Transactions

BEFORE THE TAKEOVERS PANEL

Background

[1]  Calgary Petroleum Limited ("Calgary") is an unlisted oil exploration company registered in New Zealand. In April 2005 it had 63 shareholders.

[2]  On 11 March 2005 Calgary made a one-for-four pro-rata rights offer to existing shareholders. Under the offer shareholders could elect to also subscribe for any rights not taken up by other shareholders. Many shareholders took up the offer and indicated that they wished to take up additional shares. Shares were allotted in two tranches on 23 March and 11 April 2005.

[3]  On 13 May 2005 Calgary held its annual general meeting and passed a special resolution removing Mr Bill Treuren as a director.

[4]  On 30 May 2005 the Panel received a complaint from Mr Treuren, as a shareholder of Calgary, alleging that:

(a) Calgary has assets of more than $20 million and therefore (by also having more than 50 shareholders) is a code company for the purposes of the Takeovers Code ("the Code"); and

(b) A number of associated persons had increased their aggregate percentage of voting rights in Calgary in breach of the Code.

Initial actions by the Panel

[5]  Before the Panel could call a meeting under section 32 of the Takeovers Act 1993 (the "Act') to determine whether any shareholder had increased their control of voting rights in breach of the Code it was necessary to establish that Calgary was likely to be a code company.

Is Calgary a code company? Was it a code company when shares were allotted under the rights issue?

[6]  The Code defines a code company as:

code company means a company that-

(a) is a party to a listing agreement with a registered exchange:

(b) is not a party to a listing agreement with a registered exchange but that was a party to a listing agreement with a registered exchange at any time during the period of 12 months before any date or the occurrence of any event referred to in this code:

(c) has 50 or more shareholders and $20,000,000 or more of assets:

[7]  Calgary's two main assets are interests in oil and gas prospects referred to as the Cardiff gas field and the Cheal oil field held through a wholly-owned subsidiary Cheal Petroleum Limited. Both of these interests are held in joint ventures as follows:

(a) The Cheal oil field is held by the following parties in the following proportions -

(i) Calgary - 30.5%

(ii) Austral Pacific Energy Limited ("Austral Pacific Energy"), a listed company, 36.5%, and

(iii) International Resources Management - 33%.

(b) The Cardiff gas field is held by the following parties in the following proportions -

(i) Calgary - 15.1%

(ii) Austral Pacific Energy - 25.1%,

(iii) International Resources Management - 19.8%, and

(iv) Genesis Energy Limited - 40%.

[8]  The prospectus issued by Calgary in respect of the pro-rata rights issue, dated 11 March 2005, contained financial statements for Calgary, including the interim financial statements for the nine months ended 31 December 2004. Those financial statements show Calgary as having total assets of just under $3 million. Some $2 million of this was represented by capitalised exploration expenditure.

[9]  Immediately before the rights issue Calgary had 2,000,000 shares. Shares under the rights issue were offered at a price of $6.20 per share. The Panel was told that this was intended to be a discount to the share value of $7.75 ascribed to the shares by the directors.

[10]  The rights issue was undersubscribed. Of the 500,000 shares offered, subscriptions were received for 371,738 shares.

[11]  On 14 April 2005 Paul Twynham, the Managing Director of Calgary, sent the following email message to all directors of Calgary (emphasis added):

Post Rights Issue Share Price

Evening all

The rights issue closed 5pm Monday and Bruce Dobbs is currently finalising the register, reconciling to the bank account, reconciling to the proceeds received last November, considering if there are any refunds and including the issue of shares for the accrued interest last November. Dene [Biddlecombe] will distribute this hopefully tomorrow when reviewed and finalised.

Murray [Hosking] has already sold a parcel of Calgary shares at $10 each to a close business associate (his accountant) and I request all directors to consider and approve this price. Although we could not agree on a valuation for Calgary it seems that a value between $20-25 million is fair and reasonable. No response to this email will be assumed to be tacit approval of this latest share price.

[12]  The reference to the sale of a parcel of shares at $10 each was a reference to an allotment of 3,000 new shares to a Craig Johnston on 13 April 2005. Three further parcels of shares, totalling 9,800 shares, were allotted at an issue price of $10.00 to new shareholders between 23 and 31 May.

[13]  On 13 May 2005 a Powerpoint presentation was made to Calgary's annual general meeting which described the assets and activity of the company. The presentation included "valuations" of the interests in the Cardiff gas field and the Cheal oil field. The presentation shows current valuations based on discounted cash flows. These show a "conservative" valuation of $7.9 million and a "mid-case" valuation of $115 million.

[14]  Mr Treuren advised the Panel that he understood that Calgary had received an offer for Calgary's interest in the Cheal oil field for consideration of $23 million.

[15]  Although no valuation report regarding the assets of Calgary was publicly available, on 21 June 2005 the Panel obtained a copy of a valuation of Austral Pacific Energy prepared by McDouall Stuart Securities Limited ("McDouall Stuart ") in October 2004. The valuation report stated that the value of the total Cheal field was US$39 million and the value of the total Cardiff field was US$73.9 million. Applying the McDouall Stuart valuation to Calgary's interest on a pro-rata basis appeared to give a value to Calgary's Cheal and Cardiff interests of approximately US$32 million.

[16]  The Panel contacted the author of the valuation report, Mr Christopher Stone, Executive Director of McDouall Stuart, who stated that he believed the interests in the Cheal oil field and Cardiff gas field were worth more in April 2005 than at the date of the report for a number of reasons including market conditions for gas, the increasing price of oil, and developments at the relevant fields.

[17]  This information suggested that there was a reasonable likelihood that Calgary had assets of more than $20 million.

Increase of voting rights by possible associates

[18]  The second issue to be considered by the Panel before calling a meeting under section 32 was whether it was likely that any shareholder who had increased their control percentage in Calgary had, when their increased holding was aggregated with those of their associates, exceeded 20% of the voting rights in Calgary.

[19]  Rule 6(1) of the Code, the fundamental rule, provides that:

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.

[20]  The term "associate" is defined in rule 4 of the Code which states that:

For the purposes of the 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; or

(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.

…

[21]  The pro-rata rights offer made in March 2005 was made under the terms of an enforceable undertaking that Calgary's directors had given to the Securities Commission under section 69J of the Securities Act 1978 in February 2005.

[22]  In October 2004 Calgary had offered equity securities under a rights issue by way of a letter to shareholders. The Securities Commission became aware of this offer as a result of a complaint by Mr Treuren (at the time a director of Calgary) and wrote to Calgary expressing concern that there may have been an offer of securities to the public without a prospectus in breach of the Securities Act.

[23]  To remedy the possible breaches of the Securities Act Calgary's directors gave an enforceable undertaking to the Securities Commission that it would issue a prospectus and an investment statement in respect of the rights issue. Calgary also agreed that it would hold monies received under the original offer on trust and would give each person who subscribed the opportunity to either have their original subscription refunded (together with interest) or re-invested on the basis of the prospectus and investment statement.

[24]  On the basis of the information provided by Mr Treuren it appeared that the following shareholders who increased their control percentage as a result of the rights issue offered in March 2005 (the "subscribing shareholders") may have been associates for the purpose of the Code:

[25]  In support of his assertion Mr Treuren provided a list of the shareholders who had subscribed for shares under the October 2004 rights offer which set out relationships between the subscribers. The list was prepared by Calgary for the Securities Commission after the Commission had first contacted Calgary about the October 2004 rights offer. The purpose of the list was to try to establish that the subscribers of the shares under the original offer were relatives or close business associates of the company or a director, or were persons whose principal business is the investment of money or who in the course of and for the purposes of their business habitually invest money, so that a prospectus under the Securities Act was not required.

[26]  The list described the relationships of the parties that Mr Treuren considered could be associates as follows:

[27]  The Panel considered on the basis of this information that the subscribing shareholders may all have been associates for the purposes of the Code.

Correspondence with Bell Gully

[28]  On 7 June 2005 the Panel executive wrote to Bell Gully, the legal adviser to Calgary, in respect of the value of the company's assets and some of the issues raised by Mr Treuren.

[29]  Bell Gully advised that the directors of Calgary did not consider that the company was a code company. The directors considered that it was not possible for any party to credibly state that the value of the company's assets was over $20 million, either before or after the rights issue, given the nature of those assets, the various restrictions on dealing with those assets and the industry in which Calgary operates.

[30]  In the course of an exchange of correspondence with the Panel between 9 June and 15 June 2005 Bell Gully asserted that:

(a) the board-approved valuation of the equity in Calgary in connection with the rights issue was $15,500,000 and that the assets of the company would not have exceeded $17,892,312 during the period through to allotment;
(b) Mr Twynham's email referring to a value of $20-25 million was based on market capitalisation and that such a basis is unreliable in respect of an unlisted and little-traded company;
(c) In the presentation to the May 2005 annual general meeting the valuation of $115 million was based on the company raising a considerable amount of further capital over a period of 15-20 years; and
(d) the possible sale of any asset of Calgary, and any value implications of that sale, are not relevant to the issue of whether the company was a code company at the time of the rights issue but in any event the offer which Calgary received for its interest in the Cheal field did not imply a value of that field of $23 million. The offer comprised $5 million in cash, securities stated by the offeror to have a value of $13 million, and a 5% gross overriding royalty for excess hydro-carbon production. A figure of $23 million for the total value of this offer was arrived at by adding approximately $5 million for the royalty. Calgary considered that the royalty was in fact worthless and the securities component of the consideration was significantly overvalued.

[31]  On 23 June 2005 the Panel met to consider whether the issue of shares to shareholders under the March pro-rata offer raised any issues regarding compliance with the Code. At that time, in addition to the material provided by Mr Treuren and the arguments made by Bell Gully, the Panel also had the October 2004 report by McDouall Stuart.

[32]  The Panel noted that the subscribing shareholders, who had obtained an increased percentage of voting rights in Calgary, may have breached rule 6(1) if:

(a) Calgary was at the time of those allotments a code company; and

(b) After the allotments any of the subscribing shareholders and their associates held or controlled more than 20% of the voting rights in Calgary.

[33]  At its meeting on 23 June 2005, the Panel passed the following resolution:

On or about 11 March 2005 the shareholders of Calgary approved by shareholders' resolution the making of a one for four rights issue of up to 500,000 shares in the Company at an issue price of $6.20 per share and the subsequent allotment of any shares that remained unsubscribed to such persons and on such terms as the board considered appropriate in its discretion. The resolution did not refer to the requirements of the Takeovers Code. The rights issue (made in terms of enforceable undertakings given by the directors of Calgary to the Securities Commission under section 69 of the Securities Act 1978 on 21 February 2005) was under-subscribed. 

On or about 14 April 2005 the directors of Calgary allotted some 370,000 shares to its existing shareholders being the allotments to subscribers to the pro-rata rights issue together with a number of Calgary shares that were allotted on a non-pro-rata basis following the closure of the rights issue. As a consequence of those allotments a number of existing shareholders increased their control percentages in Calgary when compared with their position before the rights issue was made. 

Calgary is not listed on New Zealand Exchange Limited. It has some 63 shareholders. Although the value of its assets as shown in its unaudited financial statements for the nine months ended 31 December 2004 is well below the Code threshold of $20 million, the Panel has evidence that Calgary's assets are worth over $20 million, although this view has been disputed by the Company. 

The Panel considers, on the basis of information it has obtained about the relationships of various shareholders, that by the application of rules 4(1)(d) and 4(1)(e) of the Code the subscribing shareholders have either or both direct business and/or personal relationships with each other, or are associated through direct personal relationships with persons who are associated with other subscribing shareholders, such that, in the circumstances, they may all be regarded as associates.The subscribing shareholders each increased their control percentage in Calgary following the rights issue and subsequent allotments. As associates, their combined control percentage exceeded 20% of the total voting rights in Calgary following the rights issue and subsequent non-pro-rata allotments. 

The Code provides a mechanism, under rule 7(c), for such increases in voting control to be approved by non-associated shareholders. This mechanism was not used by Calgary.
The Panel made interim restraining orders under section 32(2) of the Takeovers Act 1993 restraining all the subscribing shareholders from: 

a. exercising the voting rights attached to any of the shares they hold or control in Calgary; and
b. acquiring or disposing of any of voting securities in Calgary. 

These restraining orders are due to expire at the close of Saturday 2 July 2005

[34]  On 23 June 2005 the Panel gave notice of its intention to hold a meeting under section 32 of the Act on Thursday 30 June 2005 in Auckland.

[35]  The Panel issued summonses under section 31N of the Act to Treuren, Dene Biddlecombe, Paul Twynham, Murray Hosking, Jeffrey Hopper, Brent Kokich, Desmond Quinn, Robin Gilchrist, Paul Ewen, Douglas Hosking, Glen Hosking, Craig Jepson, Bryan Suckling, Peter Suckling, David Skudder and Brendan Smith.

[36]  The Panel excused Glen Hosking from attendance at the meeting for medical reasons.

[37]  The Panel also requested the attendance of Mr Christopher Stone of McDouall Stuart as an expert witness.

[38]  The summoned parties were requested to provide written submissions to the Panel by 12 noon Tuesday 28 June 2005. Written submissions were provided on 28 June 2005 from Mr Treuren. Written submissions were provided by Bell Gully on behalf of Calgary and by Mr Quinn on his own behalf on 29 June 2005.
These submissions were exchanged between the parties who provided submissions prior to the hearing.

[39]  At the Panel's meeting on 30 June 2005 the following were received:

(a) further written submissions from Bell Gully on behalf of Calgary;

(b) a written submission from Mr Lyne, a principal and director of Frankham Lyne Limited, a firm of investigating accountants, appearing for Calgary; and

(c) summoned documents from Calgary.

[40]  At the Panel's meeting evidence was taken under oath from Mr Twynham, Mr Biddlecombe, Mr Stone, Mr Lyne, Mr Treuren, Mr Murray Hosking, Mr Hopper, Mr Kokich, Mr Quinn and Mr Gilchrist. The Panel decided during the course of the meeting that it did not need to hear evidence from the remaining subscribing shareholders.

Issues for Determination

The first issue to be decided by the Panel was whether Calgary was a code company

[41]  As Calgary is not, and has not been, a party to a listing agreement with a registered exchange it will be a code company if it has 50 or more shareholders (it has 63) and assets of $20 million or more.

[42]  "Assets" is not defined in the Code. In the four years the Code has been operating the Panel has never made a determination on the meaning of "assets" for the purposes of the definition of the term "code company".

[43]  Calgary's written submissions indicated that the company had not obtained a formal valuation of its interest in the Cheal oil field and Cardiff gas field.

[44]  Mr Treuren provided a partial transcript of a telephone meeting of the directors of Calgary which took place on 5 April 2005. A copy of the transcript was provided to Calgary's legal advisers before the Panel's meeting. Mr Twynham and Mr Biddlecombe, who had participated in the meeting on 5 April, confirmed that the transcript appeared to be an accurate record of the meeting.

[45]  The transcript referred to a valuation of Calgary's assets prepared by a Mr Adam Wheatley, an Australian adviser. The valuation was prepared in response to an offer received for Calgary's assets from another party. The transcript recorded Mr Twynham's summary of the valuations of the Cheal and Cardiff interests. He stated that in respect of the Cardiff interest Mr Wheatley had given a valuation on the basis of proven reserves (a P90 valuation) of $66 million and a valuation on the basis of a 50% probability of recovery (a P50 valuation) at $90 million. In respect of the Cheal interest he had given a P90 valuation of $15 million and a P50 valuation of $27 million.

[46]  At the Panel's meeting Calgary's representatives stated that given the commercial risks and uncertainty inherent in oil and gas exploration it was difficult to put a definitive value on the company's assets. The stated valuations were on the basis of assumed future success. The representatives suggested that such valuations were not appropriate in respect of such a high risk venture until the success of the fields was proven. However, in response to questions by the Panel, both Calgary and Mr Stone confirmed that they currently had no particular evidence to suggest that the ventures would not succeed.

[47]  Calgary's representatives submitted that the most objective measure of value is the price at which willing buyers and willing sellers trade the assets in the market. It was suggested to the Panel that the market value of Calgary's shares, and therefore its assets, at the time of the rights issue could most accurately be assessed by reference to the implied market capitalisation based on the rights issue share price (despite an earlier submission stating that a market capitalisation basis of establishing value was unreliable in respect of an unlisted and illiquid company). As the shares under the rights issue were offered at $6.20 per share, it was asserted, given the number of shares on issue after the rights issue, that the market value of Calgary was less than $15 million. Calgary contended that the under-subscription of the rights issue was an indication that at a price of $6.20 shareholders considered the shares to be overvalued.

[48]  The Panel disagreed with Calgary's contention. The Panel takes the view that the pricing and success or otherwise of a rights issue is not usually indicative of the total value of the assets of a company.

[49]  At the Panel's meeting Calgary's representatives also submitted that the value of the assets of Calgary could not appropriately be derived from the McDouall Stuart valuation of Austral Pacific Energy. They submitted that:

(a) the assets of a company had to be seen in the context of that company itself. They submitted that given the illiquidity of the shares in Calgary a discount should be applied to the value of the company. As an expert called for Calgary, Mr Lyne estimated that the value of the company after applying a 33% discount to the McDouall Stuart valuation for the lack of liquidity was approximately $15 million (although Mr Lyne emphasised that he had not undertaken a valuation);
(b) the valuation in the McDouall Stuart report assumed the commercial success of the oil and gas fields concerned. Given the high risk nature of oil and gas exploration a higher discount rate than that applied by McDouall Stuart would be appropriate;
(c) the McDouall Stuart report had valued the shares in Austral Pacific Energy at a price which was significantly higher than the actual current trading price of Austral Pacific Energy shares which indicated that the valuation was too high.

[50]  However, a board paper prepared at the end of March 2005 for the directors of Calgary by Mr Twynham, and which was produced in response to the Panel's summons, indicated that the directors had themselves previously cited, and apparently relied upon, the McDouall Stuart valuation. The board paper summarised the terms of an offer for Calgary's assets and suggested possible courses of action for the directors. The board paper included the following statement:

On adjusting the McDouall Stuart valuation with Cheal 4 and Cardiff 2 successfully cased, we could argue an estimated fair value of a fully developed Calgary today is between $50 million to $100 million. 

The commercial risks associated with developing the fields, technical risk, raising finance, managing the operation etc may lead to a discount factor of 33% i.e. a net value of $33 million to $66 million. This range illustrates why we all have a great difficulty valuing our company. If we are serious about this transaction, we owe it to our shareholders to obtain a professional valuation.

[51]  At the meeting Calgary suggested to the Panel that in considering whether assets exceeded $20 million the Panel should adopt a net value. The Panel rejected this suggestion. The Panel considers that the appropriate measure is the total value of assets without any deduction for liabilities whatsoever.

Panel analysis of first issue

[52]  The Panel noted that although Calgary's representatives asserted to the Panel that the company did not have assets of $20 million or more, there were a number of sources which indicated otherwise, including documents generated by the company itself.

[53]  The Panel also noted that although at the meeting Calgary criticised the McDouall Stuart report, the directors had recently applied the report when considering an offer for Calgary's assets. It appeared the report had formed a basis of Mr Twynham's Powerpoint presentation to the annual general meeting of Calgary. The McDouall Stuart report was also not materially inconsistent in terms of its valuation of the interests in the Cheal oil field and the Cardiff gas field with a report prepared by Adam Wheatley (a consultant deemed by the company to be appropriately qualified) which was prepared for the directors of Calgary.

[54]  While it is true that the valuations were predicated on the commercial success of the two fields, the valuations were also discounted for the probability of such success. In that, they were not different from any other valuation of a business.

[55]  The Panel is not a valuation expert. The Panel has not commissioned an independent valuation of Calgary's assets. The Panel does not need to establish the precise value of Calgary's assets. The Panel was satisfied, having regard to all of the evidence available to it, that:

(a) Calgary had, at the date of the allotments of shares under the pro-rata rights issue, assets of more than $20 million; and accordingly

(b) Calgary was a code company at the date of allotments under the pro-rata rights issue.

The second issue to be decided by the Panel was whether any of the parties allotted shares under the rights issue who increased their percentage control of voting rights were associates for the purposes of the Code such that, when aggregated with their associates, they had more than 20% of the voting rights in Calgary.

[56]  Mr Treuren advised the Panel that at an extraordinary meeting of Calgary held in February 2005 shareholders voted on a resolution in respect of his removal as a director. The company's constitution required a 75% majority of shareholders entitled to vote and voting for the removal of a director. Such a majority was not reached. However, the resolution was put to shareholders again after the rights issue at the company's annual general meeting on 13 May 2005 and was passed. Mr Treuren alleged that a group or groups of associated shareholders who wanted him removed from the board had increased their shareholding in Calgary under the rights issue and agreed to vote together at a shareholders meeting to remove him.

[57]  The Panel took evidence from Mr Murray Hosking, Mr Hopper, Mr Kokich, Mr Quinn and Mr Gilchrist in respect of their relationships with other shareholders of Calgary. It also took evidence from Mr Treuren and gave him the opportunity to comment on the evidence of the others.

[58]  Each of these shareholders was shown the description of their relationships with other shareholders contained in Calgary's submission to the Securities Commission in respect of the informal rights offer. Each shareholder confirmed that the description of their relationships with other shareholders contained in that document (which some had not previously seen) was broadly correct.

[59]  Each of these shareholders had personal or business relationships with each other, some over a long period. Many became investors in Calgary at the invitation of, or through, Murray Hosking, a director of Calgary. However, no evidence was presented to the Panel which showed that any of these shareholders had any influence or element of control over the exercise of Calgary voting rights by other shareholders.

[60]  In respect of the resolution to remove Mr Treuren as a director, all of the shareholders who gave evidence stated that they had not solicited or encouraged any other shareholder to vote for or against that resolution or been solicited or encouraged by another shareholder to vote for or against that resolution. It was acknowledged, however, that there had been a lot of discussion among shareholders about Mr Treuren's actions.

[61]  The shareholders who gave evidence stated that the purpose of taking up voting rights under the rights issue in March was to provide capital to a company which badly needed additional funds to meet its financial obligations to its various joint venture partners. Only one shareholder, the most significant investor, acknowledged that he was aware that the increase in his percentage of voting rights might well assist the removal of Mr Treuren as a director. The shareholders who gave evidence stated that they did not know whether Mr Treuren would subscribe for his shares under the rights issue and as the issue was pro-rata they did not know at the time of subscription whether their control percentage in Calgary would increase as a result of the rights issue.

[62]  A number of witnesses advised that they sought the removal of Mr Treuren for a range of reasons including that in late 2004, while a director of the company, he complained to the Securities Commission about Calgary's informal rights issue.

Panel analysis of second issue

[63]  The definition of associate, particularly the limb contained in rule 4(1)(d), turns on the particular facts and the surrounding circumstances of each situation.

[64]  Parties are not associates merely because they have some type of personal, business or ownership relationship. In order for parties to be associates for the purposes of the Code their personal, business or ownership relationship must be such that "under the circumstances" in each case the parties should be considered associates.

[65]  The issue for the Panel to consider was whether the shareholders who had increased the percentage of voting rights held or controlled by them as a result of the rights issue had a relationship which meant they should under the circumstances be regarded as associates.

[66]  The Panel considered that, putting aside the question of the conduct of the shareholders in voting on the resolution to remove Mr Treuren as a director, there was no particular aspect or aspects in the relationship between the shareholders which meant that they should be regarded as associates for the purposes of the Code.

[67]  Turning now to the voting issue, Mr Treuren alleged that the fact that the resolution removing him as a director of Calgary was passed by a large majority (77.93% of shareholders voting, the constitution required a 75% majority) when the resolution had previously failed indicated that a number of shareholders were associates and that the associated shareholders had increased their voting rights under the rights issue and then acted together in exercising their votes at the May 2005 shareholders meeting. The Panel did not agree that the inference of association could be drawn from the circumstances of voting.

[68]  The fact that a number of shareholders vote in the same way on a single issue does not on its own mean that those shareholders should be considered associates for the purposes of the Code. Even if a number of shareholders agree to exercise their votes in a particular way at a meeting of a company this would not necessarily make them associates of each other.

Determination

[69]  The Panel, having considered that Calgary is a code company, determined that it was satisfied that the subscribing shareholders who had increased their control percentage in Calgary as a result of the rights issue had acted in compliance with the Code

DATED at Auckland this 6th day of July 2005

SIGNED for and on behalf of the Panel by the Deputy Chairman

D O Jones