WAIRAKEI FINANCE.

New Zealand Herald, Volume LXII, Issue 19040, 10 June 1925, Page 7

WAIRAKEI FINANCE.

Sir, —Mr. Graham's letter in your yesterday's issue docs not alter the fact, that it is impossible: (1) for tho mortgagor to dictate terms to the mortgagee ; (2) for a board of directors to oxerciso a power rightly reserved to the shareholders only. Tin's is all that my letter contended, * rind I am satisfied to leave tho final adjudication of this matter in the hands of tho shareholders. H. Beimers. Sir,—l do not propose to enter into any controversy- with Mr. Arthur Cleavo hereon, but I cannot allow tho statements contained in his letter to tho Herald of Monday's date to pass uncorrected. Mr. Cleavo's opinion as to the causes leading to tho necessity for a reduction of capital must be based upon a fallacy or an entire misconception of the position. It will be recalled that Mr. Cleavo himself loaded, tho property witli a gross profit of £26,000 when passing it ou to tho company. Shareholders mado it perfectly clear at the extraordinary meeting that this was tho prime cause of tho reduction of and insisted upon an amendment stipulating that not less than £IB,OOO should be written. off the property account. Tho writing off of tho debit balance of £10,378 18s 7d in. profit andiloss account was a result of tho operations of tho company during tho first 'two years of its existence, whilo Mr. Cleavo was managing director. The details are explained in a supplementary report and balance-sheet adopted by the shareholders at the last annual meeting, Mr. Cleavo being present and not questioning the lucid explanation of the directors who assigned the responsibility to tho board of 1920 and 1921, of which Mr. Cleave was a member, but of which I was not. If Mr. Cleave desires to do so ho can take the public into his confidence by publishing that report and enlighten the public as to where the responsibility should lie. During tho period Mr. McDonald and his colleagues had control the company showed a profit. I desiro to mention that the financial state of the company has in ny opinion never been better "since its inception. The property and business is all_ right, and I venture to predict that if given a fair opportunity without hindranco Wairakei w:ll of its own intrinsic merit more than reestablish itself. Mr. Cleave is entirely [ wrong in stating that tho litigation ended disastrously for tho company. Tho bal-ance-sheet of the company shows .1 net profit on the litigation' nnd Mr. Cleavo )s perfectly well aware of this. I will just mention hero that, on November .21 last, Mr. Cleave's solicitors wroto pointing out that unless his terms as to the litigation were accepted he would withdraw his guarantee "and that Mr. Cleave would request tho bank to enforce its remedies under its debentures." On November 28, 1924, Mr. Cleavo carried out his threat and tho company were accordingly notified "that no further pavmcnt could bo mado on tho company's account pending fresh arrangements"; but ho offered, if his terms were accepted to renew tho guarantee "to enable the company to carry on." The Christmas order, then iii course of preparation'and despatch, was about this tima held up "pending arrangements." Although other merchants had sufficient confidence t<i supply they were not permitted to do so. On December 4, 1924, two directors without reference to the board signed a letter to the merchant undertaking to earmark Sortion of the season's takings and Mr. leave confirmed this and the goods were sent. The account was paid within a month. Subsequently, on January 6, 1025, and February 12, 1925, Mr, Cleave again withdrew his guarantee, but n itwithstanding this the company is still flourishing. The object of the proposed loan was to remove from the directors any future embarrassment likely to be caused by further withdrawals /Of tho guarantee and at the same time to provide funds for further improvements likely to increase traffic, and I feel sure all right-thinking shareholders and .the public will agree with me that this is a consummation devoutly to be desired, and that the directors should make evory endeavour and even sacrifice if neccssaty to bring it about: Tho investigation committee's finding referred to by Mr. ' Cleave has been fortified by (a) a verdict of Mr. Cleave's fellow-citizens; (b) a Supreme Court judgment upon which Mr. Cleave paid £2200, and (c) the judgment of £2057 of the Court of Appeal in favour of the company. I will leave it at. that. ' A. B, Giuitam. Campbell's Buildings, June 9, 1925.