Shareholder’s Claim.

Hokitika Guardian, 7 April 1921, Page 4

Shareholder’s Claim.

BIG COMPANY SUIT

THE COURT’S FINDING

AUCKLAND, April 2

The summons by Sir George Clifford and other shareholders for an order declaring Y. R. Reed, H. B. Williams, and George AYinstone, junr., formerly directors of the Dominion Portland Cement Company, should contribute £190,000 to the company’s assets for alleged misfeasance and breaches of trust, which was heard by Mr Justice Sim in the Supreme Court, has been dismissed, with costs. THE FACTS REVIEWED. [ After reviewing the facts Mr Justice | Sim said that until early ill 191<, the ! company was a Lie to meet all its lia- ! hilitios except interest on debentures, jin February, 1917, the debenture holders notified the directors that they proI posed appointing a receiver, owing to the non-payment of interest. By Noj vember, 1917, Hie directors found it j impossible to carry on and the sliateholders in a general meeting resolved jto go into liquidation. The assets were purchased at auction, on behalf ;f the debenture holders for £137, ioo 'which, after payment of amounts owing to debenture holders, for principal, and interest loft a surplus of only £616. Ml the capital was therefore lost. THE ALLEGATION.

The allegation against the three directors, said the judge, was that {hy.y were guilty of gross imprudence, negligence, and recklessness in the management of the company, in paiticular in entering into contracts coin-

mil ting the company to the expcnc Hire of sums far in excess of its capit

and resources. Applicants relied on three matters justifying an order against the directors :—First, the establishment of the company s hydroelectric scheme ; second, the making of a contract with the fuller Engined ing Company for the supply and erection of a cement mill, and third, allotment of preference shares. ACTED QUITE HONESTLY. His Honour said it was clear the directors acted quite honestly throughout and with the sole desire of promoting the company's interests. That was not disputed, and the charge was that they displayed gross impudence, negligence and recklessness. His Honour held that they were within their powers in deciding on the hydro-electric scheme, and failure to consult, the shareholders in lhe first instance was at the worst only an error of judgment. His Honour thought the directors were prudent in not relying on the Whaiigarei Borough Council for the necessary power and in making other arrangements. The applicants’ view that directors, in any business, uere not entitled to take any serious indefinite step in the direction of establishing a business until their money was in sight, or in hand, and they could see their way clearly to the complete establishment of that business, was not the view upon which the directors hud hitherto acted. II adopted if would paralyse the operations oi companies. It was an unsound view and the directors, he thought, were not imprudent in believing they could obtain funds. Fortune did not favour the company, and it suffered one Lit of bad luck after another. The shareholders knew of the directors’ hydro-electric scheme in September, 1913, and there "as no complaint until after liquidation. The reasonable conclusion was that the shareholders approved of the position, which was much the same. In regard to the cement plant the holders of preference shares, if they ever had the right to rescind their contract, iiad no right now. Applicants had failed to establish that the directors were guilty of any misfeasance, and the summons must he dismissed, with cost*. The sum of £190,000 was involved ’n the action wherein certain shareholders of the Dominion Portland Cement Company called upon certain directors o 1 the company to show cause why they should not contribute the above amount of money in consequence of alleged misfeasance and alleged breaches of trust while acting as directors, hl.e plaintiffs were Sir George Clifford, Dr Edward G. Levinge, William Milne Hamilton, solicitor, Christchurch, anti James Stevenson, sheepfarmer, Kpreydon. The contributors and shareholder.-, were represented by Air ('. P. Skerrett, K.C., Wellington, and Mr Wright, of Christchurch; while defendants and their counsel were \ ernon Herbert Reed (Air Johnstone, Auckland), George AYinstone, the younger (M r McVoagh, Auckland!, 1 leathcoie j R. Williams 'Mr Myers and Mr Motis..n. Wellington).