Investment bankers Will Leckie and Chris Morrison were ordered to pay $12.1 million buying out Drylandcarbon joint venture partners Anthony and Wendy Beverley after a High Court ruling they misused company information diverting for their own benefit Drylandcarbon’s business plan and business opportunities.
Ant Beverley was the driving force behind an investment scheme exploiting carbon credits created by the Climate Change Response Act.
His 2017 business venture with Wellington-based Leckie and Morrison later fell apart with Beverley accused of not spending enough time on day-to-day management and Beverley accusing them of stealing his ideas.
The High Court was told Drylandcarbon grew out of work started by Mr Beverley back in 2007 to create investment opportunities out of the then proposed emissions trading scheme.
Whilst purporting to impose a tax on carbon emissions, the trading scheme created a ‘licence to pollute’ with free credits parcelled out to some industries and others required to purchase carbon credits as compensation for their greenhouse gas emissions.
Early implementation was blighted by an avalanche of carbon credits, printed like monopoly money by countries in eastern Europe, sold dirt cheap to New Zealand companies.
What qualified as a carbon credit was tightened up.
New Zealand’s forested land immediately became more valuable. Trees sequester carbon from the atmosphere. This sequestration creates a carbon credit attached to the forest, a credit available for sale to industries required to purchase offsetting carbon credits.
The beauty of Mr Beverley’s investment proposal was to stand as middleman in this process: attracting investment capital to buy forested land and then arranging transfer of carbon credits subsequently derived; all of which earns base fees on capital employed plus ongoing management fees.
He joined forces with Messrs Leckie and Morrison to exploit his proposal. They set up a management structure called DC One H1 Ltd.
DC One was to prove pivotal in their later estrangement and subsequent litigation.
The High Court was told their relationship fell apart irretrievably within months of setting up the first Drylandcarbon investment fund.
No final agreement could be reached on terms of employment for Mr Beverley. He wanted to see salaried staff doing much of the work Messrs Leckie and Morrison expected him to be doing.
Hiring a human resources consultant to undertake a review proved an unmitigated disaster; each side’s position became even more entrenched.
A 2021 mediation saw agreement that Messrs Leckie and Morrison would buy out the Beverleys’ half share in DC One. Ultimately, no price could be agreed.
Negotiations over a formal shareholders’ agreement were never finally resolved.
Evidence was given of Messrs Leckie and Morrison deciding during this period to go it alone, cutting out Mr Beverley when setting up a second investment fund modelled on the successful Drylandcarbon fund. This second investment scheme came to be called Lewis Tucker Forest Partners Ltd.
Mr Beverley was furious. He sued.
Messrs Leckie and Morrison argued the first deal with Mr Beverley was a one-off generic business deal. It was ‘one and done.’ They were free to subsequently pursue similar business opportunities, they claimed.
Justice Radich ruled their business relationship was governed by their joint participation in DC One H1 Ltd.
As directors in this company, Messrs Leckie and Morrison owed duties of good faith and were not permitted to divert company information and corporate opportunities to their own benefit.
They had breached these duties by setting up Forest Partners, profiting personally from a business opportunity which more properly belonged to DC One, he ruled.
Evidence was given of Forest Partners using spreadsheets copied from the initial Drylandcarbon investment proposal, incorporating formatting errors and formula errors which had sneaked through undetected in the original proposal. Flyers and information sheets for Forest Partners were copied from the Drylandcarbon project.
Staff initially employed by Drylandcarbon were transferred across to Forest Partners.
Forest Partners used the same approach, same structure, same modelling and the same staff (except for Mr Beverley) as the earlier Drylandcarbon fund.
Justice Radich ruled profits from Forest Partners belonged to DC One, less a fifteen per cent allowance for the time expended by Leckie and Morrison setting up and managing their new Forest Partners scheme.
DC One as a joint venture was always intended to involve multiple funds, should the first prove successful, he said.
He ruled that Messrs Leckie and Morrison are to buy out the Beverleys’ half interest in DC One, with a valuation of DC One to include profits made by Forest Partners.
Valuation proved difficult.
The Beverleys said DC One is worth $93.1 million; Messrs Leckie and Morrison said $26.4 million.
The complicating variable was assessing future value of carbon credits.
Forests sequester carbon over time. The value of carbon credits vary over time.
One expert said that possible future political intervention in the carbon credit market created such uncertainty that future carbon prices cannot be estimated at all.
Justice Radich ruled DC One is worth $24.2 million, based on recent market transactions where investors had sold their part interests in Forest Partners. Details of these transactions were supressed.
Messrs Leckie and Morrison were ordered to pay $12.1 million, buying out the Beverleys’ half interest.
Litigation costs will run into millions, with court hearings having run for a month and a panoply of expensive commercial barristers arguing the case for each side. The court record lists eight barristers appearing. Add to these costs: solicitors’ costs preparing for trial, plus fees for expert witnesses called for each side arguing business valuations.
The Court of Appeal ruled at a preliminary hearing that litigation costs are to be paid by DC One; in effect paid by Messrs Leckie and Morrison who now come to own one hundred per cent of DC One.
Drylandcarbon GP One Ltd v. Leckie – High Court (3.10.25)
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