Ralec gave NZX 'wildly inaccurate' estimates for Clear Grain Exchange, court hears

Stock market operator NZX was given "wildly inaccurate" estimates by the former owners of the Clear Grain Exchange, its counsel has told Wellington's High Court.

Ralec and NZX are facing off in court in what's expected to be a nine-week trial over NZX's purchase of the Australian Clear Grain Exchange in 2009. NZX is suing for between $A20.7 million and $A37.6 million, and Ralec has countered with a suit totaling $A14 million plus bonuses.

NZX claims Clear's former owners, Grant Thomas and Dominic Pym, and their companies Ralec Commodities and Ralec Interactive misled NZX when it bought the commodities trading platform with "wildly inaccurate" forecasts. Ralec subsequently filed a counterclaim against NZX, later adding the market operator's former chief executive Mark Weldon to the list of defendants. It claims NZX, which bought the platform for $A7 million with the potential for further earnouts, failed to fund the exchange sufficiently. The case pre-dates much of NZX's existing management, having first hit the courts in 2011.

On Tuesday morning, NZX lawyer Brian Latimour told the court that targets given to NZX of 1.5 million tons of grain didn't match up with internal figures, citing a draft document written by a consultant relating to Clear's operating budget and dated June 28, 2009.

That document contained proposed targets of 750,000 tons from Australia's East Coast, and a combined 250,000 tons from South Australia and West Australia.

"The proposed target for the year – [compared] to the 1.5 million forecast – is only a million from both," Mr Latimour said. "And the revenue she indicates [in the document] is $2.125 million, compared with the forecast given of $3.125 million."

Mr Latimour has taken the court through a number of documents, which the NZX says shows Clear's management had serious concerns about the business, including a market report from March 2009 that said the company had issues with stakeholders, particularly growers who throught they were not getting enough bids and that bids made through the platform were not competitive.

He also produced from May 2009 a skeleton business plan, whose authors had written the company had a "significant list of weaknesses identified in all sectors."

The case may be live-streamed to lawyers outside the courtroom by both sides, in what would be a first.

Ralec asked yesterday to be able to stream the proceedings, beginning from when witnesses are called, to their clients and lawyers who will be in Australia for all or part of the trial. NZX offered no objection today but requested to also stream the proceedings to their lawyers in Auckland.

"We're in relatively novel territory and I don't want to create a precedent other judges would be unhappy with," Justice Robert Dobson said. "I have somewhat of a reservation about making this process available in New Zealand."

Opening statements for both sides are due to take up to six-and-a-half days.

(BusinessDesk)