"SHARE HAWKING"

Auckland Star, Volume LXVII, Issue 285, 1 December 1936, Page 14

"SHARE HAWKING"

SEQUEL IN COURT.

TRUST COMPANY DEBENTURES

TRANSFERS DECLARED VOID,

(By Telegraph.—Press Association.)

INVERCARGILL, Monday

The financial position of the McArtliur Trust, Limited, was discussed at length in the Magistrate's Court to-day, when a civil case was heard concerning debentures which had been transferred to the trust. The application before the Court was for an order on behalf of James Fleck, Mary Fleck, Ma rgaret Bain and James Allan Thomson, all of Southland, to have cancelled and declared void a transfer by them to the McArtliur Trust of debentures owned by them in the Executive Investment Trust. The case was a sequel to the recent conviction on a charge of "share hawking" of a man who arranged the transfer of the debentures. Mr. W. H. Freeman, S.M., was on the Bench. Mr. A. C. Hanion, K.C., and with him Mr. C. M. Barnett, of Dunedin, represented the McArtliur Trust, opposing the making of an order, and Mr. H. J. Macalister supported the application. There was a long discussion on whether the Court had jurisdiction to hear the application. Mr. Hanion claimed that the New Zealand Court had no such power. He submitted that as the company did not reside in New Zealand it was not amenable to the jurisdiction of the Court. Mr. Macalister contended that the Court had power to deal with' the case whether or not the company had actually commenced business in New Zealand. The magistrate held that the Court had jurisdiction. Secretary's Evidence. In evidence Fleetwood Douglas Graham, of Sydney, secretary of the McArtliur Trust, Limited, said that people . who had transferred their debentures for shares in the McArtliur Trust how had the. security of the same debentures with the extra security of the ordinary share capital of the McArtliur Trust. On figures they were certainly better off.

Mr. Macalister: Are you serious in saying that these people are £1686 better off from the mere conversion of their money, notwithstanc 1 .ng that the company had an expenditure of £12,000 or £13,000? Where did the added value "come from? / Witness said that half of the debentures had been exchanged for preference shares in the McArtliur Trust which were fully covered and the other half were exchanged; for ordinary shares, but £30,000 of debentures of the National Investment Company had been exchanged for ordinary shares and this benefited the other shareholders. Mr. Macalister: For this £30,000 what did the National Investment Company get? Witness: It got certain assets. Mr. Macalister: But what did it get from the McArtliur Trust? Witness: It did not get anything. The debentures belonged to J. W. S. McArtliur and he transferred them to the McArtliur Trust for ordinary shares. Mr. Macalister: Was this asset worth £30.000? Witness: Considerably more, I should think. ]Vlr. Macalister: And yet McArtlrur was willing to change an asset worth more than £30,000 for ordinary shares worth 3/10 in the pound. Rather a bad deal, don't you think ? Witness: I think it was. After further questioning by Mr. Macalister witness said he would refuse j to admit that the trust was in a hopeless position. ' Magistrate's Comment. The magistrate said he did not pr pose to reserve his decision. The oth case (the charge of share hawking) lu gone to appeal, lie understood, and 1 was only concerned with the presei order. He agreed with Mr. Macalist that the Court had jurisdiction. T1 Companies Act would be useless if tl provisions were to be interpreted f not meaning what they said. "In my opinion," continued the magi trate, "although it may not, be function of this Court to . say it, tl legislation did not go far enough, should have definitely provided; when was decided to clean up the Investm'ei Executive Trust debentures and go in liquidation, that transfers of debenture for shares should have been .prevente so that the Public Trustee should ha l paid debenture holders their mone Then if they liked they /, could; liaS parted with their hard cash, but tl McArtliur Trust appearently got i "ahead of the legislation and now w have this trouble. "I think this Court has jurisdiction but as the matter will probably go t the Supreme Court I won't waste tim in summing it up fully. My decision i that the transfers be declared void." There might be some considerabl difficulty in enforcing the declaring voi of the contracts because the compan; was incorporated, in Queensland, sai the magistrate, but that was not th Court's business. He would allow £o 5 costs and fix the security for appeal a £15 15/. .