Last June about 750 disgruntled Southern Petroleum shareholders won High Court approval to pursue an insider trading case over the Fletcher Challenge Energy takeover of the former listed company in 1995. Shell New Zealand's appeal against that decision -on the basis that the shareholders' case was not arguable - was heard last month.
Yesterday the Court of Appeal dismissed the Shell appeal, finding there was a case to answer. This clears the way for the disgruntled shareholders to continue their fight for compensation because of FCE subsidiary Petrocorp's alleged insider trading actions when taking total control of Southern Petroleum.
Industry commentators doubt that Shell will further appeal - to the London-based law lords, the Privy Council - and will now probably settle out of court as it did in April 2001 with listed retirement care provider ElderCare over its disputed preference shares in the former FCE subsidiary.
Eldercare said then that Shell (which had just bought FCE) would pay it $NZ1.3 million relating to over 4000 disputed preference shares in Southern Petroleum Services, in addition to $NZ275,000 FCE had paid after ElderCare dropped its claim alleging insider trading.
"Now that Shell have lost their appeal they won't want to fight further as that would mean disclosure and they would not want legal people looking through their files," said one commentator.
At the time of the FCE takeover of Southern Petroleum, the minority shareholders were paid NZ75 cents a share but are seeking $NZ23 million in compensation, including penalties and interest. They believed they would have received $NZ1.25 more a share had FCE not withheld vital information about the size of Southern Petroleum's Taranaki oil and gas prospects, including a stake in the licence which later yielded the 500-600 bcf Pohokura gas discovery.
They also claimed former FCE and Petrocorp director James Patek advised and encouraged FCE to buy out Southern Petroleum minority shareholders and actively advised the minorities to sell, despite allegedly having information that would have increased the price if disclosed.
Patek allegedly received the information in his capacity as a Petrocorp director from a presentation about Taranaki energy prospects in November 1995.
However, Shell counsel Jim Farmer QC argued that Patek acquired information by reason of his position as a director of then Fletcher subsidiary Petrocorp and not by reason of his position as a director of Southern Petroleum.
