Sturgess' bid to liquidate criticised

HAMISH MCNICOL
Last updated 05:00 25/03/2014

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The Court of Appeal has labelled former Greymouth Petroleum executive John Sturgess' application to liquidate the company an attempt to "extort the highest amount" for his shareholding.

But his lawyer has denied Sturgess was the "wrongdoer" in the oil and gas exploration company's collapse from being prosperous to dysfunctional in less than 10 years.

The High Court ruled last year that Sturgess, the chief operating officer, must sell his 14 per cent stake in Greymouth Petroleum, one of Taranaki's most active oil and gas exploration businesses.

His stake would be valued by arbitration next month, but could be highly lucrative, perhaps as much as $90 million, based on earlier reports that Canada's Tag Oil made a $650 million bid in 2012 for total control of Greymouth Petroleum.

There were also attempts to sell the company to Canadian methanol giant Methanex in 2011.

Sturgess was blamed by the High Court for the breakdown between directors and forced to sell his shareholding, after he had sought an order for the full sale of the company.

Greymouth Petroleum chief executive Mark Dunphy held 52 per cent while Auckland rich-list investor Peter Masfen, who made $202m after leading Montana Wines to international success, owned the remaining 34 per cent.

All three were present at yesterday's Court of Appeal hearing.

Sturgess was stood down by his fellow directors in February 2011, accused of breaching his director's duties and leading Greymouth Petroleum towards a potential crisis.

The High Court found Sturgess should take "primary responsibility" for destroying the trust essential to his working relationship with Dunphy and Masfen, ordering that he sell his shares at fair market value.

But in an appeal yesterday Sturgess sought a liquidation order for Greymouth, allowing for 30 days beforehand so that the parties could negotiate on the exit price.

Sturgess was also broadly appealing findings made against him for breaches of reporting obligations and negligence.

His lawyer, Felix Geiringer, said Sturgess' actions had been the "symptoms" rather than the "cause" of Greymouth's dysfunction.

Court of Appeal judges Justice Tony Randerson and Justice Forrest Miller, however, said the issue was now about remedy and liquidation would be "difficult" with "not a lot going for it".

Justice Miller said the essential argument was over what price would be paid for Sturgess' shares, with liquidation being a "nuclear option".

"He doesn't want the company wound up at all, what he wants is 30 days to extort the highest amount.

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"But he is the wrongdoer.

"The reality is you're asking us to give them a very large club to beat them with."

Justice Randerson concurred, and said it was obvious everyone would suffer from liquidation, because it would ruin the value of the shares.

Sturgess had primary responsibility for what had happened between the shareholders, with each side undoubtedly wanting to end the relationship between them, he said.

"At the end of the day everyone agrees this company is dysfunctional. The real issue is how we're going to exit this company."

Justice Randerson said the issue was whether Dunphy and Masfen decided they wanted Sturgess' shares, and if not, whether he would then be free to sell them on the open market.

Geiringer, however, said there was evidence a liquidation might increase the value of the company's shareholdings.

He said the High Court ruling had left unanswered why Greymouth had fallen from a prosperous company controlling about 9 per cent of New Zealand's gas market to a dysfunctional one.

Geiringer said Sturgess was said to shift the blame but Dunphy had moved out of the country in 2009, which had had an impact on communication between the two.

He also said Dunphy had secretly breached a confidentiality agreement in attempting to sell Greymouth to Canadian Methanex in 2011, without notifying Sturgess.

The case was expected to last about three days.

- BusinessDay

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