IMPORTANT TEST CASE

Te Aroha News, Volume XLI, Issue 6408, 30 October 1923, Page 6

IMPORT ANT TEST CASE

BROOK v. CAMBRIDGE DAIRY CO. JUDGMENT RESERVED There was an echo of the dried milk boom at the Supreme Court at Auckland last week, when the difficulties into which the Cambridge Co-op. Dairy Co. got were explained during the course of an action by a shareholder to recover moneys in payment of which, he alleged, he had been allocated shares. Plaintiff was Alfred Arthur Brook (Mr Anderson) and defendant the Cambridge Co-op. Dairy Co. (Mr Johnson). Mr Anderson explained that plaintiff had supplied the dairy with milk and butter-fat during 1921 and 1922. At the end of the 1921 season there was due to him £44, and the next season £175 14s Bd. Instead of paying the £44, the company, without the plaintiff’s consent, allotted him £1 shares fully paid up, purporting to be in satisfaction of his claim. He claimed the amounts owing with interest at 8 per cent. Cross-examined, plaintiff recalled the meeting at which the company decided to erect a dried milk factory, but did not know how it was going to be financed. It never worried him. He admitted signing a joint guarantee to the bank. “I signed it because they were all singing it.” He knew that it had something to do with the raising of funds for the factory. Two other shareholders gave evidence, this concluding plaintiff’s case. ■Mr Johnstone stated that the company in 1918 decided to erect a dried milk factory. At that time dried milk was at a fabulous price, and it was thought that this was the solution to the difficulties of farmers in the Waikato. It was decided to borrow £33,000 from the bank, the usual practice, as the shareholders could not afford to increase their capital. A joint and several guarantee was given to the bank signed by 136 shareholders, including plaintiff. It became necessary to increase the borrowing to £63,000. As a matter of fact the factory cost almost double that sum. The bankers refused to go beyond the £63,000, and the shareholders agreed to the diversion of as much as 5d per lb butterfat during the season of 1921 for completing the factory. In . x July a specific resolution was passed authorising the directors to hold 3£d a lb from the payment to suppliers. Edwin Allen, formerly chairman of directors, said that the shareholders told the directors in 1918 that if they did not start a dried milk factory they would transfer to other companies that would. When it was found that the £63,000 would not meet the cost, a meeting of guarantors was held in November, 1920, at which it was intimated that nothing further could be expected from the bank. Two resolutions were passed, one that the directors should continue to finance from current account and the other that at least 5d a lb should be deducted. He thought all agreed to this. Witness resigned from the directorate after this. His Honor, in the course of crossexamination, said that the only question he was concerned with was whether these diversions were made lawfully and whether plaintiff was bound. Mervyn Wells, chairman of directors since May, 1921, referring to a special meeting in July, 1921, said that he moved • certain resolutions, which were confirmed at a later meeting. One resolution was that 31*1 a lb should be deducted. It was essential that any dissenters should be recorded and he as chairman gave them the option of objecting at the meeting or of recording their objections at the office later. 'Mr Brooks did neither. To His Honor: From his discussion with Brooks witness was clear that the latter knew that the 3£d had been retained and for the purpose indicated. His Honor remarked that the chairman at the meeting at which the proposal as to diversion was being voted on seemed to have taken particular care to ascertain if there were any dissentients, and if so, who wei’e they. A show of hands was taken, and then they took the people standing up. Then dissentients were invited to come forward if they did not choose to come forward at the meeting they could record their names at the office. Seeing that they took all these precautions, plaintiff being present and not making himself known as a dissentient was there not an obligation upon him to say “You are wrong; I dissented from the first!” Mr Anderson: Not necessarily. His Honor: Does it not go to minimise his statement that he did dissent ? Mr Anderson: He was under no obligation. His Honor: T think he was under an

obligation. He is a shareholder as well as a supplier. Mr Anderson said that plaintff was a creditor so far as his money was concerned. The company should have communicated with all shareholders and have obtained their assent or dissent. Plaintiff had now taken steps to recover, and it was not as if there had been a long delay in making the demand. They had plaintiff’s statement that he dissented. His Honor said he was not sure whether it was not a metal reservation. Mr Anderson said Brooks had stated that he put up his hand, and it was quite possible after recording his dissent in that way he might have left the meeting. He was under no obligation to remain. His Honor reserved his decision.