THE NEW ZEALAND LOAN AND MERCANTILE AGENCY.

Auckland Star, Volume XXV, Issue 143, 16 June 1894, Page 2

THE NEW ZEALAND LOAN AND MERCANTILE AGENCY.

THE HON. THOMAS RUSSELL INTERVIEWED.

HIS VIEW OF THE POSITION.

(Fbom Oob Special Correspondent.)

London, May 5. Mb Thomas Ruslbli. having occupied sach a prominent) position in connection with the Loan and Mercantile Agency Company, I thought it might not be amiss to hear what he had to say about the case from the private Board-room point of view, in case it might throw any new light on the affair. I found Mr Ruaaell at ' home at hia residence, 59, Eaton Square, and after sending in my card I was ushered into the study, where I was courteously received by Mr Russell himself. A large table waa literally covered with documents connected with the Loan and Mercantile Agency Company, which have engrossed his attention for some weeks past. Upon explaining the object of my visit, Mr Russell had some scruples about entering upon matters which had not come before the Court, lest their publication might be prejudicial to the course which the directors contemplated adopting when Judge Williams has delivered his summing up of the evidence, but when I pointed out that five or six weeks must elapse ere this can reach you in the ordinary course of mail, and that in the interval the matters must have become public property in London, he waived his objection. 111 suppose," I remarked, by way of opening up the interview, "you have found this examination a rather severe ordeal to go through ?" . "I should rather think I have. It wno light thing to be subjected for three days to abatteryof questions from three or, four sides at once. Mr Bray on one side, prompted by the Official Receiver and others, the Judge on the other, and Mr Reid in the middle. I told the Official Receiver the other day— •You fellows remind me of the style of warfare adopted by the Maoris in the bush. You fire first at one point and then at another, all round the compass, until a fellow doesn't know where to expect you next.' But I had really nothing to conceal, so I stood out in the open and let them blaze away." " These is no doubt," I remarked, " that the method of taking evidence is a peculiar one." ■ " Peculiar 1" said Mr Russell. " It's the most extraordinary method 1 ever saw or heard of. I can only compare it to the Star Chamber or the system adopted by the Public Prosecutor in France. Testimony is admitted which would not be received in any other court in any civilized community. It is simply a plan of fishing up evidence with a view to laying the foundation of some future proceedings. A witness goes into the box without knowing what he has to answer. The directors and officers were practically placed on their trial, not on any formulated charge, but with the object of endeavouring to extract evidence from them which would furnish grounds for some ulterior proceedings. I say it is a most un-English and unfair method of proceeding." Mr Russell uttered these remarks with much energy and force, as he paced up and down the room. "But I suppose there must have been some good reason for adopting this method, or it would not have been adopted in a country like England, where the liberty of "the subject and the impartial administration of justice are held so sacred." " The Act under which the examination has' been held," continued Mr Russell, " waa'paHßed in a time of panic, and I think is completely opposed to the spirit of English law. Look at our case. The whole of the documents have been in the hands of the Official Receiver, and we have only had access to them in Court. When I saw a telegram in the ' Argus' announcing that this examination was to be held, I at once took a cab to Dalgety's and arranged a passage by the Messageries Maritime steamer, and I travelled day and night aerosa the Continent, doing the whole journey from Melbourne to London in thirty days, and arriving just two days before the inquiry began. I jusb had time to pack up a few documents which I fortunately kept relative to the Company's affairs, but, of course, they are very incomplete, and I have been at a great disadvantage. When I gave up my office in London, I had only the most important papers kept, and the great bulk of them, which would have half-filled this room, were destroyed by my clerk. Under these circumstances I was subjected to a crucial examination as to.the most minute affairs' of the Company, being called upon to remember its whole history from the start, and what this, that or the other director or officer did or said or thought, all the complicated accounts and correspondence, and the proceedings of the Board, with the dates of the different occurrences, and so forth. Why a man would need to have the memory of a Macauley and a memory of Woodfell and a trained accountant combined to remember one-half of all these things, and avoid making mistakes, or falling into some trap carefully and artfully laid by the other side, who had all the records of the Company in their possession, and could shape toe attack from day to day as they pleased." "No doubt, Mr Russell, you were at a great disadvantage. But passing from that I should like to ask you what your ideas are of the whole case ?" " That you will get in the Judge's review of the evidence on Thursday next. But don't imagine the matter ends there. Four days after that any persons who think their conduct unjustly reflected on, may call further evidence and put in documents, and this gives us the last word. I don't mind telling you that we intend to bring a good deal of evidence which we were either precluded from adducing at the examination in chief, or we kept in reserve. You see, when the enemy is firing from different ambuscades and trying all sorts of dodgy manoeuvres, it doesn't do to show all your strength. So we have kept something back until the final attack." "Do you think that was wise ? Why not have answered the points as they arose?" " Well, we have followed the advice of Mr Reid, our solicitor. Several times during the examination some of the witnesses distorted facts. I could hardly restrain myself, nor coald Sir James Ferguson, and I passed a piece of paper to Reid giving an •emphatic denial. Sir James | Ferguson and I had the contradictions in our hands. But Mr Reid said, • Wait. Let them fire away all their powder and develop their attack, and then we shall know what we have to meet, and if they deceive themselves, so much the better for us.'" " And you think they have been misled ?" "Yes, in several.of the main features. You must have seen almost from the out3et that I was looked upon as the head and front of the offending. Even the Judge seemed to be impressed with that view. Before the examination he had seen the papers prepared by Mr Larkworthy and the Official Receiver, and though I dare not accuse him of being biassed, he must have been more than human if they did not influence his mind in directing the course of the inquiry." " Can you specify any examples of this, Mr Russell?" "Yes, I can. He seemed all through the inquiry, until I gave my evidence, to have come to the conclusion that I had struck out the paragraph from Sir James Ferguson's speech at the annual meeting of shareholders referring to the deficits on the

Australian properties, and that I had influenced Mr Elder in countermanding Mr Barker's report. Bat I proved that 1 was on the water when the. report was made— and that was a lucky thing for me—and that I had never seen Mr Elder until after the countermanding telegram was sent to London, and had no communication with him except to send two letters of introduction in the hands of gentlemen who were going out to Australia." " Still, I think the fact that Mr Barker's report was not opened for so many months, has had a prejudicial effect upon the public mind." "No doubt it has, but the public does not reason on the terrible responsibility that would have weighed upon the directors. What do you think would have happened if they had opened that report ?" " I suppose it must have compelled them to have reconsidered their annual report, and to cancel the dividend which it was known they intended to declare." "No. They would simply have referred the report to me for further inquiry. They knew I was out there, and they would never have been so rash as to act upon a report of that kind by an inexperienced young man, and to have caused a premature collapse of the whole business. I showed in my evidence that the estimates in that report were absolutely unreliable. It is impossible for men who have never seen anything but an English meadow to fully understand the changes that are made in an Australian run by a severe drought. One day you see the ground parched and bare, hardly a blade of grass visible, nothing but trampled straw and the cattle thin and wretched, with their ribs sticking out so that you could hang your hat upon them. The squatters in that district see nothing bat ruin staring them in the face. They sell their surplus stock for anything they will fetch, or drive them away to the nearest supply of water. Then comes a few days' rain, the warm sun forces up the young grass, the dams are full of water, and in a few weeks the whole aspect of the country has been changed, the cattle are sleek and fat, and instead of ruin the property and stock have gone up a hundred or two hundred per cent, in value. That gives you a fair idea of the worthlessness of valuations made in bad seasons. Bnt you cannot get people who have lived all their lives in England to understand that." "I think you referred juat .jqow, Mr Russell, to some important evidence which the directors have reserved until after Judge Williams has summed up the case." " Yes, we want to see what we have to meet. We want . some specific charge formulated against us. Yon know if a man is accused of stealing he is placed in the dock and the charge is read put, and then the evidence for the prosecution is confined to that particular charge, and he has an opportunity of making a defence. In our case a very different course is adopted. The examination takes the form of fishing for evidence against us. But under the Act we are entitled within four days after the Judge's summing up to adduce Bach evidence as we deem necessary to clear ourselves from any charges or imputations against us, and that is what, acting under the advice of Mr Held, our solicitor, we intend to do." "In fact, you have kept back some of yonr strongest trump cards V 11 Well, you can pat it that way if you like." [Mr Russell referred to some of these matters, which I cannot reproduce here.] " How do you think you will come out of the business ?" I asked, with some boldness. " Well, I have nothing to fear or conceal, though I fully expect the Judge will say some nasty things. I don't think I have got credit for the sacrifices of time and money I have made in order to save the business of the Company. When the news of the suspension reached me, I at once exerted myself to try to keep the business of the Company together through the agency of the Land Company. At this time we were in no position to undertake such a crushing responsibility. But the Official Eeceiver forbade our using a single penny of the Loan Company's funds, which were piling up in the banks, because money was coming in and nothing going out. First we had to raise as best we could £7,000 to meet the dishonoured checks of the Loan Company. Next there were a number of poor devils of small farmers who had sent their wool to London through the Company, where it was impounded by the Official Receiver. It was a great hardship to the farmers, some of whom were nearly ruined. We borrowed jnoney to relieve these claims, and I assure you it was no easy matter. We had to get it where we. could, sometimes on our own personal security. But we have saved the business of the Loan Company, and held it together, and we are in a position to pay a dividend of five per cent. I think it is very hard to accuse me of wrong doing, when for many months past I have been making all these sacrifices, without receiving a penny in return. I have put every farthing I possessed into these concerns. In 1885 I was worth £260,000, and all this has gone into the business. How can they accuse me of working the affairs of the Loan Company or the Land Company for my own personal ends ?" " I should like to know, if you do not think the question ill-timed, your views as to the prospects of a successful reconstruction ot the Loan Company ?" " Well, it is rather premature to hazard a decided opinion at present, bnt I think this inquiry has done it serious damage. Rightly or wrongly it all tends to prejudice it in ■ the eyes of investors. The loose statements made in the course of the examination have done infinite damage, and some of the very uncalled-for remarks by the Judge have made matters worse." " Is it usual for a Judge to preside in these iniquiries ?" " Quite unusual. I think this is the first time a Judge has presided throughout a long inquiry like this. The rule is that it is held before the Registrar. Then I think also it was somewhat unfortunate for us that our solicitor, Mr Reid, was appointed SolicitorGeneral while the examination was pending, because his time was necessarily a good deal occupied with his Parliamentary and official duties. For several days he was unable to be in court at all, and Mr Hollams was not quite at home in the case. Another difficulty which placed us at a disadvantage was the absence of the documents drawn up by Mr Battley, and several papers and accounts which are in New Zealand." " That last admission by Mr Paul that he had struck out of Sir James Ferguson's speech the portion referring to the deficits in the Australian properties, was a great surprise to the court." •• Yes, and I am very sorry for Mr Paul. He is a most excellent officer, and keeps his business in the most perfect order. Under his management everything went like clockwork. He i 3 scrupulously honest and straightforward, but sometimes a little too confident in his own opinions. However, I am convinced he believed he was acting in the interests of the shareholders in whatever he did." " Then you think the directors and the manager were justified in concealing from the shareholders the tme state of the Australian business ?" "I never said it was the true state of the business. On the contrary, I say that the directors would have been guilty of culpable recklessness if they bad acted upon the reports of Messrs Larkworthy and Barker without) making careful inquiries as to their accuracy. The public draw hasty conclusions without making due allowance for the responsibility that rests on the directors and management. I say no man in the conduct of his own private business would reoklenly bring ft to xuin

because of some report which he had not taken steps to inquire into." " But there seems to be a general idea that facts which ought to have been communicated to the shareholders were systematically withheld." !■-.-; " Nothing was witheld that it was necessary or proper for them to know. But the directors of a great financial business ought not to be calledupon toblurtouttothewhole world all the inner working of the affair, matters which are in progress, delicate negotiations, and measures which depend on secrecy for success. The shareholders must place confidence in the men to whom they confide their interests. A man in his ordinary business does not go out into the street and tell everybody ' I had great difficulty in meeting that bill to-day,' or *I shall have trouble in meeting that payment to-morrow,' and so forth. It would be easy to wreck the most solvent business in that way. It is another fallacy to imagine that a director ought to convert himself into a mere accountant, even if he possesses the actuarial knowledge, ■ and make himself familiar with all the details of a company's accounts. The thing is impossible and absurd. That is what the staff are paid for, and they mnst be trusted in such matters." " Well, Mr Russell, as it is getting late I must take my leave. I may say, however, I trust you will come safely through this business, and that the prospects of the Loan Company will turn out better than you seem to anticipate." I found Mr Russell suffering from a throat attack, which sometimes almost prevented articulation. In other respects, however, his health is good, and he is full of energy and resolution.