DRASTIC CHANGES ADVOCATED

Timaru Herald, Volume CXXXVIII, Issue 19946, 2 November 1934, Page 9

DRASTIC CHANGES ADVOCATED

COMMISSION’S REPORT TABLED

INVESTMENT COMPANIES' INQUIRY

United Press Association —By Electric Tel egraph —Copy rlgnt

(Received November 1, 7 p.m.)

SYDNEY, November 1

Mr Justice Halse Rogers, the Royal Commissioner inquiring into the activities of certain investment companies, announced to-day that, instead of delivering judgment upon the facts in open court as he originally intended. he had decided that the proper course was to prepare an interim report for the Government, as would be done. OUTLINE OF REPORT COMMISSIONER’S SHATTERING CHARGES United Press Association—By Electric Telegraph—Copyright (Received November 1, 11.59 p.m.) SYDNEY, November 1. The interim report of the Royal Commissioner (Mr Justice Halse Rogers) was tabled in the Assembly tonight. The report recommends the appointment of a receiver and a manager of the assets of the Investment Executive Trust Ltd., and sixteen other companies, and that J. W. S. McArthur should cease to hold any executive position in any scheme for the reconstruction of the companies. Outline of Criticism. The Commissioner opined that public money was unwarrantably invested in speculation by J. W. S. McArthur and C. G. Alcorn, who were actuated by a desire for personal gain, and there was strong ground for saying that they should not longer be entrusted with the control of the affairs of the companies. The Commissioner suggested that they should be declared trustees of the profits made for the benefit of the companies.

There was no doubt, added the Commissioner, that McArthur used the Investment Executive Trust of New Zealand Ltd., in its early stages, for his own purposes, and practically the whole of £60,000 subscribed for debentures was applied to salvaging his own assets, through the medium of Sterling Investments Company of New Zealand Ltd. The Commissioner found that wherever C. G. Alcorn had anything to do with a company he acted according to the bidding of McArthur. Purchase of Trust Building. Referring to the Southern British National Trust Ltd., the Commissioner said that its history was very largely bound up in the transaction associated with the purchase of the old “Daily Telegraph” building in Sydney. McArthur and Alcorn proceeded to make arrangements to obtain a profit of £287,000, without venturing their own money, and the object of the formation of this company was to enable them to get the necessary ready cash for alterations to the buildings, and so turn a profit on paper of £287,000 into actual profit for themselves. Abuse of Public Confidence. The Commissioner definitely opined that there was abuse of public confidence in the transactions between the Investment Executive Trust and the Southern British National Trust. There was a scheme cunningly worked out with the definite object of benefiting McArthur and his friends, and making it possible to say that nothing was done which was not within the law. Whether the transactions were just within or just outside the law, might be a matter for argument. However, there was no doubt that they had abused their positions of trust for their own advancement. Principals Enriched. The Commissioner estimated that net results of the various transactions were that McArthur and Alcorn had enriched themselves by £IOO,OOO without risking a penny of their own money, and by using moneys contributed by the public to the trust companies.

Referring to the balance-sheet of the Investment Executive Trust, the Commissioner thought that this document had not showed any intention to conceal from the debenture holders the real nature of the investments made by the company, or to produce false impressions. Commissioner’s Recommendations. The Commissioner declared that the worst evils of share-hawking were apparent in connection with the two main companies. Upon the question of recommending what steps should be taken for the preservation of the companies’ existing assets, the Commissioner said he had received a scheme propounded by McArthur, but he could not recommend any scheme which left the control, or possible control of the companies in the hands of McArthur, and “my view is that he should cease to hold any executive position. It may be deemed necessary to make special provision for the appointment of a receiver, and a manager of the assets within the jurisdiction of these companies for the time being, and until the wishes of the debenture holders, as to future policy and control can be ascertained.” The Commissioner finally recommended that steps be taken compulsorily to wind up the original V. B. Mclnnes Company, and also Mclnnes (Canberra) Company. It is understood the Government is passing urgent legislation appointing a receiver.

Statement by Premier.

The Premier (Mr B. S. B. Stevens), shortly after tabling the Commissioner’s report, obtained leave to introduce

the Companies’ Receiver and Manager Bill for the appointment of the Public Trustee as receiver to take charge of the assets of the companies and to hold them in the interests of those who subscribed, until methods were devised and sanctioned for their distribution.

Mr Stevens emphasised that many difficulties made it impracticable to invoke the courts, as the contract whereunder the money was subscribed to these companies, was entirely novel. The debentures were not true ones, and were not repayable either immediately or at any fixed date. Very heavy law costs would probably be involved in pursuing remedies. Moreover, it would be impracticable to get meetings of debenture holders, who were scattered throughout Australia. The Bill empowered the Public Trustee here to work in co-operation with the Public Trustee in New Zealand and elsewhere in the Commonwealth and its operation would come to an end either by Act of Parliament or by a proclamation. Bill Rushed Through The Bill is being rushed through all stages despite fierce opposition from Mr J. T. Lang, who claimed that the measure was un-British and unprecedented, in invoking Parliament to do what the Courts were supposed to do. Companies Involved. The companies covered by the Bill are the Investment Executive Trust, Sterling Investments Company, Investments Executives Association, British National Investment Trust, New Zealand Shareholders’ Trust. Wynwood Investments, Pacific Exploration Company, Farms and Farmlets, First Mortgage Freehold Security Company, New Zealand Transport Mutual and General Insurance Company, V. B. Mclnnes and Company (New Zealand), Alcorn and Trower Company, Financial Publications, Ltd., Southern British National Trust, British National Trust, V. B. Mclnnes and Company (Australia) and V. B. Mclnnes and Company, Ltd.