PAYMENT NOT MADE

Poverty Bay Herald, Volume LX, Issue 18193, 14 September 1933, Page 11

PAYMENT NOT MADE

VOTE TO DIRECTORS BALANCE-SHEET ERRQR UNUSUAL COURT CASE (Per Press Association.) AITCK'LAND, (his day. A sum of C 1 non voted at tho shareholders’ annua] meeting to directors for their services, and a subsequent discovery that instead of a profit of U 5000 tile company had made a loss of .2 3200, led to an unusual action in tin' Supreme <Ymrt. Charles John .McCulloch, a company manager, who was one of the five directors, claimed C2OO front the Putaruru Pine and Pulp Co. (N.Z.) Limited, as his share of the .ClOfio, which had never been paid. In a. counter-claim, the company asked the court, to rescind the resolution voting the directors .Clooo on the ground that the balance sheet, showing a. profit of ,Cf.ooo was incorrect. After legal argument, Mr. Justice Herdman asked: “Can you have a. more definite direction than that given by shareholders to directors to do a certain tiling? It was a definite order to pay, and if the directors did not pay, surely they could be sued.” In reph to his question, it was stated that the company was cat t ying on, and doing reasonably well. Counsel for the company said if would be a. curious position if the company had to pay to directors when it voted as the result of a balance sheet that contained a, false statement. The mover and seconder of the shareholders’ resolution gave evidence that they would not have moved it. had they known there was a loss, and not a profit. The present secretary of the company said tho dividend declared at the. first meeting had not been paid’. The company’s losses since its inception totalled £11,827. lie believed that the shareholders did not know till recently that the £IOOO had not been paid to the directors, and that they were now moving to have the resolution cancelled. The mistake made by the directors was in showing as assets 90 per cent, of the amount represented by tho sale of bonds, allowing only 10 per cent, of forfeitures.

Counsel for both parties made it clear that there was no suggestion of fraud against the directors. His Honor gave judgment for the plaintiff, with costs.