Muldoon evidence for Matai

Press, 19 August 1978, Page 2

Muldoon evidence for Matai

PA Wellington The Prime Minister (Mr Muldoon) has appeared as a witness in support of the SIM claim by shareholders of Maui Industries, Ltd, in receivership, against the Government. The shareholders of Matai, of which Mr Muldoon was appointed a director while in Opposition, are suing the Government in the Supreme Court for breach of contract. Mr Muldoon said that a principal shareholder of Matai. Kevin Francis Meates, had publicly invited the Opposition in 1973 to appoint a director to the company. After discussion within his party. Mr Muldoon said he was nominated. He said he made it clear that he would serve on the board in a strictly professional capacity (as a chartered accountant) and that no political considerations would influence his duties.

That was acknowledged by the then Prime Minister (Mr Kirk). At the time of events leading up to the company’s receivership in 1974, he and other board members had been asked by the Government to continue in office. By November, 1973 it had become apparent to the board that the company would have a serious cash flow problem.

Mr Muldoon said he took Mr Kirk aside, and told him that it was essential that there be a substantial injection of cash into the company. Mr Kirk said that the company would continue, and it had his continual support and backing. He said he was not close to details of the company, and did not want to be because of his close perso al relationship with Mr Kevin Meates. He left that to his ministers, particularly Mr W. W. Freer (then Minister of Trade and Industry). Mr Muldoon said it was clea to him that without a

substantial freight subsidy tht company could not suc» ceed. Had the Government been prepared to absorb as a social cost the extra expense of business on the West Coast, then there was no reason the company could not succeed, as though it were in Auckland.

Mr Muldoon said he gave advice to Mr Freer and Mr Rowling (then Minister of Finance) about the legal duties of receivership. He said the Government could not appoint a receiver on the basis that he would keep going in accordance with promises that there would be no reduction in activity and no sackings. Somebody would have to accept responsibility for any

losses it a receiver carried out Government policy rather than simply doing his duty in terms of the Companies Act. Mr Muldoon said all the directors opposed receivership because it would make it impossible for the company to trade successfully and effectively destroy it. If the Government was prepared to face up to the subsidy question, then the company had prospects of continuing, he said.

He said the company continued to lose money under the receiver. The total outlay by the State in terms of guarantees met and other losses was in the order of $4.7M.

The curious thing, he said, was that the Government paid nothing at all to Matai Industries, but subsequently paid regional grants to three companies which took over the West Coast factories from Matai.

Cross-examined by Mr D. L. Mathieson, for the defence, Mr Muldoon was rsked whether hj had been kept fully informed by Mr Kevin Meates about all the financial aspects of Matai. He replied that such information that came to the board usually came from the company’s secretary rather than the managing-director. The secretary had spent a vast amount of time com-

piling material for Government departments. The speed at which the company had been formed had got ahead of an effective system of financial reporting, and the outside directors moved to*, correct that, he said. Asked whether he remembered the amount of overdraft given in November, 1973, by the Commercial Bank of Australia to Rowe and Company, Ltd, which was closely involved in the purchase of assets for Matai, Mr Muldoon said he had a r collection of the matter but could not recall the amount of the overdraft. Mr Muldoon said he took m part in negotiations with the Government in early 1973, but there was reference to them in that year’s Budget.

Mr Mathieson: It was quite clear in your mind that the sum of $500,000 was envisaged as new assistance to meet the urgency of the company’s position?

Mr Muldoon: No. This was the regional development subsidy of the type we had been trying to get finality on throughout the whole history of the company. Mr Mathieson: Would you agree that the Government, acting responsibly in the public interest, should not firmly commit itself to a subsidy without a firm basis

upon which to calculate the subsidy, including details of actual freight costs? Mr Muldoon: No, I wouldn’t. I think the principle you are enunciating is quite wrong. To commit ourselves to a subsidy before we learned what the trade accounts of company X or Y were, you would never have a policy. Mr Mathieson Was it not obvious to you from various things Mr Freer and Mr Rowling told you that they rightly or wrongly took the view that a good deal of information about costs should come to the Governmcn before there was a commitment on a freight subsidy? Mr Muldoon: No. I have to disagree again, there was reference to this in the 1973 Budget. My belief at that time, and which I still hold, was that caution was being urged on Ministers by departmental officers, and their enthusiam for the project was not sufficient to overcome that advice.

The hearing, which is before the Chief Justice (Sir Ronald Davison), sitting as judge alone, will resume on Monday.