BIG CLAIM

Manawatu Standard, Volume LV, Issue 91, 15 March 1935, Page 2

BIG CLAIM

ACTION BY LIQUIDATOR. CASE AT AUCKLAND. Per Press Association. AUCKLAND, March 14. An action brought by the liquidator of the Premier Tobacco Company against the company seeking the recovery of £33,820 was begun to-day before Mr Justice Herdman. The claim is made up of £15,000 of shares given to one W. S. Russell, £3820 cash from the company, and £15,000 which went to a London syndicate under a contract which the liquidator claims the syndicate was not entitled to. Counsel said the Premier Tobacco Company was incorporated on March 24, 1931, an<l its highly coloured prospectus stated that it wa.s being formed in conjunction with a strong London financial group with Continental connections. The prospectus asserted that, amongst others connected with the company’s flotation, were Hon. Richard Joynson-Hicks, Mr R. G. Stavely Dale, and Mr John Reiner, M.P. The prospectus said the .investing public would realise the importance of a strong London group’s intention to establish a New Zealand industry on the Empire markets. Counsel said the New Zealand directors were Mr W. S. llussell, his brother. who is now dead, and a Dir Dlilliken. His Honour: How much did the New Zealand public subscribe? Counsel: £23,000, and lost every penny of it. Not one penny piece had been subscribed in England. A cable connected with the proposal to form the Premier Tobacco Company had boen received, counsel said, bv Tobacco Growers (N.Z.), Ltd., of which Russell was managing-director, but for reasons best known to himself lie choso to deal with the matter himself. Tobacco Growers, Ltd., was now in liquidation and had left its shareholders lamenting. Russell had admitted sending a cable which formed the basis of a secret commission in which he received £SOOO in cash and 15.000 shares.

In reply to a question by the Judge, counsel said he had been engaged in the litigation connected with the Premier Tobacco Company for three years and had not got to the bottom of things yet. Counsel said that Russell in an affidavit had said he had reasonable grounds to believe they would get the capital in. Counsel read a letter written by Mr Dale in London in June, 1931, in which he said the position was almost hopeless. Russell, however, went on advertising that £170,000 was assured, or guaranteed, or underwritten in England. Since the proceedings had been launched, Russell had circularised the shareholders putting his views and asking their help to stop the proceedings. This, said counsel, was clearly contempt of Court. SECRET CODIDIISSION. Russell’s cable agreeing to a proposal that he should receive half tlie fee for promoting the Premier Company formed the basis of the charge against him of receiving a secret commission, said Dir McKay. The cable was followed by a letter to Alexander Ronne, of whom it might be said he was equally culpable with Russell in these proceedings. Ronne was a bankrupt carrying on in London the business of a free lance tobacco agent. An agreement dated March 12, 1931, provided that the promoting syndicate should receive from the Premier To.bacco Company £IO,OOO in cash and £30,000 in paid-up shares for its services. The syndicate never paid a penny piece for anv of tho purposes stipulated, neither did it raise any capital. The two main charges against Russell, said Dir McKay, were that ho received a secret commission and that, set ill g as a director of the company, lie sanctioned the huge payment of £IO,OOO and 30,000 £1 shares to a nebulous concern that had never in any way met its obligations. Russell had received £3BOO in cash. Mr McKay said lie could not say exactly who were the members of the Eeroune Syndicate. Its documents were signed by different names, and the deduction lie drew was that it was a nebulous and fraudulent concern. Dir DlcKav referred to the directors of tlie Eeronne Syndicate, as including “two undischarged bankrupts and a penniless lord.” His Honour; Lord Brentford is not penniless, is he ? Dir McKay: Perhaps not exactly penniless, but I will place facts lielore the Court to show that he is a person of no standing in the business community. His Honour: He is tlie sou of the late Sir William Joyson-Hicks ? Mr McKay: That is so. Counsel added that the promotion agreement was a bet of £40,000 to nothing. Mr McKay said that 12 months after Russell had been informed by Mr Dale that the position for raising money in London was wellnigh hopeless, lie went down to defraud the unfortunate tobacco growers in Nelson with a published statement in May, 1932, that, “capital to the extent of £150.000 is subscribed, guaranteed, or underwritten in London to the satisfaction of the New Zealand directors ’’ Tn September, 1931, Russell advertised in a financial journal that, of the company’s 250,00 shares. 170,000 had been issued in London. Later Russell persuaded the shareholders that if he went to London ho could do something to pull the company out of the mire. That trip cost the shareholders £9OO. and while he was in London the company went into liquidation. COMPANY’S ASSETS. Dudley Norton Chambers gave evidence that when the Premier Company went into liquidation the only assets were office furniture worth a few pounds, tobacco in bond which had gone mouldy, uncalled capital of approximately £BOOO, and a building at Nelson oh which the company had spent £3OOO. The building went back to tho Nelson Borough Council without compensation, and was utterly valueless as an asset. The liabilities were two debentures of £IOO each in favour of Mrs Russell, creditors of approximately £3300, and a liability to tlie Crown for a lease at Newmarket which was settled by a payment to the Crown of £450. Very little of the share capital would bo collected, said witness, as much of it was held by married women and infants. The company had at present £2200 owing to creditors, £I4OO in the bank, and there were £3OOO worth of calls, of which perhaps £2OO ivoukl be collected. Probably the company would eventually pay its creditors 20s D’" rmf-'i. Between £19,000 and £20,000 of the shareholders’ capital would be whouy lost. From the company itself, Bussell had received £2551, and in addition the company had paid accounts amounting to £1249, which it was considered Russell should have paid. DEFENDANT GROSS-EXAMINED. Defendant, William Samuel Russell, was submitted by counsel for cross-

examination. He said that at one time the London directors had £IOO,OOO firmly underwritten. His Honour: Why did you continue to take money from the shareholders after you knew that the money could not lie got in London? Witness: The prospectus was changed. They endeavoured to get money in London eventually. Witness said that when he went to England he represented the Harbour Bridge Company, but he did not receive anything from it. Witness said he knew Ronne had lost £40.000 in the Hatry crash. Ronne was a Russian baron. Tho hearing of legal argument was adjourned.