COMPANY LAW.

Press, Volume LXII, Issue 18672, 22 April 1926, Page 11

COMPANY LAW.

TRANSFERENCE OF PROFITS A SHAREHOLDER'S ACTION. (rBESS ASSOCIATION TrLIGIAV.) HAMILTON, April 21. An interlocutory judgment was delivered by Mr Justice Ostler at) Hamilton to-day in the case in which "Robert Elliott Farrow, farmer, of "Waitoa, sought an order of the Court giving him the right to inspect the auditor's report in the New Zealand Co-opera-tive Dairy Co.. Ltd., which was attached to the balance-sheet of .May 3lst, 192.3. Farrow also nought to inspect various reports and minute bocsks now iu the possession of the company, and the books of the company's Glenafton collieries. Plaintiff also asked for an injunction prohibiting the company from transferring sums from one group of the company to'the credit of another group. His Honour said that plaintiff claimed that when he bacame a member of the company, it was represented to him. by the directors that each group of shares into which the company was divided, such as butter, cheese, dried milk, casein, coal, and timber, was independent of other groups, and the profits earned by each group divided only amongst the shareholders of that group. Ho alleged that the directors wrongfully transferred profits belonging to the butter, coal, and timber groups to make up losses suffered in the dried milk and casein groups, and claimed an injunction to restrain the defendant company from doing this. The summonses in question were concerned with particulars of the amounts transferred from ono group to another. The ascertainment of these particulars would, said his Honour, be of no benefit to the plaintiff unless he could show that what the company had done was illegal, j This seemed to his Honour to bo a grave question of law, depending principally upon the construction of the articles of the Association. _lf this question of law were answered in plaintiff's favour, then no doubt he would j be entitled to obtain particulars of the amounts transferred. If answered against him, then it would become unnecessary to make any order upon either of the sumonses.

In his Honour's opinion, it was in the best interests of both parties, especially of the plaintiff, thai this question of law should first be disposed of. A decision on this question would dispose of the action one way or the other in a cheaper and more expeditious manner than in a formal trial. The / Court had power at any time to order in such a case that a question of law should be argued before the trial of the action. His Honour said he proposed to exercise that power, and to make an oider accordingly for the argumentof this question of law at the next sitting of the Court at Hamilton. The question of law that would be argued was: Assuming that the representations alleged were made, had the defendant company their right in law to transfer profits made from butter, coal, and timber, to make up losses on dried milk and casein?