Landmark share ruling reserved

Press, 14 September 1988, Page 41

Landmark share ruling reserved

PA Auckland A summary judgment claim for $3.5 million against the former Landmark Corp chairman, Mr Oily Newland, was reserved for about a week after a hearing in the High Court in Auckland. Master Towle decided to deliver his decision in writing after listening to three hours, of submissions. The proceedings were brought by Mr John Yates, who has a take-over offer under way for Landmark. Mr Yates said in his statement of claim that he entered into a contract for Mr Newland to buy 3.5 million Landmark shares from him. The price agreed on May 12 last year, when the contract was signed, was $6.3 million, or 180 c a share. Mr Newland paid $2.8 million soon after the agreement with the balance to be paid in four $500,000 lots at the end of May and October this year and on the same dates next year. A final payment of $l.B million was to be paid on December 31 next year. Before the May 31 payment fell due this year, Mr Newland was ahead by $300,000. Mr Yates’ counsel, Mr Gary Harrison, said Mr Newland wrote to Mr Yates on February 18 saying he planned to stop payment on the post-dated cheques he had given Mr Yates to meet the contractual arrangements. A week later later Mr Yates’ solicitor wrote back notifying Mr Newland that he was in default of the contract, and called for a remedy. Mr Newland had said in his letter that he wanted to reorganise the deal, but Mr Yates declined. On March 9, Mr Newland’s solicitor wrote to Mr Yates’ solicitor explaining that his client had accepted the contract was binding. Enclosed was a cheque for $200,000 being the outstanding portion of the $500,000 due on May 31, allowing for the earlier over-payment. When Mr Yates presented Mr Newland’s original cheque for $500,000 on May 31 it was returned marked “payment stopped.” Mr Yates then presented the $200,000 cheque, but this too was returned unpaid by the bank. Mr Yates claimed this was a breach of the contract, and as such Mr Newland had renounced it. The unpaid portion, $3.5 million, should be paid at once, Mr Yates claimed, plus any costs and interest. Mr Newland’s counsel, Mr David Chisholm, argued that his client was owed money by Mr Yates, and had attempted to .off-set part of this against

the May 31 instalment. He said Mr Yates' and Mr Newland had set up a company called The Positive Force Co. last year and through it borrowed $5 million from DFC New Zealand. This money was to be used by the two men for their own needs, with $3 million being available to Mr Newland and the rest to Mr Yates. A parcel of 198,000 Landmark shares owned by Mr Newland was advanced to Mr Yates to help him to meet the security element of the loan from DFC. In a letter to Mr Yates on August 26 last year, Mr Newland reminded him of the “loan” of the shares, and that they had to be “returned”. Mr Yates subsequently satisfied the DFC’s security needs by depositing Pacific Metropolitan shares as collateral, and regain the Landmark shares “loaned” earlier. Mr Yates offered these back to Mr Newland but had not received a reply, Mr Harrison told the Court. Mr Newland claimed that the parcel was actually sold to Mr Yates at 170 c a share or $336,600, and he wanted to be paid. He also claimed that when Mr Yates drew $200,000 from the DFC loan to The Positive Force, it had come from Mr Newland’s entitlement, meaning Mr Newland was paying interest on $3 million, but was benefiting from only $2.8 million. These claims were disputed by Mr Harrison. Mr Chisholm said the contract was still operative on May 31, because Mr Yates had tried to cash the cheques. He would not have done this if he considered the to be terminated. If the stop payments were deemed to be a breach of the contract, then the penalty clause set out in the contract called for Mr Yates to notify Mr Newland of the alleged breach, giving Mr Newland 30 days to rectify the situation. After 60 days if there was no redress Mr Yates could reclaim the shares not paid for. Mr Chisholm said no notice of default was given by Mr Yates. The set-offs claimed by Mr Newland totalled $536,600, outweighing the amount due in May, he said. The parcel of Landmark shares used as collateral by Mr Yates had become entitled to a 1-for-10 bonus issue and a 2.5 c a share dividend, which Mr Newland said he had not received. Mr Newland claimed Mr Yates had retained the bonus shares and dividend.