AUDITORS EXONERATED

Waipa Post, Volume 31, Issue 1764, 29 May 1926, Page 5

AUDITORS EXONERATED

NEW ZEALAND CO-OPERATIVE DAIRY COMPANY CASE.

FULTON V. ENGLISH & LUXPORD

AND COUNTER-CLAIM.

i Reserved judgment was delivered, in V~s Supreme Court at Hamilton yesf?.rdiay by Mr Justice Ostler in the case, Fulton versus English and Luxford, which was heard on 30th March. At the hearing Mr R. W. McVeagh appeared for Mr Fulton, English and Luxford being represented by Mr Johnstone and Messrs Swarbrick and Swarbrick. The judgment, which covers sixteen pages of foolscap, Retails the circumstances of what is described as a very unusual case. The defendants are accountants who, until last year, acted as auditors for the New Zealand Cooperative Dairy Company, of which company plaintiff is chairman of directors. It recalls that at Matangi the plaintiff in a speech referred to defendants, and as an outcome defendants brought an action claiming £2OOO damages for slander. That action was settled after considerable negotiation on plaintiff agreeing to publish at his own expense in several papers a letter in terms agreed upon, and also to pay law costs as between soliictor and client at a sum not exceeding £6OO. It was stipulated that the terms were to be confidential between the parties. It was for an alleged breach of this contract that plaintiff now claimed £IOOO damages, and. in their counterclaim defendants claim from plaintiff £IOOO for similar breaches. The judgment then proceeds to traverse the history of the various actions on the part of the respective parties subsequent to 12th November last, when the settlement was made. It was clear, the Court holds, that the real agreement, was that plaintiff should pay defendants not merely their law costs but that he should pay them the actual sum of £6OO out of which they were to pay their legal costs, and the balance they were to keep for themselves. It must have been obvious to* all that the costs would not amount to more than about £IOO, and, that in* agreeing to pay £6OO plaintiff was agreeing to pay £SOO damages and costs. No doubt it was for this reason that the stipulation was made that the terms of the settlement should, be kept confidential. On the day of the settlement Its effect was telephoned from Auckland to defendants, but it was not made clear to them that its terms were to be kept confidential. Consequently they saw a reporter of the Waikato Times who happened to be local agent for the Auckland Star, and, he telegraphed a short statement of the terms of settlement to the Star. Thi s was an unintentional breach of the agreement. Plaintiffs' solicitors, however, without consulting defendants, caused a statement to be published in the Star saying that the terms of settlement had been inaccurately reported. The effect of this paragraph wa s to misstate the terms in two particulars. The first report in the Star merely said "a substantial sum" was to be paid, which was absolutely accurate

But even if the report had said this sum was to have been by way of * damages it would still have been accurate, and no one knew better than the solicitors for the plaintiff that this was .so, and consequently the statement made by them was inaccurate and misleading. Plaintiff also caused a letter to be published in the Star getting forward •what he claimed to be the actual facts. The obligation of secrecy was binding equally on plaintiff as on defendants. Jf it was an essential condition that the public should not know plaintiff had paid a substantial sum to settle the action, it was just as much an essential condition that plaintiff should not publish a misleading statement so that the public would not think they were ready to creep out of their action merely on the terms that a letter was published which was not even a retraction of the slanderous statements alleged to have been made. Later: the Dairyfarmer, which is con-

trolled! by the company, published an particle,, "Actions at", Law," at the end of whisch, in the very smallest print, appeared; the letter which plaintiff had agaieed to publish: It was an obligation! on the plaintiff to carry out exactly the terms of his agreement

and make no other reference to the Jj terms of settlement. Inste d of that an untrue statement of its terms was inserted. The plaintiff had sworn that he was not personally responsible for the publication of this paragraph, and the editor has magnanimously attempted to shoulder the responsibility for it. He admitted that the paragraph was inserted in compliance with a message from the head office,, and there was no doubt he inserted the words he was instructed to insert. When this paragraph came to the notice of defendants plaintiff was written to. That was on 21 sit December. Plaintiff called on defendants that day and expressed his willingness to insert a correction, but desired to consult Mr Goodffllow as to the form it should, take. Defendants understood ibis was to be arranged at a subsequent interview on 28th December. bu,t plaintiff understood r.he date to be 4th January. But he did not ca'll on 4th

January, but wrote a letter which s -would not reach defendants till 6th January. Meantime, on sth January, defendants had given a statement to the Waikato Times for publication. In that statement appeared the words: "We have not at the present time received any further communication from Mr Pulton." These word,s were true at the time they were written, but publication was not given till 9th January, and before that date defendants ha.d received the letter of sth January asking that the matter should stand over till 11th January. The judgment then proceeds to quote the law as to the existence and nature of contract. The finding was that the plantiff's action must fail and judgment be given for defendants on the claim, with cos's acording to scale, witnesses' expenses, and disbursements. " I phould like to add," concludes .the judge. " that even if I had come tro the opposite conclusion on this I point, in my opinion plaintiff com-

pletely failed to prove any such damages as the Court could take cognisance of in an action for damages for breach of contract, and the most he would have been entitled to would have been nominal damages. " With regard to the counter-claim, I have already held that plaintiff himself committed essential breaches of the contract in publishing misleading statements of the terms of the settlement. These breaches not only gave the right to defendants to rescind, but also to sue for any damages they could prove to have suffered by those breaches. In my opinion, however, defendants have equally failed to prove any damages recoverable as for a breach of contract. Assuming that the breaches committed by the plaintiff were calculated to injure their reputation as a firm of public accountants, and so diminish the number of their clients, or the amount or importance, and therefore the lucrativeness of their work, ■ there was no evidence that it had actually done any of these things. Possibly it might have done so had not defendants taken steps to protect themselves by publishing the terms of the settlement. That act. and.the publicity given by these proceedings, in my opinion have been quite sufficient to prevent any actual damage accruing to them, and therefore they are entitled to onlv nominal damages, which I fix at £l. This '*- not sufficient to carry costs unless I certify thai costs should be allowed under rule 557. Considering all the circumstances, which are fully set out, I am not prepared, to do that, and the result will be that on the counter claim defendants must pay their own costs."