AFFAIRS OF COAL COMPANY

Press, Volume LXXVIII, Issue 23811, 3 December 1942, Page 6

AFFAIRS OF COAL COMPANY

PUBLIC EXAMINATION

ASSIGNEE’S ALLEGATIONS

Mr Justice Northcroft was occupied in the Supreme Court yesterday with a matter under the Companies Act, 1933, concerning the Brighton Coal Mines, Ltd. (now in liquidation), wherein the public examination of Albert Adam Wilson, solicitor, of Westport (one of the directors of the company) was begun. The examination of this witness will be continued this morning. That of Andrew Hunter, another director, has yet to begin. Mr A. W. Brown appeared for the Official Assignee (Mr G. W. Brown), who had obtained an order from the Supreme Court on November 5 for these directors to be publicly examined as to the promotion or formation of the company, and as to their conduct and dealings as directors and officials of the company. Mr E. S. Bowie appeared for A, A. Wilson, and Mr H. M. S. Dawson for Andrew Hunter.

The proceedings were in accordance with the special procedure under the Companies Act when an order has been made by the Court for the winding up of a company. Such an order in regard to this company was obtained on November 15, 1941. Under this procedure the Official Assignee, who is the Official Liquidator, makes an investigation, and as a result, reports to the Court that, in his opinion, a fraud had been committed by a director or officer of the company in the promotion or formation of the company, or in relation to the company since its formation. A judge then considers the report, and, on the application of the Official Assignee, may order the public examination of a director against whom there are, in the Official Assignee's opinion, grounds for supposing that he has committed a fraud. Yesterday’s proceedings began with the examination of A. A. Wilson.

/ It was submitted by the Official Assignee that he was of opinion that the facts set out in paragraphs 1 to 19 of his report constituted fraud committed in relation to' the company since its formation, and that persons named in the schedule had been parties to such frauds to the extent as set out in the schedule. Assignee’s Schedule

The schedule alleged, in regard to both A. A. Wilson and Andrew Hunter, jointly: (a) Omission on the part o£ Wilson and Andrew Hunter to describe in the prospectus the area of Coal Prospecting Licence No. 9124, and misrepresentation in the prospectus as to the quantity of coal contained in the licence referred to: (b) misrepresentation in stating in the prospectus that Alexander Hunter was the promoter and the vendor of the company, whereas the actual promoters and vendors were A. A. Wilson, Andrew Hunter, and Otto J. Wilson; (c) misrepresentation in the prospectus regarding so-called valuable harbour rights on Seal Island; (d) omission from the prospectus of a report by Messrs H, R. Young and C. F. Schadick; (e) intent to deceive, incorporating the report of Peter Hunter in the prospectus, knowing that such report referred to application No. 12/30 and not to licence No. 9124; (f) a change over from the aerial tramway to the flume as a means of transportation of coal and in violation of the statements contained in the prospectus; (g) imposition of royalty at the rate of Is 6d per ton in respect of coal or goods shipped from or to Seal Island, and the payment of a road charge of £l2 per annum for the benefit of the promoters and in disregard of the company’s interests; (hj) serious omission on the part of A. A. Wilson and Andrew Hunter in failing to advise shareholders as to the restriction in output of 3500 tons of coal per annum as provided for in the coal licence; (i) improper conduct, particularly on the part of A. A. Wilson (and in a lesser degree on the part of Andrew Hunter), in selling vendors’ shares at a time when the whole of the company's contributing shares had not been disposed of and the company needed capital.

The schedule alleged the following in regard to A. A. Wilson separately: (j) fraudulent payment of £275 to his brother, Otto J. Wilson, allegedly in respect of brokerage on 50,000 contributing shares, and also the payment of other brokerage to O. J. Wilson or O. J. Wilson, Ltd., in respect of shares not procured by either O. J. Wilson or his company; (k) failure on the part of A. A. Wilson to obtain payment of allotment and call moneys in respect of shares subscribed for by P. C. Elliott on behalf of Otto J. Wilson; (1) inclusion by A. A. Wilson in the bill of costs of items which were not legal in nature and which were performed by A. A. Wilson as a promoter and also as a director of the company. The following was suggested by the schedule in regard to Andrew Hunter separately: (m) private dealings in coal taken from the company’s mine and also from the adjoining Crown land, and failure to account to the company for the proceeds of such sales which were retained by him; (n) fraudulent conduct of Andrew Hunter whilst mine superintendent and a director in applying for a tunnel licence in order to acquire the iron rails belonging to the company and lying at the old Charleston claims as abandoned property. The subsequent sale of such rails both before and after the order for winding up, and the application by him of the proceeds in a manner without regard to the wishes and instructions of the directors and the official liquidator. Examination of Witness A. A, Wilson said, in reply to Mr Brown, that he had been through the Official Assignee’s second report with his solicitors, and indicated the paragraphs which he admitted were correct. Mr Brown: The statement in paragraph 7 by Alexander Hunter in regard to disharmony between you is correct?—No, there was no disharmony between Hunter and myself at that time. Has there been any disharmony between yourself and Andrew Hunter?— Yes, since October, 1935. Asked who prepared the prospectus, witness replied: "I did.” Did you receive any assistance from any member of the syndicate, including Andrew Hunter?— The preparation and drafting of it was mine. Is it right to say that your wife received the proceeds of 28,000 shares?— Not all. But the bulk of them?— Yes. How much did she receive?— About £BOO. Is it a fact that at the. time you were selling those vendors' shares the company was in need of money?—We were satisfied at the time when the 120,000 shares were sold that we would have sufficient capital. X suggest to you that the company was then very much in need of money?— No. Was not the company early in 1935 steadily getting into difficulties? Yes or no?— Well, we were spending a little more freely than the money was coming in. We did not have much money in the bank, or any to spare. But was not the company still in need of money then, and the position getting steadily worse? The question is. was your action at good ‘one for the cojnpany? —We were moving along ? -at -a-good/pa/e,