Investors claim they were shafted by ASX-listed Bluescope Steel when bidding to buy Bluescope’s Taharoa iron sand mining business on North Island west coast near Kawhia. They claim $506 million damages with allegations Bluescope wrongly terminated an initial contract and then misled them in a second round of negotiations.
NZ Iron Sands Holdings Ltd is a special purpose company assembled by Australian-based Gleneagle Securities to bid for Bluescope’s iron sand mining operations. Its clients include a number of New Zealanders. A deal was struck in November 2016, subject to a number of conditions. All parties were obliged to make reasonable endeavours to renegotiate two long-term contracts: first, to obtain a reduction in charter rates charged by Japanese shipping company NYK for shipping bulk iron ore sand from Taharoa, and; second, removal of an obligation to reinstate the land once mining ceased. Bluescope cancelled the contract one month later, citing a failure to satisfy these conditions.
The High Court was told a further round of negotiations was then opened. NZ Iron Sands claims promises were made that it was the preferred bidder. Instead, a sale was made in early 2017 to a different bidder, Taharoa Mining Investments Ltd: a joint venture between Taharoa C and Melrose Private Capital Ltd. Taharoa C is a Maori land corporation owning land on which the iron sand is mined. Wayne Coffey and Rosemary Coffey are directors and shareholders of Melrose. Mr Coffey is also CEO of Taharoa C. Entitlement to royalty payments has been a matter of dispute between Ngati Te Ata and government.
NZ Iron Sands sued claiming damages from Bluescope and demanding to see background information surrounding the deal between the Coffeys and Bluescope.
NZ Iron Sands alleges breaches of both the Fair Trading Act and the Financial Markets Conduct Act as regards statements made during negotiations. Bluescope says it is all a matter of contractual interpretation. It asked for a pre-trial hearing to determine the meaning of several disputed clauses in the initial November 2016 contract. Justice Wylie refused. Detailed evidence surrounding the negotiations are needed to sort out the meaning. That requires a full trial with witness evidence, he said.
Application to see the Coffey documents was dismissed. They were not parties to the current request for a pre-trial hearing. Justice Wylie signalled that they may later be required to disclose information. NZ Iron Sands question the Coffeys’ role in striking a deal with Bluescope.
NZ Iron Sands Holdings Ltd v. Toward Industries Ltd – High Court (28.06.18)
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