Letter: Dubious dealings in the defence ministry

Sir: The Government and ministers of defence are not simply in trouble over the Scott inquiry. Their conduct was equally dubious in another matter.

J. N. Electronic Supplies (JNES) was a small company specialising in electronic and precision engineering of which I was the chairman and Joan Nathan the managing director. JNES started business in 1960, working almost exclusively for the Ministry of Defence. For more than 20 years, it had very good working relations with the ministry but, over the past eight years, the relationship soured and its directors believe that the MoD deliberately tried to drive it into bankruptcy to cover up mistakes by ministry officials.

JNES entered into a contract with the MoD to manufacture 550 control heads for manual gun sights to be fitted into the Army's Chieftain and Challenger tanks from the ministry's drawings. JNES did not think that the drawings were satisfactory and applied for permission to alter them but was refused. The MoD told JNES that Vickers had managed to produce control heads from the same drawings but we now know that Vickers, a company which is allowed to alter drawings, did so.

Without notifying its directors, JNES was taken off the ministry's approved list of contractors in 1987, although it continued to receive regular offers to tender. When its workforce was reduced to six and its turnover was virtually nil, it was told that, owing to its precarious financial position, the ministry could not give it further work. The company was put into liquidation because ministers and civil servants were not prepared to admit that the MoD was at fault.

The company applied for the liquidation to be stayed in the Chancery Division of the High Court so that JNES should be given a chance to take action against the MoD. After reading the evidence, the court agreed last year that a stay should be granted in order that the company could take its case to an independent arbitrator within a few months.

It is without precedent for the High Court to grant a permanent stay of liquidation in order to allow a company to litigate for the benefit of its creditors.

Yours faithfully,

HUMPHRY BERKELEY

London, W4