SUPREME COURT Accountant’s Evidence In Contract Case

Press, Volume CIX, Issue 32119, 15 October 1969, Page 19

SUPREME COURT Accountant’s Evidence In Contract Case

A witness, in a Supreme Court claim for specific performance of contract affirmed yesterday that Thomas Wilfred Perry, a Christchurch

company director, had agreed to buy a 51 per cent interest in a Sumner textile business, Clifton Knitwear Properties, Ltd, and in declining a written agreement had said that “his word was his bond.”

This evidence was given before Mr Justice Wilson by James Preston Davies, accountant to the plaintiffs, Robin Leslie Edwards and Beulah Lillian Edwards, on the sixth day of hearing of their claim against Mr Perry for specific performance of a contract to buy the controlling interest in their company, Clifton Knitwear Properties, Ltd. Mr Davies, the ninth—and it is believed the last—witness for the plaintiffs, was in the witness-box for almost the whole of yesterday, and was under initial cross-examina-tion on accountancy matters when the hearing was adjourned to this morning. Mr and Mrs Edwards, both company directors whose case is conducted by Mr J. G. Leggat, with him Mr S. G. Erber—claim that Mr Perry on or about August 5, 1968, made a verbal agreement to buy the controlling interest in their company, and to provide the necessary funds for a capital increase to enable it to purchase the net assets of another of their companies, Beulah Textiles, Ltd. Mr Perry, in his defence to the claim, says that no such agreement as alleged by the plaintiffs was ever made, and that it is unenforceable unless produced in writing. Mr Perry’s case is conducted by Mr R. A. Young, with him Mr E. J. Somers and Mr P. G. S. Penlington. “Outside Capital Required” On the purchase by Mr and Mrs Edwards of the Clifton Knitwear business, said Mr Davies, two things became apparent One was that capital, from an outside source, would be required, more particularly to provide for more modern machinery. The other was that Mr Edwards would need experienced managerial assistance to free him to undertake normal selling operations. Mr Edwards had accordingly approached Mr Perry.

Mr Davies said he had no part in effecting the introduction of Mr Edwards to Mr Perry. Witness first became involved personally in June, 1968, when Mr Edwards asked him to meet Mr Perry to discuss the proposed sale of certain of the assets of Beulah Textiles and the land and building of Clifton Knitwear Properties. Mr Davies said: “The proposal to me was a complete sale of the assets of Beulah Textiles and the land and building of Clifton Knitwear Properties on a straightout basis. Mr Edwards envisaged going out of the business altogether.” Mr Edwards, witness said, was simply to continue with R. L. Edwards Knitwear, Ltd, a selling organisation. Meeting Of August 5

Witness was instructed to prepare full profit-and-loss accounts and balance-sheets for Beulah Textiles as at June 21, 1968. These were sent to Mr Perry "within a very few days.” In discussions after June 25, Mr Perry had said he was not prepared to purchase the assets on an outright basis, as the price was too high to enable an acceptable dividend to be realised. Nor did Mr Perry wish Mr Edwards to cease active participation in the business.

After subsequent discussions, said witness, a meeting was arranged at Mr Perry’s office in Madras Street on August 5, 1968. Mr Pen?, witness said, had opened discussion at this meeting by explaining to Mr Mortlock, his solicitor, that he was purchasing a 51 per cent interest in the Edwards companies. Mr Davies said that agreement was then made that Clifton Knitwear Properties would take over the net assets of Beulah Textiles, with the exception of the shareholders’ funds and the capital reserve, and after allowing a reduction of $64,000 dollars. “To me, at that point, it was perfectly clear in my mind what should be done,” witness said. The capital of Clifton Knitwear Properties, said witness, was to be increased to such figure as necessary to acquire the net assets of Beulah Textiles. The money to increase the capital was to come from Mr Perry. His Honour: Who said that? Witness: He did. “Word Was His Bond”

Mr Davies went on to describe how Mr D. J. Stock, solicitor to the plaintiffs, had said he had drafted an agreement, and thought it advisable that the agreement should be in writing. “Mr Perry said that this was not necessary,” witness said. “Mr Edwards said: ‘Well, you are going on with this, you are quite satisfied?’ ” “There was some further comment by Mr Stock that he thought it should be in writing,” witness said. “Mr Perry said he was a director of 39 companies, and a director of the Reserve Bank, and that his word was his bond.

“Mr Perry said that if this had not been so, he would not have succeeded as he had,” witness said. Mr Edwards had then said words to the effect that “that is good enough for me.” Another matter mentioned “somewhat crisply” was the indebtedness to the United

Empire Box group, witness said. “Mr Perry said that he would be in Auckland at a Reserve Bank meeting, that he would see the U.E.B. people when he was there, and indicated that he would do what was necessary.” “Taken Aback” After detailing subsequent activities, Mr Davies said at no time had Mr Perry, his solicitor, Mr P. L. Mortlock, or accountant, Mr W. A. Hadlee, said anything attaching conditions to the agreement of August 5. He was, therefore, “considerably taken aback,” said Mr Davies, when Mr Perry told him over the telephone, about September 4, that he was not prepared to "go ahead with the arrangement" Mr Perry had said that a salesman in the North Island had resigned after making no sales of Clifton Knitwear products in a full week, that Mr Edwards was known as “a jobber,” and that the company’s products were of inferior quality. Witness said: "Mr Perry said to me: ‘What would you do?’ I said words to the effect: ‘lt isn’t fair to ask me what to do. You have a contract with the Edwards.’ He said to me: ‘I have discussed this with Brian, whose opinion I value, and he thinks the same, and do.es not think I can get out of it.’”

“Stormy Discussion” At a subsequent meeting on September 6, said witness, Mr Edwards was extremely distressed, and annoyed, at Mr Perry’s attitude, and had said he would force Mr Perry to go ahead. Mr Perry had replied that “nobody spoke to him like that,” and that he eould not be forced to do something he did hot want to. “There was then quite stormy discussion,” Mr Davies said. “Mr Edwards gave his reasons why sales had been small, and made it clear that stocktakings, continuous meetings, and conferences had made it impossible for him to give normal attention to selling. He said that given normal conditions he could sell at a level to satisfy everyone.”

The general temper of the meeting had then improved, witness said. Mr Perry had said that if he could be shown that a substantial turnover at profitable prices was there, he would still be prepared to go ahead. “I felt Uris was an Important statement . . . and I sought leave of Mr Perry to read it back and obtain his approval to what had been said,” witness said. Mr Davies then gave the following statement he said he had recorded: “If you can show me a substantial order book at profitable prices between now and November 19, 1968, I would still be prepared to go ahead.” U.E.B. Chairman’s Evidence James Nimmo Crawford Doig, chairman of directors of the United Empire Box group, earlier in the day gave evidence for the plaintiffs, under subpoena. Mr Doig said he remembered an approach to him by Mr Perry—in June last year, witness thought—in connection with the Clifton Knitwear business disposed of by U.E.B. to Mr and Mrs Edwards. “It was after lunch in Auckland one day,” witness said. “Mr Perry indicated a degree of interest in Clifton Knitwear. He expressed a de-

sire far information regarding it I suggested he get in touch with Mr Saker (U.E.B. company secretary) whom I instructed to give him any information he wanted. My discussion did not go any further than that”

Mr Doig said he bad never discussed the matter of the Clifton businesses with Mr Perry since. Mr Doig was not crossexamined.