DEAL IN OIL.

Sun (Christchurch), Volume I, Issue 143, 23 July 1914, Page 10

DEAL IN OIL.

LITIGATION THE OUTCOME.

ACCOUNTS ASKED FOX

In the Supreme Court, to-day, before His Honour Mr Justice Sim, the hearing was continued of a case in which the plaintiff sought to have set aside certain documents between the parties. The plaintiff is Arthur Ernest Otway, engineer, of Christchurch, and the defendant Percy Arthur Herman, agent, of Christchurch.

Mr McGregor, with him Mr A. F. Wright, appeared for the plaintiff, and Mr M. Myers, with him Mr A. H. Antony, for the defendant.

PLAINTIFF'S CLAIMS. Plaintiff set out that in May, 1912, he was the holder of an option to purchase from one Thomas C. H. Nicholls certain rights to bore for oil on 8200 acres of land at Ingle wood (Taranaki) for ,a period of 42 years. On July 11, 1912, plaintiff and the defendant entered into an agreement whereby plaintiff agreed to share with defendant the rights and interests mentioned. lu August, 1912, defendant arranged with Mr Nicholls to form a company with a capital -of £40,000, of' which thirty thousand £1 shares, fully paid up, were to be issued to Mr Nicholls. On or about August P5, 1912, a company for the purpose contemplated was registered at Christchurch. Of the i>o,ooo shares to" be issued to Mr Nicholls it was agreed between hiin and the' defendant that he Should retain as his own property 1500 shares, and the balance, 28,500 shares, he was to hold as trustee for the plaiutiff aud defendant, the 1500 ' shares, plus £SOO paid and a sum of £ISOO to be subsequently paid, being accepted by Nicholls as the full purchase for the rights over 8200 acres. Between the date of issue of the shares and December 16/ 1913, a large number of fully-paid-up shares were sold on the joint aceouut of plaintiff and defendant. The defendant had full charge and control over all arrangements, financial and otherwise, - relating to the sale of the shares. The plaintiff, who was not a trained business man, relied solely on the business knowledge and integrity of the defendant in regard to all-the transactions. In' December, _ 1912, plaintiff applied to defendant for. a shares sold and moneys received, and after considerable pressure the defendant produced to the . plaintiff- a statement showing that shares to the nunlberof 11,150 had been sold, equalling £11,1.50,. and also, an account purporting" to show all amounts received and expended. Plaintiff was in great need of money, and was entirely under the influence of the defendant in all matters relating to the statement. The defendant had never giv<*n plaintiff a copy of the statement, and the only opportunity plaintiff »ad had of seei n£ it was for a short time iu 1912. Relying ori defendant's good faith ami honest . dealing,, plaintiff signed' the statement as correct and satisfactory, and ( the defendant had since retained the Statement and account. -The plaintiff had recently, ascertained that, prior to December, 1912, the defendant had sold 500 shares in excess of the .11,150 stated to Messrs Friedlander Bros, for £SOO. Previous to December 16, 1912, defendant represented to plaintiff that he had transferred to a Mr Elworthv 500 shares, valued at £SOO, for 2000' shares Valued at. 5/- each in the Christchurch Oil Company. 'Plaintiff had, he alleged, recently found that the representation was unt r «e, as while the defendant did sell i) 00 shares to Mr Elworthv he sold the shares for £SOO cash, and instead of crediting plaintiff with £250 thereof he transferred to. plaintiff Christchurch oil shares of the nominal value of\£2so, such shares being the property not of Mr Elworthy but the property of defendant. Plaintiff recited a lengtW list of transactions, and alleged that, defendant had and false representations. The plaintiff claimed: (a) That the accoiiht and settlement of December Hi, 1912, and the two deeds of February 18, 191.'!, aud April . 22, .19KJ, be respectively declared not to be binding on the. plaintiff, and be-set'"aside accordingly. (b) That all accounts between the plaintiff and the defendant relating to the rights, options,-and concessions and shares be re.opened as from July 11, 1912. (e) That the defendant be ordered to file ah account showing all his dealings with the rights, options, concessions, and shares since July 11, 1912, the plaintiff being willing an'l offering to give the defendant credit for all moneys received or benefits derived by'him .under-the documents. (d) That the defendant be ordered to pay to the plaintiff such amount as on the taking of the account shall appear to be due by defendant to the plaintiff.

TIM-: IH'IFKNX'K

■ The defendant, in his statement of defence, said the plaintiff took an active part in selling the shares, and he denied that, the plaintiff relied on his (defendant's) knowledge and integrity. Accounts were furnished to plaintiff without any pressure, and plaintiff was also furnished fro in time to time with copies for, his own use. .Plaintiff signed the account mentioned in the .statement of claim after haying examined it and satisfied himself as to its accuracy. The books and vouchers relating thereto were from time to time shown to plaintiffs. The shares mentioned by the plaintiff, to the number of 3 000 and not 500, were not actually sold to Fried lander Bros., but were sold provisionally only. A deposit, of £;">00 was paitl by Friedlamler Bros., who took a transfer of the shares. Defendant said he received no cash from Mr "Rlworthy' in respect of shares in the Consolidated Oil Fields of Taranaki, Ltd. He transferred 500 shares, with the knowledge and consent of the plaintiff, in exchange for other shares in the Christchurch Oil Company of the sime nominal value, and on 'December 16, li) 12, he transferred half of the latter to plaintiff. Defendant denied he .made any false or fraudulent representations to the plaintiff.

MB MeG R EGO It OPENS

Mr McGregor, in opening, dealt at leugth with the transaction;-) iii which the parties had been concerned. . It was not, he said, till a chance encounter with a Mr Gill in the streets of Christ church that Mr Otway discovered how lie had been defrauded from the start, lie discovered then t'or the first time that at the very period when Mr Her iiian was assuring him that the shares were stagnant, and that there was no market for them, Herman, by his agents, was selling these shares in the market at par, and lie sold some thousands of them behind Mr Otway's back and without his knowledge. It was not till July, 191->, that Mr Otway discovered it. Then and for the first time, Mr Otway began to consider what his position was. He then took the advice'that he should have taken long before. The statement of accounts did not represent the true position between the parties at all, and plaintiff claimed to set it aside.

'Mr Herman was advised by his solicitor, Mr Free, who appeared to know what was going ou. Mr Free had large financial holdings in this matter, and was mixed up in it in a way that he (Mr McGregor) could not understand. It was only within the last two or three weeks that the true inwardness of the account was discovered. It was a very deep and designing'Tsid very successful account to throw dust in the eyes of anyone looking into it. Evidence would be called for opinions as to this account.. According to Mr Free's evidence the company was floated on the 500 acres, there being apparently some difficulty with regard to the rest of the land. Mr Free said that he was to get 1500 shares and a 5 per cent, interest in 1700 acres of land for £IOO. That was the effect of his evidence. The £IOO that seemed to have beeu received from Mr Free was not shown among the sales of shares, but was shown in statement B as ''credit by cheque." Interest was charged on the bills which Mr Herman held for shares sold and not delivered. Interest was charged against Mr Otway up to the due date of the bills —from the date of signing till December 16. His Honour: I do not understand.

Mr: M'Gregor: It is hard to understand,. Interest was charged, he said, apparently until the date of maturity of each bill at 9 per "cent. He hoped to, show that the apparent position as disclosed by the account was far from the true position. The apparent position' as disclosed by the accounts of December 16 was that Mr Otway was entitled to £274 2/3 and half of 15,870 shares. They said he was entitled to £I6OO and 7425 shares.

Continuing his address, Mr McGregor said if accounts were taken they would show that Herman still owed Otway about £4BOO in cash. In addition to that, up to June, 1913, there were 2800 shares held in partnership account by Herman and still unsold, and to half of these —to 1400 —Otway was entitled, in addition to the £4BOO. The shares were still worth par. Mr Elworthy's name did not appear ,in the accounts at all. Percy 6. Withers, assistant registrar of joint stock companies at Christchurch, and deputy-Commissioner of Stamps, produced the papers of the Consolidated Oilfields of Tara'haki, Ltd. . William Morris Tyers, accountant, of Christchurch, said he had gone through some accounts that .were ,in dispute in this action. .When he. first saw the statement of accounts he thought it was a very painstaking attempt'to give a clear statement of the position. It was; in amateur form. After thinking out the ,details he had come to the conclusion that the accounts were entirely wrong. If the plaintiff's statements were correct, the statement was a very ingenious method of disguising the txue state of'"'affairs.- / ' "(Proceeding.)