DIRECTORS’ FEES

Evening Star, Issue 21517, 15 September 1933, Page 14

DIRECTORS’ FEES

SUPREME COURT ACTION [Per United Press Association.] AUCKLAND, September 14. The sum of £I,OOO voted at the shareholders' animal meeting to the directors for their services, and the subsequent discovery that instead of a profit of £5,000 the company had made a loss of £3,200, led to an unusual action in the Supreme Court to-day. Charles John AlacCulldcli, company manager, who was one of the five directors, claimed £2OO from the Putaruru Pine and Palp Company (New Zealand) Ltd., as his share of the £I,OOO which had never been paid. In a counterclaim the company asked the court to rescind the resolution voting the directors £I,OOO on the ground that the bal-ance-sheet showing a profit of £5,000 was incorrect. After hearing legal argument Mr Justice Herdman asked: “ Can you have a more definite direction than that given by the shareholders to tho directors to do a certain thing? It was a definite order to pay, and if the directors did not pay surely they could bo sued.”

In reply to Ills question it was stated that the company was carrying on and was doing reasonably well. Counsel for the company said it would be a curious position if the company had to pay the sum voted to the directors when it was voted as a result of a balancesheet that contained a false statement. The mover and the seconder of the shareholders’ resolution stated in evidence that they would not have moved it had they 'known there was a loss and not a profit. The present secretary of the company said that the dividend declared at the first meeting had not been paid. The company’s losses since its inception totalled £11,827. He believed the shareholders, did not know till recently that the £I,OOO had not 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 90 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.