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BEFORE THE TAKEOVERS PANEL
IN THE MATTER OF
the Takeovers Act 1993 and the Takeovers Code
IN THE MATTER OF
a meeting held under section 32 of the Act to determine:
(1) Whether Philip Hamish McHardy ("Hamish McHardy") and Sundry Investments Limited ("SIL") were associates for the purposes of rule 4 of the Code with Alan Dougal Thompson ("Alan Thompson") at the time that Hamish McHardy acquired 669,200 shares in Kerifresh Limited ("Kerifresh") on or about 29 May 2002 and/or at the time that SIL acquired 669,200 shares in Kerifresh from Hamish McHardy on or about 23 September 2002 and/or over the period from August 2003 to December 2005 during which SIL acquired a further 143,000 shares in Kerifresh in five separate parcels such that the aggregate of the shareholdings of Hamish McHardy/SIL and Alan Thompson and his associates was in excess of 20% of the voting rights in Kerifresh after each of the acquisitions of shares so that any or all of these acquisitions of shares were made otherwise than in compliance with rule 6(1) of the Code;
(2) Whether Graham Cowley, and a company owned by him, GMS Fulfilment NZ Limited (now Iron Hills Vineyards Limited) ("GMSF"), which acquired 245,000 shares in Kerifresh between 28 July 2004 and 30 June 2005 was at all relevant times an associate of Alan Thompson and Hamish McHardy such that the aggregate of the shares held or controlled by Graham Cowley and GMSF and their associates was in excess of 20% of the voting rights in Kerifresh so that these acquisitions were made otherwise than in compliance with rule 6(1) of the Code;
(3) Whether Alan Thompson and/or Hamish McHardy obtained control of voting rights in Kerifresh other than in compliance with the Code or may have, in some way, been knowingly concerned in, or party to, what may have been a contravention of the Code by Graham Cowley and GMSF when GMSF acquired 245,000 shares of Kerifresh between 28 July 2004 and 30 June 2005;
(4) Whether Emma Jane Eastwood ("Emma Eastwood") and a company owned by her, Anbran Trustee Company Limited ("Anbran") which on or about 1 November 2005 acquired some 245,000 shares in Kerifresh and subsequently, on or about 31 December 2005, acquired a further 116,000 shares in Kerifresh, acquired those shares otherwise than in compliance with rule 6(1) of the Code because at all relevant times Emma Eastwood and Anbran were associates of Alan Thompson and in the circumstances were also associates of Harold Burcham Thompson ("Harold Thompson") so that at time of the acquisition the aggregate of the shares held or controlled by Emma Eastwood and Anbran, together with the shares held by their associates, were more than 20% of the voting rights of Kerifresh;
(5) Whether Alan Thompson obtained control of an additional 361,000 voting rights in Kerifresh, being the shares acquired by Anbran, otherwise than in compliance with rule 6(1) of the Code because at the time of the acquisitions Alan Thompson and his associates, including his father Harold Thompson, held more than 20% of the voting rights of Kerifresh;
(6) Whether Alan Thompson was, directly or indirectly, knowingly concerned in, or a party to, the acquisition of shares in Kerifresh by Anbran if those shares were acquired otherwise than in compliance with the Code;
(7) Whether the increased percentage control of voting rights arising from the repurchase of its own shares by Kerifresh in August and October 2005 enjoyed by Alan Thompson and his wife Helen T Thompson as well as by Harold Thompson and his wife Helen W Thompson, which was not reduced again to pre-repurchase levels until May 2006, did not comply with the Code.
16 October 2007 at Auckland
K J O'Connor (Acting Chairman)
B W F Brown QC Counsel assisting the Panel and attending the meeting
M Pasley appearing for A D Thompson and H T Thompson
A D Thompson representing himself
18 October 2007
 The Panel is publishing at this time not only the terms of its determination and restraining orders, which are required by section 32 to be made before the close of the second day after its meeting, but also its reasons for making that determination and issuing those orders.
 The Panel has proceeded in this way because of the urgency associated with this matter in the circumstances where Kerifresh Limited is currently in receipt of a takeover notice and consequently the desirability for interested and affected parties to understand the basis for the Panel's determination.
 However, as a consequence of addressing both determination and reasons in that short timeframe, it may be the case that the description of some events and the details of some the Panel's reasoning are somewhat briefer than might have been the case if the Panel had had the luxury of a longer period of time in which to state its reasons.
 Kerifresh is an unlisted New Zealand incorporated company based in Northland. Its principal business is the production of lemons and other fruit. At all times since July 2001 its financial statements show that it had more than 50 shareholders and more than $20 million in gross assets. As such, on the face of it, Kerifresh was a code company for the purposes of the Act and the Takeovers Code ("the Code")1 throughout the period that the transactions considered during these proceedings occurred. As discussed later, this view was challenged by two of the parties to the hearing.
 Turners and Growers Limited ("TGL") is a New Zealand listed company.
 On 1 October 2007 TGL gave notice under rule 41 of the Code of its intention to make a full takeover offer for Kerifresh. On the same date TGL lodged a complaint with the Panel alleging that a number of irregularities had occurred in transactions in Kerifresh shares over the previous 5 years.
 At the time of lodging its complaint TGL did not avail itself of the opportunity provided under section 35(3) of the Act to formally request that the Panel convene a meeting under section 32 of the Act. In its letter of complaint TGL said that it would consider making such a request if the Panel declined to call a meeting on its own initiative.
 Following receipt of the complaint the Panel reviewed the material provided by TGL and undertook enquiries of its own from publicly available sources including Companies Office records and various internet websites. In addition, on Friday 5 October 2007, TGL provided the Panel with a copy of Kerifresh's share register including details of share transfers since 1 January 2001.
 The Panel initially met on 5 October 2007 (before receipt of the share register) to consider an analysis by the Panel executive of the material provided with the complaint. The Panel subsequently met on Tuesday 9 October and Wednesday 10 October 2007.
 On 10 october 2007 the panel resolved:
Alan Dougal Thompson and Helen Thompson held some 1,313,016 shares in Kerifresh, representing some 18.49% of the company's issued capital, at the time the Code came into force on 1 July 2001. Harold Burcham Thompson and Helen Vera Thompson held some 346,050 shares in Kerifresh, representing some 4.87% of the company's issued capital, at that time.
On or about 29 May 2002 Philip Hamish McHardy ("Hamish McHardy") and Audrey McHardy acquired 669,200 shares in Kerifresh. On the same day the trustee of the Murrayfield Trust, Jonathan Forbes McHardy (son of Hamish and Audrey) acquired 597,316 shares in Kerifresh. On 23 September 2002 Sundry Investments Limited, of which the shareholders and directors are Hamish and Audrey McHardy, acquired the 669,200 Kerifresh shares from Hamish McHardy. The combined holdings of the McHardys represented some 17.79% of the company's exerciseable voting rights at that date.
Between August 2003 and December 2005 Sundry Investments Limited acquired a further five parcels of Kerifresh shares being some 143,000 shares or 2.0% of total exerciseable voting rights.
The Panel considers that Hamish McHardy and Sundry Investments Limited may have been associates of Alan Thompson at the time of the acquisition of these shares in 2002 through to 2005. This associate relationship may have been formalised by an agreement in or about May 2002 involving the lending and borrowing of money and the intended acquisition and holding of Kerifresh shares.
The acquisitions of shares by Sundry Investments Limited and Hamish McHardy may not have been made in compliance with the fundamental rule of the Code because firstly Hamish McHardy's, then Sundry Investments Limited's, level of shareholding in Kerifresh, when taken together with Alan Thompson's existing level of shareholding at the time, may result in the acquirers holding or controlling, together with their associates, more than 20% of the voting rights in Kerifresh.
Between 28 July 2004 and 30 June 2005 GMS Fulfilment Limited, a company owned and controlled by Graham Cowley, acquired approximately 245,000 shares in Kerifresh in 30 separate parcels, representing approximately 3.45% of total exerciseble voting rights. It appears that these share purchases may have been funded by Hamish McHardy and may have been acquired for or at the request of Alan Thompson pursuant to an oral agreement reached between Graham Cowley, Hamish McHardy and Alan Thompson in or about 2004.
On the basis that Graham Cowley, Alan Thompson and Hamish McHardy were associates then these acquisitions by GMS Fulfilment Limited may not have been made in compliance with the Code because of the existing level of shareholdings in Kerifresh held or controlled by Alan Thompson and Hamish McHardy and their associates. Alan Thompson and Hamish McHardy may also have obtained control of voting rights in Kerifresh other than in compliance with the Code or may have, in some way, directly or indirectly, been knowingly concerned in, or party to, what may have been a contravention by Graham Cowley and GMS Fulfilment Limited of the fundamental rule of the Code.
On 1 November 2005, GMS Fulfilment Limited's 245,000 shares in Kerifresh were transferred to Anbran Trustee Company Limited ("Anbran"), whose sole shareholder and director is Emma Jane Eastwood. Subsequently, on or about 31 December 2005, Anbran acquired a further 116,000 Kerifresh shares in 11 separate parcels, giving total acquisitions of 361,000 shares in Kerifresh (5.3% of currently exerciseable voting rights at that time).
It has been alleged by the complainant that Anbran is holding shares on behalf of Alan Thompson. If the shares acquired by Anbran are controlled by Alan Thompson, and/or Anbran is an associate of Alan Thompson for Code purposes, then the acquisition of shares by Anbran in January 2006 may have been made otherwise than in compliance with the Code. Alan Thompson may have, directly or indirectly, been knowingly concerned in, or a party to, what may have been an acquisition of shares in Kerifresh made otherwise than in compliance with the Code.
In August 2005 and October 2005 Kerifresh repurchased a total of 283,000 shares in 15 separate parcels. In March 2006 a further 42,500 shares in two parcels were repurchased. In May 2006 Kerifresh allotted 474,000 new shares to Kwan Holdings Limited.
The effect of the 2005 repurchases was that any shareholder in Kerifresh who, together with associates, held more than 20% of the voting rights in Kerifresh at the time of the repurchase (and did not sell into the repurchase) may have had their voting control of Kerifresh increased otherwise than in compliance with the Code. Clause 5 of the Takeovers Code (Class Exemptions) Notice (No 2) 2001 provides an exemption for shareholders in this position provided they reduce (by sell-down or dilution) their voting control within six months of the repurchase of shares to the level of voting control existing before the repurchase was undertaken.
On the basis that Alan Thompson and his father Harold Thompson may be associates as defined in rule 4 of the Code and that their aggregate holdings at the time of the repurchases were in excess of 20% of the voting rights of Kerifresh, and that the increased voting control was not reduced before 28 February 2006 in accordance with the clause 5 class exemption, Mr and Mrs Thompson senior and Mr and Mrs Thompson Junior may not have complied with the Code when their voting control increased. However it is noted that the allotment of shares by Kerifresh in May 2006 would have diluted their respective control positions to below the position prior to the repurchases.
The Panel made interim restraining orders under section 32(2) of the Takeovers Act 1993 restraining various shareholders from:
(a) exercising the voting rights attached to any of the shares they hold or control in Kerifresh; and
(b) acquiring or disposing of any voting securities in Kerifresh.
The Panel also made interim restraining orders under section 32(2) of the Takeovers Act 1993 restraining Kerifresh from registering any transfers of shares in Kerifresh to or from various parties.
These restraining orders are due to expire at the close of 18 October 2007. The full details of the Panel's restraining orders are published on the Panel's website.
 The Panel frequently, when receiving complaints from takeover participants, puts the complaints to the parties complained of for their comment before deciding how to proceed. In this instance, because of the nature of the actions complained of and the timeframe of the takeover, it was decided to call a meeting and issue restraining orders before giving notice to the parties the subject of the complaint.
 Summonses were issued to Alan and Helen Thompson, Harold and Helen Thompson, Hamish and Audrey McHardy, Emma Eastwood, Graham Cowley, Nelson J P Cull (a seller of Kerifresh shares and former director of the company) and Alan A Devcich, former director of Kerifresh (on behalf of Alanita Investments Limited, a seller of Kerifresh shares).. In addition, Jonathan McHardy, who lives in New York, was invited to attend the Panel's meeting.
 After the notice of meeting had been given, TGL formally requested, under section 31V(2) of the Act, that it be given leave to be heard and represented at the Panel's meeting. The Panel decided, on Friday 12 October 2007, that TGL was a party who ought to be heard and whose appearance could be of assistance to the Panel.
 Submissions were received from or on behalf of Alan Thompson on Monday 15 October 2007. Documents sought under summons were provided to the Panel on Monday 15 October by Alan Thompson, Emma Eastwood, Hamish McHardy and Kerifresh. A few further documents were provided at the start of the Panel's hearing. The Panel is appreciative of the cooperation of to those parties who made early provision of their documents. This significantly facilitated the progress of the hearing which ran from 9.00 a.m. to 6.30 p.m. on 16 October 2007.
 During the meeting evidence was received under oath from, in sequence, Graham Cowley, Emma Eastwood, Helen Thompson, Nelson Cull, Alan Devcich, Anthony Gibbs, Hamish McHardy, and Alan Thompson. Legal submissions were received from, in sequence, legal advisers representing TGL, Emma Eastwood, Hamish McHardy, Alan Thompson, and Graham Cowley.
 Harold Thompson and his wife Helen were served with a summons on Monday 15 October 2007 which in accordance with the service requirements in the Act was left at their normal place of residence but they were not at home at the time and did not attend the meeting or give evidence.
 At the start of the meeting the Panel considered submissions presented on behalf of Alan Thompson and Emma Eastwood who argued that Kerifresh was not a code company because at the relevant times from 2002 to 2005 it did not have assets of more than $20 million. The applicable definition of "code company" at the time of these transactions included a requirement that a company have $20 million or more of assets.
 Neither Hamish McHardy's counsel nor the counsel for Kerifresh made submissions on this jurisdictional point.
 Counsel argued that the value of Kerifresh at 2002 and later was less than $20 million. They submitted that the market value of Kerifresh's equity plus debt was less than $20 million. They argued that the asset value test should take account of the troubled state of Kerifresh's affairs.
 The 2001 statutory accounts were signed off by the auditors BDO Spicers as giving a true and fair view but recorded a "fundamental uncertainty" relating to the reliance on continuing support from Kerifresh's bankers. The "fundamental uncertainty" statement was not repeated in Kerifresh's 2002 financial statements and has not appeared since.
 The company's consolidated financial statements have never shown total assets of less than $27 million. The company has had investments in orchards and related plant, with the orchards and land valued at net current value,2 by independent registered valuers, in excess of $20 million in every year since 2001.
 The Code did not give guidance as to how to measure the value of assets but the Panel has previously taken the view that the relevant figure is that for gross assets. See the Panel's determination relating to Calgary Petroleum Limited (6 July 2005).
 The Panel does not necessarily limit itself to accounting values when measuring assets because accounting principles usually prohibit the recognition of internally generated goodwill. However, in the case of Kerifresh, the productive property assets are stated at net current value as assessed by an independent registered valuer. On that basis Kerifresh has never had assets of less than $20 million since 2001, even if the market value of Kerifresh equity, plus debt, was less than that value.
 Accordingly, and as advised to the meeting before progressing to the substantive hearing, with reasons to follow, the Panel rejected the submissions from counsel for Alan Thompson and Emma Eastwood. The Panel is satisfied that Kerifresh was a code company throughout 2002 and up to the present time.
 In the analysis and reasoning which follow the elements of the Code that are of primary interest are rule 6, the fundamental rule, and rule 4, which defines "associates" for Code purposes.
 Rule 6 of the Code is the "fundamental rule". It provides:
(1) Except as provided in rule 7, a person who holds or controls-
(a) no voting rights, or less than 20% of the voting rights, in a code company may not become the holder or controller of an increased percentage of the voting rights in the code company unless, after that event, that person and that person's associates hold or control in total not more than 20% of the voting rights in the code company:
(b) 20% or more of the voting rights in a code company may not become the holder or controller of an increased percentage of the voting rights in the code company.
(2) For the purposes of subclause (1), if-
(a) a person and any other person or persons acting jointly or in concert together become the holders or controllers of voting rights, that person is deemed to have become the holder or controller of those voting rights:
(b) a person or persons together hold or control voting rights and another person joins that person or all or any of those persons in the holding or controlling of those voting rights as associates, the other person is deemed to have become the holder or controller of those voting rights:
(c) voting rights are held or controlled by a person together with associates, any increase in the extent to which that person shares in the holding or controlling of those voting rights with associates is deemed to be an increase in the percentage of the voting rights held or controlled by that person.
 Rule 4 defines "associate" for the purposes of the Code:
For the purposes of this code, a person is an associate of another person if-
(a) the persons are acting jointly or in concert; or
(b) the first person acts, or is accustomed to act, in accordance with the wishes of the other person; or
(c) the persons are related companies; or
(d) the persons have a business relationship, personal relationship, or an ownership relationship such that they should, under the circumstances, be regarded as associates;
(e) the first person is an associate of a third person who is an associate of the other person (in both cases under any of paragraphs (a) to (d)) and the nature of the relationships between the first person, the third person, and the other person (or any of them) is such that, under the circumstances, the first person should be regarded as an associate of the other person.
(2) A director of a company or other body corporate is not an associate of that company or
(1) Purchase of shares by Hamish McHardy from Peter and Linda Hendl
 In July 2001, at the time the Code came into force and subsequently, Alan Thompson and his wife Helen were the joint owners of 1,313,016 shares in Kerifresh, representing 18.49% of the company's total voting rights. Alan Thompson is Managing Director of Kerifresh and is a founding shareholder of the company along with Peter Hendl.
 In most years from 2001 to 2007 Alan and Helen Thompson transferred Kerifresh shares (numbering 250,206 in total) to the Thompson Family Trust, of which they were the two trustees. For the purposes of rule 4(1)(a), (b) and (d) of the Code the Panel considers Alan and Helen Thompson to be associates of the Thompson Family Trust.
 There is such commonality between Alan and Helen Thompson as joint holders, and Alan and Helen Thompson as trustees of the Thompson Family Trust, that any party that is an associate of Alan and Helen Thompson would also be an associate of the Thompson Family Trust under rule 4(1)(e) of the Code for the purpose of aggregating shareholdings and determining compliance with the fundamental rule.
 Peter Hendl, co-founder of Kerifresh with Alan Thompson, and Linda Hendl jointly held 1,266,516 shares, or 17.84% of total voting rights, in Kerifresh in July 2001.
 The Panel was told that during the early months of 2002 the Hendls decided they wanted to sell their Kerifresh shares. They approached Graham Cowley to arrange the sale of their shares.
 Graham Cowley identified Hamish McHardy's as a potential buyer. He knew Mr McHardy because they had worked together some years previously.
 On or about 29 May 2002, after a period of negotiation, Hamish McHardy acquired 669,200 shares in Kerifresh from the Hendls. In addition Jonathan Forbes McHardy, son of Hamish McHardy, and trustee along with his father of the Murrayfield Trust, acquired the balance of 597,316 Kerifresh shares from the Hendls. The combined holdings of the McHardys, father and son, was 17.84% of the total voting rights in Kerifresh following these acquisitions in May 2002.
 Jonathan McHardy is an investment banker who was living in London at the time of these transactions and is now resident in New York.
 In the course of his evidence Hamish McHardy told the Panel that he considered that he and his son were associates for code purposes because they often acted together on investment matters.
 The Panel was not able to test Jonathan McHardy on his father's view because he did not attend the meeting.
 The Panel accepts that Hamish McHardy and Jonathan McHardy are associates for code purposes.
 The Panel was provided by TGL with a copy of an unsigned document purporting to be an agreement between Alan Thompson and Hamish McHardy ("the Draft Agreement"). Graham Cowley advised the Panel that he had drafted the document and sent it to Hamish McHardy and Alan Thompson. He said he was unaware whether the document had been signed.
 The text of the Draft Agreement is as follows:
PURCHASE OF KERIFRESH SHARES
This agreement is between Alan Thompson (Trust name)("Thompson") and Hamish McHardy (trust name)("McHardy")
The parties agree
- Thompson on 29 May 2002 will lend $255,000 to McHardy so as to allow McHardy to buy 375,000 in Kerifresh Ltd. ("The Thompson Loan")
- The Thompson Loan is at 0% interest and of no fixed term.
- Thompson has the right to recall the loan at any time on the terms agreed below.
- McHardy agrees to Thompson having the right to recall the loan at any time on the basis that repayment shall be in the form of the transfer to Thompson of the 375,000 shares originally purchased by McHardy or such other shares that McHardy may acquire but in either case the value of the transfer will be 375,000 shares at 68¢ each.
- Thompson is entitled to any income arising from the 375,000 shares originally purchased by McHardy. In the event this is cash as in a dividend the Thompson will raise a GST invoice for interest equal to the cash dividend. In the event that cash is a principal or capital repayment then this amount shall be applied to reducing the principal amount of the Thompson Loan. If there is any share split or bonus shares then the number of shares to be transferred to Thompson will be adjusted accordingly, as if Thompson had held the shares himself.
- McHardy agrees to maintain at least 375,000 shares in Kerifresh, or the equivalent if split or bonus shares issued and not allow any security interests to be registered against these shares.
Agreed this day
 The terms of the Draft Agreement are unusual. On its face the Draft Agreement indicates that Alan Thompson was funding or intended to fund the acquisition and holding by Hamish McHardy of 375,000 Kerifresh shares by an interest-free loan from Thompson to McHardy. That loan could be recalled by Thompson at any time, with the manner of that repayment to be by the return of 375,000 Kerifresh shares to Thompson. The economic interest in these shares therefore appeared to remain with Thompson. The only Code issue not addressed in the Draft Agreement was that of control of voting rights attached to the 375,000 shares in question.
 Although Hamish McHardy and Alan Thompson both stated that they had not signed the Draft Agreement, they nevertheless confirmed in evidence and submissions that they had entered into an agreement, ("the Agreement") albeit unwritten, essentially in the same terms as the Draft Agreement. However, the actual numbers which they agreed were 361,000 Kerifresh shares to the value of $245,000. As was provided in clause 4 of the Draft Agreement, they confirmed that under the actual Agreement, Hamish McHardy could only repay his "debt" by transferring 361,000 Kerifresh shares to Alan Thompson. They also confirmed that Mr Thompson had the call option in respect of them.
 The Agreement could be characterised as a share purchase through a nominee, with Hamish McHardy only being able to satisfy the repayment of his debt by transferring 361,000 Kerifresh shares to Alan Thompson in exchange for cancellation of the debt.
 The terms of the Agreement explain a number of actions in the succeeding three years.
 While the Agreement did not confer voting rights in the shares on Alan Thompson the Agreement gave him a beneficial interest in the 361,000 Kerifresh shares initially held in the name of Hamish McHardy and subsequently in the name of SIL.
 Graham Cowley had identified Hamish McHardy as a possible purchaser and Alan Thompson was encouraging him to acquire the Hendl shares. Hamish McHardy was interested but he wanted Alan Thompson to invest in some of the Kerifresh shares himself, thus increasing his commitment to Kerifresh,. In submissions this was described as being a condition of Hamish McHardy's investment in Kerifresh.
 Both Hamish McHardy and Alan Thompson explained that Thompson's name did not appear as the purchaser of any of the Hendl shares because for a number of reasons given in evidence they did not want Hendl to know that Thompson was a buyer of the Hendl shares.
 Both Hamish McHardy and Alan Thompson said they did not appreciate in 2002 that a small unlisted public company like Kerifresh could be caught by the Code, although they became aware of the Code's application fairly soon after.
 Alan Thompson took quite a financial risk in funding the purchase of the shares covered by the Agreement. He said this indicated the extent of his commitment to Kerifresh.
 Hamish McHardy said that on two occasions he had tried to extinguish the debt to Alan Thompson by ascribing a value to the Kerifresh shares and paying for them in cash, but he said Thompson was not interested.
 Hamish McHardy purchased 669,200 Kerifresh shares on 29 May 2002, including those financed by, and held on behalf of, Alan Thompson. On the same day Jonathan McHardy's trust purchased 597,316 Kerifresh shares, making a total interest of 17.84%. At the same time Alan and Helen Thompson had 18.49% of the voting rights of Kerifresh.
 In the Panel's view Hamish McHardy and Alan Thompson, by entering into the Agreement (albeit on an oral basis), formed a business relationship for the purposes of rule 4(1)(d) of the Code such that, in the circumstances, being the acquisition and holding of Kerifresh shares, they should be regarded as associates. In the Panel's view Hamish McHardy and Alan Thompson also formed an ownership relationship, in respect of the parcel of Kerifresh shares, such that, in the circumstances, they should be regarded as associates.
 Factors leading the Panel to this conclusion include:
(a) Hamish McHardy said that he would not invest in shares in Kerifresh unless Alan Thompson made a similar commitment to acquire Kerifresh shares with his own money;
(b) The Agreement was in effect an advance purchase of voting rights in Kerifresh by Alan Thompson because Hamish McHardy could not terminate the Agreement other than by giving Alan Thompson 361,000 shares in Kerifresh. It might be colloquially described as a warehousing arrangement;
(c) There was an element of subterfuge in the arrangements because it was the intent of both parties to disguise the identity of the real purchaser of a significant parcel of Kerifresh shares;
(d) The informal nature of the arrangement, being undocumented and therefore entirely dependent on mutual trust, was indicative of a closer business relationship than a normal commercial borrower-lender relationship.
 Hamish McHardy acknowledged that he and his son Jonathan McHardy were associates.
 The Panel concludes that at the time that Hamish McHardy purchased 669,200 Kerifresh shares, or 9.43% of the company's voting rights, that holding, when aggregated with those of his associates Alan and Helen Thompson (18.49%) and Jonathan McHardy (8.41%) was well in excess of 20% of Kerifresh's voting rights. None of the exceptions in rule 7 of the Code were used to validate this acquisition.
(2) Transfer of shares to Sundry Investments Limited and subsequent purchases
 SIL is a company owned by Hamish and Audrey McHardy and used to hold their personal investment portfolio. Hamish McHardy accepted that he controlled SIL. In the Panel's view SIL is therefore an associate of Hamish McHardy under several of the criteria in rule 4.
 In addition, for the purposes of rule 4(1)(e), there is such commonality between Hamish McHardy and SIL that any entity that is an associate of Hamish McHardy would also be an associate of SIL, and vice versa.
 On 23 September 2002 Hamish McHardy transferred his 669,200 Kerifresh shares, including those held under the terms of the Agreement, to SIL.
 The Panel is satisfied that that transfer had no Code consequences because the shares remained under the control of Hamish McHardy.
 Between 18 August 2003 and 22 September 2003 SIL purchased a further 84,000 Kerifresh shares, some 1.18% of Kerifresh's voting rights. At the time of these purchases SIL was an associate of Alan and Helen Thompson and of Jonathan McHardy, whose aggregate shareholding was well in excess of 20% of Kerifresh's voting rights. No Code mechanism was used to acquire these shares.
(3) The purchase of shares by GMS Fulfilment Limited
 GMSF (now Iron Hills Vineyard Limited) is a company owned and controlled by Graham Cowley.
 During the period 28 July 2004 to 30 June 2005 GMSF acquired 245,000 Kerifresh shares (3.45% of total voting rights) from numerous individual shareholders.
 It was explained to the Panel that Kerifresh operates and manages a facility to bring buyers and sellers of Kerifresh shares together. This is usually done in the month following the company's annual general meeting. The facility is operated by the company itself and it would appear that cheques from buyers to sellers are passed through the company's bank accounts. Often sellers would not know who was buying their shares.
 It was explained in evidence that Graham Cowley, who had brokered the original purchase of shares by Hamish McHardy and had prepared the Draft Agreement in 2002, had in 2004 entered into discussions with Hamish McHardy and Alan Thompson separately to bring about, at least from the perspective of McHardy and Thompson, the conclusion to the arrangements covered by the Agreement.
 This arrangement ("the 2004 arrangement") was that GMSF would buy shares as they were offered through Kerifresh and Hamish McHardy would provide GMSF with the funds to make the purchases. The shares were to be transferred to Mr Thompson in due course. All of GMSF's purchases were made in terms of the 2004 arrangements. Although there was no disagreement as to the fact of the 2004 arrangement, Graham Cowley stated that this arrangement was covered by a written agreement, a matter denied by both Hamish McHardy and Alan Thompson.
 Email correspondence on 27 September 2005 to Alan Thompson, produced to the Panel, recorded that Graham Cowley said to "Alan" he would "appreciate it if I could be removed from yours and Hamishes [sic] arrangement asap." No further purchases were made by GMSF after that date. GMSF's Kerifresh shares were transferred to Anbran on 26 October 2005. Anbran is discussed in the next section of this determination.
 It is clear to the Panel, from the totality of the evidence, that the 2004 arrangement involved a three party arrangement with Alan Thompson, Hamish McHardy and Graham Cowley. Although Hamish McHardy on a number of occasions appeared to understate the participation of Alan Thompson in the 2004 arrangement, Thompson made it very clear that all three parties were involved.
 At the time of the acquisitions by GMSF Alan and Helen Thompson had some 19.26% of voting rights in their own names and as trustees of the Thompson Family Trust. Hamish McHardy, through SIL, had some 11.92% of voting rights in Kerifresh. (Some of the increase in control of voting rights was due to a buyback undertaken by Kerifresh in August and October 2005.) No Code mechanism was used to approve these acquisitions by GMSF referred to in paragraph 62.
 In the Panel's view the transactions by GMSF meant that Graham Cowley was an associate of both Alan Thompson (and the Thompson Family Trust) and Hamish McHardy (and SIL) during this period because he had a business relationship with each of the individuals which was apparently directed at acquiring Kerifresh shares for the purposes of unwinding the Agreement.
 Although GMSF was the legal holder of the shares the Panel is of the view, in the light of all the evidence that it heard, that Graham Cowley did not control the voting rights attached to these shares.
 For example, in the course of email correspondence provided to the Panel, in which Graham Cowley was explaining to Hamish McHardy and Alan Thompson that he wanted payment for the shares in the name of GMSF. Alan Thompson said in a message of 26 October 2005 that "why would you get paid they are not your shares".
 The circumstances of the transfer of the Kerifresh shares held by GMSF from that company to Anbran are remarkable. The Panel heard a number of different perspectives on the circumstances surrounding the transfer of the shares. What is uncontested is that the shares were transferred from GMSF to Anbran on 26 October 2005 and no transfer of funds was made from Anbran to GMSF.
 The Panel was given in evidence a share transfer form apparently signed by Cowley and with the name of a transferee crossed out and "Anbran Trustee Co Ltd" hand written on the form. Alan Thompson acknowledged in evidence that this was his hand-writing. There was no number of shares provided on the transfer form nor the amount of consideration paid for the shares and nor was it dated.
 In an explanatory document accompanying the complaint from T & G it is stated: "The fact of the transfer surprised Graham Cowley as he had not signed any transfer form (nor had the "sale proceeds" been paid to GMS Financial NZ Limited to permit it to repay McHardy). Graham Cowley does not know to whom the shares were transferred. ..."
 Graham Cowley in evidence said he had never seen the share transfer document before. He alleged that someone in the Kerifresh office must have used an old form of his. Alan Thompson said that he had organised for Cowley to sign the transfer form.
 Subsequently, the Panel became aware of another copy of the share transfer form bearing Mr Cowley's signature (but not the signature of Emma Eastwood) and with the number of shares recorded as 245,000 but with no consideration figure. This other copy had a fax date notation of 28 September 2005 and appeared to have been sent from Mr Cowley's fax number.
 The Panel is of the view that Alan Thompson effectively had control of the GMSF Kerifresh shares, including the voting rights attached to them, which GMSF had acquired during 2004 and 2005. He did not use any of the exceptions under rule 7 of the Code to make those acquisitions.
 At the time of the acquisitions by GMSF Alan Thompson was an associate of Hamish McHardy, although the purpose of the GMSF acquisitions was to bring the Agreement to a close. The shareholdings of Alan and Helen Thompson, and Hamish McHardy and SIL, in Kerifresh were well in excess of 20% of the voting rights of Kerifresh at the time GMSF made its share purchases.
(4) The acquisition of Kerifresh shares by Anbran Trustee Company Limited
 Anbran is a company whose sole shareholder is Emma Eastwood, the niece of Alan and Helen Thompson. The Panel has been provided with a deed of trust which names the three children of Alan and Helen Thompson as the beneficiaries of the Anbran Trust.
 On 31 October 2005 the 245,000 Kerifresh shares held by GMSF were transferred to Anbran. As already discussed the circumstances of that transfer were unusual.
 Emma Eastwood had signed the share transfer. She received the shares from her aunt Helen Thompson and had agreed to give an acknowledgement of debt but none was given. Emma Eastwood explained that October 2005 was a very stressful time for her and her aunt and she did not have much recollection of what had happened or the sequence of events.
 Alan Thompson explained that the idea of the Anbran Trust had been his and he had seen it as a way of holding the shares previously covered by the Agreement in a way that did not contravene this Code. This was because the voting rights attached to the shares would be controlled by Emma Eastwood and not by him. He acknowledged that the Anbran Trust had been set up specifically for the purpose of receiving the Kerifresh shares then held by GMSF for the purpose of unwinding the Agreement.
 On 31 December 2005 Anbran acquired a further 116,000 shares in Kerifresh from multiple shareholders. This made a total of 361,000 Kerifresh shares, or some 5.08% of the total voting rights in the company.
 Although Emma Eastwood could not recall how Anbran had acquired the funds to purchase the 116,000 shares it transpired from the evidence that Hamish McHardy had financed the purchase by depositing a cheque into Ms Eastwood's personal bank account.
 Once these final shares were transferred to Anbran the Agreement between Alan Thompson and Hamish McHardy was effectively at an end. It had been settled by an overall increase in the control of voting rights in Kerifresh of the Thompson-McHardy families,, in the broadest sense, by around 5% of total voting rights.
 The Panel is satisfied that Anbran is an associate of Alan and Helen Thompson because the personal, business and ownership relationships between Alan and Helen Thompson, Emma Eastwood and Anbran are such that, in the circumstances of the holding of Kerifresh shares, they should be regarded as associates. The reasons for the Panel's views are:
(a) Anbran was set up specifically by Alan Thompson as a vehicle for holding shares, which he regarded as his, in a manner that was ostensibly outside the scope of the Code (because he did not control the voting rights);
(b) Anbran acquired shares with funds provided by Hamish McHardy as a means of increasing McHardy's economic interest in Kerifresh shares while at the same time providing to Alan Thompson the legal, and not just beneficial, interest in the Kerifresh shares;
(c) Emma Eastwood had no role in deciding the assets to be acquired by the Anbran Trust. Although Ms Eastwood told the Panel that these matters were decided by Helen Thompson this was not borne out by Mrs Thompson's evidence. Helen Thompson told the Panel, and Alan Thompson confirmed, that these decisions were made by Alan Thompson;
(d) Emma Eastwood appeared to have little knowledge of the Trust's affairs including how Anbran had financed the purchase of Kerifresh shares or had determined the price to be tendered for those shares. She could not assist the Panel with information about the terms of the share transfer. The evidence disclosed that Alan Thompson had attended to all these matters;
(e) Emma Eastwood had no knowledge of who had deposited the funds into her personal cheque account to fund the payment for the 116,000 shares acquired in the tender as noted in paragraph 84.
 No Code mechanism was used to approve the acquisition of Kerifresh shares by Anbran.
 At the time Anbran acquired its Kerifresh shares Alan and Helen Thompson and their family trust held some 19.26% of the voting rights in Kerifresh. This holding does not include that of Alan Thompson's father, Harold Thompson.
 The acquisition of 5.3% of Kerifresh's voting rights by Anbran brought its holding, and that of its associates Alan and Helen Thompson and the Thompson Family Trust, to above 20%.
 On the evidence the Panel considers that Alan Thompson was directly, and knowingly concerned in, and a party to, any contravention of the Code by Anbran and Emma Eastwood.
 In July 2001 Harold Thompson and his wife Helen, Alan's parents, held 346,050 shares in Kerifresh, representing some 4.87% of the voting rights in the company.
 The Panel was at a disadvantage concerning the situation of Mr Harold Thompson and the issue of any association he might have with other parties because Harold Thompson did not attend the Panel's meeting. On the limited information available the Panel does not believe that Harold Thompson is an associate of Alan Thompson in this instance.
 In August and October 2005 Kerifresh purchased some 283,500 of its shares and held them as Treasury stock. Further purchases were made in March 2006. In April 2006 Kerifresh issued 474,000 new shares to Kwan Holdings Limited in exchange for the purchase of certain assets. Around that time Kwan Holdings Limited received a transfer of 326,000 shares held by Kerifresh as treasury stock.
 The effect of the repurchases or buybacks made in August and October 2005 was to increase the voting control of all shareholders not participating in those buybacks, including the Thompson family interests and the McHardy family interests.
 The Panel has made a class exemption, clause 5 of the Takeovers Code (Class Exemptions) Notice (No 2) 2001, which provides that a person whose voting control of a code company is increased as a result of a buyback is exempted from rule 6(1) of the Code provided they reduce their voting control to the pre-buyback level within six months and do not exercise the increased voting control in the meantime.
 To the extent that parties breached the Code as a result of the August and October 2005 buybacks they did not comply with the terms of the class exemptions and reduce their level of control of voting rights within six months. However, those levels of voting rights were subsequently diluted by the allotment of shares to the Kwan interests some eight months later in April 2006.
 The Panel does not condone breaches of the Code by parties who ignore the terms of any available class exemptions. However, in view of the fact that the breach has been remedied, albeit outside the scope of the class exemption, and taking account of the significance of the other matters covered in this determination, the Panel does not propose to make a formal determination in relation to those parties who may not have complied with the code as a result of the buybacks by Kerifresh in 2005.
 The Panel determines, for the purposes of section 32(3) of the Takeovers Act 1993:
(a) That it is not satisfied that Hamish McHardy complied with rule 6(1) of the Takeovers Code when he acquired 669,200 shares of Kerifresh in May 2002;
(b) That it is not satisfied that Hamish McHardy, through his company SIL, complied with rule 6(1) of the Takeovers Code when SIL purchased 84,000 Kerifresh shares in August and September 2003;
(c) That it is not satisfied that Graham Cowley and his company GMSF, which acquired 245,000 Kerifresh shares between July 2004 and June 2005, and Alan Thompson, who the Panel considers controlled those shares, complied with rule 6(1) of the Takeovers Code in respect of those acquisitions;
(d) That it is not satisfied that Hamish McHardy was not directly and knowingly concerned in the contravention of the Code by Graham Cowley, GMSF and Alan Thompson;
(e) That it is not satisfied that Emma Eastwood, and Anbran, which acquired 361,000 shares in Kerifresh in late 2005, complied with rule 6(1) of the Takeovers Code in respect of those acquisitions;
(f) That Alan Thompson was directly, and knowingly concerned in, and a party to, any contravention of the Code by Anbran and Emma Eastwood.
 Pursuant to section 32(4) of the Takeovers Act 1993 the Panel has resolved to make orders:
(a) Continuing the interim order made by the Panel on 10 October 2007 restraining Hamish McHardy, Audrey McHardy, and SIL from acquiring or disposing of, or exercising voting rights attached to, Kerifresh securities, or any interest in or rights relating to Kerifresh securities;
(b) Continuing the interim order made by the Panel on 10 October 2007 restraining Alan Thompson and Helen Thompson (in their own right and as trustees of the Thompson Family Trust) from acquiring or disposing of, or exercising voting rights attached to, Kerifresh securities, or any interest in or rights relating to Kerifresh securities;
(c) Continuing the interim order made by the Panel on 10 October 2007 restraining Emma Eastwood and Anbran from acquiring or disposing of, or exercising voting rights attached to, Kerifresh securities, or any interest in or rights relating to Kerifresh securities;
(d) Directing Kerifresh not to register the transfer or transmission of any Kerifresh securities by any of the persons covered in paragraphs (a) to (c) above;
(e) Directing Kerifresh not to issue or allot Kerifresh securities to any of the persons covered in paragraphs (a) to (c) above.
 These orders will expire at the close of 8 November 2007.
 The Panel will make orders for costs in terms of the Takeovers (Fees) Regulations 2001 in accordance with the Panel's published policies for applying those regulations.
 The Panel will be meeting shortly to determine what remedies it should seek in respect of these transactions.
 As noted earlier, TGL has given notice of its intention to make a takeover offer for Kerifresh. It still has some 10 days left before the time for making an offer on the basis of the notice given on 1 October 2007 expires.
 The Panel apprehends that the determinations made in this document may impact on TGL's takeover strategy. That is a matter for TGL to determine.
 The focus of the hearing was on the complex arrangements in 2002, 2004 and 2005 involving Mr Thompson, Mr McHardy and Mr Cowley. The Panel also noted that there were other matters involving smaller volumes of Kerifresh shares that may have had Code implications, in particular, the acquisition of Kerifresh shares by Helen Thompson from the Kerifresh Employee Trust and the question of the associate status of the shareholding by the Kerifresh Employee Trust. In both instances, there was uncertainty as to the precise number of shares having regard to the state of the records of the company.
 However in what was already a lengthy hearing conducted under some time pressures these other matters did not receive the detailed consideration that would justify the Panel making any determination concerning them.
DATED at Wellington this 18th day of October 2007
SIGNED for and on behalf of the Panel
by the Acting Chairman
Kevin James O'Connor