DRIED MILK FACTORY.

Waipa Post, Volume XXIV, Issue 1402, 11 September 1923, Page 5

DRIED MILK FACTORY.

SHAKE CAPITAL AM) DEDUCTIONS. SUPPLIERS SEEK EXPLANATION MEETING AT TE AWAMUTU. Suppliers to the Te Awamutu Factory attended in force at the local Town HaJl yesterday when a meeting was held. Mr J. G-. Wynyard was elected to preside and at the outset explained' that the object of the meeting was to consider deductions which had been made by the Company from last season's payouts. Mr A. J. Sinclair, acting manager of the N.Z. Co-op Dairy Company, said he had been informed last week that many complaints were being made by suppliers in the Te Awamutu district, but they should all be aware, however, that under the agreement they were liable to a deduction of 3d per pound butterfat towards the capital cost of the factory. Many of the complaints came from people who were not supplying all of their butterfat to dried milk, but were dividing their supplies with delivery to butter factories, but the Company had no alternative from these deductions over the whole supply. It was but fair and equitable that the deduction should be made in respect to the whole supply coming forward under the agreement. It would be improper and unfair to those suppliers who were loyal to dried milk for others who divided their supply to escape the deduction. There may, of course, be isolated cases where exemption would be justified, but the Company had followed the rule of making a uniform deduction, leaving individual cases for investigation if necessary. Mr Sinclair went on to explain the share basis and the principle of fixing the share holding qualification at lol'lbs. of butterfat. The Company Avas simply following the basis laid down in the agreement for meeting the capital cost. The factory had to be paid for and the method followed was the only means at the Company's disposal at this juncture. In the future, when the position improved, the share qualification could be varied. At present the Company had allotted capital amounting to £40,391 for the Te Awamutu factory and £9302 had been paid up. In conclusion, he asked for questions so that any points needing explanation could be answered. Mr Wynyard said from his own experience the Company was fully entitled to make the deductions and its actions could be upheld on the basis of the agreement which they had entered into.

Mr F. Quin asked was it a fact that £9OOO odd of share capital had been paid up after two years' operations. He added that they were informed at the outset that 3d per lb. deduction would pay for the factory in four years. Yet it now appeared that after two years they were still a long way off. Mr Sinclair said the £9OOO had been paid to 31st May last. The trouble was that the supply had been below the amount originally estimated. Mr Linehan said the whole trouble was the secrecy about what actually Avas going on. The suppliers had been promised a balance sheet, but never got it. As to the share allocation, the allocation had been made on last season's supply which was phenomenal. He suggested that in less favourable seasons the deduction Would need to go beyond 3d in order to pay for an abnormal number of shares in the event of reduced milk supply. Mr Sinclair replied in the negative, explaining that the financial difficulties we-e being overcome. He stated that there would be no difficulty in getting dried milk supply in future. The prospect was bright. As to the balance sheet, this was now in pieparation for issue, but the work had been delayed through sickness 'amongst the staff.

Mr Sutherland asked how the difference between the cost of the factory and the allocated shares was going to be made up. He also asked what credit had been made bv thj butter department for cheaper m ; lk wells used in the dried milk factory Mr Sinclair explained the arrangement for share accounts detailing the financial position ami the basis of share allocation. As to the cheaper milk wells, he would cause inquiry to be made and report to the suppliers' committee. Mr Su.herland asked whether the Leyland lorries had been credued to Jfhe Te Awamutu suppliers. Mr Sinclair said these lorries had been loaned to Te Awamutu never having been charged. Mr Linehan asked what credit was made to dried milk for land used as a clumping station. Mr Sinclair said he would inquire and report. Mr Quin referred to the statement made earlier in the meeting that certain suppliers had not supplied in terms of the agreement. On the other hand he cited his case. He had signed to supply the milk from 120 cows, whereas he had last season supplied from 146 cows. The effect was that the Company had allotted him shares 5n the basis of this additional supply and that meant an increased share liability. He asked was that fair. Mr Sinclair replied that the suppliers had contracted to supply all the milk from their herds and to take Shares according to the quantity supp'Jed. He upheld the agreement. Mr Spiers said it was an imposition on Mr Quin to be loaded with these additional shares. He went on to say that from the commencement of the Company they had originally agreed, under the Zealandia Milkfoods Company which was embraced by 120 suppliers, to create a debt of £4S,OO{), but. unfortunately through a blunder of the management by allowing a certain section of the guarantors to leave, when transferring from the Zealandia Milkfoods to the N.Z. Co-op Dairy Company, remaining suppliers are now asked to take up shares to cover the cost of the

share of the released suppliers. He mentioned that it was totally unfair ♦»to levy on those remaining a share liability to cover the whole cost of the factory. The basis of agreement

was a£s share for every 2001 b. of butterfat and that should have been . the basis on which shares were allotted. The balance of the capital could have remained floating until such time as the Company showed a brighter prospect. Then the proposition could be again reviewed with the object of getting the suppliers to take up the remaining quota of shares instead of saddling them with shares that it was impossible for them to pay up during their term of guarantee. Mr Sinclair said Mr Spiers wanted to discard the present agreement and go back to the Zealandia Milkfoods agreement. Mr Spiers: No! I said it was a fatal mistake that was made. Mr Sinclair quoted clause 17 of the agreement which empowered the Company to make the deductions and to allot shares. It was no good arguing what would have been the position under the Zealandia agreement. The existing agreement was the basis of their negotiations. Mr Raine thought the position showed that there was something wrong with the Company. They had been told by Mr Goodfellow, at. one of the early meetings, that butter shares would be resumed. Mr Goodfellow had said it was "a bit of high finance," but the Company would arrange it. It was a clear statement made to them that butter shares would be resumed. (Hear! Hear!) Mr Sinclair asked how it would be possible to liquidate butter shares. Voices: Then why did your Company promise it? Mr Sinclair said it was absurd to suggest such a thing considering the constitution of the Company. The dried milk supply was for butter as well and hence butter shares were necessary. What Mr Goodfellow did say was that the Company would take back any surplus shares. Several speakers hotly contradicted this. Mr W. G. Macky thought neither Mr Sinclair nor the other suppliers were right. He understood from Mr Goodfellow that the Zealandia Milkfoods Company would take up the butter shares. Mr Sinclair endorsed this view. Mr Sutherland: That's what you call high finance. (Laughter). To Mr McLean, Mr Sinclair said in the coming year Id per lb. extra would be paid on the monthly advances. They were confident that this could with safety be done. The matter of reducing the share deduction from 3d to 2d was now being enquired into. Mr Linehan thought if the banks would not agree to a smaller deduction the Company should look to other financial institutions. The chairman asked for a resolution recognising that the Company had acted within its legal rights. Mr Quin asked whether the extra Id pay out would not have to be disgorged again at the close of the season.

Mr Raine said the deductions were not fail- in that the guarantors were never achised that some suppliers were being let out. Mr J. T. Johnson said he felt he had a grievance. He had perused the agreement and the articles and there was no possible loop-hole. The Company has acted legally and suppliers have no redress. Mr Quin wanted to know where the Company's rights do stop. He explained that he will be putting on another herd within the eight miles radius mentioned in the agreement, and he wanted to know how that would affect his share liability. Voices: You had better get a s.atement in writing. Mr Sinclair said the Company desired to dca] with the suppliers fairl.v and he believed su.;h cases would be met. Particularly if these additional herds are milked on lands purchased after the signing of the agreement. Tlit chairman again asked for a resolution recognising the legal authority of the Company. Mr Spiers said that it was quite all right to say there is no legal loophole. But there is the point of equity and justice. The chairman asked for a resolutijn endorsing the action of the management and approving the Company's action in alloting shares. Mr Nicholson said the Company had made statements at different meetings that shares need not be taken unless signed for. He had never signed for shares, but he had got them and deductions had been made for them. He wanted to know when and where the liability ends. | He thought there should be a reckoni ing day for the Company. j The chairman read the agreement I which, in one clause, was an applij cation for shares. j Mr Sinclair said it was quite true i that butter shares had to be applied I for, but in this case the agreement [ was an application for shares to be j allotted. j Mr Nicholson wanted to know when j and where the liability ceases. The i farmer had debts on the farm to meet | and he increased his herds to overtake his usual liabilities. But the | Company rushed in and put a new I share liability on the farmer and j saw to it that this liability was first j met. i Mr Sinclair said it was a wrong | impression to imagine that the Comj pany was endeavouring to make , every deduction possible. They only ' did what was legally in order and to meet existing conditions. Mr Young, as district director, ■ said he had only made a small guaI rantee for supply to dried milk but ; he was being "hit" exactly as were ; the others. He only desired to see a motion recognising that the Com- ! pany had acted legally, and then to i strive for a better condition in future. j Mr Raine proposed that each supI plier be supplied with a copy of the ] list of guarantors and the agreement. i The speaker was proceeding when i the chairman asked for a resolution. j Mr McLean: We want these points i cleared up before we can vote either ! way. ! The chairman moved: "That this I meeing recognises the legality of the i Company's action."

Mr Tims seconded pro forma. There was also the equitable side of the business. In his instance he supplied double the quantity of the milk

guaranteed. They were told that some suppliers had been "let out." It was most unfair. They could hardly discuss the legal points and might just as well approve as otherwise. Mr Spiers asked how the share capital would be called up after guarantee for supply ends within four years. The chairman asked for a decision on his motion. Mr Quin asked was it a fair motion to put to a meeting of farmers. Thev were not lawyers and he for one did not feel disposed to vote on such a resolution. The chairman: All (hose in favour. Voices: No. The chairman: I asked for all those in favour. Voices: Aye. The chairman: Against. Voices: No. The chairman: I declare the motion carried. There were several calls for a show of hands and at this stage there was a good deal of interjection, but the chairman ruled the question out of consideration on the grounds that the Company did not intend to take any notice of the resolution. Returning to business, Mr Linehan asked if the future shares would be allotted in any increased milk supplv. It was explained that the Company only had to obtain a financial basis that would liquidate the debt on the factory. There would be no need or justification for going beyond that, basis. After further questions concerning finance, Mr Spiers pressed for a statement, on the method of calling up unpaid shares after the four years' supply had expired. Mr Sinclair said there were no misgivings on the point. It would be a case of keeping supply from dried milk. The share capital had to be paid; there was a distinct legal liability, but beyond that the Company had no need to go. Mr Raine said he had signed for 35 cows, that was his agreement with the Company. Yet he actually supplied from many more cows and had had shares allotted on the basis of the additional supply. What would happen if he reduced his herd again to 35 cows. Would his share liability reduce in proportion. Mr Sinclair said the shares had been allotted and were a definite liability. If there was a reduced milk supply it would take longer to pay the shares off. Mr Raine said they had all been caught with shares in a phenomenally good season. If was most unfair. Mr Sinclair and other speakers stressed the need for an increased milk supply at the factory. Some speakers urged the Company to use every endeavour at its disposal to compel all guarantors to supply. Mr lnnes-Jones asked when the share capital is all paid off who will own the factory. The shareholders or the Company? Mr Sinclair: The shareholders of the N.Z. Co-op Dairy Company, who own all the assets of the Company. Mr Mills referred to statements made earlier in the year which pro-

mised that certain bonus payments would lie made. These promises, he said, had miscarried. Mr Young replied recalling the nature of the advices received at the time. There were many meetings to attend and they desired to give as much information as possible to the suppliers, but final calculations had always to disclose actual figures. The statements at meetings could only be taken as approximate, particularly in such a big business. It was further stated that Mr Sinclair had promised the suppliers that these bonuses would not lie subject to deduction. On this information farmers had entered into other commitments and were now in difficulty. Mr Sinclair said any such cases should be reported to the office and they would be met. .Mr McLean asked what the position would be of a man who sold his farm and retired. How would his liability stand? Mr Sinclair said he knew of no such cases. If the farmer did not transfer his liability to his successor the liability would stand against him. Mr Raine contended that there was a good deal of misrepresentation in respect to the second agreement. Had they known the position they would never have signed it. Mr Nicholson said he at first refused to sign the second agreement. But he was told that he would still be liable under the first or Zealandia Milkfoods agreement. Now the Company took up the attitude that the first agreement was worthless. The chairman said that at the time Zealandia Milkfoods was in operation and the first agreement was operative. There was another call for increased milk supply and a request that the Company compel defaulters. Mr Tims admitted the need for increased supply, but, he asked, was the Company encouraging more. The loading of share liabilities on to the suppliers and the making of deductions was not encouragement. They were simply making' men tulrn to other branches of farming as the men who increased their herds were penalised by being loaded with shares that they did not want. Mr Johnson asked was it a fact that when the shares are all paid and the liability discharged the factory would belong to the Company as a whole? Mr Sinclair replied in the affirmative.

Mr Johnson said there was no equitv in such a system. This group of shareholders at Te Awamutu had to provide a valuable asset which they would only own in common with suppliers all over the province. On the other hand, the Company as a whole built butter factories in various places and gave the suppliers in the immediate vicinity a premium for direct, delivery. It meant that all the suppliers in the Te Awamutu locality are being penalised through lack of direct delivery. Was it fair that these suppliers should have to provide butter shares for factories elsewhere and then in the end see other suppliers getting a premium for direct supply. It would be fair and equitable that Te Awamutu suppliers who actually were paying for their own

factory should own it in the end as an asset separate and distinct. Mr Sinclair said that it was true that the assets belonged to the Company as a whole, but if the factory was sold, the sum realised would be apportioned out amongst the shareholders group in this district. As to the premium for direct supply he hinted plainly that after this present season the \d per lb. payment was to be discontinued. Mr Young said he had a promise from Mr Goodfellow that if suppliers desired a change over from dried milk to butter at the end of this season, a butter factory would be established. Mr Spiers said that if units could break away when factories are paid for the whole Company would collapse. At this stage there was a discussion as to the quality of the milk supplied and the grading. Mi- Raine asked for a statement showing the position of his share account and showing particularly the amount of capital unpaid at the end of each season. Mr Sinclair said any shareholder could have the information on application. The general issue of these statements would mean increased staff. The chairman moved a vote of thanks to Mr Sinclair for his attendance and this was carried by acclamation.