THE JUDGMENT.

Otago Daily Times, Issue 11399, 17 April 1899, Page 2

THE JUDGMENT.

March 11.

Before Mr Justice Kekewich, in the Chancery Court, on Tuesday, the hearing of the consolidated actions Wilson v. Lubbock, and Lubbock v. Wilson, was resumed. The amounts in dispute were as follow, with the acreage of tbe blocks and the names of their purchaser-:—(1) Sir J. Innes and James Innes, 5155 acres, £4500; (2) W. J. Wadworth, 3018 acres, £1400; (3) 11. Colthart, 416 acres £381; (4) J. Craik and 1. Searle, 370 acres, £370: (5) A. Earshmuu and M. M'Kay, 2200 acres, £2934; (6) George Robertson, 290 acres, £290; ((7) 0. H. Gossett, 310 acres, £258; (8) T. Miles, 371 acres, £303; (9) C. Ensor, 8250 acres, £5716. In addition to these, which were tabulated, were amounts of £9000 referring to what was known as Courage's land, and £4000 equity of redemption for that £9000; £2200 in respect to what was known as Cordy's land; and £6200 taken when the Government seized the line, and being not moro than what was' due to Mr Wilson. • . , On the resumption of the hearing, several witnesses (including Mr Brodie Hoare) were called to speak of the methods of procedure adopted by the company, and to bear out statements made by counsel. Mr Swinfen Eady then opened for the defence and for the debenture-holders, intimating that he would call no witnesses. He then proceeded to argue upon the wording of the debenture-holders' trust deed, by whicli he said, the New Zealand Midland Railway Company was expressly forbidden to use certain of the lands except for the debenture trustees. The company, ho contended, had no power to create another security upon, or interest in, these; it had no legal right to pay away any of the proceeds of the sale of debenture lands or mortgages. Having thus dealt with the general proposition, he said he would proceed to deal with tho amount of £6200. Mr Justice Kekewich said this was a very complicated case, and he would like Mr Swinfen Eady to take the items in the same order as had Mr Buckley. Mr Swinfen Eady said he would. Ihe £6200, however, was a separate transaction altogether, and he would like to take that first. Then ho would take the other items in order. Continuing, he said the company made default in paying the coupon which became duo in April, 1895. Mr Justice Kekewich: Mr Wilson said he took this £6200 from the bank because if he did not neither he nor the company would have got it. As far as I can see, it is perfectly straightforward. Mr Buckley: The Government would have got it. Mr Justice Kekewich: Whether he ought not to have paid it over to the company, and whether the company should not have paid it to the debenture-holders, is another thing. But what Mr Wilson said was: "Ifl do not tako the amount owing to me, none of us will receive it." So far, he was wise in his gene-

ration. ' Mr Swinfen Eady said he had not sought to attack Mr AVilson in any way. The question was purely a legal one. Mr Justice Kekewich: Wilson was placed in a very difficult position. Mr Swinfen Eady: .Tery difficult, indeed. Passing on, he said the matter of the £6200 was a very simple matter: it was the deben-ture-holders' money, and Mr AVilson had no right to possess himself of it. That was his contention in regard to that. Passing on, Mr Eady said as regarded No. 1 mortgage, he could not continue to claim that, and would give it up. It was " shareholders' " land (land not earmarked), which could be used for construction purposes. -He would givo up No. 2 also, which was also "shareholders'" land, but he contended that the proof that valuable consideration for No. 2 had been given by Mrs Wilson proved also that Nos. 3 and 4 should go to the debentureholders. He reviewed the figures in Mrs Wilson's cheque-book to bear out this contention. Even, however, if she had paid full consideration she could not claim, as regarded Nos. 3 and 4, the transaction having been .carried out by her husband, who held power of attorney for the company, and who knew of the debenture deed. Not only that, Mrs Wilson was a debenture-holder, and must have known of the deed. That portion of his argument applied to all the mortgages from 3 to B—that was that she had had notice oE the true legal position whon she took the transfers of the mortgages from her husband. Leaving, then, the tabulated statement which included mortgages 1 to 9. Mr Eady dealt with the £9000 in respect of Courage's land. This was part of the debenture-holders' land, and as such was subject to the deed. The £9000 was spent in New Zealand, and in regard to this particular transaction the company had no power to mortgage the land ; and secondly, if they did, and if Mr Wilson advanced £9000 on it, that sum should have been paid over to the debenture trustees. Then, as to the £4000 which it was said was advanced on Mr AVilson getting the equity of redemption on Courage's land, there was, he held, no evidence of Ihis. In going through the correspondence in respect of this land, Mr Eady read that Courago had at first refused to buy

"as long as this Government is in power. Thero was, Mr Eady contended, not a particle of evidence that Mr Wilson had paid the £4000. His (Mr Eady's) submission was that the £9000 mortgage itself was invalid, and the equity of redemption, for which £4000 was said to have boen paid, was also invalid. He did not seek to impeach the conveyance to Courage, but as against tho debentureholders Mr Wilson could not hold it. And tlio same argument applied to the £2200 on Cot-dy's land. Thus having dealt at considerable length with, tho items iv detail, Mr Eady proceeded to deal with " that which was behind the whole" —namely, whether priority was given by the Mow Zealand law to thoso on the colonial register. Against this he quoted the case of Lord Cranstone and John«lon.(3 Vezoy, pages 107 and. 182), the great caso of the British South Africa. Company, 1893 (Appeal Cases, page 626), and others, to support tlio ruling laid down in the first that English law of equity would not permit a foreign,law to commit a "gross injustice." Mr Warrington also argu.d at some length on the same side. Mr Buckley replied.

Mr Justice Kekewich, in the course of a lengthy judgment, after reviewing the relationship' existing between Mr Wilson, the company, and the debenture-holders, said the two first-named could no more have used for railway construction purposes the money obtained by realisation of the mortgages than lhey could have used the one-third of the purchase money which was paid- down at first. And Mr Wilson, being the agent of tho company, how could lie be said to be at liberty to execute the mortgages on debenture lands from the company? This, he (the judge) said, subject to a certain proviso, he would deal with hereafter, which protected sales.

He then proceeded to deal with the items in detail. As regarded mortgages 1 and 2, which were on shareholders' land, the com-pany-were perfectly free to deal with thorn, and they had been now given up by the de-benture-holders. With regard to mortgages 3 to 8, these were, in the first instance, un-, justifiable. But they hod become vested in Mrs Wilson, and it was admitted that her title then became good, unless she herself was affected by notice of the debenture-holders' rights. It had been, suggested, in tho firßt instance, somewhere in the pleadings, that she was merely a nominee of her husband. Not only was there no evidence in support of that, but the evidence was clearly against any such suggestion. She had the money, was in a position to pay the money, and it must be taken she did pay it. _ Therefore there was nothing to be! said against her as regarded these properties, unless she was affected by notice. The argument that she had notice rested on two ' grounds. Tho first was' that she was Mr Wilson's wife. He (the judge) thought it a very unreasonable proposition that she should be taken to have had notice ■ on that ground. He had not sufficiently considered the point, but he would lie disposed to think that Mr" Wilsonwould not.have told her. The other point was that she was a de-benture-holder, and in that way had knowledge. But ho thought that was straining the doctrine of notice too far. lii therefore seemed to him that Mrs Wilson's title to mortgages 3 to 8 was perfectly clear, she being a "purohaser or transferee," whose title, it was provided, should not be affected. When they came to No. 9. the judge .went on, they had got rid of Mrs Wilson, and back to Mr Wilson again.-Without question, salary, commission, etc., were due to him, and, assuming that the company had money which they could properly pay him, the transaction would have been straightforward enough. But no money really passed.' What happened was this: The mortgage stood in the same position as the rest; Mr Wilson took it and wiped off liis debt. The companywere no-better off. than they were; he. was, because, he. had something valuable vyhiph he could convert into cash; If his (the judge's) view was right as.to the construction of the trust deed, the company had no right to do that.' Mr Wilson's title to-that was therefore bad.; he, had no right to take the mortgage and the company had no right to give it to him.

Coming how to the £9000. that was a mortgage by the company to Mr Wilson of land, coirprised in the trust deed. If the construction he had placed on the deed was right, this conferred no title on Mr Wilson. Provisions protecting the purchaser could only be made applicable.when tho cash found its way Irom the hands of the company to the trustees. As regarded tho £4000, too,''that mortgage, he held,\vas not good as against the trustees. It was good as between the company and Mr Wilson, but not as regarded the trust deed and the debenture-holders, 'fqr whom Mr Wilson really was trustee,, A somewhat different transaction was that of the £2200. Money, was urgently wanted to meet the expenses of the arbitration in New Zealand. Mr Wilson provided, it, taking against his advance a charge against the land concerned, and that had been converted into equity, of redemption. Now, if this transaction'was a mortgage it. was bad. If'it was a sale, it waa good, notwithstanding Mr Wilson knew that the money would be. diverted from the trustees. There was no proof of the exact bargain, but it might bo fairly inferred that the realisation of the equity of redemption, for which no further consideralion purported to be given, was part of the original terms, and that it was in substance a sale, and was therefore protected by subsection ,3 of the act, which.made Mr Wilson s title good. Finally, there was the transaction of £6200, which. stood alone. Tho company were in default; the Government were about to step in; there was this £6200 to the credit of. the company. This money represented proceeds of sale on charged or debenture lands. The company, however, owed him money, and he took it—in a straightforward way. But, as a matter of fact, he diverted the money ' from tiie proper hands and made it impossible for it to find its way into the hands of the trustees. It was suggested the money could bo so used." because the relation of tho London and New Zealand funds at that time allowed it, and that if the money had been remitted to London it would have been returned to New Zealand for construction purposes, when Mr Wilson would have been in his right to apply it as against his debts. The judge said he failed to understand this, because it was expressly stated that the money from charged lands should go to the trustees of the deben-ture-holders. Therefore this belonged to the debenture-holders. Beyond all this, however, Mr "Buckley contended that tho Now Zealand Land Transfer Act gave -Mr Wilson an unimpeachable title. It'was not his (the judge's). duty to construe the colonial act—at any rate, not to consider it carefully. It certainly seemed to his'mind perfectly clear tbat under'it registration was essential to title, and that more than that, when there had been registration, he who registered got a title against all ihe world.' But what Mr Swinfen Eady said was that Mr Wilson was simply trustee for the debenture-holders, and that he (Mr Eady) was entitled to enforce a personal claim. The principal authority relied on was Cranstone and Johnston (3 Vezey, page 182), where it was held that a person could not gam an advantage which neither the law of this nor of any other country would permit. This seemed exactly what Mr Wilson had done.and he must decide- against him. ■ __•■ As to the distribution of costs, the judge sai-l he would decide on Tuesday next. Mr Buokley submitted h_ was entitled lo an inquiry os ti) whether any of tho -.C()l)M and the £4000 really reached th" hands r.f the trustees. If so, he was entitled to it. Mr Justice Kekewich thereupon gave permission for an inquiry into rhe accounts m I relation to these sums.