MEREMERE DAIRY FAC-TORY CASE.

Hawera & Normanby Star, Volume LXV, Issue LXV, 16 June 1913, Page 7

MEREMERE DAIRY FACTORY CASE.

JUDGMENT FOR DEFENDANT COMPANY.

The following is Mr Kenrick's written judgment in the case P. Saxton (Mr Smart) v. the Meremere Dairy Co. (Mr ODea), which was given on Saturday. The plaintiff claims the defendant company is' indebted to him in the sum of £4 15s 6d. The claim sets out that the plaintiff and others are shareholders in and suppliers of milk to the defendant company during the season 1912-13. That on the 20th of each month the defendant paid for the milk supplied by its suppliers during the previous morith,' a portion of the price per lb. of butfcer-fat contained in the milk, arrived at in the following manner, viz., the total estimated sale price of the produce manufactured each month, divided by the total lbs. of butter-fat contained in the milk sold by the suppliers to the Company, less the estimated proportion of the total oxpenses of production for the month's supply, and less a proportionate amount of the estimated dividend likely to be by the Company on its paidup capital at the end of the financial year, the Company 'retaining in hand a proportion- of the price so arrived at to meet contingent losses. The plaintiff says he and other suppliers supplied milk on this basis of sale,. and were regularly paid until the 20th December. 1912, on "which date plaintiff claims he was entitled to receive in part-payment for milk sold in November the sum of ll*d per lb. of butter-fat supplied by him. He further says the Company paid him and other shareholders who were supplying to the Pokomoko branch factory at the rate of lid per lb. only, whereas they paid to the shareholders supplying the Ohangai branch-factory at the rate of ll£d per lb. Wherefore plaintiff claims the additional hd per lb., amounting to £4 15s;6d. "Mr ODea, for- the defendant company, asks that plaintiff be nonsuited upon the following grounds, viz.: (1) The plaintiff cannot sue until the net profits for the year have been ascertained, which can-, not be declared until July or August: (2). that the Court cannot interfere with the distribution of profits by the . directors or the interna] management of the Company in the absence of fraud or bad faith on the part of the directors; (3) that the form of the action is bad, for a shareholder without the consent of the majority of the shareholders cannot sue his company except in two '. instances, namely—where there is fraud or had faith, or where there is a necessity to waive the rule in order that justice may be done. Mr Smart, for the plaintiff, contends that he is not suing as a shareholder, but under an implied contract as a supplier? lam of opinion that the plaintiff, to successfully sue as an outsider or a non-shareholder, must prove a contract with the Company to pay him in the manner he claims. To do this, plaintiff puts in evidence the Company's articles and memorandum of association, particularly Article 11 and the amendment thereto, and evidence of the practice .of the Company to pay a monthly cheque. Notwithstanding the assertion that he is suing not as a, shareholder, he puts in the articles to prove the contract, and'his statement of claim sets out he is a shareholder. As a shareholder he is bound by the articles as if he had signed them, but the articles are not a contract with a non-shareholder. Plaintiff has failed to prove any contract on which he can sue the Company as a non-shareholder. As a shareholder he must be non-suited, for "he cannot sue for the dividend or profits until they have been declared, which has not been yet done. Nor can the Court interfere with the management of the Company's internal affairs by the directors, except in .case of fraud or bad faith, which has not been alleged in the claim (see Cowlishaw v. Christchurch Press Co., 8 Gaz. L.R. 844, and other cases). If the plaintiff claims that the payment to one lot of shareholders supplying to one branch factory a less sum than to the other shareholders supplying to another branch is bad faith on the part of the directors, he should allege same in his claim before j he can sue as a shareholder (see Reid [v. Levin Co-opeartive Dairy Co._ 10 Gaz. L.R. 375). The evidence proves the plaintiff has taken no steps to get the "consent of the majority of the Company to these proceedings (see 5 Halsbury Laws of England 291). For the above reasons the plaintiff is non-suited with costs, £4 16s.