LIQUIDATION OF A COMPANY.

New Zealand Times, Volume LXIX, Issue 3726, 28 April 1899, Page 7

LI Q UIDATION OF A COMPANY.

AN. AUCKLAND ACASE. STATUS OF CLAIMANTS. In the Court of Appeal yesterday,before the full bench of Judges, argument was heard in the case entitled.“in.the matter of the Companies Acts and in the matter of the Building Societies Acts and in the matter of the Auckland Permanent Co-operative Building and Investment Society (in liquidation). ’, ■ ' Mr William Thorne appeared for the official liquidators Mrs Hiigh Campbell for creditors holding debentures (class 1) and ordinary creditors' (class • 2); - Mr Baume for investing shareholders whose shares had matured, (class 3): Mr ineo. Cooper for investing shareholders whose shares had not matured,' but who had in accordance with the rules of the’society given one month’s notice iof withdrawal, and which month’s notice had expired beforejtho eommencomcntujtthc-iiquidation of the society (class 4)- and My Button, for investing shareholders whose shares, had not matured,, and who had not given such notice one month before the .commencement of the liquidation'of ( the society. ' " . V

This was a petition removed from,the Supreme Court at Auckland ■ > The society was established at Auckland in 1872, and was in the year. 1877 incorporated iinder the Building Societies Act, 1876. In 1893 an order was’made I by the Court that the society be wound up voluntarily uhdoi* the supervision of the Court in accdrdance"wttliTue'aFdye'Trcts'. Tho.petitioners (John Batger, accountant; Albert Devore, solicitor: and William Stephen Cochrane, gentleman) are the official liquidators: of the company. At the time the society w'ent into liquidation there . wdre five classes of persons' having claims upon its funds. , Questions have arisen- in the liquidation- of the- society as to whether one or more of the five classes of persons'is or are. entitled to-priority over the others, or other of them, and as to whether any one or more, of the, five classes of persons is or are to. interest on the amount pay able-to them;-and-as—to -whether-such interest is payable to-.anyone or more of the'five classes in priority to, the others or other of such classes.

1 The petitioners pray, the Court (1) To direct the order in which .the five classes ~pf persons.shall rank in the distribution of the assets of the society; (2) to direct which if any of the five classes of persons shall bo entitled to interest on the amounts due them respectively in. priority to any other class ,or classes, the time duringwblich such interest, has been or shall be payable, and the rate of (interest payable; (3) ,t 0 direct whether or not all dividends already paid 'by the official liquidators to, each person named in 'schedules “B,” , “G” and .“D,” ’shall be applied by such person in reduction of the society at the,time of. the com mencejnout of the liquidation of tho_ society; (4) for. Such other' direction or'order as to the Court may seem: ineOt ;'-arid (6) to direct that tho costs of tKe~6fficial liquidators and 'of ' tho persons representing the ' classes respectively of ana incidental to ' this pefitio’rt shall be ordered to be paid by the official liquidators out of the assets of the company. ' .... ; Mr -.Thorne said that, in-the. liquidation tho -rules under the. Companies Acts had been made use of throughout. There was no question here about the ordinary creditors.' The questions which’had arisen were in regard to’ the other four classes of creditors'. The! debenture-holders were in different classesnipt becausp.they were of different status,.,hut because the rates of interest (payable to them were different. . The class of persons which Mr Button represented was composed of . those who still- remained, members of tho society—who, notwithstanding the difficulties into which, the. society had got, went on paying their several amounts. > In due course, orders had been obtained from the Court for the payment of dividends, On three several occasions dividends of 5s in the £ had been paid to the deben-ture-holders. If they were all equally entitled, that would absorb the whole of the available, assets, and there would be nothing left for the class of persons represented by Mr Button. Somo-of these persons very naturally felt aggrieved. Acting under advice, the, official liquidators had authorised the presentation of this petifioh r fo' ! thei'Court ifi-* Order that; this, and other settled. 5 v Mr Buttottisaid'ho wannnlj;.concerned to see that the class or persons he represented got, if possible r -some share of the ni oney that, was, . ayailable. .Of course, his clients did feel ratter-aggrieved that all the available .funds ishould be absorbed by the debenture-holders, and that they, who had been paying on steadily, should got nothing, out, of the funds, ..He. submitted that his' clients came' under the exception introduced.by Sir George Jessell in the case of the Mutual Society, the first case of the hind that-'came before the Courts. Unless he could establish this, - ,he admitted that-his clients coiild not maintain the position they took up. Tho members who paid up never for one moment contemplated that in the case of winding-up, all the money which they had been paying in after other members had given notice would go to pay these others off. He asked for such a construction of the rules as would allow the .nonwithdrawing members .to share in the funds available.

Mr Cooper, in opposition to Mr Button, said that this society was in an entirely different position' to the Mutual Society. The members of this > society wore those who invested money in it, those who borrowed money from it, and those who were mortgagors; the Mutual Society, on the other hand, had no other source of income' than the weekly payments of its members.- The case of Walton and Edge showed that on such a rule as the one before the Court, a withdrawing- meinber—o£—the—societyLhad.. an ,acr crued right of payment on the expiration of one month from his giving notice of withdrawal. The right to payment became a debt due from the society to the withdrawing member, whose position was then the same as that of the holder of a matured share, to whom also there was simply a-debt due by- tbe society. - -These two classes were on the same footing, .though neither - of- them. could claim in ; competition with ordinarv creditors. • IVlr Bn nine'asked-thf- Coflrt-'t'o 'decide, , in cither of thtiH^va^^KmnmjyVTbat-hist'f i clients- Were, 'creditors,".ahtli'.qirfifloxV'to rank-with' : (lu\v wovo creditor* ui a pcc.niir £mn I of way. but still entitled to rank in nriI ority to all the other members; or that

they stood equally with the members who had given notice. ■ Mr Campbell submitted that his clients were entitled to be in priority to all members of the society, on the general rule that an obligation undertaken by a society was one which was bind ng on every member of the society. The shareholders were fighting between themselves as to which class of them ■ should have priority. And jet one class came here, and said. “Although our priorities are to be .established according to the rules, yet,.-when the rules say that the repayment of money borrowed is to be a first charge on the funds of the society, disregard the rules, and we are to'come. in. notwithstanding that provision in them.” The answer, so far as the unsecured creditors was concerned, was this, that the debts of a society must be paid before fho members of the society are entitled to anything out of the funds of the society.’ 1 Counsel then dealt with the question of interest. '■ Mr Justice Williams: Are tlie:e any persons who have interest-bearing debts ■ apart from the debenture-holders i Air Campbell: No. Judgment was reserved.