Soon after Sinead Boucher bought Stuff for $1, she had to go to the High Court to stop the public knowing previous owner Nine Entertainment had been happy to declare the publisher a “failing firm” – and had even threatened to close Stuff altogether.
Boucher’s lawyers wanted references to Nine’s intentions, which were to be mentioned in a judgment by Justice Sarah Katz on Nine’s fight against rival NZME, suppressed by the court for good. They later amended that to keeping it secret for between six months and a year after the June 2020 judgment.
Boucher did not agree with her former bosses and owners at Nine that the firm she had just taken over could be termed a ‘failing firm’ under the Commerce Act’s provisions, and feared if that phrase entered the market, her 850 staff, advertisers, investors, bankers and other stakeholders might believe the worst, threatening its viability. She asked for “clear air” to finalise and start delivering on a new strategy.
“We need to be able to do so without more concern or noise in the market or amongst staff that Stuff is in difficulty or, worse, is a “‘failing firm’ or might imminently fail”, Boucher said in an affidavit.
She argued the information she wanted withheld “did not reflect the views of Stuff’s management and wrongly suggests that Stuff is not a viable business… This could cause a loss of confidence on the part of advertisers, suppliers, staff, investors, bankers and other key stakeholders.”
Long an advocate for the original StuffMe merger of the Stuff and NZME media assets, Boucher invoked the Commerce Commission’s sentiment when it had declined her then-wish, ruling out the merger. “Customers could also be adversely affected by the loss of the plurality the Commerce Commission and Court saw as important when the merger application was declined.
“Real livelihoods are at stake if confidential and sensitive information about Stuff’s position gets into the public arena before Stuff has a real chance to start to reverse the negative financial impact of Covid-19, deliver on its new strategy and put recent difficulties behind it.”
NZME, foiled by Boucher in winning the right to to merge with Stuff into one mega-publisher, opposed her desire to keep the information from the public. Its QC, Jack Hodder, said the potential adverse consequences she had identified were not sufficient to displace the fundamental principle of open justice.
Justice Katz found for Boucher, suppressing Nine’s ‘failing firm’ move and its threat to close Stuff by May 31, 2020 and declaring: “The adverse consequences identified by Ms Boucher are significant ones.”
“It is not possible,” the judge wrote in her suppression judgment on July 3, 2020 which has only now become public, “to predict with certainty how key stakeholders might react to confirmation (as opposed to speculation) that Nine perceived Stuff as a failing firm and was apparently on the verge of withdrawing its support.
“However Ms Boucher, as the longstanding chief executive officer and now the sole owner of Stuff, is the person best placed to make that assessment.”
Justice Katz added: “Through no choice (or fault) of Stuff, confidential and commercially sensitive information regarding it has been put before the court in proceedings to which it is not a party. In the normal course of events, that information would likely have never seen the light of day … Further, Stuff disputes the accuracy of the information.”
The judge said the specific adverse consequences identified by Boucher were sufficient to justify an exception to the fundamental rule of open justice, for a limited period. After six months, Nine Entertainment’s “historical views of Stuff’s prospects” would carry less weight and stakeholders would assess Stuff on Boucher and her management’s performance to that point.
That six months from the June hearing was up in December but delayed by court closures until January. Then Justice Katz’ original decision, in full, declining NZME’s bid for an injunction to force Nine to continue negotiations over merging the businesses, plus her decision agreeing to the redaction of the disputed passages, were released.
The judgment declining the injunction outlined how NZME and Nine investigated using the ‘failing firm’ provision of the Commerce Act to apply to the Commerce Commission for permission to merge. That holds that even if there might otherwise be anti-competitive features to a deal, an application can be made on the basis that the ‘failing firm’ or its assets would otherwise leave the market altogether.
In the hearing before Justice Katz, NZME wanted the court to force Nine to proceed with a joint bid to merge the firms, after negotiations had broken down and Boucher’s third-party bid had emerged.
Once Justice Katz declined NZME’s bid for an injunction against Nine, the deal to sell Stuff to Boucher proceeded. She was then able to prevent publication of the Nine threat that it would have closed Stuff by May 31 without a deal, and reporting of its agreement with NZME to consider a ‘failing firm’ application.
Stuff’s period of “clear air” is over. Whether stakeholders consider Nine’s views of any consequence now is yet to be seen.
However, the business has traded on, it has employed senior executives and editors, and paid some staff end-of-year bonuses. No newspaper has been closed, advertising revenues have picked up from the nadir of the lockdown months, the website Stuff remains a market heavyweight and Boucher is still considering a scheme to devolve some of Stuff’s equity to staff.
So far, with the court’s help, Stuff is proving it is too big to fail.
