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How to lose your company

(... just take out a bank loan)

Case History: By the then company owner Wilfred Taylor

1. MC Products manufactured cookware for microwave ovens, and was the only company in the world who had successfully overcome a stress problem in a plastic moulding material known as TPX manufactured by Mitzui of Japan. Mitzui had sent five of their staff to MC Products during 1986 hoping to obtain the "know how," as MC Products had the monopoly on producing cookware with this superior material. The cookware held about 45% of the market against some other 12 brands on the market.

2. In March 1986 MC Products had obtained a loan of $250,000. During the middle of 1987 the bank began agitating for MC Products to obtain additional capital. A 6-year term loan had been arranged with the bank on the basis that the company was to develop additional machinery and moulding dies for a range of new products. The banks had been provided with the details of the entire new program and were satisfied at the time that the securities provided were more than sufficient. The company was making very good profits (the margin of profit was over 200%).

3. The bank understood that it would take two years before any reasonable returns could be expected from the new products. Another $250,000 was paid into the No 1 account established in March 1986 with the bank. Both loans had been arranged through the bank.

4. The position was now, that the two banks had made a loan to the company of $500,000.

5. The bank increased the loan to $604,373 by December 1986. At this point, the bank decided to put the No1 account into "Reduction" and opened a No2 account which account was to be kept at all times in a credit condition.

6. This meant was that only the profit money was available for the final development program, which naturally would now take a little longer. But the company was at all times well able to control its finances and working at maximum speed in order to finalise the program.

7. In the 1987 balance sheet, the bank loan was shown as a $500,000 loss because over $800,000 had been put into the new development program. Much of that development work was contained in a new moulding machine, which was yet not completed, and therefore was not in production and not earning any money for the company. Therefore its cost was shown as a loss in the balance sheet, had it been shown as profit, tax would have had to be paid on something not earning the company money. The following year, being in a production condition, it would have been shown as a capital item. The bank were well aware before they provided the loan and that it was a normal practice for the company to offset development costs against profits.

8. However, when bank saw the balance sheet they started pressing for the company to find additional capital.

9. It would appear that a Melbourne based company told the bank that they wanted to obtain the technology concerning the TPX plastic, as that company did plastic moulding also.

10. I told the bank I would consider offers, but was keen to finalise the development which was short of completion and I did not require any outside assistance.

11. During October 1987 the Chief Manager of the bank told me bluntly that if I did not take on a partner, he would put in receivers.

12. At that time, the Chief Manager of the bank had no legal reason to appoint receivers, as the company was not asking the bank for any more money, nor had it done so after December 1986, when the No 2 account was commenced.

13. Around about that time I was approached by "WL" who claimed he had a well financed company. He made an offer to immediately pay out the bank loans, and take a 51% interest in MC Products. I was at that time under pressure from the Chief Manager of the bank, so decided to accept WL's offer.

14. One week later, I received a telephone call from a Neil Tumbers, whom I had recently met. He asked how I was getting along with WL and told me I should contact Margaret Sobels of the Sobels Winery in the Hunter Valley, as he had heard that WL was trying to take their winery from them. I phoned Margeret Sobels. She told me that WL was a professional con man who had a record of crooked deals, and was trying to take their winery from them.

15. I asked WL if he had paid out the bank as promised, when he said he had been delayed, I gave him 24 hours to pay up or the deal was off. Consequently 24 hours later I cancelled the deal and sent WL off the premises.

16. Meanwhile, I had had further talks with Neil Tumbers. His company United Systems Holdings P/L, was interested in purchasing 51% of MC Products. That company made chemicals, including liquid soaps, and required MC Products to produce soap dispensers for them. Tumbers showed me a valuation by Peet Marwick, which showed that United Systems Holdings had assets in excess of $8 million. Bobby Fulton (Football Coach) was a director and Kerry Packer was a 25% shareholder.

17. After removing WL from the premises, I phoned the Chief Manager of the bank and told him that I had broken off the deal with WL and that United Systems Holdings were interested in paying out the bank in full. To my surprise, the Chief Manager of the bank, said I was not to sign any deal without his approval, and that he would investigate both United Systems and WL and his company and let me know which one I was to sign with.

18. I reiterated to the Chief Manager of the bank that I had already had dealings with WL, and did not want any further dealings with him, I also told the Chief Manager of the bank about the Sobels winery, and many other crooked deals that WLe had done. Still the Chief Manager of the bank said I was not to sign until he had made his investigations.

19. About 10 days later, the Chief Manager of the bank phoned me and said that he had investigated both parties and that of the two, WL had the securities the bank required, and that WL had shown him (the Chief Manager of the bank) a Letter of Credit of $1,000,000. He also told me that he had investigated United Systems Holdings and had rejected their offer as unacceptable, WL's offer was by far the best offer which suited the bank.

20. There never was a Letter of Credit for any amount. The Chief Manager of the bank lied.

21. I tried to argue with the Chief Manager of the bank that WL was of bad character, a professional con man etc. but the Chief Manager of the bank insisted that if I did not sign with WL within the next 24 hours, he would appoint receivers, and put me into bankruptcy.

22. Under duress I again signed with WL. The Chief Manager of the bank having told me that he had thoroughly investigated WL and his companies, I thought that perhaps WL might be OK. On this occasion WL used another of his so-called companies called "B" Pty. Limited.

23. All appeared to go smoothly for several months; WL and his partner "PM" took over the office, while I concentrated on the toolwork. It was not until end of February 1988, that I discovered all was not as it should be. WL had insisted that the bank had been paid out, the Chief Manager of the bank was on holidays. One day both WL and PM were out I answered the telephone. A creditor wanted to know why his account had not been paid. I went through PM's desk drawers and discovered the truth.

The bank had not been paid.
Creditors had not been paid.
Finance companies had not been paid.
WL and PM had invoiced some $100,000 worth of cookware on false invoices, which paid the money into their bank account and not to MC Products.

24. The Chief Manager of the bank and WL had been having discussions over several months without WL paying the bank anything. When WL and PM returned to the office I had changed the locks on the doors and sent them packing.

25. I telephoned the Chief Manager of the bank and told him what had happened, and that I had already contacted Neil Tumbers who had told me he was still ready to pay out the bank.

26. The Chief Manager of the bank replied that he had already rejected an offer from Neil Tumbers and would not consider it. That was Friday 26th February 1988. On Monday 1st March the receivers took control of my company and I was forbidden on the premises.

27. The Chief Manager of the bank now thought he had a legal right to appoint receivers.

28. New orders had just been received that would have made profits of over $300,000 in the following three months. The Chief Manager of the bank knew of these orders and his efforts would have been in vain if the company continued. All the new tooling had just been completed and the new products were getting under way. Even after WL had stripped $100,000 of stock, the company still had a credit bank account.

29. The Chief Manager of the bank had had an offer from the Melbourne company, that if he put the company into liquidation, that company would buy the assets.

30. On 8th March 1988 the matter was heard by Justice Young. His judgement set out my rights. Evidence showed that the bank claimed the company owed more than $750,000. Justice Young, Supreme Court of NSW stated amongst other things.. "Under that act all the plaintiff must show is prima facia evidence of false, misleading or deceptive conduct."

31. A letter from Badrick Pty Limited, a company in Mosman states that "B" P/L was only a shelf company, which was purchased by WL on 11th January 1988. Yet WL used that company to purchase 51% of MC Products on 10th November 1987. WL was NEVER a director or shareholder of "B" P/L

32. Now the Chief Manager of the bank claimed that he had thoroughly checked out WL and his companies and claimed that they had the securities the bank required. Evidence showed that the Chief Manager of the bank did make investigations of WL and his companies, but those investigations showed that nothing was known of either company.

33. The Chief Manager of the bank lied, he received the report on "B" P/L before the 8th December on which day he told me he had investigated WL and his companies. There is no doubt that his insistence that I sign up with WL would suit his purpose. He was well aware that WL could not pay out the bank. He also knew that WL was a crook and con man. By having me sign with WL he knew the time would come when he could appoint receivers with some excuse.

34. While on the other hand, he knew that Peet Marwick had valued United Systems holdings at over $8 million. He was also aware that Kerry Packer was a shareholder and was prepared to invest more money into United Systems if they so required.

35. He also had a report on that Company from the ANZ bank at Brookvale which states..." Directors are well known and capable and reliable. Involved in production and distribution of industrial detergents and solvents. It is considered that they would not enter into any commitments that they could not fulfil. Considered safe for engagements generally."

36. Now why would an honest bank manager ignore such a recommendation and force a company to sign with a known crook and con man such as WL, unless he had an ulterior motive?

37. Now, just compare the offers from both parties. The offer made by United Systems Holdings on 4th December was rejected. Now WHY was it rejected ? The answer is simple:

The Chief Manager of the bank knew that Neil Tumbers would be making an offer to pay out the bank, that he did not want, as he had made a deal with a Melbourne company to buy the assets of MC Products at a cheap price. This could not happen if the bank accepted Tumber's offer.

38. Earlier I mentioned that the Chief Manager of the bank stated he had seen a Letter of Credit from WL.

39. The Chief Manager of the bank knew that WL banked at the CBA where he had an overdraft account to $50,000. On 11th December, the day after receiving WL's offer, the Chief Manager of the bank offers to sell all of the company's assets to WL on the presentation of a Letter of Credit.

Why would a Letter of Credit be required by the Chief Manager of the bank for this arrangement?
Why not just a cheque?

40. Be that as it may, the Chief Manager of the bank required having the agreement signed with WL before the offer from Tumbers was to hand. This offer was accepted on 3rd December 1987, just a day before the offer from Tumbers was to hand.

Why was the Chief Manager of the bank in such a hurry to get the offer from WL approved, because if the two offers were placed before the directors, WL's offer would not stand against the Tumber's offer?
The Chief Manager of the bank wanted WL to get control of MC Products. I believe the Chief Manager of the bank had made a deal with a Melbourne company prior to the appointment of receivers.

41. When "MB" took over the control of MC Products assets on 1st March 1988, he was insistent that he would run the company as a going concern in order to obtain the best price for the creditors and the bank. This was his statement to Justice Young on the 8th March 1988 yet on 9th March 1988 he banked a cheque from "K P/L" of Melbourne for $40,4000 for assets sales.

42. He then proceeded to make a sham of advertising the company assets, in what he called as a going concern. Yet not one of the advertisements mentioned going concern. Just machinery and plant for sale. To any company making enquiries as to just what was offered, he provided a list of plant and equipment. However, the main 20 moulds of the MC Products cookware was not listed... WHY? Because they were earmarked to go to "K P/L" who were under the impression that they now would have all the technical "Know how" on the TPX moulding of microwave cookware.

43. By not showing the main moulds, those earlier interested lost interest, as the moulds were the main part of the company 's production. If some previous deal had not been made, How did "K P/L" make such a quick deal on the asset purchase?

44. The sham of trying to sell the company as a going concern continued into April. On 20th April I received an offer from Kerry Parker (Through United Systems.) that he wanted to put my two companies, together with three of his, in a consolidated company on the Stock Exchange.

45. This offer was given to MB on 20th April. MB immediately settled with "K P/L" and claimed that the offer was received too late.

46. The article "Shadow Ledger" in the Sun Herald unravelled some of the bank practices. As the bank would not be able to claim tax rebates, they alter the company's figures in order to claim illegal losses. The Bank used two accounts. The amounts of one accounts are altered without the knowledge of the customers. In this case from $601,992 to $705,793.58.

47. Although interest was charged on each account individually, the combined account (account 1 and 2) were again charged with interest. The repayments of $99,250 were not credited to account no. 2.

48. These false figures were presented by the Bank to the court claiming that the company was unable to pay $750,000. On the day the receiver was appointed the "Shadow Ledger" had grown to $1,031,779.

49. Accordingly to obtained evidence the Bank awards any bank manager who puts a company successfully into liquidation with shares as a "thank you" payment.

50. During 1992 I had an article printed in the press styled "Goliath is afraid of David" together with a cartoon drawing of an elephant hiding behind a tree in fear, a small mouse in front of the tree saying "Boo".

51. Amongst other things, was a written challenge to the bank----
" I put out this challenge to the board of Directors of . If you consider that my allegations against you and your chief manager are false--- meet me in court and settle the matter once and for all."

52. A copy was forwarded to the Chief Manager of the bank -----The silence was deadly.

53. For 7 years I tried to get the bank into court, but was blocked by all means by the bank. They were afraid to meet me in court. They well know that I will beat them but I was forced to drop the case as I ran out of money.

54. What happened to the Law which says that " no man can be deprived of his tools of trade, except by a ruling of his peers" Yet the banks can sell you up without having such a ruling.

Violations of local statute law and international covenants appear to be involved.

ONE VOICE - ONE PEOPLE is an independent, non-party-political, non-profit organisation committed to defend human rights and fundamental freedoms and to contribute to the promotion and advancement of democratic societies, institutions and processes

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