At the Wellington Court of Appeal Shell yesterday withdrew an attempt to take the legal issue of "causation", that it was a defence to say that insider information was not used, to the Privy Council. However, it is reserving the right to go to the London-based law lords, depending on the outcome of the High Court trial.

An appeal court spokesman told EnergyReview.Net today that Shell New Zealand lawyers had yesterday withdrawn the application dealing with causation, though another application had been adjourned for a substantive hearing.

The legal fight by about 750 Southern Petroleum shareholders over the Fletcher Challenge Energy takeover of the former listed company in 1995 has become New Zealand's longest running insider trading battle. Shell assumed responsibility for the case after taking over FCE in 2001.

At the time of the FCE takeover of Southern Petroleum, minority shareholders were paid NZ75 cents a share but are seeking $NZ23 million in compensation, including penalties and interest. They argue they should have received $NZ1.25 more per share had FCE not withheld vital information relating about the size of Southern Petroleum's Taranaki oil and gas prospects. The information included a "deep gas study" of the Mangahewa field which FCE then thought covered the acreage that later yielded the possible 1tcf Pohokura gas discovery.

Shell legal head Jim Farmer QC is reported as yesterday saying Shell had withdrawn the causation argument as it wanted to have the merits of the case decided by the High Court, but reserved the right to argue the legal issues later in London.

Farmer expected the High Court might hear the case early next year, but depending on the outcome, lawyers would go back at the appeal court after that, and then to the London council, probably in 2005. There was a reasonable chance one side or the other might take the case back to the appeal court after the high court hearing anyway.

The appeal court yesterday also adjourned the issue of which party would pay the legal costs involved in taking the case to court.

The shareholders' first victory in their David-and-Goliath legal battle came in June last year when the high court decided they had an insider trading case against FCE and gave the shareholders leave to take the case "in the name of the company", which meant Shell would have to pay shareholders' legal costs and allow them access to the company's records

Then last April the appeal court dismissed Shell's argument that there was no case to answer, prompting some commentators to say Shell would probably settle out of court.

Proceedings for the high court to hear the insider trading case had initially been scheduled to start in Wellington on August 11.