TWELFTH DAY.

Auckland Star, Volume LXIV, Issue 134, 9 June 1933, Page 8

TWELFTH DAY.

SPEEDWELL OIL CASE.

DEFENDANT CROSS-EXAMINED

STATEMENTS IN PROSPECTUS. The Speedwell Oil case continues to occupy the attention of the Supreme Court, and is expected to last another four or five days. Counsel in the case are Mr. Gould and Mr. Dyson for the shareholders, and Mr. Weston and Mr. Goldstine for the defendant, Harry Clinton McElwain, from whom the shareholders are claiming £4633, alleging misleading statements contained in a prospectus. Mr. Justice Smith is on the Bench. The defendant McElwain, who gave his evidence in chief on Wednesday afternoon and yesterday morning, vras under cross-examination the whole of yesterday afternoon. The witness was questioned at considerable length regarding the promise of 200 shares to one Barber, of Wellington. Witness said ho did not promise Barber any shares, but the promise had been made by Burleigh, and the directors had to support him in that promise. It was not exactly Optional for them. "Never Entered''My Thoughts." Mr. Gould: Were you reserving your right to pick directors to ensure your option being taken over? —That never entered my thoughts. Do you recognise that the gift and acceptance of qualification shares made the prospectus misleading from that time?— No. Witness said he knew the importance to the investing public of a board of directors being independent of the vendor, but he did not think of it at the time the prospectus was being drawn. He did not know that if the directors were interested the fact had to be disclosed. / Witness said that on May 9 when the balance-sheet of the Newmarket company showed a loss of £90 for the year it caused the directors of the new company concern and disappointment. Despite this he could not now see that the prospectus setting out that the Newmarket business was prosperous, was misleading. The position was cleared up at meetings held in Mr. Massey's office subsequently, when they were convinced that the business was then solid and in a liealthy condition, the loss shown in the balance-sheet being accounted for by the inclusion of £108, bad debts incurred over a period of two years, which witness and his directors considered should have been written off. The statement in the prospectus that the business was profitable was not meant to convey to the public that the Newmarket company was profitable. The statement referred to oil businesses generally.

Loan of £587. Dealing with the receipt of a cheque from Burleigh, witness said that on March 28, 1930, the company could not wo to allotment as the minimum of 6000 shares had not been sold, and the application money The provisiona.l directors held a meeting and Burleigh gave a chequc to cover the amount of application money for shares unsold by Stocker, the underwriter. Witness then regarded Burleigh as a salesman only and did not think he was behind Stocker. However. Mr. Massey advised that unpresented cheques for application moneys could not be accepted. Witness then knew Stocker did not have the money required and that was why witness asked Charles Adams to lend the £587 required to Stocker. Until March 28 witness did not doubt Stocker would be able to find the money. Witness said that although he knew on March 28 that Stocker could not find the money. 3515 shares were allotted him on April 10. The directors had no option but to allot them, as Stocker had by then paid the money which had been borrowed from Leslie Adams. Mr. Gould: Would you put out a prospectus with a man of straw as underwriter ? Witness: I would not put out any prospectus knowing what I do of them now. Mr. Gould: You are a very wise man. "Never Want to See Another." Witness: I never want to see another prospectus or underwriting contract. Mr. Gould: The company relied_ solely upon the sale of shares for its capital ? Yes. And that being so, and knowing the position of the company, did you think lit was honest Jo go to allotment? —Yes. Witness said that he was to receive £1000 cash from the company in addition to 2500 shares. The £1000 was in the bank and lie could have taken it, but took only £400. Despite letters written by Burleigh, m which he referred to him as having fhe underwriting, contract, witness said Burleigh was not recognised as the underwriter, but Stocker was. Burleigh was the organising salesman. Mr. Gould: Despite the correspondence do you still say you didn't know Burleigh's financial position ?—I don't know it to-day. Cash and assets are two different things. His Honor Astonished. Mr. Gould questioned the witness at length about his visit to the house of Charles Adams, when there was a discussion about a loan of £2400, which was the amount required to purchase the Newmarket company. His Honor: Do you expect me to accept the view that for a loan of £2400 Charles Adams had simply been promised 700 shares in a company which had been formed and take the risk of getting his cash back? Witness: It was only a discussion. If everything had gone along all right he would have received reasonable interest. His Honor: I think any ordinary business man would tell you to go packing if that was all the security he was going to get for his cash. Witness: He said he liked the idea. His Honor: Well, miracles happen. I am astonished that you should put up such a proposal to Adams. You see what you had to pay a. little later to be accommodated for a very much smaller amount. Mr. Gould: You had 2500 shares?— Yes. And you gave Charles Adams 700, Cave 200, Parkes 200, Millikin 200, and promised Leslie Adams 500 and. Gilmore 200 ?—Yes. That accounts for 2000, so that you only had 500 left?—l had 1000 left. Those figures must be wrong. But according to those figures you only had 500 left?— That is correct. I was satisfied. His Honor: And if Burleigh was to get 400 and Barber 200 your cup had overflowed. Mr. Gould: That marie 2600 -out of 2500. (Proceeding.)