A TRUST AGREEMENT.

New Zealand Times, Volume XXXVI, Issue 8188, 1 August 1912, Page 3

A TRUST AGREEMENT.

WAS IT RESCINDED? APPEAL COURT ANSWERS IN THE NEGATIVE. Tho complications which arose during fhe evolution of an oil company in Rovei’ty Bay wore dealt with In a decision delivered by tho Court of Appeal yesterday. Tho appeal wan one from the decision of Mr Justice Chapman, the parlies being William Lasnant Clayton, land agent, Gisboruo, appellant, and iiliaru ICnox Cha,a‘ber.s shoopfannor. Gisborne, and Goorgo Hutchison, barrister (as liquidator for the East Coast Petroleum Co., Ltd.), respondents. , . Tho case was heard before their Honors tho Chief Justice (Sir Robert Stout). Sir Joshua Williams and Mr Justice Cooper. In tho action before tho Supreme Court, Chambers, on behalf of himself and other shareholders of tho East Coast Iclroleura Co., proceeded against Clayton, asking for a declaration that a trust agreement made between Chambers, Clayton. Hutchison, and if. J. Finn (who had Binco retired; had riot been rescinded. In 1906 tho four persons mentioned lor men sl syndicate to acquire concessions and rights to boro for oils and minerals, ano It was mutually agreed that any concessions acquired by any one party should ho bold in trust for tho four, tho proceeds to bo divided in proportion to the funds advanced by each individual. Finn withdrew from tho syndicate on January 23rd, 1907. About Juno Ist, 1057, the three remaining members formed tho KavSt Coast Petroleum Co., with a capital of £20,050 in £1 shares, Hutchison acted as managing director, and Clayton and Chambers as directors. In 19-8 or 1509. it was alleged, Hutchison purported to give Clayton an option to purchase* tho concessions and rights ami other property of tho company In consideration of tho transfer of one-fifth of the total sum, less brokerage, which Clayton . it receive for tho resale of these and other concessions and rights. This option was allowed to lapse, but Hutchison renewed it. and Clayton entered Into a contract for the* sale of tho concessions and rights to certain persons in England, In consideration of tho issue to him of £50,000 in 500.000 fully paid-up shares of the New Zealand Oilfields, Ltd., having a capita! of £200,000 divided Into 2.0C0.C00 ordinary shares of 2s each. In April, 1910, Clayton claimed that ho was entitled to retain for his own benefit certain other concessions which, ho alleged, had been obtained by him since tho formation of tho East Coa-st Company, In consideration of this fact he further claimed that tho East Coast Comnany was entitled to only £9OOO m tho shares of the New Zealand Oilfields. Chambers alleged that tho trust agreement of June. 1906. had never been rescinded, and that Clayton, in fraud of the East Coast Company and breach of his duty as a director, acting in connivance with Hutchison, had sold the company’s property and was liable to account therefor. Chambers asked that it be declared that Clayton held the £50.000 In shares In trust for Chambers. Hutchison and Clayton: that he bo ordered to transfer them; and that the partnership bo wound up and accounts taken.

Clayton contended that the trust agreement had lapsed in 1907. on tho retirement of Finn. Hutchison had endeavoured to place certain shares in tho East Coast Company on the- London market; but was unable to do so. In tho meantime Clayton had acquired other concessions in his own name and hud opened negotiations with a company promoter who was to proceed to England with a view to floating a company to purchase theeo concessions. He suggested to Hutchison that the occasion might prove opportune for the disposal of the company's concessions, and thereupon Hutchison gave him the option mentioned. Mr Justice Chapman decided that the agreement waa never rescinded and that Chambers must succeed. His Honor added that ho could not help thinking that at come time Clayton had formed the opinion that he was working for himself. He was not bound to work for tho company, though he was interested in doing so. It was very probable that he had done more than his share of the work, and, if a suggestion were made by him that ho should receive some remuneration, it might bo considered.

Clayton appealed against this decision on the ground that it was erroneous in law, and ae-ainst the weight of evidence.

In giving the decision of the court yesterday his Honor the Chief Justice said that even if the original agreement was merged when the company was registered In Juno. 1907, still Clayton remained in such a fiduciary position as would prevent him from petting concessions on his own behalf, against the company's Interests. Tho court did not'-oonsider that Chambers, by agreeing to carry out the bargain with the Bast Coast Petroleum Company.' ratified or approved of Clayton's holding these concessions for himself. He seemed to have acted on the assumption that ho could call Clayton to account for what he had done, and obtain the benefit of those concessions, and tho court failed to eeo anything In his conduct In which h© waived any rights he may have had against Clayton either by his conduct or by the resolutions in which he was said to have aenuiesoed.

The appeal was dismissed with costs on the highest scale as from a distance.

At the hearing Sir John Findlay, K. 0., with him Mr A. R. Meek anponrerl for the appellant, and Mr 0. P. Skerrett, K. 0.. with him Mr O. B. Morteon, for the respondent. Chambers. Mr Hutchison appeared In por-1 eon.