McARTHUR CROSS-EXAMINED

Greymouth Evening Star, 11 August 1936, Page 7

McARTHUR CROSS-EXAMINED

BUYING WITHOUT CASH

METHODS OUTLINED

[PEE PEESB ASSOCIATION.]

WELLINGTON. August 10

The prosecution of J. W. S. McArthur was continued in the Supreme Court this afternoon, with the continuation of the examination-in-chief of McArthur. The acting-Chief Justice (Sir John Reed) presided. The purchase of the “Daily Telegraph” building in Sydney was the subject of more of Mr Meredith s questions. McArthur said he and Alcorn decided to buy it at a time when they had no available cash. The sum of £50,000 needed was obtained from the Investment Executive Trust. He then forme# the British National investment Trust, which became owner of the building. He and Alcorn were the proprietors of the British National Investment Trust and they increased its shareholding capital and themselves subscribed for more than 230,000 2s 1 shares. They pqid nothing for them.' They could control the' whole thing. They passed a resolution allotting 49,598 shares to Alcorn and 190,000 to McArthur, and a resolution that they should pay 10 per cent, of the cost within a month. ' That amount was paid later. 'lhe position then was that the British National Investment Trust owned, the building and that he and Alcorn owned shares in the British National Investment Trust. Then the British National Trust was formed with one of its principal objects the taking over of British National Investment Trust shares. There was a advantage in transferring them at a price representing equity in the building that would establish the value in Australia. He and Alcorn sold British National Investment /Trust the . same day that they got them for 23s i a share, they having not paid six- ■ pence. He and Alcorn then held i paper amounting to more than £250,9QO, for which they had paid nothing. - At that time nothing had been done < to the building by way of improve- ' ment and there was only the prospect

that it had been well bought. It was bought, however, for much less than - its value so that the British National Trust had real equity in it. Mr Meredith: You and Alcorn had made your profit on paper?

McArthur: Yes. Mr Meredith: That profit, I take it, really would be realised later when the building was sold or something was done with it? McArthur: Yes, or when it was

revenue-producing. McArthur agreed that It was intended to house various organisations in which he was interested in the “Daily Telegraph” building. Mr Meredith: So you were really going to occupy and not sell it?

McArthur: Yes. McArthur said that extensive alterations were required to make the building suitable, and about £115,000 was spent in this connection. He did not, at the time he bought the “Daily Telegraph” building, notify the debenture holders of his intentions, and no minutes were kept of any advances.

JUDGE AND COUNSEL

Mr Meredith questioned McArthur closely on the contents of literature Issued by him. He asked McArthur whether he suggested it was quite reasonable and justifiable to divert companies for the purpose of purchasing the building in Sydney. McArthur said that with plans they had in mind he thought it was. In reply to Mr Meredith as to the way the purchase of the “Daily Telegraph” building was financed and implications of the transaction generally, McArthur said that a successful deal meant a substantial profit to the Investors, to Alcorn and to him. If the deal had failed the investors would have had to stand the loss. Mr O’Leary said this was an unfair comparison to put to McArthur, as the deal was a successful one. x McArthur interposed that had it been other than a good investment, it would not have been made. His Honor said this seemed to him as had been quoted in the recent English pepper case, like an office boy taking half a crown from the till because he thought he had a good thing for the Grand National.

Mr O’Leary: I submit with respect that that is an unfair remark to make to the jury. His Honor said that was the way it was put in the English pepper case. Mr O’Leary replied that in the pepper base persons who put their money in lost all, and it was the same in the Lord Kylsant case. In the present case they would lose only six shillings, not through McArthur’s fault, but through the legislation. His Honor: I say without hesitation that where directors take trust moneys

Mr O’Leary: But they were not trust moneys.

His Honor: I rule they are. Where moneys are received by directors from the public for investment, these are trust moneys, and it is a wrongful thing in such circumstances that such money should be invested in something that must be a gamble. Mr Meredith, to McArthur: In your view directors of investment trusts can use public moneys for their own speculations ? McArthur: No, but if investors are going to benefit I say it is quite equitable.

McArthur’s cross-examination was not completed when the court rose.

TO-DAY’S PROCEEDINGS

“OFFICE BOY’S HALF-CROWN”

WELLINGTON, August 11. The McArthur prosecution was continued to-day. Re-examined by Mr. O’Leary, McArthur said he attended continuously the whole five months of the commission of inquiry at Sydney, and gave evidence for six days. He was crossexamined by three different counsel who had the assistance of four chartered accountants, and all the various matters were brought out in detail, At much greater length than in the present proceedings. In October 1935, one of these charges was laid against him. Mr. O’Leary proceeded to question

McArthur in regard to a comfnent in the “Investors’ Journal.” McArthur said the journal had consistently attacked him and circularised Stock Exchanges asking assistance from the Exchanges and brokers, and stating if they did not assist they would live to regret it. He believed that Stock Exchange brokers afterwards subscribed to the journal. The second auditor of the company was in Sydney under subpoena the whole time of the commission, but was not called.

Mr. O'Leary proceeded to bring up the matter of the meeting of debenture holders held at Christchurch, and one a few days before at Wellington. The Judge questioned what bearing the vie-ws of the Wellington meeting could have. Assuming they passed some resolution, though not fully in--1 formed, what value had any resolution they passed? Mr. O’Leary went on to question McArthur in regard to a loan of B.N. LT. for the purchase of the Trust Building. He recalled the Judge’s remark of yesterday that the transaction was on a par with an office boy taking 2/6 from a till to put on the Grand National.

McArthur: It is not parallel because in this case the £50,000 advanced to the 8.N.1.T. was a temporary loan on security. The loan was repaid with interest, and was always secured. The Judge: Are yon going to suggest that if any person buys a cottage for £5()0 on which there is a mortgage of £25V>, and if he gets anyone foolish enough to lend £250, that person is fully secured? , Mr. O’Leary said he would be, if the property was secured at under its value.

The Judge: How many people in New Zealand have

LOST EVERYTHING

in that sort of transaction? Mr. O’Leary: As events turned out McArthur was right. The Judge: That has nothing to do with it. It is just the same as the office boy with 2/6. If the horse wins and he gets 7/6 and puts 2/6 back in the till, he commits an offence just the same. Mr, O’Leary: What offence? The Judge: Of taking 2/6 he has no right to. The Judge said it was not strictly a breach of criminal law for a trustee to commit a breach of trust, but the distinction between a breach of trust and theft was very slight. There was a distinction without a difference. A breach of trust might be a criminal offence, but it was not necessarily a criminal offence. Mr O'Leary to McArthur: As events turned out was there any risk at all? McArthur: There w’as no risk at all.

He said that he purchased the building at one third of its value at the sale. That was a forced sale. The Government valuation of land alone was £93,000 and a leading valuer’s estimate of the land alone was £160,000, which was more by £60,000 than the price he paid for both land and building. He spent £115,000 on it after buying it. The Judge asked were they to have the price realised on the recent sale. Not that it mattered, but the sale had' been mentioned ip the case, and the jury might like to know. Mr. O’Leary said the cabled advice which was subject to confirmation, was £273.000. Mr. O'Leary to McArthur: That is being fought by yon even at that price? McArthur: I say that is x 150,000 below the. value, because the building could not be replaced to-day for £450,000. McArthur said the building was bought Dy 8.N.1.T. Mr. O’Leary: Could you have carried out the transaction in any other way? McArthur: I could have carried out this transaction dishonestly by getting a dummy to do it and taking the whole of the profit. At all times, he said, he disclosed his dealings in connection with the purchases and consideration and security was always given. Mr. O’Leary called two accountants Robert Arthur Glen and Donald Gordon Johnston, to give evidence regarding and to identify statements he put :n to show the wide distribution of the assets of Investment Executive Trust at various dates from March 16. 1933 to April 3, 1934. The case then closed, and counsel is now addressing the jury.