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PPCS Vs Richmond Law Changed Urged

PPCS Vs Richmond Law Changed Urged

ACT New Zealand Justice Spokesman Stephen Franks today urged the Commerce Minister Margaret Wilson to amend Securities Law, to reverse the message sent by the Court of Appeal's decision in the PPCS and Richmond litigation.

"Labour yesterday announced it would amend the law to avoid, in future, the outcome of the GPG vs Perry Corporation litigation. The PPCS vs Richmond case is just as unfortunate. The outcome encourages people contemplating a cold-blooded breach of the law to assume they might get away with the benefits even if they face a hefty penalty," Mr Franks said.

"In other words, it will encourage some to look at the penalty as just a tax on the profits of breaching the law. My letter to the Minister reads as follows:

Dear Minister

Enforcement of Securities Law: PPCS and Richmond

I note that Mr Geoff Connor of the Ministry of Economic Development is reported in yesterday's New Zealand Herald as confirming that the Securities Markets Act will be amended as a result of GPG failing in its lawsuit against Perry Corporation. I endorse this focus on the enforceability of the existing provisions.

I urge you to include in that foreshadowed amendment, a provision to ensure that the result in the litigation brought by the Bell Group of Richmond shareholders against PPCS, is similarly neutralised. The judgments in the High Court and Court of Appeal revealed calculated wrongdoing. At the High Court level, the orders made attempted to ensure that the wrongdoers could not benefit from their wrongdoing.

At the Court of Appeal, the Judge's orders were partially reversed. The net effect was to leave the wrongdoers with a penalty that was paltry in context, secure in the achievement of their original commercial objective. There is a widespread market view that the Court of Appeal decision negated the moral effect of the earlier outcome in the High Court, though the Court of Appeal did not reverse the findings of wrongdoing.

It was open to the Court of Appeal to conclude as it did, but it could equally have upheld the effect of the decision appealed against. I believe Parliament should signal support for the approach taken by Willy Young J, and focus the Courts on the removal of incentives to indulge in sharp practice.

I suggest an amendment to Section 32 of the Securities Markets Act 1988, by the insertion of an additional sub-section, perhaps numbered (2A) to read along the following lines:

"An order under sub section 1 of this section should take into account the full extent of advantages obtained by any wrongdoer with the assistance of any failure to comply with this Act, and the order should, so far as is reasonably practicable, result in the wrongdoer being deprived of all of the advantages so obtained, or subject to a financial disadvantage of equivalent value."

Yours sincerely

Stephen Franks MP

ACT New Zealand

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