A LEGAL BATTLE.

Otago Daily Times, Issue 10037, 1 May 1894, Page 4

A LEGAL BATTLE.

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

OPPOSING THE.ORDER FOR AN

EXAMINATION.

(Spec'iaiia- Egpobted foe the Otago Daim Times.) On the 19th of February a further report was made to the court by the official receiver. This further report covers 17 pages o£ foolscap paper and contains statements which, unless eventually explained away, are at least unsatisfac-

tory. It ia to be noticed that the official receiver abstains from expressing his opinion as to whether any fraud has been committed by anyone, bttt the unavoidable inference from the statements in this further report certainly is that, unless explained away upon examination of the directors, there must have been fraudulent transactions in two matters—viz., in the issue of prospectuses inviting applications for secured debentures, which in reality were unsecured, and also in certain carious and intricate transactions between the Loan Company aud the Laud Company, cbiefly affecting Mr Thomas Russell's shares in the Land Go^ &11l- ihi3 furth™ report ends thus: ;l Sht official receiver ia of opinion that further' inquiry is desirable .... and ha makes application for an order directing the public examination of the parties whose names appear in the attached schedule." (The names have been already given you by this mail.) The order for tho public examination was made about a fortnight ago, as a matter of coarse, by Mr Justice Vaughau Williams sitting in Chambers as the judge -in bankruptcy and winding-np of companies, In the ordinary courco a notice would at once have been put ia the Gazette, calling upon the direotoro by name to present thomselves for liublic examination, but at this paint it seems to have occurred to some of them that this further report displayed animus against them, and that the official receiver was actuated by a desire to brand their characters with a stigma of fraud—at least so their counsel protested in court—and with what seems to many people ' questionable policy they took proceedings to get the order for public examination rescinded. When it became known that personages in tho highest possible official position, actual Cabinet Ministers (past and present), and others, had not only been ordered to bs publicly examined in the wiudiug-up of a company, but were actually going to try and get tho order rescinded, the case instantly came to the front as a remarkable affair, and a crowded court at tha hearing of the directors' application was a certainty. Moreover, the mero fact of any resistance whatever being made to any possible form oE- public examination was obviously more than enough to convince the vast majority of newspaper readers that the directors dreaded some expose, and must have some good reason for so doing. Success in getting such an order rescinded upon some fine legal point would cot lessen that conviction, and consequently a strongly unfavourable impression was created against the directors, and prevailed amongst those attracted to the court.

At noon on Thursday last, 15th March, tho struggle began. To show how desperate it was on the part of tho 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 Vanghan 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 chooEes to defy or attack him. At tho same time he 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 Vaughau Williams, one of the justices of the Court of Common Fleas, nu ancient court of law now merged iv the Supremo Conrt of Judicature. Sir Henry James is looked upon (is an exceedingly sound lawyer and a subtle and determined advocate, who will stand his ground from hour to hour without any sign of fatigue or of giving, in. His Btandiug at tha bar can be estimated by calling to mind that he refused the Lord Chancellorship eight years ago. He was Attotney-geiitral under Mr Gladstone's Government in 1873. Ho declined the offer of the Chancellorship on tho ground of disagreement with Mr Gladstone on the Home Rule question, and accordingly joined the ranks of tho Uniouiets, and now sits as a private member in the House of Commons for the constituency of Bury, Lancashire.

In the present case Sir Henry James appeared for all the directors named by the official

receiver excepting Meesra Larkwoithy and Thomas Rassell, the latter of whom is ia New Zealand. The other counsel were Mr Finlay, Q.C., and Mr Howard Wright for the official receiver, and Mr Reginald Br.jy for a debentureholder. These latter gentlemen had little to do, as it could easily bo seen from the outset that the judge was stroDglysgainst tho application for rescission of the order, which ho himse!f had made in Chambers, and that tho hearing would be one magnificent battle royal between Sir Henry James acd Mr Justice Vaughan Williams. The court was full daring both days of tho argument, and thero couid be no dulncss even iv 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 «£ the bar were present, and thoroughly enjoyed tho contest, which over aud over again seemed on the verge of affording a scene. " Relations were strained " repeatedly between the judge and Sir Henry James; in fact £0 much so, that after <ouo eoiuewhat unusually daring interpretation of the judge's previous remarks tho jud£<>, with chiltiug and emphatic dignity, addressed Sir Henry James by name, and declined to "converse" any further with him, and requested him to confine himself to the argument of points of law only. To understand the proceedings iv court it is

necessary to give here as short a summary as possiblo of tho statements in the official receiver's further report with r*sp:ct to tbo two principal matters from which inferences of fraud might be made.

Soon after tho Loan Company was (started (in 18S5) the directors issued annual prospectuses inviting applications for 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 tho promised charge, and wore therefore unsecured. In 1879 the directors were advised by counsel to tha.t effect, and advised, moreover, that they ought not to issne any more prospectuses as printed, but should give notico to existing debenture-holdera that their debentures would not bo renewed when due, and that other debentures would be given them in a now form. In tpite of this tbo directors went on issuing prospectuses and giving debentures down to 1891 worded substantially as before, only ÜBing the words "secured by" instead of "secured npon." 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 cartiflcato 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 now Btock. This issue j was duly secured by a mortgage on the uncalled I capital; but as the prospectuses had not stated that tho outstanding debentures and debenture stock were absolutely unsecured, most of the holders ol these earlier and unsecured debentures did not avail themselves of the chance of exchange, and now found themselves unsecured and postponed in the liquidation to tho newlycreated debentures.

The other principal matter liable to a construction of fraud was the series of transactions with the Waikato Laud Company. In 1879 Mr Thomas Russell, a director of tho Loan Company, helped to form a syudicate called the Waikalo Laud Association, which sold its laud to the New Zealand Land Company, a company formed lor the purpose of buying tho syndicate's land. All the shares in the Land Company were £20, and issued as having £10 paid to eight person?, three of whom were: Sir James Fergusson, tho Right Hon. A. J. Mundclla, and H. J. Bristow. "Those three, as far as can bo ascertained, acquired their shttres from those interested in tho syndicate for £3 6s 8d a share," aDd, as the judge said afterwards in his judgment, " these gentlemen, directors of the Loan Company, had apparently allowed themselves to rcceivo Eioin Mr Russtll and the members of tho sjudieate (something very like a gratuity." Then tho Loan Company got a " bonus" of a filth of the syndicate's property, aud leritthesTinlicate £80,000. Iv 1887 the Laud Company, having debentures to meet, made a caII of £4- 7s 6d a share. Mr Russell, a director of both companies, not being able to meet this call in tho Land Company, thu Loan Company lent him £10 000 to meet his c;.lls, aud also lent the Land Company £30,000 to meet their dua debentures. By December 1890 the Land Company had lost'half its capital, aud its income was £5000 a year less than tho interest on its ('ebentuvcß of £200,000. In 1891 tho Land Company owed tha Loan Company £90,000. Mr Russell also owed the Loan Company £70,000, partly secured by mortgage. Sir James Fcrgusßon aud tho Right Hon. A. J. Muudella, also directors of both companies, had an outstanding liability of £5625 to tho Land Company.

A general arrangement of an exceedingly complicated kind was thereupon made between the twocompanies—toointricatetosetoutfullyhere, aud only to bo underatood 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 Kaglan ruu and other properties mortgaged by Mr Russell to the Luiti Company. Ono hundred thousand £1 fully paid-up deferred shares were therefore issued to him by the Land Company, aud of these shares Mr Russell gave a third to the Loan Company as a "bonus" on the transaction, and settled his iudebtedness 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 arrangement between the two companies was (according to the judge's summary in his judgment) this—viii., 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 oi: £77,659, and got in exchange fully paid deferred shares in the Land Company carrying, of course, no liability whatever; and Mr Russell, who was once a holder of 11,400 ordinary shares in the Loan Company with a liability oE sglQ eAch, or £ll<t-,000, now held only 22,387 £1 fully paid deferred shares in the Land Company with no liability whatever; in other words, Mr Russell ifot out of a liability for £6.1,000 and an indebtedness of £75,000, the Loan Company bscomiog saddled with all the ordinary shares j of the Land Company except one thirty-fifth—

the liability being £188,307 10a. The above_ being tha facts as stated in the official receiver's. further report, we can now go back to tho beginning of the fight on Thurs' day 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 "Company's Winding Up Act 1890." Subsection 2 of 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 say fraud has been committed by any person iv tho promotion or formation of the company, or by any director or other officer of tho company in relation to the company since the formation thereof, and any other matters which ia his opinion it is desirable to bring before the notice of the court. ,

Subsection & of the same section 8 adds that the court may after considering such report direct any person who had taken part in tha promotion or formation of the company, or had been a director or officer of the company, to attend before the court and be publicly examined, not only as to his own conduct and dealings as director or officer of tha company, but also as to tho promotion or formation of the company, and the conduct of the business of the company generally.

Sir Henry James began by protesting that the applicants desired the utmost publicity i they would giyo 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 waa like processes in foreign countries, and practically put a man on his trial before he knew what ha was charged with—a system abhored by Englishmen. It conveyed an impression that fraud had been committed.—(" By someone," the Judge remarked). The applicants objected to any examination based on the notion that the slightest fraud had been committed by them or by anyone with whom they acted, and he protested against 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 examination could be made.) Sir Henry James then contended that the judge was wrong in making his order on two grounds: (1) That ho had not materials upon which he could exercise the jurisdiction given him by section 8, and he had therefore no power to make the order; (2) that if he had jurisdiction he had not exercised his discretion rightly. There must be eilher a written statement by the official receiver th»t in his opinion fraud had been committed, or he must state faofc3 whioh unequivocally showed that a fraud had been committed. The official receiver ia this case had not said in oxpres3 terms that a fraud had bsea committed, and he was wanting in moral courage not to say so if he thought it was so.—(Hero the Judge emphatically disagreed with counsel). Sir Henry James then went on at great length to read and criticise the report with the object of explaining away 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 prospectuses nor could the dealings with the Land Company ba eaid to be fraudulent. There was no motive for fraud; none of the directors obtained any benefit; tha Laaii Compsny was perfectly solvent at the time oS the new is3uo of debentures ; do one had b-icxx induced to become a debsnture-holder who would not otherwise have

become one; there was no peculation; and the directors of the Loan Company had acted boiux' .fide with tho Land Company. .

MrFinlay, Q.C., opposed tha directors' application to rescind tha order for public examination, he contended that tho 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 tho report that a fraud had been committed in the issue of the prospectuses and as to the Loan Company's transactions with the Land Company ; shares on which thers was largo 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 rose, ordering in the meanwhile that until judgment was delivered the Gazette_ notica for the public examination should be withheld.

Friday^ heaiog was opened by Mr Howard Wright, junior counsel for the official receiver Ho urged that fraud might reasonably be inferred from .the facts as ttated iv the official receiver's report, and that unless the official receiver omitted to state euch facia thero could ba no ground for rescinding the order for examination already made re the debenture and Land Company transactions. In the course of Mr Wright's address the judgo remarked that the unsecured debentures wero merely acknowledgments of indebtedness, whiUt the secured debentures wero a mortgage charge. The object of the iuquiry was to liud if any fraud had been committed. Tho report should raisa a prima facie caso of fraud, aud the examination would serve two purposes-(1) to ascertain what the trno facts were, and (2) to give an opportunity for affording an explanation. His LorSship could conceive that thoro might ba a legitimate Quaucial transaction in transferring tha proparty o* one company to the other. It was by no means essential to the propriety of ths order that all the parties should be accused of fraud. It was enoeighif fraud was iufarrcd against auy one.

Sir Honry James then rose to reply, and began by rejoicing that both counsel on tho other side had acquitted the applicants of fraud and had admitted that they could not say that any one of theso honourable and distinguished gentlemen wero charged by tho official receiver with fraud. That was a highly satisfactory condition of thing 3.

This remark began tho prolonged battle between Sir Henry Jamss and tho judge, tho judge emphatically stating that counsel on the other Bide had made no such admission. 16 was not a Bittiafactory condition of things when an official receiver said that at tho time a prospectus was issued certain people were directors, but he did nob kuow who issued tho prospectuses. Hero Sir Henry James wont still further and said that tha official receiver could not put his hand npon any one allegation of fraud.

The Judge: It is not noceesary that he should. That is your interpretation; all that counsel on tho other Bide have said is that it didn't necessarily follow from tha report that any individual was guilty of fraud. S'r Henry James: Your Lordshipis confusing what was said.

Tho Judge: Your interpretation is very different in fact from what they did say.

After another statement by Sir Henry James was that not only counsel, but his lordship himself, on the previous day, had admitted that the applicants were not guilty of fraud. The Judgo: It is painful to me to interrupt you, Sir Henry James. I understood counsel on tha other side to mean that they did not allocate fraud ; but it ia nefc competent for you to say that either I or they absolve the applicants from fraud. Sir Heury James: I never said absolution. Tho application in made under a section of the act. and tha report does not comply with it. The Judge : "Sour observation does not commend itself to my understanding. Kir Heury James: If they use certain words I have a right to repeat them. Tlio Jad?e: You are attributing to words a meaning of words not meant. Sir Henry James : The roport doesn't charge anyone* with fraud, therefore if no charge ia made against any particular member of the board it'is very unsatisfactory to the partie3. The Judge (sarcastically): If there is a charge of issuing a fraudulent prospectus, and the effieial receiver says ho ia unable to say by which particular member it was issued ! Sir Heury James : My clients appreciate the admission on the other side.

Tse Judge: It is idle to address me with a premiss which I do not admit.

SSir Hftiu-y James : I tako your lordship's own "orniula. '

Tho Judge: I shall uot discuss tho 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 oase and add nothing to it, pniy go on, but nben 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 say that that is satisfactory. The Judge: It ia satisfactory that tho official receiver does not allocate fraud—say so.

Sir Henry James: I say that the official receiver absolves the applicants from any charge* The Judge: Absolution! Nothing of thesort!

The argument then proceeded more calmly, Sir Henry James arguing against any possible inference of iravd 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 had that excuse. His Lordship's experience was that in company business 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. A light-minded and honest man might be tempted into concealments in the interests of shareholders whose securities would be dspreciated. It did not follow, however, that a fraud had not been committed. In this case the directors had failed to follow the plain, honest, aud excellent advice o£ counsel a3 to the prospectuses. • , ■

Sir Henry. James, continuing, said it must ba shown that someone was defrauded.

The Judge: No. We arc inquiring if there is aprima facie case of fraud. What 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 mado other remarks, another passage, tha most serious of all, took place.

The Judge: I shall not expose mysslE to that observation. Your duty and mine is to arrive at the truth. If criticism is to be offered to the style of any observations, whether employed or not, I decline to continue the conversation, but I will listen with patience and attention to any arguments you have to put forward. Here Sir Henry James expressed deep regret, and then proceeded, after what sounded like an elaborately stately apology, to recapitulate again all that he had said before, and then vrcut 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 oE fraud, aud that there could be ns m'otivo for any fraud. Sir Henry James concluded by offering his clients for examination under section 115 of " The Companies Act 1832 " the control of the court. Every voucsher should ba produced by his clients, and the result would be filed and read by everyone interested. The alternative was a publio examination, and any creditor for a few pounds could come in and cross-examine.

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 Bight Hon. A. J; Mundella, the President of the Board of Trade). His lordship then surprised everyone by reading a Board o£ Trade report of 15th February 1894 (bearing Mr Muiidella's name) containing this phrase :—" The practical restrictions which [have hitherto been imoo3fld upon public examinations by confining then! to cases where fraud is alleged orsuggested have in some cases prevented public investigation which appeared desirable, and it may still be necessary to havß 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 j had made no objection about them.

The court was then adjourned, the judge saying he would deliver judgment the following Monday.

On Monday the judge delivered an elaborate written judgment, which was given verbatim in The jTimes of the following morning (Tues: day, March 20). The following is anabitract :— His Lordship said, in reference to the form of the report, that he could not all agcee with the strictures which Sir Henry James had thought lit to pass on 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 tho official receiver in this respect. Indeed, jn this vary case his lordship had found it necessary to rule that tSie Board of Trade had no jurisdiction to forbid the presentation by the offbial receiver of the particular report in question. This being so, thcrsfore, ha could not help feeling that the official receiver had not deserved tha censuroof Sir

Henry James. Moreover, there wa.% he thought, much to ba said in favour of the form in question, which presented rather tho facts upon which the presumption of fraud rested than the simple conclusion tint in the opinion of the official receiver such fraud hid existed. If tha official receiver hid Eiiaply stated his conclusion that fraud had bsen committed, without staling the grounds on which he had come to that conclusion, ho did not think that aa order of tho 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 officbl receiver—a dolay for whicu there had been no adequate reason. As to the suggestion mads by Sir Henry James more thin ondd that tha directors should Eubmib themselves for examination under section 115 of tho act of 1862, this offer was altogether beside the mark, seeing thatsuah an examination would ba in private, and the depositions would ba accessible to the official receiver only. As to the substance of the report, the Bjle question which he had to consider was whether tha7«cts submitted supported a pram facie caso of fraud. la other words, was it » natural inference from tbe facts, if left unexplained and unanswered, that fraud had bevn committed ? The report suggested two diatincl frauds—ikst, that tliadirectors or some of them issued prospectuses inviting replications for debentures which were misleading and known to ba misleading; secondly, that tho directors or some of then, on behalE of the New Zealand

Loan Company, entered into a series of transactions wish a company called the New Zealand Land Company not bonafide in the interests i>f tha Loan Company, but iv aome other interest and to the detriment of the Loan Company. Aa 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 wore so worded as to indicate that the debentures were scoured on the assets of the company. In the form actually issued tho debentures giro no security of this kind whatever. In 1879 tha board took counsel's opinion on tho subject, wore advised of the misleading character of tho prospectuses, and were recommended to tike certain steps, putting the matter on a proper basis, 60 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 tho word " upon" the word'"by," a small chingo of terminology which did not in tho slightest degree meet tho requirements set forth by counsel. Moreover, it was stated subsequently that tho debenture stock was secured by. trust deed, which was quite contrary to fact. In truth, no debenture stock issued gava to the subscriber?, notwithstanding implications to the contrary in tho prospccSusea, any charge on the asssts of tho company, with the result that as a consequeuce of the course pursued a large portion of tho existing dsbenture-holdcrs found themselves eventually the possessors of debentures wholly unsecured, and postponed accordingly in the liquidation. The only conclusion ha could coaio to on the subjeoi was that whoever issued the prospectuses in question, intended to mislead the subscribers and framed the prospectuses accordingly, and that the subscribers wero, in fact, thereby deceived.

Iv regard to the second imputation contained in the report, this related to a long series of transactions which took placa between the New Zealand Loan Company and the New Zealand Land Company, whereby one person at least; Mr Thomas Russell, who was a director of both companies, benefited in such a way a3 to establish clearly in hi 3 opinion a prima facie case of fraud 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 Loan 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 theso transactions tho Loan Company now become possessed of all the ordinary shares in the Land Company except about l-35th. Upon this he thought that as against Mr Kussell the facta raised decidedly a prima facie case of fraud, and went to show that tho 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 tho public examination might be to dear them entirely and also Mr Kussell of tha suspicions attaching to their proceedings— a hope whish was warranted by the high character which was enjoyed by all those concerned. In conclusion, the iearnedjudgesaid that, whether or not aprima facie case of fraud, which, in his opinion clearly had been mada out, wero boruo out by the inquiry, tho report at all events revealed a state of things whiuh demanded rigid examination, and this he thought the directors, conscious of their own innocence, would earnestly desire in order that there might be an immediate public inquiry. Noblesse oblige 1 i

Tha application was accordingly dismissed with costs, leava to appeal being granted. Joint appeal was put in the list for the following day (Tuesday), that being the last day of sitting of the Court of Appeal before the Easter holidays. THE APPEAL AGAINST JIR JUSTICE VAUQHAN WILLIAJIS'S JUDGMENT. The appeal was heard on Tuesday last, the last day of the sitting of ttao court before the holidays, and a general anxiety was manifest amongst all parties (not excluding the judges) to get the matter settled somehow and to catch traius and get away for the holidays. The judges sittingwere Lord JusticesLindley, Kay, and A. L. Smith. The couusel, the arguments, and the audience were, of course, the same as in the lower court. Sir Henry James, of course, began, and as the appeal ended in an arrangement being come to it was not argued out, and no one bat Sir Henry James had anything to do. It was eqnnlly evident in this court that the Lord Justices were against reversing the judgment of the lower

court. Sir Henry James was interrupted frequently by Lord Justice Kay, who seemed to take the strongest view against him.

Sir Henry James complained that though an innocent person might be examined under an order for public examination, yet the public did not discriminate, and would assume that his clients were charged with fraud. Section 8 was intended to be penal. A public examination was equivalent to a committal for trial.—(H£r|j Lord Justice Lindley remarked that that, wati an unfortunate expression.) After such on examination no judgment was pronounced by the court, and an innocent man could net therefore ba actually and completely acquitted.

Here L ord Justice Lindley remarked that there must have been gross carelessness in connection with the issue of the unsecured debentures; and shortly afterwards Lord Justice Kay interjected a question whether it was right for the directors not to tell the debenture-holders, that they had not any actual charge; and his Lordship also commented upon the directora having gone back to the use of tho word " upon " in their debenture prospectuses, and further that if the debenture-holders had no charge they were none tho less defrauded, though there may have been no intention by the directors to defraud them ; would not that be a ground for an action of deceit? Lord Justice Lindley i thereupon said that this court was not tryicg the case. He protested against that view. The caurt was deciding whether the directors should ba examined. He agreed that the court had no; jurisdiction except under section 8. The court had been lax enough under section 3. Sit Henry Jame3 having said that the more public an examination was the batter it would be, and all that ho resisted wa3 an order for examination which conveyed a stigma o£ fraud, the effect of which would be to let loose all sorta of people upon his clients, 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 arguo any longer.

After a long informal discussion, in which it was evident that the judges 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), i i was finally arranged that, by consent of all parties, an order should be made rescinding Mr Justice Vaughau WiUiams'a order and directing a public examination before the court) or before such persons as the court should appoint, with liberty for. the official, receiver and any creditor or contributory to take part iri the examination, putting only such questions as should bo allowed by the court. The depositions to be available for any purposes as if made under section. 8 of "The Companies Winding-up Aot 1890."