THE MILLERS' ASSOCIATION.

Press, Volume LVIII, Issue 11152, 19 December 1901, Page 2

THE MILLERS' ASSOCIATION.

AN IMPORTANT CASE.

lii banco before Mr Jnstk» Deanision yesterday Mr Kippenterger moved for an order directing the transfer of tea shares in the Timaru Milling Company from Samuel Frederick Smithson. of lanaru, to Edwin Henry Lough, of Dunedia, to be registered and ih& regist-er to be rectiiied to this extent. It appeared from the notic* of motion, that the Company had refused to register tlie shares.

Mr Stringer appeared for the Milling Company, for the purpose of endeavoanng to establish the ligiit of refusal to register. •_ In addressing the Uoort, ba said that the objection to register was that the persons wio Trere soagfit to bs registered as transferees were merely the nominees and agents of what was called the New Zealand Flour Millers Co-operative Association. These shares ■which it was now sought to be regs- | tered ■were purchased during th* time of tfte litigation bettreea the Association and tbe Coinpanj", when tbe Association tried to force the Company into joining the Associa- ! tion, and the allegation \ras tbat the sharee ! had been purchased ■with the object of splitting the shares among the rarious transferees for the purpose of wrecking the Company or prejudicing it in its operations. The Timaru Milling Company had agreed to join the Association, but it was Leid that the Company had no power to take shares in the Association. The Association, finding that it could not compel the Timaru Milling Company to come in in that xray, br its various nominees purchased shares "■smb. the object of joining in directing tbe affairs of the ! Timaru Milling Company. ! His Honour: With -what object?

Mr Stringer: They could then influence toe business in such a way as to get rid of the competition of the Company, and ■which would Have the effect cf forcing them into the Association. The suggestion was that the shares were purchased pending the litigation, with the object that if the defence set up proved a sound defence they tvottld still have power to come in as shareholders and j direct the course of the Company's operations and prevent it coming into competition. One of the affidavits admitted the main facts that these shares, although in the names of a variety of persons, had been purchased on behalf ol the Flour Millers' Association, and it seemed somewhat difficult to imagine that an association of that sort could nominate a number of people to hold shares for it, and become registered as proprietors. - If the Flour Millers' Association had purchased the shares, it seemed to him that it ought to apply to have itself registered, and not the shares up among a great many people, so as to get the maximum voting power. Mr Kippeiiberger having replied, his Honour asked when were the shares purchased. Mr Stringer replied that it was after the issue of the -writ.

In delivering judgment his Honour said that the action was admittedly a singular and novel one. On September -3rd, 189 shares in the Ximaru Milling Company, Limited, were purchased by a broker, and transfers of these 189 shares were made out to 15 persons, and 12 of these persons took 10 shares each. Ten shares was the minimum number, giving a vote to a shareholder in the Milling Gempany. It was. perfectly clear that the shares were bought*by, and assigned to, persons who migat be "trusted to act in the interests of the members of the New Zealand Flour Millers' Co-operative Association. .That Association had been the subject of litigation in the Court of Appeal, and the judgment of the Court of Appeal -would be under review by the Privy Council. At the time of purchase of the shares a writ in an action by the Company against the Association had been issued for the purpose of having an agreement entered into between the company and the Association declared void, on the ground inter alia that the Association was not one the shares of which the Milling Company -was entitled to purchase. That was the view taken by the Court of Appeal. After the issue of the writ, and before the hearing, these shares were purchased. Ib was perfectly clear, he thought, looking at the number of shares and the cues of the case that thoee purchases were made not only as suggested by one of the affidavits for the purpose of having persons to represent at the meetings

of the company the advantages of joining the Association, but for the purpose of securing the rotes and of giving practical effect to those representations. When the transfers -were remitted to the directors of the Milling Company they refused to register them or to puWhe shares in the names of the transferees. It was against thai; decision that tire present proceedings were brought. There was admittedly no power to the directors of the company to refuse to register a transfer regular in form,' as these admittedly were. The directors herefore relied upon some equitable grounds for refusing thes® persons their legal rights. That ground was an allegation that the dlnfctors were convinced that the transfers -tvero made with the intention, if possible, of vreakcniug the company or prejudicing it in its litigation, or forcing it to join what thfcy had been advised was an illegal combiie or monopoly. This ■was denied by another affidavit,"which aliened that the" parties simply joined to enable them to attend the meetings and apply moral suasion?to the shareholders, and get them to do w&at they ought to consider to be in their o*n interests' Had he in the case, to determine the abstract proposition as to -whether it could be shown thai the object of a purchaser of shares was to obtain what was called a "controlling interest" , in the company, and then to •wreck, it, -which -was a practice not unknown in some parts of the world, he might require time to consider bis judgment. He had a strong opinion in the matter, but looking at the importance of the point he should not have decided it ofi. hand. He could only say that he would have to consider not only the interests of the purchaser, but tie interests of the seller, who had a Tight to sell independent altogether of Jhe motives of the purchaser, and also the fact that the cases show that any action of a majority obviously in the interests of the majority as opposed to the general interests of the Company and the minority, could be restrained by the Courts on proper application. It -was sufficient for him in the present case to say that nothing had been shown to justify hdm in holding that an illicit or improper object had been sHown in that.transaction, -whatever might have been, the case before the determination of the litigation as to obtaining a voting power purpose of cartying a resolution that the" Milling Company should join the Association. That litigation had now determined, subject to the Privy Council's appeal, in favour of the Milling Company. It was impossible, therefore, for those votes to operate in tihe suggested direction, even ifi that direction were one not in the tie shareholders of the Company. He had no ground for saying it would not have been in the interests of the shareholders generally to have joined the Association. At the argument before the Court of Appeal it -was not so. much the interests of the idling Company" as the interests of the public that wtus dwelt upon. The only suggestions- -was that the Milling Company -would, by standing ont, be able to get the benefit of the Association's proceedings -without being liable to any of the obligations of the Association.' He "was not, of course, called upon to decide any of those cases. Ail he coudd say -was that, broadly speaking, apart from the abstract question, there wae nothing whatever to show in the transaction that the object was not legitimate enough, and one in the interests of tihe Company. Of course, that being so, apart from the abstract question, the transferees had a right to have their shares registered. They Jiad bought and paid for their shares, and they conid not remain in suspense. On the other hand, the sellers had a right to insist that, having parted with their shares, and received the purchase money, they should be relieved from any .possible obligation in connection with the shares. On that ground alone, •witihout deciding the important abstract question, he thought that the motion should be aEowed. There was also another motion for an order directing that a> transfer of shares from Smithson to John Cowie trow, be registered, and this was taken with the first. Hie Honour allowed £10 10s costs and disbursements on the two 'motions.