LOAN AND MERCANTILE.

New Zealand Herald, Volume XXXI, Issue 9496, 27 April 1894, Page 6

LOAN AND MERCANTILE.

THE EXAMINATION OF DIRECTORS, v WHAT LED TO IT. THE REASONS FOR OPPOSING IT. ' SCENES IN COURT. MR. JUSTICE WILLIAMS' JUDGMENT. ~ [FROM OCR SPECIAL CORRESPONDENT.] London, March 24. On the 19th February a further report was made to the Court by the Official Receiver. This further report covers seventeen pages of foolscap' paper, and ends thus — "The Official Receiver is of opinion that farther inquiry is desirable . and he makes application for an order directing the public examination of the parties whose names appear in the attached schedule."

The order for the public examination was made about a fortnight ago as a matter of course by Mr. Justice Vaughan Williams, sitting in chambers as the Judge in Bankruptcy and Winding-up of Companies. PUBLIC INTEREST IN THE CASE. In the ordinary course a notice would at once have been put in the Gazette calling upon the directors, by name, to present themselves for public examination, but at this point it seems to have occurred to some of them that thin further report displayed animus against them, and with what seems to any people questionable policy they took proceedings to get the order for public examination rescinded. When it became known that personages in the , highest possible official positions, actual Cabinet Ministers past and present, and others, had not only been ordered to be publicly examined in the winding-up of a company, but were actually going to try and get the order rescinded, the cose instantly came to the front as a remarkable affair, and a crowded Court at the hearing of the direc tors' application was a certainty. JUDGE AND COUNSEL. At noon on Thursday last, 15th March, the struggle began. To show how despeate it was on the part of the directors, it is enough to record that it lasted till late on the following afternoon, Sir Henry James obstinately fighting for the directors almost the whole time. There were no witnesses to take up time in examination and cross-examination—absolutely nothing but keen legal argument from first to last. The Judge was Mr. Justice Vaujjhan Williams, sitting in Court as an additional Judge of the Chancery Division. This Judge is looked upon by the legal profession as a decidedly strong judge, able to hold his own against any counsel that ohoses to defy or attack him ; at the same time be is the very personification of dignity and courtesy both in appearance and in speech ; a case of hereditary talent and tendency clearly, for his father before him was a very distinguished old judge -Sir Edward Vaughan Williams, one of the Justices of the Court of Common Pleas, an ancient court of law now merged in-the Supreme Court of Judicature. Sir Heury James is looked upon as an exceedingly sound lawyer ana a subtle and determined advocate, who will stand his ground from hour to hour without any sign of fatigue or of giving in. His standing at the bar can be estimated by calling to mind that he refused the Lord Chancellorship eight years ago. He was Attorney-General under Gladstone's Government in 1873, but declined the offer of the Chancellorship on the ground of disagreement with Gladstone on the Home Rule question, and accordingly joined the ranks of the Unionists, and now sits as: a private member iu the House of Commons tor the coustituency of Bury (Lancashire).

COUNSEL FOR THE DIRECTORS. In the present case, Sir Henry James appeared for all the directors named by the Official Receiver, excepting Messrs. Larkworthy aud Thomas Russell, the latter of whom was in Australia. The other counsel were Mr. Finlay, Q.C., and Mr. Howard Wright for the Official Receiver, and Mr. Reginald Bray for a debenture holder. These latter gentlemen had little to do, as it could easily be seen from the outset that the judge was strongly against the application for rescission of the order which he himself had made in chambers, and that the hearing would be one magnificent battle royal between Sir Henry James and Mr. Justice Vaughan Williams. The Court was full during both days of the argument, and there could be no dulness even in a Chancery Court with a legal duel going on between such skilled lawyers as Sir Henry James and Mr. Justice Vaughan Williams. A considerable number of members of the bar were present, and thoroughly enjoyed the contest, which over and over again seemed on the verge of affording a scene. " Relations were strained" repeatedly between the Judge and Sir Henry James, in fact so much so thot, after one Somewhat unusually daring interpretation of the Judge's previous remarks, the Judge, with chilling and emphatic dignity, addressed Sir Henry James by uame, and declined to " converse " any further with him, »nd requested him to confine himself to the argument of points of law only.

To understand the proceedings in Court, it is necessary to give here as short a, summary as possible of the statements In the Official Receiver's further report with respect to the two principal matters from which inferences of fraud might be made. THE PROSPECTUSES. Soon after the Loan Company was started in 1865 the directors issued annual prospectuses inviting applications tor debentures, which debentures were to give the holders a charge over the company's assets. The debentures issued, however, did not have the legal effect of giving the promised charge, aud were therefore unsecured. In 1879 the directors were advised by counsel to that effect, and advised, moreover, that they ought not to issue any more prospectuses as printed, but should give notice to existing debenture holders that their debentures would not be renewed when due, and that other debentures would be given them in a new form. In spite of this the directors went on issuing prospectuses and giving debentures down to 1891, worded substantially as before, only using the words "secured by "instead of secured upon." In 1888 they issued a prospectus for a quarter of a million debenture stock, again using the words " secured upon," against the use of which words counsel had advised them. The debenture stock certificate actually said that it was secured by trust deed, whereas no such deed ever existed. In 1892 fresh debenture stock was issued, partly in exchange for old debentures, and partly new stock, this issue was duly secured by a mortgage on the uncalled capital, but as th« prospectus had not stated that the outstanding debentures and debenture stock were absolutely unsecured, most of the holders of those earlier and unsecured debentures, did not avail themselves of the chance of exchange, and now found themselves unsecured, and postponed in the liquidation to the newly-created debentures.

THE WAIKATO LANDS. The other principal matter, liable to a construction of fraud, was the aeries of transactions with the Waikato Land Company. In 1879 Mr. Thos. Russell, a director of the Loan Company, helped to form a syndicate called the Waikato Land Association, which sold its land to the New Zealand Land Company, a company formed for the purpose of buying the syndicate's land. All the shares in the Land Company were £20, and issued an having £10 paid to eight persons, three of whom were Sir Jas. Fergusson, the Right Hon. A. J. Mundella, and H. J. Bristow. These three (as the report says), as far as can be ascertained, acquired their shares from those interested in the syndicate for £3 6s 8d a share (and as the judge said afterwards in his judgment), "these gentlemen, directors of the Loan Company, had apparently allowed themselves to receive from Mr. Russell and the members of the syndicate something very like a gratuity." Then the Loan Company got a " bonus " of a fifth of the syndicate property, and lent the syndicate £80,000. In 1887 the Land Company having debentures to meet made a call of £4 7s 6d a share. Mr. Russell, a director of both companies, not being able to meet this call in the Land Company, the Loan Company lent him £40,000 to meet his calls, and also lent the Land Company £30,(100 to meet their due debentures. By December, 1899, the Land Company had lost half its capital, and its income was £5000 a year less than theinterest on its debentures of £200,000. In 1891 the Land Company owed the Loan Company £90,000. Mr. Russell also owed the Land Company £70,000, partly secured by mortgage. Sir James Fergusson and the Right Hon. A. J. Mundella, also directors of both companies, had an outstanding liability of £5625 each in the Land Company. A general arrangement of a most exceedingly complicated kind was thereupon made between the two companies, too intricate to set out fully here, and only to be understood by reference to the actual words of the Official Receiver's report. One detail is however too striking; to be omitted here. It was arranged that the Land Company should take over the Raglan run and other properties mortgaged by Mr. Russell to the Loan Company. 100,000£1 fully paid deferred shares were therefore issued to him by the Land Company, and of these shares Mr. Russell gave a third to the Loan Company as a "bonus" oa the transaction, and settled his indebtedness to the Loan Company by transferring to them not his fully-paid deferred shares with no liability but his original shares in the Land Company carrying a liability of £28,632 and representing a par value of £73,168. The outcome of this arragemeut between the two companies

was (according to the Judge's summary in I his judgment) this, viz. : That. Mr. Russell and his co-directors of the Land Company transferred to the Loan Company 16,507 shares in the Land Company, carrying a liability of £77,659, and got in exchange fullypaid deferred shares in the Land Company, carrying of course no liability whatever ; and Mr. Russell, who was once a holder of 11,400ordinary shares in the Loan Company, with a liability of £10 each or £114,000, now held only 22,387 £1 fully-paid deferred shares in the Land Company with no liability whatever ; in other words, Mr. Russell got out of a liability for £61,000 and an indebtedness of £75,000, the Loan Company becoming saddled with all the ordinary shares of the Land Company except one thirty-fifth, the liability being £188,307 10s. The above being the facts as stated in the Official Receiver's further report, we can now go back to the beginning of the fight on Thursday last. It must be noted first that the order for public examination made by the Judge in Chambers purported to be made under Section 8 of the Companies Winding-up Act, 1890. Subsection 2of that Section 8 enacts that the Official Receiver may make a report stating the manner in which the company has been formed, and whether in his opinion any fraud had been committed by any person in the promotion or formation of the company, or by any director or other officer of the company in relation to the company since the formation thereof, and any other matters which in his opinion it is desirable to bring before the notice of the Court. Subsection 3 of the same section 8 adds that the Court may, after considering such report, direct any person who had taken part in the pro- . motion or formation of the company, or had been a director or officer of the compauy to attend before the Court and be publicly examined not only as to his own oonduct and dealings as director or officer of the company, but also as to the promotion or formation of the company, and the conduct of the business of the company generally. WHY THE ORDER WAS OPPOSED.

Sir Henry James began by protesting that the applicants desired the utmost publicity ; they would give the fullest information as to everything within their knowledge, and they were willing that an order might be made to examine them under section 115 of the Companies' Act, 1862, which would be a private examination, though the result would be filed in Court and the judge might make any further order after reading it. The section of the Act of 1890 was a penal one, and an order for public examination was a very serious matter. A public examination on such a report was like processes in foreign countries, and practically put a man on his trial before he knew what he was charged with— system abhorred by Englishmen. . It conveyed an impression that fraud has been committed ("by someone" the judge remarked). The applicants objected to auy examination based on the notion that the slightest fraud had been committed by them or by anyone with whom they acted and he protested agaiust any stigma of fraud being placed upon them (here the judge interjected that if the report only said that fraud was likely to have been committed, an order for public axamination could be made). Sir Henry James then contended that the judge was wrong in making the order on two grounds. 1. That he had not materials upon which he could exercise the judicial discretion given him by section eight, and he had therefore no jurisdiction to make the order. 2. That if he had jurisdiction he had not exercised his discretion rightly. There must be either a written statement by the Official Receiver that in his opinion fraud had been committed, or he must state facts which unequivocally showed that a lraud had been committed. The Official Receiver in thiscas« had not said in express terms that a fraud had been committed, and be was wanting in moral courage not to say so if he thought it was so. (Here the Judge emphatically disagreed with counsel). Sir Henry James then went on at great length to read and criticise the report, with the oliject of explaining iway any possible deduction that might be made from it that fraud had been committed by anyone; he contended that there had been no intention to deceive by statements in the various Erospectuses, nor could the dealings with the aua Company be said to be fraudulent. There was no motive for fraud, none of the directors obtained any benefit; the Loan Company was perfectly solvent at the time of the new issue of debentures ; no one had been induced to become a debenture-holder who would not otherwise have become one ; there was no peculation, and the directors of the L>an Company had acted bona fide with the Laud Company. Mr. Fintay, Q.C., opposed the directors' application to rescind the order for public examination. He contended that the making of such an order did not convey the slightest imputation of fraud upon those particular individuals who were to be examined. It was evident from the report that a fraud had been committed in the issue of the prospectuses, and as to the Loan Company's transactions with the band Company, shares on which there was large liability had been taken in the Land Company by the Loan Company, instead of shares on which there was no liability. At this point the Court v rose, ordering in the meanwhile that until judgment was delivered t.ie Gazette notice for the public examination should be withheld. Friday's hearing was opened by Mr. Howard Wright, juuior counsel for the Official Receiver ; he urged that fraud might reasonably be inferred from the facts as stated in the Official Receiver's report, and that unless the Official Receiver omitted to state such facts there could be no ground for rescinding the order for examination already made. Counsel then went on to comment on the debenture and Land Company transactions. In the course of Mr. Wright's address the Judge remarked that the unsecured debentures were merely acknowledgments of indebtedness, whilst the secured debentures were a moitgage charge. The object of the inquiry was to find if any fraud had been committed. The report should raise a prima facie case of ; fraud, and the examination would serve two : purposes— to ascertain what the true facts were, and (2) to give an opportunity for affording an explanation. His Lordship could conceive that there might be a legitimate financial transaction in transferring the property of one company to the other. It was by no means essential to the propriety of the order that all the parties should be accused of fraud ; it was enough if fraud was inferred against anyone. SCENES IN COURT. Sir Henry James then rose to reply, and began by rejoicing that both counsel on the other side had acquitted the applicants of fraud, and had admitted that they could not say that anyone of these honourable and distinguished gentlemen were charged by the Official Receiver with fraud. That was a highly satisfactory condition of things.

This remark began the prolonged battle between Sir Henry James and the Judge. The Judge emphatically stating that counsel on the other side had made no such admission. It is not a satisfactory condition of things when an Official Receiver said that at the time a prospectus was issued certain people were directors, but he did not know who issued the prospectus. Here Sir Henry James went still further, aud said that the Official Receiver could not put his hand upon any one allegation of fraud. The Judge: It is not necessary that he should. That is your interpretation. All that counsel on the other side have said is that it didn't necessarily follow from the report that any individual was guilty of fraud. Sir Henry James: Your Lordship is confusing what was said. The Judge: Your interpretation is very different in fact from what they did say. After another statement by Sir Heury James that not only counsel but His Lordship himself on the previous day had admitted that the applicants were not guilty of fraud. The Judge: It is painful to me to interupt you, Sir Henry James. I understood counsel on the other side to mean that they did not allocate fraud but it is not competent for you to say that either I or they absolve the applicants from fraud. Sir Henry James : I never said absolution. The application is made under a section of the Act and the report does not comply with it. The Judge: Your observation does not commend itself to my understanding.

Sir Henry James: If they use certain words I have a right to repeal them and make the words unsaid. * The Judge: You are attributing to words a meaning of words not meaafc. Sir Henry James : The report does not charge anyone with fraud, therefore if no charge is made against any particular member of the board it is very satisfactory to the parties. The Judge (sarcastically): If there is a charge of issuing a fraudulent prospectus and the Official Receiver says he is unable to say by which particular member it was issued. Sir Henry Junes : My clients appreciate the admission on the other aide. The Judge: It is idle to address me with a premiss which I do not admit. Sir Henry James: I take your lordship's own formula. The Judge: I shall not discuss the matter further with you Sir Henry James. Sir Henry James still persisting in his remarks the passage continued thus. The Judge : If you will simply state your case and add nothing to pray go on—but when you add that an admission has been made and is extremely satisfactory, when it does not so appear to my mind, I should prefer you should close the conversation.

' Sir Henry James: I cannot abstain from' drawing the natural inference that my clients are not being charged with fraud, and I have a duty to as.y that that is satisfactory. The Judge: If it is satisfactory that the Officer Receiver does not allocate fraud— say so. ' ' "'' ' ' " . Sir Henry James: I nay that the Official Receiver absolves the applicants from, any charge. ■ ■ .'- ; '-'..'•.*/-■ , - i The Judge!: . Absolution! ■ nothing of the sort. '."•.-•'.... - ]'-■''-<■■■ The argument then proceeded more calmly, Sir Henry James arguing against any possible inference of fraud in connection with the unsecured debenture issue, the Judge remarking that' though the first'issue of ■ prospectuses for debentures might have been carelessness, yet, after _ taking counsel's opinion, the subsequent issues of prospectuses could not have bad that excuse. His .Lordship's experience was that, in companybusiness, the great proportion of frauds were committed without any personal object. Finding things in an unsatisfactory state, directors often felt that if the truth were told, great injury might be done to those already injured, and a high-minded and honest man might be tempted into concealments, in the interests of shareholders whose securities would be depreciated. It did not follow, however, that a fraud had not been committed. In this case, the directors had failed to follow the plain, honest, and excel lent advice of counsel, as to the prospectuses. Sir Henry Junes, continuing, said it must be shown that someone was defrauded. The Judge: No. We are inquiring if there is- a prima facie case of fraud. YVhat was the reason why the directors having received counsel's opinion, reduced the alteration in the prospectus to a minimum, and continued the certificates without alteration?

Shortly afterwards Sir Henry James having made other remarks, another passage, the most serious of all, took place. The Judge: I shall not expose myself to that observation. Your duty and mine is to arrive at the truth. If criticism is to be offered to the style of my observations, whether employed or not, I decline to continue the conversation, but I will listen with Eatience and attention to any argument you ave to pub forward. Here Sir Henry James expressed deep regret, and then proceeded, after what sounded lika an elaborately, stately apology, to recapitulate again all that be had said before, and then went on at great length to urge that the transactions between the Loan Company and the Land Company could .not possibly give ground for any inference of fraud, and that there could be no motive for any fraud. Sir Henry James concluded by offering his clients for examination under section 115 of the Companies Act, 1862, under the control of the Court. Every voucher should be produced by his clients, and the results would be filed and read by everyone interested. The alternative was a public examination, ami any creditor for a few pounds could come in and cross-examine. THE BOARD OF TRADE. Before the Court rose the Judge remarked that the accusation of a want of moral courage on the part of the Official Receiver ought not to have been made by counsel for "one of the applicants" (implying, of course, the Right Hon. A. J. Mandella, the President of the Board of Trade), and His Lordship then surprised everyone by reading a Board of Trade report of 15th February, 1891 (bearing Mr. Mundellas name), containing this phrase :—" The practical restrictions which have hitherto been imposed upon public examinations by confining them to cases where fraud is alleged or suggested, have in some cases prevented public investigations, which appeared desirable, and it may still be necessary to have this interpretation of the provisions of the statute further tested." His Lordship added that the form of the Official Receiver's report in this case, viz., where no fraud was specifically alleged, was the form always presented to him by the Official Receiver, who was an officer of the Board of Trade, and if the Board thought they were not in proper form it was remarkable that they had made no objection about them. The Court was then adjourned, the Judge saying he would deliver jodgment the following Monday.

JUDGMENT. On Monday the Judge delivered an elaborate written judgment, which was given verbatim in the Times of the following morn-, ing (Tuesday, March 20) the .judgment occupying two and a-half columns of small print. His Lordship at the outset, referring to the form of the report, said he could not at all agree with the strictures which Sir Henry James had thought fit to pass oh the Official Receiver in this connection. The form adopted had been that which always had been employed, and in regard to which the Board of Trade had never expressed any disapproval, and this was so, notwithstanding the fact that the Board of Trade expressly claimed the right to control the Official Receiver in this respect. In this very case he (the Judge) had found it necessary to rule that the Board of Trade had bo jurisdiction to torbid the presentation toy the Official Receiver of the particular report in question. This being so, he could not help feeling that the Official Receiver had no* deserved the censure of Sir Henry James. Moreover, there was, he thought, much to be said in. favour of the form in question, which presented rather the facts upon which the presumption ! of fraud rested than the simple conclusion that in the opinion of the Official Receiver such fraud had existed. If she Official Receiver had simply stated his conclusion that fraud had been committed, without stating the grounds on which he had come to that conclusion, he did not think that an order of the sort asked for could properly have been granted. The only criticism he had to make in reference to the report was the delay which had taken place in the presentation of it by the Official Receiver—a delay for which there had been no adequate reason. As to the suggestion made by Sir Henry James more than once, that the i directors should submit themselves far exami- ; nation under section 115 of the Act of 1802, this offer was altogether beside the mark, seeing that such an examination would be in private, and the depositions would be accessible to the Official Receiver only. As to the substance of the report, the sole question which he had to consider was whether the facts submitted supported a prima facie case of fraud. In other words, was it a natural inference from the facts, if left unexplained and unanswered, that fraud had been committed ?

The report suggested two distinct fraudsfirst, that the directors, or some of them, issued prospectuses inviting applications for debentures which were misleading, and known to be misleading ; secondly, that the directors, or some of them, on behalf of the New Zealand Loan Company, entered into a series of transactions with a c >mpaiay called the New Zealand Land Association, not bona fide in the interests of the Loan Company, but in some other interest, and to the detriment of the Loan Company. As to the former charge, it appeared from the report that shortly after the formation of the company in 1865, the directors began issuing prospectuses inviting applications for debentures, which prospectuses were so worded as to indicate that the debentures were secured on the assets of the company. In the form actually issued, the debentures gave no security of this kind whatever. In 1879 the Board took counsel's opinion on the subject; were advised of she misleading character of the prospectuses, and were recommended to take certain steps putting the matter on a proper basis, so that there could be no possibility of misunderstanding. The directors, however, continued to issue the prospectuses and forms of application as before, substituting only for the word "upon" the word *' by "—a small change of terminology which did not in the slightest degree meet the requirements set forth by counsel. In truth, no debenture stock issued gave to the subscribers, notwithstanding indications to the contrary in the prospectuses, any charge on the assets of the company, with the result that as a consequence of the course Eursued a large portion of the existing deenture holders found themselves eventually the possessors of debentures wholly unsecured and postponed accordingly in the liquidation.

The only conclusion he could come to on the subject was that, whoever issued the prospectuses in question, intended to mislead the subscribers and framed the prospectus accordingly, and that the subscribers were, in fact, thereby deceived. As to the second imputation contained in the report, this related to long series of transactions which took place between the New Zealand Loan Company and the New Zealand Land Association whereby one person at least, Mr. Thomas Russell, who was a director of both companies, benefited in such a way as to establish clearly in his opinion a prima facie case of frr.ud against him. The outcome of the arrangements in question was, briefly, to the effect that Mr. Russell and his co-directors of the Land Company transferred to the Loan Company 16,507 shares, carrying a liability of £77,659, and obtained in exchange deferred shares carrying no liability, and Mr. Russell, who at one time was a holder of 11,400 ordinary shares in the Land Company with a liability of £10 each, now held 22,387 £1 deferred shares, fully paid, carrying no liability whatever. Further, as the result of these transactions the Loan Company now became possessed of all the ordinary shares in the Land Company except about l-35th. Upon this he thought that as against Mr. Russell the facts raised decidedly a prima facie case of fraud, and went to show that the transactions as a whole entered into by the Loan Company were not in the interests of that company. . With regard to the other directors to be examined, he could not but hope that the result of the public examination might be to clear them entirely, and also Mr. Russell, of the suspicions attaching to their proceedings— hope which was war-

ranted by tiie high character^ioiT^r 3 *' joyed by all those concerned i„°i WM .«»• the [earned judge said that\wK U * lon ' the prima facie case of fraud »Uu °- no opinion, clearly had been madft *hU borne out by the inquiry; thT»L'» *««"« events revealed a state &! 11 . « all manded rigid «wtaK?M»* dethought the directors, conscious - he innocence, would earnestly d«rf« • ,r °? n that there might be an immediate Dn \r4« quiry. "Noblesse oblige." H.^S! 01 ?- dismissed the application with costs* gly APPEAL. Sir Henry James immediately anrw.i j and by special leave the am,eal * PPealedthe list for the following %Za I ? ut , » being the last day of sufi of"Sfij *»» Appeal before the Easter holidays " of The appeal was heard on Tuesday last ~ last day of the sitting of th fell . .£' , tn * the holidays, and a B g&£j anStv*^ fei v r atch^^ The Judges sitting were Lord* t • Lindley. Kay, and A.VSmith The"S*" sel, the arguments, and the audience « » "i course the same as in the lower Court %i Henry James of course began and!'. J r appeal ended in an arrangement be iL , the to, it was not argued out?and no X&Sg Henry James had anything to do I? bn equally evident in this Court that the LoTdl Justioes were against reversing the i,,%' 3 of the lower &urt, and SiWenrv U, ent was interrupted frequently by LocS Juffi! Kay, who seemed to take the strongest vi!» against him. Leso v,e » Sir Henry James complained that though an mnocent person might be examined ~„j an Order for Public ExaminatTon yetfe public did not discriminate, and * would assume that his clients were charged w? J fraud. was intended to be penal A public examination was equivalent committal for trial (here Tort T„,H Lindley remarked that that was 'ITS fortunate expression). After such an examination no judgment was pronounced by the Court, and an innocent man could not therefore be actually and comnU.i , acquitted. Here Lo r *, Jastice°Tindl y remarked that there must have been « carelessness in connection with the issue the unsecured debentures, and shortly afterwards Lord Justice Kay interjected a question whether it was right for tht directors not to tell the debenture holders that they had not any actual charge, and Mis Lordship also commented unon th* directors having gone back to the use of the word "upon" in their debeature prospectuses, and further that if tie debenture holders had no charge the 7 were none the less defrauded, though there may have been no intention by the director to defraud them, would not that be a ground for an action of deceit? Lord Justice Lindley thereupon said that this Court was not trying the case. He protested against that view. he Court was deciding whether the directors should be examined. He agreed that the Court had no jurisdiction °x ent under section 8. The Court had been 'lax enough under section li. THE DIRECTORS WANT A PUBLIC EXAMINATION. Sir Henry James having said that the more public an examination was the better it would be, and all that he resisted was an order for any examination which conveyed a stigma of fraud— as section 8, one effect of which would be to let loose all sorts of people upon his clieuts. Mr. Finlay replied that an examination under section 115 of the Companies Act would be ineffective. If Sir Henry James wanted an examination to be as public as possible why argue any longer ? After a long informal discussion, in which it was evident that the Judge's considered that as Sir Henry James said he wanted some form of public examination some compromise should be come to ("and let everyone get away" a remark which the judges did not make verbally), it was finally arranged that, by consent of all parti s, an order should be made rescinding Mr. justice Vaughan Williams' order and directing a Eublic examination before the Court or efore such persons as the Court should appoint, with liberty for the Official Receiver and any creditor or contributory to take part in the examination, putting only such questions as should be allowed by the Court. The depositions to be available for any purposes as if made under section eight of the Companies Winding-up Act, 1890. [Since the above was written we have learnt by cable of the examination of the directors, and of the sanction of the Court having been given to the reconstruction scheme.—