UNUSUAL CASE

Hokitika Guardian, 15 September 1933, Page 5

UNUSUAL CASE

INCORRECT BALANCE SHEET PROFIT TURNSTO LOSS (Per Press- Association, Copyright). AUCKLAND, September 14. A sum of., : £100(1. was voted at the shareholders’ annual '. meeting, to the directors for their services, but there was a • subsequent discovery that inBtead.of a, r profit of,. .£-5000,- the company had made a-loss ;of. £3,?00. This led to. an, umispal - action in the Supreme Court, whop. Charles John Ma<Culloch, company manager,, who was onp of the. five ,directors', claimed, £2OO from the Putaruru Pine and Pulp Co (N.Z.) .Ltd,, as hie share of the: £IOOO which, had never beep' paid.'. In a mounter claim, the Company; a sked the Court -to rescind, they, resolution . voting the directors £1000;. on the ground that . ■ the balance- sheet showing a profit of £SOOO-was incorrect;'“uV;-' . After legal argument,;’ Justice- Herdman qsked.Camyou-'ipvefVa more 1 definite direction That thfdy given-by the shareholders ito the directors to do certain > Things f .’ Ht; was' a definite, order ito pay, and if the,,directors did not ’pay, surely; they 'could be sued. .In reply to, his ■ question, '. it .was . stated /that the company Jijj'Sts’-; carrying on and 1 doing reasonably, well. , , ; " • Counsel ’ for the 'y company said it would, bq a .curious . position if the .company had. to .pay, a sum voted to the directorsywhen is wajj’.yoted as. a result of the.balance,'sheet:that contain-, ed a false ... statement-, ). t d'. , V-'"; The fijovlr .... arid seconder of- the

shareholders’ 'resolution , gave -evidence that they \yould. hot have .moved it, had they' known’ .there"*' was 'a loss, and not a profit. - , - ...

: The present secretary, of the comttitny said the- dividend declared at too first • meeting.; hAdrlnot - beep paid. The , eqmn ai >yi( ''-jofsepi si'epei. the. ‘ inception totalled £11,82.7.. He believed the. : shareholders did not know till re•cently . that; the 4l<X)o had. not been paid to the directors, and; that they were now moving 1 b<>? have the, resolution cancelled. The mistake made by. the directors was in showing' as, assets! 90 per cent, of the ambnjiF represented by the sale; of bonds, .allowing only 10 per .cent, for forfeitures. ’

Counsel for b' oth parties' made it clear that'there, was no suggestion of fraud against the directors; - His Honor- gave- judgment for the plaintiff, with costs.. •'-«