VALIDITY OF DEBENTURE.

Auckland Star, Volume LIII, Issue 210, 5 September 1922, Page 7

VALIDITY OF DEBENTURE.

ALLEGED PREFERENCE PAYMENTS. DECISION RESERVED. The action of the Auckland Provincial Fruitgrowers' Co-operative Society, limited (in liquidation), by its liquidator. Thomas Mr. Johnstone (Mr. Towle). to set aside a debenture of £1300 given to Samuel W. House (Mr. Hogbeu), on the grounds that it wae issued when thy Society was insolvent, and was therefore an act of fraudulent preference, was continvied before Mr. Justice Herdman at the Supreme Court to-day. The liquidator ha-ving paid defendant £1353 12/9 on the debenture, now claimed recovery of half that amount, the Society having also paid its other creditors 10/ in the £. CASE FOR THE DEFENCE. The defendant said when he gave the £300 to the Society he expected security, and Bodley mentioned a debenture. There was. however, no arrangement about the £1000, which was a temporary advance, to be repaid in a few days. Thie was simply done by him to oblige the Society, which had a shipment arriving. Mr. Bodlvy had said they would lose £300 in commissions. The Society was arranging the opening of a bank account, and he expected repayment from that source. As a matter of fact the bank lent him the motwy to advance it to the ■Society. As a director he saiv and inspected the balance-sheet*, and knowing the position completely, and also ac to uncalled capital and moneys owing to the Society, he was sure the company waa able then to meet its creditors. In addition he trusted the manager and accepted his assurances. He also took 10(10 shares in the amalgamated company.

To Mr. Towle: Xo debenture was men tioned as regards the £1000 advance.

To his Honor: He understood that the repayment to him wae delayed because the Society paid a sum to ite bank, and the balance was insufficient'to repay hie raonev for a time.

Defendant also said he always had ai : good idea how the uncalled capital I' stood, but was not aware that come of | these shareholders were unwilling to pay up—not until after the company went into liquidation, which was also the first time he realised that that course was ' tlie only alternative to amalgamation ! with Turners. He knew in August, 1920. that the calling up of uncalled capital and the paying of creditors would mean a loss of the Society's capital. NO INTENTION TO VREFER. Mr. Hog'ben said that the debenture was given not with the intention of prv>- j ferring House, but in the ordinary course I of business to put House on the same | ■footing as those who had advanced ' money and had been given debentures. ] When the debenture was given the direc- ' tors honestly believed, and were justified I in believing, that they would t>e able to ! pay 20/ in the £. Thirdly, the transaction being one for which valuable consideration was given it was protected, because House was acting honestly and in good faith. Replying to the conten- ! tion of plaintiff's counsel, that the deJ Ibenture wae irregularly executed, Mr. Hogben said that House was ignorant of any irregularity in the circumstances, and the Society would be legally bound by ite own actions. His Honor reserved decision.