An application for an injunction to stop the sale of state owned enterprise Terralink to a consortium of New Zealand Aerial Mapping and Animation Research was dismissed yesterday.
The injunction was sought in the High Court at Auckland by unsuccessful bidder Ocilla Investments, which complained it was given no chance to carry out due diligence on Terralink or to increase its initial indicative bid. It also argued a debenture Terralink granted to the Crown to secure a short-term loan was deceptive and misleading under the Fair Trading Act and voided the appointment of the receivers.
In his reserved judgment Justice John Priestley said there was no evidence to suggest that the certificate of solvency which the directors at Terralink signed as a prerequisite to drawing down the first tranche of the $2.5 million loan was false or fraudulent.
"There is no evidence to suggest that the decisions made by the two shareholding Ministers and subsequently by Cabinet to advance secured funds to Terralink were foolhardy or improper. I do not consider that the debenture in any shape or form is a sham," said Justice Priestley.
But the case has prompted some response among politicians. No less than three parliamentary select committee inquiries are likely to focus on the collapse and sale of failed state-owned enterprise over the next few days.
On Thursday Parliament's primary production select committee is due to hear evidence on the Terralink accounts when it went into receivership. The committee is also understood to have completed a draft of its longawaited report into the sale of Terralink's profitable property services division to some of its own managers.
That investigation was initiated last year with committee chair Damien O'Connor expressing concern at the implications for state entities.
"The Crown risked the capital to build up the company and intellectual property," he said, "but it was able to be pulled out from under its nose by a bunch of ambitious managers."
Meanwhile the committee has to decide on a request from Act MP Stephen Franks to extend its investigations into the way Terralink itself was sold.
Mr Franks said that given the criticisms surrounding the sale Parliament needed to act "to ensure we retain our reputation for transparency and utmost integrity in state asset sales."
Justice Priestley also found there was no legal ground for Oscilla and its joint venture partner South African mapping firm GeopSpace to pursue injunctive relief over its dealings with Terralink receivers PricewaterhouseCoopers during the bidding process.
"I have considerable difficulty in seeing how the plaintiff's would be able to sustain a serious challenge to the first defendants' conduct under the Fair Trading Act. Whether or not conduct is misleading is viewed objectively, but for conduct to be misleading there must be something akin to a misrepresentation."
Justice Priestley said damages rather than granting interim injunctive relief would be more appropriate in this case. Other factors also influenced his judgment including what would happen to Terralink employees due to to be hired by the new owners and the potential damage to Terralink's business and its value if the injunction wer ganted.Costs are still to be decided but Justice Priestley said that in his view "the plaintiff is obliged to pay costs to both defendants."
Ocilla director Roger Barry said he was still considering a damages claim and wanted to contact all the other parties which had made unsuccessful bids.
"All they [the receivers] had to do was let us know they had an unconditional bid. Instead they told us to put in a non-binding offer."