YACHT MOREWA

Southland Times, Issue 22993, 12 September 1936, Page 8

YACHT MOREWA

Question Of Her Ownership JUDGMENT IN FAVOUR of McArthur (United Press Association.) Wellington, September 11. The ownership of the yacht Morewa and the complicated financial dealings connected with it were the subject of a judgment delivered by his Honour Mr Justice Johnston in the Supreme Court. The plaintiffs, Pacific Exploration Co., Ltd., financiers, and the Sterling Investments Co. (N.Z.) Ltd., investors, two companies formerly in business in Auckland and elsewhere and now in liquidation, sought a declaration that John William Shaw McArthur, a company promoter, was liable to pay either plaintiff £10,335 4/4, or the value of the yacht at the date of its acquisition by McArthur, together with interest at 6 per cent., and an inquiry as to the value of the yacht at the date of its acquisition by McArthur and all necessary directions as to the holding of such inquiry. The case occupied four days last month.

The judgment, which covered 18 typewritten pages, dealt exhaustively with various aspects of the evidence and submissions. “In this case,” his Honour said, “I have felt that so far as regards the particular transaction involved—the disposal of the yacht Morewa—l cannot deny to the companies their legal status and that the control of the companies by the defendant is not in -itself sufficient to entitle me to impute fraud without better proof than has been offered in this action. Without fraud, I think it is clear that the weight of evidence is against, the interpretations placed on the transactions by the plaintiffs.” Companies Saved Loss. “I can see no reason why, if the defendant wished to purchase this yacht, he had any object in deceiving or defrauding the companies he controlled. If they were mere aliases he would only be deceiving and defrauding himself and, prima facie, it appears on the construction of the entries in the books of the Pacific Company and the balance-sheets of both companies, that the sale relied on by the defendant saved both the Pacific and the Sterling Company a considerable loss. In all probability they were both bound to suffer. If, to liquidate the Pacific Company’s debt to the Sterling Company, the yacht had been put on the open market, it is clear from the evidence of the accountants that by taking over the whole of the indebtedness of the Pacific Company to the Sterling Company, the Pacific Company was properly credited and the defendant debited with the whole of the moneys spent on the construction and equipment of the boat, leaving the Pacific Company reimbursed for all the expenditure on the yacht. As, in my opinion, the only interpretation to be put upon the Alcorn receipt is that given to the accountants, Messrs Glenn and Johnston, I find it impossible to hold that the plaintiffs have proved either the sale by the Pacific Company to the Sterling Company and the delivery to the defendant to hold upon trust for the Sterling Company or the failure to pay the stipulated consideration.

Stay of Execution Granted.

“In the event of it being held that the agreement for sale was made by the Pacific Company to the defendant I have not forgotten, in the consideration given to this case, that I should entertain the gravest doubt about the truth on any statement made by the defendant when it is to his advantage that that statement should be made. His credibility as a witness is gravely shaken by his conviction for the issuing of false prospectuses. Nothing that I can do in this action can assist or in any way affect members of the public who subscribed to the company to recover their losses. It may be that the manipulation of companies allowed by the Companies Act opens the way to fraud and that the control as was exercised here provides a good target for attack.”

Judgment was entered for the defendant with costs and witnesses’ expenses and disbursements. On the application of Mr Watson, a stay of execution was granted, provided notice of appeal were filed within 28 days, the costs to be paid into court within seven days and to be paid to the defendant if the appeal be not lodged within 28 days. Leave was given to the defendant to move to set aside the order on seven days’ notice.