Page 6 | Code Word June 2008
The thinking and actions of each of them did not merely run in parallel.” (paragraphs 151 and 152 of the Panel’s 22 November 2007 statement of reasons)

Personal/business relationship association - Rule 4(1)(d)
The Panel also found that they had personal or business relationships, such that, under the circumstances of Lawrence Fletcher’s proposed acquisitions they should be considered associates. Factors bringing the Panel to this conclusion included that:

"
  1. Lawrence Fletcher and Jonathan McHardy have a personal relationship as friends and colleagues...;
  2. Lawrence Fletcher, Jonathan McHardy and Hamish McHardy have had a business relationship as evidenced by participation in the Neverland property syndicate and through the lending of a significant sum of money by Lawrence Fletcher to the trustees of the Murrayfield Trust, the trustees of which are Hamish McHardy, Jonathan McHardy and Roger Sinclair in 2006, on a basis clearly showing a high degree of confidence and trust in each other;
  3. Lawrence Fletcher, Hamish McHardy and Jonathan McHardy have an ongoing business relationship in relation to the acquisition of shares in Kerifresh by Lawrence Fletcher in circumstances:
    1. Where Jonathan McHardy encouraged Lawrence Fletcher to invest in Kerifresh, a highly illiquid, under-performing, but asset-rich, company,
    2. Where Hamish McHardy and Jonathan McHardy discussed strategies for raising capital funds for Kerifresh and increasing their percentage of control in Kerifresh which involved getting Lawrence Fletcher on to the Kerifresh share register,
    3. Where Hamish McHardy made the initial contact with Grove Darlow, financed the initial purchase of shares, disclosed confidential company information to Jonathan, and remained closely involved with all aspects of the acquisition strategy,
    4. Where, as Jonathan McHardy advised Hamish McHardy in an email of 17 October 2007, Lawrence Fletcher was “keen to get involved” and provided his own money to purchase up to 500,000 Kerifresh shares, and
    5. Where Lawrence Fletcher, Hamish McHardy and Jonathan McHardy maintained frequent and close communications with each other over the strategy to be followed in planning and executing Lawrence
Fletcher’s acquisition of shares in Kerifresh…”
(paragraph 155 of the Panel’s 22 November 2007 statement of reasons)

Lawrence Fletcher’s proposed acquisition would have breached rule 6. It would have increased the percentage of voting rights in Kerifresh he held to 6.73% which, when taken together with the percentage of voting rights in Kerifresh held or controlled by his associates Hamish McHardy (10.72%) and Jonathan McHardy (8.41%), would exceed in aggregate 20%. No rule 7 exception was proposed to be used to effect that increase.

Other issues
Although the parties determined by the Panel to have breached the Code engaged with the Panel on the issue of remedies, those parties did not and do not accept the correctness of the Panel’s determinations.

In its complaints to the Panel Turners and Growers Limited alleged that Alan Thompson and his father, Harold Thompson, who held and controlled approximately 4.87% of Kerifresh, were associates. The Panel explored this relationship with Alan and Harold Thompson at its second section 32 meeting. The Panel found that Alan and Harold Thompson were not associates for the purposes of the Code at the time of the transactions in question. Harold Thompson had explained on oath his investment objectives in respect of his Kerifresh shareholding. He said that while he occasionally discussed Kerifresh matters at family gatherings, these were only in the most general terms. However, he regularly attended Kerifresh annual meetings, frequently spoke up in criticism of the performance of the company, and never gave his son or anyone else either a general or specific proxy to exercise the voting rights attached to his shares.

In its 18 October 2007 determination and statement of reasons the Panel made the observation that Alan Thompson was directly and knowingly concerned in the breach of the Code by Anbran and Emma Eastwood. This was not a determination by the Panel for the purpose of the exercise of its enforcement powers. It was an observation that might assist the Court in any subsequent application for orders as a statement of the Panel’s view on Alan Thompson’s involvement in those transactions. The Panel’s finding was not made on the basis that Alan Thompson knew that the transactions involving Anbran would breach the Code. Rather, the Panel’s finding was made on the basis that Alan Thompson had actual knowledge of and assisted in carrying out those transactions.

Page 6 | Code Word June 2008

Index | Page 2 | Page 3 | Page 4 | Page 5 | Page 6 | Page 7 | Page 8

Return to Publications index