Paviour-Smith says NZX forecasts for grain exchange were 'not unrealistic'
By Sophie Boot
May 6 (BusinessDesk) - NZX director and Forsyth Barr managing director Neil Paviour-Smith rejected Ralec's claims in the
High Court that earnout targets which would have netted the former owners of the Clear Grain Exchange A$7 million were
unrealistic.
Witness evidence began on the fifth day of the scheduled nine-week court action in which NZX and Ralec, the grain
exchange's previous owner, are suing one another for up to A$37.6 million and A$14 million plus bonuses respectively.
Paviour-Smith, who was appointed an NZX director in 2002 and has sat on the stock market operator's audit and risk
committee since 2006, was the first witness to give evidence.
NZX bought the grain exchange from Ralec for A$7 million in October 2009, with two earnouts of A$7 million tied to
performance. The initial target for the first earnout was trading of 1.5 million tonnes of grain by June 30, 2010, with
further targets of 3 million tonnes by June 2011 or 4.5 million tonnes by June 2012. The second earnout payment was
based on the successful delivery of the agri-portal.
Earlier in the day, Paviour-Smith said Clear had fallen "well short" of the earnout targets, with volumes respectively
of only 14 percent, 13 percent, and 17 percent.
This afternoon, Ralec's QC Tim North questioned him on the use of the phrase 'unrealistic initial forecast' about Clear
in an NZX internal document from 2013, saying the New Zealand sharemarket operator was accepting its own forecasting
work from 2009 was unrealistic just four years later.
"With the benefit of hindsight the initial forecast proved to be unrealistic because Clear did not achieve what we had
thought," Paviour-Smith said. "At the time [the forecasts] were robust and well-considered. There was a huge amount of
time put into the forecasts in relation to the size of the investment. People produce forecasts with the best effort and
judgement they can but you never have any idea what's around the corner."
Paviour-Smith said NZX "hasn't given up on Clear Grain" and still wants to see it succeed.
"Right through this whole process, NZX has done everything we can to make Clear Grain the dominant grain market in
Australia," he said.
Paviour-Smith also talked about problems NZX found with the Clear Grain software, with one example of the software not
being able to be broken down into certain modules although he said he was not familiar with the specific issues.
"There were aspects of the performance which didn't bear up to what was promised to management," he said.
The case, which is ongoing, pre-dates much of NZX's existing management, having first hit the courts in 2011.
Paviour-Smith will continue giving evidence on Monday.
(BusinessDesk)