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Inquiry into the 1 Parliament Street Car-Park Limited Contributory Mortgage

APPENDIX B

Exchange of correspondence between the Commission and Money Managers Limited

22 - 26 March 2002

(These letters are reproductions of this correspondence)

22 March 2002

Lowndes Jordan
Barristers & Solicitors
Facsimile : (09) 309 1445
AUCKLAND

Attention: Alan Webb

1 PARLIAMENT STREET CONTRIBUTORY MORTGAGE

We refer to paragraphs 8.18 to 8.34 of the submissions of Mr Somers-Edgar, Money Managers Limited and Securities Registry Limited. The unequivocal commitment of Money Managers to pay any shortfall in the full amount of the loan on or before 29 March 2002 is important to the Commission's consideration of this matter.

In paragraph 10.3 of the submissions your clients propose that "MFL should be required to obtain a further valuation and post it to investors with an explanatory letter and the option to withdraw their investment".

Would you please confirm that the effect of these submissions is that Money Managers will make good any shortfall in the $27 million remaining after contributors have decided whether or not to withdraw their investment. In other words, please confirm that Money Managers agrees that its obligations under the promissory note will extend beyond 29 March until such time as contributors have decided whether or not to withdraw.

Please confirm your clients' position by 5pm Monday 25 March 2002.

We note that the Confidentiality Orders in this matter remain in force.

Yours faithfully
Kathryn Rogers
Senior Solicitor

Securities Commission
PO Box 1179
WELLINGTON

Attention: Kathryn Rogers

Facsimile: 04 472 8076

Thank you for your facsimile dated 22 March 2002.

When Mr Somers-Edgar (DSE) signed the promissory note (PN) on behalf of Money Managers Limited (MM), he was confident that MM would have no difficulty in raising the funds for the Parliament Street contributory mortgage (PSM) - see clauses 8.30 and 8.31 of our submissions.

Therefore, whilst an objective assessment shows that the PN imposed an unconditional promise by MM to pay any shortfall of funds, DSE's subjective assessment at the time he signed the PN was that he did not believe that MM would have any obligation to pay any shortfall (as the funds would easily have been raised by MM).

This assessment demarcation is important as neither DSE nor MM resile from the position adopted in our submissions and do not believe that they have any obligation to meet any shortfall.

However, in order to assist the Commission and a speedy resolution of this matter, MM is prepared to confirm that it will... make good any shortfall in the $27 million remaining after contributors have decided whether or not to withdraw their investment on the following terms:

1. MM is agreeing to assist the Commission resolve this matter expeditiously;

2. This represents an additional obligation on MM, and one that was not in place when DSE signed the PN;

3. This assistance will resolve the matter and there will be no outstanding issues between the Commission and DSE, MM or Securities Registry Limited. We are sure you will understand that noting this condition is not to influence the Commission's regulatory role in any way, but is simply to clarify what MM has taken from your letter of 22 March 2002 that in the light of the above indications, this may well resolve the matter. This is the basis on which MM has proceeded to provide the commitment to make good any shortfall set out in this letter; and

4. That there be no indication to investors that if they require the return of their investment, that any shortfall will be met by MM.

We look forward to hearing from you.

26 March 2002

Lowndes Jordan
Barristers & Solicitors
PO Box 5966
AUCKLAND

Attention: Alan Webb

By facsimile: 09 309 1445

1 PARLIAMENT STREET CAR-PARK LIMITED CONTRIBUTORY MORTGAGE

We refer to your facsimile of today's date.

We note your statement that "This demarcation assessment is important as neither DSE nor MM resile from the position adopted in our submissions and do not believe that they have any obligation to meet any shortfall".

It is not clear to us how your clients can both stand by their submissions, and also believe that they have no obligation to meet any shortfall. Your clients' submissions stated that "It is accordingly an unconditional promise to pay this shortfall" (para 8.24), and "MM must make good its promise by the payment of money" (para 8.27). They also stated that "the parties' intentions when signing the PN are immaterial"(para 8.22).

With regard to your numbered paragraphs, the Commission will not enter into any discussion, or consider any proposals, which would imply a constraint on the Commission's powers to properly address the issues raised in its inquiry.

Yours faithfully
Kathryn Rogers
Senior Solicitor