Shareholders call meeting
A special meeting of ordinary shareholders has been called by nine Motor Trade Finances (MTF) shareholders who together hold 8.1 per cent of the shares in the company. The purpose of next week's meeting in Dunedin is to consider resolutions put forward by the proposing shareholders relating to MTF’s handling of the Sportzone court case – and its communication and disclosure to shareholders in relation to that. READ: Heartland New Zealand calls for full disclosure The case is an ongoing High Court matter brought by the Commerce Commission in December 2009 for alleged breaches of the Credit Contract and Consumer Finance Act 2003. This was in respect of credit fees charged in 39 contracts originated by Sportzone Motorcycles Ltd, now in liquidation, between 2005 and 2008. Stephen Higgs, chairman of MTF, says: “While the board doesn’t agree with the resolutions, it’s obliged to hold the special meeting to consider them. “Given the concerns raised by the proposing shareholders and confusion there may be around Sportzone, the meeting will provide a good opportunity for shareholders to understand the litigation in more detail. READ: Backstory on MTF takeover bid “The MTF board understands the significance of this litigation to shareholders and the importance of keeping shareholders updated on progress. MTF will continue to update shareholders when material developments occur.” The proposing shareholders indicate they are concerned about MTF’s liability if it loses the case. MTF’s statement to the NZX states the proposing shareholders’ resolutions indicate dissatisfaction with the way MTF has handled the litigation. They also want MTF to estimate potential liability if a further case, “of which there is no present indication”, in respect of all other MTF loans. “The proposing shareholders are not happy with disclosure by MTF and rather than engage in the quantification process with the commission, assert that MTF choses to appeal the litigation,” states Higgs. “The resolutions appear designed to undermine the management and governance of MTF, and contain errors that seem to play into the hands of those we compete against.” Higgs emphasises “there can be no mistake” that:
- MTF has been engaged in the quantification process with the Commerce Commission since October 24, 2013.
- MTF reported on the litigation in the half-year report dated May 12, 2014, which stated this process was ordered by the court.
- Until the process is completed, it’s not possible to usefully quantify any liability because the existing High Court judgement doesn’t determine the amount by which MTF’s fees are unreasonable.
- The Sportzone litigation applies to 39 loans. It doesn’t apply to any other loan and it’s unclear what application any principles that arise from this case will have on other loans initiated by MTF.
- To seek a settlement with the commission would require MTF to admit liability in a case that hasn’t yet been decided, would remove MTF’s ability to have the High Court case overturned on appeal, and may require MTF to unnecessarily admit liability in regard to up to a further three years of loans.
- Any attempt to reach a settlement with the commission at this point is impractical.
- It appears the proposing shareholders have concluded MTF has lost the Sportzone case and it’s better to settle rather than let the quantification process run its course and complete the appeal. That conclusion is “entirely incorrect”.
- The board is confident the litigation and the case’s disclosure to shareholders have been managed appropriately, and it has received, and followed legal and accounting advice.
