SUPREME COURT

Dominion, Volume 13, Issue 53, 26 November 1919, Page 3

SUPREME COURT

LIQUIDATION CASE

ALLEGED SECRET AGREEMENT ( In tho Supremo Court in Banco yesterday, His Honour tho Chief Justice'(Sir Robert Stout) heard the ease of tho United Farmers-' Co-operative Association, Ltd. (in liquidation) v. David • Joseph Nathan, merchant, Wellington.- . • Air, I'. Young apneared for shareholders of the company, and Air. C. P. Skortett, K.C., with liim Mr. M. Myers for tho defendant. Tho defendant was called unori to -nnswer-(l) Why an. order should" not be rondo in terms of Ihe summons issued on November It, 1017, or in the alternative (2) why he should not be oidercd to account to the liquidator of the United Farmers' Co-operat've Association for tho sum of ,£SS9, being ihe balance of tho sum of JSBOO agreed to bo paid by liim to tho said liquidator by agreement dated December 5," 1917, aiul " interest thereon from that date until the date of pnyriicnt. (3) .-Why he should not procure to have allotted to him tho shares unapplied far in tho Wairarapa Farmers' Co-operative Association, Ltd.,find transfer the same to tho liquidator or to the eontributories in the Wairarapa Farmers' Co-operative Association in accordance with the second agreement.

The history cf the case, briefly is that David _ JoK-nh Nathan, who had been managing director of the United Farmers' Co-operative Association previous to his retirement, in July, 1018, had arranged an amalgamation of tho company's business with the Wairarapa Farmers' Co-operative Association, Mr. C. E. Dempjov being appointed liquidator of the- United Farninvs. During tho piocess of fh.'s liquidation some shareholders- of the U.F.C.A., of whom Mr. John Martin, of the Wairarapa, was tho principal, commenced proceedings against D. J. Nathan, alleging that he had benefited by a secret agreement made by him. with the purchasing association,. and in proceedings, wh.ieh were in-' Btitnted in 1917, it wis claimed: (1) That D. J. Nathan was liable to account to tho liquidator of the United Farmers tfor the vahio cf all benefits secured by liim under.a certain agreement, dated Juno 9, 1910. and made, between the Wai■rnmpa Farmers' Cc-o!>erat ; ve Association. Ltd., and D. J. Nathan (which agreement was made whilst D. J. Nathan was a director of and agent for tho United Farmers' r Co-bperativo Association), and why accounts should not. 1)3 taken far tliat purposo; or in tho alternative (2) that it may be declared th.it D. J. Nathan was liable to -ontr'.bnto to tho assets of tho Uirtod Farmers .£3OOO as compensation for his alleged misfeasance in contracting for whilst a director, of tho United Farmers, and subsequently securing for himself tho benefits under the agreement. Upon the grounds that whilst a director and agent of the United Farmers' Association D. J.. Nathan made n. provisional eale of the assets of the Unitod Farmers to the AVairnrana Farmers' Association at an undervalue and procured the shareholders of the United Farmers to accept the same without discing to tbem that he had secured for liimsolf the following'benefits,- viz.: (a) Tho payment of a mm of .£2OBO alleged to be a commission for his services.

(b) That the firm of Joseph Nathan and Co., Lid., of", which D. J. Natiwn is managing d'rector, should ho relieved from Ihe repayment of the sum of ,£13,030 deposited with them in cash by the United -Farmers' Co., and that the Wairarapa Farmers' Cow.pony should rerece'vo in lieu thereof shares in Joseph Nathan and Co., Ltd., to the face, vp'luo of ,£IS,OCO.

(c) The right to have transferred to himself all shares >. the Wairarapa Farmers' Company which were unapplied' for. ■ .11

The proceedings, initiated in 1917. did not .coma before the Court because D. J. Nathan lin.-lc'rrook fa account to (be liquidator of the United Farmers for the benefits received by him, and the present prcceed-'iv-rs were bronrht by the same shareholders :(Mr;ars. John M'art-in. Lewis Nix, Henry R, Eunnv, .Alfred Matthews, and the Hon. Sir Walter Buchana.n, farmers, all r.f the Wa;rnrapa, and W. F. Jacobs, of ]fi.w-:t?a, far-' me'r, 'contributors of the' United Farmers' Co-operative Asweiat'on), who eWir.ed that D. J. 'Nathan had failed to carry out completely the settlement arrived ftt in IHI7. and that a K->lar>c» cf J&3O was still-duo and payable by him. Mr. Young said tho action was brought wider Section 20-l of the Cnmrani"s A'ef. The orig'nal summons was i.;su«l in 1317, nnd a settlement was arrau.jjd, but tho terms, according to Mr! Young, had not lwen carried <:\\t It was ogrced th'.-.t Nathan should refund .!:20r0, lr*s the costs of liqu'dation. and what thev were concerned about was the bnlm'na c< the J?>m. Tho lOli nniw-pl-f-d far sharei had bfen allotted to' Mr. Nathan. ■Jlr. Skerrett: He did net desire then far his ow->-'benefit.- These rhare3 had been sold ! the inonev wa-j in the hands of ; Wa'rarnpa l-'araiera' Association to bo ba;idcd over to tho liouidater.

Air. Young, continuing, cai.l the matter in dispute was as to v.-hcther certain items cha'rgfd to liou'dation expenses could bs rightly charged. It_was shown in the coarse of the discussion that' Nathan gave the Wnirarapa Farmers' Co-operative jAsvjciaifan two guarante.es, one in reswet to the -benJ; dfbts, and tho "thcr in rcMir-t.t to (ho 38.0C0 shares in Joseph Nathan and Co., Ltd. !

Mr. - Skerrett : Under tho terms of-set-tlement Nathan agreed, to surre'ido,- (ho .£2OOO, and it was obvious that the burdens as well as the Iwneftts of 'the alleged 'secret .agreement should bo taken over.

The parties.agreed ,-K_.fa spyerol items. On behalf of Mr.\Nathan itrra.i to the amount of .-P.'.vn wore admitted, end Mr. Yr.ung admitted certain small items to b3 rightly c!mrg"d. The main disimto centred round the choi-go of fhrio amounts aggre';at'ng = C 202 Ih. 7d. in Tespeet to Hie 'ruarantee of the ia.OM shares. Mr. Nathan guaranteed the W.F.C.A. that during rhe.wmHnuance of the-war the net dividend on the IPOC-0 uliare? should not be less fhan- C per cent, free of inenmo. tax. 'i.'h« dividend paiej by Joseph Nathan and Co. on the IH.KKI shares was (i.'r por cenl., 1c; English income tax, which brought the net dndend'down to'lesis thaji (5 nw cent., nnel the d'.fferenca had to bo made gaod ■under tho guarantee. Mr. Skerrett .'aid that the action seemed to lie something like a vendetta against Natim-i on the uart of two or three suarch»:dcrs. Nathan and his family held about 'three-fifths of th» shares of the T.fnitod Farmers' Co-opera-tive Assoe.iaton. There was nm'i'c di«clcsure of the agreement made by Nathan w;tn the Yv.F.C.A., because b" resigned the chairmanship, nnd had elated that he was getting his remuneration from the W.F.C.A., and that hi wa-, paying the costs of the linnidat'on H» T:r.s bound to accounl: fa the companv far the benefit*, he received. The iy-K) was given fa him. on condition 'ihaTh? gave two .(ruara.ntios, and tho gu-arantres must bo re-.d as lwii.of the doc-uineii'-flinl counsel cr-ntende.d that the amount paid in respect to the guaranteed «hares should be taken over by tin- Unit-' Farmers' Co-operative As-oc'ation. !""'•._ Myers taid that Nathan carried the United Farm°rs' Associniiou on .his back for years, othenvi-o the company. w;otild have gone into lioiiirl-ilion fo m',. time ago, and ths shareholders would h.iv; sos 4- or as. per share. Out of the 12W odd .'-hareholders in the enmpany it was onlv n few sharekiders who had oWcclVns, and that on a technical point of law. Wr. Young point'."! out thct far six'oen years the shareholders received no div'deiids, and it was only when ,1:18X00 W. boon accumulated, and Ihe money depcs'ied with .fas-e:>h Nafhan and' Co.. lid., that'they w.:< fanwd with a;i nnar.gement l.v wh>h Ihe inoiiev was pot to be imv!;> f-r dislrihm lion to the >.'iarp'»j'de;-s. but was to 1" put info !i!it!"es i:i .Insrr.'i Nathan i::v\ Co. He ivwidnfad-t'v>'ic'fi of n ve'idc'ta. and claimed ih."t Mr. Martin and the oH'?r fihai-h' ; d"r: l:a:i come forward In the public ii'!;'rr.-t to *-ce (ha; the sharc-ho-'.dc-rs received what (hey wc.-e entitled to. His Honour soid h" wou'il look ink the matter, and '.live his incision Inter.