BUTTER-FAT SHARES.

Taranaki Daily News, 17 July 1922, Page 5

BUTTER-FAT SHARES.

“AN ADDED OBLIGATION.” SUIT AGAINST NORMANBY DAIRY FACTOR'-. A case of considerable interest to dairyfarmers was commenced at Wellington on Thursday before the Full Court of Appeal, consisting of Their Honors the Chfef Justice (Sir Robert Stout) and Justices Hosking, Herdman, Salmond and Reed. The matter was that of an appeal on a point of law from the Magistrate’s Court, and concerned Stuart Evan MacDonald, of Normanby, a dairy-farmer, as the appellant, against the Nonnanby Co-operative Dairy Factory Company, Ltd., having its registered office at Hawera, and carrying on business at Nonnanby and other places as dairy produce manufacturers. Mr. F. C. Spratt, of Hawera, appeared for the appellant, and Mr. P. O’Dea, of Hawera, for the respondent. In his statement of claim, the appellant demanded from the company the sum of £6 15s 7d, as the balance due to him for milk supplied during the month of November, 1921. The reply to the claim was that the amount above-stated was owing to the company under its Articles of Association, and had been so applied bv the company in satisfaction of its counter-claim.

: When the case came on for hearing on . January 31 last the claim and counterclaim were heard separately, evidence was given, argument taken, and the decision of the court was reserved. The facts were then set out as folloy: , The plaintiff (appellant) became a member of the company on October 14, 1920, by transfer to him of 223 shares fully paid up. During the year ended June 30, 1921, the plaintiff supplied 18,693 lb of butterfat, and held, during that year, 223 shares. A RESOLUTION PASSED. By a special resolution of August 8, 1921, the company altered its Articles of Association in conformity with a resolution reading: “That Article No. 7 of the company’s Articles of Association be altered by substituting the words ‘one share for every 60 lb of butter-fat,’ in lieu of thr?e shares for every 250 pounds of butter-fat.’ ” It was submitted by the company that the necessity having arisen to increase the capital from £BOOO to £14,000, following the practice of taking the amount of but-ter-fat supplied by the shareholders as the basis, they requested the plaintiff, on September 16, 1921, to take up an additional 89 shares in the company. The plaintiff objecting, the company allotted the 89 additional shares to him, deducting £6 15s 7d from the amount of £162 14s 9d due to the plaintiff for butter-fat supplied bv him during the month of November, 1921. Counsel for the plaintiff contended t|iat the company had no right to retain the £6 15s 7d and apply it in satisfaction of share capital; and that, ps a matter of fact, the company had misconstrued Article 7 of its Articles of Association, which, he contended, should be read as indicating “any current year” instead of “any year.” The plaintiff’s counsel further maintained that the company could not legally, by amending its Articles of Association, throw upon its shareholders the liability to take further shares; that such amendment by the company was ultra vires, and the allotment of such additional shares invalid.

Briefly, said Mr. Spratt, in opening his argument, what the court had to decide was not whether any of the company's Articles of Association were ultra vires but whether a resolution, which was afterwards pasted into the Articles of Association was competent to the company. AN ADDED OBLIGATION. In changing the article to read three shares for 180 lb instead of three for 250 lb, the company was imposing an added obligation on its shareholders, not to supply milk, but to take additional shares. That was the crux and very heart of his case, he contended; and what applicant objected to was that resolution passed on August 8, 1921. 3516 company, by that resolution, he said, asked its shareholders to take up additional shares more than they had agreed to take; and counsel contended that the resolution referred to was not a legitimate alteration of the company’s Articles of Association. Mr. Justice Salmond: Suppose that Article 7 had been amended to its present form before you originally took up your shares, would you then have taken up the shares ? Mr. Spratt: We should have had to. Mr. Justice Salmond: How can you discuss the validity, or otherwise, of an amendment to the article, without first deciding whether the article itself, as originally drawn up, was valid? Decision was reserved.