AFFAIRS OF COMPANY

Otago Daily Times, Issue 26853, 18 August 1948, Page 6

AFFAIRS OF COMPANY

SUPREME COURT INQUIRY SEQUEL TO LIQUIDATOR’S ALLEGATIONS P.A. CHRISTCHURCH, Aug. 17. An inquiry into the affairs of the Southern Cross Construction Company, in liquidation, was begun m the Supreme Court to-day. William Samuel Newburgh, company director, and Peter Belford Watts, public accountant, appeared on summons under section 216 of the Companies Act to show cause why they should not be debarred from acting as company directors or being concerned in the management of a company for such period, not exceeding five years, as the court might order. Mr Justice Fleming presided. Mr G. G. G. Watson, with him Mr A. C. Perry, appeared for the official assignee. Mr T. P. Cleary, with him Mr T A. Gresson, appeared for Newburgh and another, Mr E. S. Bowie for Watts. The current proceedings follow a hearing on June 23, when, on behalf of the official assignee as liquidator, Mr A. W. Brown said that Newburgh and Watts had supplied the official assignee with certain information which he would have sought at a public examination, which was, therefore, not now necessary. _ . , Opening the case for the official assignee, Mr Watson said the applications were based on allegations of fraud made in the assignee’s report. The action was brought not by way of punishment, but as protection to the shareholders. The proceedings were based on two specific charges of fraud, primarily that the defendants, whne acting as directors, improperly manipulated the moneys of the company to give preferential treatment to Newburgh, who was actually an unsecured creditor; also, that the defendants, knowing the company unable to pay its debts, incurred further debts. After evidence had been given by Mr G. W. Brown, official assignee, Mr Cleary opened the case for Newburgh. “We are called upon to answer two specific charges relating to a limited period and what happened to a company. Before the respondents came into the company does not concern us,’’ said Mr Cleary. “When anyone makes a charge of fraudulent misconduct it is necessary to bring clear proof of dishonest intent carried into practice. The respondents’ conduct must be shown to be. attributable to a calculated intention to deceive. It is for the court to say, after hearing the evidence of the respondents, whether the charge of fraud is proved or whether it offers an innocent explanation of the conduct complained of by the official assignee. “ The whole transaction m 1943 when the company was reorganised was carried out under legal advice,’’ Mr Cleary continued, “ and Newburgh was assured that everything was in order. Within a few months of advances being made to Thompson and Roberts £3BOO was credited to their accounts and it was truer to say that £3OOO was advanced to them without security and not £6875. The directors considered it reasonable to make the advance because they considered it could be repaid from profits within two or three years. In the five years ended in September, 1943, the company provided for its shareholders an average of more than £3OOO a year on a capital of £IO,OOO. There is no evidence to warrant the suggestion that the company should have gone into liquidation in 1943, for it had good prospects which, however, were not realised because of heavy losses on contracts.” Mr Cleary was interrupted by the adjournment until to-morrow.