THE N.Z.L. AND M.A. COMPANY.

Otago Daily Times, Issue 10036, 30 April 1894, Page 3

THE N.Z.L. AND M.A. COMPANY.

THE ORDER FOR A PUBLIC

EX AMIS ATION.

k (Fbom Onn Own Correspondent.) - y London, Jlarch 24-. 0 Suddenly the Njw Zealand Loau and Meri, eantile Company has once more sprung, into a ) front place in the public attention. Indeed, I r might say justly that it is exciting more attena tion in London now than it ever did, even in the 9 days of sharp conflict between the termi- , nable and consolidated debenture-holders, for f the new interest is a personal one, and in some 1 degree political. A Minister ef the Crown and 1 a prominent Ministerial member of Parliament ' and two ex-Ministers of tbe Conservative side " are personally affected by the most recent events in this connection. 1 ' At the end of last week Sir Henry James moved to discharge the order made by the " court for the public examination of the directors 1 of the N.Z L. and M.A. Co., on the ground that '' the order was made under section 8 ef the Com- ' panics' Winding-up Act, which prima facie 1 implied a suspicion of fraud—which in fact was 1 suggested by the report of the official receiver, 1 whereon the order was based; but no facts wore stated by the receiver from whioh fraud conld ' necessarily be inferred. Sir Henry said tho directors had no desire to avoid publicity or to escape examination, and were quito willing to be examined under section 115 of tho Companies Act; but they did object to an examination which suggested fraud. The application was opposed, and a sturdy battle of counsel ensued, in which the presiding judge, Mr Justice Vaughan Williams, was manifestly from the first strongly against Sir Henry Jame3 in the matter, but at'the close of the argument, which in reality was far more between Sir Henry and tho judge than between the respective couusel, Mr Justice Williams said he would tako time to consider his decision on account of the great importance of tho case. On Monday last judgment was delivered, and it went, as everyone expected, dead against tho directors. Its was, in fact, an exceedingly trenchant and remarkable judicial utterance. A condensation of auy real value is hardly practicable. Its gist was that tho official receiver's report did suggest "two distinct frauds,"and that as tho report, in the judge's opinion, clearly made out a ■prima facie caso of fraud in these respects, " an immediate public inquiry " ought to be held. The two alleged frauds were—" (1) That the directors, or some of them, from timo to timo issued prospectuses inviting applications for debentures, which were misleading and known to be misleading. (2) That the directors, or some of them, on behalf of the New Zealand Loan Company, entered into a series of transactions with a company called the New Zealand Land Company (Limited), not bona fide in the interest of the Loan Company, but in some other interest, and to its detriment." Mr Justice Vaughan Williams held that in regard to the first case a "prima facie case of fraud is made out," and pointed out that Sir Henry James, though repeatedly pressed by him to do so, " was wholly unable to suggest what was tho object in issuing the prospectuses and application forms in the form in which they respectively were issued aud of abstaining from the advice given by counsel if tho object was not to deceive those to whom they were* issued." s

As to the second charge, his Lordship said : " In my judgment, it is impossible to avoid the conclusion that, as against Mr Russell at all events, the facts stated in the report as they stand raise a prima facie presumption of frand that he at least on behalf of the loan company entered into transactions with the land company, not bona fide iv the interest of the loan company, but in his own interest. With regard to tho other directors who have been ordered to be examined, I cannot but hopo that the result of the public examination may be entirely to clear them. It may be that, in the result, Mr Kussell will be able to clear himself. Bat tho great advantages which he personally^ obtained upon the transactions impugned mako a prima facie case of fraud against him wbich is not made ogaitnt the other directors. Tho interest of the other directors in tho loan oompany largely exceeded their liability for calls in the land company. It is in the highest degrco improbable, therefore, that they wilfully risked a liability for calls of £12,000 in tho loan company to avoid oven au immediate liability of £5000 in the land company, to say nothing 1 of the improbability that distinguished men bearing tho highest possible character, should ba wilfully pirties to injuring the interests of the company of which tbey were directors. But it is sufficient to justify my order if a prima facie case of fraud is made against one director. That fact makes it right j that all the directors and tifficrfrs of the cjm- '. pany eh mid ba examined ; aud I cannot help . thinking that—now that discussipn in open { court, must havo shown to theso distinguished j men that, whether or not tho report makes out | a prima facie case of fraud, as I think it clearly' dues, it at all event-) shows a state ol things demanding rigid investigation—thoy themselves will earnestly desire, conscious of their own iDno:onc, thit there shall be an immediate public iaq-iiry. Noblesst o'lliije." , Aud thu application was dismissed wiih costs. | An immediate appaal was mile aud sot down ] for next day, when it was heard by Lords Justic-'s Lindldy, Kay, snd A L. Smith. Sir ' Henry James emphasised his assertion that tho ' order was resisted not to avoid c-ximiaation, but bfcuuse the order was bised ou a presumption of fraud. He asked that his clients ) should be declared f res from auythiug approaching fraud, and that lhe order for the public examination should bo discharged. ' At first the court seemed diipased to follow ' Mr Justica Vaugh&n William,*!* footsteps, but j gradually a change came over tee aspect of , ulfiirs. Sir Henry James appeared to me to i veer gradually from hi*3 original position into i another which materially alt:r<.d the situation. 1 Lord Justica Liudley asked if tho dispute wero ' whether the examination should bo public or ' private. Thereupon Sir Henry, who just before had asked the court to '• discharge tho order ; for a public examination," said that if a public t examination could be conducted without the i suspicion of fraud, tbo more public it was tho ' more his clients would ba satisfied. ' Upon this Mr Finlay, the opposing counsel, at once said that (.11 tbe official receiver , wanted was a public examination, and if this i were agreed to there was an cad of the case. < Accordingly this was agreed to and by consent < an amended order was made for public exami- ' nation with liberty to the receiver or any ] creditor or contributory to put any question sanctioned by the court. Ai the risk of some duplication I am compelled to makea clear narrative of these momentous events in order to render comprehscsiblo what followed. In tho lirst placo there was an immediate sequel which is exceedingly unfor- ' tunate for the long-Bufferiug shareholders of Iho < company who had fondly hoped that the re- ] construction scheme was safe, and their long , su'pense at rest. For when application was made to the court to sanction tho tcheme, Mr Justice Vaughan Williams flatly refused to ' do so until the examination of tho directors should havo taken placo, on tho grosod that tbe scheme was agreed to by the creditors without the frets disclosed in t'ae receiver's ; report briog properly placed before them or without their being in possession of the information which might be elicited in the public examination of the dircttots ordered by tho court. And bo ho postponed the matter until the llth proximo, when the whole affair will come up agaia for argument in tho light of such fresh facts as may be disclosed in tho examination of tho directors. The judgo holds that tho'io may be of such a naturo a3 would have prevented the creditors' agreeing to tha scheme had they been known beiore that was submitted, therefore he deems it right to reopen the whole case. This, of coarse, is very regrettable, but so for as I can learn, if tho juJge requires tha scheme to be submitted agaiu to a meetiug of creditors thero i 3 no serious likelihood of its being negatived, even if the coming disclosures should bo of a nature to excite their wrath. They liwe made their not unnatural splutter of rage at the way they had been treated; havo threatened all sorts of dreadful things, and have finally awaksned to the unwijdotu or sacrificing substantial advantages for the fake of mere revenge. fc"o I do not onticipato any worse consequences in thi- respect tho-i further delay. What has caused the ciso to attract such extraordinary attention i.-i Loudon, however, U not the fortunes of the Now Zeilarid shareholders or others in the ci lony or at Horn?, but the eminence of the persons reflected upan by the official receiver's report aud by Mr Justice Vaughan Williams's judgment. Ouo of them U no le«s a personage than the receiver's own official chief, a Minister of tte Crown, Mi- A. J. Mundelh, President of tba Board of Trade; another i 3 Sir George Ru'sell, M.P., a prominent supporter of tho Government. T»o oibera are fx-Miuisfers, and were memberi of Conservative Administrations—Sir John Gorst and Sir James Fergu<son, Ihe lottos b^ingalsaau ex-Gjvernor. Sir Edward S-aff ml is au exPremier of New Z;ohnd, and a. G C M.G. Others are men pfomiuent in the Loi.don cr colonial business world. But it is tho political celebrity of these particular geatlemen that has brought the affairs of the "NowZeiland Lean Company" (as it is almoit invariably termed in the London papers) into such fresh aud disagreable notoriety. Several of tho journals have had severe articles oa the subj :ct. It was very unfortunate that the e'Leetors did not make their position cltarer at tho cutset of their laat proceedings and court a public examination, instead of oiitefctiug the matter desperately to tho last poiut, and only then suf getting that the order for public examination sbould be varif d instead of bting discharged altogether. Technically, of course, the original order was dischirged, but only by consent on the condition of a new one being issued under a different act. In the case of Mr Mundella, tho matter assumed a peculiarly awkward shape. Mr Mundella, being the head of the Board of Trade, of which the official receiver is an officer, was placed in a very unpleasant posij tion, not only through his directorship of the j company, but still more through certain com- - 11 ments made by Mr Justice Vaugban Williams. Mr Thomas Pvnssell'is understood to beon ' bis way to Londo^ and is expected here in a

few days. There was a rumour afloat that he was to be the general manager of the reconstructed company, but this is deemed improbable. I hear ho is a candidate for a seat on tho new board. Probably no other man has so intimate and extensive an acquaintance with all tha complex ramifications of the company's affairs.

Considerable difficulty is being experienced, I hear, in obtaining directors even at very tempting rates of remuneration. Most men who have the requisite business capacity are already deeply engaged in other affairs, and the now directors will have to devote their time almost exclusively to the duties of their office if the company is to be made a success. Practically, I gather, the company will have to make up their minds to pay a sort of board of general managers, and pay well, too.

Most of the old directors, I am told, still hold aloof, and object to having two or three of their number picked out for seats on the new board. Some, indeed, refuse altogether to serve unless tbe imputations cast upon them by various creditors or shareholders shall be unreservedly retracted and apologised for. Possibly, this coming examination may clear the way a good deal in this respect, if it result in tho exoneration of some or all of the directors, as everyone mußt hope thut it will.

Mcauwhile, this outgoing mail onco more leaves the N.Z.L. and M.A. Company still in the traditional situation of Mahomet's coffin.