LAND SPECULATION.

Press, Volume XLIX, Issue 14838, 2 December 1913, Page 2

LAND SPECULATION.

WALTER SHAW'S AFFAIRS.

SUPREME COURT CASE.

An interesting case was opened at the Supremo Court yesterday when the Official Assignee in the estate of Walter Shaw, a bankrupt proceeded against tho Timaru Property Company on a claim to upset a salo made by Shaw, on behalf of himself and Mr S. Trevurza, to the Timaru Property Company in December last.

Mr Myers, with him Mr W. E. Kin-, nernoy and Mr Geo. T. Weston, appeared for the plaintiff; Mr C. P. Skerrett, K.C., with hini Mr J. A. Ca_sidy for all the defendants except Samuel Trevurza; ar.d Mr J. H. Hosting, X.C, with him Mr H. D. Aciand, ior the defendant Trevurza. PLAINTIFF'S CASE. Mr Myers, in opening, said that the object ol the action w_s to set aside na agr-euitMi- or December 2ist, I__2, and a subsequent trausler ot April loth, 1. i 3, oi tho prop-ity referred to in tho agreement. The agreement, was muue between the d-iendant 'Ircvurza, tlio bankrupt Shaw, and the d-teudant company, tne dc-ieiidaiit company being the purchas-r, so it was contended, of tlie interests of Trevui--and Siiaw in the properties which were in Trevurza's name. The action niigube divided into two branches, and the d-itos oi importauce were the 14th, l.th, and 16th of April, IUI3. On tne 14th Shaw committed au act ot bankruptcy by giving notice of suspension S P _Ssment"of his debts. On the tollowing day another act of bankruptcy was committed, in that there was a meeting of his creditors held when a resolution was passed requiring him to. filo his schedule in bankruptcy. U.April loth tho defendant Company procured the execution by Trevurza of the transfer of the properties, and on April 16th Shaw filed ins schedule, and on that day also the transfer, the execution ot which was P'™l on the previous day, was stamped and re-cister-d on behalf of the company. Concerning the fir*U branch of the case ,t would be contended that the. agreement of December 21st was so.»«*.»£ able and unconscionable that no Court of Equity would allow it to stand, Sd that hJr could have obtgnjd, . and that the Official A«igne* couid now obtain, a decree setting• it . aside It might turn out upon the l hearing of the whole case that that was the stronger branch. The second branch of the ca-e was that the transfer of April 15th, though Shaw himself was not a party to the document, involved & transfer or assignment of certain interests of his which had become vested in 'the Official Assignee. It would no doubt be contended that the prior agreementi of December 21st supported tho tMU__er f but his contention would ne that that was 'no answer it the agreement of December 21st was ono of which the Court of Equity would havo refused Jo decree specific performance. It would be further contended that the transfer of April 15th was in itself an act of bankruptcy _o far as it affected Shaw p property as being a fraudulent transfer. The agreement of December 21st could not be an act of bankruptcy because the authorities showed that an agreement?was not a transfer within the. Act,' and the most that could bo said was that the agreement taken with the transfer was an act of bankruptcy which became complete on April 15th. Difficult questions of law would no doubt arise during the case, but it was essential to show that the agreement of December 21st was one of which no Court of Equity would grant specific performance. It iwould ba"shown, that the agreehient was -of an e-traordihifry nature, and that" with the surrounding circumstances would,' he proposed to show, be sufficient' to upset it. '. Mr Myers proceeded to detail the facts of" the case, when Mr £ikerrett raised an objection. He said that the first branch of tho case as opened involved an allegation >f fraud, but thero was not a word in tho statement, of claim upon the point. His Honour said the statement set out the facts. .

Mr Skerrett said there was not a syllable in the statement of claim which dealt with any such allegation. His Honour said it was sufficient if the facts were set out.

Mr Skerrett said there was no allegation of any knowledge on tho part of the defendants or any one of them of' any circumstances which would suggest they were taking undue advantage of Shaw. .The second branch of the case was also wholly unrepresented in the pleadings. His Honour said the matter seemed to him at' present to be an academic discussion. Unless asked by Mr Skerrett for a definite ruling, he Would prefer to hear counsel for the plaintiff state his case. If at tho end of the case Mr. Skerrett made an application he would deal with it.Air Myers, continuing his opening, said that Shaw started as a solicitor in Timaru in 1906 with £40, and in 1913 ho owed no less a sum.than £50,000, practically the whole of that being trust' moneys which he had misappropriated. There was, as far as could be seen by the accounts, no misappropriation prior to the association of Shaw, with Trevurza, but the misappropriations commenced shortly after that association started. .His Honour: You do not sugyst anything against Trevurza? Mr Myers: No. Mr Hosking:' It is not suggested that Trevurza had any knowledge that Shaw did this? Mr Myers: It is not suggested that Trevurza knew that Shaw was stealing the money. Mr Myers, continuing, said that many thousands of pounds were diverted to Trevurza's speculations, and .the company had the benefit of that if the agreement stood. Shaw became, in effect, tlie banker of Trevurza. The association between Shaw and Trevurza commenced in May, 1907, and within a montii of that time Trevurza's £"3000 was paid away in part payment of properties, and Tr_vui_a wus in fina__ial uihicul.ies. It was then that -"haw made with-Trevurza the uni'ortunaie arrangement out of which the whole of tho suDsequent trouble arose. The indebtedness of Trevurza to Shaw grew and grew until* the weight of it was more than Shaw could bear. That s.ate of affairs affected Shaw's mind, and he became really unfit to attend to ousiness, although, as far as he could, he concealed his condition and end avcured to carry on for fear of consequences. Mr Myers proposed to quote from Shaw's diaries to indicate his state of mind, when an objection was raised. Mr Myers contended that S_aw's distress of mind, the grossly inadequate consideration under the agreement, and the absence of independent advice on the part of Shaw, even without moral fraud on the part of the purcl-aser, entitled the plaintiffs to the setting aside of the agreement. He also relied .on the knowledge by Imrie, the promoter of the Land Company, of the points he had mentioned. His Honour said that as _at present advsed he preferred not to accept any external evidence as to Shaw's stato of mind. Continuing his opening, Mr Myers said that property worth £17,907 "was sold to the defendant company for nominally £7500, which was going to be considerably reduced at Shaw's expense. The ageement gave to Trernrrza £2500, whilo Shaw for Jiis £11,500 of indebtedness, £9500 of which was cash, was to get only £5000, and that subject to deductions. Shaw got no cash, nor anything he could negotiate. His Honour: Why did he take it? Mr-Myers: Because he was in a com-, pie te state of desperation, i ■•;,-'-■,.... .

His Honour: What _o wanted was ready money. -.;'■' Air Myers: Which the agreement did not'give iiiin, a-.th_.ug_ alter'a littlo time he borro-ved on" the strength of the a_i'e-_*:llt. Mr Hosking: He got rid of all tho respon-it-iluies of financing to keep tho _,;_. iiior.gaj.__ goi-g. Mr Myers said that neither Shaw nor Trevurza was to receive any interest, al._,oug_ the company received all t_o income which was about -•-_ per annum net, apart from two properties w_ich if let would bring the annual income to. £11,<A>J. and t_at after ail expenses and interest on tho mortgages. _.'„_ agreement bound tiie company to nothing in*tlie way of giving security. *_*„iw 11-d aiso to inue-iniiy the company against undisclosed liabilities, but Trevurza was the man responsible f.r them, not Shaw. SV.aw was also bound to pay. outstanding commissions which wore "duo only to Messis. Imrie and Higgins, two me:_ bers"of the company. Shaw was also required to take ever a property for £.C 0 which possessed an equity of enly £IGO. Jb'urther the payments mado by the company to Shaw and Trevurza were to be spread over live years. Sbaw was asked by Imrie to initial a statement of deductions from tho £50'__ payable to him amounting to £2052. The total deductions wero £2552, which left £2447 payable to Shaw in respect or the £5000.

Continuing his opening after the luncheon adjournment, Air Myers 6aid that harsh as tho agreement was thero was an endeavour to make it harsher still, for in the draft agreement there appeared a clause to the effect that if the vendor. Trevurza, was found to be liable to Shaw for less than £11,500. Shaw would be liable to account to the purchaser for any such deficiency. That clause, however, was struck out and an undertaking was given by Shaw to refund half the amount should there oe a deficiency from £9000. Shaw continued to muddlo along, but he was T>ro_-ec! from all quarters, and suspended payment. On tho following aay the trans fer was obtained from Trevurza. It war curious that there should be such haste just nt that time after all the delay that had occurred before. At the first meeting of creditors it was impossible to ascertain how relations stood between Trevurz? and Shaw, and it was onlT after mos£ careful investigation that it was found Trevurza • was indebted to Shaw in tho sum of about £10,000. On the facts to he prove*.he would contend that the transaction amounted to such unfair dealing a.* equity considered a fraud, and that was so even if there was no moral fraud on the part of the persons who purchased.

WALTER, SHAW'S EVIDENCE. Walter Shaw gave evidence that he wftf fo I rmerl y -a solicitor at Timaru. When he started on his own account hi \ ad , n ? cash » his oa ly property being, _ third interest in a house, on which he borrowed £40 or £50. He became acquainted/with Trevurza in May, 1907 about a year_ after ho had started iii business. Prior to that he (witness) had not speculated in land. Trevurza who was purchasing properties, broughi a considerable amount of business 't-r. him. He brought £3000, proceeds of the sale of his farm, and £350 later on. ihat was the total amount Trevurzs brought to him. Trevurza was paying cash for most of the properties he bought. Trevurza bought 32 properties to tho value of £10,000 or £11,000 with "V a month, and a good nart of his £3000 was used for tho payment of doposits; which wero usually fairly large. Trevurza as a rule paid the deposits himself to the agents, so that the whole of his money did not go through witness's office. At the end of a month Trevurza was in a bad financial position. The only advice he had giver Trevurza was not to buy so many properties. A good many of the properties, bought wero rubbish, and not more -fagn,four, or five were sold for cash. Tlie. rest .were'worked off by exchanges and deferred payments. -He (witness)., commenced to finance Trevurza.., Trevurza's big purchases commenced to create a sensation among business people, and his (witness'_) name begar. to be associated with Trevurza's. Ho thought the only way to save'his reputation, which he feared would bo affected if Trevurza filed, was to assist him. Even then - Trevurza continued to buy. He told Trevurza he would see him over his difficultie-? but.he would have to take a security over the properties for the money advanced. To complete the purchases he had to raise a considerable cum of money, and he obtained - funds from Kerr's Trustees, John Grieve, and Mr. Chalmers. .Tho securities were deposited in- tne bank and Trevurza arranged an overdraft and drew againsf them. The moneys he had received were to be, invested on first mortgage and tliat was the first case of misappropriation. He took a mortgage from Trevurza, subject to the bank's mortgage for the be.efit of those whose money he applied. His arrangement with Trevurza was that when any of the properties were sold he (witness) was to receive the purchase money. He also took a power of attorney, from Trevurza to enable him to deal with the properties. Ho was also to receive his legal costs and commission, and interest op tho moneys he had provided at the fate of 6 per cent. Later on ho received moneys for investment from other clients, and some of that was used in connexion with Trevurza's purchases. Ho paid his clients 6 per cent, for their money, but later, on- he had to pay considerably more than that. For the first two years he collected the rents of tho properties, and then allowed Trevurza to do so. for Trevurza wanted money for his private use. After lie bought the 32 properties Trevurza acquired others mostly on the exchange system which he (witness) financed. In 1007 he (witness) bought a half-acre section for! £220, in 1909 he bougiit an acre from Trevurza for £500, and speculated further - later.On the whole of his properties he made a loss which totalled about/ £6000. That was quite apart from his connexion with Trevurza. After he mado tho arrangement he advanced money regularly to Trevurza. He kept his accounts with Trevurza fully posted up to May, 1912, but there were items entered up afterwards. In June, 1912. Trevurza left him and. went" to Raymond and Campbell. Trevurza wanted to exchange the whole of his oroperties for a property in the North island, but he (witness) would not consent to it. Trevurza then wanted a settlement, and he offered Trevurza £7000 for the whole of his properties, £500 cash,' and the balance at the rate of £1000 a year. That Tell through, and he then offered Trevurza £7000 for bis equities with one property clear. He (witness) had been to settle up with Trevurza. Mr Imrie, who was acting for Trevurza and himself, endeavoured to fix up a (settlement. At that time Trevurza was owin*_ him about £15,000, which consisted of money left with him for investment and winch he had applied in that way. He told Imrie that his association with Trevnrza was causing a great deal of suspicion, and that it would be better if he could break away from liim. He asked Imrie if he could moke an arrangement between them. Imrie was the .agent for Tre.vurza in bringing about sales and exchanges ; he also acted for other vendors in selling to Trevnrza. He received a notice from Raymond and Camobell that his rower of attorney from 'Trevurza was revoked. Prior to that Mr Geo. Raymond called on him and said that a man named Trevurza had ! called on him regarding his affairs. He told Mr Raymond that Trevnrza owed him £12,000. Mr Raymond asked him where be got it from, and he told him he-had received large sums on deposit. Mr Raymond asked him to __et an account made up, and to have it audited. He objected to several auditors, . and Mr Raymond asked him if he was frightened of anything, and he said no. He.tod Mr Raymond that he had kept an account of his tr__sactior_ witlt Tre-

,v_rza, and that his position with Tre--vurza had made him desperate. Mr Raymond told him that if it got out ho had Tent so much money to Trevurza on doposit money it would smash him. Mr Raymond added " We could smash yon now, but we're not going to do that; we will give you every latitude to have the account made up." It was arranged that Mr Imrie should audit the account. He said it was no use trying to keep the thing quiet if Imrie | were seen' too much about, Raymond and Campbell's office, and Mr Raymond I replied that as far as possible the business would be carried on at Imrie _ office. Witness and Imrie went through the books and made out a statement, which showed that without costs, disbursements or interest, the amount owing by Trevurza was £95,000. That statement did not contain all the items in the account between himself ■- and Trevurza. Imrie knew that the costs, etc., were left out. On June 4th Mr Geo. Raymond said if there was any finance to be done they would endeavour to do it themselves, so as to get witness out of trouble. He did not think that Mr Raymond would help if he tol_ him what the full amount was and so he kept the amount down when he informed Mr Raymond that Trevurza's indebtedness was £9500. With interest, commission, etc., the amount was about £15,000. After the account was made up he met Mr Trevurza and, Mr Imrie to try and m: ke a settlement. Trevurza said he was ent'tiealo £10,000. He told him to pick out what equities he wanted, and he selected equities which amounted on his own valuation to £10,003*. Trevurza said he thought t was a good offei, but told him later that he could not accept the offer. In the meantime rumours were going about that he was robbing-Trevurza of £5 000. and that he (witness) was in a frightful merS and about to go bankrupt. He saw Mr Willie Raymond and told him he was eick of tho whole business, and that he would sell his account for £5000. Mr Raymond asked him if he would make that into an offer, and he replied that he would-be orly too delighted. Jilr Raymond askod him upon what terms he would se_, and he replied that he would want £1000 down and £1000 a year,. A few days later he saw Imrie, who said that Trevurza was prepared to sell also at a big sacrifice. He understood that Trevurza would sell for £3000. Mr Raymond said he thought his firm would accept, and do business, and lie would see his brother, Mr George Raymond, about it. A few days after he was told by Imrie that.Mr George Raymond would have •nothing to do with the matter, as he did not want to have his reputationaffected. He told Imrie that something would have to be done. Imrie then went to Christchurch, and, on returning, told him-he bad done no gocd, and that it was not advisable for a private individual to take, up so large a purchase, and that a company should be formed to do it. **Imrie suggested the names of Messrs Geo. Kerr, Bowker, and Gray, and said he was advised that tbe commission on the formation of the company would be £1000 and the costs £500.

Mr. Imrie said it was Mr Raymond who suggested the formation of a company, and Imrie added that it was impracticable to form a company of four people as proposed. Imrie said that probably he and his partner Higgins might do business if "the offer made to Mr Raymond was made to them. After several interviews the offer was made and accepted, and Imrie told him that Mr Willie Raymond would come in. Ho asked what would Mr George Raymond say, and was told that Mr Frank Raymond wonld come in. He was told afterwards that Mr Willie Raymond was not in. On October sth he signed an offer which had been prepared in Imrie and Higgins's office. . He knew then that Trevnrza had made an offer of his interest. He had prenared a statement showing that the utmost profit Trevurza conld have made out of tho properties if .everything had gone well

•was £9202. had an exaggerated notion as to what he was worth, and he prepared the statement to show him .exactly how he stood. Tho profit shown on the.- statement was after allowing for what Trevurza owed him. He showed the statement to Mr Willie Raymond, and ho thought Imrie saw it also. He prepared also a statement of the equities held by Trevurza, which showed a total of £20,484. He also prepared a statement showing the net income from the properties. The income shown was £1131 10s, after providing for all interest on with two exceptions.', He was anxious to have the matter fixed up, for on account of the rumours in circulation he was afrnid of a rush and a* crash. ■

To his Honour:—He was to receive only £-500 in cash, hut he intended, to discount the bills. He had assets of his own at the time he was negotiating, but few were left in December.

Continuing, the witness said in reply to Mr Myers, that on October 18th he •signed another agreement giving an option to Imrie, and finally an agreement was signed with the defendant company on .December 21st, 1912. On December -18th, when the two months ioption 1 expired a question was raised*by Trevurza s solicitors' as to whether he had been speculating with trust moneys. He was asked to go to Mr Raymond's office, and there were present the three members of the'company and Messrs C. A. Stringer and Campbell. He was asked if he had been speculating with trust moneys, and also as to his financial position. That was the first time, the .question* was raised. He replied that in addition to Trevurza's estate he bad asset- valued at £22,000,. and had .not been, speculating : with triist funds. They wanted to investigate his books, "but he would not consent. The members of the company then went out, and Messrs Campbell .and Stringer told him that as the matter was an important one and affected the company, they did not' want to tike the responsibility, as they thought 4ho company's lawyers should take the responsibility. They asked him if he would go to Ihinedin to discuss the matter with Mr Macgregor. He" said lit was impossible for him to jgo away. People were then watching him, and few_ expected him back after the Christmas holidays. The people who were watching him were people whose money he held.- He did not want his books inspected, for they would have shown the misappropriations. -Mr Macgregor came up from -Dunedin on December 20th, and Imrie told him that Mr Macgregor had advised the company to sign the agreement, and that the matter would be fixed v? the n-xt day. The agreement was signed on De-ember 21st. He consult d no'-odv before he s'g-'ed, for he had agreed to those terms after a good deal of- discussion, and know that no further alteration would be made. He also •!<-«-- -+*-*vfc if +h« nsrrermpnt were not signed Tr vurza would have to file, anl he would h"ve +n lie also, and criminal proceeding*- would then be brought /)ga ; nst him. Under the agreement certain dr'"'""*tion«? were to be rrwle from -""QOO duo to him. On the d*iy thf ji<r--einoTt ~--s rig-prl *,„ he. oou'rl :*•*>- a*"-+h"njy. nr'-'v"*-"''*-" he cor-Hr-_ T-(-nir*-a's arport-_ settled .A+ * Ui * ;*T" tT)t * n-'-'ig was adjourned un-il 10 a.m. to-day.