COMPANY FAILURE

Ashburton Guardian, Volume 56, Issue 280, 8 September 1936, Page 7

COMPANY FAILURE

NORTHERN TUNG OIL, LTD. QUESTION FOR SUPREME COURT. (Per Press Association.) WELLINGTON, Sept. 7. The success that attended one of the early efforts to establish the tung ol industry in the northern Auckland district and the subsequent failure of the venture through the destruction of the plantation almost overnight by a cold southerly wind, were described in the Supreme Court to-day wr c the opinion of the court on matteis affecting debenture holders of Northern Tung Oil, Ltd., was sought y ‘ originating summons. Plaintiffs weio Northern Tung Oil, Ltd., and John Howard Barnett, public accountant, Wellington, and Gilbert Conboy Beckett, secretary, Wellington, receivers for the debenture holders of the company, and defendants were Leo Blake manufacturer, Wellington, and Robert Steven Johnson, company director, Wellington, representatives of a class of applicants for debentures who had not at November 15, 1934, completed their payments of purchase money. His Honor, Mr Justice Smith, presided. Mr M. O. Barnett appeared tor plaintiffs, Mr J. T Cleary for the first-named defendant, and Mi E. Hay for the second-named defendant. Mr Barnett said the company had not deliberately evaded its obligations in any way. The growth in the early stages was quite amazing. Everything went quite well and there was mo complaint with the company or the trustees in the way they carried on, but ultimately a cold south wind wiped the whole plantation out practically in one night. The company in that stage was in a position where it could not go on to the market and sell more debentures because it could not represent that it would lie a success and there were insufficient funds to start afresh. The trustees for the debenture holders then appointed receivers. _ At the time the receivers were appointed the debenture holders fell into three classes : _(a) Those who had paid! up in full; (b) those who had paid up m instalments so as not to he in detau t at the time the receivers were appointed; (c) those who were in arrears. Payment of Dividend. It was not yet known exactly what would he available for distribution as so far the land had not been sold. The problem was whether fully-paid debenture holders only were to participate. If that was the case the dividends would be much greater. . Some holders had paid so much that if they knew the dividend it might pay them to pay the balance and get more back in dividends, but others had paid so little that if they paid up they would lose. His general submission was that only those who had paid up fully should participate in the dividends. An alternative submission was that a debenture bolder who had 1 paid up his instalments in full until the receivers were appointed should be entitled to participate. In reply to a question by bis Honor, Mr Barnett said tlie company had not been wound up. Receivers had been appointed, but nothing was being done at present. His Honor: It could be struck off the register then? Mr Barnett: It could and eventually will be, of course, It was contended by Mr Cleary that there was a contract between the company and the applicants as a body. He claimed there was a total failure of consideration, thus making the contract unenforceable by the company against applicants for debentures. Mr Hay’s argument was based on the contention that the documents of agreement constituted a debenture. On the express wording of the trust deed, all the moneys in the hands of the receivers, after the payment of the prior charges provided for, became distributable among the debenture holders in proportion to the moneys paid up on each debenture. Decision was reserved.