CLAIM FOR £4633

New Zealand Herald, Volume LXX, Issue 21514, 10 June 1933, Page 12

CLAIM FOR £4633

Oil COMPANY'S AFFAIRS

ACTION BY SHAREHOLDERS

FORMER DIRECTOR SUED EVIDENCE FOR DEFENCE / The hearing was continued in the Supreme Court yesterday, before Mr. Justice Smith, of the claim for £'4633 brought by 49 shareholders in Speedwell Oil Company (N.Z.), Limited, acainst a former director of the company, Harry Clinton McElwain, company manager, 'Auckland. /( It is alleged by plaintiffs that representations in the prospectus of the company were untrue, and that the company did not obtain the full minimum subscription of £'6ooo within 90 days, as provided in the prospectus. The defence is a general denial of the allegations. Plaintiffs are represented by Mr. Gould and Mr. Dyson, and defendant by Mr. Weston and Mr. Gold6tine. I Resuming his evidence under crossexamination the defendant, Harry Clinton McElwain, said that on March 23, 1930, the date on which a meeting of provisional directors was held for the purpose of going to allotment, he regarded Stocker as the underwriter and Burleigh as organisms share salesman. Witness had no reason to believe Stocker was the agent of Burleigh as underwriter. Burleigh •was not the underwriter. The company was unable to go to allotment on the due date as the full minimum subscription of £6OOO had not been received. ' _ Allotment Date Passed Witness said Burleigh offered a cheque to cover the balance of the allotment money, but the company's solicitor would not accept an' unpresented cheque. That was the reason why wit- ; ness subsequently entered into an agreement with Leslie Adams, solicitor, fbr a loan of the required sum. £SS7 j 10s. As the date on which the company | was to have gone to allotment was then \ passed the application moneys were j returned on the advice of the company's solicitor, and fresh applications were called for. Mr. Gould: Wo'dd you _put out a prospectus with a man of straw as underwriter? Witness: I would not put out any prospectus knowing what I do about ttyem now. Mr. Gould: You are a very wise man. Witness: I never want to see another prospectus or underwriting contract. , . Mr. Gould: There was an obligation to tjay you £1000? Witness: I never had all the money, tjhfortunately. It was in the bank though. Mr. Gould: There was also an obligation to pav the Newmarket company £2400? Witness: About ";:hat. Mr. Gould: I put it to you that as an/experienced man you knew the company was insolvent from the outset.' Witness: Oh, no. I Bonus Shares In referring to bonus shares which lie had divided among persons connected with the company witness said Jae agreed tq give Charles Adams 700 shares in consideration that he should find a loan of £2400 to pay off the first j Speedwell oil company. He was to : have the money back as soon as the ; company got it. Another proposal was that Adams should take 24.00 shares .and distribute them to friends. Witness was to stand in the stead of the .company not then lormed and to repay Adams. -His Honor: You ask me to accept the view that Charles Adams would pay out £2400 simnly cn the promise that vou would give him 700 shares Witness: No, sir. It was only a discussion. ~ Sis Honor: I think any ordinary business man would tell you to go packing if that was all the security he ■was to get for his cash. ' Witness: It was only a proposal. He Baid he liked the idea. His Honor: Miracles happen. I am astonished that you, a business man, should put up such a proposition to Adams. . It was pointed out by His Honor that in consideration for a much smaller loan witness offered Leslie Adams far more generous terms. The Proposed Loan

v To Mr. Gould, who alleged that the idefence- had withheld the "discovery ' of important documents from the plaintiffs in spite of the; fact that an order of discovery had been served, witness said he did not accept responsibility for any omissions :in affidavits filed disclosing documents., and he could not explain any omissions. All the documents were in chsirge of witness then solicitors, who were not restrained in any way. With permission of His Honor, witness again referred to his dealings with Charles Adams regarding the proposed loan of £2400. Witness said he wanted to make the position clear. The suggestion was not that Charles Adams should personally advance the money, but that he should take 2400 shares and sell them to a group of friends. Adams would hand tho money collected to the company, and for his services would receive 10 per cent commission, £240, in addition to 700 of witness' shares. In a sense it was a kind of underwjiting agreement. Adams later told witness his friends would not buy the shares, as they had recently invested £SOOO cash in another enterprise. Witness added thai he had no doubt as to the earning capacity of the company when it was taken over, and ■ honestly thought it was a good proposition to put before the public. Preparing the Prospectus F. G. Massey, solicitor, said //his firm acted 'for McElwain in connection with the incorporation of the new Speedwell Oil Company. Witness prepared the technical parts of the prospectus, and perused the general matter submitted by defendant. Defendant told witness the first directors would undertake to acquire 200 shares as long as they were free to get them whenever they pleased. The clause regarding directors' qualifications was then inserted on defendant's instructions. Witness understood the position was thai; the proposed directors were at liberty to get the shares When and how they pleased. The provision would cover directors getting .shares bv gift. To witness' knowledge there was no "catch" intended. At that time witness did not know* it defendant had promised any fully-paid Shares to proposed directors. Burleigh was n&med as underwriter, hut witness took the view that he should not hold this position while he Tvas a director. Stocker tlion been mo . underwriter. Witness knew of no agreement between Burleigh and Stocker. Also, he had no knowledge of the suggested agreement between McElwain and Charles Adams, and the substitution of Charles Adams' name by that of Leslie Adams. As far as witness was aware thero waa no third ' party in tho agreement between Mc- ' 121 wain and Leslie Adams. The hearing was adjourned until Monday.