DISTRICT COURT, WESTPORT.

Westport Times, Volume V, Issue 879, 26 October 1871, Page 2

DISTRICT COURT, WESTPORT.

Tuesday, Ootobee 24. (Before Mr Justice Ward.) IN BE ENTERPRISE QUARTZ MINING CO, REGISTERED. This case caine before the Court upon an order made on the 24th of August last winding up the company. The Official Agent had given notice to the (several shareholders, with statement of the amount claimed against thein as by sec. 6 of "The Limited Liability Companies Wind-ing-up Act, 1870." Mr J. Bickcrton Fisher appeared for Mr Pitt the petitioning creditor, Mr William Pitt represented the Official Agent, and Mr Home appeared for Messrs Hughes, Bailie, Rowlands, and other* who objected to the company being wound up, and to the scheme of contribution proposed by the Official Agent. Mr Home moved to discharge the order made on August 24. He contended that the order had been obtained under the Act above referred to, and the proceedings ought to have conformed to the provisions of that Act. He quoted sec. 2 of the Act to show "that the petition should be signed by «. majority in number and value of the Hhareholders. The petition herein was signed by Mr Pitt alone, a shareholder, and afao it was admitted a creditor. Ilia Honour: But Mr Home, Mr Pitt, in his position of shareholder, does not apply that the company be wound up, but as a creditor of the company. It cannot be contended that a creditor, who is also a shareholder is precluded from-presenting a petition under'the Act of 1865. Mr' Home thought that the latter Act was imperative, and its require-

meats had not been complied with. Besides which, the shareholders he represented were not liable to be placed in the list of contributors, they having paid up their calls to the extent of their shares in the company, as provided by the deed of association, and they had had no notice of the proceedings.

His Honour: There are three Acts, and the petitioning creditor appears under all the three Acts. I understand you to be showing cause that the winding-up should not bo made absolute. The two questions as to whether certain shareholders are liable or not, and, if liable, in what amount, remain to be dealt with, as soon as the winding-up order is made absolute. Am I to understand that you withdraw your objections to the order being made absolute ?

Mr Home : I do, your HonouYj the first objection having been overruled. Mr Pitt remarked that the order granted on August 2* was tie facto an absolute one ; but under see. 5 of the winding-up Act shareholders could move that the rule be set aside.

Mr Fisher then applied that the order be made absolute, which was granted.

Mr Pitt stated that the official acent, actin«; Under the order of Aug. 24, had prepared accounts, showiu.: the liabilities of the shareholders.

His Honour: At the present stage it was unnecessary that all manner of tables should have been compiled. However, if the shareholders now represented consent, T see no objection to the question of liability being now dealt with.

Mr Home was quite prepared to proceed in the matter. Mr Pitt thought it better that it should stand over. He should prefer to argue? when the schedules were completed, and when every sharehnlile' had had an opportunity of being represented.

Mr Fisher applied for the peti turner's costs.

Mr Home objected to any order being; at present granted for costs. His Honour: The Act provides that the costs incurred in winding up a company shall be borne by the company.

Both parties consented to the question of contributors being proceeded with, the amount of their individual liability to stand over for future adjustment. Evidence was then taken to show that the shareholders present were not liable to be placed on the list of contributors at all. J. Lesley sta f ed that he held ten shares of '£s each. The whole had been paid up.

By Mr Pitt: I paid a contribution of £l2 as a final oayment in respect to my shares on August 25. Huehns paid £24 Cs on, I think, August 26. He received a cheque for the same amount on that day for moneys previously disbursed by him on account of the company. Bailie's last contribution was on August 26, and Rowlands also paid his instalment on that date. I was not informed of the Winding-up application, or of the order obtained on August 24. On August 25 I made certain payments. They were: Rowlands, £2 9s ; Rowlands, £1 8s 6d; sundry accounts, £3 9s 6d ; Meldrum, £5 ; Reid and Co., £6 10s ; Home, £3 3s ; Hughes. £24 Gs ; Field, £9 9s MM ; Munson, £t 9<. I had heard it rumoured that an order for winding-up thecompany had been granted. The chairman of directors generally passed the accounts for payment; some of the accounts enumerated had been naased for payment twelve months previously. John Hughes: I am a shareholder in the Enterprise Company. The refund of £24 6s was for items disbursed by me. I paid Mr Button £2l for legal expenses. I still owe £8 14s. His Honour: The present witness admits his liability to be placed on the list of contributors. Witness resumed: I do not know what amount I have paid. I am told that I still owe £8 14s, and I admit that. I believe I have paid £8 14s less than the others have paid. Richard Rowlands: I hold ten shares. I have pa : d up the full amount of my shares, £SO in all. I paid it some time in August. I did not hear that an order had been granted. I heard some rumour of the company being wound up. I think 1 was present at a meeting aft \r August 24. Thomas Bailie: I hold ten shades in the Enterprise Company, and have paid them in full. I was one of the directors, and occasionally acted as chairman. I was present at a meeting on August 26. T could not have said that there was any notice that an order had been granted for the winding-up of the company. It had been so reported. Mr Home cited sub-sec. 4 of sec. 37 of the Mining Companies Aet, 1865, and he claimed that, his clients having paid the full amount of their shares, no further claim could be made upon them. As for the winding, up order, it had been shown that they had received no official notice of it. The Official Agent had given no notice, and Mr Pitt had abdicated his position of legal manager and adviser to the company, and assumed a hostile position to the directors. He was, in fact, the petitioning creditor, and any notice he had received ■of the order was as a petitioning creditor, and not as legal manager, "if any doubt remained as to that point, he at least had not taken the necessary step of acquainting the directors with the fact of the Court having been petitioned for a winding-up order, and such order having been granted. He would con-

tend that no notice having heen served upon the directors, and the shareholders having paid up the full amount of their respective shares, no further claim could be made upon them. Mr Pitt for the Official Agent contended that sub-sec. 4 of sec. 37, did not free the shareholders in this case. Tho section contem plated a regulat', proper, and a bona fide payment of tin call. Now, 'it was obvious, from the evidence, that neither of those elements existed in the case. It would be clear to the Court, that these payments being made after the order of the Court winding up the Company, and immediately afterwards being disbursed in payments to favoured creditors to the exclusion of the judgment creditor, Were neither regular, proper, nor bona fide. Ho would not say that the payments were made in contempt of the order of the Court, because he did not believe any of the gentlemen named Would be guilty of a deliberate contempt of Court. Still they had, after hearing rumours of the windingup of the Company, and without taking any steps to ascertain, supposing they did not in fact know whether such rumour was correct, deliberately determined to keep in the cold or freeze out an execution creditor in favour of others, and leave the superior creditor to seek his remedy where he best conld. Counsel then referred to the operation of see. 19 of the act of 18G9, which vested in the Official Agent, from, the making of the order, the whole assets of the Company, and gave that official the same powers of collecting the assets which theretofore resided in the Company, and contended, that therefore these payments and disbursements being subsequent to the order could not he upheld as legal payments of the calls due.

His Honour iu giving judgment said that there cou ! d he no doubt that the directors held a meeting subsequent to the Court granting a winding-up order, and were acquainted with the fact of its being granted. Without their admission on that point, there was the fact that a rule absolute had been granted , and there was the constructive notice which cou'd not be got over by reason of such order having been obtained with the knowledge of the legal manager of the company. He considered that the evidence showed conclusively that the final payments were made with the object of realising all the available assets of the Company by the directors, in order that the latter, who were now objecting shareholders, might be enabled to distribute such assets to favoured creditors, and in ignoring the claim of the petitioning creditors, they had without doubt shown a fraudulent preferenceAny grievance that might have existed between the directors and their legal manager and adviser could not justify such a course, and could not shield t'-iem from the consequences of their il'egil act. The decision of the Court would be that the shareholders were liabie to rank as contributors in such amount of their shares as re mauled unpaid nt the time that the absolute order tor winding up the Compauy was granted. This concluded the business set down, and the Court adjourned.