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Colonial Cases

Pichon v. Nachtrieb, Leroy and Cie., 1877

[company law]

Pichon v. Nachtrieb, Leroy and Cie.

French Consular Court, Shanghai
Buhaud, 12 February 1877
Source: The North China Herald, 15 February 1877

 

FRENCH CONSULAR COURT.

Shanghai, 12th February.

Before M. BUHAUD, President.  M. MILLOT, M. VINAY, Associates.

PICHON

v.

NACHTRIEB, LEROY & CIE., Agents, and MOREL, ex-Auditor of the French Gas Company.

      [The evidence and pleadings in this case were heard on the 10th inst., but it is unnecessary to report them, as the judgment fully states the case presented.]

   Dr. Pichon is a shareholder in the Gas Company of the French Concession, for more than a-twentieth of the capital.  Having had occasion in 1876, in his capacity as vice-President of the Board of Directors, to examine the books and inventories of the Company for the years 1872-3-4 and 5, although these books and inventories had been verified and certified accurate and truthful by E. Morel and O. Brabdt, salaried auditors, the petitioner detected, or believed he detected, grave errors, which he asked should be corrected.  The agents, Nachtrieb, Leroy & Co., while rebutting the allegations of Pichon so far as regards the accounts of the years 1872, '73, and '74, seem to have admitted that in fact a certain error in arrangement of figures had been committed in 1875, and to have in consequence, with the assent of Morel, rectified the inventory of this latter year, but still not to the satisfaction of Pichon.  The latter, inferring from the errors he had discovered, and that at least partial rectification which he had obtained of the inventory of 1875, that it was possible that inaccuracies of the same nature had slipped into the accounts bearing on the other inventories, persisted in his demand for complete rectification, and requested the Board of Directors to subject the books of the agents to a rigorous inquiry. 

   The petitioner has on this account, and through M. Rouhaud, Chancellor of the Consulate-General, on the 6th of Feb., 1877, summoned Nachtrieb, Leroy & Co., and Morel to appear before the Consular Court at the hearing of the 10th of this month, continued on this day, in order to show that the accounts presented to the shareholders of the Company for each of the years 1872, '73, '74, and '75, are erroneous, in that they do not exhibit the veritable position of the company on the corresponding dates; that there is, therefore, ground for appointing a commission of experts with the object of investigating the books of the Co. so far as the said years are concerned, and to examine the extent and the gravity of the prejudice caused to the petitioner, in order to have the defendants declared responsible for the prejudice in question, and. In consequence, condemned effectually to repair it; that is to say, Nachtrieb, Leroy and Co. in their capacity as agents, and Morel in his capacity as ex-auditor of the said Company, for having presented during several years for the acceptance of the shareholders erroneous accounts of which he had certified to the correctness and accuracy; and in order further to have the defendants condemned in the costs of the case.

   At the hearing, the petitioner stated the terms of his requests, and adds that, after the refusal of his colleagues to entertain his proposition of an inquiry, he resigned his position as director in order to be able as a shareholder to seek the redress of the errors committed by Nachtrieb, Leroy and Co. and Morel to the prejudice of the Company.  He explains that Morel, now President of the Board of Directors, towards the close of 1876 caused of his private authority access to the books and papers of the Company to be refused him; that, summoned on this account before the Consul-General of France, Morel withdrew this interdict, but renewed it almost immediately, in order to prevent him pursuing investigations which he was undertaking.  He believed that the obstacles thus placed in the way of his researches in the books of the company had for object to prevent the discovery of errors which Morel, now President, had allowed to pass when he was a salaried director.  As for the agents, Nachtrieb, Leroy * Cp. The petitioner had been led to examine the manner in which they kept the accounts by the fact (of public notoriety) that they had, so far as regarded their personal affairs, suspended payment for about a year, and they persisted nevertheless, despite the rules of common law laid down in Rule 2,033 of the Civil Code, in retaining that appointment with which they had been invested. He accuses them of acts of management which prove their responsibility, and notably of loans on account and in the name of the Company, without having previously obtained the authorisation of their employers.  Finally, in addition to the first conclusions, Pichon requests to be relieved by the tribunal of the responsibility which Article 44 of the Law of the 24th July, 1867, plays upon him as a former director of the Company.

   Before hearing the defendants, the President informs Pichon that the tribunal finds it necessary to set aside at once this latter request, seeing that it has no place either in his first petition or in the summon issued to the parties concerned.

   Nachtrieb, in the name of the firm of Nachtrieb, Leroy &Co. replied that the agents of the Gas Company hold their appointment from the Board of Directors and from no one else; that they are only employees of this Board, which is responsible to the Directors for their acts; that their own responsibility could not be adduced unless in case the Directors had been found guilty of fraudulent action in which they had been accomplices.  The defendant does not think himself authorised to give the Court any explanation about the accounts of which the petitioner has spoken, and concludes by saying that if Pichon has a complaint to make he should sue the Directors who have successively managed the Company during the years whose accounts he attacks.  As for himself he knows the text of Articles 17 and 39 of the Law of July, 1867, but he thinks that these Articles are only applicable to Joint Stock Companies in the points which do not touch upon their proper constitution.  There is not, he says, in a Joint Stock Company, either manager or council of supervision; the law only admits directors as alone responsible.

Morel in his turn denies Pichon's right to attack him for his acts, before the Court, inasmuch as he also is only called on to render account to the persons who appoint him.  He knows that Articles 32 and 33 of the Law of 1867, require that the commissaire of a joint Stock Company be nominated at a general meeting of shareholders, and that if this has not been done in this case it is because the title of commissary which the petitioner gives him does not belong to him.  Every year, about 8 or 10 days before the publication of the annual reports, the agents informed the Directors at their (the agents') request, had designated him conjointly with Mr. O. Brandt to verify the accounts of the year; and, he argued, it is a long easy from that to the function spoken of in the Article 32 referred to.  The defendant admits that Pichon had incontestably, in the terms of Article 17 of the Law of 1867, the right to bring an action against the company wither in the person of the Directors or its Commissaries if there were any.  He might equally have asked the Court to appoint one of several shareholders if the general meeting of shareholders of the  Company on the 4th of Dec. last had not supplied the void; but still, in order to do this in the terms of Article 32, the Directors ought to have been "duly summoned."  Burt, adds the defendant, no Director has been summoned to appear, and the company in question is not actually represented at the present hearing by any one.  Even of there were reason, in order to satisfy Pichon's request, to nominate one or more experts, to nominate them to-day would be to condemn the company without having summoned it or heard it.

Points of Law.

  1. - Should the Court order the enquiry demanded by Pichon?
  2. - Should Nachtrieb, Leroy & Co. and Morel be responsible for the prejudice of which Pichon complains?
  3. - On whom should fall the costs of the investigation if this is ordered, and also the costs of this proces?

Decree.

   The Court, after having deliberated in conformity with the law,

   On the first question -

   Seeing that, even admitting that Pichon has the right to bring the action in question, an inquiry could not be made into the books of the Gas Company unless the Comp may had been summoned;

   On the second question -

   Seeing that, even admitting that Nachtrieb, Leroy & Cp., and Morel could be held responsible, they could not be so for a prejudice, which is not established;

   On the third question -

   Seeing that, in the terms of Article 130 of the Code of Civil Procedure, the side which succumbs should be condemned in costs;

   For these reasons -

   Declares Pichon not admissible in his demands, rejects them, and condemns him in costs, in frs. 238.

 

The North-China Herald, 15 February 1877

Not content with the verdict of the Shareholders at two successive meetings, Dr. Pichon has carried his imaginary grievance against the Auditors and Agents of the French gas company, into the French Consular Court.  He wants experts appointed to investigate the accounts of the Company; and Messrs. Nachtrieb Leroy, and Mr. Morel declared responsible for having presented erroneous accounts to the Shareholders for several years, to the prejudice of the Shareholders.  The Court rejects the suit - 1st, because an enquiry cannot be ordered into the books of the Company, without the company being heard on the subject.  2nd because, whether Messrs. Morel, Nachtrieb Leroy & Co. are responsible or not, they cannot be declared so, in respect of a prejudice which is not established.  - The decision will turn more or less on technical points; but we trust Dr. Pichon will be content with it, and will push the case no further.  We think we may assure him that the Shareholders are perfectly satisfied with then explanations given by the Directors at the recent meetings, ...

   [See also The North China Herald, 18 January 1877, 'THE FRENCH GAS COMPANY. ["An extraordinary meeting of shareholders in the French Gas Co. was held on the 15th instant."]

Published by Centre for Comparative Law, History and Governance at Macquarie Law School