MCARTHUR CASE

Evening Post, Volume CXXII, Issue 32, 6 August 1936, Page 11

MCARTHUR CASE

EVIDENCE FOR CROWN

TRUST CO. OPERATIONS

TODAY'S HEARING

The financial activities .of John William Shaw McArthur, company director, formerly of Auckland, and of the Investment Executive Trust of New Zealand, Ltdi, and associated companies, were the subject of further evidence by Crown witnesses in the Supreme Court today. McArthur is on his trial before the Acting Chief Justice (Sir John Heed),and a jury on six counts relating to the issue of allegedly false prospectuses and re-' ports of the Investment' Executive Trust of New Zealand, Ltd. The case for the prosecution is being conducted by Mr. R. V. Meredith and Mr. C. Evans-Scott. Mr. H. F. O'Leary, K.C., with • him "Mr. R. E. Tripe, is appearing for the defence, which has the assistance of Dr. F. Louat, a Sydney barrister. Continuing his evidence, John Leslie Griffin, public accountant, of Welling-" ton, one of the'four inspectors appointed pursuant to the Companies (Special Investigations) Act, 1934, dealt with the manner in which the Trust building in Sydney was purchased in 1932 by the British National Investment Trust for £100,000 land of :the allotment of shares in this company to McArthur and Mr. C. G. Alconv His evidence followed the • lines of that given by witness in the Magistrate's Court last month. \ Mr., O'Leary. asked witness whether, if it was the business of a company, such as the Investment Executive Trust, to buy and sell assets, the incidence of income tax fell on the profit made. - ■> - ■ : , The witness said he thought that was the general rule. : ' Mr. O'Leary: Had the Investment Executive Trust purchased the Trust building" for £ 100,000 and subsequently sold it for £287,000, it would have been liable for "income tax on a profit of £187,000?-^-I don't know whether it woulti necessarily. It may have been. I think it is a debatable point; it would depend on the purpose for Vhich the building was bought. There would be a strong probability of its being assessed for income tax?— I would not like to go that far. I suppose you know that the profit made wasn't assessed for income tax? '-^■haven't heard of it being so. A SUBSTANTIAL ASSET. There is no question about this, is there? The Trust building was'a very substantial asset to which the debenture holders of the Investment Executive Trust would have to look for a return of their money if they wantet it?— Yes, it was one of their substantial assets. Taking it intrinsically, it was a substantial asset. Mr. O'Leary submitted a large photograph of the building to his I Honour and the jury. . ■''Yes, it is a very fine building," said his Honour. r : : ;•■'..'. Mr. O'Leary (to witness): Isn't. it evident now that the £100,000 paid for this/building was tens, if not hundreds, of thousands of pounds below its true values?—l think it must have been a good deal below its value. . '.''.'[ You know that reputable valuers in Sydney placed a value on- it, certainly after money had been expended on it, of over,£4oo,ooo?-^-Yes,. but Mr. .Justice Halse Rogers did not accept that. He suggested some figure between £300,000 and £400,000. Mr;: Meredith- said he did. not think reference should be made to sections of Mr. Justice Halse Rogers's report as a result of the Sydney Royal Commission proceedings, .unless the whole report was put in. . - , ' Mr. O'Leary said he was astounded at this objection; being taken by the Crown after the mass of material that had been introduced by the Crown which he submitted had no bearing on the case. ■-,"■■■ .■-.■.' His Honour: Is this some move in the . same direction? Mr. O'Leary said he did not. think it could be suggested that he was going into any more detail than was necesIsary or that he was prolonging the hearing in any way. He wished to dp nothing more than refer to the value of the building suggested by Mr. Justice Halse Rogers in his report. ,' His Honour said he thought that could toe accepted,DISPOSAIi OF BUILDING. In reply to another question from his Honour relating to the reported sale of the building,. mentioned yesterday afternoon, Mr. O'Leafy said that what the building had: been sold for had hot been authenticated yet, but it wbuld be available. . z to his Honour, Mr. Griffin said,that the long-term lease of the building to the British National Trust, Ltd., would probably be detrimental in negotiating a sale. .

.Mr. .O'Leary: Actually, hasn't the lease been cancelled by the Legislation? ,:•'•■ . . ■ • . i Witness said he was not sure. ■.'Mr; O'Leary: It could be subject to cancellation by mutual consent?— Yes. I suggest to you it is quite different trying to assess the position now of the. value or the .amount debenture holders will get compared with prior to August, 1933, or 1934, when this legislation went through?—Do you mean after the inquiry had started?. After the inquiry and the forced position of realisation and everything else that has happened because of the legislation?—l' think August, 1934, would be perhaps a bit late to give you an affirmative answer on that. If there was anything,detrimental to getting a good price for iV.it would have taken.place about this time. He-examining witness,; Mr. EvansScott asked him if the Investment Executive Trust at any time owned the Trust building. . "No," replied witness. Mr. Evans-Scott: If there had been a profitable sale of the Trust building —if it had been turned over at a profit a few months after its purchase—who. would have got the profit?— The profit then would have gone to the British National Trust. : In answer to another, question, witness said that the shares in the British National Trust were helu principally by McArthur- and C. G. Alcorn. Witness agreed with Mr. Evans-Scott that if there had been sufficient profit out of the building to pay 23s per share by way of distribution to the shareholders1 of British National Investment Trust, practically all this money would have passed to the British National Trust. This would have made each British National Trust debenture worth par, £1000. Mr. Evans-Scott: And the accused personally held 81 of these?—l think so at that stage.. ' SEARCH FOR MISSING BOOKS. John MeFarlane Elliffe,' an AucklaiidVpublic accountant' and another of the four inspectors appointed to investigate the affairs of certain companies, said that he had specialised In the Sterling, Pacific, and Wynwood Companies and to a certain extent in the Investment Executive Trust "The Sterling books to February 28, 1934, had not been recovered, in spite of the search made for them. They were of very- considerable importance in the operations of the various companies; in fact they could be regarded' as the

key to many of the transactions. A balance-sheet of the company to August 31, 1932, had been found, and with its assistance and that of other documents available he made a partial reconstruction of the Sterling books, discussing it' afr times ;with McArthur. The witness described various transactions involving the Trust and its associated .companies, as he did .in the Lower Court.

Mr. Meredith began to question the witness concerning a-list the latter had prepared,-' showing assets taken over by Me Arthur personally, and by the Wynwood \Company from the Sterling Company.

Mr. O'Leary objected to the schedule as being'irrelevant. He submitted that the fact was being forgotten that McArthur was charged with, offences under a section of the Crimes Act, the allegations being that he had issued reports which were false. That was the' gist of the charges.

His Honour:; My own view is, as I said before, that intent is one of the ingredients of the offence, and to prove intent you can call evidence to show the benefits a person was likely to obtain from'making a false report. If it can be shown- that a false report was made accidentally, that there was nothing to be gained by it, it would lapse from the position of a criminal charge to that of a civil charge.

Mr. O'Leary submitted that there was nothing in the schedule to indicate intent, it was apparently a-com-pilation made by Mr. Elliffe out of-his own head to some extent, because the books of the company appeared to be not available. ■

"This is a striking resemblance to what we are charged with," said Mr. O'Leary, "that is, with part of the information being put forward and not the whole of it. .■. . Material which would put a different complexion on it is being suppressed."

His Honour: I don't know where suppression comes in at the present time. :

Mr. O'Leary: The witness does hoi go, back far enough. ...

His Honour said he saw no objection to the matter being dealt with, and Mr. Meredith' proceeded with his examination of the witness.

"Do you know who made the declaration of ownership of the Morewa?" asked Mr. Meredith, a little later, and the witness replied that he did know.

Mr. O'Leary again objected, referring to a claim for £10,000 made by the Public Trustee against McArthur, the hearing' of which was to come on immediately after the present case.

His Honour said he thought the question necessary, and the witness answered that McArthur made the declaration of ownership of the yacht on December 16, 1933, at Auckland. ' (Proceeding.)