Free Questioning Of Standard Directors

Press, Volume C, Issue 29508, 9 May 1961, Page 16

Free Questioning Of Standard Directors

(New Zealand Press Association)

DUNEDIN, May 8.

Although questions came freely the tempo of the extraordinary meeting of shareholders of the Standard Insurance Company Ltd., seldom rose to any great excitement. The meeting was called to discuss the directors’ report on the state of affairs of the company. A winding-up petition lodged by the directors in their capacity as shareholders will be considered in the Supreme Court on May 24. The •'chairman of directors, Mr E. C. Hazlett, presided over the meeting. Associated with him were the other members of the board, Messrs C. J. Wood, W. F. Edmond, T. K. S. Sidey, H. T. Speight and A. H. Allen. ,

All directors, with the exception of Mr Allen, spoke during the meeting Officials of the company called on by the chairman at different stages to speak were Messrs W. H. Masters (auditor), G. B. McKenzie (solicitor) and J. D. Mercier (assistant general manager).

The meeting opened with a resolution from the chairman concerning the admission of the press. He said that as far as the directors were concerned there was no reason why the press should not be present. There was no discussion, and by a substantial majority it was agreed by the shareholders that the press should be admitted. Mr Hazlett then made reference to the voting power of the Perpetual Trustees Company, Ltd., of which he is also chairman, at the meeting and called upon the general manager of the trust company to give an explanation on this matter. In his statement the general manager (Mr T. F. Basire) said the chairman of this company, Mr Hazlett, had not been present at meetings of directors when matters pertaining to Standard Insurance had come before the board. For many years the Perpetual company had not used proxies available to it from estates or trusts it administered except when it had been asked to do so by beneficiaries. In the case of this meeting, the company, wherever practicable, drew the attention of the beneficiaries to the voting position. Some beneficiaries had nominated men who had no connexion with the company. Others had nominated officer? of the company and some had nominated Mr Hazlett personally. Directors’ Report Mr Hazlett then moved that the directors’ report, with the exception of the sentence concerning the appointment of the liquidator be adopted, and this was seconded by Mr Wood. Before there was any discussion, Mr McKenzie explained to shareholders the principal matters before the meeting. He said there were two main things which the meeting had to do. First, the meeting would be asked to consider the report of the directors. Second, and most important, there was the question of the winding up of the company.

Mr McKenzie said the company was quite insolvent, and unable to pay its debts both in this country and in Australia. Creditors in Australia had already moved rapidly in taking action. The petition to the Court for the company’s winding up had put something of a brake upon these creditors. But at this stage assets were still vulnerable and so a provisional liquidator was appointed to "hold the fort,” he said. He was able to resist any of the efforts by creditors. These moves had been made by the directors for the protection of shareholders. “Hostile to Company”

Mr McKenzie commented that the company assets were well scattered and many of the creditors in Australia were hostile to the company. There was a large number of valid claims against the company, and had the directors not taken the steps which they did the creditors could have “taken over the reins.”

When the petition was filed in New Zealand a similar petition was also filed in New South Wales, but it had no status without the consent of shareholders.

Six large creditors were awaiting the outcome of this petition. If the shareholders did not act then the company could be prostrate at the feet of creditors. There was absolute necessity for the com-

pany to proceed with the winding up. “It is obvious we are in a hopeless position.’” Mr Hazlett said. “The value of the assets of this company would have been considerably reduced had we not taken the course we did.” Liquidators

Dr. R. C. Connell, of Auckland, then moved an amendment that three liquidators be appointed to wind up the affairs of the company. Mr Tilly had a high reputation, but shareholders in Auckland were not happy with the appointment of a single liquidator. The three names suggested by Dr. Connell, were Messrs H. W. Fisher, of Auckland. W. N. Satterthwaite, of Dunedin, and H. S. J. Tilly, of Dunedin. On the question of a shareholder being a liquidator, Dr. Connell submitted that the rule was subject to exceptions and this was one on which the judge should decide. Another director. Mr Edmond, considered that the first item to consider was the report of the directors. If Dr. Connell’s amendment W’as put and carried then the meeting would be over. Actjng on this, the chairman decided to defer putting Dr. Connell’s amendment until later in the meeting.

A Dunedin shareholder, Mr E. A. Bolwell, said it was imperative that shareholders should have knowledge of the assets and liabilities of the company. He asked why the Standard company had entered into the field of performance and guarantee bonds.

Mr Hazlett had said that this was common practice for insurance companies, but this statement had been denied by the chairman of the Underwriters’ Association of New Zealand, Mr Bolwell said.

Mr Bolwell, referring to the H. and S. Credit Group said the “Sydney Morning Herald” had warned investors of this group three years ago. Surely the Standard company should have been wary of this group and not issued guaranteed bonds. Statement Criticised Mr Bolwell criticised a statement that had been issued in March concerning the non-payment of a dividend and the fact that premium income was at a record level. When the company received the first unauthorised claim the company should have repudiated and, if necessary, fought it to the Privy Council, Even if the case was not won it would have stalled off what had happened. “The directors killed the Standard Insurance Company. They now throw the body at our feet and ask us to dispose of it,” he said. Two questions were then asked by Mr Bolwell. (1) Did the directors before November, 1960, receive an approach by another insurance company regarding the take-over of the Standard? (2) Could the liquidator repudiate any further claims on the company? “There is going to be considerable hardship on the shareholders to meet calls,” he said. Mr Bolwell said he had every faith in the integrity of the directors; but he thought they had made a poor job of handling the affairs of the company when in trouble. H. and S. Reputation

In reply to questions by an Auckland shareholder, Mr Gerald Ryan, Mr Wood said the directors had no previous knowledge of the reputation of the H. and S. Group. The Standard Company was approached for a merger; but Standard did not accept. “We thought we were getting along very nicely.” Regarding the interim dividend announcement on March 9, he said that at that time the directors were negotiating for the sale of the company. “When you have something to sell you don’t write it down.”

Mr Edmond, replying to suggestions that Sydney directors should have advised the board of the reputation of the H. and S. Group, said that they were not local directors in the ordinary sense but in reality were insurance agents. Asked if they had given advice. Mr Edmond said that this had not been to the board but to the local manager. Referring to the suggestion that the issue of guarantee bonds was not normal business for insurance companies, Mr Edmond said that this might be the position in New Zealand. The board, however, had evidence that the type of business was carried out by insurance companies in Australia. If the transactions with the bonds had been put through the books, the premiums would have been charged to the H. and S. Group and there would have presumably been a reissue, but the transactions had been suppressed from the records. Replying to further ques-

tions, Mr Edmond said the full facts about the transactions’between the company’s Sydney office and the H. and S. Group were in the hands of the C. 1.8. in Sydney and it was for them to act as they thought fit. H. and S. Value Called upon by Mr Hazlett, the company auditor, Mr W. H. Masters, said it was impossible to assess the value of the H. and S. “empire,” whijh consisted of 27 to 30 companies. Even with the extensive investigations of Mr Tilly in Australia it was not possible to get an assessment of the value of the assets. They had properties in Sydney, and near Surfers’ Paradise, a cattle ranch in the Northern Territory. and other holdings in Brisbane. America and Hong Kong. It would be impossible to forecast the recoveries which this “empire” would realise on liquidation. If the H. and S. group was solvent, the Standard Company would recover substantial amounts, but at present nobody could indicate what that recovery would be. he said. There was a substantial equity in some of the assets, and Darts might bring substantial recoveries. The amount guaranteed to the H. and S. group was about £2.5 million.

“I speak from memory and stand to be corrected within a few hundred thousand pounds.” Mr Masters said, amid laughter. Another director. Mr Speight, then outlined the present position of the Standard Company with the National Insurance Company. He said that had Standard not been able to enter into an agreement with the National Company, then the Standard Company would have had nothing to sell. The full agreement between the National and the Standard Company was tabled and made available for inspection by shareholders.

At this stage Mr R. C. Burgess, of Dunedin, moved an amendment that the directors’ report be received. To receive the report would be fair and it would not commit the shareholders This was seconded by Mr R. H. Henderson. “Chance of Minor Loss” Mr Sidey said that at first there seemed a reasonable chance of only a minor loss to the company, and that the situation could be handled. The directors could not say there was a limit to the unauthorised bonds that had been issued. Because of this other concerns could not afford to risk accepting the Standard liability. “We thought at one stage we had assistance from the Government. When I got to Australia I found it worse than I had expected. I was disappointed in the insurance industry as an industry. Not one company would indemnify the risk if the Reserve Bank had guaranteed policies. The Commonwealth Bank of Australia also could do nothing to help.” Mr Hazlett said the company still owned buildings but the new Sydney building had been sold becauseof a large sum which the company owed the Commonwealth Trading Bank in Australia.

The statement by the Dunedin Stock Exchange on the passing of the interim dividend had repercussions in Sydney. A broker telephoned from Sydney and said that he .intended to cancel policies for £7m to £Bm. “I know it was unfortunate that we didn’t tell the shareholders, because the business would have gone overnight,” he said. Mr R. C. Burgess’s amendment that the report be received was then put to the meeting. It was carried. The resolution that the company be wound up by the Court by the reason of the fact that the company was unable to pay its debts was then carried unanimously and without discussion.