BRUCE’S OATMEAL MILL.

Temuka Leader, Issue 1909, 27 June 1889, Page 2

BRUCE’S OATMEAL MILL.

On Monday, in the District Court, Timaru, before His Honor Judge Ward, the case of Bruce’s Patent Oatmeal t~d Milling Company was resumed. Mr Perry justified the action of the directors in getting rid of their shares when they found that the other shareholders would not take their advice and do the only thing possible to be done. He contended that the duplication of shares was void, as the provisions of the Act and the regulations were not complied with, A company could issue new shares, but the duplication involved the abolition, by splitting up, of the old shares, and the distribution of the capital paid up on one share over two new shares, a proceeding not contemplated by the law. The duplication was also void because its terms did not apply to tho whole capital. Even if shares could bo legally issued in this manner, the shareholders, not the directors, must fit the conditions. He contended the shares were void, never existed in point of law. Directors cannot bind shareholders by illegal shares ; if shares are void no acquiescence or ratification can make them valid. He also referred to the oases of those shareholders who had given property for shares, and said it would be a most iniquitous thing if they were m; ie to pay again. Mr Hay addressed the Court at great length. Dealing with those of his clients whom it was sought: to make contributors under the duplication he contended that the

76 par cent, must refer only to those on the share list on the date of the agreement, August 20, and of 33 then on tho list only 10 agreed. However, at no time was the condition fulfilled, notwithstanding the sham transfers, and therefore no condition of the agreement having been fulfilled the shareholders were not bound by it. No act of the shareholders could bo said to signify acquiescence in the director’s action, They had received no notices, and when they attended meetings had been told the omngsmoat had fallen through. He contended that a person’s name being on the share-list was not a proof of his being a shareholder if he denied liability. The liquidators must prove that he was. Thus far he had been speaking as though the duplication was a legfl contrivance. Ho need not follow Mr Ferry in showing that it was illegal, but would press a little further the illegality of the abolition of tho original paid up shares and the substitution of two half-paid up shbros. Unless specially empowered by their articles and memo rand am, a company cannot deal in its own shares. Tho duplication was a contrivance outside the law and could bind no one Dealing with the holders of 11 new issue ” shares, E. Rutherford and I. E. Jones, Mr Hay argued that there was no legal contract made with the company by the former. He either bought two £SO shares at par or two £IOO shares at a discount; neither would be a legal bargain; tho company could neither issue £6O shares nor sell at a discount. Whatever Mr Rutherford agreed to, it was not to take one of the original shares; and being allotted one of those shares, he was not bound to take it. doming to the “ hardship cases,” those of Braynhaw, Bruce, Reid and Urey, and Drysdale, so far as the register went they had paid up—that was prima facie evidence they bad paid up properly—and it was for the liquidators to prove two things : that they had not paid up iu cash, and that they had not registered a contract of another kind. His Honour painted out that tho statute forbade traffic iu shares for property —with an exception ; it must then be for the shareholder to show that he came within the exception.

Dealing with tho oast 3 of those who had had shares transferred to them Mr Hay quoted authorities to show that boaa fide transferees of shares purporting to be fully paid up, without notice of special mode of payment, cannot ba made to pay up in orffi. Mr Raymond addressed tho court for Messrs J. iS. Rutherford and Amitage. la the liquidation of companies tho whole question was: Was there a valid contact in the

fint instance ? The entry of a name on a shore register would not moke a person liable as a shareholder, unless it was properly entered. No notice of allotment was oven posted to Mr ArmUage, who had paid £IOO far two shares. He contended that the whole of the d ! «ectoru must act in alloting shares, and could not delegate their power to Mr Bruce. Payment of deposit with application did not bind an applicant prior to proper allotment. Counsel quoted numerous authorities in support of their argumentf, and at 5 o’clock ths count adjeurned unt ’ the following morning.

On Tuesday, Mr Baymcnd concluded his address. He contended that the duplication scheme was void entirely; there wss no provision '’fa*' such a thing in the Companies Act; Jao authority to allocate capital paid up on one share egfingfc another thare. Assuming, however, the duplication was a legal arrangement, Mr Rutherford should not be liable for a “duplication chare,” because the “condition precedent,” the concurrence of 75 per cent., had never been fulfilled. Mr Hay mentioned the oases of Mrs Bruce, Miss Bruce, and Mr Bruce, innr. If not struck off the list altogether, they should come under the same class as Messrs Quinn and Stubbs, as transferees unaware of the payment made for the share. Mr Stewart in replying said sales of shares need net be in writing. If a person agreed to take sharer, was put on the Hit and notified of the fact, he was ’’’able. (Linley 1402.) His friends had said a good deal about acquiescence, but had argued as if this must be of some active hind; there was an acquiescence by negligence. The “ now issue 11 shares were made under a properly sanctioned decision to increase the capital to £20,000, therefore all the argument about ultra vires fell to the ground;

His Honor said there was no power to nplifc up the value of a paid up share in that way. There was no application for new shares; the agreement that was signed was not an application, wsi not even t idresied to tho company. It ran “we the underi fiigned, agree to resolve," and apparently tbs' undersigned never did resolve. The issue of second shares, in the way they were issued, was ultra vires. The rr’es required payment of £l2 10s on application and the same amount on allotment, and the scheme was to relieve the shareholder of liability for these payments, and other payments up to £59. Mr Stewart said the rights of others must not bo injured by internal mistakes of the company, therefore ell that had been said about the 75 per cent, not having been oh* tained fell to the ground • The directors bona fide believed the condition had been completed and declared tho allotment. His Honor said the proceedings of the directors in the matter were illegal, Mr Stewart having dealt with several other cases the Court adjourned until noon on Wednesday. THB JTO9MBNT.

Yesterday morning His Honor delivered a lengthy judgment. Before doing so he expressed the opinion that the action of directors in regard to duplication of shares a d other matters was most objectionable, but at the same time he did not fesl justified in imputing to them dishonorable conduct. Their actions, although peculiar, had evidently been guided by a desiie to wind up the company. The dup'mation of shares was illegal and ultra vires, and consequently all duplicating shareholders held to to liable by the directors would be struck eff the list. Omitting those who had paid their shares, and also James Bruce, end Beid and Gray (whose oases were held over for tho pfesent), there romnned oniy those who had not folly paid up an their legal shares. These, with the amounts owing, were: A. Holman, £3l6sfid• W. B. Quinn, £so} B. Bell, £B7 108} Tofev Joneti, £B7 lOi ; J. Holland, £BB} A, MoK’itzie, £B7 10a } A, Burke, £B7 10a; total, £491 ISa fid. These were the contributories. Several others, who had not paid up, were released from farther obligation owing to technical informVit : ei in share contract. Mr Stewart gave notice that iu all probability an appeal would bo made as regarded Brayshaw. Appeal could b» made any time under three wnks. The appeal, if made, would probably include certain directors. What was now proposed to be done was to have those whose liabilities were undisputed fixed. He also asked for authority to pay official liquidators out of funds coming to bend. His Hon® * granted permission. Mr White reserved right to appea' on behalf of Messrs Helmru, Burke, and McKenzie. On the application of Mr Hay, His Hono? certified for £2 8s expenses in the case of Messrs Stubbs and Armitage, His Honor refused to allow expenses :o the case of bogus transfers. Duplicating shareholders would hive to bear their own costs, as they were there by their own wrong. The duplication was an illegality. Mr Perry notified that the proof of debt between Dawson and others and the company would be allowed to stand over until next Court day.