ALLEGED BREACH OF CONTRACT.

Wairarapa Age, Volume XXVIII, Issue 7987, 16 March 1906, Page 5

ALLEGED BREACH OF CONTRACT.

PLAINTIFFS NONSUITED. Mr W. P. James, S.M., delivered judgment, yesterday morning, in the case of the Kaituna Cooperative Dairy Company, Ltd., v. E. L. Holinwood, which was heard at the Masterton Magistrate's Court, on March Ist. The defendant in the case was a shareholder in the plaintiff Company, possessing five shares, and by Article o of the Articles of the Association, agreed to supply the Company with the whole of the milk from twenty cows. In' the season 11904-5, he sold his farm, and oeased to supply milk, The Company then sued for damages, under Article 9, or in the alternative, for ordinary damages. (Article 9 reads as follows:—"Should any member fail to supply his due 'proportion of milk to the Company, he shall be liable to pay to the Company by way of 'penalty,' such sum as the Directors may determine, in Hccordauce with the by-laws of the Company, for the time being in force and, further, he shall be liable to pay to the Company, on demand, the sum represented by the d fference between the nominal value oi all the shares held by him, and the amount actually paid by him introspect thereto"). The defendant had paid the difference between the nominal value of his shares, and the amount actually paid by him for such shares at the time of the breach of contraot, but he disputed his liability for the penalty or for any damages, as there were no by-laws of the Company ip force at the time of the breach of contract, fixing the amount of penalty.

After defendant's failure to supply, thfl Company demanded damages, and the defendant disregarded the demand, then the Company made by-laws, so that they might proceed against the defendant, and recover the penalty mentioned in Article 9. The manner in which the by-laws were made was given in evidence by the Secretary of the Company, and Mr W. L. Falconer, one of the directors. No notice was given to the mem bers calling the special meeting to make the by-laws, and a quorum of members (seven) waa not present at the meeting. Section 122, of the "'Company's Act, 1903," provided that regulations could only be made at a general meeting of the Company, and they must be made by special resolution. Notice of the meeting must be sent to every memDer not beyond summoning distance, otherwise the meeting would be invalid, unless all members entitled to notice are present. The by-laws, in the Magistrate's opinion, were altogether bad. Buth parties admitted that although in Article 9, the word penalty was used, the amount claimed under that article was, properly speaking, "liquidated damages," and with them His Worship agreed. The parties to the contract by the previous argument, had fixed the damages for its breach at a particular sum, "suoh sum as the directors may determine in accordance with the by-laws of the Company for the time being in force." The argument that such a proceeding should be followed, and that the damage should bo issued in that particular way, must be taken to mean that that mode alone should be adopted to the exclusion of any other mode. As there had been no by law in force when defendant made default, and the by-law, when made,. being bad, the Company had failed to 1 clothe itself with the power of determining the extent of the defendant's liability, and so far as the period complained was concerned, it oould not recover. Clearly, too, the directors could not make the operation of their by-laws retrospective. The Magistrate non - suited the plaintiff Company, with costs* amounting to £2 14s. Mr R. K. Jackson appeared for the- plaintiffs, and Mr D. K. Logan for the defendant. Notice of appeal was given, the oosts for which were fixed at £l.O 10s.