SHAREHOLDERS’ CLAIM.

Taranaki Daily News, 5 April 1921, Page 5

SHAREHOLDERS’ CLAIM.

BIG COMPANY SUIT. DEFENDANTS NOT GUILTY OF MISFEASANCE. “A REASONABLE CONCLUSION.” Auckland, April 2. The summons by Sir George Clifford and other shareholders for an order declaring V. R. Reed, H. B. Williams and George Winstone, unr., formerly directors of the Doni, .on 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 that until early in 1917, the company was able to meet all its liabilities except interest on debentures. In February, 1917, the debenture holders notified the directors that they proposed appointing a receiver, owing to the non-payment of interest. By November, 1917, the directors found it impossible to carry on, and the shareholders in a general meeting resolved to go into liquidation. The assets were purchased at auction, on behalf of the debentureholders, for £137,750, which, after payment of amounts owing to debentureholders, for principal and interest, left a surplus of only £616. All the capital was therefore lost. THE ALLEGATION The allegation against the three directors, said the judge, was that they were guilty of gross imprudence, negligence, and recklessness in the management of the company, in particular in entering into contracts committing the company to the expenditure of sums far in excess of its capital and resources. Applicants relied on three matters justifying an order against the directors: First, the establishment of the company’s hydro-electric scheme; second, the making of a contract with the Fuller Engineering Company for the supply and erection of a cement mill; and, third, allotment of preference shares. ACTED QUITE HONESTLY. His Honor 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 Honor held that they were within their powers in deciding on the hy-dro-electric scheme, and failure to consult the shareholders in the first instance was at the worst only an error of judgment. His Honor thought the directors were prudent in not relying on the Whangarei Borough Council for the necessary power and in making other arrangements. The applicants’ view that directors, in any business, were not entitled to take any serious or definite 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 complet? establishment of that Business, was not the view upon which the directors had hitherto acted. If adopted it would paralyse the operations of companies It was an unsound view, and the directors, he thought, were not imprudent in believing they could obtain funds Fortune did not favor the company, and it suffered one bit of bad luck after another. The shareholders knew of the directors’ hydro-electric scheme in September, 1913, and there was 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, had no right now. Applicants had failed to establish that the directors were guilty of any misfeasance, and the summons must be dismissed, with costs. PARTIES INVOLVED. The sum of £190,000 was involved in the action wherein certain shareholders of the Dominion Portland Cement Company called upon certain directors of the company to show cause why they should not contribute the above amount of money in consequence of alleged misfeasance, and alleged breaches o-f trust while acting as directors.. The plaintiffs were Sir George Clifford, Dr. Edward G. Levinge, William Milne Hamilton, solicitor, Christchurch, and James Stevenson, sheep farmer, Spreydon. The contributors and shareholders were represented by Mr. C. P. Skerrett, K.C., Wellington, and Mr. Wright, of Christchurch; while defendants and their counsel were Vernon Herbert Reed (Mr. Johnstone, Auckland). George Winstone, the younger (Mr. McVeagh, Auckland). Heathcote B. Williams (Mr. Myers and Morison, j