HOLDING THE BABY

Otago Witness, Issue 1892, 15 May 1890, Page 14

HOLDING THE BABY

Among all the operations known in mining and other speculations there is none more disagreeable than that known as "holding " the baby," and the general disinclination to perform this sometimes indispensable duty was well exemplified in the case Brodrick v. Hislop, decided by Mr Carew on Friday last. The case lies in a nutshell. In July last — during the Nenthorn boom — a company was projected to be known as the Golden Causeway. It was to consist of 50,000 shares, of which 30,000 were to be allotted to the promoters of the company. The promoters' shares were nominally paid up to 3s per share. No work was done in the claim, which was thus to be

sold to the public by the promoters for £4500. The usual machinery for setting

companies in motion was employed. The prospectus was duly drawn up and circulated, the necessary public intimation was given, and steps were taken to effect registration. Mr W. Hislop was duly appointed broker to the company, and had acquired

1000 promoters' shares paid up to 3s. At this time Mr Brodrick, another sharebroker, desired to purchase an interest in the yen • ture, and expressed a preference for promoters' shares — a preference which, it must be confessed, was quite natural under the circumstances — and purchased from Mr

Hislop 500 at 2s feach, for which he handed over his cheque, and received a proper transfer. Meanwhile the boom collapsed or, rather, the inflation did not increase — the registration of the company was not completed, and Mr Brodrick could not obtain his scrip. Like the heroine in the " Critic," he could not see the Spanish •fleet because 'twas not in sight, and his promoter's interest was not negotiable. The interest was not valueless because of Mr Hislop's failure to implement the contract by handing over the scrip, but from other causes which need not be specified, since they are common to all abortive schemes. Mr Brodrick was now in the unenviable position of "holding the baby," and considered that because of the failure of consideration he should obtain a refund of the purchase money. The other side asserted that be had bought all they had to sell — namely, a promoter's interest in the company, and that both parties believed at the time that registration if not actually effected was about to be. This was not denied, and there were good grounds for their belief, because the prospectus said the company was registered, and, as Mr Carew said, no person believing the prospectus to be honest could form any other opinion. At all events Mr Brodrick sued Mr Hislop for the return of his purchase money, and got it. The defence was that what was purchased was a portion of the interest in the venture, with all

its attendant risks and, of course, all its « prospective advantages. What the court decided was that Mr Brodrick had purchased 500 scrip, which Mr Hislop had failed to deliver. For the defence it was farther alleged that such transactions were carried out every day ia Dunedin, and that ' ail offer had been made to submit the case to the Stock Exchange. If such transactions* are common it is very safe to conclude what the decision of the Stock Exchange would have been, and Mr Brodrick naively concluded that Mr Carew was a better judge of the matter. Meanwhile the unregenerate — that is the public— smile, and no doubt resolve to profit by the interesting insight into the manner in which companies are loaded by promoters' snares. If things had prospered with the Golden Causeway Company ; if the public had been induced to purchase the number of shares necessary t o float the company — the promoters would have reaped a nice haryest. Like too many other ventures, the company appears to have been projected to a considerable extent as a medium for speculation as well as for legitimate working, as all that appears to have been done at the claim has been the sinking of a prospecting shaft, to pay for which a call had to be made. It is time there was plain speaking about these transactions, which have been really largely the cause of mining stagnation, because the public have no reliable means of judging between a reasonable investment and a scheme, partly legitimate, bat mainly intended to benefit a coterie of excessively sharp persons. The Golden Causeway claim may yefc prove to be worthy of its name ; it would need to have more than ordinarily promising attributes to survive its early treatment.