COMPANY CASE

Timaru Herald, Volume CXXXIX, Issue 20058, 15 March 1935, Page 6

COMPANY CASE

LIQUIDATORS SUE FOR £33,820

A TOBACCO CONCERN

By Telegraph—Press Association AUCKLAND, March 14

An action brought by the liquidators of the Premier Tobacco Company against the company seeking the recovery of £33,820 was begun to-day before Mr Justice Herdman. The claim is made up of £15,000 for shares given to one W. S. Russell, £3820 cash from the company and £15,000 which went to a London syndicate under a contract which the liquidator claims the syndicate was not entitled to. Counsel said that the Premier Tobacco Company was incorporated on March 24, 1931, and its highly coloured prospectus- stated that it was being formed in conjunction with a strong London financial group with Continental connections. The prospectus asserted that amongst others connected with the company’s flotation were the Hon. Richard Joynson Hicks, Mr R. G. Stavely Dale and Mr John Remer, M.P. The prospectus said that the investing public would realise the importance of the strong London group’s intention to establish a New Zealand industry on Empire markets. Counsel said that the New Zealand directors were W. S. Russell, his brother who was now dead, and a Mr Milliken. His Honour: How much did the New Zealand public subscribe? “Lost Every Penny” Counsel: £23,000, and lost every penny of it. Not one penny piece had been subscribed in England. A cable message in connection with the proposal to form the Premier Tobacco Company had been received by Tobacco Growers (N.Z.) Ltd., of which Russell was managing director, but for reasons best known to himself he chose to deal with the matter himself. Tobacco Growers Ltd. was now in liquidation and had left its shareholders lamenting. Russell had admitted sending the cable message which formed the basis of a secret commission in which he received £SOOO in cash and 15,000 shares. In reply to a question by his Honour, counsel said he had been engaged in litigation connected with the Premier Tobacco Coy. for three years, and had .not yet got to the bottom of things. Counsel said that Russell in an affidavit said he had reasonable ground to believe that they would get the capital in. Counsel read a letter written by Dale in London in June, 1931, in which he said the position was almost hopeless. Russell, however, went on advertising that £170,000 was assured or guaranteed or underwritten in England. Since the proceedings had been launched, Russell had circularised shareholders putting his view and asking their help to stop the proceedings. This, said counsel, was clearly contempt of Court. Alleged Secret Commission Russell’s cable agreeing to the proposal that he should receive half fee for promoting the Premier Company formed the basis of the charge against him of receiving a secret commission, said counsel. The cable was followed by a letter to Alexander Ronne, of whom it might be said he was equally culpable with Russell in these proceedings. Ronne was a bankrupt carrying on in London the business of a free lance tobacco agent. The agreement da’;ed March 12, 1931, provided that the promoting syndicate should receive* from the Premier Tobacco Company £IO,OOO in cash and 30,000 paid up shares for its services. The syndicate never paid a penny piece for any of the purposes stipulated, neither did it raise any capital. The two main charges against Russell were that he received a secret commission and that acting as a director of the company he sanctioned the huge payment of £IO,OOO and 30,000 £1 shares to a nebulous concern that had never in any way met its obligations. Russell had received £3BOO in cash. Counsel said he could not say exactly who were members of the syndicate. Its documents were signed by different names, and the deduction he drew was that it was a nebulous and fraudulent concern. Counsel referred to the directors of the syndicate as including “two undischarged bankrupts and a penniless lord.” His Honour: Lord Brentford is not penniless, is* he? Counsel: Perhaps not exactly penniless, but I wili place facts before the Court to show he is a person of no standing in the business community. His Honour: He,is a son of the late Sir William Joynson-Hicks? Counsel: That is so. Counsel added that the promotion agreement was a bet of £40,000 to nothing. Twelve months after Russell had been informed by Dale that the position for raising money in London was well nigh hopeless, he went down to defraud unfortunate tobacco growers in Nelson with the published statement in May, 1932, that “capital to the extent of £150,000 is subscribed, guaranteed or underwritten in London to the satisfaction of the New Zealand directors.” In Septmber, 1931, Russell advertised in a financial journal that of the company s 250,000 shares 170,000 had been issued in London. Later Russell persuaded the shareholders that if he went to London he could do something to pull the company out of the mire. That trip cost the shareholders £9OO. and while he was in London the company went into liquidation. Assets and Liabilities Dudley Norton Chambers gave evidence that when the Premier Company went into liquidation the only assets were office furniture worth a few pounds, tobacco in bond, which had gone mouldy, uncalled capital of approximately £BOOO, and a building at Nelson on which the company had spent £3OOO. That building went back to the Nelson Borough Council without compensation, and was utterly valueless as an asset. Liabilities were two debentures of £IOO each in favour of Mrs Russell, creditors of approximately £3300, and a liability to the Crown for a lease at Newmarket, which was settled by a payment to the Crown of £450. Very little of the share capital would be collected, said witness, as much of it was held t?y married women and infants. The company had at present £2200 owing to creditors, £I4OO in the bank, and there were £3OOO worth of calls of which, perhaps, £2OOO would be collected. Probably the company would eventually pay the creditors 20/- in the £. Between £19,(00 and £20,000 of the shareholders’ capital would be wholly lost. From the company itself Russell had received £2551, and in addition the company had oaid accounts amounting to £1249 which it was considered Russell should have paid.

The defendant William Samuel Russell, was submitted by counsel for cross-examination. He said at one time the London directors had £IOO,OOO firmly underwritten. His Honour: Why did you continue to take money from shareholders after

you knew that money could not be got in London? Witness: The prospectus was changed. They endeavoured to get' money in London; When he went to England he represented the Harbour Bridge Company, but he did not receive any payment from it. Witness said he knew Ronne had lost £40,000 in the Hatry crash. Ronne was a Russian baron. The hearing of legal argument was adjourned.