Fri, 07 May 2004
TOWER has been in dispute with GPG over a clause in the Underwrite Agreement entered into as part of TOWER’s rights issue in August 2003, that required GPG to dispose of any shares it acquired as a result of the underwrite in excess of 15.6 million shares.
The TOWER Board decided to refer the matter to an independent Counsel, Mr David Williams Q.C., for an opinion. Mr Williams’ opinion was based on material provided to him by both TOWER and GPG, and included the NZX announcement of 12 February 2004.
The specific matters on which Mr Williams’ opinion was sought were:
(a) In the circumstances as outlined, is GPG in breach of clause 25.2 of the Underwrite Agreement by effecting an off-market sale in or about 4 February 2004 at the then current price of the relevant excess shares to a related company or, for New Zealand Stock Exchange ("NZX") Listing Rules ("LR’s") purposes an "Associated Person"? (b) If GPG is so in breach, then has TOWER and/or any shareholder of TOWER suffered any loss or damage as a result? (c) If GPG is so in breach, what are the prospects of a successful action by TOWER seeking specific performance of the Underwrite Agreement against GPG?
(a) In the circumstances as outlined, is GPG in breach of clause 25.2 of the Underwrite Agreement by effecting an off-market sale in or about 4 February 2004 at the then current price of the relevant excess shares to a related company or, for New Zealand Stock Exchange ("NZX") Listing Rules ("LR’s") purposes an "Associated Person"? (b) If GPG is so in breach, then has TOWER and/or any shareholder of TOWER suffered any loss or damage as a result?
(c) If GPG is so in breach, what are the prospects of a successful action by TOWER seeking specific performance of the Underwrite Agreement against GPG?
A comprehensive opinion from Mr Williams has now been received and in his view, while GPG may have been in breach of clause 25.2 of the Underwrite Agreement with TOWER, there was no basis for TOWER to pursue any effective remedy against GPG. On the basis of the circumstances as disclosed, Mr Williams felt it was difficult to see how there was any direct loss or damage to TOWER or its shareholders.
Mr Williams' opinion concludes with a summary as follows:
(a) "In the circumstances, GPG was in breach of clause 25.2 by offering an off-market sale in or about 4 February 2004 at the then current price of the relevant excess shares to a related company or, for New Zealand Stock Exchange ("NZX") Listing Rules ("LR’s") purposes an "Associated Person"; and (b) Neither TOWER nor any shareholder of TOWER has suffered any loss or damage as a result of the breach; (c) The prospects of a successful action by TOWER seeking specific performance of the Underwriting Agreement against GPG are minimal or non-existent.
For completeness and for all of the foregoing reasons, I do not believe that there is any duty on the directors of TOWER to initiate legal proceedings even though GPG has breached the contract.
On the contrary, if substantial sums of money were expended in suing GPG and the results were as predicted, it might even be said that they were in breach of their duties by commencing and pursuing such proceedings".
On the basis of this opinion, the independent Directors of the TOWER Board have determined that it is not in the interests of shareholders to take further action on this matter.
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