Court Rejects Eldercare’s Insider Trading Claim
STOCK EXCHANGE LISTINGS: NEW ZEALAND (FEG), AUSTRALIA (FLCES), NEW YORK (FEG).
HIGH COURT REJECTS ELDERCARE’S INSIDER TRADING CLAIM AGAINST FLETCHER CHALLENGE LIMITED SUBSIDIARY
AUCKLAND, 15 August 2000 - Eldercare’s
statement of claim alleging insider trading against a
Fletcher Challenge subsidiary (Petrocorp) was rejected by
Justice Fisher in the High Court at Auckland yesterday (14
Eldercare was seeking leave to bring insider trading proceedings in the name, and at the expense, of Southern Petroleum No Liability (“SPNL”) a formerly publicly listed company taken over by Petroleum Industries Limited, a Fletcher Challenge Limited subsidiary, during 1995.
The case revolved around the knowledge and actions of Petrocorp and its appointed directors to SPNL. Justice Fisher held that the insider-trading claim advanced by Eldercare was not even arguable.
He was critical of the way the case had been brought by Eldercare describing its statement of claim as being “fraught with problems” and said it contained an “unacceptable level of obscurity” and “simply does not spell out the basis of an insider trading claim”.
Although Justice Fisher expressed serious scepticism about whether the case could be salvaged, he has given Eldercare until mid October to construct an arguable claim. Justice Fisher said he was granting Eldercare a considerable indulgence. He noted that, in order to succeed, Eldercare would need to radically change its pleading. In some cases it would need to directly contradict what it has already pleaded and its own evidence.
Justice Fisher took the unusual step of ordering Eldercare to pay the full costs of Fletcher Challenge Energy and its associates in preparing for the High Court hearing.
Fletcher Challenge has always believed this to be opportunistic litigation and will continue to vigorously defend any re-pleading.