AN INTERESTING CASE.

Otago Daily Times, Issue 10417, 20 July 1895, Page 8

AN INTERESTING CASE.

APPLICATION IN CHAMBERS.

Before Mr Justice Williams, Bitting in Chambers yesterday, the case of the Southland Frozen Meat and Produce Company (Limited) v. Nelson Bros (Limited), which i sa claim^or £30,000 damages' came up in the shape of a summons for the discovery of documents. ■■*■'■ ■ ■'■■

.Mi Sim .appeare.l on behalf, of the plaintiffs in support or the summons, "and Mr J A Cook appeared on behalf of the defendants °°k mons^in nnls t^ Kr Were Pta"icaily tyro sum-r|rflne-^A^er^atS f°^: mayin aay way interfere with or ™atript the ££?& bU pSiness' l ra! c- of Ihe com' SrV *'A 5 was, as. follows :-"l%e defendants, without having made any snecial arrangemeiitswith the plaintiff" f n the yeaflS9l torth dunns the.remainder .of-the i-aid term of three years concerned und interested in the use of weVt m, f 2 i! X w<X kß-",- The state«ent of claim went on to allege the damaga sustained by the Plaintiffs, and set out aclaim for ,£30,000 damages 5 ami ?Jh n» 4, eQie5 tl? ■«««a«on 8 of p.ragrapt 5, and said they had no concern or interest whatever, direct or.indirect, in the erection of the Ocean Beach Freezing-Worki.,.. nor did the defend.mte have any interest or concern iv the use of the said works dunns; the termiof. three years from lit January 1891,. covered,,by the agreement be.tw«anthe Plaintiffs and.the defendants ■" For cJh M d4fa n°?v the defe^a°ts said that on the SAY sthey entered: into. an • agreement ot the Ocean Beach Frdezing ~.Works, for the purchase of all the sheep frozen at those works, and thoy denied:, that entering into the. agreement amounted !to a breach of the agreement of 26th-June! 1891., they said, too, -hat during the period covered by the said am-ee-nient of the 26th June 1891-that is to say, from Ist January IS9I to Ist January 1894-they had no interest^ or concern, whatever in the erection or use of ths Ocean Beach Freezing Works or any other freezing works within the limits mentioned in the agreement, and they denied that they did any act which interfered with or restricted the J^R.H** business, trade, or profits of the plainiv, j ? 1S ono.r WO»W sea.that, the question for the determination of the court when the case came to trial would be whether the defendants were interested in any way in the Ocesn Beach Freezing.Works, and the object of the present discovery was to ascertain whether they were or Tw ,He understood from/Mr Nelson's affidavit that he (Mr Nelson) objected to make the discovery of documents referred to in the first part of the summons. What the defendants objected to was to make any discovery in connection with the investment account in their balance sheet. _io ebowthe importanceof the investment account in v connection with' the plaintiffs' case it was necessary to state what the plaintiffs expected ti prove. In 1891 Mr',l. G. Ward was a director of the plaintiff company.' In July IS9IMr Cook, interposing said this wjs evidence v.'r.ich the pliia tiffs might be able to bring, but it was not under consideration now. . Mr Sim said the point, was this: If he could show that the answars to these interrogatories would be relevant to the plaintiffs' case, then he was entitled to the discovery, he asked. His Honor asked what the reference to the investment account meant. If. the defendants were ordered to discover documents thfy would not be bound to state documents which did not relate to tie notion.- -

Mr bim said the answer to this particular interrogatory might have a very material hearing on the question in issue. In 1891 Mr f. G Ward was a director of the company. In Jul» 1891 he resigned his position as a director for the purpose, as he stated, of taking the management of a new company m . Southland. Immediately, after his resignation the erection of the Ocean Beach !|Vreezins Works war. commenced, and in the"following year—in 1692-freezine operations were commenced. In May 1892 an agreement was made between Mr Ward and the defendants which was set oat in the statement of- defence, and by which the defendants agreed to take from Mr Ward the whole of the output of the freezing works. From the defendants' balance sheet it seemed that in 1891 for the flivt time thera appeared the myster.ons item of "investments." Iv IS9I the amount wa:j £bSl2lOs, hut as the freezing works went on the amount grew. On the 30th September 1892 ?* h^ t gr?T V £l0' m Ms; or. the 30th September 1593 it had grown to £29,362 10s ; and in the baiance sheet of 1594 it was up to .£54 710 ]g a which was about what was supposed to have been the cost of the Ocean Beach freezing Works ihe inference that the plaintiffs drew imderthese circunihtauces was that in some way ov other it was really the money of Nelson Bros. (Limited) that was used for the purpose of erectmthe freezing works, and that Mr Ward was simply the defendants' dummy ;,, the matter. It was. true that Mr Nelson in his affidavit said that the defendants had made no investments, directly or indiiwtlv either with Mr J. G. Ward or the Ocean B«"ch ireezing. Worka, or to the Ocean Beach Freezing fo^T^' d l ut' i? s the V*™'} from the Ist J*nuar? 3801 to the Ist January 1894, and that none of the balance sheets had any reference to such investmente. That was a curiously-worded paragraph in Mr Nelson's affidavit Mr Nelson did nntlav that there was no connection of any kind bstwe-n Nel son Bros, and the Ocean Bench Freezing Works The plaintiffs were satisßed that there h"d C jUKgle of some kind or another, but they did not know exactly what the nature of the jug4 c wa f It imght be that Mr Ward's account with the Colonial Bank had been guaranteed by the de fendants or by one ot the defendants1 servant t> was quite competent for that to be so and VoV th« paragraph to which he bad referred to'be perfeetlv true. -If any. juggle of that sort had been clrriirf out it would be a breach of the agio ment w S the plaintiff company, and ttepS^S it would make it in such a way as to aroid"dis cnvery aa far as possible. Towards tlm ». 1 i lS3j-towards the 1 expiration of tte^eri?d o three years covered by the agreement if was stated in Invercargill that Ntel^n V" (Limited) had purchasedthe Ocel-n BeaTh Freez 1115 Works; aud early in the January fnlu - Mr William Ncison went to In&fe pos«sssion of the freezing works on h^, if f Kelson Bros. (Limited). J n th° renor^ f4. °f to th. defendant company^ sharSU Tccw panyiag the balance sheet aa at the 'Wi-h <5i O Sl ast,ofwh^^|^^dm is required for the acquisition n f M capital Beach Freezing Works m the province «f <5° CT land, New Zealand. Thua the coL°L '% secure a supply of a very useful cL?« „}• I Wl' l-hen after Mr Nelson took pos^iorf "■ beginning of ISM Nel.on Br«S! Js° works until May ISU, when the <iS? n P th, e Refrigerating Company (Lin"«odT- a 1 ■/^ with a capital of £50,0u0 of wh^h ii?wgl^v^ £-t<J,9iS. aud the balirce of £•« ™ v , ? rd held ployees of Nelson Bros •$£ St^ by erai to be this: Nelson B rM tS' U, Ss:o' ne.d oxn report and to the statement2t in W wrgill, purchased the works in iR , ! Then thera was an imnT>r° t °V (L;-;li^). by Mr Davidwn, on" oTthe^d rector^f th* v*** m - company, at * *^™$*g ts&w

& tat the defendants "had lately acquired a ] £w ! hl9- hal l'eUikd t0 swell tho iten> «f mveatwentg in the balance abest." That statement by Mr Davidson showed plainly ihat the mvestraent account was connected in some way A af , wlP h the v«rJ' interest acquired by the defendant! m the Ocean Bsach Freezing Work's. s^M S. 00J £'-rcni- arkcd that Mr Nelson's affidavit an interest N- ClsOn BroS acc *uirod n?l^? 1" said Mr Nelsoa wanted to maks out win .v l"vestlnent account had nothing to do with the Ocean Beach Breezing Works, but Mr JJavjdsoas .statement wont •to show that tho! Nt»i stl?™t, account was connected with the 1W?" be!-d b-& Ne!aoa Bros- in the^ Ocean «ffn tv| reezia S Worka: They had it as far back as m the report of September 1893 that the defendants were raising money to acquire an interest, h™ lH P?i!' eall y *° I>ecembsr 1593 the defendants tb^Ll Hoaor:, Ifsc,they committed a breach of the agreement with the plaintiffs, thf ™"2 s*ld $!$, defeadaats ostensibly bought wa^V, +t\ ln IS9?- but v' hat the Plaintiffs aid >Vle nhe Work? were a" alou S the property of t L „ ■ interrogatory, it would show clearly w y iv-^ 1? 11 the defendants, erected those wor ivS Ihe defendants did not know exactly evtn l"'c °, f ! he iu>-gl3-thev did not know exactly iq what w.iy Nelson Bros, ereited tho works, but they kuov that. Mr Ward said he had uo inouoy in the works, and if Mr Ward had no money m the works, they did not know whose money it was if it .was not Nelson Bros1. ills Honor: Or suaranteed by Nelsoa Bros. TpA s^ ldtbe 'suggestion was that Nelson i;ros. did not pay the morioy directly, but they Cnln" fif*? I*^1*^ Mr Ward's account at the m? A? T>B*r k> Ol' Ooe of their officers-Mr Nelson or_JJlr Reid-guarantsed the ■ account, and the defendants in turn guaranteed their officer, and tais investment account, which WO3 so mysS'£ ame exil^n^ at the very time at which the erection of the Oceaa Beach works \\as commenced, and would show clearly what n nit£ v>j:°f the pendants' connection with tho Ucean Beach works was. Under these circurabtauces he submitted that the plaintiffs were plainly entitled to (he discovery they sought ™™ "on"S: Supposing ifc turns out that the w oDvs y,m the investment, account is invested in wh'L -ouf nS°i ß ~'3UppOsinS H has nothin S to do 'Mr Sim : : Supposing that was so, what harm was done to defendants? What was the reason for such mystery.? The circumstances he had stated raieed-a strong probability th*t the investment account would shn iv that Nelson Bros, were rucrestedin the Ocean Beach works from the lime they were erected. His Honor: If. ifc be the case that-they had acquired some interest, direi'tly or indirectly, in the works, the investigation of ths investment ac? oua*, w°uld be tho key by which you would obtain that information ? . Mr Sim : .Exactly. That is the point, and Mr i ki ?? n s t tistement renders' it extremely probable that they had such interest. His Honor observed that according to the schedule in "The Companies Act'lßß2"-from whicb, however, companies might depart— the balance sheet itself should show what the investments were. ' . Mr (Jook said that was never done. The grounds upon which the defendants objected to the summons were: First, as .to the discovery, that trie plaintiffs.'wera only entitled to a discovery iv terms ot-the rule'; they '"could call ou the deteudants to file an affidavit naming the documents in their possession referring to ilia action, and they had to be guided by that affidavit. They m, "°/'.e^ t0 Pall for any particular document, lne defendants were prepaied to comply with the i-* s \.; the . only interrogatories objected to .were Nos.'ll, 16, and 17 No. 11, deahns with ths question' of .investmsnts, the other fide had no right, to ask for. In the remaining interrogatories they had asked in every shape and form, in what way. the company were interested, directly or indirectly, in the financing or guaranteeing or dealing with Mr Ward in these works, and the answers to those questions would give the plaintiff* all the information they required, without the interrogatory in which they fought to ask what the investments of Nelson Bros. were. His friend had put a number of facts be:ore the court, most of,them probably suppo- itious or inferences; some of which drawn from facts which he (the speaker)'had no doubt were correct, arid some drawn from circulated reports; but if .Mr Sim's statement was correct they would have a peculiar state of things. Mr Sim stated that the Hon. Mr Ward retired in Ju!y 15.91 from the plaintiff company, and that iv the samp month the erection of the Ocean Beach Ereezin? Works was commenced. To suppose tuat Me Ward was in collusion with Nelson Bros, at the time he, left the board of the southland Company, and at once started the erection of other works, would be to suppose that when Nelson Bros, made the agreement with the Southland Company, dated the 29th June— only two. days before,—they had already made arrangements with Mr Ward to break that agreement. . .. . .

Mr Sim pointed out that the agreement was in operation from the begin'pirig of the year. Mr Cook repeated that thoy must suppose that when the operation was signed and sealed Kelson Bros, nadmade arrangements to break it As to the investments, he said that Nelson Bros, had been incorporated since the frozen meat industry was instituted, and there was no reason why they should not in 1891, for the first time,-have made suflicieDt proQc to put something to an investment account ; but the 1891 investment account would be ridiculously small, in connection with the erection of freezing works, and his learned friend had said that £50,000 was required for the erection of the works, which v/ore finished and ireazing before IS9-2. The assistance that could have bfen afforded with £5000 would be practically no assistance at all; so.that the application tossetbe investment account could not be for the purpose of ascertaining whether-this money was advanced for the purpose of ,the work • there mustiba some other motive. It.must be remembered that these two companies were practically in opposition in the south, the Southland Company being the older. The Ocean Beach Freezing Company seemed to have held its own; while the balance sheet pf the Southland Company unfortunately showed a loss, of £10,000 in one year in freezing aione and it was now in such a position that it.bad either to. find further capital or to succumb. That was. a matter of notoriety In order to make a start by finding further capital they had an action commenced against Nelson Bros., in which the very modest sum of £30 000 n? fl^S eJI ICpr6f nt\?* ths lo3ses- at the rate of £10,000 a.year, for the three years the agree-1 ni?"t was supposed to be in force. mrM T;On°i r / emai' ke4 thafc the agreement set out by tne defesce, Supjposmg.it not to be a breach of the contract showan that the defendants were Prepared to sail pear to the wind as they could without breaking tbe coatract u'7* *d not 'think it went so far as that; ,?Vv f± ad toJ a, ke tbls iuto consideration, that at .that time Nelson Bros, were buying up as many sheep as_thcy could from all the freezing works in New Zealand, and were endeavouring to acquire the key of the frozeu meat trade Th^y were not buying from this one or from that one, but wherever'they could-they took the whole out put from the works in order to have the control of the trade in London. They were finding the shipping, and they had the cool stores i:i London, in this c*se the defendants were perfectly frank, andUuty set out tlieir agreement in thair defence. \\ith respect to Mr DividsonV. utterances. Mr kelson had admitted that the defendants purcnased an interest: iv the company in 1894, but that was six months af:er the expiration of the agreement by. which they were bound. The stateluent in the report of the defendants1 company .showed that in September ISH3 the money was not even ia hand. The defendants submitted that tiie plaiatitis now made an assumed claim uyon them because'-they happened to be freezing meat in the distact. Mr Ward was quite able to finance without going to Nelson Bros, learned counsel submitted there was no reason why the plaintiffs should be allowed to look-into the private affairs of the defendante. His rlonor: Supposing ■ Mr'Nakon were in the witness box, and in cross-examination this balance sheet wns'pufc iv his baud, and he was asked what was the rneaningof £IO,&Sz 10s shown in the balance sheet for 1892. Ha would have to answer.

Mr Cook : It would be a question as to whether it would be releviitit to the issua. He might bs asked whether any ot the. investmAuts had reference to the Ocean Beach Freezing Works in any way,_ hut he could liot be asked to state what the investments were. He probably might not know. The investments might have been made in Loadon.

Mr Sim said his clients did not want to pry into private affairs, but to net information to enable them to saow the way in which' kelson Bros, paid for the Ocean Beach Freezing Works. His Honor :On the whole I think those interrogatories should ba answered. In coming to that conclusion, I am.very much influenced by She existence of the agreement set out in the statameut of- defence, which the defondaats admit they entered into on the 6th May 1892 with the Hoe. J. G. Ward. Whether that agreement was or was not a breach of the agreement which the defendants had entered into in June 1891 with the plaintiffs it in not necessary now to decide. By the agreement oflS9l the defendants agreed not to assist or be in any way concerned or interested in the erection or use of freezing works at the Bluff, and that they would not do anything of the like nature which might in"anyway interfere with or restrict the output, business, trade, or profits of the plaintiff coniLiany. By the agreement they entered iato on the 6th. May ISS»2 the defendants agreed with a rival company to purchase'the'whole of their output up to IO.OOtf sheep. As I have said, whether this latter agreement is a breach of ths agreement previously entsred into between the plaintiff,; and defendants' it is not necessity to decide. What, however, is perfectly clear 13 that the second agreement was calculated-to prejudicially affect' to a considerable extent the busineiia, trade and profits of the present, plaintitts. It appears, therefore, that the defendants by their own admission, and assuming, of coursa, that this second agreement was not a.breach, of the first, endeavoured to get round the first agreament and to sail as closely as possible to the wind so a3 to avoid a breach of it. t hat naturallyraises a suspicion that if they have done this m the case of the agreement they may have tried to Ket round the first agreement in other ways Tha only way to ascertain whether they have done so is to inquire in as searching a way as possible 111 to the paiticulurs of their financial operations. Had it not been for the sgienment they have Hiains^lves admitted I confess I should have hesitated at the present stage. to order interrogatory 11 to ba answewd-Islwuld have probably considered if as somewhat oppressive L. Beenis to me, however, that it is not at all improhf^Jo "w the olaiatiffs may derive benefit WttointoXSw beiM.tns.wrad. There is nn tlnrht *Jiit ifth»re ha:s bseu financial assistance rendered by the defendant, to the Oeeaa BeacaTrS Ctompany, it is uader the head of theMtein^Tnvestnieiils that the particulars will be foufd S,I think, is clear torn the fact thaf -.f-^r the terininatir.il of the .igrsement hetwol the plaStiff" and tha 'defendants, the in'er^t which the defendants admitted they L""ve^m4 wauired in Ocean Beach Preezin.Worfa U^inXded uodsr that item in the l,rt MI- uc- he-t I think, tberefore that the interr^?oriof 01W to go as iisked for. As :o As rogatories °> M" •> t !>a CoQtunt with Jh »md'Vito°fth e manger for the defendant a 3 to Riuaiva 01 jj he considers material. Ti^rSom^. w. a!i :-Order for discovery in V ,'„,.,„ Ot-ior ior mterrostatorits as ? -"?! Affidavit to be raade by Mr William Nelsoa pad iiled wiHiin four weeks. Cosfc3 j I&rhe foilowing are the interrogatories to which | exception was takeu;— '

11. What are tho investments referred to in tho following manner under the head of property and assets in the several balance sheets pre3unted by the deffttidants to their shareholders in the yeari 1892, 1893, lS9d, and 1595 respectively-thar, into say.: in. the balance F.heet as at 33«h Septamber 1891, investments j£sSl2 10s ; in tha balance sheet ns at 30th September 1892, investments £10,832 10.1; in the balancw sheet iv at 30th September 1593, investments £29,362105; and in the balance sheet as at 30th September 1834, investments £61.712103.

IG. Were any agreement or asreemeats ever made between the defendants and the said Oee*n Beach Refrigerating Company in relation to the said Ocean Bpach Freezing Works? If so, stats fully the terms of any auch agre&ment or agreements.

17. Is it true as stated by Mr W. S. Davidson, one of the directors of the defendants, at tho ordinary general meotinrf of the shareholders of the defendants, held on the sth February 1895, that the defendants had than lately acquired a large interest in the said Ocean Bsach Freezing Works, and that this had tended to swell the item of investments in the balauce Bheet ? If so, stato when and under what circumstances ths large interest acquired ia the said works was co acquired.