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BEFORE THE TAKEOVERS PANEL
IN THE MATTER OF
the Takeovers Act 1993 and
IN THE MATTER OF
a meeting held under section 32 of the Takeovers Act 1993 to determine whether one or more of:
Ms Kate Foot ("Foot")
Kooiman Investments Limited ("KIL")
Mr Bruce McCullough ("McCullough") and
Pisces Holdings Limited ("Pisces")
who, on or about 10 June 2002, purchased various parcels of shares in Seafresh New Zealand Limited ("Seafresh") totalling 55.98% of the voting rights in Seafresh from Lim Family Holdings Limited ("Lim FH") acquired their respective voting rights in Seafresh in compliance with the Takeovers Code.
26 June 2002
J C King (Chairperson)
R A Dobson QC as counsel assisting the Panel
K G Morrell, M M Hemphill and T P Dolan (from Panel Executive)
27 June 2002
 Seafresh New Zealand Limited ('Seafresh") is a company based at Lower Hutt and listed on the New Zealand Stock Exchange ("NZSE"). As a listed company Seafresh is a Code company. At 30 September 2001, the date of its last published annual report, its largest shareholder was shown as Lim Family Holdings Limited ("Lim FH") with a holding of 55.98% of the company's voting share capital.
 On 11 April 2002 a Mr James Slade announced an off-market acquisition of a beneficial interest in 56.46% of Seafresh's shares at $0.0027 per share. The acquisition was expressed as being conditional on "statutory approvals and approval of shareholders pursuant to the Takeovers Code". On 26 April 2002 it was announced that a due diligence condition in the offer was not satisfied and that the purchase agreement had been terminated.
 On 11 June 2002 Mr Peng Lee Lim ("Lee Lim") of Lim FH announced the sale of the Lim family's 55.98% interest in Seafresh for $0.0027 per share. The consideration paid for the shares was approximately $100,000. At the time of the sale the shares were trading at approximately $0.02 per share.
 Following an informal request from the NZSE, accountants acting for Seafresh (Gillingham, Horne & Co) ("Gillingham") advised the NZSE on 12 June 2002 that four persons ("the four purchasers") had purchased the following approximate parcels of shares from the Lim family by way of private treaty:(a) Kooiman Investments Limited ("KIL") 19.80%(b) Pisces Holdings Limited ("Pisces") 19.80% (subsequently shown to be incorrect, see para 6)(c) Balmoral Investment Trust ("Balmoral") 14.49% (subsequently shown to be incorrect, see para 6), and(d) Ms Kate Foot ("Foot") 1.89%.
Seafresh also advised the NZSE that the parties were not associated.
 Mr Michael Edwin Kooiman ("Kooiman") of Wellington is the sole director and shareholder of KIL. Mr Byran Somerville Patrick Marra ("Marra") is the sole director and shareholder of Pisces.
 Seafresh's original announcement was incorrect. Mr Bruce McCullough ("McCullough"), a chartered accountant from a Lower Hutt-based accountancy firm (Pritchard McCullough), rather than Balmoral, acquired a holding in Seafresh. McCullough's holding was 19.80% rather than the 14.49% earlier reported (which was the size of parcel purchased by Pisces).
 On 13 June 2002 Seafresh announced the resignation as directors of Lee Lim and Mr Tim Saik Lim following the sale of the Lim family shareholding. On 19 June 2002 Seafresh announced the appointment of Marra as Chairman of Seafresh and Kooiman as a director.
 The acquisition of the Lim family's shareholding in Seafresh has attracted some media attention. In a report published in The Evening Post on 13 June 2002 Kooiman indicated that he had agreed to purchase the shares in Seafresh "with only six hours due diligence". The article also quotes Kooiman as saying that "I can't say how we will turn things around until we [the buying quartet] get together early next week for our first meeting since the sale was announced."
 The Panel was aware, from other media comment, that the Securities Commission had raised questions with Seafresh, Lim FH and with the four purchasers concerning the disclosures made by the various parties to the NZSE under the Securities Amendment Act 1988 (relating to the timing and accuracy of filing of substantial security holder notices).
 The published information concerning the apparent change of control in Seafresh raised questions concerning compliance with the Takeovers Code by the four purchasers. The Panel wrote to the four purchasers, to Seafresh, and to Lim FH on 17 June 2002 seeking information about the purchase and sale. Answers were sought by 5.00 p.m. on the following day, 18 June 2002.
 Responses were received from Pisces, Lim FH and McCullough. No responses were received from Kooiman or Foot.
 Lim FH indicated in its letter that the Lim family had had many enquiries from parties interesting in purchasing the family's shares in Seafresh following the earlier announcement by Slade. However Lee Lim indicated that the company was only interested in selling to parties who wished to individually acquire less than 20% of the company because it did not, given Seafresh's financial position, wish to incur the expense of holding a shareholder meeting (including the independent adviser's report) required to approve a transaction under the Code.
 McCullough stated in a letter of 18 June 2002 that he had provided tax advice to Kooiman over a number of years. Kooiman had sought tax advice from him in relation to the purchase of shares in Seafresh. McCullough said in his letter:
He subsequently rang me and asked whether I might be interested in buying shares myself as Lee Lim was indicating interest in selling. I said I could well be and to have Lee Lim contact me.
I have known the Lim family in Lower Hutt for some 10 years and have acted for interests in dealing with Seafresh or family members, all of whom are unconnected here.
 McCullough also advised that he had "… given some limited tax advice to Kate Foot…" but did not have a "continuing agency arrangement".
 McCullough also said that:
I don't know who Pisces Holding Ltd is and have had no contact with its directors.
 Pisces, in a letter of 18 June 2002 signed by Marra as "Director" said that he had not met McCullough or Foot, and had "first met Mike Kooiman towards the end of the week of 3 June 2002." He said:
My understanding is that I am acting independently of the other parties.
I met Mr Kooiman towards the end of the week of 3 June when he was having discussions with Mr Lee Lim to acquire a parcel of shares from him. Mr Lim wanted to sell all of the Lim Family shares and I agreed to acquire the residual parcel.
 The Panel met twice on 18 June 2002 to consider the purchases. As a result of consideration of the circumstances and nature of the purchases the Panel considered that KIL, McCullough, Pisces and Foot may not have acted or may not be acting or may intend not to act in compliance with the Takeovers Code, namely by acquiring voting rights in Seafresh in a manner that may not comply with the fundamental rule of the Code.
 The Panel gave notice that it would hold a meeting on 26 June 2002 in order to determine whether it should exercise its powers under section 32 of the Takeovers Act 1993 in relation to the acquisition. The Panel also resolved to issue interim restraining orders restraining Foot, KIL, McCullough and Pisces from acquiring securities in Seafresh, from disposing of securities in Seafresh, and from exercising the voting rights attached to securities in Seafresh. The interim restraining orders expire on 29 June 2002.
 The Panel issued summonses to Lee Lim, Seafresh (Cotsilinis), Foot, Kooiman, Marra and McCullough to attend the Panel's hearing on 26 June 2002.
 The issue to be determined by the Panel is whether one or more of Foot, KIL, McCullough and Pisces acquired their shareholdings in Seafresh in compliance with the Takeovers Code.
 The relevant provisions of the Code are contained in rule 6, the fundamental rule, which states:
6. Fundamental rule
(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.
 The exceptions provided in rule 7 are not relevant in this case because there has been no full offer, no partial offer and no attempt to have the transaction approved at a meeting of shareholders of the company.
 The purpose of the Panel's meeting on 26 June 2002 was to enquire into the facts of the purchase of the Lim FH's 55.98% shareholding in Seafresh so that the Panel could determine whether it was satisfied, or was not satisfied, that the purchases had complied with the Code.
 For this purpose the Panel received certain documents in evidence, and took evidence on oath from the four purchasers, as well as the seller Lim FH (represented by Lee Lim) and Seafresh (represented by the corporate secretary, Cotsilinis).
 On 10 June 2002 Lim FH sold its shareholding in Seafresh to:
a. KIL as to 19.8% for $0.0027 per share
b. Pisces as to 14.5% for $0.0027 per share
c. McCullough as to 19.8% for $0.0027 per share
d. Foot as to 1.4% for $0.0027 per share.
Rule 6(1) (the fundamental rule)
 The fundamental rule of the Code (see para 21 above) provides that, unless one of the exceptions provided in rule 7 is followed, a person who holds no voting rights in a Code company cannot become the holder or controller of voting rights in that 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.
 In this case four parties have, between them, on the same day and for the same price, purchased 55.98% of Seafresh's voting shares.
 No party on its own purchased more than 20% of the shares in Seafresh, so the first part of the fundamental rule appears to have been complied with. We comment later on the possibility that some of the parties may be "associates" for the purposes of the Code.
 The Code has extensive anti-avoidance provisions so that many transactions that appear to comply with rule 6(1) may in fact not do so. Of relevance in this instance is rule 6(2)(a) which states:
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.
 The significance of rule 6(2)(a) is that it relates to the actions of parties in acquiring voting rights jointly or in concert. It does not require an association to exist after the acquisition of those voting rights which is the case when aggregating associates' interests under rule 6(1)(a).
 The Panel has noted that four persons acquired 55.98% of the shares in Seafresh on the same day and at the same price. In order for the four purchasers, or indeed any two of them, to have acquired their shares jointly we consider the holders would either be registered as the joint holders of the shares, or would have entered into arrangements as joint holders. To our knowledge, and on the basis of the evidence put before the Panel, neither has occurred.
 The second question is whether the four purchasers, or any two or more of them with cumulative holdings of more than 20% of Seafresh, acquired their shares in concert.
 From the evidence the Panel received it gained the following understanding of events that culminated in the purchases of the four holdings of shares in Seafresh from Lim FH:
(a) Following the unsuccessful proposed sale of its shareholding to Slade, Lee Lim made it clear to those interested in acquiring the shares that the family did not want to sell the parcel to a single buyer because the family did not want to put Seafresh to the expense (which they estimated at around $40,000) of holding a shareholders' meeting, but that the parcel was still available at the same price, if a number of purchasers independent of each other were prepared to take it in parcels of less than 20%;
(b) Kooiman, whose business interests have including fishing in the past, told the Panel that out of a desire to re-enter the fishing industry he had held discussions with a business partner (unrelated to the purchase of Seafresh shares) about purchasing a fishing boat. His business partner had suggested they look at a vessel owned by Seafresh, the Nan Hai, then being refitted in Nelson. As a result Kooiman, with the partner, entered into discussions with Lee Lim concerning the purchase of the Nan Hai. These discussions took place in May 2002, and led to KIL agreeing to purchase the vessel from Seafresh. During the course of Kooiman's discussions with Lee Lim, Kooiman asked if the Lim family was still interested in selling its stake in Seafresh. Lee Lim indicated to Kooiman that the family did want to sell its whole holding but would not sell in parcels of more than 20% and that the purchasers had to be independent of each other;
(c) In late May or early June Kooiman decided to pursue a purchase of the Lim family's holdings in Seafresh, and that he would find other buyers to join him who would meet Lee Lim's requirement that they would take less than 20% and were independent of each other;
(d) Marra, a business consultant, told the Panel that in late May 2002 he had been approached by a mortgage broker and asked if he would become involved in preparing a business plan, or reviewing a business plan, for Seafresh, which appeared to be in some financial difficulties. Marra met with Kooiman, Lee Lim and Heng Lim on Wednesday 5 June 2002. He also had a meeting with Seafresh's corporate secretary, Cotsilinis and with the company's auditors. During the course of that day Marra said Kooiman had told him he was interested in buying a parcel of shares from the Lim family, and that he knew other people were also interested in buying shares. Marra told the Panel that on Thursday 6 June 2002 Kooiman had asked him if he would be interested in taking on the residual balance of the shares. Marra said he had told Kooiman that he would be interested in taking shares, provided he remained a consultant to the company;
(e) On Friday 7 June 2002 Marra signed a consultancy engagement letter with Lee Lim, then Chairman of Seafresh;
(f) On Saturday 8 June 2002 Marra prepared a "Things to do" list which he discussed with Kooiman. This list included completing the change in the Seafresh shareholding, and getting themselves appointed as directors;
(g) McCullough had advised the Panel in writing that he had known Kooiman for a number of years and had provided tax advice to him during that period. Kooiman had called him on 7 June 2002 to discuss the tax implications of KIL purchasing shares in Seafresh. McCullough said that Kooiman had subsequently called him and asked if he was interested in buying some of the Lim FH shareholding. McCullough had indicated he could well be interested, and asked Kooiman to have Lee Lim call him. McCullough said he had known the Lim family for some 10 years;
(h) The Panel was told that Foot lives in a domestic relationship with Kooiman at the same residential address in Wellington. Foot said that she knew that Kooiman wanted to take an interest in Seafresh and she wanted to show support and interest in what he was doing. She took a small holding in the company;
(i) Subsequent to the purchase Marra and Kooiman were elected Chairman and a director, respectively, of Seafresh and two of the Lim family resigned as directors.
 The Panel was told that the purchase of the shares was settled by Kooiman on or about Monday 10 June 2002. The Panel was told that Lee Lim was handed one cheque in full settlement for the whole 55.98% holding sold to the four purchasers. This cheque was from KIL and was presented by Kooiman. The Panel was told that all four share transfers had been prepared by Kooiman, who had arranged for them to be signed by the various purchasers. The Panel was told the following financial arrangements were made for the purchase of the shares in Seafresh:
(a) McCullough told the Panel that he had agreed with Kooiman that he would buy the parcel of shares being offered to him so long as Kooiman paid for them. This payment took the form of McCullough setting off various debts owed by Kooiman to McCullough which had been written off or not invoiced;
(b) Kooiman agreed to fund the purchase of Marra's parcel of shares. Marra told the Panel that he envisaged paying this amount to Kooiman in the near future from proceeds of moneys due to him from another source. Kooiman told the Panel that there was no discussion about payment. The arrangements were not formalised in any way;
(c) Foot made a loan of $25,000 to Kooiman to assist him with the venture. Out of this $25,000 some of the amount was used to purchase Foot's 1.89% stake in Seafresh. The arrangements for this loan were not formalised in any way;
(d) We did not receive evidence that Kooiman had any explicit form of put or call options over shares held by Pisces, McCullough or Foot.
 The Panel considers that Kooiman was instrumental in Foot, McCullough and Pisces (Marra) making the investments they did in Seafresh. He funded Pisces' purchase of the shares. McCullough supported Kooiman's wish to acquire shares in Seafresh by purchasing shares in the company in exchange for the setting off of debts previously owed by Kooiman. Kooiman's partner, Foot, took some shares and financially assisted Kooiman's acquisition of the full parcel of 55.98% of the shares in Seafresh. The purchase of shares in Seafresh by the four purchasers on 10 June 2002 at the same price was not coincidental. The evidence is that the investment was initiated and co-ordinated by Kooiman.
 It is clear that McCullough did not know Marra before the transactions were concluded. It is clear that Marra did not know Kooiman before early June. However it is also clear that McCullough knew he was one of a number of investors purchasing a larger block of shares than 20%, Foot knew that she was part of a group purchasing more than 20% of Seafresh, and Marra (Pisces) knew he was part of a group purchasing more than 20% of Seafresh.
 All of the shareholders asserted they would exercise their voting rights independently of Kooiman. Without forming any judgement on how genuine these claims were, it seems likely that this attitude was the major determinant of their own perception that they satisfied Lee Lim's requirement that they be "independent" of each other.
 It is apparent that none of the purchasers turned their minds to the requirements of rule 6(2)(a) or what "in concert" means.
 On these facts it is clear to the Panel that all parties were acting "in concert" in acquiring a 55.98% stake in the company by means that met Lee Lim's rudimentary stipulation.
 The Panel is mindful that this part of the fundamental rule is intended to apply to share buying undertaken jointly or in concert regardless of whether or not the parties have an ongoing status as associates. Whilst the evidence raises matters likely to be relevant to a determination of associate status between at least some of the purchasers, the Panel need not determine in the present case whether or not KIL was an associate of one or more of the other purchasers for the purposes of rule 6(1)(a).
 For the purposes of section 32(3) of the Takeovers Act 1993 the Panel determines that it is not satisfied that:
(c) Pisces; and
acted in compliance with the Takeovers Code in their purchase of 55.98% of the issued shares in Seafresh from Lim FH on or about 10 June 2002 on the grounds that Foot, KIL, Pisces and McCullough acted in concert, as that term is used in rule 6(2)(a) of the Takeovers Code, in purchasing the shares and are therefore each deemed to be the holders of more than 20% of the voting shares in Seafresh.
 In terms of section 32(4) of the Takeovers Act 1993 the Panel decided to issue orders continuing the interim restraining orders made earlier restraining Foot, KIL, McCullough and Pisces from:
(a) Acquiring securities in Seafresh, or any interest in or rights relating to such securities; and
(b) Disposing of securities in Seafresh, or any interest in or rights relating to such securities; and
(c) Exercising, either jointly or severally, the right to vote attaching to securities in Seafresh or any other right relating to such securities.
The orders will expire at 5.00 p.m. on Thursday 18 July 2002.
 The Panel's restraining orders can, by statute, only extend for a further 21 days. The Panel's determination raises issues relating to the provisions of the Takeovers Act 1993 that allow the Panel to apply to Court for various orders against parties who have not complied with the Code.
 The question of further action remains under consideration by the Panel.
 The Panel will deal with costs separately.
DATED at Auckland this 27th day of June 2002
SIGNED for and on behalf of the Panel
by the Chairperson