Partner files against Fletcher

Fletcher Challenge Forests is rejecting High Court claims by its Central North Island forest partner, Citic, that it is failing to honour the agreement.

Citic yesterday filed papers in the court seeking the dissolution of the partnership, established three years ago to take over a 190,000 ha forestry block formerly owned by Forestry Corporation.

Citic, a wholly-owned subsidiary of Beijing-based China International Trust and Investment Corp, said it has taken the action because of a conflict of interest unresolved since the partnership began.

"We are disappointed this action is necessary, but we have reached the point where a resolution is needed," said Citic managing director Cui Peisheng.

Citic, with Brierley Investments and Fletcher Challenge, bought the former government-owned Forestry Corporation forests in the central North Island in September 1996 for $1.6 billion, net of debt.

Brierley this year took advantage of an exit clause it had negotiated in the contract to quit, albeit at a loss.

Citic New Zealand general manager of operations Greg Molloy said the potential for a conflict of interest to arise for Fletcher Challenge was recognised from day one.

"Fletcher's are the manager. They are also the single largest customer by value," he said.

Citic's view was that Fletcher Challenge Forests had preferred their own interests over those of the partnership, he said.

Mr Molloy refused to detail the company's court action, nor its estimate of the value lost to the partnership.

Fletcher Challenge Forests said it did not accept Citic's claims and it would continue to honour obligations as manager of the partnership.

It would also be pursuing claims against Citic.