WEL ENERGY TRUST AGAINST THE NEW ZEALAND HERALD

Case Number: 559

Council Meeting: NOVEMEBER 1994

Verdict: Not Upheld

Publication: New Zealand Herald

In a judgment issued today, the New Zealand Press Council rejected a complaint by WEL Energy Trust that the New Zealand Herald had misused a confidential document and had published an article containing factual errors, unsubstantiated opinions and mis-statements. The Press Council held that the Herald's use of the confidential document had accorded with established practice and that, apart from a minor factual error that the Herald had been quick to rectify, WEL Energy's other criticisms were without substance and its demands for specific forms of redress inappropriate.

The Press Council considered the complaint against a background of WEL Energy's dealings with an American company Utilicorp (UCU) and its efforts to be listed on the New Zealand Stock Exchange. The joint venture arrangements between the two companies provided that UCU should have full voting rights within the combined venture even though it had only partly paid for the third portion of the shares it was now considered to own. When WEL Energy applied to the Stock Exchange for listing, it was refused on the grounds that the UCU shareholding was not fully paid up. WEL Energy then had its shares listed with a new mini-sharemarket, Share Market, N.Z. Limited. The New Zealand Stock Exchange, however, maintained its refusal to list the company.

On 12 May, under the heading "Mini market link called listing ploy," the New Zealand Herald printed an article which stated that WEL Energy's involvement with the mini-market for unlisted companies, was an attempt to pressure the New Zealand Stock Exchange to list WEL Energy. This viewpoint, the article said, had been espressed in a confidential report prepared for WEL Energy by its legal advisers, Austin Hill. The article went on to outline a number of other observations from the report. One was that WEL Energy and Utilicorp had "only themselves to blame" for not being able to list on the main sharemarket. According to the article, the report had questioned whether WEL Energy and Utilicorp had made their best endeavours to achieve the listing and had said that the problem revolved entirely around matters which the two joint partners had control over and which, if corrected, would allow them to be listed.

The article drew a complaint from the legal firm, Norris Ward pointing out that it was they who were WEL Energy's lawyers and not Austin Hill as the Herald article had said. They complained that the article was based on a report clearly marked confidential and had contained a large number of errors.

They took particular exception to the statement that Wel Energy and Utilicorp "had only themselves to blame for not being able to list on the main market." That, they declared, was a total fabrication, was nowhere stated in the report, and could not be reasonably inferred from it.

They demanded an immediate retraction of the article, a published apology and a further article giving different interpretations of the confidential report. In particular, the new article would say that the report had not stated or implied that WEL Energy had used the mini sharemarket to pressure the New Zealand Stock Exchange. It would acknowledge that the original article had misinterpreted the basis on which the New Zealand Stock Exchange had refused to list WEL Energy. It would say that the confidential report had merely questioned whether the joint venture partners had used their best endeavours to get listed and had not specifically contended that this was so. And it would apologise for unjustified use of the report and for embarrassment or damage that this might have caused. To assist the Herald in its reply, Norris Ward supplied a full copy of the confidential report.

On 16 May, the Herald acknowledged its error over the identity of WEL Energy's lawyers and undertook to rectify it immediately. Beyond this, however, it rejected the contentions in the complaint. The Herald had acknowledged that the report had confidential status. But it could not be held responsible for any lapses of confidentiality by those party to classifying the report in that way. And in other respects, the Herald upheld the interpretation it had placed upon the report.

In the light of this reply, the Executive Director of WEL Energy on 5 August complained to the Press Council that the issue raised by Norris Ward had not been satisfactorily answered. In response, the editor of the Herald on 12 August drew extensively on the contents of the confidential report. He pointed out that the report had indeed stated that the recourse to the mini shgaremarket was "an attempt by the company to place pressure on the New Zealand Stock Exchange." He said that the Herald's interpretation of the Stock Exchange's ruling was the same as Norris Ward's and that an attempt to find a discrepancy was nitpicking. And, he continued, in saying that the report had questioned "whether the companies had made their best endeavours to achieve listing," the Herald article had quoted directly from the report.

On 14 September, the Executive Officer repeated the charge that the Herald had misused confidential material and supported the complaints made earlier. And, he said, the editor had failed to answer the assertion that the words "had only themselves tro blame" did not appear anywhere in the confidential report and could not be implies from it. That part of the Herald's article, he contended, was a total fabrication.

Members of the Press Council had little difficulty in agreeing that the editor of the Herald had satisfactorily answered the main complaints levelled against his newspaper's article of 12 May. The minor error over the identity of WEL Energy's lawyers had been acknowledged and speedily rectified. And all other criticism had been deflected by direct reference to the text of the confidential report. It was true, as the complainant had stated, that the words " had only themselves to blame" did not appear in the document. But members of the Council did not not sustain the view that their import could not be implied. The report had indicated that there were things that the companies could have done, and did not do, that would have led to a listing. The Council did not feel then that on that issue the charges of fabrication could be sustained. And the Press Council had no fault with the Herald's handling of the confidential report. It did not therefore uphold the complaint or the forms of redress that had been sought.