Richwhite and Fay demand the proof

Sir Michael Fay and David Richwhite have challenged the Securities Commission to prove their company sold shares in Tranz Rail while it had inside knowledge about its dwindling fortunes.

Midavia Rail Investments, the expat merchant bankers' investment vehicle, has given the commission written questions asking it to give details substantiating its insider trading action against Midavia (formerly Pacific Rail), which sold 14.5 per cent of Tranz Rail at $3.60 a share months before big writedowns were revealed.

More than 250 questions have been lodged on the Midavia issues and a claim that Richwhite tipped the share sale while he was a Tranz Rail director.

The merchant bankers say the commission's case is defective as it "does not give such particulars of time, place, amounts, names of persons, nature and dates of documents, and other circumstances as are necessary to inform the court and the defendants of the plaintiff's causes of action".

Midavia and Richwhite have also applied for a directions hearing in Auckland in early February in an effort to get the case fast-tracked to "secure the just and expeditious disposal of the proceedings".

But the commission is expected to strongly oppose their bid to have the insider trading case heard in Auckland.

Commission staff were yesterday surprised to be told the merchant bankers had filed a statement of defence in the High Court at Auckland and had applied for the case to be transferred from the High Court at Wellington and heard on the commercial list in Auckland.

The commission would not comment directly on Midavia's move yesterday.

But it is likely to argue that because all six defendants are expatriate New Zealanders or foreigners, the inconvenience of travelling to Wellington for a lengthy case is irrelevant.

Midavia and Richwhite - and other defendants who have yet to file their defences - say the case should be heard by one of the four judges that service the commercial list and are familiar with complex financial issues.

Only Auckland has a commercial list; no such service is available in Wellington.

The jurisdictional issue is the first of many tetchy issues that will be fought by top Queen's Counsel before the insider trading case is heard.

Most other defendants will not file their statements of defence until the New Year.

The second defendant - Boston-based Berkshire Funds III, which sold a 3.5 per cent stake on February 12, 2002 at $3.60 a share - will not file its defence until February.

Rick Shera, from Lowndes Jordan, is acting for Berkshire and Carl Ferenbach, a Berkshire managing partner and former Tranz Rail director who is also accused of tipping.

He said his clients had 50 days to file their defence, as they were served overseas.

Shera said his clients were still angry over the commission's action, which came as a "shock".

Former Tranz Rail chief financial officer Mark Bloomer, who sold 595,346 shares between February 13 and May 24, 2002, will file his defence in the New Year.

The position of former Tranz Rail managing director Michael Beard, who also sold shares, was not known yesterday.

Beard's lawyers said they had "no instructions to communicate" with journalists.

Fighting back

The Securities Commission is being asked to back up its Tranz Rail insider trading claims.

Two accused merchant bankers are trying to get the case fast-tracked.

A clash is looming over where the insider trading case will be heard.