RAPID FINANCE.

New Zealand Herald, Volume LXVIII, Issue 20978, 15 September 1931, Page 11

RAPID FINANCE.

LARGE COMPANY'S FAILURE. LIQUIDATOR ASKS DIRECTION. THE RIGHTS OF INVESTORS. The affairs of a finance company which launched out rapidly on a very large scale and suddenly was compelled to go into liquidation were disclosed to a large extent before Mr. Justice Herdman in the Supreme Court yesterday. The company was the Associated Investment Underwriters of New Zealand, Limited, concerning which application was made for the Court to determine certain questions arising out of its winding up. It was mentioned early in the case that there were 78 creditors scattered throughout the Dominion, having claims amounting to £3OOO. Mr. A. 11. Johnstone appeared fo,r the liquidator, Mr. J. M. Elliffe, on whose behalf the questions were asked; Mr. Finlay for Dr. J. A. Cowie, of Masterton, and Robert McKenzie, of Masterton, solicitor; Mr. Richmond for Henry Maxwell, sharebrokcr, of Wellington; Mr. F. W. Thome for T. Mason Chambers, of llavelock North, sheep farmer; Mr. M. Adams, for Leightons, Limited, representing unsecured creditors; and Mr Goulding for Albert Richmond, of Hastings, caretaker. The questions submitted were whether the allotment of certain debentures issued by the company to Henry Maxwell was valid, and what were the rights of the following persons who paid money to the company, and to whom the company purported to allot debentures: R. McKenzie, Dr. J. A. Cowie, A. Richmond, T. M. Chambers, and Mrs. Elisc Page, of Hamilton. Capital of £IOO,OOO. Mr. Johnstone said the company was registered on March 1, 1929, with a capital of £25,000. On July 1, it increased its capital to £IOO,OOO. The company's objects were to promote other companies, to underwrite their shares and debenture issues, to act as brokers, and kindred objects. On December 6, 1929, a resolution of the company was passed authorising the issue of 1000 mortgage debentures of £IOO each. The debentures were further secured by a trustee named the First National Mortgage Bond Corporation, Limited. On March 27, 1930, the trustee for the debenture holders appointed J. M Elliffe as receiver, and on April 7, 1930, the company went into liquidation and Mr. Elliffe was appointed liquidator. There were some transactions which seemed to call for investigation, said counsel, particularly those with Henry Maxwell, who was manager of Wellington branch of the concern. He was a shareholder, and he made advances to the company for which he was entitled to reimbursement. The company had a large number of branches which were increasing almost up to the date of liquidation. " The Presiding Genius." His Honor: Who , was the presiding genius ? Mr. Johnstone said the presiding genius was a Mr. Lawrence, who lived in Auckland and was managing director. The company had underwritten shares in the Tobacco Growers (N.Z.), Limited, and on March 21, 1930, it owed Tobacco Growers £587, being calls on 4699 shares. Tobacco Growers threatened that if that sum were not paid the shares would be forfeited. At that time Associated Investment Underwriters had paid £3468 on the shares, and it was also entitled to a bonus of 2000 fully-paid tobacco shares. The underwriters' company was not in a position to find the money, and Mr. Maxwell came to the rescue with £674, in addition to what he had already advanced to the company. In return for his services to the company he was to receive 35 of the £IOO debentures. Only 33 were in fact issued to Mr. Maxwell, those representing about the sum which the company owed him at that time. "They called the company the A.1.U.", said . Mr. Johnstone. "Not the I.'o. U." ? queried His Honor. Mr. Johnstone said the question for the Court would be whether there had been a valid allotment of these 33 debentures. Was Mr. Maxwell a secured creditor for £3300? No doubt counsel for other creditors would contest that view, and the liquidator desired to know where he was. Mr. McKenzie advanced £SOO to the company, and the same thing was done by Dr. Cowie. They were informed that their money was to be used to underwrite companies. Sums of £SOO Advanced. Hampton Court Flats was one of the concerns underwritten by Associated Investment Underwriters, continued counsel. Mr. Richmond advanced the company £316 for SCO shares in the First National Mortgage and Bond Corporation, Limited, and for 100 shares in Tobacco Growers (New Zealand), Limited. Mr. Chambers advanced £SOO to underwrite the Hampton Court debentures. Mrs. Page, who was a shareholder, advanced £SOO in July, 1929, to underwrite first mortgage debentures in Tobacco Growers (New Zealand), Limited. Not one of these people ever asked for debentures, said counsel, but on December 30, 1929, the company passed a resolution alloting debentures to them. There was no mention in the books that these debentures were ever executed and made available. The company was in a parlous financial condition, and Mr. Maxwell endeavoured to reconstruct it. The only one of the directors who seemed to have been permanent through the company's history was Mr. Kells Mason. It lasted just over a year, but it had a pretty lively career while it lasted. The tobacco concern was still in existence. The question was whether these people who had advanced money were secured or unsecured creditors. The company purported to allot debentures to all of them. His Honor: Has this concern any assets ? Mr. Johnstone: Yes. There are still the tobacco shares. The Nominal Assets. John M. Elliffe, tendered by Mr. Johnstone for cross-examination, stated that on March 27, 1930, he was appointed receiver for the debenture holders of Associated Investment Underwriters, Limited. On April 7, 1930, the company went into voluntary liquidation and he was appointed liquidator. The books showed that £SOO was received from Mr. McKenzie on October 16, 1929. Witness traced entries relating to this and to ihe similar investments of Dr. Cowie, Mr. Chambers, Mr. Richmond and Mrs. Page. In reply to Mr. Finlay, witness stated that Maxwell had been appointed a director on February 15, 1930, and his resignation was accepted on March 25, 1930. The books showed that sums of £1970 and of £SOO had been paid over to Hampton Court. To Mr. Goulding witness said he valued the assets of the company when he took over at nominally £IB,OOO. The principal items were investments in various companies. The total amount due to unsecured creditors was about £4500. The company had no cash, but was overdrawn about £I4OO or £ISOO. The hearing of the case was adjourned until to-day.