£880 CLAIM

Sun (Auckland), Volume III, Issue 638, 15 April 1929, Page 10

£BBO CLAIM

CREDITOR OR SHAREHOLDER? COMPLICATED CASE A claim £or £BBO, the balance of a loan of £I,OOO made in March, 1923, was argued before Mr. Justice Kennedy in the Supreme Court this morning. The plaintiff was Leslie Arthur Cannon, warehouseman, who claimed against Thomas Archibald Felton, accountant (Mr. A. H. Johnstone and Mr. Uren), as liquidator of Foote Brothers, Ltd. In March, 1923, wnen the plaintiff was employed by Foote Brothers as a commercial traveller, he lent tne company at its request the sum of £I,OOO. Plaintiff said that a proposed agreement about this loan was never actually drawn up, but half-yearly interest at 7 per cent, was paid him regularly till March, 1927. In December, 1927, Foote Brothers went into voluntary liquidation and defendant Felton was appointed liquidator. Felton agreed to set aside an allotment of preference shares in Foote Bros., Ltd., alleged to have been made to plaintiff, and to admit his claim as an ordinary creditor in respect of the loan of £I,OOO.

Felton, as liquidator, in December. 1927, paid over an instalment of £l2O and undertook to pay the balance of £SSO. Plaintiff asserted that the shares alleged to have been allotted to him were never legally created by the company. He asked for judgment, declaring that the £I,OOO was and is a loan, that the alleged allotment of 1,000 preference shares of £1 sterling in the company was irregular and void and that plaintiff was entitled to rank as an ordinary creditor in the liquidation of the company for the balance of £SBO with interest.

The case for the defence was that in March, 1925, Foote Bros., at plaintiff’s request, issued him 1,000 fully paid up shares in the capital of the company and that he had accepted this in satisfaction of his loan of £I,OOO. If Felton had agreed to admit the claim of £I,OOO the agreement was made i«-ignorance of the facts and was void of legal authoritv. The shares had been duly created. The defence counter-claimed for £l2O and interest on the ground that it had been paid to plaintiff in the erroneous belief that plaintiff 'was a creditor of the company, whereas plaintiff was not a creditor of the company but a share holder in it. (Proceeding.)