TUNG OIL COMPANY

Waikato Times, Volume 120, Issue 19985, 8 September 1936, Page 3

TUNG OIL COMPANY

DISPOSAL OF DIVIDEND. DEBENTURE-HOLDERS' CASE. (By Telegraph.—Press Association.) WELLINGTON, Monday. The hearing took place in the Supreme Court helore Mr Justice Smith of a case in which the Court’s opinion on matters affecting the deben-ture-holders of Northern Tung oil Ltd., was sought by an originating summons of the receivers for the de-benture-holders. The broad issue was whether only fully-paid debentureholders should participate in a divi- i dend or all classes of debenture-hold- j Mr M. 0. Barnett appeared for the j plaintiffs, Mr J. T. Cleary for the | first-named defendant, and Mr E. P. ' Hay for the second-named defendant. Mr Barnett said the company had not deliberately evaded its obligations in any way. The growth in the early stages was quite amazing. Everything went quite well. There was no complaint with the company or the trustees in the way they carried on, but ultimately a cold southerly wind wiped the whole plantation out practically in one night. Three Classes. The company in that stage was in a position where it could not go on to the market and sell more deben- ! tures, because it could not represent that it. would be a success, and there were insufficient funds to start afresli. The trustees for the' debenture-hold-ers then appointed receivers. At the time the receivers were appointed the debenture-holders fell into three classes: (a) Those who had paid up in full; (b) those who had paid up in instalments so as not to be In default at the time the receivers were appointed; (c) those who were In arrears. It was not yet known exactly what would be available for distribution, as so far the land had not been sold. The problem was whether the fully-paid debenture-holders only were t* participate. If that was the case, the dividends would be much greater. Some holders had paid so much that If they knew the dividend it might pay them to pay the balanoe and get more back in dividends, but others had paid so little that if they paid up they would lose. Counsel’s general submission was that only those who had paid up fully should participate in the dividends. An alternative submission was that the debenture-holder who had paid up his Instalments In full until the receivers were appointed should be entitled to participate. Contract Unenforceable. In reply to a question by His Honour Mr Barnett said the company had not been wound up. Receivers had been appointed, but nothing was being done at present. His Honour: It could be struck off the register then? Mr Barnett: It could and eventually will be, of course. It was contended by Mr Cleary that there was a -contract between the company and the' applicants as a body. He claimed there was a total failure of consideration, thus making the contract unenforceable by the company against the applicants for the debentures. Mr Hay’s argument was based on the contention that the’ documents of agreement constituted a debenture on the express wording of the trust deed. All moneys in the hands of the receivers after the payment of the prior charges provided for became distributable among the debenture-holders in proportion to the moneys paid up on each debenture. The Court reserved its decision.