DEALINGS IN LAND.

Dominion, Volume 4, Issue 1150, 10 June 1911, Page 6

DEALINGS IN LAND.

REMARKABLE CASE, ALLEGED SECRET AGREEMENT. A ITUTT .SPECULATION. Serious allegations were made in Hie Supreme Court yesterday in a case which was concerned with the Inlying and selling of certain land in file Hutt A alley. Mr. .Justice Si in was on the Bench. The plaintiff was William Edwin Redstone (represented by Mr. H. D. Bell, K.C., with him Mr. H. E. Anderson), and the defendant was the Silverstrcam Land Company (represented by Mr. C. B. Morison, with him Mr. A. do B. Brandon, junior). The Claim. The plaintiff claimed .£173 16s. 5d., being six months' interest, from Juno 1, 1910, to December 4, 1910, at £7 per cent, per annum, on the balance of unpaid purchase money, XI9G6 10s., owing by the defendants under .ail agreement for purchase and sale, dated July 12, 1907. The Defencc—Fraud Alleged. It was alleged in defence that in April. 1907, plaintiff, with a view to the formation of a company to purchase certain lands belonging" to plaintiff, gave to the firm of Thomson and Brown an agree-

ment giving sole option for two months ending June 4, 1907, of floating a syndicate to purchase 255 acres 3 roods 21 perches in tho Upper Hutt district for .£8956 10s. At about the samo time, plaintiff agreed with Thomson and Brown that upon their procuring a sale to a syndicate or company to be formed, plaintiff would allow them '.£SOO, and they became, or were, tlie plaintiff's agents to procure the formation of tho company and tho sale to the company. It was alleged that Thomson and Brown represented to the persons who afterwards became incorporated, as a company that they were desirous 'of forming a company to purchase the land, and'that they were themselves anxious to join with others in the purchase by contributing out of their own moneys sufficient to acquire a thirtieth interest, estimated at .£298 lis., and they staied, I hat they wero on the same footing as the other shareholders, and that they considered it good enough for themselves to risk (heir money in tho purchase. They further stated that their only gain (other than the profits of their own share) out of the transaction, would bo the right, .to bo solo for . tho company in realising' tho property, and by.this and other representations plaintiff induced the other persons to join in forming a company. ' The defendant further alleged that plaintiff, through tho firm of A. J. M'Tavish and Co., of which lie was, and is, a member, gave a receipt to Thomson and Brown, who, while acting as agents for the vendor in promoting tho sale to defendants, represented to the shareholders (1) that they were acting solely in tho interests of "the purchasers; (2) that the price, i£S9SO 10s., was bedrock, and not' subject to any abatement, whereas they knew they were to receive and did receive an abatement or commission, of over ,£•' (3) that they were willing to subscribe for the payment, out of their own moneys, and not "out of any. allowance, up to ,£29S lis., whereas they wero to be paid out of tho purchaso money; (1) . that a road along the northern boundary was a public and practicable one,'and that sections abutting thereon were readily saleable, whereas such road, to their knowledge, was not and could not bo made a practicable road, and sections abutting thereon could not' be sold; (5) that the only area which was not practically level

could be sold to a person at nearly the price per acre which was being given for the lot, whereas (hero was no such person and they had, 110 one in view to purchase it. The shareholders and defendant were induced by these representations to enter into the agreement. The defendant company only became aware in December last that Thomson and Drown were acting as the plaintiff's agents in procuring (lie sale and they thereupon notified the plaintiff that they desired to rescind the contract'. On the above grounds, the defendant company alleged that the agreement in respect of which plaintiff was suing was fraudulent' and voidablo at defendant's option. Counter-claim —Rescfssion Demanded, Defendant in a counter-claim asked for (1) a declaration that the agreement was fraudulent and void, and must bo resciudcd; (2) an order for the taking of an account of all moneys paid by defend--1 ant and nil moneys received by defendant in connection with the property, and that iu .such account interest should be. allowed to defendant from I'imo to time on the balance; (3) an order for payment of the net' amount, which upon such recount should bo found to have been paid by defendant together with interest'. In support of this counter-claim it was alleged that' the defendant company had

' paid to the plaintiff JMSifl by way of instalmenls of purchase money and had also paid .C9G3 7-. (id. onaccount of interest'. Defendant had al'o paid rales and other charges on the property and other money lo the plaintiff. Plaintiff': Answer-Some Denials. lu an.-wer lo the counter-claim plaintill' .admitted thai he (,'avc Thomson and 111-own flie sale option lor two months of iloating Ihe syndicate, but denied tlir.t a commission wa.i given to that linn with a view to promoting tho lonnalion of a company. He admitted having promised that if the linn succeeded in Healing a syndicate and effecting the sale he would remunerate the firm, but he denied that they were his agents for any purpose. Plaintiff had nothing to do wnli the formation of (ho company, and denied that Thomson and Brown w pre fhorised by him to make the. alleged represcnt.ilions, lie further denied that such representations, if made, would entitle the defendant to rescind the contract. Tho directors and shareholders inspected the property and were fully aware of tho position and condition of the road bcteio entering into the agreement, lie denied that either the company or the tliaicholders were induced by the alleged iepresentations to enter into the agreement. The directors, iu 1007, were fully of all Hip matters complained of. me whole matter of the sale was completed in 1007, and at that time the directors and officers of the company were Hilly aware of all the facts, and the company, villi full knowledge, elccted to affirm tho purchase, and continued to make tho payments due lo the vendor, and in particular the company, in July, 1009, o fie red to make ono such payment without prejudice to its claims, and when such payment under protest was refused by the plaintiff, the company expressly withdrew all reservation aud made the payment. The defendant company had by its laches and acquiescence ceased to have any right to rescind the contract, even if it had ever had such a right. "A Fiduciary Relation." In view of the character of the pleadings, counsel for defendant began, according to rule. Mr. Morison, after reviewing the facts and contentions set out above, said that the cardinal fact was tho secret agreement between Redstone and the firm of Thomson and Brown. The promoter of a company was in a fiduciary relation to tlie company, and Redstone was the real promoter of this company, and Thomson and Brown were his agents. Kedstone bad induced Thomson and Brown to pose as purchasers when they were really agents for tho vendor. Forming a Syndicate. Arthur Thomas Clarke, accountant and a shareholder, and director of the Silverstream Land Company, said that when no became a shareholder Thomson and Brown stated that they wero taking one share. He signed - a document in the matter at the instance of one Davies, who, lie understood, was in the employ of Thomson and Brown. He afterwards called at Thomson and Brown's ottice, and saw Thomson, to whom ho said lie thought ho would withdraw from the syndicate. Thomson said there would be no difficulty about that, as there were plenty of people willing to come in. He also "confirmed statements mado by Mr. Davies, including an allegation that the hilly portion could bo sold to someone who was prepared to give ,£IOOO for it, and he mentioned that a road had been formed (shown afterwards on plan as Hislop Bond). Witness asked Thomson what ho was getting out of it, ;'and the latter replied that ho was getting a good commission on tho sale of the sections for tho company, and would be content .with that.- Witness believed these statements, aud did not ask if he was also getting a commission from tho vendors. Witness then decided not to withdraw. In 190S witness and Mr. Hunt, at the request of the shareholders, held an inquiry into the defalcations of one Elliott, who had been secretary of the company. At that time Dymock, who succeeded Elliott as secretary, handed to witness and Mr. Hunt, what appeared to be a .copy of a letter from Thomson to' Elliott. When witness discussed this with Thomson. the latter, said, "You're making l a. great fuss about nothing! the shareholders' will do very well, in spite of Elliott's defalcations." Ho also said that tho letter, which promised Elliott a commission, had never been acted on. Witness on the same occasion asked Thomson whether he was taking any other coinmission other than those from the company, and Thomson replied in the negative, and raid the company was getting the property at bed-rock price. Witness accepted these statements, and reported accordingly to ths directors. Mr. Bell, cross-examined witness as to the expense of forming n syndicate. Would he expect that a syndicate of 30 persons could be formed and united by a binding agreement without expense? Witness said there was very little expense in the present instance. : Did you and those associated with you in the syndicate ever offer to pay the expenses in'cnrred'in forming the combination which brought you intq the position of purchasers'?—! was never asked to. Did you offer —No. Did it never occur to you that it was th(? duty of yourself and those with you to pay the- expenses that had been 'incurred by Thomson and Brown?— No. A Letter and Explanation. ' Jlr. Bell pointed out. that Thomson and Brown in tho letter to Elliot' said, "Wo hereby agree to a reduction of ,£lO on your deposit of .£32." They also agreed, by the samo document, to allow him a commission of ,£7 10s. on each share he sold, provided that the company was floated with 30 shareholders. Counsel asked whether witness was not struck by the "startling inconsistency" between that document and Mr. Thomson's statements that tho company was getting tho property at bedrock price, and that he was getting only tho commissions from the company on sales of sections. Witness replied that he simply asked the question and received the answer. . And you were not surprised?—No; because tho letter was never acted on. It was only in the event of Elliott getting the shares which he did not get. Witness further stated" that after the o.bovti incidoiu hu bccame a director of tho company, and after that he visited and inspected the property. He then found that certain roads wero not made and ho came to the conclusion that lie had not made-a good speculation. Ho had taken his half-share in (ho company on a representation that a road, as shown on the plan, running along the boundary of the property was a proper!v-forn-.ed road, and he found on inspection that it was not. Ernest William Hunt, accountant, q] so gave evidence. Hon. Mr. Hislop's Evidence. Thomas William Hislop, a director of tha company, said Thomson induced him to become a shareholder in tho syndicate At that lime he had absolute confidence in I liomson, whom lie had known from a child. Witness remarked upon the low. ness of the price which Thomson ?aid he had an acre-for laud eo near tho railway. Thomson described the land as close to the railway line, whereas it was about 30 chains away. He said it was nearer the station than a certain other property—which, it was not. .Witness also asked Thomson what was his interest in the property, and he replied that he merely wanted to have chargo of the development of the property, and because ho knew it was a good thing, and he would be able to make money for himself and the others. He also said, in reply to a direct question, that ho was not employed by the vendor and was getting no commission from the vendor. Witness relied on these statements, because he trusted Thomson, and regarded him as being in common cause with himself.

Mr. Claris convoyed to the directors the result: of his inquiries as (0 Thomson's interest in the enterprise, after Mr. Clarke had seen the copy of tlio letter f;> Elliott. T!ii= report was made viva vocc at a meeting of the directors. Three or four copies of tho letter were found among Thomson and Brown's papers, but none among Elliott's papers. Mr. Clarko had said lie was satisfied with the explanation given by Thomson. Thomson had spoken very highly of Elliott, and said lie was very glad' to havo him associated in the matter. Describing what lie saw 011 an inspection of (lie land, witness remarked: "Any person who had bought that land on the representations made to us by Mr. Thomson would have felt very sick tho first lime he saw it." After that the directors had different opiuions as to how to deal with the laud.

Suspicions and Questions,

Witness complained to 13rowa, and also to Redstone of. misrepresentation by Tliomson. Redstone denied that Thomson was his agent. 'Witness had at that time no fact connecting Redstone as vendor wifcn Thomson as his agent. Witness iiad afterwards, at' his own office, an 'interview with Redstone, who said lie had ahvays treated the company fairly. Witness replied that under ordinary circumstances they would have no right to complain, but they- had. considering (he kind of property that had been planted on them. Redstone said that he was not responsible for. any misrepresentations that might have been made. He also again denied that Thomson was his agent, but on'boiii?. further questioned; admitted, that! Thomson! got: .ai commission. The following conversation ensued: —Witness: What sort of a commission? Redstone: 1 don't know that I shall toll you. Witncss: Did he have five per cent. Redstone: Yes,' he had five per cent. \\ ltliess: How can you say that he was not your agent when you paid him that commission? Redstone: 1 only gave liim an option, and he got the commission on the acceptance of tho oiler. Witness called tho directors together, and reported this interview. They failed to get any satisfaction from Redstone, and they wul'e. considering whether they should claim rescission-of the agreement, rhey would probably have done so, but the plaintut anticipated them with the present claim for interest. ■

Cross-examination, To Sir. Bell: Ho did not know' what tho expenses of getting up tlio syndicate would 1)0. Ho had known s'icli things done for nothing. Tho. shareholders did not oiler to pay for (ho printing, etc.; they understood that Thomson would get tho sale of sections at G per cent. Ji lie had supposed that it had cost as much as ,£3OO to (leal: tho syndicate, he would have seriously inquired into it. Was it not been use you believed no was being paid by ilie vendor that. .jou made no'offer to refund tho expenses.— Absolutely untrue. ... , Witness also said that if he had heard at that time anything about a commission paid by the vendor to Thomson, ho would have seriously inquired into it. Anything above 2', per cent, would be evidence of fraud. Cross-examined as to his action in going into the company without first inspecting the land, witness said he hail had several investments m the tiutt Valley, and all of them except this one had been fortunate. He also said ho had been in half-a-dozen speculations without seeing the property. Mr. Bell: And been a director?—les. Mr. Bell: Well, Mr. Hislop, I don t know what a Judge would say to that. Ed far Marris. joiner, said he jollied tho syndicate, being influenced by tlio statement that tlio price was not loaded Hit nil. Evidence will he continued to-day. but counsel's arguments will bo heard at ft later date. • 1 i Tlio Court adjourned until 10 ociocK this morning.