CASE FOR COURT OF APPEAL

Southland Times, Issue 23538, 18 June 1938, Page 8

CASE FOR COURT OF APPEAL

SHARE TRANSFERS IN DISPUTE DISCORD IN INVERCARGILL COMPANY (United Press Association) WELLINGTON, June 17. The Court of Appeal is hearing the case of Miller’s (Invercargill) Ltd. versus Maddams. The case arises out of internal discord in a company known as Miller’s (Invercargill) Ltd. The company is carrying on business as drapers in Invercargill. The company was incorporated in 1933 with a capital of £lOOO, the shareholders being James Thomas Sharp (350 shares), respondent, George Maddams (300) and Sydney Albert Hanchard (350). The business was carried on in both Invercargill and Gore. The Gore branch was for a short time managed by the respondent and the Invercargill branch by James Thomas Sharp. Eventually the respondent retired. The company proved very successful and for the years 1935, 1936 and 1937 large directors’ fees were voted, Sharp getting the largest portion of them. Hanchard decided to retire and he offered half his shares to respondent who suggested that Hanchard should make up his existing difficulties with Sharp. Hanchard then saw Sharp and arranged to sell his shares to him. Finally the transfers of these shares were executed, covering 267 to Sharp, 50 to Mrs Sharp and 33 to Maddams. Difficulties then arose in the management of the company with Maddams and Sharp, as a result, transferred certain of his shares to nominees to give him greater voting power. In 1937 Maddams began an action in the Supreme Court in Invercargill claiming a declaration that the resolutions of the company approving the transfers of these shares by Sharp to his nominees were, invalid. He also claimed as invalid a resolution passed by the company in November 1935 fixing the directors’ fees at £6OO, of which £560 was made payable to Sharp, £2O to Mrs Sharp and £2O to him. JUDGMENT IN 1937 In his judgment delivered in the action in September 1937 Mr Justice Kennedy held that the resolutions relating to the shares and similar internal matters of company management could not be attacked but that the resolution of November 1935 awarding Sharp £560 or the total directors’ fees of £6OO constituted a fraud by a majority of the shareholders against a minority (Maddams) .and that it could not stand He said that the effect of the resolution was that Sharp had used his voting power to make a present to himself of part of the company’s funds which should have been available for distribution among the shareholders and he made an order that there should be repaid to the company £560 by Sharp and £2O by Mrs Sharp. An appeal from that order is being heard today. The company, Mr and Mrs'Sharp and other shareholders, with the exception of Maddams, are the appellants for whom Mr W. J. Sim and Mr L. J. Hensley (Christchurch) are appearing. Mr H. J. Macalister (Invercargill) appears for the respondent. Mr Sim said the only question to be considered was whether the resolution of November 1935 was in fact fraud on a minority of the shareholders and that the question was entirely one of fact. The court would have to consider the evidence and determine whether the judge in the court below had come to a correct conclusion on the facts. There was no dispute as to the law applicable.