SOUTHLAND FROZEN MEAT COMPANY v. NELSON BROS.

Otago Daily Times, Issue 10444, 21 August 1895, Page 4

SOUTHLAND FROZEN MEAT COMPANY v. NELSON BROS.

On Friday last-in the cara of the Southland Frozen Meat and Produce Export Oompany (Limited) v. Nelson Bros. (Limited), in which-Mr Sim appeared for the plaintiff company and Mr J. A. Cook for the defendants, the defendants, at a sitting of the Supreme Court in Chambers, applied, by way of summons, for security for costs; and yesterday morning his Honor Mr Justice Williams gave judgment in the case as follows:- Io the case ot the Southland Frozen Meat Company v. Nelson Bros, I think that the .defendants are. pn titled to'.the'security'for costs ■which they ask. The rule under the Adjudicature Aotwhich was inferred to in the case uf Martano ! ~y. ftlaun 13 not in force in our procedure That i waa decided m the ca?e of Feirier v. Bartlem_n. ; We are therefore governed by the. oid practice in ■ the Court of Chancery.' The application of that ! ! practice m a particular case of a joint stock company (the plaintiff being asked for security for ; costs) was dealt with by Vice-chancellor Page I Wood in the case of the.-Washoe Mining Company v. Ferguson. As the Vice-chancellor there pointed out, thecase of a defendant seeki ug security from a plaintiff company.is a very different case from where a defendant asks for security against a plaintff who is absent from the country. In tbe case of a company beiug a plaintiff, the Vice-chancellor says that the defendaut must wait till he is in possession of the necessary facts It appears also by the judgment that he is justified in waiting till'he'is'in the* fullest possession of the facts. He may be aware that the company is in a doubtful position. The circumstances may even be such that the court might perhaps have made an order, yet those circumstances do not preclude the defendant from applying for security if he waits till the company has got into a still worse position and he then applies for security. In the present case there was "a meoting in February. The position of the compauy, as disclosed by the ptoeeedingsat that meeting and by -I the balance sheet, was not at all a satisfactory •' one At that meeting there was a proposition made which was submitted to the shipping, comPf n. ,es_f ho were vei'y large shareholders in the plaintiff company. That proposition waß that the shipping companies should guarantee the bank to a certain. amount and should agree to carry on the business of the company for a year. If that proposition bad been carried out. as the carrying on of the business would have been provided for by it, and as the costs of ( the proceedings taken by the compauy would be part of the. costs of carrying on the busiuess, it might well' be suggested that if therhipping companies had undertaken to carry on the busiuess they would in the ordinary course have paid the costs of these and any other proceedings. In any case, if an application "had been made attune the writ was served for security for costs a fair answer might have been: "Wait and see whether.this agreement eventmtea or not. If it does, obviously your costs, together with other expenses of the company, will be met by the shipping companies under the arrangement.' Whether, if an application had been then made tor security for costs the court, would bave accepted that as a sufficient answer, there is no need absolutely to decide. It is sufficient to say lt is an answer which would certainly have been -Put "forward, and which has elements of plausibility about it. The proposed arrangement, however, did not come off, ahd the next thing we hear of is the circular ot the 10th of' June. The statement of defence was filed oh the 18th «f June It does appear that the''defendants had received the circular before they filed their statement .of-defence. The ■.■representative^ of' the defendant*, re-ides in Napier, and the statement of defence had 10 be filed' iii--invercargill:' I am .justified m assuming, as the Vice-chancellor in the case of the Waihoe Mining Company v.- Ferguson assumed in the ese of a similar circular, that the defendants did not receive the circular before they i tiled; the statement of defeuce,1 or, at any rate !. before it,was too late to prevent the statement of defence being nled. ■'" The circular 'it-elf, however, though it shows the plaintiff coihpany to be in a i doubtful position, was issued for the purpose of convening a-meeting to see how the .company could be got out of that'position." ■ At the time , the circular, was issued the defendants had Applied tor hither time lor filing astatement of defend, andtherefore were under an obligation topromptly file it. Even, therefore, if the defendants had become aware of- the issue of the circular in time to enable them to withhold the tiling of their statement- of defeace I ! should have- some difficulty in holding that as the defendants weiv naden anobligation to file a statement of defence promptly; i.hs fiUhg of a statement of defence at that time was a waiver of the right to ask for security. The circular was issued for th« purpose of conventus; the meeting. •It might well be suid that uutil' the meeting was convened and the whole- matter broiight before the shareholders the defendant was justified in not aski..«r for security, but that he w_s justified in waiting t^g ee what the result .of the meeting would be... The portion of the; corapat.V at the meeting; on the 22nd of June shows that tha company.then-wss in a very bad way indeed and tne chairman status this : that if the company were to go into liquidation the shar'-hoMers would jret nothing; and, accor-iing to thefslattment of the ohairman, the possibility of liquidation was then imminent.' I think,there can-be no u.-nibt that tne position' of the company as,disclosed in the report ofthe meeting of tbe 22nd of' June shows that any defendant against, whom- the "company hud brought an action was justified under the provision.in'the Companiea Act in »ski»g for security tor co^ts,; unless it was shown in the clearest way Hiatvhe had waived his right '■ to such' security. _ or the reasons Ihave already given, I do not thiak that the defendants had waived their right to ; such security. That being; the position- of things after the 22nd Of June, tbefquestion arises': Has the position of the company since then so altered that the court can Say that the defendahts liave no longer any right toask for' security ? To show that the position of the ciiipany has altered lies as strongly as possible upon* the company itself, and >ts repre-entatives>'-'I do n»t .''think that there is sufficient materialJbefore mo to show that if the defendants had, after the meeting of ..the iznd of June, the riaht to ask for security, the position of the compauy has s-i; tittered for the better as io deprive them of tain right, It appears that the. whole assets-of' the company including the uncalled capitalf are under mortgage to the Bank of New ii Zealand. There is s very large overdraft. There are statements and -.. affidavit that the :5: bank is not now pressing for that overdraft, and also that aitieient persons bave come forward and are willin^ to guarantee' in various sums' an amount equivalent t-> th* --mount of that overdraft. Ido nor think that these facts sufficiently alter the position.ot-the company, as di-cidsed at the meeting ofthe 22ad of Ji.ne, as to deprive the defendants of the light to security. There" is nothing to Show, that-theirs any undertaking or ogree'ment with the Bank of New Zealand to carry on the company for , any definite time. If <he bank chose for any l-sason whatever fo call up th» overd'aft at any time whatever, there is nothing so far as it appears to preveßt th<-iii; and if they do call it up, the fact xhat it may be met by the' persons who gnaiunteed it does not really improve the position of the company.'The guarantors would become creditors of t'-:e company instead of the b»nk. If the-.bank called iip the overdraft it seems re«o_able to (.appose that liquidation must tollow, and if liquidation follows we have the chairman's statement at the meeting that there would be nothing for the shareholders furthermore, it is difficult, to see/in the event of the der«nnant« being successful, oufc ofwhat part of the assets of the company these costs will come. All thc^ ■•s*els-_of the-company are und r mortgage to the bank. If the defendants are -successful Jiers is really nothing to levy execution upon, lt they are successful the question of whether they will get their costs'or not will really depend upon this : whether at the time their right to costs accrues the Bank of New Zealand i R williii" to advance to ihe comp^y-the amount of these costs. Futtiug it in the best way possible I the queatipa of whtther the defendants, if successful shall pet thei- costs-^depends upon the pleasure ofthe Eaok-of New Zealand. I thick/for these reasons, that the defendants are entitled to sufficient security. ; ■■ ■-■ ■• ■-•■■ air Sim asked his Honor to fix the amount for which security was to be g yen; and said'tbat the plaintiffs were m a position to give security, so the other side need not think that they were going to stop the action. * Ki^°_ or .I? ade the following order: Security for£3oo to the satisfaction of -the registrar of Invercargill to be given within 14 days. If not giveu within that time all proceedings t-j be stayed. . No cost-!. ?