INQUIRY REPORT

Hokitika Guardian, 29 March 1935, Page 2

INQUIRY REPORT

SPECIAL LEGISLATION URGED TO WIND UP McARTHUR’S COYS ; (Pe r Press Association.— Copyright.) WELLINGTON,'March 28. ; v A Doughy Ministerial statement was -4,made unexpectedly to the House 'of f* Representatives to-night by Mr J. Gi Coates, relating to further proposed ' legislation arising from reports of the vl; investigatitons of the Investments Ext eeutive Trust of New Zealand and al' ? ]icj companies, known as the McA I '- ■' thur 'Group. It was desirable, he said, >. v in the interests of the debenture holders, that a statement should be made. Th e Minister summarised the effect ,m 0 f the previous legislation, pointing UVmt that, np to the present, the Governmoots of New South Wales and New r"- Zealand have protected the assets of all of the compa(nies by placing them in the hands of receivers, and eonduct in" investigations, by inspectors, "'•'as to their future. TVo possible f-i courses would seem to be op'tn. On-

;was to use the process of the existr jng ,law to put the companies into liquidation. The other was to devise special legislation to deal -with the 3 k atter on the grac'd that the position • g unprecedented 'one, and that the exist big law would he ineffective. The same 1 oroblein faced the Govediment in • New Eo«.'Th Wales, and the Commonwealth U t ’ over nmmt. The question thus raised Lad been very seriously considered bv* the G'overments. wKii the aid of the best legal chd accountancy advice available.“The result is,” he said, “that the Oovcrnmelnts in question have aH decided with the unanimous approval or their advisers, to adopt the course r-T meeting this tibique position by special legislation.”

Referring to the large volume, containing the inspectors’ reports, which he tabled, Mr Coates stated that there were ma(-iy investors and there vere questionable transactions, adding that it 'was most importak-t for the debenture holders in the Ifnyestm&nt Executive Trust to note that the result 'of the .series of lsactions was to fix their. ■ relative rights according : to mere accidental affects and results of these transactions. All of the Governments’ advisfers liln. New Zealand and ;. Non Soutli Wales, both' legal and accountancy, .were unanimous ia believing that these considerations would inevitably tend to defeat, and break 'down, any Attempts tip 1 feconsWuct' | land parry on the affairs of .‘the Companies,. [lt was their unhriimotis belief that a'a attempt to straighten out these transactions by

the application of the existing laws of the two States would result Hll expensive a,o d wasteful litigation, which might easily; dissipate the funds of the debenture, holders. Eurtherinoi'e, the debenture holders of the Investment Executive Trust should taote carefully that, ulthough they wore persuaded to subscribe to a purely New Zealand concern, with a New Zealand Board of Directors, their books and records and their securities were, with ,out their consent, transferred to the State of New South Wales, from which State the directors of the Investment Executive Trust attempted to administer the affairs of he Company. Neither inquiries in New South Wales nor in New Zealand could got th e complete history of the transactions involved, without taking into a crow it materials obtainable in the other State. This state of' things was such that the transactions had becO roundly coll ' denned, but’ whilst it hampered, it did not preclude, a full inquiry. If however, a new phase of the inquiry should involve reference to the courts under the existing laws, there was presented a good opportunity to use difficulties inherent in these facts to support technical legal objections and submissions. It -might be premised, for a start, for instance, that, any appeal to the existing .law, 011 either side of the Tasman Sea, would be strenuously fpught by tlibrfc Directors. “Nothing is more certain,” said Mr Coates, “than that, if any appeal is made under the existing law to the Supreme Court of New Zealand or to tne Supreme Court of New South Wales, the. fullest possible advantage will be taken % of- difficulties created by the inter-State nature of the problem produce by''* these directors. 11 the court in. New Zealand, for instance is aske ( ] to< deal with a transaction which originated i t i 'Auckland, but which was carried t 0 fruition in New South Wa.c a, it may be expected that objection would be raised immediately to the admissibility even of the sworn testimony off Mr McArthur himself in relation to the whole of this transaction. as tendered before the Royal Cotnmision i’si Sydney; and it is probable that, oil!- Court would have to uphold the objection. If so, the matter could mit lie proceeded with further without the extensive procedure of endeavouring to take this evidence over again Eli New South M ales in a commission appointed by the Supreme Court of Near Zealand. Conversely, if it should bo sought to act in New South' Wales ’ before the Supreme Court of that State, an objection would he raised to the admissibility of >any evidence taken in Now Zealand, however : logically relevant it .might he, or ; however well it might be authenticated. The 11 exit act on juggling and probably a successful net, would !>e

to compel the Courts to keep within the letter of the rules of evidence, and the existing law to protect the original jugglery.

“Since the closing of the Royal Commission in Sydney ,there is evidence that Mr McArthur has been busily engaged trying to consolidate the position created by these transactions with his own assets,” added the Minister. “Certain operations are he- ' ing conducted in Brisbane, and a Trust Company is being formed there. Two of the assets so taken over from Sterling, namely the yacht and Mr McArthur’s property at Hillsboro, have oceii first mortgaged, and later trans--1 erred to a Brisbane mortgagee and purchaser. Caveats against certain other properties have, within the lasttwo months, been filed in public offices in Auckland in favour of the Brisbane Trust Company. It is quite clear that, unless the New Zealand and New South Wales Governments act in concert to put all of the companies into Bquidat.on, there is every prospect of one of two things happening. The first is that the position rising out of tne transactions described above will be consolidated, and made impregnable, and the debenture holdois of the Investment Executive Trust will receive nothing in respect of_ a sum of from £60,000 to £90.000 of their money so diverted. 1 lie other alternative is that they will he involved i„ expensive litigation in endeavouring to follow their property through these devious transactions. “Unless the Governments of New Zealand and New South Wales and Canberra can agree on a legislative scheme that will give the honest de-

benture Holders of tire Investment Executive Trust and Southern I>t itisli National Trust first call on the proceeds ol the building, those debenture holders will find themselves thrown into competition to a greater or lesser extent with other holders of British National Trust debentures, issued as part of the profits of McArthur and Alcorn on the sale, of

their 8.N.1.T. shares. The Governments of New Zealand and New South Wales and Canberra have agreed on a scheme which has been approved unanimously by their legal and accountancy advisers, and by the inspectors appointed to inquire into the Now Zealand companies. The guiding principle, accepted unanimously by those Governments, is that the interests of those members of the public of both countries who are debenture holders of the Trust Companies must he paramount, and that they should receive the net proceeds of the bulbling before any other claimant is recognised.” • •'The Minister, referring to Mr Mc-

Arthur’s scheme of reconstruction said the advisers of both Govern-

ments had represented strongly that , they had had no faith in the possi- I hility of any adequate safeguard being devised that could guard against Mr McArthur regaining control of the companies. “I am satisfied,” said i.ir Coates, “;ns to the bona, lidos of certain men in New Zealand who have interested themselves in seeking to organise the New Zealand debenture holders to move for their own protection. I am .satisfied that, they are genuinely working ip what they believe to be the interests of the New Zealand debenture holders. In settling the details of the proposed legislation tile Government will give lull consideration to any representation that may be made bv these gentlemen, or by any other debenture holders, or their representatives. The New South Wales Government took the view that seeiiirr that it is practically certain that "nearly all, if not all, contracts to take debentures were induced by misrepresentation, tilt' only lair basis is to put all of the debenture holders on an equal footing. This, also, will act as a measure of protection to the debenture holders of the investment Executive Trust, most of whom, it is believed, iconic!, with equal reason, claim that their debentures were taken up under misrepresentation.”