UPDATE: New Zealand Court Of Appeal recognises "market reality" in overturning lower court decision in equity swaps case

As reported in the Winter 2003 edition of Financial Services Quarterly, in March 2003, the New Zealand High Court ordered the forfeiture of 12 million shares in Rubicon Limited owned by Perry Corporation.

In a unanimous decision handed down on 4 November 2003, the full bench of the New Zealand Court of Appeal overturned the decision of the High Court in Ithaca (Custodians) Limited v Perry Corporation.

The Court of Appeal's decision will be welcomed by participants in the equity swaps markets, who would have been unsettled with the ease at which the High Court inferred an "arrangement or understanding" giving rise to a disclosable "relevant interest" for the purposes of the Securities Markets Act 1988.

The Court of Appeal's judgment is littered with phrases that will be well received by the business world, such as "commercial reality", "practical business sense" and, in particular, "market reality". In fact, the latter phrase is the key to the Court's decision.

Bell Gully partner David Craig has prepared a newsletter outlining the broad basis for the decision principally as it affects the equity swaps market.

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