CLAIM ON FIDELITY FUND

Taranaki Daily News, 20 February 1932, Page 7

CLAIM ON FIDELITY FUND

DEFALCATIONS BY LAWYER

FIRST ACTION OS’ THE KIND.

ECHO OF THOMSON—DARLOW CASE

LAW SOCIETY THE DEFENDANT.

Described as the first claim brought to the Court under the Law Practitioners’ Amendment Act, 1929, an important action was commenced before Mr. Justice Blair in the Supreme Court at New Plymouth last night. It arose out of the conviction of H. J. M. Thomson and S. R. Darlow for the theft of moneys held in trust by' the legal firm at Inglewood with which they were connected. The plaintiff is Nelson Ben Bishop, who asks the New Zealand Law Society to reimburse him by £1052 10s. from, the Solicitors’ Fidelity Guarantee Fund.

Wellington counsel is appearing for the Law Society, associated with him being a local barrister. After Darlow had given evidence the hearing was adjourned until this morning. The claim, eaid counsel for Bishop, was divided into two branches, the first relating to £lOOO, and the second to two sums of £35 and £l7 10s. respectively. Dealing with the first branch, counsel eaid Bishop owned a freehold property and a leasehold property. In 1925 he leased the freehold property to Mrs. Weston, with a compulsory purchasing clause at a price of £BOO. About the same time he transferred to Mrs. Weston the leasehold property, and as part of the. purchase price took a mortgage for £650. That meant that Mrs. Weston owed , Bishop £1450—-£BOO in respect to the’freehold and £650 under the mortgage. Early in 1929 Mrs. Weston decided to apply to the State Advances Office for a loan of £1450 to enable her to pay for the freehold and pay off the mortgage on the leasehold. This application was made by Thomson, who was .then in practice as a solicitor at Inglewood. Thomson, or his managing clerk, Darlow, had acted for both Bishop and the Westons in connection' with these matters. PREPARED TO LEND £lOOO.

In September, 1029, the State Advances Office notified Mrs. Weston that it was prepared to lend her £lOOO, not £1450; the security suggested was first mortgages on both properties. The Westons agreed to accept £lOOO, believing Bishop would accept a second mortgage for the £450. Thus Thomson was able io notify the State Advances Office of the acceptance of the money offered, and in November, 1929, the money was received by him from the State Advances. There was no doubt that the money was stolen before December 31, prior to the date from which the fund operated, said counsel. His Honour: How did Thomson get the money? Counsel said that Thomson acted for Mrs. Weston in applying for tire advance and she authorised hiin to receive the money, which came to the post office, was uplifted by him and placed in the trust account. The money when received was certainly not Bishop’s, but either the property of the State Advances or Mrs. Weston.

: In November, 1929, Thomson held for Bishop various documents of title, comprising the certificate of title to the freehold (leased with a. purchasing clause), a memorandum of lease, and a mortgage. Early in November Darlow prepared a transfer of the freehold from Bishop to Mrs. Weston, a mortgage on both properties to the State Advances for £lOOO, and a second mortgage for £450 on both properties in favour of Bishop. The authority to Thomson was that on receiving the £lOOO in cash from the Westons and the second mortgage on both properties for £450 he was to complete the transfer of the freehold property to Mrs. Weston and obtain a discharge of the £650 mortgage. ■ It was claimed—and it was the only question of fact in the case—that before January 1, 1930, Bishop executed no documents regarding this matter, and that anything taking place up till then did not affect him. The Court would appreciate that Bishop and Mrs. Weston had agreed on certain tilings. There were documents held by their joint solicitor; In November, when the money came from the State Advances Office, the transactions were in no way completed. \

LEGAL TEST APOPLIED.

To test the position, counsel said that if on January 1, 1930, Bishop had begun to distrust Thomson and had instructed another solicitor to take over all the documents, etc., from Thomson, he would have received all the money. A memorandum of transfer of the freehold may have been in existence, but was useless because it was not signed until February 5, 1930. After tlie money was received it was misappropriated. Thomson and Darlow were subsequently both prosecuted for theft, and were now serving terms of imprisonment. Darlow would tell the Court that the money was undoubtedly stolen before the end of the year. Both Mrs. Weston’s husband and Bishop from time to time questioned Darlow regarding the reasons for delay in settling up the transactions, and Darlow, in the circumstances in which his office was placed, felt obliged to put them off with the best story he could make up. Weston would say that Darlow said there were difficulties in obtaining a consent from the county council. Then there was a suggestion later on that a more convenient settling day would be the half-yearly day—February 1. But the situation became rather desperate and eventually, towards the end of January, Thomson instructed Darlow to see Bishop and propose to him an investment for the £lOOO cash he was to get upon a settlement being made, the idea being that if Bishop agreed to the money being invested it would not have to be produced in specie. Darlow did see Bishop and proposed a fictitious temporary loan to a man named Campbell, or Cameron, at 7 per cent. To this Bishop agreed, and thus cleared the -way. Darlow at once arranged for a settlement to date from February 1. According to arrangement Bishop and Weston called at Darlow’s office on February 5 and Bishop signed a transfer and the release of the mortgage for £650. Campbell, or Cameron, never received the £lOOO, but interest was paid later. WEETON PAYS A CHEQUE.

Mrs. Weeton having signed all the necessary papers some time earlier, possibly in November, Weston, at Darlow’s office on February 5, paid a cheque for £7B 10s. representing 12 months’ rent for the freehold property, payable to Bishop on February 1, and 12 months’ interest on the £650 mortgage, payable on February 1. A few days later Darlow paid this money to Bishop. Weston and Bishop did not call at Darlow’s office together. The money was payable to clear up things between them to February 1. A bill of costs was drawn up by Darlow

against Weston on February 4, and next day Weston paid the amount involved to Darlow. It was on these two things, said counsel, that he relied on most to establish that ■ a settlement took place not earlier than February 5, 1930. The case for Bishop was that on February 5 Thomson stole the document representing the £lOOO belonging either to Mrs. Weston or the State Advances Office. It was contended that Thomson’s action came within the definition of theft, in that he fraudulently and without colour of right converted valuable documents, the result being a pecuniary' loss to Bishop of £lOOO. Dealing with the’ second branch of th® claim, Involving £35 and £l7 10s., counsel said the fictitious investment of the £lOOO was to be for a few months only. In August, 1030, Darlow went to Bishop and explained the money was wanted by Campbell for a little longer, as he had not been able to obtain a Government loan. Darlow paid Bishop £35, being six months’ interest at 7 per cent., and asked him to leave the money on loan for a short time longer. In November Darlow told Bishop the money had been repaid and was held by Thomson. “If you can find another £3OO I have an excellent investment for £l3OO with Marshall,” said Darlow. Bishop agreed to that, and on November 8 he took £3OO to Darlow at Inglewood. It was after banking hours, and when Darlow said he had the interest on the £lOOO for three months, £l7 10s., Bishop said he would not take it then. Darlow paid him the £l7 10s. ou November 26. / The Law Society admitted the £3OO had been stolen within the time for reimbursement, but claimed to be entitled to retain out of the £3OO the £35 and £l7 10s., on the grounds that it could treat them as paid on account of the £3OO stolbn by Thomson, and that they were set-offs against the society’s liability. Counsel said the most effective way of answering that was to point out that the £35 was paid to Bishop on August 29, when the £3OO was not in existence; it had not then been stolen. Counsel for the Law Society said that the statement of facts by the other side concurred almost in every particular with his side of the case. The only point in doubt was -whether Bishop signed the documents before the end of the year. It was not doubted that there was a purported settlement by Darlow later on.

Samuel Robert Darlow was examined and cross-examined before the Court rose for the night.