First
public sign that the NZX purchase of Australian-based Clear Grain Exchange had
gone sour was a July 2011 on-market announcement that legal action was being
taken against Australian vendors Ralec Commodities and that the value of the
claim had not been quantified. Fast
forward four years and NZX is looking to recover $A37.6 million while Ralec is
counterclaiming for $A14 million plus potential workout bonuses. Litigation is bogged down in procedural
squabbles.
In the High Court, Justice Dobson said
procedural haggling is getting all out of proportion to the issues in
dispute. Lawyers for NZX predict a full
hearing of claim and counterclaim will take eight weeks.
In 2009 NZX signed up to buy from Ralec
Commodities its expertise in developing and operating online commodity dealing
platforms. Ralec’s business was then in
its start-up phase with two components envisaged: an online grain trading
business and an electronic database recording supply of and demand for grain. The
agreed price was $A7 million, with later payments in both cash and NZX shares
promised if specified performance targets were met. NZX claims it was shafted. It alleges there were promises broken
regarding an existing tie-in with bulk grain handler Grain Corp. It alleges individuals behind Ralec hindered
and frustrated the ongoing business. It
alleges misrepresentations were made about the trading platform’s capabilities
and about future profitability.
Ralec argued New Zealand was the wrong
venue to hear the case; it should be heard before Australian courts. In November 2011, Justice Gendall ruled New
Zealand was the appropriate venue. In
July 2012, Justice Dobson ordered Ralec make an initial payment into court of
$60,000 as security for NZX legal costs, should NZX succeed at trial. The court was told Ralec is broke. It had already passed on to its shareholders
the upfront payments made by NZX. Since
that date both NZX and Ralec have been involved in a very expensive legal
tennis match lobbing accusations back and forth in court as to what the other
is obliged to do before the case goes to a full trial. The primary questions have been: who is able
to be sued and why; what paperwork has to be disclosed to the other side; and
what, if any, pre-trial questions can be asked.
NZX
Ltd v. Ralec Commodities – High Court (22.11.11, 5.07.12 & 3.12.15)
16.017