COMPANY LIQUIDATION

Evening Star, Issue 22442, 12 September 1936, Page 27

COMPANY LIQUIDATION

AFFAIRS ftF JATTOH'S DMFEDtIdHERY QUESTIONS DETERMIHED BY JUDGE : Several questions with respect-to the liquidation -of Hattons Coufectionei y Company! Ltd, were determined by itis Honour Mr Justice Kennedy in a juagwent given in. the Supreme Court jes terday afternoon. . : His Honoiir-’s. judgment was-tins is a; summons, issued .by the liquidator or Hattons-Confectionery Company Ctrl, (in • liquidation), -for the -purpose or settling, the list; of; contributories ana determining various incidental questions. ;The company was registered witn a capital of £2,100, ,the.,shareholders being Oswald M. Smith and Co. Ltd. 2,098 shares, Oswald M. Smith one imarei and >• George Ambrose Donnelly one share. From the entries in a minute bhok iti.appears.ithat. on August .10,;, 1931, the capital was tp he increased by Mthe?.’ issue •of l,wo shares, and.iiMr.diHarbott, was; to be entered on the/share , register tor ow shares, and on- July'2s, 1933, the capital of the company was to be increased to 12,000 ordinary shares of'£l each. The record is irregular, although it may, in fact, he that the capital was properly' increased. The requisite notices* were given: to othac registrar or companies. , What,. however, .aa '™P° r r tant ist that the shares - were allotted and; :the>i names,'.of -the allottees were placed on the company’s register and remained .-there, -for, at a meeting ot directors of;tbo company helm,on September 8, 19331 shares! were allotted as folowsl:—-N. *,H/‘Sinclair 12!?, a. L* Beer 200,.E;.:Hy;Wood- 250, A. E. Smith 1,500, OswaMLM. Smith and Co. Ltd. 6,825.; An application was later made to the court for rectification, and tne shareholding of A. E, Smith was reduced ■-from- H6OO to- ■'.The share register, shows; a capital -of , £il,oUU, made up As follows; —Oswald M. Smith and; Co. ,<Jjtd. 9.423,-G.i A 1, A. S. Harbott .500, S. L. Beer 200, IN. H. Sinclair 125, E. G. Woo'd 250; A. E. Smith'l,ooo,i-and; Oswald M. : Smith 1. All. the. shares, were fully pair up except' the 5 sharps ' held by Oswald M. Smith.and Co.- Ltd., upon,which there is an unpaid liability of £8,925. The first question which arises is whether the persons, whose names appear in the register of members, should be treated, for the purposes of the winding up, as shareholders, possessed of the shares -recorded. against thennames. -All who. were represented at the- dlearingo wererfoiv various reasons concerned to admit or. contend that they ’Shduld. be 1 placed upon- the- list of contributories for the shaves named. In the case of all, other than Oswald M. Smith and Co. Ltd., they held fully paid up shares. It is clear that the entries in the register of members are prima facie evidence of the facts therein recorded. Some small inaccuracies in the register do not prevent the. register from being such evidence. All the relevant cases were cited by Mr Stephens, but as, in the end, there was no contest and his submissions were accepted as correct, I shall not set out tne cases. at length in this judgment. In my view it was correctly admitted by counsel for the various, parties that the names , of, those they represented—indeed, all the names referred to in paragraph 9 of the first affidavit of W. R. Brown—must be placed upon the list of contributories. The prima facie evidence of the register was not rebutted, but other circumstances in evidence supported the view that the persons whose names appear in the register must be treated as members. The rights of creditors had intervened. The share capital for the purposes of the winding up must accordingly be treated •as £11,500, being £12,000 Jess the 500 shares of £1 each recovered from the register pursuant to an order of the Court. This sufficiently answers such of the questions 3 (a), (b), (c), and (d) as require answer. The next question is whether there is any right of set-off against debts due by the company to Oswald M. Smith and Co. Ltd., of a liability for calls on the shares held by Oswald M. Smith and Co. Ltd. It was not contended that there had existed a right of set-off. The rule is that where a company in liquidation is both a creditor and a shareholder of another company in liquidation it cannot, even when insolvent, set-off agaifist calls made by the liquidator of the latter company a debt owing to it by that company, or take any dividend on that debt until it has paid up all calls in full. It follows that Oswald M. Smith and Co. Ltd. (in liquidation) must pay whatever calls are required to enable the debts and liabilities of the company and the costs of winding up to be discharged. • The final question is whether Oswald M. Smith and Co. Ltd. (in liquidation) should be compelled to make payment of a call for the adjustment of the rights of contributories. Section 25 of the articles provides as follows:—“If the company shall be wound up the assets remaining after payment of the debts and liabilities of the company and the costs of liquidation (hereinafter called ‘the surplus assets’) shall be applied first in repaying to the members the amount paid up on their shares respectively, and the balance, (if any) shall be divided among members m proportion to the amount paid up on their shares respectively, but no member shall be entitled to have any call made upon other members for the purpose of adjusting their _ rights, provided always that the provisions hereof shall be subject to the rights of tho holders or shares issued upon special conditions. That article expressly excludes a call in the winding up for the purpose of adjusting the riglts of contributors inter se. and it follows that the liquidator should not make a call to equalise the amounts paid up as between the various members, and any sum called up by the liquidator in excess should be distributed so as to presex’ve tho rights given by article 25, Oswald M, fennth and Co. Ltd (in liquidation) is ontitled to rank as a creditor as soon as it pays sufficient on the shares held by it to meet the deficiency and the costs of the winding up, and is not bound as a condition of claiming as a creditor to Surrender its rights undei article 23. , , „ , Costs are reserved and will be nxed upon application upon the relevant rules and authority being brought to the notice of the court. _ r At the hearing of the ease Mr .1. AlPaterson appeared for the liquidator, Mr A. C. Stephens for Coulls, Somerville, Wilkie Ltd., representing all vnsecured creditors other than Oswald M* Smith and Co. Ltd. (in liquidation), Mr G. V. Murdoch for A. E. Smith Mr C. B. Barrowclough for A. S. Harbott, and Mr H. L. Cook for G. W. Reid, the receiver for the Bank of New Zealand or the assets of Oswald M. Smith ana Co. Ltd.