointed out that a provision in the GIA acknowledged that whilst GrainCorp was to register as a buyer on the Clear exchange, it was not obliged to trade.
[107] Mr Pym recorded a number of the telephone discussions between him, Mr Thomas and NZX representatives, and prepared a less than complete transcript of
one call that occurred on 19 August 2009. There appeared to be no dispute as to the
32 5ASOC at [102].
33 CB7/05149.
34 CB7/05163.
accuracy of that transcript, which attributed to Mr Thomas an observation that GrainCorp was “the BHC that loves us”.35 Mr Weldon and NZX representative Ms Newsome both gave evidence of their recollections of the 19 August 2009 telephone conversation. There was no evidence of any of the NZX participants making a specific note of Mr Thomas describing GrainCorp as the BHC that “loved” Clear, but their recollection was nonetheless that the relationship between Clear and GrainCorp was described in very positive terms.36
[108] Later in the same call, the transcript records a discussion about the need for a suitable definition for the concept of “unique tonnes” which the parties intended to use to identify trades that were genuine, revenue-earning transactions on the exchange. In illustrating the difference between primary and secondary transactions, one of the Clear representatives is recorded as saying:37
Let’s say GrainCorp might buy some grain from 100 growers and they might then on-sell that grain and CLR wants to understand what it means by “unique tonnes”.
[109] There was no qualification to the impression given in the WDDR that GrainCorp was positive in its approach to the GIA, and that its implementation would, in GrainCorp’s view, lead to trading of up to one million tonnes in the
2009/2010 season. That positive impression of GrainCorp’s approach to dealing with Clear was reinforced by the comments in the 19 August 2009 telephone discussion, particularly that GrainCorp “loved” Clear. That positive representation could reasonably colour NZX’s analysis of the terms of the GIA and what NZX could reasonably attribute to Clear’s projections of the volume of trading it anticipated.
[110] However, I am not satisfied that any contribution to an actionable representation could arise from the example given of the prospect that GrainCorp might buy grain from 100 growers and then resell it. The transcript suggests it was stated as a hypothetical example, which could not reasonably be interpreted as
indicating buying activity that GrainCorp anticipated.
35 CB11/08508.
36 Weldon BoE at [5.29], Newsome BoE at [4.12].
37 CB11/08509.
Volume representations
[111] NZX alleged that Clear represented as a present statement of fact that the forecast of 1.5 million tonnes to trade through the Clear exchange during the
2009/2010 harvest was reasonable, realistic and attainable.38
[112] The alleged volume representations include statements by Clear that:
· it expected to hold 10 per cent of the tradable grain in the Australian market by the end of the 2009/2010 season;
· revenue streams for the Clear business were likely to commence predominantly from November 2009; and
· the 2009/2010 year would be a benchmark one for the business where they expected to break even or make a small profit.
[113] NZX alleged that Messrs Thomas and Pym commented that Clear addressed revenue forecasts on a conservative basis.39 Those statements, as with the support and alliance representations, were pleaded as context for the primary representation in relation to volume, namely that the Clear exchange would trade 1.5 million tonnes of grain, generating revenues of $3.125 million in the year to 30 June 2010.
[114] The most explicit written reference to projected volume of trading on the grain exchange was in the projected P&L presented by Mr Butler to Mr Taylor during the due diligence meetings in Melbourne on 2 September 2009. That included Clear handling fees for the core months of the grain season, November to February inclusive, of $625,000 per month. On the shoulder months of October and March, the projection included handling fees of $312,500 per month, with no additional revenue from handling fees in the remaining six months.
[115] The page of “key assumptions” accompanying the projected P&L included a note stating that “revenue is based on Grant Thomas’s email …”. That email had
38 5ASOC at [106].
39 See [67] above.
been sent by Mr Thomas to Mr Butler on 27 July 2009, in response to a request for revenue forecasts. The relevant part read:40
Grain Exchange: $3,125,000
This figure is based on trading l,250,000mt on the system @ $2.50 per mt. This figure was calculated on the back of the GrainCorp integration agreement which means all warehoused grain within GNC will be listed on the CLEAR system. We still need to stimulate or initiate trading with growers putting Offers and buyers putting bids. GNC have budgetted for
1,000,000mt (they warehouse over 10Mmt). The remaining 250,000mt will come from WA and SA.
[116] In cross-examination, Mr Butler accepted that the arithmetic calculations in Mr Thomas’s email did not add up.41 After allowing for the revenue share to be allocated to GrainCorp, at the rate of $0.50 per tonne on the first 750,000 tonnes and
$1 per tonne on the next 250,000 tonnes, the revenue generated for Clear from one million tonnes traded through GrainCorp would be $1.875 million. Trading in non- GrainCorp grain therefore needed to be 500,000 tonnes, not 250,000 to make up the additional $1.25 million. Mr Butler accepted the arithmetic but was reluctant to attribute particular relevance to it. He was at pains to emphasise that he accepted information from the board at face value.
[117] Clear had been reluctant to provide financial forecasts. The WDDR recorded Clear’s preference not to provide financial statements, suggesting that the financial data for the 2009 financial year would be of little use.42 Ultimately, the financial statements for the previous year to 30 June 2009 were annexed to the SPA. For the grain exchange business, that showed that there had been a loss of some
$4.256 million. Clear continued to resist a request that they provide a five year forecast.
[118] When Mr Butler responded to additional due diligence questions posed on
27 July 2009 after NZX’s receipt of the WDDR, he contemplated that a one year
forecast for the year to June 2010 would be prepared and discussed at the meetings in Wellington on 30 and 31 July 2009. Mr Butler did prepare a forecast and referred
40 CB8/06306.
41 NoE at 3302–3303.
42 CB7/05156.
it to Mr Thomas, but that document was not provided to NZX during those meetings.43
[119] During August 2009, NZX repeated requests, relevantly in the following terms:44
Please provide: monthly capital P&L, cashflow and bank reconciliations and balance sheets for the last 12 months for each of the Clear companies[.] Financial forecasts for the 12 months ahead[.] Please be prepared to take us through and justify your 12 month financial projections.
[120] Responding before the due diligence meetings in Melbourne in early September 2009, Mr Butler confirmed that 12 month projections had been prepared, and that time would be allocated to discuss them. On 1 September he forwarded the projected P&L to Mr Thomas, indicating it had been prepared in response to the due diligence requests. On 2 September 2009, Mr Butler met with Messrs Taylor and Alrayes of the NZX due diligence team, to go through the projected P&L.
[121] In the course of his evidence, Mr Taylor produced a copy of the projected P&L that contained his handwritten notes, which he confirmed were made at the time of his discussion with Mr Butler. Next to the projected income from the grain exchange of $3,125,000, Mr Taylor had noted “1.5mt à 2”. His evidence was that the note reflected Mr Butler’s explanation that the projected revenue corresponded to a forecast of 1.5 million tonnes of grain at approximately $2 per tonne. That rate per tonne took account of the rebate that would be payable on one million tonnes to be traded by GrainCorp and 500,000 tonnes traded by others who would not be transacting GrainCorp grain and were not entitled to a rebate on the usual charge of
$2.50 per tonne.
[122] On the revenue line in the projected P&L for Clear handling fees, Mr Taylor had also endorsed alongside the figure of $3,125,000, the words “net of revenue share”. He recalled that this reflected an explanation by Mr Butler that the amount
of revenue specified was net of the rebate Clear would have to pay to GrainCorp on
43 NoE at 3286/27–30.
44 CB12/09116.
GrainCorp grain that was traded on the Clear exchange. Mr Butler denied providing any such explanation.
[123] Mr Butler was adamant that the projection was provided with explicit disclaimers that NZX could not place any reliance on its content. He claims he said that when presenting it to Messrs Taylor and Alrayes. He expected that would be understood, given that the Clear grain exchange was in its start-up phase and the uncertainties in respect of its business were perfectly clear. Mr Taylor did not recall any form of disclaimer or warning from Mr Butler that the content of the projection could not be relied on.
[124] The WDDR described the nature of the grain exchange, how it worked and the anticipated trading that would occur.45 To assess the relevance of the volume of trading implicit in the revenue in the projected P&L, it is appropriate to reflect on other statements on this topic that were alleged to have been made by Clear in the course of due diligence.
[125] Numerous internal NZX documents from early August 2009 make reference to Clear’s projections of trading 1.5 million tonnes in the 2009/2010 season. The context suggests that NZX was advised of that projection during Messrs Thomas and Pym’s meetings in Wellington on 30 and 31 July 2009. It is not entirely clear how many of those documents were records of what various NZX staff had heard first- hand, and how many relied on comments relayed to them by others. From early August, drafts of the board paper prepared for the board meeting on 6 August 2009 included the statement:46
CLEAR expects GrainCorp to have 1 million tonnes traded through CLEAR’s trading system, and an additional 0.5 million tonnes from other bulk handlers. …
[126] On 5 August 2009, Emma Hunt (an NZX employee who was not as critically involved as some of the others), commented in an email addressing a possible
structure for the consideration to be paid for the businesses:47
45 See [104] above.
46 CB10/07310.
47 CB10/07828.
Maybe the metric to use is related to their own estimates for how many tonnes grain they think they will get traded through Clear. They have said between 1 and 1.5m tonnes for the year I think. …
[127] Mr Weldon and Ms Newsome both specifically recalled that the projection of
1.5 million tonnes was conveyed by Messrs Thomas and Pym during the meetings on
30 and 31 July 2009. Ms Newsome was sure that it had been described as a conservative projection.48
[128] Messrs Thomas and Pym denied providing any such projection during their meetings in Wellington. In closing, Mr North argued that the recollections of NZX witnesses were unreliable because it was inherently unlikely that both Messrs Thomas and Pym would have used exactly the same words, as attributed to them by the NZX witnesses.
[129] In negotiating the earn-out provisions in the SPA, NZX proposed an earn-out target of 1.5 million tonnes in the 2009/2010 season on the basis that it was Clear’s own projection. There was further comment about the appropriateness of 1.5 million tonnes as the target in an email Ms Cross sent to others at NZX on 10 August 2009. That included the following:49
I’m less happy about removing the requirement to get 1.5million tonnes trading through CLEAR – this is based on what CLEAR said was their conservative estimate of the amount of grain that would be trading through the platform this [sic] for the 2009/10 season – this coupled with their constant comments about the importance of this harvest to set the scene/future of CLEAR Grain means I don’t think this is an unreasonable request of ours (esp also since we really don’t have any other CLEAR business numbers to tie any performance review to). Also there is a real incentive for them to meet and exceed their own business estimates for the trading to be put through the trading platform this season. Grant specifically said that if they only got 500,000 tonnes traded through the platform this
09/10 season then they would be in trouble – I think we should at least hold them to the requirement to double this amount this season (so 1mil tonnes at the least as a requirement). I [sic] not sure we’d want to remove this requirement as it really is pretty key to our investment that this succeeds.
[130] Then in an email on 13 August 2009 to Mr Weldon, Ms Kirkham and
Ms Newsome, Ms Cross observed:50
48 Weldon BoE at [5.20]; Newsome BoE at [3.25], [3.27].
49 CB11/08075.
50 CB11/08199.
Now to the probability of Clear hitting 1.5 mil tonnes – I think this is high
80-90% probability.
[131] In an internal email to Mr Weldon and others of the due diligence team on
20 August 2009, Ms Newsome included a projection of 1.5 million tonnes “… based on their own statements”.51 She also observed:
We believe that 1.5 million tonnes is reasonable, and achievable.
[132] NZX’s stance with Clear during the negotiation of terms for the SPA was consistently that NZX proposed 1.5 million tonnes trading in the year to June 2010 because that had been Clear’s own projection of the level of trading. The consistent reliance on that representation in NZX documents throughout the period supports the clear evidence from Mr Weldon and others on the representation having been made.
[133] Messrs Thomas and Pym’s denials of having made any such representation is not necessarily supported by their attempts to negotiate down the earn-out target for the year to June 2010. Those attempts can be explained by their understandable wish to make the earn-out target as easy to attain as possible, not because of any concern that earlier statements by them as to their projections of the volume of trading had been misunderstood, or indeed wrongly attributed to them. There was no evidence that they protested during these negotiations that they had not made the projection at all.
[134] The evidence of Messrs Taylor and Butler clashed on the terms of Clear’s revenue projection in the projected P&L. I prefer Mr Taylor. He is a New Zealand qualified chartered accountant and barrister and solicitor who, at the time of his evidence, had worked in London as a vice president in Deutsche Bank AG’s treasury finance department since December 2014. His recollection of Mr Butler’s comments when presenting the projected P&L was consistent with the somewhat cryptic notes that he handwrote on the document at the time. Further, that explanation for the revenue projections was consistent with more general comments that I am satisfied
were made on behalf of Clear at earlier stages of the due diligence process.
51 CB11/08449.
[135] Mr Taylor recalled that Mr Butler had been careful to explain that Mr Butler’s firm (Wellingtons) had simply adopted information provided to them by Clear, and that his firm was not independently verifying the reasonableness of the information. Mr Taylor’s evidence was that the NZX representatives acknowledged at the time that it was Clear’s forecast, rather than Wellingtons’.52
[136] Both Messrs Thomas and Pym described Mr Butler as fulfilling an outsourced chief financial officer role for Clear. They had no in-house accounting expertise at his level, and his firm undertook all significant accounting functions, such as preparation of management accounts, and financial statements. It appears that Mr Butler (or in his absence another representative from his firm) contributed to at least parts of all, or the significant majority, of Clear board meetings.
[619] Mr Storey defended the adequacy and quality of the call centre function that was operated by Ralec in-house. That was recognised as one potentially advantageous model by Mr Morison, who saw a dedicated, knowledgeable “in- house” team of employees as a very valuable sales and support requirement.231
Mr Storey’s reply brief included the following comments on this point:
2.44The call centre size and BDM staff has varied over time, but my experience in running Clear is that there has not been any clear link between the volume traded on Clear and staff numbers (i.e. simply adding in extra BDM resource or extra staff to the call centre does not increase volume). Clear’s biggest trading year remains a year when its staff numbers were at their lowest. Market conditions have so far appeared to be a decisive factor, in terms of the volume traded on Clear. Some market conditions suit selling on Clear (e.g. prices not too high or too low, when growers tend to take a longer time to sell) whereas other market conditions do not (e.g. high prices where growers sell quickly using methods they know).
[620] I accept that the approach adopted, to use a smaller, in-house call centres, was reasonably open to NZX in the years after acquisition. I am not satisfied that contracting out a much larger call centre was a step it should reasonably have taken.
[621] A seventh initiative suggested by Mr Morison related to the grower brokers who earned their revenue from an alternative to the service the exchange would provide, and marketing advisers who earned their living advising growers. Both were similarly threatened by the “do it yourself” potential of the exchange. Part of Mr Morison’s evidence suggesting a means of reducing this disadvantage was expressed as follows:232
… These market advisers needed to be co-opted into the ‘CGX’ [the grain exchange] business as long term agents, and offered the prospect of greater earnings from a wider commodity base, once the platform was expanded. By gathering the support of more grain marketing advisers (acting as agents for CGX) through commission payment, these advisers had an interest in
231 Morison BoE at [196].
232 Morison BoE at [141].
marketing the platform and promoting the benefits to their clients who generally paid (and still pay) the grain market adviser for this advice and market monitoring service anyhow.
[622] This aspect of Mr Morison’s analysis was adopted by Ralec in its closing submissions.233 Mr Morison also accepted that the Clear exchange had to compete directly with grower brokers.234 His suggestion of co-opting market advisers, whose antipathy to the exchange would be similar to those of grower brokers, made no allowance for the difficulties in doing so. Presumably they would need to be offered remuneration at least equivalent to their existing earnings, with better future prospects than offered by their existing roles. Successful market advisers would likely take considerable persuasion to change their allegiances. Also, an immediate transformation in behaviour by sellers and buyers was unlikely. This meant that market advisers earning their living by commission payments would be dependent on their ability to transform sellers’ marketing behaviour, which would appear to be an unattractive and risky prospect.
[623] To the extent that Mr Morison contemplated the exchange recruiting existing grower brokers, that would require them to turn their backs entirely on their existing mode of doing business. He accepted that their mode of doing business competed directly with the Clear exchange.
[624] In considering the optimistic assessment of Mr Morison and the pessimistic assessment of Mr Holmes, I consider that both of them have been somewhat more emphatic about the positives and negatives than perhaps was warranted. Neither has done so, however, to an extent that their expert opinions were objectionable advocacy for the cause of the party that called them. The projection of market behaviour is a difficult assessment to make with any degree of probability.
[625] In the end, however, I am satisfied that the impediments to progress were certainly far more serious than Mr Morison has treated them, and that for the most part Mr Holmes’ concerns at the impediments to progress are realistic. It follows
that Ralec cannot make out either that one or more of the earn-out targets would
233 Ralec closing submissions at [964].
234 Morison BoE at [142].
have been achieved, or that there was a reasonable and substantial prospect of that occurring, had NZX had regard to the earn-out targets when deciding on the required level of resourcing for the businesses.
[626] Once the grain exchange failed to meet the earn-out target for the first season to 30 June 2010, the businesses had also to complete a second integration agreement of the type that was already in place with GrainCorp. Messrs Holmes and Storey took the view that reasonable attempts to do so had been unsuccessful, so that this component of the earn-out targets for subsequent years could not be made out, irrespective of the extent of increase in the volume of trading.
[627] Mr Morison took the opposite view. He considered that GrainCorp’s reasons for completing an integration agreement ought to have applied similarly to the dominant BHCs in South Australia and Western Australia. So far as CBH in Western Australia was concerned, there was a measure of support for Mr Morison’s view from Mr Tutt.
[628] On all the evidence, Ralec has not made out, on the balance of probabilities, that such a second integration agreement was more likely than not. It therefore follows that I am not satisfied that there was a real and substantial chance of such an agreement being completed, had NZX turned its mind to the resourcing necessary to afford a reasonable opportunity of the 2010/2011 and 2011/2012 earn-out targets being met.
Prospects for an Agri-Portal
[629] The APPP was included within the consideration payments referred to in cl 9.6(c). Accordingly, Ralec advanced claims that NZX failed to resource the development of the Agri-Portal, having regard to the criteria that had to be met in order for the APPP to be made.
[630] The parties were at odds as to what was required to meet the extensive definition of the Agri-Portal in the SPA. Ralec contended that the Agri-Portal constituted the technology platform that would enable NZX to offer the combination of information, access to electronically operated markets and infrastructure.
[631] NZX argued that a core component of the Agri-Portal was sufficient proprietary information to give it marketable value. NZX also emphasised that the combination of features to be developed within three years of completion of the SPA had to be completed and put into operation to its satisfaction.235
[632] Ralec’s case was advanced on the basis that the parties recognised that work on the Agri-Portal was to be independent of the development of the grain exchange, and that it would proceed irrespective of the level of success with the grain exchange.236
[633] From NZX’s perspective, the whole Agri-Portal structure depended on the success of the grain exchange as the first of two exchanges expected to generate proprietary data. It was required to show sufficient traction to justify building the other components of the Agri-Portal around it. NZX’s evidence at trial was that the commitment of resources as had originally been contemplated simply could not be justified when it became apparent that the grain exchange was falling so far short of any growth profile that would develop trading data with proprietary value. With no realistic prospect for that first component, the commitment to the rest of the platform arguably could not be justified.
[634] NZX’s case was that it did continue developing other aspects of its agri-data businesses, including by acquisition of other relatively modest-sized businesses, but only to the extent that those initiatives could be justified on their own terms. However, work that depended on the Agri-Portal offering proprietary data compiled from the grain exchange or other relevant businesses could not be justified given its poor performance.
[635] As with the commitment of resources to developing the grain exchange, the context in which NZX assumed a contractual obligation to work on an Agri-Portal included its then understanding of the likely level of trading on the grain exchange,
as projected by Messrs Thomas and Pym as its then operators.
235 SPA, third schedule, cl 6.1, quoted at [306] above.
236 Ralec closing submissions at [134], [165]–[196].
[636] I find that Mr Weldon had discussed, from the early stages of his dealings with Messrs Thomas and Pym, his target of expanding trading on the grain exchange towards 15 to 20 per cent of the grain market. Achieving growth consistent with that target was important to NZX’s rationale in all the descriptions of the Agri-Portal. Any indications that work could proceed on the Agri-Portal independently of the state of progress with the grain exchange were implicitly on the assumption that the grain exchange would perform at least at a level that justified a continued belief in its viability. It would be contrary to all basic expectations for the development of such a venture that it would be pursued despite signs that a necessary component was failing to get anywhere near the volumes needed for the data to have value. I therefore am not satisfied that Ralec can make out an obligation on NZX in relation to the Agri-Portal that existed irrespective of the performance of the grain exchange.
[637] Ralec claimed that NZX breached the cl 9.6(c) obligation in relation to the Agri-Portal, by not providing any resources towards developing it. Ralec also claimed that NZX hampered development of the Agri-Portal by diverting the IT resources of the tech team onto IT projects for other NZX businesses. On Ralec’s case, had those funding and resourcing obligations been met, then the earn-out target for the APPP would also have been met. At least, there would have been a reasonable and substantial chance of that occurring.
[638] NZX’s response to these claims was, first, that it did commit significant capital expenditure to agri-data projects that would have formed part of the Agri-Portal, had progress with the grain exchange justified its further development. Secondly, the diversion of the tech team personnel was warranted, and was a reasonable business decision for NZX to make the best use overall of that resource, having regard to the evolving priorities of NZX’s various businesses.
[639] I find that NZX cannot characterise the work it did on other projects (with the code names Agri-Data, Ingress and Pasta Maker) as constituting compliance with its obligation to attempt to develop an operating Agri-Portal within three years from completion. Although the definitional distinctions are somewhat blurred, the Ingress project was justifiable as a stand-alone means of rationalising investments that NZX had made in Agri-Data businesses. I accept that the IT development work cited by
NZX on its agri-data businesses may well have become components of the Agri-Portal, had the economic rationale for developing the whole Agri-Portal in fact ensued. However, that work was justified for business reasons independent of any conscious attempt to discharge NZX’s cl 9.6(c) obligation to build the Agri-Portal.
[640] I have found that NZX’s decisions about developing the Agri-Portal were made without explicit regard to its cl 9.6(c) obligation to take into account the achievement of the Agri-Portal earn-out target. However, I also find that the unexpectedly poor performance of the grain exchange significantly distracted NZX from considering its commitment to resourcing the development of the Agri-Portal by having regard to the earn-out target. Any explicit consideration would have been dominated by the failure of the grain exchange to grow by anywhere near the extent needed for its trading data to have proprietary value.
[641] Accordingly, if NZX had conscious regard to what would be needed by way of resources, then it could reasonably have made resourcing decisions not materially different to those that it did make. As a matter of sequence, at the very least there would need to have been reasonable assurances that the first of the two markets for agricultural products that were contemplated as generating data of proprietary value was at a stage that warranted the commitment of further substantial capital investment. On any view, the tiny tonnages traded on the grain exchange compared with the projections made when the Agri-Portal was being planned would cause a reasonable operator in NZX’s position to defer significant capital commitments until that critical component was at least a realistic prospect.
[642] Ralec cannot make out recoverable damages for NZX’s breach of cl 9.6(c). The issue of damages does not arise on Ralec’s remaining causes of action as they were not made out.
COSTS
[643] Both sides may consider their positions vindicated in principle by making out breaches by the other of contractual obligations owed under the SPA. However, where it really matters in commercial litigation, in the recovery of damages, the overall outcome is a nil all draw. In reviewing the totality of the litigation to the
extent competing merits might influence the approach to costs, I am reinforced in my view that neither side should receive an award of damages.
[644] Although Ralec was insignificant in terms of comparative resources and financial strength, both parties embarked extremely willingly on the deal between them, and must be taken to have appreciated the significant risks involved. The team on each side was led by strong and combative personalities, and there can be no suggestion of inequality of bargaining power. Both sides retained professional advisers.
[645] For NZX, this was a new endeavour in an industry where it had no experience, but was one which it hoped would be a critical component of a much larger new venture. Despite a detailed due diligence analysis, the lack of experience, the novelty of the propositions and the embryonic state of the grain market inevitably meant it was a high risk venture. The prospects were oversold, but the first part of the payment that it did make was for assets, principally software, that NZX continued for a number of years to recognise as having value more or less equivalent to what it paid for it, independently of the failure of the grain exchange.
[646] For Ralec, its shareholders had effectively exhausted their own prospects of transforming their novel idea into a business generating viable levels of revenue. They were dependent on a new financial backer. Ralec sold the embryonic grain exchange business to NZX on a basis that shared the risks of that business not succeeding. They were paid at a rate substantially in excess of the value recently attributed to the businesses for the purpose of raising capital from existing shareholders.237 Ralec should also have accepted that any further payment was subject to substantial risks.
[647] Accordingly, my provisional view is that costs ought to lie where they fall as between NZX and Ralec. Of course, I am not privy to any Calderbank offers to settle the proceedings that may have been made, and would need to reconsider my
provisional view if any such offers are claimed by the parties to be relevant to costs.
237 April 2009 issue of new shares at $0.0003 per share: CB4/03036.
In the absence of such considerations, I would take considerable persuading that costs in favour of either or both parties would be appropriate.
[648] Mr Weldon’s position is notionally different. Ralec pursued claims separately against him and it has failed to make them out. However, I do not accept that the inclusion of Mr Weldon in his personal capacity was entirely misconceived. There were possible concerns (not ultimately borne out) that Mr Weldon may have obtained board approval for the acquisition without full and frank disclosure, and his injudicious overstatement about a commitment to invest $100 million was not endorsed by the remaining directors who gave evidence. As matters unfolded at trial, NZX made no attempt to distance itself from any of Mr Weldon’s actions or omissions, but Ralec could not be certain of NZX’s stance on the point when the counterclaims were pleaded. If Mr Weldon were to pursue any claim for his own costs, I would require disclosure of whether, given the terms of the judgment on the claims and counterclaims, he is entitled to indemnity, directly or indirectly, by NZX. If indeed he is indemnified, then my provisional view is that NZX should absorb those costs as part of a larger nil all draw.
Dobson J
Solicitors:
Bell Gully, Wellington for plaintiff and counterclaim defendants
Duncan Cotterill, Wellington for defendants and counterclaim plaintiffs
Glossary of Abbreviations and Terms
08 IM 2008 information memorandum 09 IM 2009 information memorandum 2ACC Second amended counterclaim ACF Australian Crop Forecasters 2ASOC Second amended statement of claim 5ASOC Fifth amended statement of claim APPP Agri-Portal Purchase Payment AWB Australian Wheat Board BDM Business development manager BHC Bulk handling company BoE Brief of Evidence CB Common bundle of documents CBH Co-operative Bulk Handling CRA Contractual Remedies Act 1979 DIS Delivered in store FIS Free in store FTA Fair Trading Act 1986 GIA Grain integration agreement with GrainCorp GMSB Grain Market Software Bonus payment GMSI Grain Market Software Instalment payment IMI Information/markets/infrastructure NoE Notes of evidence of hearing P&L Profit and Loss SPA Sale and Purchase Agreement dated 5 October 2009 WDDR Written due diligence response Witness summary
| NZX WITNESSES | ||
| 1 | Neil Paviour-Smith | Director of NZX and Chair of Audit and Risk Committee |
| 2 | Andrew William Harmos | Chairman and Director of NZX through relevant period |
| 3 | David Philip Godfrey | Chief Information Officer of NZX |
| 4 | Mark Rhys Weldon | Former CEO of NZX |
| 5 | Heather May Kirkham | Former Head of Strategy, Head of Energy Business and Head of IT Development at NZX |
| 6 | Garth Kevin Taylor | Former Senior Accountant and Group Business Leader at NZX |
| 7 | Rowan Elizabeth Macrae | Former Head of Corporate Office and Head of HR and Communications at NZX |
| 8 | Rachael Frances Newsome | Former Corporate Counsel and Head of Direct Products at NZX |
| 9 | Ronald James Storey | Agribusiness consultant at NZX; former senior executive of Australian Crop Forecasters (acquired by NZX in 2009) |
| 10 | Phillip Arthur Holmes | Director of commodity marketing advisory service to Australian agri-businesses; former general manager of marketing for the Queensland Grain Growers Association, principal of FarMarCo Australia Pty Limited and director of Grain Trade Australia – called as expert on the grain market |
| 11 | Amy Louise Trotman (formerly Wilding) | Manager, Tax and Corporate Finance at NZX |
| 12 | Grant Robert Graham | Partner, KordaMentha, Chartered Accountants – called as expert accountant |
| RALEC WITNESSES | ||
| 1 | Grant Davis Thomas | Principal of Clear |
| 2 | Dominic Luke Pym | Principal of Clear |
| 3 | Rachael Lee Cross Greer | Former lawyer for NZX and subsequently Head of Business Acquisition for NZX |
| 4 | Graham Russell Mathason | Former Client Relations Manager at GrainCorp |
| 5 | Byron Thomas Wood | Former BDM, and Product and Operations Manager, at NZX4 |
| 6 | Tristan James Shannon | Former BDM at NZX4, and former Operations and Product Development Manager, Market Growth Manager and Manager of the Clear grain exchange |
| 7 | Andrew McDowell Butler | Partner in Wellingtons, Chartered Accountants, Clear accountants |
| 8 | James Daniel Maw | Former Trading Manager for Glencore Grain Pty Limited |
| 9 | Malcolm Kingsley Bartholomaeus | Vendor of Callum Downs agricultural reporting business to NZX; consultant providing commentary and analysis of grain industry |
| 10 | Justin Howard French | Former Team Leader, User Interface at Clear, then NZX |
| 11 | Richard William Koch | Former Managing Director, Profarmer Australia Pty Limited |
| 12 | Adam Joshua Rich | Wisewoulds Mahony, Melbourne solicitors for Ralec |
| 13 | Marcus Robert Crafter | Former software engineer for Clear |
| 14 | Mitchell Jesse Morison | Former commercial manager with Cargill Australia Limited, significant trader of grain in Australia – called as expert on the grain market |
| 15 | Stephen John Seear | Partner of BDO East Coast Partnership – called as expert accountant |
| BRIEFS ADMITTED BY CONSENT | ||
| 1 | Philip Williams | Independent economist, Melbourne – called as expert |
| 2 | Colin Tutt | Former CBH employee |
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