A COMPANY’S CLAIM.

Taranaki Daily News, 17 November 1922, Page 7

A COMPANY’S CLAIM.

HISTORY OF OIL SYNDICATE.

1 NON-SUIT SUCCEEDS. Can a member of a syndicate be deemed a member of a company, when the syndicate is so merged, and be allotted shares in the company accordingly, even though he may make no written application for shares? This was a question about which lengthy legal argument was heard in the New Plymouth Magistrate’s Court, yesterday, before Mr. A. M. Mowlem, S.M., in a claim for £35 made by the Paritutu Oil Company, Ltd. (Mr. Brokenshire), against Frank Willis (Mr. C. E. Monaghan).

. Air. Brokenshire said defendant was . a member of a syndicate formed for the purpose of obtaining certain oil rights near New Plymouth. The syndicate wag known as the Blenheim . Oil Syndicate, and when -the comjyiny was . formed defendant was allotted shares but gave no notice as to his intentions till -several months afterwards. ’-The ; defence would probably be that de-fendant-had made no application in writing for shares. ~ '

Counsel submitted that the question was one for the Supreme Court to. decide, and he asked for the Magistrate’s ruling; but the latter replied that he could not give a decision on the point raised till he had beard all the evidence.

Detailing the facts mentioned in his opening remarks, Mr. Brokenshire said the men who~had banded themselves together as a syndicate had signed the agreement on August 15, 1921, defendant signing and agreeing to take £5O worth of shares, on which he paid Is per £1 share at that time. The first two items in the claim were calls made under the agreement before the company was formed. Defendant signed a further memorandum confirming the negotiations between the executive of the syndicate and the Crown. This memorandum, amongst other things, set out the total liability of each member and reserved the right to form the syndicate into a company, and defendant must have known that a company would eventually be formed. He did not,' however, attend the meeting on February 13, 1922, when this was done.

The company, was incorporated on May 2, 1922, and directors were appointed. The company had acted on the fact that Willis was a member of the syndicate and had not disclaimed his membership when the company was formed. This attitude, then, was treated as an application for shares, and formal notice to this effect was given by post on June 23. Counsel therefore submitted that the company was justified in assuming that defendant had applied for shares. OIL AT TWO THOUSAND FEET. Evidence was given by Valentine Duff (secretary of the company), who was examined mainly as to what happened at the various meetings of the syndicate and the company. In the course of a lengthy cross-examina-tion by Mr. Monaghan, witness said the company was formed for the purpose of exploiting the oil rights, the idea being to obtain oil at 'a depth of 2000 feet, where oil had been found before. No new bores were to be laid down. The company, he added, still hoped to obtain oil in payable quantities. Further cross-examination centred round the point as to whether the notice of allotment was posted, counsel for the defendant stating that his client had received no such notice. Witness produced a book .showing letters posted on June 23, the record showing that amongst other notices sent one was posted to “F. Willis.”

Re-examined, witness said Willis had given the first intimation, on September 9, -of his intention to let the Paritutu Oil Company sue for the money, as he had made no written application for shares. He was positive of the date, as he made an entry in his private diary as soon as Willis left the office.

Frances Holmes, clerk in the employ of Vai Duff, gave evidence as to entering the notice of allocation of shares to Willis, with others, in the postage-book and posting it. She had previously posted to Willis a notice informing him of the meeting., at which the syndicate was formed into a company. Various notices of call had also been sent to him.

To Mr. Monaghan: The notice of June 23,. giving notice of allocation, was addressed “F. Willis, New Plymouth.” No letter addressed to defendant had come back through the Dead Letter Office. In opening for the defence, Mr. Monaghan said he intended at the outset to move for a non-suit. In the statement of claim the £35 represented 14s on each of 50 shares. There was no contract between defendant and the Paritutu Oil Co. in respect to the first two calls in the statement of claim. Notice of the third call was not in order, as defendant had not been given 14 days’ notice, as was required by clause 12 of the articles of association. In answer to the Magistrate, Mr. Brokenshire said he was not pressing the claim of £l2 10s in respect to the third call, it being admitted that 14 days’ notice had not been given.

Mr. Monaghan submitted further that the purpose of the concern was not to exploit the oil undertaking, but to obtain the rights over the land for leasing purposes. Numerous cases were quoted which generally went to show that a shareholder in a syndicate could not be compelled to transfer his shares as a member of a company. .Willis had never attended any meetings 1 of the syndicate or the company, and by no means of commission had he associated himself with the company. The Magistrate, addressing counsel for the plaintiff, said the great obstacle to the success of the claim was that before the compahy was incorporated calls were made by the syndicate. Nothing had been shown as to why the company should have any claim. Mr. Brokenshire said it. was purely a matter of implication, but, as defendant had allowed his name to be left on the share list of the company, counsel submitted that defendant had agreed to a transfer of his shares and his debts from the syndicate to the company. The Magistrate said he would decide the non-suit point at the moment. THE DEFENDANT’S EVIDENCE. The defendant, in the box, gave his occupation as an insurance agent. He had agreed to contribute £5O in shares to the syndicate, £2 10s being paid at the time, the balance to be called up. He attended only one meeting, after which an agree? ment was signed with the Mines Department.’ He subsequently received notices of call from the syndicate, which be had not paid. His idea of the purpose of the 1 company was to secure the rights over a bore over which the Government had a lien. He looked at it as absolutely a speculation, the idea being to sell the acquired rights to a company. He could not explain bow it was that he appeared on the, new company's register; he had received no not : ce of allotment. A letter addressed to ‘T. Willis, New Plymouth,” nrght, or not, reach him. as were other.

Willises in the town, and letters and telegrams were constantly wrongly delivered in consequence.

To the Magistrate: He admitted liability to the original syndicate. Reviewing the case, the Magistrate said it seemed plain that plaintiff must be non-suited. The calls had been made, it appeared, on January 16, March 24 and August 7. Admittedly clause 12 of the articles of association had not been complied with in respect to the third call, as the requisite 14 days’ notice had not been given. Therefore the claim for the third call was not recoverable. It was equally plain that the present company could not recover the first and second calls under the claim, as these calls were made prior to the incorporation of the company by the executive of the syndicate. The company had not been incorporated till May 2. There was not sufficient evidence to show the Paritutu Oil Company took over any liabilities that might have existed in the Blenheim Oil Syndicate. It was plain that the gentlemen who formed the syndicate thought it wise to form it into a company, but this did not give to the plaintiff com pany the right to recover for calls made a very considerable time before the incorporation of the company. The plaintiff company was therefore non-suited, with solicitor’s costs (£3 3s).