SUPREME COURT.—Civil Sittings.

Wellington Independent, Volume XXVIII, Issue 3928, 16 October 1873, Page 2

SUPREME COURT.— Civil Sittings.

Wednesday, 15th Ootobeb.

(Before his Honor Mr Justice Johnston, and

a common jury.)

D. ANDJBBSON V. NEW ZEALAND STEAK SHIP

PING COMPANY.

The following gentlemen were sworn in as a special jury : — Messrs J. DransGeld (foreman), J. A. Allen, O. D. Barraud, W. Bishop; T. Buchanan, J".. Dyer, W. 6Hbson, W". T. Hirst, J. Holt, F. A. Krull, W. H. Levin, and J. F. E. Wright. ' Mr Travers appeared for the plaintiff} and the Attorney-General and Mr Moorh^se for the defendants. . .J.-.

Mr Travers, in opening the case, said this action was brought by Z». Anderson, on behalf of himself and. other. . shareholders in the 'N.Z.S.S. Co, against the eajd company for the refund of certain moneys, paid o.iit of : the . profits of the company to.,<Me'ssr,B. Allen aud Burne, to which they were, nofc justly entitled. The company was incorporated on the Ist May, 1871, and the balance sheet for the six months ending p.ctober 31st, 1871, showed a profit of ,£I9BB, which was equivalent to 35 per cent for the half year, or at the rate of 70 per cent per annum. The plaintiff held one hundred £10 shares in the company, whioh bad been fully paid up on the Ist; May. Messrs Allen and Burne also held one hundre.i shares, each, but had only pnid £700 on the formation of the company, the balance not being paid until tha 18th July following. In the. beginning of 1872 a dividend was declared, arid . plaintiff received £352 17s 6d, whereas hewas entitled to • £366 oil the basis of paid-up capital. Allen and Burne each received £352 17a 6d ; whereas jbhe former was only entitled to £328 9a Bd, a^d the latter £320 195. Messrs Allen and Barne, on condition that they paid j 10 per cent on their unsubscribed capital, were credited as if they .had fully paid up their shares on the Ist May, 1871. [ Thia privilege was not extended to other shareholder*. Messrs Allon and Burne were now called upon to refund .the £56 they had received more than they were entitled to, which amount would be divided amongst the j other shareholders of the company. It was not until Burne and Allen knew what the profits would be I hat they agreed to pay the ten per cent. At the time the dividend was j deolared they had not paid the interest, although Mr Anderson then believed they had. But even if they had paid thejnterest, plaintiff still maintained that they- were not entitled to more than the profits on their paid-up capital. At the time Mr Anderaoi^ strenuously opposed the arrangement, and it was decided that the matter should be referred to Mr Walter Turnbull.- That gentleman was sent for, and t,he matter was explained to him, and he gave it as his opinion that Messrs Allen and Burne were entitled to the same profits as if , they had fully paid up their shares ; but he had so given his opinion on the . distinct representation made to him that they had paid the interest. But it had not been paid. If it had been it would have gone into the profit and loss account, and would have shown on the books of the company. In the books it actually appeared as if Burne and Allan had paid up the full amount of their shares in May. Mr Anderson did not bring the action with the hope of making anything by it, but through the principle Ihvt no company had a right to deal wilhany moneys contrary to the expressed object for which the company was formed, unless it, was the wish of every single shareholder. The company had no power to give a preferential advantage to particular shareholders, to tha detriment of others, There had been a resolution of the company that the profits should be divided on the basis of the paid-up capital. It wasafterwards carried that Messrs Allen, Burns, Anderson, Plimmer, and Harrison, being the projectors of the company, should receive the profits on the amount of their shares. This was a harmless resolution, and could in no way affect the previous resolution of the company. It was alleged that the plaintiff had acquiesced in the arrangement. This plaintiff denied. It was through the representations of Mr Allen, who took a more active interest in the matter than Mr Burne, that plaintiff had been led to believe that the interest had been paid. He called

I). Anderson, who said -that himself and four other gentlemen agreed to purchase the steamer Wellington. There was no wri'ten agreement between them ; they verbally decided that they would go as high as £8000, but they obtained her by auction for £7000. The N.Z.S.S. Company was incorporated in May, 1871. I was one of the directors. The others were Messrs Allen; Burne, Harrison, and Plinamer, I was the holder of one hundred shares. The company oommonoed running >the steamers Taranaki and Wellington immediately after incorporation. The accounts wore made up to the 31st October, 1871, and a meeting took place early in January to decide on the distribution of the profits, at.whioh I was present. There was no document produced to the directors at that meeting showing the proposed plan of distribution of the profits.. Mr Allen was present. He read a paper with reference to the profits, of the company, but it was not given to the director*. On the 20th January, I saw in the company's ofßoe a paper showing how the 35 per cent wus arrived at. I spoke to the accountant of the company on the matter. There was a meoting of directors afterwards on the 25th January. I caused that paper to be. put before the board. I pointed out that Mr Allen's and Mr Burne's payments were pre-dnted from the 18th July to the Ist May. An nnjjry discussion ensued, and Mr, Allen I assorted the right of himself and others who had taken great trouble in establishing the company, to do what I complained of. Mr Burne said nothing. The meeting broke up without any resolution being arrived at. There was a meeting of shareholders on the Bth February. There was a preliminary meeting of directors on the preceding day, Vhen Mr Allen's claim was diecussed. . Mr. Burno, who was in the ehnir, proposed to put to the shareholders the resolution that 35 per cent should be paid to all the shareholders. I said I proposed informing the shareholder of the mannar in which payments were predated. It was objected to my doing so, arad ifc, was proposed that an arbitrator should be appointed, and Mr Greorge Hnnter was agreed to. .He was sent for, but; he said he could not attend., Mr Walter Turnbull's name was then mentioned,and Mr Plimmer and Mr Harrison went for him, and he came. , I explained to him the nature of the resolution which-, was to. be pub bofore the shareholders, and informad, him Allen and Burne's payments were pre-dated. They claimed; the. full amount on the. .ground, that they, had paid interest on -;their:Unpaid,';Bhwef. ..Mr -Allen, went., into, a; history' of .the oompany. ..'■ Her said - to (Mr. Burne, " When we paid that interest was it sob at the rate of ten per oent P" Mr Burne

opifiioW th>t tfiplneeiesfc hid^B^enid^^Mr-l Turnbul^id|tat ■ xiß^M^^^^^m^:. : aid BulSnieiwejjl eilitied W^^^^fii^if Ithey Bad^pajd jipjt^Mll a^BppSfitlel^^ shares in^^ May, arideratood hipjr'to.''^j^f'Sflpv:^opinion on the supposition that ;.the\:inl^|li|f?|; ~htsd^e«t-paidi~-^wO"^ay«^fterwftr^lß>3|^j§^pi oeiyed;r£3s3 l^s^d. f^"»oeepted' l ii,.:jpvtl|»^ belief th'at'theinterest* Bad 'bien' p:aid,". "ri4» :^?i dressed a copy of* printed: circular '\o alltlra^"^ shareholders on thY -iltli March: . "ifcwiaß io^'th'e effect thaift ;' an^^ i»6pecto^ a^pW^^^Bpi"' " pointed to inquire, |n|;o,. tfie diyi^^^s.phq- : profits, on tlie .oasia.^f> rbsolutidn p^geujtlialj'v :• profits should' be divided accOrdi^lf^ ? j|E^^ time of payment. Mr Burne had oefoireitfiatl^*; time gone to England. XheVe wa,B;a.'m*eiejtiifigb£^ : ': directors on ,the 28th March j at wWdli.f Mr .Allan f complaiqedc that::l hadviTiiol?^ j brought forward the jdiiatter before; jmd'jpvotifeX posed that a meeting should: be fbeld" 6iuise/ ;;V . Bth " April . tfo inquire jnto my: complaintß*, . g* which was carried. The -meeting was;beidx ii£* v^ which Mr^-AUeir proposed .thtffe';Mißßßrß'lAnOT|.ic.^ Anderson, Burnes, Harrfton,.,aiQidU;P|jifttQex > i., ; -; having ftubs'eribed thensceßsa,py;/ci|preal'fo^thflf^i company, >ere entitled 'to .participate iii 'the* " profits of the; company to the full amount of their shares. I still, protested against. snob.-.*"— distribution! "I am acting for other objecting ' | shareholders. I could not' get a fifth'pf»th&. ' ! shares, so as to bring it under the Joi'nt'^toct Act, when % could have applied' to the Go- "~ vernment to have an 'inspector appointed.. Allen and r Burne,, were the only persons who..', : had received lan eiceßS". ' '//: •'-:..

Cross; examined , by. the. Attbrney-Gmeral i » L The shareholders wh6 concurred with >ne .inmy action were. William -Anderson,- Pavi<|L Anderson, jun, Captain Williams, Captain. ' '. Stafford, James Barber, Bobert Burrett; ft^d' A Henry 'Jackson.. It was given into my;K4nas 5 ' by; them to do as*. l liked. I'beKe«ft?l<|n^V. aotiing.in concert with theni in -bringing. 'raßi)V; .'•'., present action, into Courfc. They never bbje(^d|^s? always understandings jthat, dbjpglfpifev^.v my own ri&k and expense. Thepaper for^^»A , specie. to. be appointed was, signed .by/a^fififfi*/* ■■•:•;:•. oiejnt nptnber of shareholders,' i bufrsd.^^ 7 0fe^ enajbracera sufficient aitaourit of vßhar|s?^|S|f|J:t' John- Martin held so. many share! VthafcXieS^^ completely swamped uS.^Al^ the meefcii^yijrtS^ January there ' - was 1 Jnothing * .diß6usßed*^nfcp£| E ' giving £7,7. as a present id the7olerks.^/SK;ff . Hartmann received £55 of it, and Mr. Qannoi^t the accountant, tha remainder. I objected to ( such an 1 appropriation of the funds without . :. the consent of the-shareholder.s.' ; Therelwag'/Z' no balance-sheet produced "at ! the 'tiine^iiit'-v'i was merely an absfcraok Ort ; the i 2Obhoj^aaii \ .] ary, I examined the cash Book fcbVs^e ; :%H^nit _ Allen paid the iiiterestf bit -y he ' £pOOgcT:{iiiifi. ! :.' C ; covered then ' that "Allen paying inonay on ihe Ist May.^Mpii}i?^a^^S?he had : not paid until the 18th. July.: disapproved of the balance-sheet. TKe-tiitin^l;'^ pßid to the clerks was not, put down up3SjßfSvi that head, ; but for. some/ ofch.er; : ite^V.^v&'S *£■ was not; ia willing party .' to.' ■th'at''fratijl.^>> I cannot point out un.der whit >• .-heai'c^;'' ,'. the monay '.was -putr. dowtir \ The '4^eP'v: tors of the company had an honorariam b|jß^O. ■: each for the twelve i n>ontbk n * 1871, to October, 31, 1872;?' ' The ,direoj»|f/ ; of; : '5?: which I was one, bought the for v-: ; £7000, and sold her td the" company* -fdr ;H; '_ £7,500, thus making -6 100 each., Thig^aiott v ;: account of the trouble theyf had incurred/iti ■" raising the Tarariaki.' > That t was a legitimate -• t' speculation. In the raising of the Taranaki I# „ . had a greater interest than all ihe others. .%;/■_ held to the amount of. £2,700} they to tha\ amount of £3,600. The, company for raising .1 her could not have been got up witljQU^iny _' .■ '[■ exertions. lam perfectly sa|;ißfiod tbat'rath© profits shown there was' no interest contained..; paid by either Allan orßurne/'The interest was •;.. paid subaequent to the balance sheet being made up. There i& an item of £35 as an. ; aa?et, but I do not know what it includes. .". Mr Travera would;. admit that; that^ item included the interest paid by . Messrs Burne •, and Allan, although there wat nothing in the book to show that such was the case. , .". •

Cross-examination continued : The oompany > has bean paying 20 per cent. since that time. ! What induced me to look into the book wets that I was curious to knriw whether Allen and Burne did actually pay 10 per , cent when the banks were only charging 9 per cent. I wrote to Messrs Harrison and Plimmer with regard to Alien predating his amount. Harrison srid he knew a wrong was done, but he. would rather suffer it than expose.it. Allen and hia son-in-law, (Hartmann) oan do just ai tHey, like in the oompany. I never paid any money , to the company, bub it was arranged that our interests in the company for raising the Taranaki should be transferred (;o. fche" jjew.comv pany. W e were, running the Taranaki at; the time the new oompany waß.Btarted t whioli was almost forraad entirely out .of, the -Wrack Eecovery Company. There were two fresh . shareholders introduced, but they did. not take, an aotive part in- the affairs of the oompany. On the 18th July, 1871, the Wreck Recovery Company was wound up. The five directors, of the Wreck Recovery Company sold; the Taranaki before the proposed ootnpany , was formed. None of iispaid a, n y nponey,. The agreement was that btier Taranaki Oom- •■ pany should be wound up, and each one aocording to the interest he hold in the Taranaki should hold interest in. the. New Zeajarid - Steam Shipping Company. ■ Allen; and Burne ouly held interests to the amount of £600. each in the Wreck t ßecovery r Compa.»yi ■.wbioh| with thedßlOOeaoh added through thfepurchaso " of the. Wellington,- made, the .£.7oojijtey^ere_ each credited with when^fche/new; oompany was formed. It vfas a peculiar arrangement: -■ we, simply sold the Taranaki , to -ourselves for £8,500, as provisional directors of a new company. . ' •;■'• ••"' By Mr DransfieH : The Taranaki was supposed to be purchased for what Bhe cost. There was not a fraotion of intermediate pro» fit on- the Taranaki. . , . ,

Cross-examination continued: When the Wreck Recovery Oompany was wound up, some of the shareholders Were paid iq money, and not; in shades in the new. oompany. In the purchase of. the Taranaki Sir, Allan car*, riod out the details. - .The Wellington- and Taranaki were valued at £16,000 before/ the formatiori of the new company. At this stage of the prooeedings'tho Cotirt adjourned till this, morning at ten o'clock. « • •'• t