FARMERS’ MEAT CO.

Taranaki Daily News, 2 July 1925, Page 8

FARMERS’ MEAT CO.

ACTION OF SHAREHOLDERS JOINING OF ALL PJAINTIFFS. COMPANY’S APPEAL REJECTED. COURT’S DECISION UNANIMOUS. (By Wire—Special to News.) Wellington, Last Night. The question of the right to rescind a contract to take shares in a company occupied the Court of Appeal today, the court comprising the Chief Justice (Sir Robert Stout) and Judges Sim, Herdman, McGregor and Alpers. The case was one in which Dann Le Cren Morgan applied to have his name removed from the list of shareholders of the Taranaki Farmers’ Meat Co., Ltd. - Mr. D. R. Hoggard (Wellington!, instructed by Messrs. Govett, Quillians and Hutchen, appeared for the appellant company, and Mr. L. M. Moss for the respondent. Respondent was the plaintiff in an action against the appellant company in the Supreme Court to have his contract for shares taken in an issue of 12,000 £-5 preference shares rescinded, his name removed from the register, and the money returned to linn, upon tiie alleged grounds of false representation as jto Abe opening of the company’s jfcJlWir'fcs, carrying on freezing on consignineat and the financial arrangements made and to be made with the Bank of New Zealand. In the original action the respondent sued for himself and in a representative capacity for 112 other subscribers to the company's share issue. Hie statement of claim was ordered to be amended so far as it related to the plaintiffs other than Morgan on the ground that a wrong form of procedure laid been adopted, which, however, did not prejudice the company. JUDGMENT OF SUPREME COURT. The judgment of Mr. Justice Ostler was that the" 112 shareholders followed up their repudiation by active steps to be relieved of their sliares. They were joined m a representative action, whereas they should have sued as co-plaintiffs. It would be, he stated, an injustice if they were deprived of their rights because their action was wrong in form. ” It was against this decision that an appeal was made by the company. A preliminary objection was raised by Mi. Moss that the notice of appeal was premature, as the orders, as sealed by the appellants, were defective. A summons had been taken out on behalf ot the respondent for amendment of the orders. The court reserved these points for consideration if necessary, and granted Mr. Moss leave to file an affidavit showing that the draft case on appeal had never been submitted to him by the appellant’s solicitors before being printed. The court also gave Mr. Moss the opportunity of stating the facts omitted from the printed case. Mr. Hoggard, for the appellant company, based his arguments on three main grounds: Firstly, that the action being instituted as a representative action was not necessarily therefore an action commenced with the consent of the parties represented, and -could not be treated as equivalent to an action in which all were joined; secondly, that it did not appear from the proceedings that the first cause of the case relied upon by the plaintiffs gave rise to the same question of law or fact to be determined, and that even if it did the joinder was not in order in view of the decision in the case of Dalton v. the guardians of St. Mary’s Abbots; thirdly, that the plaintiffs could not have instituted effective proceedings to secure rescission before liquidation. The rights of innocent third parties having arisen, it was too late for other parties to be joined in the action instituted by Morgan, which, by the just order of Mr. Justice Ostler, had ceased to be a representative action, and became an action by Morgan aloue. CASE FOR SHAREHOLDERS. Counsel for the respondent stated that Morgan was the secretary for a body of snareholders in New Plymouth and the surrounding district. These people, tlirough their secretary, had asked the company- for information of its dealings with the bank and the financial position of the company. There were delays in giving the.information until shortly before a general meeting, at which the company went into liquidation. In view ■ot the course taken by the company the committee decided to issue a writ on behalf of 113 shareholders, and a copy was served on the company- the day before the meeting. Counsel submitted that the company, in asking the shareholders to wait until after the meeting, was endeavouring to delay the shareholders, knowing that after that meeting, where a motion to go into liquidation would be passed, it would be too late to take action. Action was taken by Morgan on behalf of himself and the other 112 shareholders whose names the company had in their possession. The company then moved to have the writ set aside, and Mr. Justice Ostler refused to do this and made an order to join the 112 shareholders as co-plaintiffs. Counsel pointed out that the shareholders desired to be joined in the action taken at their request, and to have refused the joinder would have permitted the company to take advantage of its attempt to thwart the action by the shareholders and would have penalised them for bona fide negotiations with the company. The shareholders had taken the course which meant the least delay, and expense. At the last moment tlw company turned down a request to have one action taken as a test ease, and now sought to take the unfair advantage ot a last moment refusal. Mr. Moss submitted that, on the authorities, the shareholders had taken the necessary steps, and the Court of Appeal had power to say whether under the circumstances what had been done was the act of reasonable men. THE COURT’S DECISION. Mr. Moss proceeded to quote authorities, when the Chief Justice intimated that the court did not require further authority, as it was satisfied that the appeal could not succeed. In giving the decision the Chief Justice said: “I am of opinion that this appeal should be dismissed. A representative action was brought by plain- * 4,iff on behalf of liimscl’ and 112 other shareholders. It was an action claiming proper relief and otherwise a proper action, although perhaps not in the

proper form. It seems clear from the authorities that the proper course was for the 112 shareholders all to be plaintiffs in the action and that a representative action should not have been brought. The representative action was set aside and leave was expressly reserved to join the 112 parties as coplaintiffs. Now the 112 other shareholders have been joined as parties. The court had ample power to do this when necessary, and I am of opinion that the court was right in making the order that it did. The appeal will be dismissed, with costs on the lowest scale as from a distance.” Mr. Justice Sim said there was amply power under the Supreme Court rules for the course adopted by Mr. Justice Ostler in joining the 112 shareholders as co-plaintiffs in the action with Morgan. He agreed with the Chief Justice that the appeal should be dismissed with costs. Judges Herdman, McGregor and Alpers concurred in the judgments delivered.