COMPANY OFFICIALS BARRED: COURT FINDS FRAUD

Gisborne Herald, Volume LXXV, Issue 22757, 1 October 1948, Page 6

COMPANY OFFICIALS BARRED: COURT FINDS FRAUD

(P.A.) CHRISTCHURCH, Sept- 30. “The affairs of the company began In folly and ended in fraud,” said Mr. Justice Fleming in the Supreme Court yesterday when delivering judgment on an application by the official assignee under section 216 of the Companies’ Act for orders that William Samuel Newburgh, company director, and Peter Belford Watts, public accountant, should not, without leave of the court, be directors in any way, whether directly or indirectly, be concerned in or take part in the management of a company for such a period not exceeding five years from July 30, 1947, as the court might order.” “I order that neither shall, without leave of court, be a director of a company or in any way take part in the management of a company for four years in the case of Newburgh and three years in the case of Watts,” said His Honour.

The inquiry into the conduct of Newburgh and Watts as directors of the Southern Cross Construction Company, Limited (in liquidation), opened in the Supreme Court on August 17 and occupied four days. The official liquidator, Mr. G. W. Brown, sougnt tnp orders now. granted by the court on the ground that, in his opinion, a fraud had been committed by Newburgh and Watts in relation to the Southern Cross Construction Company since its formation. Judge’s Finding

“1 find both defendants guilty of both cnarges made against them by me official liquidator and that both, as directors, are guilty of fraud in connection witn the company since its formation within the meaning of the Companies Act,” said His Honour. The specific allegations of fraud made were that the defendants, as directors, improperly manipulated the moneys of tne company to give preferential treatment to Newburgh in the payment of an ordinary unsecured aeDt to the prejudice of other unsecured creditors and they incurred further debts at a time when the company was unable to pay its debts.

Referring to the first allegation, the judgment said that the defendants in June 1945 could not have had any real belief that enough would be salvaged to pay all the debts in full. The defendants claimed that they did not have a formal winding up and appoint a liquidator because they thougnt it to be to the company’s advantage to do it themselves. if so they should have followed the procedure required by law and put all the unsecured creditors on the same footing. They had no intention of doing so. “During the period from June 23, 1945 to tne end of the year, the company went on incurring debts when it was unable to pay the existing debts,” continued the judgment. "This was a breach of the law. Was it alsp fraud within the meaning of section 216? It is impossible to hold otherwise.”