COMPULSORY LIQUIDATION

New Zealand Herald, Volume LX, Issue 18578, 10 December 1923, Page 10

COMPULSORY LIQUIDATION

MEAT COMPANY'S AFFAIRS. CHIEF JUSTICE MAKES ORDER INVESTIGATION -NECESSARY. EVIDENCE OF MISMANAGEMENT. [BT TBLBGaAPH.— CORRESPONDENT.] WELLINGTON, Saturday v Reserved decision was given by the Chief Justice, Sir Robert Stout, at the Supreme Court to-day in the case, in which a petition was made for the compulsory winding up of the Wellington Farmers' Meat and"Manufacturing Co., Ltd. The Chief Justice remarked that the petition was by several creditors and that no creditor opposed the petition and motion, while no shareholder, save the directors, offered opposition. Further, the chief creditor was secured although it was said that the security would not be sufficient to liquidate this creditor's debt. "The company is hopelessly insolvent,* said His Honor, "and it seems to me that from any point of view there is no chance of any money coming to the creditors and certainly none to the shareholders. Why then, is the motion made that the company should be wound up by the official liquidator, and why is it that the present liquidator, who seems an impartial man,' should be removed The reply is •that the company has been so mismanaged that it is absolutely necessary that there should be a , proper investigation of the dealings of the company, and of the directors with the company. The liquidator- has no objection to resign. He really has nothing to do. The company's property has been sold by the mortgagee and debenture holder, namely the Bank of New Zealand, and, as I have said, there is nothing left that will pay the unsecured creditors, or give any return to the shareholders. Further, the creditors who are petitioning will themselves have to pay the legal expenses of their action, as there is no fund out of which this expense can be liquidated.

Reasons for Investigation. "I am at a loss, therefore, to know why the directors should object to the investigation by an impartial officer _of the Government. As to their suggestion that the mere fact of an officer of the Government investigating the affairs of the company is in the nature of a slur cast upon them,* I fail to see that. If this had been an ordinary bankruptcy of a partnership and not of an incorporated company, the officer who would have had to act as the liquidator of the partnership would have been the present official assignee. here is the fact of a dividend being paid when there was no money to pay it. 'hat is always a serious matter in the management of a company. Secondly, there is also the fact that blunders had been made in the carrying on of the business, and the balance-sheet was some £26,000 in error. Thirdly, there is ihe fact that the directors, without any authority from..the company, spent large sums of money 'in purchasing machinery for a weaving plant. It is true that the authority to carry on the manufacture of woollen.'goods was given to the directors afterwards, but at the time they started the business they had no authority, and then* was the loss of many thousands of pounds through their management of this new business that the company undertook. Further, there is also the statement in reference to the.purchase by one of the directors of a motor-car without authority, and there are various other facts stated in the petition and in the report of the committee that need investigation on behalf of the creditors.

Not a Judgment on Facts. " I do not think it is the duty of the Court to decide the question as to whether those statements are true or untrue. That requires further investigation and further evidence which has very properly not been placed before the Court. All that the Court has to consider is whether there are prima facie statements on oath which require further investigation. lam of opinion that it is» no answer to say that no money payments can be obtained by the ' creditors from such an investigation. That is not the object of investigation in bankrupt estates. The investigation is to see whether justice has; been done and the management been effective, or whether there has been gross negligence in the management.

" A great number of cases was cited, and I have referred to them, but in none of the cases, do. I find a case in which not one creditor, but a considerable number of creditors have asked for compulsory winding up and in which no creditor and no shareholder has opposed the motion; and that the only opposition comes from the directors, save one, who are charged with mismanagement. All the cases that have been referred to differ in facts from the present position. - " Further,. I cannot see that the directors can be injured by a winding-up order because there are no costs to be cast upon the company, or upon them; and they say the company is insolvent and nothing is to come to them or to the shareholders whatever is done. It seems to me, therefore, that if the shareholders desire an investigation, and are prepared to pay for it, the Court ought not to prevent that being of the fullest and of the most impartial kind, and being compulsory under the Act. The Bank, of New Zealand and the liquidator do not oppose the motion, but do not consent to it. I shall therefore make the order. I say nothing about costs at present." ,