Fraud Alleged In Sale Of Shingle Business

Press, Volume CIV, Issue 30809, 22 July 1965, Page 21

Fraud Alleged In Sale Of Shingle Business

Dennis Alexander McFadgen, a bushman, of Blackball, claimed £lOOO damages in the Magistrate's Court yesterday from E. J. Tyler, Ltd., a shingle and premix contracting business formerly operating in the Waimakariri riverbed, for the loss he suffered as the result of alleged fraudulent misrepresentations by the company’s directors during negotiations for the purchase of the business in May, 1963.

The claim was made before Mr H. J. Evans, S.M., who adjourned the case part-heard until next week.

Mr B. S. McLaughlin appeared for the plaintiff, and Mr J. N. Matson for Eric James Tyler and his wife, Ngaire Charlotte Tyler, directors of the defendant company. Mr P. T. Mahon appeared for the executors of the estate of the late John Ainger, secretary and accountant of the company. The executors, Warwick John Ainger, an accountant, and Keith Wilson Frampton, a solicitor, were cited as third party in the action.

In his opening submissions, Mr McLaughlin said the Tylers and John Ainger were in a position where they should have known the state of the business they were selling to McFadgen. They had no right to say it was doing well and making a profit when in fact it was making a loss. Mr Mahon objected to the production of any evidence of statements alleged to have been made by Ainger in the course of negotiations for the sale, on the grounds that as Ainger was dead such evidence was hearsay and therefore inadmissible. Mr Matson supported the objection. The Magistrate said he would reserve his decision on the question in the meantime, end give his ruling later. Reason For Selling

In evidence, McFadgen said that in May, 1963, he saw an advertisement in a Christchurch newspaper for a truck and shingle screening plant working in Canterbury. The price advertised was £2750. When he telephoned in reply, a woman he later learned to be Mrs Tyler, told him the concern comprised a truck, shingle screen and drag-line, operated for making premixin the Waimakariri riverbed and carting it to customers. She said it was a good business, and they were selling it because her husband was in ill-health.

She said they were very busy in the summer, but work tapered off slightly in the winter. Annual takings for the last three years had been £7OOO.

McFadgen said he received a letter shortly afterwards from Eric James Tyler, dated May 20, 1963. in which he confirmed the figure for annual takings mentioned by his wife. When he came to Christchurch and saw the plant, the Tylers told him they were selling the business cheap. An —even higher figure—£7soo—-

was quoted as the annual takings over the last three years. McFadgen said, and he was told a good profit had been shown.

Tyler said the machinery was in good mechanical order, and the truck had a new warrant of fitness. They went to see Mr Brian Harman, the Tylers’ solicitor, and McFadgen asked if he could send the company’s books to Greymouth for his solicitor to examine. There was an argument, Tyler saying he could not do this and telling him to make up his mind.

The sale was discussed further at the office of the company’s secretary and accountant, John Ainger. Ainger “flicked over” a book of monthly statements, and said it was a good business and that Tyler had worked hard to build it up. Decided To Buy McFadgen said he decided to buy the business, and Vinger drew up a document by which he would pay £2750. £lOOO as a deposit and the balance in monthly instalments. He later paid £BOO in cash.

Advertisements were placed in newspapers, at first under Tyler’s name, and later under the name of Shingle Supplies Ltd., a company formed by McFadgen at Ainger’s suggestion. Two vehicle authorities were transferred from E. .» Tyler, Ltd., to the new company. He operated the business for about five months until October, 1963. Nine weeks after he started he had to pay £l7 to bring the truck up to the standard required for a warrant of fitness. Later, when the truck was caught by a flood in the river, Ainger admitted that none of the machinery had been insured, though about £lOO for insurance had been included in the sale agreement.

Insufficient orders were coming in and he was “going down the drain,’’ McFadgen said. He consulted Mr Harman, and then told the Tylers they had lied about the business: in the year ended March 1963, only £4500 had been taken, and there had been a loss of about £7OO that year and the previous one. Tyler and Ainger had originally allowed him to pay £BOO of the deposit and leave the remaining £2OO to be paid later, McFadgen told Mr Matson. When Tyler asked him for the balance he did not have it and handed over a station waggon instead. Tyler afterwards said money was still owing for the truck under a hire-purchase agreement. To the Magistrate, McFadgen said Ainger had previously told him that Tyler would pay this.

If he had examined the monthly account book at Ainger’s office carefully, he would not have bought the business, said McFadgen, when questioned by Mr Mahon. The ease was adjourned part-heard.