Takeovers Panel v New Image Group Limited - [2022] NZHC 1504

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-500

[2022] NZHC 1504

UNDER the Takeovers Act 1993

BETWEEN

TAKEOVERS PANEL

Plaintiff

AND

NEW IMAGE GROUP LIMITED

First Defendant

NEW IMAGE HOLDINGS LIMITED

Second Defendant

Hearing: 22 June 2022

Appearances:

F J Cuncannon and T S Jenkin for Plaintiff D Cooper for Defendants

Judgment:

28 June 2022

JUDGMENT OF WYLIE J

(Contravention and penalty hearing)

This judgment was delivered by Justice Wylie
On 28 June 2022 at 2.00 pm Pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:…………………………

Solicitors/counsel:
Meredith Connell, Wellington
S Grey, Nelson/D Cooper, Auckland

TAKEOVERS PANEL v NEW IMAGE GROUP LTD [2022] NZHC 1504 [28 June 2022]

Introduction

[1] The plaintiff, the Takeovers Panel (the Panel), is a Crown entity established under s 5 of the Takeovers Act 1993 (the Act). The Act provides for the making of regulations setting out the rules relating to takeovers. These regulations are known as the Takeovers Code (the Code).1 The Code governs transactions and events that can impact on the voting rights attaching to the shares owned by shareholders of what are known as “code companies”.2 The Panel has various powers to ensure that the Code is complied with. Inter alia, it can seek declarations of contravention and pecuniary penalties if the Code is breached.3

[2] On 4 February 2022, the Panel filed a statement of claim alleging contraventions of the Code by New Image Group Ltd (formerly New Image Trustee Ltd) (NTL) and by New Image Holdings Ltd (NEW).

[3]Two causes of action were raised against NTL. It was asserted that NTL:

(a)made a selective offer in breach of r 20 of the Code to some but not all holders of equity securities within a class on terms different than those contained in the takeover offer made for the rest of the equity securities of that class; and

(b)failed in breach of r 44(1)(d)(i) of the Code to disclose in the takeover offer the existence of persons acting jointly or in concert with it.

As against NEW, it was asserted that, in breach of r 46(1)(a) of the Code, it failed to disclose in the target company statement issued by it the equity securities held in it by NTL or its directors.

[4] In respect of all causes of action, the Panel sought a declaration of contravention and a pecuniary penalty under s 33M of the Act.

1 At all relevant times, the relevant Code provisions were set out in the Schedule to the Takeovers Code Approval Order 2000 (SR 2000/210).
2 Takeovers Panel “Guidance: Takeovers Code Overview” < Act 1993, ss 35(4) and 33M.

[5] A notice of admissions was filed by the defendants on the same day as the statement of claim was filed. NTL and NEW admitted the facts set out in an agreed statement of facts (also dated 4 February 2022). NTL admitted the two causes…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] NZHC 1504
Decision Date: 28 June 2022

CaseChat Overview and Summary

The case involves the Takeovers Panel (the Panel) bringing proceedings against New Image Group Limited (NTL) and New Image Holdings Limited (NEW) for alleged breaches of the Takeovers Code under the Takeovers Act 1993. The Panel alleged that NTL made a selective offer to certain shareholders of NEW, failed to disclose certain information in its takeover offer, and that NEW failed to disclose certain information in its target company statement. Both NTL and NEW admitted the breaches. The Panel sought declarations of contravention and pecuniary penalties for the breaches. The court was required to determine whether the breaches occurred, whether declarations of contravention should be made, and whether pecuniary penalties should be imposed and, if so, in what amount. The court found that NTL and NEW had indeed contravened the Takeovers Code, and that declarations of contravention should be made. Regarding the pecuniary penalty, the court found that the breaches were serious but not deliberate, and imposed a penalty of $1.5 million on NTL. The penalty was to be applied first to pay the Panel’s actual costs in bringing the proceedings, with the balance to be paid to the Crown. The court made no order as to costs, as the parties had agreed that costs should lie where they fall.

Orders