Other formats

    Adobe Portable Document Format file (facsimile images)   TEI XML file   ePub eBook file  


    mail icontwitter iconBlogspot iconrss icon

The Pamphlet Collection of Sir Robert Stout: Volume 84

Further report of the Committee of Investigation as desired by the shareholders ... 25th July 1884

page break

Further Report of the Committee of Investigation as desired by the Shareholders at the Adjourned Ordinary General Meeting of the Company, held on the 25th July, 1884.

Committee of Investigation.

  • Charles L. W. Fitz-Gerald, Esq.
  • Henry Grèwing, Esq.
  • John Taylor, Esq.
  • Arthur H. Baker, Esq.
  • George B. Howden, Esq.
  • R. A. Germaine, Esq.


In presenting to you the further Report on your Company's affairs, your Committee wish to state that they have as far as possible avoided personalities, and simply state the facts as they occurred.

After the Committee of Investigation had presented to you their Report on the position of the affairs of your Company, you expressed a wish that certain points should be more minutely examined and reported on.

The Allotment of Shares was one of the points, and you will see that the opinion of our Counsel gives hopes of your being able to attack Sir Julius Vogel on the subject of the allotment of shares to himself.

page 2

We have thoroughly examined all the facts bearing on the compromised contract for the 4,000 Telephones, but in this case, as you will see, our Counsel does not hold out great hopes that any proceedings could be taken against your late Directors.

We have considered to what extent the assets of the Company necessitate a reduction of capital, and add a recommendation to that effect.

Certain alterations of the Articles of Association appear to us desirable, and they are laid before you.

We also submit an arrangement by which the control of your Company over the affiliated Companies, and the harmonious working of these different concerns, will be assured.

We recommend a Reduction of Directors' Fees in all the four Companies.

The letters which passed between your present and past Directors, referring to the latter's claims for fees, deserve your attention.

We finally add some remarks about the Staff of your Company, the legal expenses, and the settlement with the River Plate Telephone Company.

The adoption and passing of the Report and Accounts for the year ending 31st March, 1884, appears to us to be now desirable, and we think that a portion of the balance (£10,290 17s. 9d.), to the credit of the revenue account, might be used to write off certain items, such as depreciation of plant, bad debts, &c.

£7,050 of the above £10,290 17s. 9d. should not be dealt with as profit, because Mr. Grower was paid a far larger sum than that for the contract of the 4,000 Telephones.

This amount should go to the reduction of goodwill, &c.

page 3

Allotment of Shares.

Colonel Gouraud having attempted to cast a doubt on the accuracy of the Committee's Report respecting the allotment of shares in April, 1881, we think the shareholders should be made acquainted with the following facts.

Sir Julius Vogel had allotted to himself 3,330 shares, and for the balance of the 15,000 shares (alluded to in the former report), he handed the Secretary a list of nominees; this list was unfortunately given back to Sir Julius after the shares had been placed in the nominees' names, so no record is left of the parties receiving the shares.

Colonel Gouraud had allotted to himself 3,250 shares, and to his nominees 10,200 shares; of these there is a record, as Colonel Gouraud has placed his name against them in red ink in the allotment book. 1,000 shares were also allotted to Mr. Powers—Colonel Gouraud's nephew—total 14,450.

Mr. Carnegy had allotted to himself 500 shares, and to one nominee 2,000 shares.

In respect to the allotment of shares to Sir Julius Vogel, the following facts have been laid before Counsel, and the opinion thereon is given below.

Sir Julius Vogel sent in a written application for 1,000 shares. In the Allotment Register this 1,000 has been altered into 5,000, and 3,330 shares allotted to him.

The original letter of application was not altered, nor was any further written application made by Sir Julius Vogel.

On December 2nd, 1881, the Director's declared a dividend, and sent a circular round to the Shareholders, in which the following appears :—

page 4

I am to inform you that the Directors believe they will be in a position to continue to pay regularly quarterly dividends, of the same amount, which is equal to 10 per cent, per annum.

There were two further dividends declared; one on the 24th April, 1882, with the accounts of the Company, and one on the 16th June, 1882; since then no dividend.

Sir Julius Vogel sold the greater part of his shares between December, 1881, and May, 1882.

Prices ruling, taken from the Official List of the Stock Exchange:—
December, 1881, to end of March, 1882 1¼—1½
April, 1882, to 29th April, 1882 13/8—15/8
13th May, 1882 1½—1¾

On that date marks of business done occur as high as 21/10.

On the 15th May, the price was 2¼ to 2¾, with marks as high as 3.

From this date the shares receded.

We contend that Sir Julius Vogel made improper use of his position as a Director, to obtain a larger number of shares than he applied for, and we have taken Counsel's opinion to see if there is a case against him for doing so.

Counsel's Opinion.

The principle of law applicable to this case is clear. The difficulty is in applying it to the facts. The principle is that an agent, who in the course of his agency, and in the matter of his agency, acquires a profit, must account for it to his principal, unless his principal knew of and assented to his acquiring the profit.

In the present case the agency of the Director in the matter of the allotment of shares was clearly not concluded until the allotment was made. This being so, the way the case strikes me is this—As a consequence of the issue of the prospectus the Company and its Directors either were not or were as between the Company and the applicants bound to allot the total number of shares offered, if they received a page 5 sufficient number of applications from responsible persons. If they were not so bound, then to the extent to which the Director rejected applications, he was bound to give the Company any benefit he might derive from the rejection. If, on the other hand, they were so bound, then to the extent to which the Director substitutes his own name for that of an outside applicant as an allottee, he is using his agency with exactly the same result as if he bought those shares or the inchoate right to those shares from the applicant at par and subsequently sold the shares at a premium.

The difficulty is in drawing the line, for there is no doubt that the Director is to some extent entitled to allot shares to himself. A principle may I think be found in this (taking this particular case) that, as regards the 1,000 for which Sir Julius applied, he stood at risk and stood towards the Company in a position in which the Company had rights against him, for if the Company allotted to him he was bound; but as regards the excess he never stood at risk, but acquired the shares, so to speak, despite the Company, and at a time when by reason of the large number of applications the shares had gone to a premium. As matter of logical result, perhaps one ought to say that the Director ought not to receive upon his application more than his proper rateable proportion, having regard to the total number of applications from responsible persons; but I think this is too fine.

To the extent of the 1,000 shares no objection can, I think, be taken, but I am of opinion that as to the excess Sir Julius is liable.

(Signed) H. Burton Buckley.

18, Old Square, Lincoln's Inn,

Your Committee are of opinion that this case might be taken as a test case, and, if the shareholders approve, proceedings will then be taken against Sir Julius Vogel.

page 6

If the result of such action be successful, we could then consider the advisability of taking similar action against some of the other Directors.

The History of the 4,000 Telephone Contract.

We think we cannot, do better than give you Sir Julius Vogel's own words on this subject, taken from a document

May, 1882.

which he laid before the Board—
"The history of this transaction is rather lengthy. It

Feb, 1881.

dates so far back as when the prospectus of the Oriental Telephone Company was just issued. Immediately thereafter, Mr. Gower published in the papers that he possessed certain rights in the Oriental countries. Negotiations ensued to acquire those rights. I myself negotiated with Mr. Grower to acquire all his rights for the purpose of forming a Consolidated Company like the present one. These negotiations could not be hurried on. Meanwhile the Oriental Vendors were anxious to enable the Directors of the Oriental Company to allot, they having positively refused to do so unless Mr. Grower's rights were first extinguished. The idea at that time was that the Oriental Company, like the United Company, would co-operate with the Consolidated Company, and that the Consolidated Company would have bought out Mr. Grower's rights for the benefit of the Oriental Company, as they did for the benefit of the United Company. However, as I have said, time pressed and Colonel Gouraud, Mr. Cargill and Mr. Bigelow made an arrangement with Mr. Gower by which they undertook to take 4,000 Telephones at Post Office prices. Immediately Mr. Gower got this undertaking from the vendors, he became very indifferent to carrying out the arrangement for the Consolidated Company, and finally broke off the negotiations; and in explaining why he did so he told me he had obtained, through his negotia- page 7 tions with the Oriental vendors, a contract which he estimated at at £220,000 in value to himself. He subsequently brought out a company to purchase his rights and asked a very large sum, amongst his assets reckoning this very contract. Through the intervention of the late Mr. A. Scrimgeour the proposed company was dropped, and the present Consolidated Company formed. Before the prospectus was brought out, Colonel Gouraud endeavoured to make an arrangement for extinguishing the contract with the Oriental vendors. Mr. Morris (Ashurst, Morris, Crisp, & Co.), however, advised that it was impossible for such a thing to be done, as Colonel Gouraud was acting in a fiduciary character as a Director of the proposed company, and could not be a party to making away with a valuable asset. The Consolidated Company was formed, and amongst the other things it acquired from Mr. Gower was this contract for 4,000 instruments. This is briefly the history of the transaction up to the formation of the Consolidated Company. The Directors are as well aware as I am of the history of it since then. Briefly it is this, we never could get any answer from the vendors, and they were only 'brought to book' when they found they could not get their money from the Oriental Company, because they could not offer Mr. Gower's rights. In order to obtain these rights and hand them over to the Oriental Company, they formed a company which guaranteed the performance of the contract, and to which we gave a certain recognition, but without releasing the original parties from their contract with us. This new company made one payment in order to obtain the papers and documents so as to enable the Oriental vendors to procure payment from the Oriental Company. When the next instalment became due, the Secretary to the Company wrote a note repudiating the engagement upon the most flimsy pretext, viz.:—'That there had been some intimation received from the United Company.' Whether or not there was such intimation mattered not to us; and, as the matter page 8 stands, it would seem that this company was formed or the purpose of getting securities out of our hands and then throwing up the matter. Under these circumstances the

May, 1882.

board came to the conclusion last week that there was no option but to promptly and vigorously institute legal proceedings to enforce the Company's rights, and this is to be done with the utmost promptitude."

The price to be paid by the Oriental Telephone Company, originally for purchase of the rights and patents of the Edison party, for whom Col. Gouraud, Bigelow and Cargill were acting, was £50,000 in cash, and £100,000 in fully paid shares; but somehow this seems to have been reduced, owing no doubt to the questions raised by Mr. Gower, as only £40,000 in cash, and £75,000 in shares was given for the joint patents.

The Company alluded to by Sir Julius Vogel was the Telephone Supply Company, Limited, which was registered on the 10th January, 1882, with a capital of £50,000 in £10 shares, the Shareholders being:—
Cargill 198
Cheston 1*
Cheston 1
Hubbard 299
McLeod 1
Bigelow 100
Edison 200
Gouraud 197
Grigg 1
Kingsbury 1
Allen 1
On the 5th June, 1882, a proposal was made by Colonel Gouraud and Mr. Bigelow without prejudice—

"Ihat the Consolidated Telephone Company transfer the responsibility of the 4,000 Telephone Contract from the vendors personally to the Telephone Supply Company, page 9 which has a subscribed capital of £10,000; the vendors agreeing to work the Supply Company to the advantage of the Consolidated, and fighting the United Telephone Company, if necessary."

On the back of this document the following was written :—

"Arranged by Sir Alexander Armstrong, Mr. Bigelow, and Mr. Carnegv."

Two Hundred Telephones were delivered to the Telephone Supply Company by the Consolidated, and £1,800 paid for them. No further deliveries took place, and apparently the purchasers and the Telephone Supply Company then raised the unfounded contention that the United Company alleged that the Telephones could not be used in the United Kingdom, and on that ground objected to complete the contract.

(As Colonel Gouraud had throughout taken a very active part in all arrangements between the United and the Consolidated Companies, he must have known that such contention was entirely without foundation.)

An action was then commenced against Messrs. Gouraud, Bigelow, and Cargill, to enforce the contract.

On the 18th August, 1882, Mr. Maton (Messrs. Mackrell, Maton, & Co., solicitors) wrote a long letter to the Consolidated Board, giving the result of a conversation with Colonel Gouraud, who argued that the attempts to enforce the 4,000 Telephone Contract was the chief reason of the hostility of the United, but it was pointed out to him that the United had never put this forward as a reason for disagreement.

Colonel Gouraud, in reply, stated nevertheless that it was a feet, and that he was now in a position to propose that a page 10 sum of £5,000 be paid to the Consolidated and the contract cancelled. He further stated that it was an extremely difficult matter to deal with all the various interests in the 4,000 Telephones, but that, "for the present week," he had them all in his control, and that if his proposal were at once accepted and the question settled he should be prepared (in the event of further difficulties occurring with the United in the matter) to resign his seat at that Company's Board, and side with the Consolidated as against the United.

The aforesaid action was compromised by the United Telephone Company paying to the Consolidated the sum of £5,000, and £250 was paid as interest. The agreement under which this settlement was made contains no statement that the United Company dispute the right of the Consolidated Company to supply the Telephones to be used in the United Kingdom; on the contrary, it recognises the fact that the benefit of the agreement of the 4,000 Telephones was reserved to the Consolidated Company by the agreement of the 8th April, 1881.

The Agreement of Settlement states : "It is considered by the United Company that the use of the 4,000 Telephones as free Telephones in the United Kingdom would be prejudicial to the interests of that Company, and they have accordingly agreed to pay the sum of £5,000 in consideration of no part of the 4,000 Telephones being used within the United Kingdom."

On the 6th September, 1882, a letter from Messrs. Mackrell, Maton, & Co. was received, enclosing the first instalment of settlement, and asking the Consolidated Company to send a letter to Messrs. Gouraud, Bigelow, and Cargill, stating that the agreement had been signed by the United Company and that the Telephone Supply Company "could now be wound up."

On the 17th September, 1882, a letter was received from page 11 Mr. F. A. Grower stating that this compromise did not meet with his approval, and asked for a distinct and formal resolution of the Board, requesting him to sign certain documents.

On the 3rd October of the same year, Mr. Mays (one of Mr. Gower's associates) wrote, threatening an action against the Directors to restrain them from carrying out the 4,000 Telephone settlement; and his solicitors (Messrs. Davis and Co.) in a letter to the Consolidated on the 17th October, write—"You are aware that Mr. Mays knew all the circumstances under which the contract was made with Mr. Cargill and others, and is of opinion that nothing has occurred since to justify the compromise," and further they ask for "facts to justify the compromise," and demand a special Meeting of shareholders to be called to consider the question of carrying it out. In the meanwhile, however, Mr. Gower had written to Mr. Mays, advising him not to go on with the action, as it might injure the Company for years, if not destroy it altogether.

On the 6th October, 1882, Mr. Maton (Messrs. Mackrell, Maton, & Co., solicitors) wrote to Mr. Gower, "The Board are perfectly satisfied that the arrangement which they have made with reference to the 4,000 Telephone compromise, is, under the circumstances of the case, in the best interests of the shareholders; " and on the 8th October, in reply, Mr. Gower writes expressing dissatisfaction with the settlement, and mentions his repeated statements of facts which had proved to be of no service in preventing, what seemed to him, the sacrifice of the Company's interests.

On the 26th October, Mr. Maton wrote to the Consolidated that he had seen Mr. Mays, and had, in confidence, explained some of the reasons which led the Directors to assent to the compromise.

Messrs. Davis (Mr. Mays' solicitors) then advised him not to pursue the threatened action, as he could not succeed unless he could prove "malâ fides " on the part of the Directors, and thereupon Mr. Mays withdrew.

Your Committee, in reply to their enquiry of Mr. Maton for the reason of the compromise, have received the following letters:—

page 12
21, Cannon Street, London, E.C.,

C. L. W. Fitz-Gerald, Esq.

Dear Sir,

4,000 Telephones.

Since our interview with you a few days ago, we have refreshed our recollection on this matter.

When the Oriental Company applied for an assignment of the patents in the early part of 1882, negotiations took place between the Consolidated Company and Messrs. Gouraud, Bigelow & Cargill, and ultimately an arrangement was made under which Messrs. Gourand & Co. were to take and pay for an immediate delivery of 200 Telephones, and agree to take the remainder at an increased rate of delivery; the Telephone Supply Company, to whom they assigned the benefit of the contract, guaranteeing the performance of the contract.

Mr. Gower and his associates then, at the request of the Consolidated Company (who had been advised that the assignment could not be withheld), assigned the Oriental patents to the Oriental Company at the expense of Messrs. Gouraud & Co.

The Consolidated Company received £1,800, and the 200 Telephones were, we believe, never removed from the warehouse of the Consolidated Company.

In the following May an action was brought by the Consolidated Company against Messrs. Gouraud & Co., claiming performance of the contract for the supply of Telephones, and terms of settlement of this action were approved by the Board of the Consolidated Company in August, 1882, after the determination of the Post Office contract, and eventually carried out. Under this arrangement the Consolidated Company retained the £1,800 they had received, the 200 Telephones were handed back to them, and £5,250 in cash was also paid to them. page 13 We should perhaps point out that the rights of Mr. Gower in the Oriental District consisted of the benefit of the contract for the supply of 4,000 Telephones at a price which might vary.

Yours faithfully,

John Mackrell, Maton & Co.

Not considering this letter satisfactory, we demanded further reasons for the compromise.

21, Cannon Street, London, E.C.,

C. L. W. Fitz-Gerald, Esq.,

4, Hercules Passage, Threadneedle Street.

Dear Sir,

We have delayed replying to your letter to our Mr. Maton until our Mr. Godlee's return to town.

The letter to which you refer us, as you will obsrve, states that we explained to Mr. Davis, Mr. Mays' solicitor, "some" of the reasons which had led the Directors to assent to the terms. We can only state of course the reasons, so far as they were known to us, and necessarily, after an interval of two years, some of these may have escaped us. We must ask you, therefore, to take this letter with that explanation.

It would perhaps, however, save trouble if you would refer to our letter to you on the 7th July last, in which we explained to you the course which events took and some of the considerations affecting the matter. You will recollect that at the time immediately prior to the settlement the relations between your Company and the United Company were in a very strained position and in any negotiations with the United Company the question of these 4,000 Telephones was constantly raised as a preliminary difficulty which must be got rid of. Their anxiety in the matter is best shown by their providing so large a proportion of the £5,250 agreed upon in settlement.

The United Company, moreover, suggested that it had been intended that these 4,000 Telephones should be used in the Oriental district alone, and this view they stated themselves prepared to contest in Court, although the Consolidated Company did not consider it well founded. It must, however, be evident that a direct rupture between the United and Consolidated Companies would have been almost dangerous thing for your Company.

page 14

Assuming, however, that the Telephones could have been supplied without restriction, you will observe that two difficulties presented themselves, either they would be delivered in England, the result of which would be an immense increase in the difficulty of discovering unlicensed instruments and a serious interference with the defence of the patents, which your Company acts under and with the business of the United Company, one of your largest customers. On the other hand, they might have been delivered in the River Plate or the Oriental district where your Company supplies instruments, which would simply have been a deduction from the number otherwise supplied by your Company. Their delivery in North America is scarcely a probable result, having regard to the prices ruling there.

A further question existed as to the price at which these instruments were to be supplied by your Company. You will observe that this was to be the same price as Telephones supplied by your Company to the General Post Office "at the time being." The Post Office agreement, as you will recollect, was determined on the 17th June, 1882, and no price could therefore be said to be fixed at the time these matters were under discussion. What the actual profit would have been, taken even at the Post Office price during the first 12 months, we have no means of knowing, but this will be doubtless familiar to you.

The terms of the settlement besides this provided the Company with ready money, which we believe was of importance to them at this time. How far £5,250, together with the £1,800 previously received and the retention of 200 Telephones represented the probable profit, we are not able to judge. You will of course recollect that before this time the patents were in the possession of the Oriental Company, the form of the contract itself making it, we think, plain that these patents were to be handed over forthwith and not at the expiration of the contract for the supply of Telephones.

These are some of the reasons, and we think you will agree very cogent ones, which we believe led the Board to adopt the course they did in settlement of the action against Messrs. Gouraud, Bigelow & Cargill.

Yours faithfully,

John Mackrell, Maton & Co.

In conclusion, your Committee would state that the foregoing facts have been laid before counsel, and his opinio is appended.

* Those marked were the Signatories to the Articles of Association.

page 15


To the facts stated in this case, it is to be added, that Colonel Grouraud ceased to be a Director of the Consolidated Company on the 11th August, 1881, and that Bigelow continued until the 18th February, 1884.

Under these Articles of Association, it is clear that the Directors had power to bind the Company by a compromise of the action which was brought on the 20th May, 1882, and that power was none the less exercisable by reason of the fact that one of the defendants was a Director of the Company.

Upon the facts stated, the Directors, other than Bigelow, are not charged with any malâ fides in the compromise which they made; and on the contrary, there existed in the relations between the United Company and the Consolidated Company reasons which, to the Board of the latter Company, may well have seemed to render it expedient to compromise the action for a much less sum than they might have expected to obtain if they had prosecuted it.

The facts, in my opinion, certainly do not go beyond charging the Board with a mistake of judgment. Directors cannot be rendered personally liable for a mistake of judgment, unless their mistake is so gross as that they can be accused of what is commonly called crassa negligentia. There is a passage in Lord Hatherley's judgment in Overend, Gurney & Co., and Gibb (L.R. 5 H.L. 494), which is instructive upon this. In my opinion, the Directors, other than Bigelow, could not upon these facts be rendered liable for making the compromise which they made.

As regards Bigelow himself, I do not know whether at the date of the compromise he was a Director of the United page 16 Company, as well as of the Consolidated Company, I think he is entitled to say that under Article 90 it was for the Directors of the Consolidated Company, other than himself, to decide as to what was most to the interests of the Consolidated Company, in the matter of a compromise in which he was himself an interested party. But I can conceive that upon certain facts he might be liable for breach of duty, as for instance, if he deceived the Company, of which he was a Director, by using the position of Director of the United Company, to induce that Company to put forward an untenable contention, with a view to drawing the Consolidated Company into a compromise beneficial to himself. But no such facts are alleged. Upon the materials before me, I do not think that any of the Directors of the Consolidated Company could be rendered liable.

(Signed) H. Bueton Buckley.

18, Old Square, Lincoln's Inn,

Reduction of Capital.

As intimated in the Report of the Committee of Investigation, a reduction of capital seems absolutely necessary, as the Patents for which so much money was given have gone out of your possession, and the contract with the Postmaster General for the supply of Telephones, from which no doubt it was expected you would derive very large profits, is at an end.

It must also be borne in mind that should the anticipation of your Board be correct as to the payment of a dividend next year (on which subject they see no reason to change page 17 their opinion already expressed), that you could not take that dividend by reason of your not having sufficient assets to represent your paid-up capital.

Your assets amount to the nominal sum of about £360,000, and consist of the following :—
£14,000 9% Debentures of the River Plate Telephone Company,
£11,500 9% Preference shares of the River Plate Telephone Company,
£19,250 Deferred shares of the River Plate Telephone Company,
*£30,000 5% Debentures of Telephone Company of Austria,
£23,000 Ordinary shares of the Telephone Company of Austria,
£190,000 Ordinary shares of the Edison-Grower-BellCompany of Europe.

In addition, you have the amount to be received from the United Telephone Company, if that Company elects to terminate the agreement. Stock at home and Abroad, bills due at various dates from the Edison-Grower-Bell Company. Instruments to be supplied under the agreements with the subsidiary Companies. Plant, goodwill of business, and cash in hand or owing the Company.

We do not think that all these assets could be said to be worth more than £170,000, though of course this is only your Committee's opinion on the subject, as you will readily perceive that it is a difficult matter to value securities which have no market price; one thing we may say, we are of opinion that the value of these securities will increase.

page 18

A reduction of five shillings per share would bring the capital of the Company down to £168,880, and a resolution to that effect will be brought before you.

* In course of issue.

Articles of Association.

Your Committee recommend the following changes:—

Clause 51 reads—

Power to borrow

51. The Directors may from time to time, at their discretion, borrow or raise any sum or sums of money for the purpose of the Company, but so that the moneys at any one time owing shall not, without the sanction of a General Meeting, exceed the nominal amount of the capital. The Directors may raise or secure the repayment of such moneys in such manner and upon such terms and conditions in all respects as they think fit, and in particular by the issue of debentures of the Company charged upon the property and rights of the Company (both present and future), including the uncalled capital, or by accepting or endorsing on behalf of the Company any promissory notes or bills of exchange.

For the words "nominal amount of the capital," we would substitute "£50,000."

Clause 87 reads :—

Remuneration of Directors.

87. As remuneration for their services the Directors shall be paid out of the Company's funds the sum of £3,000 per annum [and in addition a sum equal to 20 per cent, of the net profits of the Company made during the financial year or other period included in the accounts submitted to the Ordinary Meeting in each year, remaining over after providing for the payment thereout of a dividend for the period elapse since the last preceding Ordinary Meeting (or in the case of the first Ordinary Meeting since the incorporation of the Company) at the rate of 10 per cent, per annum on the capital for the time being paid up], such remuneration shall be divided among them in such shares an proportions as they shall determine.

We propose that "£1,500" be substituted for "£3,000, and that from "per annum" to "paid up" be erased.

page 19
Clause 89 reads:—
89. The office of Director shall be vacated:—

When ofice of Director to be vacated.

(a.)If he become bankrupt, or suspend payment, or file a petition for liquidation of his affairs or compound with his creditors.
(b.)If he be found a lunatic or become of unsound mind.
(c.)If he shall absent himself from the meetings of the Directors during a period of three calendar months without special leave of absence from the Directors.
We propose to add:—

"(d.) If he hold or accept any other place of profit or office under the Company, with the exception of that of Managing Director."

Clause 90 reads :—
90. No Director or intended Director shall be disqualified by his

Directors may contract with Company.

office from contracting with the Company, either as vendor or otherwise, nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company with any company, corporation, or partnership of, or in which any Director shall be a member, or otherwise interested, be avoided, nor shall any Director so contracting, or being such member or so interested, be liable to account to the Company for any profit realized by any such contract or arrangement, by reason only of such Director holding that office or of the fiduciary relation thereby established; but no such Director shall vote in respect of any such contract or arrangement.
We propose that in place of this the clause shall read :—

"No Director shall contract or be personally interested in 'any contract with the Company; but no contract or arrangement entered into by or on behalf of the Company with any company or corporation of which any Director shall be a member, or officer, shall be avoided, nor shall any Director, being such member, or officer, be liable to account to the Company for any profit realized by any such contract or page 20 arrangement, by reason only of such Director holding that office, or of the fiduciary relation thereby established; and such Director may vote in respect of any such contract or arrangement."

Clause 112 reading :—

Director may hold other office.

112. A Director may hold any other office under the Company in conjunction with his office of Director.

Will be struck out.

Change in the Directorate.

The Boards of the Consolidated, The River Plate, The Telephone Company of Austria, and the Edison-Gower-Bell companies, have been in the past almost identical one with another, it is now proposed that there shall be three Directors for each of the three subsidiary Companies, and that these Directors, nine in number, shall constitute the Board of the Consolidated.

In recommending this scheme to the Shareholders, we call attention to the fact that there is every reason to believe that it will work harmoniously, the Boards will be practically independent, and yet by attending at the Consolidated Board Meetings each Director will gain a knowledge of what is being done by the other Companies, so be able to take a grasp of the whole business, and also advantage of any improvement, &c., which may be suggested.

We think it would not be wise to limit the Boards of the Companies to three Directors, as this might lead difficulties in the appointment of any very desirable gentlemen wishing to join one of the Boards, but would leave matter for individual consideration of the respective subsidiary Companies.

page 21

Directors' Fees.

We propose that the fees for the nine Directors be reduced from the sum of £3,000 authorized by the Articles of Association to the sum of £1,500; and as your Company is so largely interested in the subsidiary Companies as a holder of debentures and shares in the undertakings, that letters be addressed to the various Boards requesting them to reduce (for the present at all events) the Directors' Fees in the case of the River Plate Company, to an amount, say of £600, formerly £1,200; in the Austrian Company to, say £500, formerly £1,200; and in the Edison-Gower-Bell Company to, say £300.

The Boards of the subsidiary Companies at present are :—

River Plate Telephone Company.

  • Mr. John Taylor, Chairman.
  • Sir Alexander Armstrong, K.C.B.
  • Major Henry T. G. Fitz-Gerald.

Telephone Company of Austria.

  • Mr. Henry Grèwing, Chairman.
  • Mr. C. L. W. Fitz-Gerald.
  • Mr. R. E. Bateman.
  • Mr. Josef Wessely (local).

Edison-Gower-Bell Company. (At present.)

  • Colonel Gouraud.
  • Honourable H. Spensley.
  • Sir A. Armstrong, K.C.B.
  • Sir J. Vogel, K.C.M.G.

Colonel Gouraud, Sir Julius Vogel, and Mr. Spensley thus far have retained their teats at the Edison-Gower-Bell Company's Board, so the control of that Company is still in their hands, but it is only a question of time.

page 22
The revised Board will be:—
  • Mr. Arthur Baker.
  • Mr. R. Van Zeller.
  • Mr. J. H. Buckingham.

In connection with the Edison-Grower-Bell Telephone Company of Europe, we find that the large item £23,380 9s. in the Balance Sheet of that Company was a liability incurred by the Directors of a Company called the

European Telephone & Electrical Manufacturing Co.

Capital £800,000, in £450,000 Preference and £350,000 Deferred Shares.

The date of the Prospectus of this Company is 2nd July, 1881.

The Directors were—
  • F. A. Gower.
  • J. L. Montifiore.
  • Sir A. Armstrong, K.C.B.
  • Sir Juliusvogel,K.C.M.G.
  • R. M. Robertson.
  • M. M. Moore.
  • J. H. De Ricci.
  • L. Solomans.

This European Telephone Company did not float.

If the floating of this Company had been a success, the Edison European Company and Mr. Edison (for whom Colonel Grouraud was acting as Agent), were to have received £78,500 in cash, and £75,000 in Deferred Shares.

The lability for expenses, incurred to the amount of £3,380 9s. be got rid of somehow. Was this, or was this not, the cause of the agreement which Sir Julius Vogel on the one hand, and Colonel Gouraud and his party on the other, arranged in Paris, by which the Edison-Gower-Bell Telephone Company of Europe came into existence, and was by that agreement, made to assume the liabilities created by still the European Company ? [We believe there is a further sum due by the Edison-Gower-Bell, for Solicitors' charges, We are not certain on this point.]

page 23

No prospectus was issued of the Edison-Gower-Bell, and no capital subscribed for, other than the 15,000 Shares of £1 each, which the Consolidated bought at par, as stipulated by the agreement between the two Companies.

As to the Italian business by which the Edison-Gower-Bell Company paid £1,000 to Colonel Gouraud, and expended a further sum of about £880 in goods, &c.

Colonel Gouraud alone has the key to the solution of this business, but that gentleman does not seem inclined to state in plain language what are the real facts of the case.

Sir A. Armstrong has been applied to for information as a member of the Board at the date of the Edison-Gower-Bell agreement; but beyond stating the fact that the agreement was made in Paris by Sir Julius Vogel and brought back for confirmation by the Board of the Consolidated, he could give us no further information on this head.

The papers of the Company have been searched and the solicitors applied to in the hopes of obtaining the original heads of this agreement, but they are not forthcoming.

You are already aware that Colonel Gouraud re-joined the Board in January, 1883, as Deputy-Chairman, at £1,000 a year, yet in spite of the circular sent round to the shareholders, which states—

"That no part of the £1,000 remuneration as provided was drawn by me, I having voluntarily surrendered my right to it."

Your Board has received and answered the following letters:—

page 24
34, Walbrook, London, E.C.,

Dear Sir,

I have to request that you will be good enough to forward me a cheque for the amount of the special remuneration due me from the 31st March, 1883, to the date of my ceasing to be a Director of the Company.

Yours faithfully,

(Signed) G. E. Gouraud.

Chas. Curtoys, Esq., Sec. Consolidated Telephone Company.
Consolidated Telephone Construction and Maintenance Company, Limited,


Your letter of the 18th inst. was yesterday submitted to the Board of this Company, and I am instructed to inform you that you will shortly receive a further communication on the subject.

Yours faithfully,

(Signed) Charles Curtoys,


Colonel Gouraud,

34, Walbrook.
Consolidated Telephone Construction and Maintenance Company, Limited,

Dear Sir,

With further reference to your letter of the 18th inst. my Board desire me to express their astonishment at your claiming fees in the face of the statement of Sir Julius Vogel at the meeting of 1883, when, with the Directors' concurrence, he stated that no fees were being drawn while the Company was paying no dividend. Further, in your own circular to the Shareholders, and in the circular of Messrs. Spensley and Carnegy, both expressly state that you had voluntarily relinquished your fees for the year 1883.

As to your special remuneration as Acting Chairman during the absence of Sir Julius Vogel, it can be proved that the resolution voting you £1,000 per annum was never passed at a Board Meeting, but was irregularly added to the minutes of a meeting which had been held previously. It is also understood that you as Chairman of the Company instructed the Auditors to place in the Balance Sheet the figures page 25 £104 3s 4d as your special remuneration up to the 31st March, implying that that was your total claim for "special remuneration " up to that date.

I am further instructed to remind you that the Report and Balance Sheet have not yet been passed; but even if they had the Board hardly think that under the circumstances, as to the passing of the resolution, that you are entitled to claim this remuneration.

I would call your attention to the fact that the books of this Company show a sum of £141 5s 6d to your debit and for which amount a cheque will oblige.

Yours faithfully,

(Signed) Charles Curtoys,

Secretary. Colonel Gouraud.
34, Walbrook, London, E.C.,

Dear Sir,

In reply to your letter of the 1st inst., I have to say that I entirely demur to its contents, and would again refer you to my Letter of the 18th ult., which I hereby beg to confirm.

I am, &c.,

(Signed) G. E. Gouraud.

Chas. Curtoys, Esq.,

Secretary, Consolidated Telephone Company.
Consolidated Telephone Construction and Maintenance Company, Limited,

Dear Sir,

Your letter of the 4th inst., has been considered by the Directors of this Company, and I am instructed to inform you that they can only confirm their letter to you of the 1st inst.

Yours faithfully,

(Signed) Charles Curtoys,

Secretary. Colonel Gouraud.
page 26
Messrs. Carnegy and Spensley have followed Colonel Gouraud's example. Ellery Court, Norwood,

Dear Sir,

I shall feel obliged by your informing me the amount of fees due to me by your Company, from April, 1883, to the date of my ceasing to be a Director, and I beg such amount may be sent to me at the early convenience of the Board.

Yours faithfully,

(Signed) P. Carnegy.

C. Curtoys, Esq., Secretary, Consolidated Telephone Company.
Consolidated Telephone Construction and Maintenance Company, Limited,

Dear Sir,

Your letter of the 18th inst. was yesterday submitted to the Board, and I am instructed to inform you in reply that the Directors cannot see how any fees can possibly be due to you, as Sir Julius Vogel stated at the Meeting of 1883, with the Directors concurrence, that the Directors would—it really was, were drawing no fees while the Company was not paying a dividend. This, in connection with what passed at the Meeting in July last, must, my Directors consider, convince you that no fees are due to you.

Yours faithfully,

(Signed) Charles Curtoys,


P. Carnegy, Esq. C. I. E.

page 27
Ellery Court, Norwood,

Dear Sir,

I beg to acknowledge receipt of yours of the 23rd ult. The Board appear to be under misapprehension. Neither directly nor indirectly have I relinquished my claim to such fees, as under the Articles I am entitled to. I therefore request that that claim may be acknowledged and liquidated with the least possible delay .

I remain,

Yours faithfully,

(Signed) P. Carnegy.

The Secretary, Consolidated Telephone Construction and Maintenance Company, Limited.
Consolidated Telephone Construction and Maintenance Company, Limited.

Dear Sir,

Your letter of the 13th inst., has been considered by the Directors of this Company, and I am instructed to inform you that they can only confirm the letter to you of the 23rd August last.

Yours faithfully,

(Signed) Charles Curtoys,


P. Carnegy, Esq., C.I.E.

12, Earls Court Square, South Kensington, S.W., London,

Mr. C. Curtoys,

Secretary, Consolidated Telephone, &c., Company.

Dear Sir,

I shall be glad to receive a cheque for the fees due to me from your Company.


(Signed) Howard Spensley.

page 28
Consolidated Telephone Construction and Maintenance Company, Limited,

Dear Sir,

Your letter of the 22nd ult., has been submitted to the Board, and I am instructed to inform you in reply that the Directors cannot see how any fees can possibly be due to you as Sir Julius Vogel stated at the Meeting of 1883, with the Directors' concurrence, that the Directors would—it really was, were—drawing no fees while the Company was not paying a dividend.

This in connection with what passed at the Meeting in July last, must, my Directors consider, convince you that no fees are due to you.

Yours faithfully,

(Signed) Charles Curtoys,

Secretary. The Hon. H. Spensley.
12, Earls Court Square,

My Dear Sir,

Re Directors' Fees.

You are seemingly labouring under some mistake. The Directors' fees are a debt under seal and take priority over ordinary debts due by the Company. By the Articles of Association the Directors are entitled to £3,000 a year.

So far as I know, Sir Julius Vogel never relinquished his own or his Co-directors' fees, and speaking for myself alone, I never authorized him to relinquish my claim on the Company. I shall be glad to receive a cheque for the amount due to me.


(Signed) Howard Spensley.

Chas. Curtoys, Esq. Secretary, Consolidated Telephone Company, Limited.
Consolidated Telephone Construction and Maintenance Company, Limited,

Dear Sir,

Your letter of the 17th inst. has been considered by the Directors of this Company, and I am instructed to inform you that they can only confirm the letter to you of the 1st inst.

Yours faithfully,

(Signed) Charles Curtoys,

Secretary. The Hon. S. Spensley.
page 29

Staff at Factory.

We do not recommend any further change in the staff, which has already been reduced to as low a limit as appears advisable.

At a future date we propose removing all the subsidiary Companies from the offices (Colonel Gouraud's, 34, Walbrook) at present occupied by them, and accommodate them at the Factory, where we have ample space unoccupied.

It will probably be to your interests that an office be rented in the City, to be used as a Board Room for all the Companies, and the cost divided amongst them. As the Factory is rather far off for gentlemen to go to who are engaged in other business in the City, and to whom time is an object, we hope by this means to have good attendances on the Board days.

Accounts and Solicitors' Bills.

After further deliberation your Committee decided not to incur the expense of having an accountant in to examine the books of the Company, as they could find no particular point to look into, and it appears useless to go into the ordinary business accounts, which have already been checked and audited.

The solicitors' bills have been looked into, and a lump sum offered to Messrs. Mackrell & Co. to settle those owing by your Company up to the 31st March, 1884.

[This offer having been declined, your Committee suggest that the bills be examined and the costs taxed.]

page 30

The Terms of the River Plate Settlement were as Follows:—

"That for the outstanding debt at the 31st March, 1884, your Company was to receive £20,000 in 9 per cent, debentures, and the balance of £8,440 was to be paid for in 9 per cent, preference shares, £5 each, at the price of £4."

One of the stipulations in the settlement was that the River Plate Company should, on demand by the Consolidated, pay off £500 of the above debentures every month.

This option has not been exercised for the present, as we think it would be most prejudicial to your interests in the River Plate, that that Company should have to find a sum equal to £6,000 per annum, in addition to the interest on the 9 per cent, debentures, and the 9 per cent, cumulative dividend on the preferred shares, and further we do not think it advisable that the 9 per cent, debentures should be paid off, as they form a satisfactory investment.

decorative feature

S. Straker and Sons, Printers, London and Redhill.

page break

Executive Committee

  • The Mayor of Melbourne, Godfrey Downes Carter, Esq., Chairman.
  • The Right Rev. Dr. Moorhouse, Bishop of Melbourne.
  • His Honor Mr. Justice Holroyd.
  • The Hon. E. Langton.
  • G. H. F. Webb, Esq., Q.C.
  • J. L. Purves, Esq.
  • Professor Elkington.
  • P. Moloney, Esq., M.D.
  • John Blyth, Esq.
  • Mr. Councillor Wilks.
  • R. G. Benson, Esq., Hon. Treasurer, 32 Collins Street East.
  • M. Lang, Esq.
  • R. Balderson, Esq.
  • Jas. Macdougall, Esq.
  • Andrew Rowan, Esq.
  • David Bennett, Esq.
  • W. E. Murphy, Esq.
  • A. G. McIntyre, Esq.
  • J. E. Phillips, Esq.
  • C. J. Fairfield, Esq.
  • T. L. Parker, Esq.
  • H. U. Alcock, Esq,
  • Benjamin Douglas, Esq.
  • E. G. FitzGibbon, Esq., Hon. Secretary, Town Hall, Melbourne.