DAIRY FACTORIES AND MILK.

Taranaki Daily News, 18 May 1917, Page 7

DAIRY FACTORIES AND MILK.

PROFIT DISTRIBUTION, SUPREME COURT ACTIONS. In the Supreme Court yesterday, before His Honor, Mr. Justice Hosking, an action was heard in which John Dickson and Benjamin Dickson sued the Pihama Dairy Factory Campany, Ltd., to recover £2OO alleged to be due for milk supplied, the question at issue being whether the plaintiffs were entitled not only to the monthly payments they had received but also to further payments, or bonuses, paid to other suppliers.

Mr. P. O'Dea (Hawera) appeared for the plaintiff, and Mr. J. H. Quilliam for the defendant Company. Mr. O'Dea, in opening, iaid there were certain facts that had been agreed to by his learned friend and himself, namely: That the defendant company was a duly incorporated company and cordectly described m the statement of claim; that tho .plaintiff. John Dickson, lvas (juring the 1915-10 season and at ill material times a shareholder in the company; that the plaintiff Johir Dickson commenced supplying the company with milk in September, 1912, when he became a shareholder; that he continued to supply and deliver his milk to the defendant company until June 1, 1913, when he' discontinued supplying the defendant company and- commenced supplying the liaupokonui dairy factory; that he discontinued supplying the ICaupokonui factory on October 25, 1914, when in consequence of 'Skeet bridge oil the road he used being pulled >.v-u he discontinued supplying the Kaufokonni company and resumed supplying the Pihama company; that he continued supplying the Pihama factory from October 1916, to March 31, 1910, >,hen the brjdge was re-erected and he recommenced supplying the liaupokonui company; that the milk delivered by Benjamin Dickson was really milk belonging to John Dickson; that the plaintiff received payments for the milk at the rate of Is per lb of butter fat in October and November,' 1915; and that two further payments of 3d per lb each had been made to bona fide suppliers. It was for these two further payments, sometimes called bonuses, that the plaintiff claimed. His Honor: The point seems to be,' Was the plaintiff, John Dickson, a bona fide supplier? . Mr. O'Dea said that was one point, ■but in the alternative plaintiff claimed for the'valne of the milk supplied. From October 25, 1915 to March 31, ID I ft, the plaintiffs had supplied the Pihama factory with 85,352 lbs of butter fat. The company had made no special contract during the season distinguishing between bona fide suppliers and non bona fide suppliers. If the plaintiffs were not entitled to claim as bona fide suppliers then they claimed a reasonable price for the milk supplied. The case, counsel continued, had first bev-n instituted in the Magistrate's Court but remanded by the defendants to the Supremo Court. The plaintiff had received Is Id for the butter fat he had supplied whereas tho shareholder-suppliers had received Is 7d. With -the first payment he received a statement showing that the company had retained 6s 4d, which was equivalent to y,d,per pound on th'j butter fat he had supplied, but the next month that amount had been refundi-d. According to the articles of the company a bona tide supplier was a shareholder who supplied the whole of his milk to the company 'during the season. A great deal depended on the meaning of the word, "during," counsel contending that it did not necessarily mean continuous or throughout, but might be taken in the same way as they spoke of even that occurred during a year. But if ic was held that the plaintiff John Dickson, was not a bona fide supplier, there was a contract to be inferred from the facts and implied by the law that he was entitled to receive payment equivalent to what bona fide suppliers rjc?ived. Michael Joseph- Brennan. stated that he was secretary of th 6 Pihama Dlviry Factory Company. He knew that Dick, son supplied all his milk from October to March last. For some years the factory was open continuously. The company treated the season as from July 1 to June 30. The factory was opan to receive milk any day during that period. Of course some suppliers had mi'k to supply during the whole twelve months and some had not; it depended or. how they worked their farms. If a man became a hona fide supplier and supplied all his milk till the middle of the season and then ceased because he had no milk under his control he woujd still be treated as a bona fide supplier.

His Honor: If he continued a shareholder. Witness continuing: Dickson had supplied the bulk of his milk du'ing the period from October to March. Witness knew that the Dickson's had begi.n to supply only as a temporary expedient, and knew, or expected that a 9 soon f.s the bridge was rc-erected thsy .woujd cease to supply the Pihama Company The company had no agreement with other companies to take milk from each other's suppliers under exceptional circumstances. In witness' experience for 16 years when suppliers camu temporarily to the defendants' factory they always received the usual monthly payments, but in no case did they receive further payments. When witness made out the first statement for the October milk to Dickson be deducted a halfpenny, because it was a rule to do :<o when non-shareholders came in temporarily. It was an oversight, 'jecause the milk came in B. Dickson's name whereas it was J. Dickson who was Hie shareholder. Next month the halfpenny | was refunded because in the meantime he was informed that the milk was really J. Dickson's. The acount was opened in B. Dickson's name and remained so. J, Dickson had not his frll proportion of shares in the company. Until the shares were fully paid up the practice was to deduct so much butterfat per month. J. Dickson's shares were fully paid up, but he was supplying more milk than the shares h> held justified The company did not expect him to take up more shares, knowing that he was only a temporary supplier. The same observation applied to Schinkel, the plaintiff in another action against the company. When the company directors met in November the pay sheet for October was passed by resolution in the ordinary way. There was no special resolution to say what was to be paid to non bona fide suppliers. There were three classes of suppliers-—shareholders who supplied all the season, shareholders who only supplied part of the season, and non-shareholders who supplied. The company tried to protect themselves by providing that the bonus should not be paid to any but bona fide suppliers. Owing to the fluctuations of prices on the British market, it could not be estimated in February the amount of the extra payment or bonus for the year. There was nothing on tho

sheet given to Dickson for tlic Octobc* milk to indicate that it was a final'payment. So far as ho knew, the custom with other factories was to deduct a half-penny from non-shareholders, who therefore lost that halfpenny and any chance of further payments." Witness could not say whether Dickson had not expected a further payment, except. t)iut in 1912-13 he only supplied a part of the season, and did not receive the further payments. In August, 1910, he claimed a further payment for that season, and witness explainod to him that he was hot entitled to it, not being a bona fide supplier. Rehinkel had also expected to receive the further payment, but did not get it. If Dickson had supplied to the end of the season lie would not havo been treated as a bona fide supplier, because he did not begin the season with the company. Had he come in oil the Ist of .July he would probably have been called on to take up the extra shares required by his toutterfat supplies, and when he did so he would have been treated as a bona fide supplier. To. Mr. Quilliam: Mr. Dickson had been a broken supplier during the 191213 season, hut he made no claim, as far as witness knew, for the further payment of that season. The monthly payment was the highest that could be safely paid. The amount might vary from month to month, the usual payments being Is, Is Id, and Is 2d, at different periods of the year. A shareholder who was not a supplier did not* get a very good dividend; it was not looked upon as a good investment. During the season 1915-16 Dickson and Schinkel were the only suppliers who were not bona fide suppliers. John Bryce Murdoch, chairman of the T. L. Joll Co-operative Dairy Factory Company, the second largest dairy factory company in Taranaki, said his company. accepted milk from non-share-holders, and if they subsequently took up shares they would be treated as bona fide suppliers. Persons who had become suppliers in emergencies had been treated toy his company on the same footing as shareholders, excepting that 3-8 d was deducted for expenses. If the shareholders got Is 7d, then the non-sharehold-ers would be paid Is 6E-Bd. If a supplier came in in the middle of a season for his own purposes, and then left the company again, he would only get the first payment. A reasonable price for milk supplied to cheese factories in Tar>naki during the season 1915-16, the big season, would be' Is Bd, The idea of Is Id would shock his feelings. The October to March period would he responsible for seven-eighths of the year's output of butterfat. During the strike in 1918 the price went down to 9d, and with one company to 6d. To Mr. Quilliam: Witness' company had no clause in their articles defining a bona fide supplier. There was a decided relation between the value of milk delivered at the factory and the price of finished product in London. Ernest Charles Barleyman, secretary of the liaupokonui Dairy Factory Company, deposed that Dickson and Schinkel were both shareholders in the company. They discontinued supplying when the bridge was taken down, and re-sumed after it was re-erected. There was an agreement, to which the Pihama Company was a, party, providing that milk could be taken for the usual suppliers to other companies under exceptional circumstances. His company paid non-shareholders the same as shareholders, minus a deduction for expenses. In the 1915-1(5 season his company had paid shareholders Is Bjd and non-share-holders Is Bd.

To Mr. Quilliam: Bona fide suppliers were required to hold shares in accordance with the amount cf their butterfat. If they did not the directors allotted the required number. Robert Lambie, chairman of the Pihama Company during the 1915-10 season, said he had known that Dickson had, commenced supplying the factory, after the bridge was pulled down. After the first bonus had been declared, a brother of Dickson's came to him about it. When the payment was made he did not consider Dickson was entitled to any more.

Benjamin Dickson deposed that he had seen the manager of the Pihama factory two days before he began supplying the milk, and the manager offered no objection. He supplied the whole of his brother's milk from October to March, going back to the Kaupokonui factory. They expected to get more than their monthly payment, and were not aware that they were to get no further payments tiil after the first one of 3d had been declared.

To Mr. Quilliam: They expected more because of the good state of' the market.

Walter Dutton Powdrell, chairman of the Kaupokonui Dairy Factory Company, stated that his company paid Is 8 3-84 in the 1915-16 season. They had sold a large quantity of that season's product to the Imperial Government in September and October at a lower price than they knew they could get in the market. The practice of his company was not to accept milk from non shareholders, unless under special circumstance 1 ;, and in emergencies. In such cases they deducted 3-Bd. Some compapies charged Jd, and he had heard of one charging a penny. He had never heard of any company charging Gd. He considered that Dickson and Schinkel were bound to come back to the Kaupokonui fnctory when the bridge was reerected, under the terms of an agreement entered into by the five companies in the district.

. To. Mr. Quilliam: The directors of this Kaupokonui company had a considerable amount of discretion in regard to payments, but generally wished to pay as much as they possibly could. If Dickson took his milk to Pihama he would have to travel six miles extra per day. This closed'the caserfor the plaintiffs. Mr Quilliam said lie did not intend to call any evidence. The defendants relied 011 their articles of association. These articles were designed to keep the shareholders together and give certain advantages to bona fide suppliers, who were defined as holders of shares proportionate in number to the quantity of butterfab supplied, and sent the whole of their milk to the factory during the season. The real question, then, was whether the plaintiff John Diekson was or was pot a bona fide supplier in accordance with the articles of association. Counsel on the other side had submitted that the words "during the season" should be taken to mean in the course of the season, but he (Mr. Quilliam) quoted an English authority to show that the word "during" in this instance must be taken to mean throughout the whole season. The plaintiff had not supplied the whole of his milk throughout the season, and had out therefore been a bona fide supplier. In the alternative, the plaintiff asked for a reasonable market price for the milk he had supplied. He (Mr. Quilliam) submitted that there was no market at the time, or that if there /was, the reasonable price would be the market price, and not the value of the milk supplied at the time to the factory. Bja Honor, after bearing further argu-

liient, said ha would take time to consider all the aspects of the case and give judgment later. Thero was the other case, Schinkel jr. the same defendant >

Counsel agreed that Schinkel's case should stand or fall by the evidence and. argument in Dickson's case. His Honor directed that Schinkel's caae be formally called, and, on that being dona, entered a note that by consent judgment should go in accordance with judgment in Dickson v. Pihama Dairy Factory Company.

FREE v. ELTHAM DAIRY COMPANY. Another action of a similar nature to the foregoing was then taken, the plaintiff being John Hamilton Rowan Free, and the defendants the Eltham Cooperative Dairy Company, and the claim £135 3s'"9d, milk monies. Mr. Johnstone, with him Mr. J. Morrison (Eltliam), appeared for the plaintiff, and Mr. C. B. Collins, with him Mr. J. L. Weir, for the defendants. Mr. Johnstone, in opening, said the case was one ■ which [presented some features similar to those in the action his Honor had just heard, but in other respects thero were material differences. The plaintiff in this actinon claimed £135 2s M, 'which he alleged to be due for milk supplied during the months of August, September, October, and November, 1914. The plaintiff -jvas a farmer, and for some years lived in the. Mangatoki district. In August, 1914, he purchased a farm at Hunter Road, Eltliam, where the Eltham Dairy Company 'had a branch factory. The Mangatoki Company also had a branch situated some distance away. In August, 1914, the plaintiff was not a shareholder in the Eltham Company, but simply Went to the Hunter Road branch and was welcomed, as a new supplier. He supplied milk durinf the months of August, September, October, and November. At the end of November the manager of tho company questioned the quality of the milk, in consequence of which Free ceased to supply tho Eltliam Company, and again liecamo a supplier to the Mangatoki factory, and with that factory he continued ever since. The dairy factories, counsel continued, made a practice of paying out every month on account of milk. The contention was that tho amount received by the plaintiff was not) a reasonable price for the butter-fat supplied by him in September, October, and November in that jyear. Deductions were made from the amounts payable to plaintiff for the four months, amounting to £ll to 2d. The plaintiff eventually acquired 92 shares, but the other side claimed that 'lie was not a shareholder because his namo did not appear on the registered list of the company's shareholders. The contention for the plaintiff was that if he was not entitled to claim as a shareholder he was entitled to claim a reasonable price for the milk supplied. The company denied that the plaintiff was a shareholder, audi the plaintiff had been refused the further payments or bonuses paid to shareholders, on the ground that he did not hold the number-of shares required by the articles of association. Counsel then read correspondence between the company and the plaintiff that he had eventually been allotted 92 shares in 1915. If the company's contention was that the plaintiff was not a shareholder, then he claimed a reasonable price for the milk supplied, which, counsel submitted, would be %d less than the price paid to shareholding suppliers. Counsel further sultoiitted that by holding 03 shares on July 12 he was a shareholder holding the full number of shares necessary to qualify for further payments by the company from that date.

J. H. R. Free gave evidence to the effect indicated in counsel's opening address.

Hugh Bailey, oompany secretary, deposed that he had had thirty years' experience of dairy factories. He knew lof a company that made no difference in payments to suppliers who were shareholders and those who were not. | The shareholders benefited by mlik supplier! by non-shareholders, because of the additional milk their factory got. and the shareholders might also get interest. The company was in a thoroughly sound financial position, hut it was not their aim or object to make profits. He considered that from %d to Id per lb of butter-fat would he a deduction for expenses. He would nofc Consider a deduction of 7(1 fair to the supplier.

To Mr. Collins: The company witness was connected with held all through that they did not buy the milk from suppliers. Co-operative companies were not supposed to make profits, even from supplier!! who were not shareholders.

Robert Henry Free, manager t'-tf of the Mangatoki Dairy Company, deposed that in the winter time they had suppliers who were not shareholders. They charged fully paid up shareholders nothing, but shareholders who had not paid up were charged jd, and id was deducted from non-shareholders who came casually. John B. Bennie, secretary of the Kaponga Dairy Factory Company for seventeen years, also considered 'that up to %d per lb would he a reasonable deduction to make in payment to nonshareholders.

Edward William Garner deposed tlrat he had been secretary of various dairy companies for fifteen years. The practice was to deduct id per lb buttej|fat from non-shareholders at every monthly payment. When a man came in in the middle of the season he was notified to take shares, ijnd if he did so the monthly deduction for expenses ceaSed. but Is ppr GOlbs of milk was deducted towards payment for the shares. If the man pulled out before the end of the financial year what had been charged to him for his shares was put to his credit, and tho deduction for hiß expenses to his debit.

This closed the case for the plaintiff. Mr. Collinß briefly opened for the defendants, submitting that the plaintiff was not entitled to payments further than those he had received, because he was not a shareholder at the end of the financial year then current. If the defendant company had impliedly agreed to allot plaintiff 92 shares, the condition was implied that t/ie defendant would take them up, and this he had not done till July 12, 1915, the financial year expiring on the 30th of the previous uionth. As to a reasonable price for the milk supplied, that was determined by the price paid out each month to shareholders, minus the deduction made for expenses in payments to nonsliareliolders. No notice was posted in the factory as to the terms of payment to non-slmreholdcrs, but the monthly pay sheets conveyed the information, and, counsel submitted, the court could draw an inference from the articles of association and the facts that the plaintiff had been expected to become a fullypaid up shareholder and bona flde supplier. He would defer further legal ar-. gument and the quotation of authorities until after he had called evidence. At this stage the court rose till 10 «.m. to-fab