PROMOTION OF COMPANY

Press, Volume LXXI, Issue 21423, 15 March 1935, Page 9

PROMOTION OF COMPANY

CORRUPT PRACTICES ALLEGED y v s CLAIM FOR £33,820 i i 3 LIQUIDATORS TAKE ACTION | AGAINST DIRECTOR ' U'KtWS ASSOCIATION TCI.EOn A.M.) : AUCKLAND, March 14. Allegations of corrupt practices en a large scale in the promotion of the Premier Tobacco Company (New Zealand), Ltd., were made in proceedings brought before Mr Justice Hcrdman in the Supreme Ccurt. Chambers, Worth, and Chambers, public accountants (Mr Mackay), as liquidators for the Premier Tobacco Company (New Zealand), Limited, in liquidation, took action by way of misfeasance proceedings against William Samuel Russell, managing director of the Premier Tobacco Company, Limited (Mr R. N. Moody). The plaintiffs claimed a total of £33,820, made up of 15,000 £1 shares received by the defendant, 15,000 shares which ho allowed to go to the Ecronnc Syndicate, though it had never carried out its part of the contract, and £3820 cash received by the defendant. Mr Mackay said the question was whether Russell had been guilty of misfeasance within the meaning of Section 254 of the Companies Act, 1908. In 1930 Russell was managing director of Tobacco Growers (New Zealand), Limited, a concern having a nominal capital of £25,000, which went into liquidation on January 14, 1932. In September, 1930, this company received from R. G. Staveley Dale, managing director of the Endoto Syndicate in London, proposals for promoting a tobacco manufacturing company in New Zealand with a capital of £250,000, of which £IOO,OOO was to be issued. There was to be a promotion fee of £IO,OOO and 30,000 pound shares in the new company, this to be divided equally between Russell and the Endoto Syndicate. Russell registered the Premier Tobacco Company in March, 1931, and about that time was instructed to substitute the name "Eeronne" for Endoto. Company's Prospectus The Premier Tobacco Company, which was to be promoted by the Eeronne Syndicate, issued a prospectus on which the public subscribed for shares, continued counsel. That prospectus was a highly-coloured document which set out that the directors in England would be the Hon. Richard Cecil Joynson-Hicks (now Lord •Brentford), Mr R, G. Staveley Dale, F.R.G.S., and Mr John Remer, M.P. The New Zealand directors were one Russell, a brother of his, now deMr Thomas suggested that the evidence would have to show that Crowhen actually died from injuries received in the accident. The inquest was adjourned until this morning.

ceased, and M. M. Millikin. The prospectus claimed that the Ecronne Syndicate was a strong group with connexions in Paris, Berlin, Athens. Cyprus, Alexandria, and Addis Ababa. Its confidence was said to have been ;-ho\vn by the financing in London of more than three times the amount of the capital that New Zealand was asked to subscribe. His Honor: How much did the public subscribe? Mr Mackay: The public in New Zealand subscribed £23,000, and they lest every penny of it. There was not a penny piece subscribed in England. J Secret Commission Alleged Russell's cable message agreeing to the proposal that he should receive half the fee for promoting the Premier Company formed the basis of a charge against him of receiving a secret commission, said Mr Mackay. The cable message was followed by a letter to Alexander Ronne, of whom it might be said he was equally culpable with Russell in these proceedings. Ronne was a bankrupt carrying on in London the business of a free lance tobacco agent. An agreement dated March 12, 1931, provided that the promoting syndicate should receive from the Premier Tobacco Company £IO,OOO in cash and 30,000 paid-up shares for its services. The syndicate did not pay a penny piece for any of the purposes stipulated, neither did it raise any capital. The two main charges agaihst Russell, said Mr Mackay, were that he received a secret commission and that, acting as a director of the company, he sanctioned the huge payment of £IO.OOO and 30,000 £1 shares to a nebulous concern that had never in any way met its obligations. Russell had received £3BOO in cash. Members of Syndicate Mr Mackay said he could not say exactly who were the members of the Eeronne Syndicate. Its documents were signed by different names, and the deduction he drew was that it was a nebulous anH fraudulent concern. He referred to the directors of the Eeronne Syndicate as including "two undischarged bankrupts and a penniless lord." His Honour: Lord Brentford is not penniless, is he? Mr Mackay: Perhaps not exactly penniless; but I will place facts before the court to show that he is a person of no standing in the business community. His Honour: He is a son of the late Sir William Joynson-Hicks? Mr Mackay: That is so. Promotion Agreement Council added that the promotion agreement was a bet of £40,000 to nothing. Twelve months after Russell had been informed by Dale that the position for raising money in London was well-nigh hopeless, he went down to defraud unfortunate tobacco growers in Nelson with a published statement, in May, 1932, that "capital to the extent of £150,000 is sub- | scribed, guaranteed, or underwritten in London to the satisfaction of the New Zealand directors." In September, 1931, Russell advertised in a financial journal that of the company's 250,000 shares 170,000 had been issued in London. Later Russell persuaded the shareholders that if he went to London he could do something to pull the company out of the mire. That trip cost the shareholders £9OO, and while .he was in London the company went into liquidation. Company's Assets Dudley Norton Chambers gave evidence that when the Premier Company went into liquidation the only assets were office furniture worth a few pounds, tobacco in bond which had gone mouldy, uncalled capital of approximately £BOOO, and a building at Nelson on which the company had spent £3OOO. That building went back to the Nelson Borough Council without compensation and was utterly valueless as an asset. The liabilities 1 were two debentures of £IOO each in : favour of Mrs Russell, creditors of :

• approximately £3300, and a liability ■ to the Crown for a lease at Newmar- ■ ket, which was settled by a payment to the Crown of £450. ; Very little of the share capital would be collected, said the witness. ; as much of it was held by married women and infants. The company had at present £2200 owing to creditors, £I4OO in the bank, and there were £3OOO worth of calls, of which, perhaps, £2OOO would be collected. Probably the company would eventually pay the creditors 20s in the pound. Between £19,000 and £20,000 of the shareholders' capital would be wholly lost. From the company itself Russell had received £2551. and in addition the company had paid accounts amounting to £1249, which it was considered Russell should have paid. Defendant's Evidence The defendant, William Samuel Russell, was submitted by counsel for cross-examination. He said that at one time the Londond directors had £IOO,OOO firmly underwritten. His Honor: Why did you continue to take money from the shareholders after you knew that the money could not be got in London? Witness: The prospectus was changed. They endeavoured to get the money in London eventually. The witness said that when he went to England he represented the Harbour Bridge Company, but he did not receive any payment from it. He said he knew Ronne had lost £40,000 in the Hatry crash. Ronne was a Russian ■ baron. The hearing of legal argument was adjourned.