SUCCESSFUL ACTION

Dominion, Volume 26, Issue 301, 15 September 1933, Page 12

SUCCESSFUL ACTION

Company Sued for Payment of Director’s Fee ERROR IN BALANCE-SHEET By Telegraph*—Press Association. Auckland, September 14. A sum of £lOOO voted at a shareholders’ annual meeting to the directors for their services, and the subsequent discovery that, instead of a profit of £5OOO, the company had made a. loss of £3200, . led to an unusual action in the Supreme Court to-day. Charles John MacCulloch,. company manager, who was one of the• nve directors, claimed £2OO from the Putaruru Pine and Pulp Co. (N Ltd., as "his share of the £lOOO which had never been paid. In a counter-claim, the company asked the court to rescind the resolution voting the directors £lOOO, on the ground that the balancesheet, showing a profit of £5OOO, was incorrect. After legal argument, Mr. Justice Herdman asl^d: "Can you have a more definite direction than that given by the shareholders to directors to do a certain thing? It was a definite order to pay, and if the directors did not pay, surely they could be sued.” In reply to his question, it was stated that the company was carrying on and doing reasonably well. Counsel for the company said .it would be a curious position if the company' had to pay the sum vojed to directors when it voted as a result of a balance-sheet that contained a false statement. The mover and seconder of the shareholders’ resolution gave evidence that they would not have moved it had they known there was a loss and not a profit. The present secretary pf the company said that the dividend declared at the first meeting had not been paid. The company's losses since the inception totalled £11,827. He believed that the shareholders did not know till recently that the £lOOO had not yet been paid to the directors, and that they were now moving to have the resolution cancelled. The mistake made by the directors was in showing as assets 00 per cent, of the amount represented by the sale of bonds, allowing only 10 per cent, for forfeitures. ,

Counsel for both parties made it clear that there was no suggestion of fraud against the directors. His Honour gave judgment for the plaintiff with costs.