FEES OF DIRECTOR

New Zealand Herald, Volume LXX, Issue 21597, 15 September 1933, Page 14

FEES OF DIRECTOR

'ACTION AGAINST COMPANY SUM OF £2OO AWARDED 'COMMENT ON BALANCE-SHEET • A company director, Charles John MacCulloch (Mr. Towle), was plaintiff in an action in the Supreme Court yesterday brought against the Putaruru Pine and Pulp Company (N.Z.), Limited (Mr. Hunt). Plaintiff, who was formerly a director of the defendant company, claimed £2OO, which he stated was owing to him for his services. In a counter-claim the defendant company asked the Court to rescind tho contract (if any) for the payment of money to plaintiff by way of remuneration in his capacity as a director. Mr. Justice Herdman presided. Mr. Towle said the defendant company 7 was incorporated on May 7, 1928, for afforestation purposes, and plaintiff was a director practically from the commencement of the concern until July, 1931. At the first annual meeting of shareholders on December 16,/1929, it was resolved that £IOOO be •v oted to the directors for their services during the first financial year. Subsequently a meeting of directors was held and it was decided to divide tho £IOOO equally between the five members of the board. In spite of the resolution, the remuneration was not paid, and plaintiff was now claiming his share, £2OO. It was submitted that in view of the shareholders' resolution plaintiff was entitled to recover. Misrepresentation Alleged Mr. Hunt said tho defence relied on alleged/ misrepresentation in the company's balance-sheet, for which tho then directors were responsible. The shareholders were told in the balancesheet that the company had made a profit for the year of £5200, whereas a loss of £3200 was actually suffered, and it was this which induced the shareholders to vote tho directors £IOOO. //The statement as to profit -was false, although the defence did not allege fraud. It was submitted that in view,of tho allegedly false statement of the directors the company was under no obligation to pay the directors remuneration. His Honor: Can you have a more definite direction than a resolution of shareholders at a general meeting ? Surely the directors can sue if they are not paid? Forfeiture of Bonds Regarding the charge of misrepresentation, Mr. Towle said the bonds sold in connection with the defendant company's afforestation undertaking were to be paid for over a number of years. The figures in the balance-sheet were correct and showed the number of bonds sold. Subsequently, doubt-

■ less owing to difficult times, many of the. bonds were forfeited, and this * forfeiture resulted in a loss. The resolution regarding the directors'* remuneration was passed four years ago, yet no steps had been taken by the shareholders to have the resolution rescinded.

Evidence was given by the shareholders moving and seconding the resolution that had they been aware the company was not making a "handsome profit" they would hot have voted for payment to the directors. Bonald Keith Wylie, public accountant, said he had been secretary of the defendant company sincß the beginning of 1932, and had investigated its affairs. In the "first balance-sheet the then directors assumed 90 per cent of the bonds issued would be paid for in foil. In witness' opinion there should have been an allowance of at least 40 per cent of the bonds to cover default and forfeiture. Comment by Judge Hi" Honor held there was a definite (contract for the payment of remuneration to plaintiff for his services as a director. He said there was nothing to indicate fraud on Ihe part of the directors, although there may have been an error of judgment. Before voting money to the directors, however, the shareholders had an opportunity of considering the balance-sheet, and it must be assumed they were aware of the company's business. No attempt had been made to rescind the resolution. Plaintiff was awarded the full amount claimed, and costs. The possibility/of an appeal was intimated by Mr. Hunt*