DECLARED VOID

Press, Volume LXXII, Issue 21954, 1 December 1936, Page 12

DECLARED VOID

!' . '♦ Debenture Transfer Contracts THE MCARTHUR TRUST FINANCIAL POSITION DISCUSSED (PEXSS ASSOCIATION TELEGRAM.) I INVERCARGILL, November 30. The financial position of the McArthur Trust, Ltd., was discussed at length in the Magistrate’s Court today, when a civil case lasting several hours was held to determine the fate of debentures which had been transferred to the trust. The secretary of the trust, F. D. Graham, of Sydney, attended the hearing and was cross-examined on the balance-sheet for more than an hour. The application before the court was for an order on behalf fo V r Southland persons—James Fleck, Mary Fleck, Margaret Bam, and James Allan Thomson— to have canrplled and declared void the trans fer by them to the McArthur Trust of debentures owned by them in the Fxecutive Investment Trust. Although the sum involved was not stated in court, it is understood to be about £25,000. The case was a sequel to fhe i | cent conviction on a charge of share hawking” of the man who arranged the transfer of the debent “f e ®- a the hearing Graham s evidence and the magfstratf cTlr W. H. Freeman) dared the contracts void. and hxed sr ss a s eSu|holders of the money received by the McArthur Trust from the Public Trustee for debentures received Mr A. C. Hanlon, K.C., with Mr C M Barnett, of Dunedin, represented the McArthur Trust, opposing the making of an oi-dei of can cellation, and Mr H. J. Macalister supported the order. Question of Jurisdiction There was a long discussion on whether the court had jurisdiction to hear the claim, Mr Hanlon arguing that a New Zealand court had no such power. He submitted that as thc company did not reside in New Zealand, it was not amenable to the jurisdiction of the court. Mr Macalister contended that tnc court did have 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 ) urlsd^ tlot } and security for appeal was fixed at 15 guineas. „ , „„„ Fleetwood Douglas Graham, secretary of the McArthur Trust, Ltd., said that people who had transferred then debentures for shares in the McArthur Trust now had the security of the same debentures, with the extra security of the ordinary share capital of the McArthur Trust. On figures, they were certainly better off. Mr Macalister: Are you serious m saying that these people are £1683 better off from the mere conversion of their money, notwithstanding that the company had an expenditure of £12,000 or £13,000? Where did th«* added value come from? The witness said that half of the debentures had been exchanged for preference shares in the McArthur Trust, which were fully covered, and the other half were exchanged for ordinary shares; but £30,000 in debentures of the National Investment Company had been exchanged for ordinary shares, and this benefited 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 McArthur Trust? ; Witness; It did not get anything. -The debentures belonged to J. W. S. McArthur, and he transferred them to the McArthur Trust for ordinary Mr Macalister: Was this asset worth £30,000? Witness: Considerably more, I should' think. Mr Macalister: And yet McArthur was willing to change an asset worth more than £30,000 for ordinary shares worth 3s lOd in the pound—rather a bad deal, don’t you think? Witness: I think it was. After further questioning by Mr Macalister, the witness said that he would refuse to admit that the Trust was in a hopeless position. Comment on Legislation The magistrate said he did not propose to reserve his decision. The other case (the charge against Calvert of share-hawking) had gone to appeal, he understood, and he was only concerned with the present order. He did not see that he should be bothered with conflicts of law. He agreed with Mr McAlister that the court had jurisdiction. The Companies Act would be useless if its provisions were to be interpreted as not meaning what they said. “In my opinion,’’ continued the magistrate, “although it may not be the function of this court to say it, the legislation did not go far enough. It should have definitely provided that, when it was decided to clean up the Investment Executive Trust debentures and go into liquidation, the transfers of debentures for shares should have been prevented so that the Public Trustee should have paid the debenture-holders their money. Then, if they liked, they would have parted with their hard cash. But the McArthur Trust apparently got in ahead of the legislation, and now we have this trouble. I think this court has jurisdiction; but as the matter will probably go to the Supreme Court I won’t waste time in summing it up fully, and my decision, is that the ‘ transfers be declared void. I agree with Mr Macalister that there should be taken into consideration the methods employed in getting the trans 7 fers —canvassing, and the circumstances of that canvassing, the legislation passed at the time, and the value of the shares in the McArthur Trust.” There might be some considerable difficulty in enforcing the declaring void of the contracts, because the company was incorporated in Queensland, but that was not the court’s business, said the magistrate. He would allow £5 5s costs and fix security for-appeal at £ls 15s.