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Report of the Securities Commission on Aspects of the Affairs of Max Resources Limited
5
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Legal requirements for disclosure of relevant interests |
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| 5.1 |
Under Part II of the Amendment Act, every person who becomes a substantial security holder in a public issuer is required to give notice of that fact (in the prescribed form) to the NZSE and the public issuer. "Substantial security holder" is defined as a person who has a "relevant interest" in 5 % or more of the voting securities of the public issuer. The notice must be given as soon as the person knows, or ought to know, that the person is a substantial security holder. Notice must also be given where a substantial security holder's relevant interest has changed by 1% or more of the issuer's voting securities. |
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| 5.2 |
"Relevant interest" is defined widely in the Amendment Act and includes any form of beneficial ownership, the power to acquire or dispose of, or control the acquisition or disposition of, the securities, and the power to exercise the voting rights or the power to control the exercise of the voting rights. The power may be express or implied, direct or indirect, legally enforceable or not, exercisable presently or in the future, or exercisable singly or jointly with another person. |
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| 5.3 |
The High Court may, on application, where there are "... reasonable grounds to suspect that a substantial security holder has not complied..." with the law, make orders as prescribed in the Amendment Act. These orders include: prohibition on the exercise of voting rights; directions to the public issuer not to register the transfer of securities; restraint on the security holder from disposing of the securities; direction to the security holder to dispose of the securities; order directing the forfeiture of the securities; or a declaration that the exercise of voting rights attaching to the securities is void and of no effect. Appendix A to this report sets out the relevant definitions from the Amendment Act.
Relevant substantial security holder notices filed with NZSE in the period 1 April 1996 to 30 October 1997 |
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| 5.4 |
As at 30 October 1997, Max had on issue:
- 39,147,499 ordinary fully paid 25 cent shares
- 22,967,725 options to acquire fully paid 25 cent shares on or before 31 July 1999. The options carried no voting rights.
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| 5.5 |
On 8 August 1997, Jeff Verheggen notified the NZSE of a relevant interest in 5.65 million shares held either in his own name or in the name of Gybson Pty Limited. At the time, this constituted 16.61 % of the voting securities on issue. This percentage would have reduced to 14.43% of the voting securities in Max after an increase in Max's share capital carried out in October 1997. |
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| 5.6 |
On 15 August 1997, Myles Nominees gave notice to the NZSE of a relevant interest in 5 million Max shares it had acquired on 7 August 1997, constituting 14.7% of the voting securities on issue. After the increase in Max's share capital in October 1997, this would have reduced to 12.77% of the voting securities in Max.
The McLernon Group report to NZSE |
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| 5.7 |
On 28 April 1998, the McLernon Group provided the NZSE with a report they had prepared concerning the apparent non-disclosure of interests by substantial security holders in Max. The McLernon Group report concluded that shareholdings or interests through related or controlled offshore entities were not fully disclosed and this had enabled Jeff Verheggen and Briggs to covertly control Max.
Our Enquiries |
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| 5.8 |
The Commission has undertaken enquiries in order to identify all the persons who may hold, or may have held, interests in the largest 20 shareholdings listed in the 1997 Annual Report. For the purposes of this enquiry, we have sought the assistance of various overseas regulatory authorities. The Commission also referred to the files of McLernon Group concerning their enquiry into Max's affairs, which were provided to us pursuant to a summons issued under section 18(3) of the Act. (Langoulant said in submissions to us that "The validity of information provided by the McLernon Group is flawed in that it contains a large amount of conjecture and hearsay. ...".) |
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| 5.9 |
In conducting this investigation, we have encountered a labyrinth of nominees. The Commission, in conducting enquiries of this nature, is well acquainted with the use of nominees. In our experience, we typically find that the use of multiple layers of nominees in relation to substantial security holdings is indicative of a design to hamper enquiries to determine the identities of individuals interested in shareholdings. This is particularly the case where enquiries reveal that a nominee does not appear to exist or has supplied incorrect information about itself. |
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| 5.10 |
In the course of our enquiries into the disclosure of relevant interests in Max, we have had regard to the threshold for action under the substantial security holder provisions of Part II of the Amendment Act. For the Court to be able to make orders under section 32 of the Amendment Act, it needs to be shown (section 30) that there "are reasonable grounds to suspect that a substantial security holder has not complied". |
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| 5.11 |
For the purposes of this report, we have assumed that the 22,967,725 Max options on issue, being options to acquire yet-to-be issued Max shares, did not constitute "voting securities". While acknowledging that there is some uncertainty in the law in this area, the Commission is of the view that options do not constitute "voting securities" for the purposes of the law unless they confer a right in respect of a security already on issue. We do not have detailed information in our possession regarding the beneficial ownership of the Max options. This report assumes that the Max ordinary shares are the only "voting securities" for the purposes of substantial security holder disclosure. |
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| 5.12 |
A table setting out the relevant parcels of Max shares and the association of the registered holders with related parties as at 30 October 1997 is set out below. The "registered holder" is the person named in Max's 1997 Annual Report. A more detailed description of the basis for our conclusions about the associations between the various parties is set out in Appendix B. |
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| REGISTERED HOLDER (and number of shares) |
HELD ON BEHALF OF (and number of shares) |
PERSONS WITH RELEVANT INTEREST |
| SBC Warburg NZ (7,553,400) |
PS Holdings Limited
(810,000) |
Pica Corporation |
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Myles Nominees Pte Limited
(5,000,000) |
Pica Corporation
Jeff Verheggen - put and call option arrangement with Pica in respect of 2,500,000 Max shares |
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TPIC Limited
(1,397,000) |
Wyllie Group -Jeff Verheggen granted TPIC Limited a put option for these shares which was exercised in late 1997.
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NZ Central Securities
Depository (4,434,286 |
Citibank Nominees (New Zealand)
Limited (3,400,000) |
Citibank London
Held for Global Portfolio Management, London (Maloney) |
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National Nominees (NZ)
Limited (1,000,000) |
Royal Bank of Scotland plc Held for Global Portfolio Management, London (Maloney). Total interest 4.4 million = 11.24%. |
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| Gybson Pty Ltd (3,000,000) |
Jeff Verheggen |
Jeff Verheggen |
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Hendry Nominees Ltd
a/c 486 (2,794,815) |
Bohemia Pty Limited (45,700)
S Cassim (257,148) |
No ASIC Record of company
S Cassim |
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City Merchants P/L (24,739) |
Unable to locate entity |
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European Fund Perth (185,000) |
Suspect Jeff Verheggen |
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Grosvenor Securities Limited (682,652) |
Suspect Jeff Verheggen |
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Gybson Pty Limited (177,074) |
Jeff Verheggen |
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Isseka PL (171,429) |
Paul Blackman (Partner, Clayton Utz, Solicitors, Perth) |
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Pine Valley Enterprises Pty Limited (244,285) |
Verheggen Snr, also suspect Jeff Verheggen |
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R Verheggen (50,000) |
Jeff Verheggen's sister. |
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Forbar Nominees Ltd
(2,567,900) |
Hartley Poynton Limited (Perth) |
Grosvenor Securities Limited (179,900) - Suspect Jeff Verheggen |
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Gybson Pty Limited (225,000)
- Jeff Verheggen |
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Pine Valley Enterprises Pty Limited (853,000) - Verheggen Snr, also suspect Jeff Verheggen |
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TPIC Limited (1,000,000) (Wyllie)-Jeff Verheggen granted a put option to Wyllie. Option exercised in late 1997 |
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| Hampton Snow Ltd (2,135,000) |
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Suspect Briggs |
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| Interbac Australasia Pty Ltd (2,000,000) |
Briggs |
Briggs |
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| Fidelity Mutual Funds Management Inc (928,572) |
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Suspect Jeff Verheggen |
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| Zurich Capital Management (785,715) |
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Suspect Jeff Verheggen |
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Hendry Nominees Ltd
a/c 263 (681,143) |
Leeward Trading Limited
(405,000) |
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| Salim Cassim (542,858) |
Salim Cassim |
Salim Cassim |
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| Wilbur Nominees Ltd (511,700) |
Patterson Ord Minnett (Perth)
(80,000) |
Grosvenor Securities Limited - Suspect Jeff Verheggen |
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Montagu Stock Brokers (Perth)
(431,700) |
Grosvenor Securities Limited (381,700)- Suspect Jeff Verheggen |
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| Isseka Ltd (400,000) |
Isseka Pty Limited |
Paul Blackman informs us that he had these shares but sold them in November 1996, notwithstanding Isseka remaining listed as a shareholder in the 1997 Annual Report. |
The relevant interests of Mr Briggs
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| 5.13 |
On the basis of the information in our possession, and having regard to submissions made by Briggs, the holdings in which we know, or in which we believe there are reasonable grounds to suspect, that Briggs had a relevant interest in 1997 and subsequently are as follows:
| Hampton Snow Ltd |
2,135,000 |
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| Interbac Australasia Pty Ltd |
2,000,000 |
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| Capital Resources Pty Limited |
325,000 |
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| Natural Resources Finance Pty Limited |
40,000 |
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4,500,000 |
11.49% |
None of these relevant interests were disclosed to the NZSE or the Company in accordance with the law
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| 5.14 |
Our reasons for coming to this conclusion concerning Briggs's relevant interests are as follows:
- Briggs has acknowledged he has a relevant interest in the shares of Max held by Interbac Australasia, Capital Resources and Natural Resources;
- Although Briggs has told us that he has "never owned or controlled" Hampton Snow:
- There was correspondence between Briggs and Hampton Snow in November 1996 from which it appears Briggs may have had the ability to direct the affairs of Hampton Snow;
- There was a letter of 20 June 1997 to Max, from WRS Pacific, and signed by Briggs, in which Briggs directed how the Max shares received in consideration for the sale of WRS assets were to be issued and in which he referred to "receiving our share certificates";
- There are statements made by Lunt, in correspondence with McShane in February and March 1998, in which he refers to Hampton Snow as a company "owned" or being a "nominee [company]" of Briggs.
See Appendix B for reference to this and other relevant material.
The relevant interests of Mr Jeff Verheggen |
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5.15 |
On the basis of information in our possession, and having regard to the submissions made to us by Jeff Verheggen and Langoulant, the holdings in which we know, or in which we believe there are reasonable grounds to suspect, that Jeff Verheggen had a relevant interest at times during 1997 were as follows:
| Disclosed to the NZSE in August 1997: |
5,650,142 |
14.43% |
| Relevant interests |
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| Gybson Pty Limited |
3,402,074 |
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| Pica option |
2,500,000 |
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| Wyllie (TPIC) option |
1,397,000 |
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| Grosvenor Securities Ltd |
1,324,252 |
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| Fidelity Mutual Funds Management Inc |
928,572 |
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| Zurich Capital Management Ltd |
785,715 |
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| European Fund, Perth |
185,000 |
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| Pine Valley Enterprises Pty Ltd |
1,097,285 |
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| Total actual and suspected relevant interests |
11,619,898 |
29.68% |
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| 5.16 |
Our reasons for coming to this conclusion in relation to Jeff Verheggen's relevant interests or suspected relevant interests are as follows:
- Jeff Verheggen gave notice of relevant interests in 5.65 million Max shares in August 1997 and has acknowledged his interests currently comprise the holdings held by or for Gybson Pty Limited and the remaining Pica option;
- Jeff Verheggen entered into a put option arrangement with Wyllie of TPIC Limited in May 1997 in respect of 1.397 million Max shares. This option was exercised by TPIC late in 1997, although we understand Jeff Verheggen was unable to pay for the shares and they remain in the ownership of TPIC.
In the period from the time the shares were put back to Jeff Verheggen until a settlement arrangement was reached with TPIC we believe Jeff Verheggen had a relevant interest in these shares.
These shares comprised some 3.4% of Max's voting shares. In addition to the requirement to disclose overall interests that exceed 5% of the voting securities of a company, notification to the NZSE is also required when a substantial security holder changes its interest by 1% or more of the voting securities. At no time were Jeff Verheggen's relevant interest in these shares, or the changes in his relevant interests, disclosed to the NZSE or, we believe, to the Company, as required by law;
- We believe there are reasonable grounds to suspect that Jeff Verheggen had and has relevant interests in shares held by or for Grosvenor Securities, Fidelity Funds Management, Zurich Capital Management and European Fund. The basis for this view is set out in the material referred to in the last three pages of Appendix B. We believe Jeff Verheggen demonstrated an ability to control the disposition of holdings registered in the names of Grosvenor Securities, Fidelity Funds Management, Zurich Capital Management and European Fund.
Jeff Verheggen, in his first submissions to us, said he had no interest in shares held by these named entities. Jeff Verheggen later told us, in further submissions, that he had hoped to utilise scrip from clients of Mr Richard Rowe of Mercator Trust Company Limited, Guernsey, Channel Islands ("Mercator"), for which he was to pay a fee, to use as security for a loan to purchase other shares, but the parties had been unable to resolve the fee payable. As a result "... the shares and transfers were never provided and that security was neither lodged nor took effect." However we have copies of a facsimile message from Mercator to a Mr Barry Panos of Transcontinental Resources Limited of 27 March 1995 forwarding to Panos executed transfers out of the names of Zurich Capital Management, Fidelity Mutual Funds Management, Grosvenor Securities and Standard Investments and of a similar message of 22 March 1995 with an executed transfer in the name of European Fund Managers. A message of 21 March 1995 from Rowe of Mercator to Panos referred to Mercator completing five stock transfer forms "On Mr Verheggen's instructions";
- We understand that Pine Valley Enterprises is owned by Verheggen Snr. On the basis of material provided to us and referred to in Appendix B, particularly that related to the "Inovax" settlement, we believe there are reasonable grounds to suspect that Jeff Verheggen has a relevant interest in shares held by Pine Valley Enterprises. We think, on the basis of the Inovax material, that this interest could arise from an ability to control the acquisition or disposition of voting securities held by Pine Valley Enterprises. Jeff Verheggen has told us he has no interest in these shares. Verheggen Snr has also "categorically [denied]" that Jeff Verheggen has any interest in shares held by Pine Valley, although he says he (Verheggen Snr) has sometimes acted as guarantor for Jeff Verheggen.
- Our conclusions are supported by a handwritten note from Jeff Verheggen to Maloney referred to in the McLernon Group report. This handwritten note stated that in October 1997 the following entities held major shareholdings in Max:
| "JJV (personally) |
5.65 m |
| JJV + FAMILY |
5.2 m |
| WRS (to be issued) |
5.0 m |
| Connor |
4.0 m (PLUS) |
| BOB PETERS |
3.0 m |
| PICA (Malaysians) |
3.5 m |
| JOHN CARTWRIGHT |
1.30 m |
| Bill Wyllie |
1.9 m |
| Argosy Asset Mgt |
1.1 m |
| Joe THROSBY |
1.0 m |
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31.65m |
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| OUT OF TOTAL |
39,012,185m" |
- Jeff Verheggen, in his first submissions to us, acknowledged that he "...had a relationship with all the major shareholders." He has told us that he "know[s]" "Richard Rowe" (Mercator), "Mr Aziz Hussein" (Pica), "Dr Salim Cassim" (Pica), "Joe Throsby, Bob Peters, John Cartwright, Connor Moloney[sic]" (Global Portfolio Management), "Bill Wyllie, Peter Briggs,[and] Ian Williams", and said that "... at various times I have borrowed money or had other commercial relationships with some of these people, but I do not own or control their holdings." In his later submissions Jeff Verheggen, referring to the handwritten note set out in the preceding paragraph, said that "The shares in 'JJV Personally' and 'JJV family' overlap by 3 million shares which were beneficially held by Gybson Pty Ltd on behalf of my father. ...". According to our analysis Gybson Pty Limited only has 3.4 million shares in Max. In his earlier submissions Jeff Verheggen said his holdings consisted only of those in Gybson Pty Ltd and the remains of the Pica option. We do not understand his later submission.
The relevant interests of Pica Corporation |
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| 5.17 |
On the basis of the information in our possession we believe that the holdings in which Pica Corporation had a relevant interest in 1997 were:
| PS Holdings Limited |
810,000 |
2.06% |
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| Myles Nominees PTE Ltd |
5,000,000 |
12.77% |
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| Total relevant interest |
5,810,000 |
14.84% |
(Of which Myles Nominees' holding was disclosed) |
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| 5.18 |
PS Holdings and Myles Nominees are subsidiaries of Pica Corporation. We believe that Pica Corporation had, as at 30 October 1997, a relevant interest in 5,810,000 Max shares (14.84% of the voting securities in Max). While Myles Nominees gave notice to the NZSE on 15 August 1997 of a relevant interest in 5,000,000 shares, it appears that Pica Corporation also had a relevant interest in the shares held by Myles Nominees through its ability to control Myles Nominees. Pica Corporation has not filed a substantial security holder notice with the NZSE.
The relevant interests of Global Portfolio Management |
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| 5.19 |
In the course of our enquiries we observed holdings of 3,400,000 Max shares held by Citibank Nominees New Zealand Limited and 1,000,000 shares held by National Nominees (N.Z.) Limited. Our research indicated that these holdings were held on behalf of an entity called Global Portfolio Management based in London, England. This information has been confirmed by Jeff Verheggen. Jeff Verheggen identifies Global Portfolio Management with a "Connor Maloney". |
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| 5.20 |
4,400,000 shares in Max constitute 11.24% of the voting securities.
This interest has not been disclosed to the NZSE, or, we understand, to the Company, as required by law.
Conclusion |
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| 5.21 |
Based on the above, and taking into account Jeff Verheggen's and Briggs' submissions, we consider that there has been significant non-compliance with the disclosure requirements of Part II of the Amendment Act by Jeff Verheggen, Briggs and Global Portfolio Management.3
We also consider that Pica Corporation has not complied with the law.
As a result information about the extent of the respective shareholding interests of these people was denied to Max's other shareholders and to the markets of Australia and New Zealand.
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3Conclusion. We have communicated by facsimile to a facsimile number obtained from our files, and by letter delivered by courier to a street address in London obtained from the same source. Return
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