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SPRING AILMENTS.

THE PROMOTION OF THE OLDI…

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THE PROMOTION OF THE OLD I SWANSEA. BREWERY CO. ALLEGED MISFEASANCE. I Before Mr. Justice Wright, in the Com- panies' Winding-up Court, recently, the matter of the Swansea Old Brewery Company, Limited, came up on a misfeasance summons. The applicants were Messrs. William Evans and William Jones, contributories to the ccmpany, and the respondents Messrs. David Davies and David Davies, jun., Swansea; Dd. Davies (Cardigan), directors; David Isaac and Edwin Sydney Hartland, directors and solicitors; and Richard G. Cawker, auditor and liquidator of the company. Mr. F. Williams, Q.C., Mr. Lawson Walton, Q.C., and Mr. Gore Browne were counsel for the applicants, and Sir Edward Clarke, Q.C., and Mr. Frank Evans for the respondents. Mr. Gore Browne said the Swansea Old Brewery Company was formed in 1887, and was very successful, the bulk of the share- holders at that time being the directors and their relatives; but there were a few outside shareholders, of whom Messrs. Jones and Evans, the' applicants, were two. Mr. Jones held 40 and Mr. Evans 20 shares. The mis- feasance alleged was, first of all, that in the year 1889 the directors issued shares to them- selves at par, whereas they could have got a considerable premium to the benefit of the company. The answer to that was that the company was always intended to be a private company, and that only the then existing shareholders should be approached for addi- tional moneys. On that the applicants sub- mitted that the shares should be taken at a proper price. The second point of the sum- mon-3 was that the respondents were guilty of misfeasance and breach of trust in connec 'on with the sale of the assets of the company in 1896, when the company was paying 15 per cent., inasmuch as they wilfully and know- ingly sold the same under value. The value of brewery and licensed properties at that time had risen in an extraordinary manner. In the beginning of 1895 Mr. Isaac, one of the directors, was given a commission-note. signed by three of his co-directors, promising him J32,000 if he found a purchaser. Mr. Isaac afterwards introduced a gentleman named Dantziger, on whose behalf a Mr. Cox purported to contract for the purchase of the property. That contract did not appear to have been very definitely acted upon. and, not very long afterwards, a syndicate, called the United Contract Corporation, was formed by Dantziger and his friends, and to that syndi- cate Cox assigned the benefit of the agree- ment to purchase the business of the Swan- sea Old Brewery at the price of £ 37,500, plus the stock and book debts. Mr. David Davies, of Cardigan, it appeared, carried on the busi- ness of a bonded warehouseman, and he had also a number of licensed houses. Cox had apparently entered into an engagement for the purchase of this business at the price of £ 25,5G0, together with the stock and book debts; but the contract with Cox was not produced among the documents purporting to assign the benefit of it to the United Con- tract Corporation. The latter subsequently entered into a contract with David Davies, of Cardigan, the Swansea Old Brewery, and a third firm, named George and Sons, on March 28, for the purchase of the three businesses, at the price of £ 75,105. The United Contract Corporation entered into a contraet with a new company for the sale of the three businesses at the price of JE 100,000. On May 16, 1896, the prospectus of the new company was issued, and the three Davies' were to be directors, Messrs. Isaac and Hart- land, solicitors, and the firm of Messrs. Cawker auditors. His Lordship: What is the misfeasance on which you rely ? Mr. Browne said it was that the sale of the Swansea Old Brewery was made at an under- value, that a much better price than £ 37,500 might have been obtained, and that the ap- portionment of the purchase money was made so as to favour Mr. Davies, of Cardigan, at so as to favour Mr. Davies, of Cardigan, at the expense of the company. As to Mr. Jones, counsel mentioned that he had paid £ 160 for his 40 shares. „ His Lordship: What did he receive ? Sir Edward Clarke said he was entitled to £ 1,310. His Lordship: He does not appear to have done badlv. Mr. Browne said the company was very prosperous, and the submission of the appli- cants was that there ought to have been more money to divide when the sale to the syndi- cate took place. The other shareholders were, apparently, satisfied, and would take no action. Against the other respondents it was alleged that they had made secret profits out of the sale of the property. The summons asked that the respondents should pay, with interest, the difference between the sum for which the property was sold and its proper value, the difference between the par value of shares allotted to themselves and their market value, and also all secret profits and commissions they had made. Sir Edward Clarke read lengthy affidavits by the respondents, giving a general denial to the allegations in the summons. They alleged that a good price was obtained for the business of the old company as a going con- cern. and that all that they had done was in the interest of the shareholders, as was proved by the fact that all the original share- holders had received a good profit out of the transaction with the United Contract Cor- poration. They had had no share in the profits of the syndicate, and it was untrue to say that they had obtained out of any of the transactions any secret profits whatever. Everything as to commission, etc., was men- j tioned to the directors at their meetings, and | was approved by them. „ ] Mr. Lawson Walton submitted that at least the directors were guilty of improper conduct in apportioning shares to themselves at par when their market value was three or four times that amount. They had also failed to show that they had received the assent of the shareholders to their receiving the commission, and therefore a clear case had been made out why they should refund it. Sir Edward Clarke said there was no evi- dence before his lordship that the property was sold at an undervalue, and as to allotting the shares to themselves at par, they had a perfect right to do so, and there was therefore no case against them on that point, unless mala fides were proved. It was a most ex- traordinary case of alleged misfeasance, and Mr. Evans should have been satisfied with what he got out of it, seeing that for years he had been paid 10 and 15 per cent. on his investment of £160, and that when the pro- perty was sold he got £ 1,013. He contended that the respondents were justified in all they had done, and that it had been for the benefit of the shareholders generally. His Lordship said the applicants had not been able to produce any evidence to show that the directors did anything wrong in al- lotting the shares to themselves and their friends. As to whether Isaac and his firm were entitled to retain the amount of JE 1,600 costs which they received, he had come to the conclusion that whilst acting as directors and also as solicitors to the company they thought they had protected themselves by getting a resolution passed authorising them to be paid their solicitors' charges. He was satisfied that they made the charges on the strength of that resolution being passed, and the applicants were shown to have assented to the accounts being parked. Then as to the serious matter of comml ion. Isaac and his partner were solicitors & :id directors to the company, and were thus in a double fiduciary position. It was therefore doubly necessary that they should make no secret profit which they did not account for to the company. The payment of the £ 2,000 was made by the other three directors named Davies, and it was doubly necessary that such payment should have been carefully recorded and discovered to the shareholders. Therefore some relief must be given on the question of commission, and the question arose how much. He could not do more than order that the share pro- perly attributable to Evans and Jones— about one-twenty-eighth—should be paid to this account. There would be no order as to costs.

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