Paperlinx is investigating whether Andrew Price shared confidential information with hybrid shareholders from when he was chief executive.

The embattled paper merchant has asked the Federal Court to compel Price and another former director Michael McConnell to turn over all communication with hybrid shareholders and others.

The application is for preliminary discovery, where before bringing legal proceedings someone seeks discovery of documents in order to allow them to determine whether they have sufficient basis to bring those legal proceedings. 

Paperlinx is seeking the documents from McConnell and Price to determine whether they have used or disclosed confidential information gained by them while a director or employee of Paperlinx.

ProPrint understands Paperlinx is concerned by some of the information hybrid shareholder Blue Pacific is basing its breach of agreement claim on, and the content of other letters.

The New York hedge fund earlier this month publically alleged Paperlinx breached the terms of its 2007 agreement with the hybrids that it would not ‘buy-back or acquire any share capital’ unless it pays dividends to the hybrids – something it has not done since June 2011.

The merchant denies the claim, saying: “The hybrid unit holder's suggestion is misconceived. The company denies the accusations and if proceedings are initiated, will defend its position vigourously.”

Paperlinx’s discovery application will be heard by the Federal Court in Melbourne on October 14. If the former directors are found to have disclosed anything, Paperlinx could argue it has grounds to sue them.

Paperlinx and Price both declined to comment.

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