Trust misplaced — Matai counsel

Press, 29 August 1978, Page 3

Trust misplaced — Matai counsel

v ■ .. Wellington l ’* r Kevin Meates founder u '?] ata ' Industries, Ltd, should not have trusted the Labour Government, said counsel for Matai shareholders, in the Supreme Court at Wellington yesterday.

Mf J. Cadenhead was JP a I’ na * submissions to the Chief Justice (Sir Ronald Davison) in which Matai shareholders are sueing the Government for SIM, alleging breach of agreement in establishing a plastics industry on the West Coast. Mr Cadenhead said it was important to re-emphasise in the context of the case the relationship between the late Mr Norman Kirk and Mr Meates. A telegram from Mr Kirk to Mr Meates highlighted the fact that the Labour administration was elected owing a tremendous amount to what Mr Meates did before the election. “Mr Kirk was, after all, the Prime Minister in the context of this case,” Mr Cadenhead said. “He cannot, as it were, be brushed off to one side. Mr Meates’s relationship with the late Norman Kirk would be well known to Messrs Freer and Rowling.” Mr Cadenhead said it was Mr Kirk who visited the West Coast and made the promises about the industry. It was a Labour administration that was making statements to the press about the arrival of new industries before the official agreement had been reached.

“The defendant is saying he. Mr Meates, dealing with his friend the late Norman Kirk and Minister of the Crown of an administration which he had helped put into power, made the fatal mistake in trusting him,” Mr Cadenhead said. “He should, as I under-

stand the complaint, have committed the important meeting of April 12, 1973, to writing and he should not, as the complaint goes, have paid heed to the later assurances that he hadn’t anything to worry about.

“And the defendant, on hindsight, is correct. Mr Meates should not have trusted the Government. He should have indeed heeded the advice of Machiavelli when he said, ‘Put not your trust in princes’.” Mr Cadenhead said that on January 19, 1973, Mr Meates gave a very detailed set of proposals in which a budgeting forecast was set out. Such forecast included a freight figure of §320,000. This was a net figure arrived at after deducting from gross freight of §960,000, a freight subsidy of $640,000.

“Clearly the project was not viable unless such a subsidy was contemplated,” Mr Cadenhead said. “After all why should the plaintiffs go and relocate on the West Coast?

“On February 5, 1973, Mr Meates received a telephone call from Mr Tyler, who put a proposal that instead of an annual freight subsidy there should be a once-only capital grant of $500,000.

“The figure of $500,000 raises its head for the first time. How did the defendant react to that piece of evidence? Mr Tyler was not called to disprove it.”

Mr Cadenhead submitted that in the context of events two points made were that th - defendant offered a onceonly grant of $500,000 and that clearly this was not a figure plucked out of the air. He said that negotiations had continued. Mr Meates had been dissatisfied, and so on February 26, 1973, wrote to the then minister of Trade and Industry (Mr

Freer). Mr Meates clearly expressed his view that he must have a freight subsidy. In his letter to Mr Kirk, Mr Meates clearly indicated he was withdrawing from the proposals. In consequence a meeting was arranged at Mr Freer’s office on February 23, 1973. It was clear from the meeting that Mr Freer emphasised he was keen to get the undertaking off the ground. It was also clear that Mr Meates desired a firm commitment on freight subsidy. Mr Cadenhead said that on March 23, Mr Freer wrote to Mr Meates saying it was quite clear there was s ° m e misunderstanding about the extent and terms o' the bank guarantee, import licensing, and freight costs.

On April 9, 1973, there was an emphatic reply from Mr Meates that there was no misunderstanding. Mr Meates called for the notes of the meeting of February 27, 1973.

“It is submitted these notes were never sent to him,” Mr Cadenhead said. “He said that if necessary he would close down and move to Auckland?’

1 Mr Cadenhead said it was t impossible really to divorce ; the political realities of the situation from the comt mercial negotiating that was going on. There would have I been a “tremendous hullabaloo” if Mr Meates had closed the project. Mr Cadenhead said Mr t Freer was quick to try to throw the blame on Mr Meates for “going too fast.” The complete inability of ; Mr Freer to recognise that possibly there could have been fault on the part of the Labour Government in moving too fast should be noted. He was all too ready to infer the blame on someone else, counsel said. It was clear Mr Freer had regarded unsecured creditors as a binding obligation upon him, Mr Cadenhead said. He ’ had also regarded his obligation to employees as binding upon him. 1 “But by some juggling of words shareholders don’t seem to fall under that pro* I tection,” he said. Mr W. J. Gough, junior counsel for the plaintiffs, referring to the “arrangement argument” contended it was on the basis that the share- 1 holders retained a residua! benefit in the “physical i undertaking’’ as at the date 1 of the appointment of the 1 receiver.

In effect, it was an unorthodox method of nationalisation using private law mortgages to acquire a receiver.