MR MASTERS’ CEMENT TRUST ALLEGATIONS

New Zealand Times, Volume XLVIII, Issue 11047, 2 November 1921, Page 7

MR MASTERS’ CEMENT TRUST ALLEGATIONS

In his opening remarks Mr Perry traced the facte leading up to the ease, arising out of the .allegations made by Mr Masters in the House. Mr Masters had alleged that by reason of the existence of the trust there was an excitement of competition in the price of cement in the Dominion; and that the treat was responsible for the high prices that had obtained for some considerable time past. He blamed the Government for the existence of the trust hy reason of the failure of the Board of Trade to properly control the price of cement during the time the cement was under the control of the board. There was legislation oh the statute to prevent the creation of trusts and the formation of monopolies. That very legislation was contained in the Board of Trade Act, 1918, and other Acts, and he submitted that it was a scandalous thing that in an abnormal time stfch as we had passed through during the last few years, when the great majority of the people had made great sacrifices, a few people should have been, able to form a trust for their own selfish ends. He alleged, further, that a cement trust actually existed in the Dominion. The word trust, used in the present sense, was a very ugly ward, and a trust was a very ugly thing. We 'generally referred to a trust or compared a trust with, a monster such as an octopus, which destroyed everything with which its .tentacles came in contact. They had read of combines that had existed and probably still existed, in the older countries, and hoped there would never be anything of the sort in New Zealand. They had heard of the “Big Five” of America, one 'of the most notorious trusts that ever existed. There was a big five in the Golden Bay Cement Company, Ltd., holding 66,000 shares out of 66,002. The other two shareholders held oneshare each. The big five were Mr B. S. Luttrell, who held 4-Bths, or half of the shares, Sir George Clifford, Mr lan Duncan, Mr A. B. Luttrell, and Levin and Co. “AN INFAMOUS AGTEEEMENT. Mr Masters had stated in the House that the creation of such a trust was one of the most criminal things that had ever been-allowed in New Zealand. Hie exposed for the first time the famous, or rather, infamous, agreement entered into between the Wilson Portland Cement Co., Ltd., the Milbum Cement Co., Ltd-, and the Golden Bay Cement Co., Ltd., whereby the Wilson oompany and the Milburn company agreed to pay the Golden Bay company a royalty of 4s per ton up to 60,000 tons of the cement produced by the two'companies, and 2s per ton on every ton in excess of 60,000. It, therefore, followed, taking 90,000 tons as the total anrauiaJ consumption of cement in New Zealand, that the Golden Bay oompany was being paid £15,- ; 000 for the purpose of keeping its i works closed for twelve months, to do I nothing, to produce nothing, and to • earn northing. In other words, it was ; to. reoieive £3OO for every working week I in the. vear, or, really, about £6O for ■ eatery idle day in the year, £6 for every i idle hour, £1 for every idle ,10 min- [ utes. He desired to, submit what he contended were the reasons for the clos- ! ing down af the worksit was neces- | sary to trace the history of the Gold:en Bay company. The oompany was j farmed some years ago, and was a ptros- ! porous concern with great prospects, ; bolt some time ago it fell into the hands , of a gang of speculators and gamblers, ; as distinct from a body of legitimate j shareholders who originally put their i money in the oompany, believing genu- ' inely in the possibilities of the Indus- ! try in New Zealand. It was probably within the last 20 years that the cement industry had become important in the Dominion, and during the last few years the public had been getting out of its mind the idea that private houses should not be built of concrete, because of the fear of earthquakes. He had now to explain the difference between a legitimate shareholder and a speculator. The legitimate shareholder m the oampany_ concerned in the Commission was there for the purpose of obtaining what be could, and seeing that the industry flourished. , The speculator was there to turn out a profit as soon as he possibly could. . NO QUARREL WITH OLD OOMPANY. With the original Golden Ray Cement Company Mr Masters had no Quarrel. He had been an agent for the oompany for a number of years, and always found it entirely honourable in its dealings. The capital of the company was £60,000, and it had debentures to the extent of 26,000. The syndicate offered a good price to the director Of the old company, telling him that fresh capital would be introduced, fresh machinery installed, that the works would he doubled, and that the price of cement on that account would be cheaper. The syndicate paid the oompany £30,000 for its interest, and the promoters took £II,OOO worth of shares and paid £II,OOO in cash into the company, making a total capital of £136,000. Some five members of the original syndicate which purchased the Golden Bay Company were so pleased with the prospects that they bought out the other five members of the syndicate. He understood that at the time the five were bought out they had hot put any cash into the conoetm, and he also alleged that the purchasers were paid, or were promised £3OOO in order that the company should fall into the hands of the present five shareholders. He submitted that' the big five, having got the Golden Bay Company into rts hands, planned how to manipulate the market, or, as the agreement put it, “in order that the mQst satisfactory results might an-

(IMPORTANT EVIDENCE BEFORE COMMISSION ORDER OF REFERENCE EXTENDED YESTERDAY S PROCEEDINGS The Cement Commission set up as a result of the sensational allegations made in the House of Representatives recently by Mr R. Masters', M.P., of commercial immorality in the operations of certain oement companies in the Dominion, resumed at the Supreme Court yesterday. Mr Masters, it will be recalled, denounced in* strong,, terms in the House the operations of an alleged trust formed for the purpose of controlling and increasing the price of cement. He also blamed the Board of Trade for granting an increase in the price of cement on the application of some of those concerned. * The Commissioner is Mr Justice Sim, Acting-Ghief Justioe. Mr W. C. MacGregor, K.C. (Solicitor-General), appears for the Beard of Trade; Mr M. Myers for Wilson’s Portland Cement Co., Ltd.; Mr M. Myers and Mr Loughnan for the Golden Bay Cement Co.; Mr C. S. White for the Milburn Lime and Cement Co.; and Mr W. Perry for Mf Masters. At yesterday’s sitting Mr Perry first raised the question of the order of reference, asking that an extra clause be ad#id providing that evidence should be permitted dating back further than had been provided, when the Board of Trade effected certain increases in the price of cement. Mr Maocregor 'and Mr Myers agreed, the Solicitor-General remarking that he was willing to have evidence adduced as far back as 1918. i

crue to the company.” They might have added, “Never mind the public.” BOARD OF TRADE APPROACHED. They first approached the Board of Trade with a request to be allowed to increase the price of oement. That was m December, 1920. To the amazement of everyone, the Board of Trade sanctioned an increase to the extent of £1 16s per ton retail, ox £1 12s at the works, such increase to take effect from January Ist, 1921. Which of the companies asked for the increase he did not know, but he did know that, on or before that date, the syndicate had bought out the Golden Biay Company. It was contended that Mr E. S. Luttrell approached the board after acquiring half the shares of the Company. He was the man who was entrusted hy the shareholders with the delicate' part, perhaps the easy part, of persuading the Board of Trad© to grant the increase. In the evidence placed before the Board of Trade, either erroneous statements were made by the companies in order to secure the increase, or, if the board had correct “figures before it, it had acted improperly and had committed a grievous error of judgment in granting the application. Backed by evidence he would introduce, he would submit that the sanctioning of the rise in the price of cement by the Board of Trade was entirely unjustifiable. It would be also shown that the Milburn company did not take advantage of the rise. He also intended to establish that the Board of Trade, “that supposed custodian of the pockets of the people,’’ communicated with the Milbum Company- asking why it had not charged the increase after it had been authorised. He would ask his learned friencl, Mr MacGregor, if he would produce all the letters he could bearing on the cage, - Mr MacGregor: By all means. You can have them all if necessary—between 8000 and 9000. Before May 6th, Mr Perry proceeded, the date on which the' agreement was entered into between the companies, the Golden Bay Cement Company had determined to Reduce the price of cement to the old price that had. obtained before the increase was sanctioned. i - SHAREHOLDERS’ INVESTIGATIONS. Mr Perry referred the chairman to the oopy_ of the agreement, “whereby the parties were to derive the most satisfactory results possible.” “When one read that agreement and considered the sinister words it contained, it seemed incomprehensible that the Board of Trade, which knew of it, did not take any action in regard to it.’ Not so the debenture-holders of the Golden Bay Company. The agreement was brought to their notios, and they set up a committee of three to fully investigate the matter as it affected them, and to report. “We have,” said counsel, ‘that the. Board of Trade sanctioned an increase of 86a per ton retail, and we submit the Golden Bay Oompany was probably in need of this money, because they had paid, or were going to pay, £15,000 to the little five whose interests in the company had been acquired by the big five.” ' Mr Myers i As a lawyer, you must know that is incorrect. Some of the other matters - are incorrect, too, but Mr. Perry is speaking as a representative of a politiciahj which, is . a different matter. “A LITTLE TOO CLEVER.” Mir Perry: May I say, then, that the £15,009 was paid to the little five by the big five, and that the big five, to all intents and purposes, ore the Golden Bay Oement Company, Ltd. P Then we submit that the big five were a little too clever when they persuaded the Board of Trade to increase the price, because the consequence was that people who required oement refused to pay the increased price, and commenced to import it. The Government commenced to import in considerable quantities after January 80th, 1921. So that the board raised the price also against _ the Government. Mr Luttrell, the biggest' member at the big five, saw what was happening, and apparently conceived the idea that the price was going tb fall, and that some means must be adopted "to keep it up. He met Mir Elliot, who was either managing director or chairman of directors of the Wilson Portland Cement Oompany, and discussed the matter with him, suggesting that the Golden Bay cement works should dose down for a certain period. Mr Luttrail, counsel submitted, being alarmed at the importations of cement, thinking “at a gallop,” obtained authority from hie directors to enter into an agreement with the other companies or conduct negotiations with them. They Tver© apparently only too agreeable, and authorised him to enter into an agreement whereby the Golden Bay oompany was to dose its works for three- months, the other companies to pay a royalty on the output up to a certain figure. Without any further reference to Ms directors, he alleged, Mr Luttrell signed an agreement to the effect that the works, should dose down, not for three mouths, -but for twelve. SURPRISED DIRECTORS. Further than that, the Wilson Company took. over from the Golden Bay Company its total stock of cement sacks. When the agreement oame to the knowledge of the debenture-hold-they appointed a committee consisting of Mr Gerald Fitzgerald, of Wellington! Mr, Thomas Wilson* Of

Wellington; and Mr Smith, of Napier; i to investigate the position. They cir- j dollarised all the agents of the'Gplden Bay Company inquiring whether they had. been consulted by the company in regard to the closing of the works, and whether the demand for cement at the time of closing down was normal and likely to remain the same. All the debenture-holders except one replied expressing surprise that the works were to he closed down, stating that the demand was normal and likely to continue so. Some of them were incensed at the action of the Golden Bay directors and. considered that they had acted wrongly. As a result of the inquiries negotiations were entered into between the debenture-holders and the company, whereby the latte!’ agreed to give the shareholders further security for £20,000 of uncalled capital, because of the probable deterioration of the Golden Bay works during the period thev were closed. Mr Perry said that the debentureholders obtained a reinstatement of the trading agreement that had previously existed between the three companies, whereby the Wilson Company was to supply 64 per cent, of themarket requirements, the Milburn Company 18 per cent., and the Golden Bay Oompany 18 per cent This was in order to obviate as far as possible the loss of gopdupll that would accrue to thf/ Golden Bay Company on account /£ their Works being closed down. It was Obvious the goodwill built up during a period of years must necessarily have been very prejudicially effected by the closing down for twelve months. DIFFICULT TO OBTAIN EVIDENCE What was likely to arise out of the Commission, said Mr Perry, he could not at present say. Maybe a great deal migiht arise to the detriment of the companies and to the Board of Trade. It had been very difficult for him to obtain evidence, because many of the people who were particularly affected by the closing of the -works, and the consequent increased parity in the price of oement were not keen to corns before the Commission. He would have also to call several witnesses in the dark as to what they knew: He hoped', however, to obtain evidence that would satisfy the Commission that the agreement. was an improper one, an illegal agreement in restraint of trade; that the agreement had operated detrimentally to the public interests ; that the Bpard of Trade, in authorising the increase in the price of cement, had 1 acted improperly and had committed a grievous error of judgment, and had been lacking in its duty, as stated in the order of reference; in not . taking any action in regard to the agreement. Mr MacGregor: What action do you suggest should have been taken?' Mr- Perry: It might have made half as much investigation as the debentureholdera did. ■

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