CHARLES BEGG AND COMPANY

Otago Daily Times, Issue 19964, 4 December 1926, Page 9

CHARLES BEGG AND COMPANY

PETITION TO WIND UP. SUPREME COURT PROCEEDINGS. A SETTLEMENT REACHED. A greater portion o£ the time of the Supreme Court yesterday was taken up with a petition by Alexander Milne Begg praying for the winding-up of Chas. Begg and Co. (Ltd.) under the provisions of the Companies Act. His Honor Mr Justice Sim presided. Mr W. 6. Hay, instructed by Messrs Lang and Paterson, appeared in support of the petition. Other counsel were —Mr C. L. Calvert, for the company; Mr J. B. Callan, for Mr Kerr, Mr John Kerr, Miss Florence Kerr, and Mr Colin Kerr; Mr A. C. Stephans, ior Charles Eric Begg, Mrs Williamson, Mrs Catherine Begg, Mrs Wishart, Miss M. J. Begg, and Mrs Isabel Fraser; E. Barrowclough, for Mrs Mary Kellas. Mr Hay, in opening the case, said that Mr Alexander Begg had been managing director of the company since its inception in July, 1908. In the 'sixties the late Charles Begg established the business for the sale of musical instruments, and it went on till he died in "1897. In 1899, the family at that stage consisting of the widow and her children, it was decided to float the family concern into a public company. The assets were then £27,000. In 1908 the company was reconstructed, and the shares distributed amongst members of the family. The assets had increased. till to-day they were worth £158,588. Tn his affidavit Mr Alexander Begg claimed that the true value of 'the assets would be somewhere about £200,000. Throughout the period the petitioner had been managing director of the company, and he claimed that the success of the business had been largely due to his efforts. At the present time he found himself in an unfortunate position. Mr Hay went on to trace the history of the company, and said that the company, being a family concern, had, with the acquiescence of the shareholders, made advances to certain of the shareholders from time to time against their holdings in the company. At the present time the petitioner owed to the company £12,000 in respect of such advances. Other members of the family had also had advances. The company now demanded from the petitioner payments of the loans made by the company to him, and had commenced an action to recover it. Petitioner had confessed judgment that he was not in a position to repay the money without having to resort to the shares held by him in the company. These shares he assessed at a minimum value of £41,776. All the shai’eholders knew that the petitioner was obtaining the advances, as these appeared in the reports of the auditors.

His Honor: What has all this got to do with the winding-up of the company? _ Mr Hay said it was alleged that the petitioner was in debt to the company without the consent of the shareholders. Counsel then went on to enumerate the advances which other shareholders had had from the company. Owing to the concern being a private company, and owing to the restrictions on the transfer of shares, and that the shares were wholly held by members of the Begg family, persons who were not already shareholders were not disposed to purchase shares, a. fact which tended to prevent petitioner from selling at a fair value. If the other directors chose to force the position it would ruin the petitioner. He suggested that the affidavits of the others showed that the purpose was not really to claim the £13,000 (the £12,000 advanced to Air Alexander Begg, together with interest). The w'hole affair had arisen out of feeling between the members of the family. There was no trouble until after the death of Margart Hunter Begg in 1922. The minutes of the company showed that there was no indication of trouble till then. There was no disputing the fact that Mr Alexander Begg was thoroughly conversant with the affairs of the company, and he must have known more about them than any of the others. Only that morning the petitioner had offered to retire from the directorate, and have the present private company formed into a public company, so that he could withdraw his money in a few years. That was as far as Mr Alexander Begg could reasonably go. In his affidavits it would be noticed that Mr Begg had said that orders of his had been countermanded. His Honor: Is that admitted to be the position? Is the allegation disputed? Mr Hay said he did not think it was denied. Mr Calvert said it was not admitted that there was a deadlock. His Honor: Well, it looks like it. and it will spell ruin to the company if this state of affairs continues. Mr Hay said that petitioner could not agree to leave the management to Mr Thomas Ritchie and Mr Charles Eric Begg, the latter having little experience, and being only 27 years of age. Mr Alexander Begg claimed that he had dismissed a servant of the company, but that he had been reinstated and paid a salary against his wishes. Mr Alexander Begg had suspended Mr Charles Wishart and deprived him of his keys, and called a meeting of directors to consider the matter. Mr Charles Eric Begg, however, restored the keys and reinstated Wishart without consulting him. A meeting of directors was. held, of which no minutes were kept, and Wishart resumed his duties, notwithstanding that Mr Alexander Begg had suspended him, and notwithstanding the protest. His Honor: A discrepancy, it is called. Mr Hay: It also indicates the feeling which Mrs Wishart, one of the directors and a big shareholder, has against petitioner. His Honor: Naturally she would. Mr Hay: Naturally the petitioner feels that none of them will help him in respect to the enforcement of the £13,000. His Honor: Why doesn’t a wealthy company like this settle its difficulties in private? It is washing its dirty linen in public. Mr Hay said that if Mr Alexander Begg were given time to pay he was agreeable that his dividends should go into the company, and he would not be a loser. If petitioner retired from the company he would have an unsatisfied judgment hanging over his head, which was most unsatisfactory for a man of his position. Mr Begg had gone as far as it was possible for him to go. The petitioner had been put in the position of being shot from the top storey of the business into the gutter. Mr Begg asked for £IOOO a year, and that was not acceptable. His Honor said that Mr Mondy, acting for the directors, suggested that it should bo for two years only Mr Hay, continuing, said that Mr Begg did not consider that ho bad been well treated. Matters had got to a stage when there was almost fisticuffs between the petitioner and Mr Charles Eric Begg. There were 70,000 shares in the company. Mr Alex. M. Begg hold 11,900 of these, the estate of Mrs Elizabeth Kerr 10,000, the estate of Margaret Hunter Begg 2200. His Honor said that no director could vote with respect to Mrs Kerr’s estate, so there must bo a deadlock. Mr Callan said Mr Hay had not yet read the correspondence, which would show that very fair offers had been made to the petitioner. His Honor would see where the negotiations crashed. Mr Hay wont on to say that Mr Alexander Begg had given a life service to the company, and was entitled to some recognition of that service. The petitioner could go no further than make the offer to retire from the directorate and make the company a public company. Petitioner, however, had been forced to confess judgment. Counsel said it seemed that the parties should have come to an agreement. In fact, it was tragic that the matter should como before the court in this way, bpt Mr Begg felt there was nothing else for it. Mr Begg stressed that he was not being properly treated by Mr Charles Eric Begg, who. to a large extent, was usurping his position ns general manager. Mr C. E. Begg was being supported bv his two aunts —Mrs Wishart and Miss Mary Jane Begg. Mr Hav went on to say there was every reason why the comoanv should bp made a public company. It bad assests of nearly £200,000. It was unfortunate, repented Mr Hav that the affairs to bo made public. His Honor: I suppose because there arc too many ladies in it. It is always the wav. Mr Hav said the confidence which the bank had in the company was shown bv the fact that its limit to the overdraft it we-dj allow the company was £92.000. His TTonor asked, whv it was necessary for such a company to have an overdraft. Mr Fry :aiV? f|i-< Wellington and Christchurch branches had proved huge successes, but he questioned whether they

would continue successful if left in the hands of the men it was proposed to put ia charge. Mr Alexander Begg had managed the business for over 30 years, and, though his control might bo criticised in detail, there was the fact that the company was extremely prosperous. By his initiative and enterprise, Mr Alexander Begg had been largely responsible for the phenomenal success of the company. Mr Hay went on to quote the dividends of the company in recent years, and pointed out that there was a reserve fund of £58,000. His Honor again remarked that it was regrettable that the case had not been settled out of ooui't. Mr Stephens: We have not brought the matter before you. Mr Hay said that the petitioner claimed that his experience was essential to the business. The other side said that was not so Petitioner was now willing to retire provided ho got his money out of the company. Learned counsel wont on to refer to allegations that had been made against petitioner. His Honor: The worse petitioner’s conduct is made out the more reason for the matter being settled out of court. Mr Hay, continuing, said that immense profits had been made out of the hire purchase branch of the business, for which petitioner was largely responsible. Mr Charles Eric Begg was at present manager of the gramophone department, and it was suggested that he should take a prominent part in the management. His Honor: I note that he was admitted a solicitor of the Supreme Court. Mr Hay: “That probably .accounts for the non-committal nature of a resolution passed at a meeting of directors.”— (Laughter.) Mr Hay said that thei;o had been various alterations to the premises at some of the company’s branches’ and subsequent events had proved that these alterations were fully justified; although they were opposed by some of the other directors. It had boon arranged by the other directors that in the event of petitioner retiring from the company as genera! man ager, Mr Ritchie and Mr Clias. Begg would assume control. Mr Ritchie was to be appointed genera! manager, and was subsequently to receive the appointment of managing director. One could quite understand the attitude of Mr Begg towards Mr Ritchie, who was apparently standing by to step into his- (Mr Begg’s) position. It was after the death of Margaret Hunter Begg that trouble arose in the family, and consequently in the company. The throe directors signed a letter sent to the office urging that Mr Alex. Begg bo not paid any moneys, and he had received no moneys from the company since April last. Mr Begg contended that with his experience he was essential to the business, and the others apparently thought he was not. Although Mr Begg had not been deprived of his position as general manager or managing director. Mr Chas Begg bad sent instructions to the company’s branch managers stating that they were not to take any notice of Mr Alexander Begg. Mr Ritchie had acquired all his experience under the petitioner. Mr Stephens said the offer referred to by Mr Hay was made only this morning. Other counsel said they had heard of the offer only before the case this morning. Mr Stephens pointed out that an offer was on record in a letter sent to Mr Begg on November 17. His Llonor, in referring to the offer in that letter, said he did not see why C. E. Begg should not go out as a director the same as the other directors. Mr Barrowclough said there were two ways of adjusting the matter. One was by ” liquidation and the other by arrange ment. The method by arrangement could not bo carried out until the present petition was dismissed or adjourned. His Honor said he certainly thought that C. E. Begg should retire as a director with the others. Mr Callan said they could not hope to got independent competent business men to go into this concern while there was a danger of thrusting their noses into a His Honor: A hornet’s nest. Mr Callan humorously remarked that one would expect a musical business to be one of harmony. Apparently people might pro-, vide music for the public and have discord among themselves. His Honor asked if Mr Begg were willing to accept £IOOO a year for two years under the proposal of the other side. Mr Hay said Mr Begg did not like to think he was being pushed. His Llonor: He need not bo pushed; he should resign. Mr Hay: He is prepared to resign provided an independent board may say whether ho is fit or not.

Mr Calvert: Mr Eric Begg does not want to stand in the way. Mr Hay said ho thought the intention was to reconstruct the company, and alter the articles of association so as to provide for a board of four directors to hold office for a period of seven years, the hoard to consist of independent men. Provision should also be made for forming the business into a public company, His Honor suggested that during the luncheon adjournment counsel should discuss the position with a view to coming to a settlement. The course was unanimously agreed to. The court did not resume, but it was announced Into in the afternoon that a settlement had been arrived at, and the case would be called on Tuesday, when it was hoped that a written agreement between the parties would be submitted to the court for its approval.