ALLEGED FRAUD AND CONSPIRACY

New Zealand Mail, 17 September 1902, Page 49

ALLEGED FRAUD AND CONSPIRACY

eighth day s proceedings

uvutt. tjEFENC'E. OPENING Oi? xx— -

U the Supreme Court on Monday Mr A “.' ‘ Edwards resumed the Hearing of JUS actimi d by Thomas Mitchell, Manau recover £IO,OOO damages from Zealand Loan and Mercantile * f'oinnany Ltd., Ernest D. JohnStevenson, W.-mgan.,,, w alleged fraud and conspiracy. PlainIff SS’seeks to have the company dehkfed° trustees of certain properties which he claims to be entitma to redeem nn aavnient of the sum of £10,400 Ids 5d less what may be found due to him on the taking of accounts of receipts and expenditure in the management of certain meat freeing works at antra mb' Further, that the defendant company be restrained from disposing of the secured properties; that plamtifi’s assignment of September 30th, 1001 be declared'to stand only as semritv for any sum actually paid by defendants; that accounts having been taken and adjusted, tlie deed of assignment bo delivered up to plaintifl; and that the defendant -Johnston be restrained from exercising his powers under the assignment. - Mr Jellicoc appeared for plamtiH.; Messrs Bell and Bar incoat for the Mercantile Company; Messrs Gully and Uerdman for Mr Stevenson; and Mr G. Harper for Mr Johnston. Mr Jellicoe formally moved to have the statement of claim amended by adding to the claim for £IO,OOO damages “or such other sum as the Court may determine,'’ and gave notice that he would object to all correspondence not expressly referred to in the letters lie bad put in

Mr 8011, in opening the defence, said the defendant company had an opportunity, after a great many days, of putting before the Court the true position of affairs. It would be his duty to refer to the correspondence on various points, and he submitted that the principle suggested by Mr Jeilicoe had no application in a case like the present, where it was alleged parties had combined, and certain letters were relied upon as proof of illegal and wrongful conspiracy. Anxious as his clients would be to go into tlie box and submit to cross-examination, be submitted that his Honor had the whole case before him, and they had not any matter to bring forward not already in Court. The whole of the evidence given by plaintiff had been either entirely .irrelevant to the issues, or else in favour of the defendant company and those connected with them. That being so, the Court was now in possession of all the relevant matter, and was as competent to deal with it then as at a later stage. He, therefore, would state—in moving to have the plaintiff non-suited —one or two propositions which he would snipport with authority after he had called attention to the evidence before the Court. His first proposition was that “fraud must he alleged in a specific, pointed and relevant manner,” and he desired -o point out that such was the effect of a recent decision of the Court of Appeal— to which-his Honor was a party—in the native cases. His second proposition was that “fraud must he conclusively proved by tlie plaintiff, and plaintiff’s case must fail if the facts which he adduces are consistent with an honest interpretation/’ There was also a subsidiary point which it was hardly necessary to bring forward—that “even in a ease where fraud alleged had been proved, damage must also bo provedotherwise there was no cause of action."’ As to the charge of combination, the authorities were now finally determined that “combination for any lawful purpose, although it may do damage, and although part of its intent is necessarily to do damage to another, is not actionable.” The House of Lords had decided that motive was absolutely irrelevant in such cases. He submitted that no equity in any way known to the Courts had been proved, or had been in any way sought- to be established by the evidence. It was first suggested that the officers of this company, which had lent money, were not entitled to take ordinary business steps to secure payment ; and. that- the company were acting as plaintiff’s agents. That ivas an absolutely novel theory, and no authority for it could be found. The relation or principal and agent applied only to subject matter in respect of which agency was created. Supposing the arrangement witli Nelsons had gone on, the relation which" existed would not have prevented the Loan and Mercantile Company from buying frozen meat winch went through Nelsons, i v j '^ onor observed that at present he did not see how the defendant company were the agents of plaintiff in the acquisition of the mortgages. Mr Bell (continuing) said there was another matter which arose from the peculiar position occupied by Mr Johni l , l ' ,¥f,£ ohnston,s position was defin--M1 Mitchell’s letter; he was there m Mr Mitchell’s employment, with specific duties towards'both the company and Mr Reid. Plaintiff complained that Jolinston performed those duties. . The answer surely was—that fie appointed him to perform them; and was it not impossible to contend that xtwi bpnipany became t-lio agents ofMitchell by reason of Mitchell’s ap-

pointmeiit—at their instance—of Johnston? His Honor remarked that there was something very curious about his position ; ho was appointed with the righbto dictate. It was an extraordinary position. Mr Johnston was bound to the company’s directions. Mr Bell went £1 t? w} I®*- 1 ®*- ever might result from the peculiar position of Mr Johnston, the Court would have' to create a new equity- to hold with plaintiff’s case. The object of Mr Johnston’s appointment was that tne company might the more effectually exercise their ordinary rights as creditors —that those powers should be increased. If his appointment had been ineffectual in making the plaintiff’s business a success, it was not Johnston’s fault, or the company’s fault; nor was tliere any alegation that it was. The third equity was claimed to arise from the fact that Mr Mitchell was net informed of the arrangement which was entered into between Reid and the company on the 7th September, 1901. The Court was asked to determine that two creditors, finding themselves in a difficulty such as these two were in, were bound to tell their debtor what they were arranging for their mutual protection. If any such equity could be held to exist, then, .first, what damage did Mr Mitchell suffer by reason of the nonperformance of the alleged duty, or through the breach of trust ? Plaintiff himself was asked to explain that, and his Honor had the explanation before him. Secondly, plaintiff had. from the time of his return until the 6th January to complete any arrangements lie could make to extricate himself, and ho was in no sense hampered by the agreement. Further, from that t'nie to the present he had been in the position to redeem on payment of his debts. Johnston "was the trustee, and the company still the mortgagees; so that if the Court were to find tlnv consistently with the principles of equity tins new form of duty did arise, then the answer must be—that non-performance of that, duty caused no injury whatsoever. As to the allegation that two persons could not combine to make a man bankrupt—if such were to be accepted what became of the bankruptcy law which provided that creditors whose debts were under £SO must combine? Until Reid paid the company, Mitchell owed him nothing. He arranged with the company that united action should he taken, and what wrong or impropriety there was' in such a transaction they had not yet heard, these were the equities relied upon. Counsel next proceeded to deal with the allegations contained in the statement of claim. In paragraph 2 it was alleged that defendant company was, during all the time, plaintiff’s agent in the management of the business operations, financing same, exporting the produce, and placing it on the London market. Then in paragraph 9 it was alleged that in October, 1899, the defendant company, to secure the practical control of the plaintiff’s works and business, compelled him to appoint Johnston, who was described as their alter ego. Was it not ludicrous, in face of the evidence, to suggest that such a contention could be established? It was then that the defendant company, at the request of plaintiff, took him over from the Bank of New Zealand. It was in that month,after communication with Mr Reid, and after the messMitchell had got into with the Bank of New Zealand, the appointment of Johnston was decided upon—of somebody to look after the financial part of the business. If somebody had been required to look after the butchering and freezing, he would have been a different class of man. The allegation that it was a scheme on the part of the defendant company to secure control of plaintiff’s business, was disproved by the evidence of plaintiff himself. It was plain that, whatever the effect might have been, such was not the case. Johnston’s position became eventually of primary importance witii regard to Reid, not to the company. The position of Johnston had to have, and was intended to have, the effect of keeping Mitchell’s finances in check, and if the London market had not failed, and if disastrous results had not followed from buying stock at high prices here and selling for less in London, his appointment would have been of great help in remedying the state of the business. His Honor: They were willing to take it over on condition that Johnston 1 should control the matter, and that if any difficulty arose, Stevenson should decide it.

Counsel concurred, and went on to deal with the allegation as to the bal-ance-sheet. He said it was true that Johnston had prepared the balancesheet showing a large profit, but that was in anticipation of a surplus in London, which was not realised. With regard to the allegation as to the power-of-attomey, it was a joint power; young Mitchell practically did the business, drew the cheques and so forth, still it seemed to bo suggested that because the company insisted that Johnston should be included, they constituted themselves Mitchell’s agents. For all purposes the reason was that he principally was to be under their directions. If anybody was to be agent it was Mitchell, not the company. It was stated that plaintiff was absent between August, 1900, and September, 1901, and that the defendant Johnston fraudulently combined and conspired

with the defendant Stevenson to acquire the implicit confidence of Reid, and t o destroy Reid’s confidence in the plaintiff; that it was fraduleiitly impressed on Reid that the losses on the retail business amounted to £2OOO. There had been no attempt whatever to prove that such was not the case

Mr Jellicoe: What do you say to letf-TS before this—that they would recILCC t-0 «• pittance? Mr Bell: It is for the planum T" prove and not for us to disprove statements of ibis kind. (Resuming) It was complained that they had represented there was nothing but bankruptcy ahead of the business. How could it be suggested that they were not correct? - And it they were, what was to suggest that they were dishonest? It was clearly Johnston’s duty to point out the real state of affairs to Reid. It was charged that they bad represented the securities of Reid as being in jeopardy. Such was the fact, and the only security or only chance of getting them back was that these works should be kept as a going concern. His Honor: Supposing lie gave him inaccurate advice, the only factor is this statement about the loss; the others are mere representations apart from that.

Mr Bell (continuing) said there was proof that Johnston as the adviser of Reid had told him of those things; there was proof that Stevenson knew of it, and there was proof that it was his duty to have it impressed; and whore was tiie combination and conspiracy to be found in that? It was. stated that the defendant company and Messrs Jolmston and Stevenson apprehended from plaintiff’s cablegram that the arrangement lie referred to with Nelson Bros, would enable him to pay off the mortgages, and thus cause them to lose control, profit, etc., and the New Zealand Shipping Company the carrying trade. The plaintiff had been endeavouring to prove that- bis object was not to benefit the Shipping Company, but the Tysqr line. The evidence as to the defendant’s state of mind was afforded by their letters, and the letters showed—not that they apprehended they would be paid off —but that they apprehended they would not. There was no evidence other than that of anxious fear that they would not. With regard to the allegation cf concealment from Reid, he knew the plaintiff was going on with Nelson, and if they conceded that, they conceded' what they did not know. That was disproved, because he was allowed to go on and try and carry out tiiat arrangement, but Mitchell himself said to his sou that it was impossible, not because of any action of the company—because he did not know of it—but because £SOOO was ludicrous in its insufficiency to extricate him from the position in which he was, especially if all the profit was to go to Nelsons. Defendants were accused of coercing Reid to enter into an agreement. Reid said he was not coerced; but supposing he was, what business was it . of the plaintiff? How was plaintiff injured? Since he had the right to redeem, it could not matter anything to him. Next, coming to the agreement of the 7th September, supposing they had control, what was to prevent them carrying out their arrangement with Reid unless the Court were to create a new law? Both had arrived at the conclusion that tliere was no interest in the concern at all except themselves and Reid. Mr McPherson wrote off £SOOO as loss, and when asked by cable from London, for the purpose of audit, if he adhered to that decision, confirmed it. With reference to the alleged conspiracy with Reid to keep secret the transactions referred to in the last two paragraphs of the statement of claim, lie maintained that it was their first duty to conserve their own interests, and not only was Johnston not guilty of any impropriety in the matter, but was simply performing his duty to Reid. Mr Watt had told them he advised young Mitchell not to show the arrangement made with Nelsons, so that in Mr Watt’s opinion they were not in any sense bound to let the defendants know what was being domte by the plaintiff in London to absolutely defeat any possibility of trie recovery of their position. He submitted that there had been absolutely no proof of fraud. Plaintiff aleged that in furtherance of the fraudulent, conspiracy, he was induced to execute a deed of assignment to Johnston. What was the use of saying that without proving it? What was the use of making a suggestion when the law required there should be proof? The Court was asked not to proceed upon solid, well-established rules of equity, but to create new equities for. the purposes of plaintiff in this action. It was analogous to the “chops and tomato sauce” mentioned by the learned counsel in Pickwick, when he asked “were the feelings of a confiding female to be trifled with in this fashion?” (Laughter.) Such arguments would be all very well in a breach of promise case, biut would not do- in a Court of Equity. Catch expressions, and the imparting to them of a sinister meaning, would not do in such a Court. Counsel proceeded to review the history of plaintiff’s dealings with the defendant company, and pointed out that the arrangement with Nelsons drove the defendants into making one for. their own protection before bo return-

ed. In doing so they abstained from any comment on the absurdity of the arrangement he was trying to make, because it was transparent that it needed no comment, as air arrangement that could not have been given effect to. His Honor: It does not appear to have been an arrangement. Mr Bell: Nelson Brothers committed themselves to machinery which they never delivered, if it was an arrangement, it was a declaration of war by Mitcfiell. xataii Mitchell said the defendant company were bound to viOY'Ml® money for three years to carry on iiis father’s business; nevertheless his father makes an arrangement by which he delivers over the whole mf the profitable business to Nelsons, and leaves Reid wholly unsecured. It was the possibility they had to guard against, to prevent Nelsons making an arrangement with Reid against them. It was for their joint interests, because if the Loan and Mercantile Company insisted upon Mitchell going into bankruptcy, the works would no longer have been a going concern. Counsel having dealt with the correspondence and cited various authorities, including the English House of Lords, concluded by holding that the plaintiff had entirely failed to establish his case, and ought to be nonsuited.

Mr Harper, following on "behalf of Mr Johnston, moved to nonsuit, and argued that plaintiff should elect which claim he purposed to stand by—whether rescission of the contract, or for damages as claimed for conspiracy. Counsel dealt with the evidence as affecting bis client, and submitted there was nothing to show he had sought the position of manager of plaintiff’s works. From the very first he had acted according to his lights and ideas m an honest, straightforward manner, in the interests of the different parties it was his duty to represent. At the conclusion of counsel’s address, the Court adjourned until 10.30 on Tuesday morning.