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Report of the Securities Commission on Aspects of the Affairs of Max Resources Limited

 

1		 INTRODUCTION
 
1.1 Max Resources Limited (in Statutory Management) ("Max" or "the Company") is a New Zealand public listed company with its registered office at Tauranga. Max is also registered as an overseas company in Australia under the same name and, until recently, had its principal operating office in West Leederville, Perth, Western Australia
 
1.2 On 23 March 1998, the Market Surveillance Panel ("Panel") of the New Zealand Stock Exchange ("NZSE") suspended the quotation of Max's listed securities.
 
1.3 On 31 August 1998, by an Order in Council pursuant to section 38 of the Corporations (Investigation and Management) Act 1989, on the recommendation of the Securities Commission ("the Commission"), Max was declared subject to statutory management with effect from that date.
 
1.4 It is one of the Commission's functions under section 10 (c) of the Securities Act 1978 ("Act") to "keep under review practices relating to securities, and to comment thereon to any appropriate body". The purpose of this report is to publish, for the benefit of the shareholders of Max and any other appropriate body, the Commission's comments on aspects of the affairs of Max during the period 1996 to early 1998 and subsequent related events.
 
1.5 This report contains the Commission's observations on aspects of Max's affairs. The report has been based on documents made available to the Commission and on submissions from parties to whom confidential consultative draft reports were distributed for comment. The Commission took careful account of all information and comments received.
 
1.6 The report is prepared in two volumes -
Volume 1 - Substantial Security Holder Disclosure and Directors' Conduct in Transactions of the Company

Volume 2 - Financial Statements

This is Volume 1 of the report.
 
1.7 The report has been prepared by a quorum of Members of the Commission comprising:
Mr E H Abernethy, Chairman
Mr F R S Clouston, Member
Ms E M Hickey, Member
 
1.8 When referring to persons in our report we use the customary honorific the first time a person's name is mentioned. Subsequently we may use the surname only. No disrespect is intended by this practice.
 
1.9 For the purposes of our report we obtained or reviewed a number of documents related to the affairs of Max, including:

  1. Affidavit evidence filed in support of, and opposing, a winding up application and motion to appoint a provisional liquidator to the Company, filed in the Federal Court of Australia, Western Australian District, in March 1998 including, but not limited to:

    1. affidavits of Mr Robert Ivan Owen McShane sworn on 18 March 1998 and 6 April 1998 together with supporting documents (some 260 pages) which included a report of the Company's operations from Horwath, Chartered Accountants, of Perth, ("the Horwath report") requested by McShane and Mr Thomas William Johnson in their capacity as the Audit Committee of directors of Max;
    2. affidavit of Johnson sworn on 18 March 1998;
    3. affidavits of Mr Michael James Langoulant sworn on 24 March 1998, 30 March 1998, 2 April 1998, 7 April 1998 and 15 April 1998;
    4. affidavits of Mr Josephus Jeffery Verheggen ("Jeff Verheggen") sworn on 24 March 1998 and 2 April 1998;
    5. affidavits of Mr Peter Briggs sworn on 24 March 1998 and 2 April 1998;
    6. affidavit of Mr Jeffrey Laurence Herbert, chartered accountant, of PBB Ashton Read, Perth, sworn on 1 April 1998, including a report he had prepared on the solvency of Max at the request of Jeff Verheggen and Langoulant for the purposes of the hearing;

  2. Sinclair & Wood's audit file relating to the audit of Max's financial statements for the year ended 30 June 1997;
  3. papers received under summons relating to an investigation into the affairs of Max carried out for two of the directors, McShane and Johnson, by an Australian private investigator, McLernon Group Limited;
  4. papers of the Company held in New Zealand by the statutory managers;
  5. written submissions from a number of affected parties in response to versions of the report circulated to those parties in May, October and November 1999.
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