TOBACCO COMPANIES

Greymouth Evening Star, 20 August 1940, Page 2

TOBACCO COMPANIES

SUPREME COURT PROCEEDINGS

DIRECTORS’ EXAMINATION

[PER PRESS ASSOCIATION.]

AUCKLAND, August 19. A public examination in the SupreiTie Court of two directors and officers of two tobacco companies, now in liquidation, Loyal, Ltd., and the Consolidated Tobacco Company, Ltd., was commenced before Mr. Justice Fair. The examination was ordered by Mr. Justice Blair last March on account of a report by the Official Assignee, as liquidator of the companies. The examination was conducted on behalf of the liquidator by Mr. V. R. Meredith. The directors concerned were Edward Valentine Owen, of Howick, and. Michael Maher, of Wanganui, for whom Mr. A. H. Johnstone, K.C., and Mr. Mackay appeared. In terms of Mr. Justice Blair’s order the examination was to be directed to the promotion and formation of the companies, and the conduct of their business, and to the conduct of the examinees in their dealings as directors or officers of the companies. Edward Valentine Owen, examined ffiy Mr. Meredith, said he promoted (Loyal, Ltd., with Michael Maher. It was to be a manufacturing, not a growing company. Maher was the accountant, and had no experience of tobacco. Mr.’Meredith: What capital of your own had you when you started? Witness: I should say £2OO or £3OO. Witness said Maher and he each took up 100 shares as directors. About £7OOO in share money had been subscribed for this venture. Mr. Meredith produced an agreement dated February 12, 1931. be ” tween witness and Loyal, Ltd. In it he was described as managing director, and Maher as secretary. There were three other directors, one of whom was a retail tobacconist and another had knowledge of the production of cigarettes from tobacco, said the witness. Witness was the only one who had any knowledge of tobacco growing, and he had no ex- < perience of merchanting it. By this agreement he was to get £lO weekly, together with bonuses. He got a sample of powder, either from Ger- . manv or America, to use m tobacco • manufacture, and a chemist to whom he submitted it reported that it was nine parts potash and one part gum arable The company, witness said, made a loss in its first year, but accoiding to the next balance-sheet at March 31, 1934, there was a net profit of £4,530. He thought they paid a dividend of la ner cent. The minutes of the meeting 'of April 5, 1934, witness agreed, showed his salary was put up from £5OO to £1,250, and Maher’s also from £5OO to £1,250. In addition, he had director’s fees, £66, travelling allowance £l2 a month, and also an expense allowance of £250, making a total of £1,710. Maher got about the same. The formulas he was using he nad himself discovered. There was an arrangement to lease his formulas io the company for £3oo ,°h p W /P o e o S A said he did not draw any of the £3OOO that was offered him for the lease of his formulas. The customs people found that he was paying sales tax on a greater amount of tobacco than that on which he was paying duty. T y issued a writ alleging that 33,7281 b of manufactured tobacco had been iemovedffiy Loyal, Ltd., without paying duty, and claiming £6,815 short paid duty, and also penalties of £40,000 for three times the value of. the goods. Mr. Meredith: That was which you showed a profit of £4,535. —That is correct. If you had paid the duty the customs claimed, you would have shown a loss of over £2OOO? — Yes - . , You agreed ’to pay something just under £Booo?—Yes. At a meeting of directors on September 25, 1934, it was agreed, witness said, to acquire the New Zealand rights of his tobacco blends for £lO - 000. What he wanted was £IO,OUU worth of shares. Mr Meredith: Where were you going to get £BOOO to pay the customs'— From the sale of blends and formulas. Had the company got ttyat sum. Witness said that at a meeting on February 25, 1935, he declined to complete the sale of the formulas for £lO 000. At the same meeting a leso lution was passed to raise the capita of Loyal, Ltd., from £30,000 to £lOO,OOO. That was on account of an amalgamation that was about to ta Mr P Meredith: In March. 1935, you asked £20,000 for your formulas, ana the.board agreed to give it to you.

rh Witness said he got about £ 15,000 in fairly big cheques,. and. ient abom £6OOO to the Consolidated Company. Maher received about £2 700 of it. Witness retained about £3OOO for himself. When Consolidated Tobacco went into liquidation, his formulas and blends came into the possession of the liquidator, who sold them for £125. The hearing was adjourned till tomorrow.

alleged payments.

FIRM’S COMMISSION.

AUCKLAND, August 20. The public examination of officials respecting the affairs of Loyal Ltd. and Consolidated Tobacco Co. Ltd., m liquidation, was resumed m the Supreme Court to-day. Edward Valentine Owen, further examined, gave details of payments made to him in respect to the purchase by the company of his blends and formula. In June, 1934, he received £3OOO, and a month later £lO,OOO, through Mr Gibson, of the New Zealand Investment Trust, who held power of attorney, and took 10,000 shares in the company. For several months, he was in constant touch with Gibson, while the Loyal Ltd. Company was endeavouring to raise capital to £lOO,OOO. Gibson suggested this and favoured a general amalgamation of the various tobacco companies. Mr Berkeley was not solicitor for Loyal Ltd., but acted as negotiator. He paid Berkeley over £2OOO for his services, and paid Maher also over £2OOO. At one stage, he quarrelled with Gibson, and broke off negotiations with him, but later they got together again, and he got Gibson’s demands on Consolidated Tobacco reduced. The amalgamation with Consolidated Tobacco took place in June, 1935. In the agreement, Gibson and Co. got £18,500 commission, half from each company, Consolidated Tobacco taking over the liability of both companies. Loyal Ltd. had to raise capital to £lO,OOO. A dividend had been paid by Loyal Ltd. at the end of the year in April,

1935, but h'ould not remember if it was paid borrowed money. A sum of £5( was borrowed from the New Zeala Investment Trust. In a letten to e shareholders advocating amalg ation, witness did not mention tncost in commission. Witness |s examined as to the items in Left Ltd. prospectus to raise £70,000. did not agree that £BDOO was.ortpaid in duty, and the prospectus d not show that such amount wa hortpaid in the previous year’s ope ion. The £70,000 was obtained fn the public. When E xamination of this witness ended ie Court adjourned until to-morrow'hen his re-examination commence; ____________