Featherston action set down for July

Emma Weston and Timothy Goodacre. Photo by Peter McIntosh.
Emma Weston and Timothy Goodacre. Photo by Peter McIntosh.
Litigation over the collapse of the privately owned Taieri-based diatomite fertiliser company Featherston Resources has been set down for a Supreme Court hearing in New South Wales, in July.

Three years after launching its $1 million Dukes Rd processing plant, after more than $15 million was invested by more than 200 shareholders, Featherston was placed in receivership, understood to be owing more than $5 million.

At the heart of the matter is the role of its directors leading up to the company's collapse and a later bail-out offer by another entity, Australian investment company Plaman Group, which would take control of Featherston but leave shareholders empty-handed.

A bail-out $A4.8 million ($NZ5.2 million) offer by Plaman has been accepted by creditors, which cedes control of Featherston to Plaman.

Because Featherston is Australian-owned, a group of disgruntled shareholders represented by Ashlaw Legal Services in Sydney has been to the Supreme Court seeking redress, the last hearing on March 10 ordering a two-day hearing be set down for July 15.

Ashlaw Legal Services represents at least 11 shareholders, with one client having committed up to $A400,000 for the litigation.

Ashlaw had itself made an unsuccessful bail-out offer for Featherston which would have seen shareholder interests diluted by about two-thirds.

In documents obtained by the Otago Daily Times, an ''amended originating process'' outlines application details by Ashlaw Legal Services.

Cited as defendants before the March 10 hearing were Featherston's managing director and director Emma Weston and shareholders and directors Simon Kember and Timothy Goodacre, plus Featherston and numerous subsidiary companies.

Ashlaw Legal Services is looking for ''final relief'' in a declaration that Ms Weston, Mr Kember and Mr Goodacre and others ''are liable to pay Featherston any profits, alternatively damages and equitable compensation'', under alleged breaches of the Corporations Act or ''general law and fiduciary duties to Featherston''.

Ashlaw Legal Services wants the rescinding of a convertible note deed - a $A1.72 million loan to Featherston by FRCN Pty Ltd, which gained a charge over Featherston's assets - which would be repaid by the Plaman Group offer. Plaman would in turn own Featherston.

In a summary of the March 10 hearing, the shareholders sought to amend their application to have more defendants included: James Mollison, formerly director-elect and chief executive of Featherston; Driftwood Capital Pty Ltd, Featherston's mandated corporate adviser; and Plaman Group Pty Ltd, a mandated adviser to Featherston and which became the successful financial bail-out company.

Ashlaw Legal Services claims Mr Goodacre, Mr Kember, Mr Mollison and Driftwood ''rejected or stymied'' numerous investment offers or merger proposals, nor was any reference made in the annual meeting notice for shareholders about any ''additional capital financing''.

Mr Mollison and Driftwood consented to being added as defendants, but Plaman's counsel opposed inclusion, several objections including that the New South Wales Supreme Court did not have the jurisdiction, and New Zealand was the more appropriate forum.

However, the judge granted the application, and Mr Morrison, Driftwood and Plaman ''are all parties to the action''.

As with the other defendants, Ashlaw Legal Services seek that same relief and declarations against Mr Morrison, Driftwood and Plaman's activities.

While the fertiliser manufacturing plant has been advertised as for sale, on March 10, the Supreme Court judge said, ''Existing orders restraining FRCN and its receiver from taking any action to sell Featherston's assets were continued until further order.''

-simon.hartley@odt.co.nz

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