THEATRE BUILDING

Taranaki Daily News, 27 November 1934, Page 5

THEATRE BUILDING

ENTERPRISE AT HAWERA MOVEMENT BY A SHAREHOLDER. HEARING IN SUPREME COURT. A petition for the compulsory wind-ing-up of Taranaki Amusements (Ha- ■ wera) Limited was heard by Mr. Justice .Smith in the Supreme Court at New Plymouth yesterday. The petition was brought by P. F. Donnelly, shareholder and director of the company. His main ground was that the company had not commenced the operations for which it was formed within a year of incorporation. The defence maintained that the company had commenced in some proportion those operations and that Donnelly had no right to petition, as it was alleged that were the wind-ing-up to be carried through there would ■be no benefit to anyone. His Honour reserved his decision. Mr. R. J. O’Dea (Hawera) appeared for Donnelly, Mr. A. K. North (Hawera). for the company and Mr. J. C. Nicholson (New Plymouth) for the shareholders other than the petitioner. Witnesses were put into the box by both sides for cross-examination upon matters relative to their affidavits. The facts of the case were that the company, was formed as a subsidiary to Taranaki Amusements (New Plymouth) Limited to build a theatre at Hawera, land in High Street being purchased from Donnelly to a value of £BOOO. Donnelly was paid £2OOO in cash raised by the allotment of other shares, and took 2000 -fully paid-up shares and a first mortgage of £4OOO was left on the property. An article in the memorandum of association provided that in the event of winding-up there should be no equalisation of shares. The building of the theatre projected when the company was formed in 1928 was - not proceeded with, although plans were obtained. The reasons for that were the introduction of sound films, ,an agreement by the existing Hawera Theatre Company with Wellington interests and general depression. The directors discussed the advisability of selling the property, but at the present time the majority opinion was to sustain a minor loss annually by holding it in the belief that in the future conditions would improve sufficiently to enable the company either to build or sell the property at a better figure. PETITION OPPOSED. The petition was opposed as it was thought that a sale at present would not provide any surplus, which would probably be available if the land could be retained till a suitable opportunity for sale occurred, failing the possibility of the erection of a theatre. i The petition was brought by a contributor to the company, said Mr. O’Dea, on two grounds: That the substratum of the company had gone; and that the company had failed to commence . its business within a, year of incorporation. Dealing with the first ground, the object for which the company had been formed had gone. There were no prospects that the objects of the company would be carried out. It had been proposed at a meeting in 1932 that the property be sold. This had been endorsed by the members. The petitioner, was asked on October 2, 1934, if he would consent to voluntary, wind-ing-up, clearly indicating that it was not intended to proceed with the objects. The only defences raised apparently were that voluntary liquidation was desired. Mr. Nicholson said no liquidation was wanted but, if the court thought it right, voluntary liquidation was asked for. If he came to the conclusion that the company should be wound up, said His Honour, he would adjourn the action to give an opportunity. The second .ground of defence, said . Mr. O’Dea, was that no one would benefit from the winding-up. Even if the company was insolvent, that was no justification for the court refusing an order. Concerning the allegation that the company had not commenced its business within a year, Mr. Nicholson said that it was not admitted. Witnesses were then cross-examined on their affidavits. Peter Francis Donnelly, stationer, Hawera, said to Mr. North he had had no personal experience of the theatre business. He had valued at £Bsoo' the land sold in 1928 for £BOOO./He would not agree there had been a fall' in the value of all land at Hawera. He did not knqw that in a recent valuation there was no-land valued .at more than £95 a foot. NO KNOWLEDGE OF RENTALS.

He • was - a director but had no knowledge of the present rentals of the property, or whether they covered the first mortgage of £4OOO. The depth of the section in this particular case added greatly to the value, although that did not apply to High Street, Hawera, sections generally. In this case the frontage to Little Regent Street was valuable. When the directors decided not to erect a theatre he wanted them to go on, and still wanted them to carry out the promises made —10 per cent, and director’s fees —when he sold the land.

The only directorial experience he had had was in a building society, and in his own private company. In 1932 he declined to re-purchase at £BOOO the property he had sold for that price. It was hard to say whether times were better now than then. He took the view that if the company were wound up and capital were called up he would desire the liquidation, but not if no capital were called up. He would not have sold* the section if he had not expected to receive 10 per cent, and director’s fees. To Mr. Nicholson, Donnelly said he understood plans for a theatre had been prepared by Mr. T; H. Bates, New Plymouth.

Bernard Augustine Fama, builder, Hawera, told Mr. North he had never owned property in High Street. His business was largely the building of private houses. He had not overstated the position when he said in his affidavit that he had acted in an advisory capacity to the borough of Hasr tings. He had not been paid for his services there. He was not one of the recognised town valuers at Hawera.

His value of the buildings on the property was £lOOO, and their term of usefulness would be a number of years. The income, after deducting rates and upkeep, would be £169, equal to the interest at 5 per cent, upon £3400. Therefore, said Fama to Mr. North, if he advised purchase of the area at £7700 the outlay would return less than 21 per cent. He did not know that the limit of value in the recent revaluation was £95 a foot. ■ He had known of sales at £l6O a foot and £125 a foot before the depression. He would not advise the sale of the section in question at present, as it was a valuable area. He would advise holding any property as long as it was paying its way. Mr. North: Just what the company thought. Thomas Fergusson McKenzie, public accountant, Hawera, secretary of the company for 5J years, said he had prepared the balance-sheet for the last annual meeting and had shown the property at the original value. The com-

pany was at present working on an overdraft of a few pounds,, but there were calls of over £l2O due to the company since shortly after formation. To Mr. North, McKenzie said both persons owing the money were substantial and could find the money. No demand had been made. Mr. O’Dea suggested the money had been owing for over six years. Edward Percy Webster, accountant, New Plymouth, chairman of directors of the company, told Mr. O’Dea that the company had not built owing to the existence of various circumstances over which the company had no control. Those circumstances, he said, still existed, but he would not like to say if they would go on. He could not say if the Hawera Theatre Company still had' a business arrangement with two large picture combines, which had been suggested as a circumstance. He had not made any inquiries.

It could not be inferred from the company’s offer to sell the property back to Donnelly that all intention to build had been abandoned. He could not remember whether he had endorsed a view expressed at a meeting on December 22, 1932, that as it was highly improbable that a theatre would be built the property should be sold, even at a loss.

His Honour: You cannot remember your attitude two years ago? He could not remember, said Webster. The company had no intention of building at present and he could not say what the intention was in the future. A voluntary winding-up would save money as against a public winding-up. His Honour: Mr. O’Dea, what is your objection to a voluntary winding-up? To make sure of all the assets? —We want the property sold by public auction to realise its full value. Webster said to Mr. O’Dea that although the company had desired to sell in 1932 it was not desired to sell now. His Honour asked if it had not been hoped to combine with a theatre company which had instead gone in with the opposition company. Webster said the depression had had its effect and was perhaps worse now than in 1932. To Mr. Nicholson, Webster said he was not in favour of selling the property because he felt that at the present time it would be a sacrifice. If in a year or two the market had improved and it was still not expedient to build, he would have no objection to sale then.

Athol Grant, land agent, Hawera, gave his estimate of the value of the property as £4400, £lOO per foot being a fair market value. The road at the back was worth little as it could be done without, nor would the front right-of-

way be of any. value for any building other than a theatre. He had endeavoured to obtain offers for the property. Mr. O’Dea: Have you quoted a price to anyone?—l may have mentioned what I considered would be a price likely to be accepted. What was it?—£6soo. He would not say that the instruction by the late chairman to sell the property if possible was an indication that the company did not intend to build, said Grant. He had made an offer to buy Donnelly’s shares on instruction from Mr. C. H. Wynyard, secretary of Taranaki Amusements Limited, but the offer was later withdrawn.

To Mr. Nicholson, Grant said the price would be lower to-day than in 1932, and the loss on a sale more now than then. Garnet H. Saunders, company manager, New Plymouth, said he had one share in the company, but a subtstantial interest in the parent body. He had been connected with the picture business for 25 years. The reason for not building was the change over in types of picture entertainment making the building of theatres risky. Tire Hawera Theatre Company’s agreement with Williamson’s and Kemball’s would have some effect upon the matter. Mr. O’Dea: Is it not a fact that they then told you that if you built a theatre in Hawera they would build another in New Plymouth?

Saunders: They may have done so. I have no recollection.

Mr. O’Dea: You would have still built the theatre if conditions had been suittable?—Yes.

Saunders said the conditions changed after the property was acquired. He could not say when the building of a theatre might be favourably considered. Mr. O’Dea: Were you one of those who were in favour in 1932 of selling at a loss?

Saunders: Definitely no. I do not believe in selling anything at a loss. I was against selling. To Mr. Nicholson, Saunders said he thought the property could be held for a year or two with little loss. In 1928 it was thought an arrangement could be made with the Hawera Theatre Company. That had been made impossible by the arrangement of the Hawera Theatre Company with Wellington interests. That, combined with the slump and the change-over from silent to sound pictures, upset the plans made. A building scheme was prepared but it was entirely unsuitable for sound pictures. He could not say what the charge for the plans was, but it was fairly substantial. Government regulations now required the obtaining of a Government license for the operation of a theatre. The pre-

sent site was an excellent one for a picture theatre. James McLeod, member of the Legislative Council, said he had no idea who the tenants of the property were. He had not spoken to them. He could not recollect precisely his opinion in 1932, although they would have been glad to get out if it could be done without much loss. The first move came from Donnelly. To Mr. Nicholson, McLeod agreed with Saunders’ evidence in the reasons given for holding up the building. It would be hopeless to try and sell the property to-day. His view as one interested in theatres was that it was hoped all along to build a theatre at Hawera, but it was ridiculous to think of it now. He would retain the property for a while as he did not think the bottom had fallen out of Hawera by a long way. John Alfred Duffill, architect, Hawera, said he was a recognised valuer. At the recent Hawera valuation the highest valuation was £95 a foot excepting corner blocks. In several syndicates and partnerships he held much High Street property and was a believer in it. Duffill disagreed with Fama’s values. The frontage to Little Regent Street and the right-of-way were of little value, and the Lack sections were useless. One could not draw any inference as to the value of the property now possessed from the two instances given by Fama. To Mr. O’Dea, Duffill said he thought the drop in values had been arrested and the figures were likely to go up. Mr. O’Dea: Are you not a director of the Hawera Theatre Company?—Yes. Mr. O’Dea: Would not the erection of a new theatre affect the Hawera Theatre Company? Duffill (to His Honour): Am I required to answer questions about the Hawera Theatre Company? Mr. O’Dea suggested there was the question of bias. Mr. North said that, if Mr. Duffill was being called to support the petition, his chairmanship of the Hawera Theatre Company might have some importance. As it was he would not lose “much sleep” if the Taranaki Amusements (Hawera) Limited were wound up. Mr. O’Dea did not press the question and began his argument. The most important point was that the company had not commenced its business within a year after incorporation. Mr. O’Dea gave numerous authorities showing that where a company could not continue the object for which it was formed a winding-up petition could be granted whether the company was carrying on part of the objects, whether it was solvent and whether a majority of the shareholders wished to continue. Mr. North argued the point as to whe-

ther the petitioner had established, not merely alleged, a surplus in which he could participate. There had also been a very faint suggestion of misrepresentation, said Mr. North, but he submitted His Honour could not take any notice of that. All that remained was the property and the effect on it of the present conditions. Mr. North submitted that Fama’s evidence was weak. His Honour: Fama’s evidence cannot weigh against the evidence you have called.

Mr. North proceeded to outline the position of partly paid-up and fully paidup shareholders. Neither from the property or any other cause had the' petitioner established any justification. Mr. O’Dea’s allegation of failure to commence business was really suspension. Land had been bought and plans prepared before circumstances interfered.

In this case Donnelly was the vendor, selling to the co-shareholders for £2090 cash and £2OOO paid-up shares in 1928, just before the slump, and now he wanted to force the company to sell, involving it in considerable loss. He submitted this was a case for the court to use its discretion.

His Honour: Does the petitioner's claim that there will be a surplus become affected by the valuations I have heard?

Mr. North said there was the first mortgage of £4OOO to be cleared off. A statement had been prepared for Mr. Donnelly in 1929 showing how values had dropped. There was also the view that if the property was held it would be valuable. Both theatre buildings at Hawera were old wooden buildings, and the present site was extremely valuable. His Honour said he had been most impressed with Mr. North’s first point, and before Mr. North and Mr. Nicholson went on he would like to hear Mr. O’Dea’s answer upon the rights of a fully paid-up shareholder to present a petition.

Mr. O’Dea gave his answer, citing cases that this did not affect the particular case.

Mr. North submitted that Donnelly had not established his right of petitioning and that, even if he had the right, the granting of the order was in the discretion of the court.

The business was commenced, said Mr. Nicholson, by the purchase of the property, although later it was suspended. Mr. O’Dea’s argument was that the substratum of the company had gone, but it was submitted that it had been found impossible to carry on the objects of the company, which did not apply here. The whole point was if on a winding-up there could be any calling-up of capi-

tai. No one would receive any benefit on the. winding-up at present. Donnelly had no right to present the petition if he could not show he would receive some benefit. Mr. Nicholson proceeded to quote authorities regarding the distribution of surplus or losses in relation to the amount of capital paid up and calls upon those not fully paid-up.

Mr. Nicholson referred to his client company’s attitude towards selling the property, pointing out the large proportions of the liquidator’s fee that would have to be paid on the first mortgage by the New Plymouth company. He had estimated the sum at £250. The whole policy had been that the property should be nursed, .and when the time came either to sell or build. His Honour: You admit that you have not followed the business for a year?— Yes.

His Honour: They have got a ground for an order if they have established the right to petition. You will need very strong grounds in that case to prevail upon me not to make an order. Mr. Nicholson, replying, said the New Plymouth company was not insolvent and was prepared to carry a small loss till something definite could be done, and the majority of creditors were willing to carry on. The New Plymouth company was the only one involved in any money. Mr. O’Dea said there was no question of misrepresentation or other practices on the part of directors. There seemed an intention to abandon the original object for which the company was formed.

His Honour: What does your client really want? Does he want to sell? Mr. O’Dea: He is a large propertyowner and he thinks he can sell the property for more than £4400. His Honour: What if he does not obtain that figure? You and everybody have lost a lot of money. He is trying to force the petition in order to get some ready cash. Mr. O’Dea said Donnelly had 2000 fully paid-up shares, but against that had lost the income from the property for seven years.