TOBACCO CASE.

Auckland Star, Volume LXXI, Issue 196, 19 August 1940, Page 3

TOBACCO CASE.

LOYAL LIMITED.

PUBLIC EXAMINATION.

DIRECTOR GIVES EVIDENCE.

On an order obtained by the Official Assignee as liquidator of the tobacco company Loyal Limited, in process of being wound up, a public examination was commenced to-day, before Mr. Justice Fair, in the Supreme Court of officers of company. The order required that Edward Valentine Owen, director, of Howick, and Michael Maher, director, of the Provincial Hotel, be publicly examined as to the formation of the company, the conduct of its business, and their own conduct and dealing as directors or officers of the company. Consideration was given also to the affairs of the Consolidated Tobacco Company, Limited, in liquidation. Mr. V. R. Meredith and Mr. N. I. Smith conducted- the examination on behalf of the liquidator, and Mr. A. H. Johnstone, K.C., and Mr. R. MacKay appeared for the examinees. Nelson Experience. Edward Valentine Owen said he was now a farmer at Tauranga. He was a director of Loyal Limited when the company was wound up. He had had experience in growing tobacco at Nelson, also in grading and in assisting to buy. He was employed by VV. H. O. Wills as field instructor in the Motueka district in grading the leaf. His duties as instructor were to instruct the growers in growing, grading and curing. His wages were £6 10/ a week. Later he got a position with the Empire Tobacco Company at a salary of £500, rising to £750 a year, with a free house. It was a growing company, not a manufacturing company. He was plantation manager. After a year the company sold out, but he had left before that, and he then promoted Loyal Limited. Promotion of Company. He and Mr. Maher were the prime promoters of Loyal Limited, a manufacturing company. Mr. Maher had had no tobacco experience, but was then an accountant. Witness then had £200 to £300 capital and took up 100 shares in the company. Maher also took up 100 shares. He thought about £7000 was got in share money for the company. He could not increase his shares. On February 12, 1931, he entered into an agreement with the company, in which agreement he was described as managing director, and Maher was secretary. There were three other directors, none of whom had practical experience of tobacco-growing and manufacture. He had not had commercial experience of tobacco manufacture. By the agreement he was to get the sum of £10 weekly for a term of 18 months. He was bound by the agreement to preserve trade secrets and to employ the eervices of experts in growing, buying and blending tobaccos. He employed as a blender a man named Gordon. He also employed tobaaco smokers. One was a man named Cooper, who made cigarettes. Later a man named Smith, who had no former experience, was employed to mafce cigarettes. Witness himself did the blending. He had got his experience by wide experiment. A Dividend Paid. In December, 1932, he sent a powder to an analytical chemist for analysis. It 'was a powder that assisted in the burning of tobacco, a sample. of which he had got either from Germany or America. It contained nine parts nitrate; of potash. The analysis did not assist him, because he was already using the same base. One kept on experimenting all the time in tobacco manufacture. In the first year the company showed a loss, to November, 1932, of £1300. The next balance-sheet was to March 31, M>34, and showed a profit of £4535. The latter was for a period of Iβ months. He thought they paid a dividend of 15 per cent that year. The cash in the bank then was shown as ov§r £2000. Mr. Maher would know whether or not the dividend was paid from the cash in the bank. Rise In SalaryWitness did not remember whether or not there was difficulty eiter March in 1934 in paying for the leaf bought by the company. In April, 1934, at a meeting the salaries of witness and of Mr. Maher were raised from £500 to £1250 per annum. Witness was also «iven £66 13/4 director's fees, £12 a month travelling allowance and £250 expenses, which raised his income to £1710 13/4. The same applied to Mr. Maher. Witness said he had various formulas for treating tobacco which he had discovered, some for treating the leaf and othere for different brands of tobacco. There were eight or nine brands. He kept the formulas in his head. He had made various experiments? but had not made tobacco commercially before coming to Auckland. The cigarette makes did not stay on the market, but the tobacco brands did. Some of the cigarettes deteriorated with standing on the shelf. The question that the formulas used for blending were not the property of the company was raised in 1934 by Mr. Maher. Witness notified the other directors at the outset that he owned the formulas. It was arranged to lease the formulas from him for £3000. The company at that time had not the money, to pay, and he was prepared to accept shares. He didn't get any of that money. The company manufactured with two classes of tobacco, local and imported. The case ie proceeding.