DIRECTOR'S BONUS

Rotorua Morning Post, Volume 3, Issue 637, 15 September 1933, Page 6

DIRECTOR'S BONUS

QUESTION OF VALIDITY LOSS REVEALED INSTEAD OF EXPECTED PROFIT PAYMENT DISPUTED Auckland, Thursday. A sum of £1000 voted at a shareholders' annual meeting to the directors for their service, and the subsequent discovery that instead of a profit of £5000 the company had made a loss of £3200, led to an unusual action in the Supreme Court to-day, when Chai-les John MacCulloch, company manager, who was one of the five directors claimed £200 from the Putaruru Pine and Pulp Co. (N.Z.), Ltd., as his share of the £1000 which had never been paid. In a counter claim the company asked the court to, rescind the resolution voting the directors £1000, on the ground that the balance-sheet showing a profit of £5000 was incorrect. After legal argument Mr. Justice Herdman asked: "Can you have a more definite direction than that given by the shareholders to the directors to do a certain thing? It was a definite order to pay, and if the directors did not pay, surely they could be sued." In reply to His Honour's question it was stated that the company was carrying on and doing reasonably well. Counsel for the company said it would be a curious position if the company had to pay the sum voted to the directors when it was voted as a result of a balance-sheet that contained a false statement. The mover and seconder of the shareholders' resolution gave credence. They would not have moved it had they knowr. there was a loss, not a profit. The present secretary of the company said the dividend declared at the first meeting had not been paid. The company's losses since its inception totalled £11,827. He believed the shareholders did not know till recently that the £1000 had not been paid to the directors, and that they were now moving to have the resolution cancelled. The mistake made by the directors was in showing as assets 90 per cent. of the amount represented by a sale of bonds, allowing only ten per cent. for forfeitures. Counsel for both parties made it clear that there was no suggestion oi' fraud against the directors. His Honour gave judgment for plaintiffs, with costs.