TRUSTS ACT CASE.

Dominion, Volume 6, Issue 1610, 29 November 1912, Page 3

TRUSTS ACT CASE.

' MR. FAIRBAIRN AGAIN. NO EVIDENCE FOR DEFENCE. - BUT NONSUITS ASKED. THE JUDGE REFUSES THEM. COUNSELS'ADDRESSES. Evidence offered by tiie .Crown in tho Trusts Act case was completed soon after the hearing was resumed yesterday morning, and the next phases of tho action were nonsuit-points raised by the defendants, followed by an announcement that it was not proposed to call.'any evidence for the defence.... The case,, as Us now. .sufficiently likown, is one against a Dumber of defendants for participation in an alleged monopoly. The proceedings, which are 'being taken in the Supreme Court before the Chief Justice (Sir Robert Stout),'are the first 'under, the Commercial Trusts Act, 1910. The plaintiff is his Majesty the King. The defendants are the Merchants' Association of New Zealand; Incorporated, a trade protection society, Wellington; the Colonial Sugar Itefining Company, Ltd., incorporated in New South Wales, sugar refiners and sugar merchants, Auckland; Levin and Co., Ltd.,' W. M. Bannatyne : and Co., Ltd.,' and Joseph Nathan and Co., Ltd., all'merchants, of Wellington. Tile Attorney-General (the Hon. A. L. Herdman), Sir John Findlay, K.C., and Mr. H. H. Ostler, of the, Crown Law Office, are appearing for the Crown. . Mr. C. I>. .Skerrett, K.C.; with Mr. C. ' H. T-readwell, is. for the' Merchants' Association; Mr. J.-H. .Hosking,,K.C., of Dune.din, .with Mr. H. P; Richmond, of Auckland, for the Colonial. Sugar ' Refining Co o Ltd.; Mr. M. Myers for Levin and Co., Ltd.,; and Mr. T. Young for W. M. Bannatyne and Co;, Ltd., and for Joseph Nathan and Co., Ltd. ■' ' Mr. Skerrett and Mr. Fairbairn. : Hearing of ■ the case commenced on Monday. The first three days were occupied with'the Crown's opening, and the Crown " witnesses. : When, the. adjournment, was ..taken on Wednesday evening, Mr. Skerrett had not. completed his crossexamination of ..Andrew Fairbairn, of tho firm of and Co.' Yesterday morning the witness, in answer to further questions, said that with the exception- of a couple -of firms, which he had: already / named Fairbairn, Wright and Co. allowed all their friends. the same-'discount on'sugar, retaining 1 per cent' or .i.,per cent, thein- ' SelveSi ;!i On other lines they' charged 2i' per cent, or less, but there were cases where'they had to charge 10 .per cent, or more.That was because of.tlio tariffs. : Mr. Skerrett: ,Y'ou J re very touchy on this question'of'tariffs? ." ,> '• ; Witness "replied that :he did not Relieve in them at "all, and had been fighting against-them. Headmitted that it : was a general>rule . that' when. accounts were paid within ; seven weeks, the business wa-s treated as..casli; .At current rates of interest, however, it had to be remembered that - the money ■ during. this period. was worth J per . cent. That was an important: question. ' - : . : On the question of sugar,. Mr. Skerrett ■asked.'if the .price-"of sugar' in New Zealand was riot, necessarily controlled by the price of sugar in. the world's market.' : Witness,:-,lt ought, to be, but w;hen you liijvo, a-sugar business olosely-confined it is a different matter. It. is a very difficult tiling for any individual to import suear. into New Zealand. \ . Mr. Skerrett: was proceeding to crossexamine the witness on. the question of retail profits, when the witness appealed to the Chief Justice. .

His- Honour thereupon remarked that ho could Sirtt sss ivhnt benring the questions had. If counsel wore takinjr this lino, he ought to bo : able to show how the question of the profit chared by the rothiler affected the position. here.

• Mr. Skerrett then stated that tlio position was whether the profit;made by this combination was a reasonably one. Ha. submitted that the discounts:sriven away l>y the merchants never affected the public. ■ ' . ■ ■ ■ ' . His Honour did not think tliat .it had any "bearing' on. the question.' ; He had said on'., the previous . that • ho did' 'not ■■■think that two-thirds of the cjuostjons had any'bearing oil tlio -point at issue. ■ ■ -'- .■' '■'■.■•- discussion, his -Honour al-, lowed tjio examination to continue. .' Witness; in reply to another question by Mr. Skerrett, stated that,one retailer had been satisfied with 1G per cent, profit. ... Mr. Young and Mr.y Fairbairn. ' Mr: Young, who next took-tip. the crossexamination, asked questions; as .to.- the' profits made by the. .witness on .lines other, than sugar. ■ ' • . ~ , ■-. Witness again appealed' to the- Chief Justice. •■' .-;■'■ .' '■•'■• ,' ' His Honour • inquired • what was . the-ob-ject of; this line of examination. Mr. Young remarked' that the ■witness; had stated that ho was satisfied with J per cent, on vulgar, hud-;.counsel' wanted to show that this , satisfaction was due to profits wliich he" gained on other lines. . . . His Honour, ruled that the witness need not, answer 'questions that-would ■ disclose,'his private business." : • Witness suggested that, if ; counsel want-, ed.to find but '\rlio were 'really ';charging, the higher prices, lie (witness) would''pro-; duce his pries- list,' and co.uns'el .could produce the., price list, of the' -Merchants' Association, and-leave it to the Court .to decide.. ' <• • '' His Honour remarked that that seemed a reasonable offer, and.-the? matter would then be confidential. . - ' Mr. Yeiirig,. who said he-was not there to make bargains, declined'to, accept the offer,' but asked leave to continue''liis •examination.' ■ /. His Honour: It is' not usual,for a firm's' . private business to,. be disclosed "to. the' public. . . . . i' : . .'.Mr. Young: But your Honour can order' the reporters, to take'no 'notes. His Honour: No,. I have no power to do that. I ' .- , ! After' a little more discussion, his Honour. ruled that this lino of eross-examina- : tion- could 'not-be proceeded : with, and Mr. ,Young sat down;.. Sir John Findlay then reexamined the witness. 1, .- ■■'. The Crown.Case Closes. Thomas ICing, of Levin and Co., was then , called by the Crown to produce documents';(cheque • butts,-, etc.) showing discounts "paid on .account-of 'sugar. . The Attorney-General then- announced •that. the: Crown case had -closed, but he ■'wished:-it. toi be' understood that the min-' utes of tile Wellington Merchants'. Association, the-articles, of -association, the agreement relating -to corn broom,, and 'the .agreement relating to terms, fere -all in the custody of the' Court, and would, be used by'-the-Grown in addressing the Court .if. they could be shown .lo be role-, vant. - ■.'■■■ ; .' •!.. ■ ■ •Mr. Myers' Asks for, Nonsuit for Levin . and Co. , . jlr, Myers tlien. submitted tliat Levin and Co. were .plainly en titled to a nonsuit on .the second action (charging them with paying the discounts), 110 would alta 'submit that it 'was equally "clear that his clients were entitled to-a nonsuit ill' so fa.- us. the cause of action was conoci'ried .that was contained in paragraph '33. of', the statement of claim in the first action (the refusal to supply Fajrbairii, Wright, and Co.-with sugar for the alleged reason (iint . Fairbairn, Wright, and Co. were not members 4 of the' sugar ring;. Counsel submitted that there was no. evidence to show that Levin aiiil Co. had refused to supply Fairbairn, Wright,..and Co. for the reasons alleged. Indeed, the evidence of Mr. Fnirbairn himself showed thai: lire mutual ■business relations between the firms, which had existed for some time ..prior lo Octol'.oi', 1911, had ceascd for an, entirely different ; reason. There was further proof of this in the correspondence, and no broach, of Section 4 of the Act had beeii disclosed. In rcyard lo the charge contained in the second action, counsel argued that ( no breach of Section 3 of the Act had been proved against Levin and'.Co.,-.who lincl merely held the money in trust f«n ti e

other firms, and had not actually paid the discounts. \

Mr. Hosking Asks a Nonsuit for the . Sugar Co. Mr. Hosking also moved for a nonsuit on behalf of tho. ColohiaL Sugar Refining Co. in connection with tho same causes of action mentioned' ly Mr. Myers. He contended that thero was no evidence to show that the Sugar Company had been aware of any application to Levin . and Co. to supply Fairbairn, Wright, and Co. with goods,'nor-were the Sugar Co. parties to any refusal!.. His Honour'said that all he ; had to consider at 'tliat stage was whither a prima facie caso had. been mado qut. Mr. Hosking: And I submit there is not. . • His Honour was of opinion that there was something in the correspondence that the company 'would have to explain. Other for Nonsuits. Mr. Skerrett moved for' a nonsuit on the same grounds taken by , Mr. Myers and Mr. Hosking, and in respect of the same causes of action. contended that the discounts jiad'been held by Levin and Co. in a fiduciary. capacity. Counsel _ also moved for nonsuit on the additional ground that there was no proof that tho Merchants' Association had interfered in any way in the. conduct of the business of any member of the association. Mr. Young finally moved for a nonsuit on behalf of his-clients, taking the same grounds as other counsel. The Nonsuits Refused. His Honour, without calling off tho Crown to reply to the 'arguments raised in support of the motion lor nonsuit, said: "1 do not think it is necessary at this stage to express any opinion. I think it is a case which requires further investigation. ..I thereforo refuse the nonsuit." In answer to' questions by his Honour, tho different counsel for tho defcnco intimated that they did not propose to call any evidence. Sir John Findlay's Address.—The Alleged Hostility to Fairbairn, Wright and Co. In addressing tho Court for the ■ Crown, Sir John. Findlay pointed out that the Commercial' Trusts Act was 'designed to check-artificial competition.. To ,do this, the Legislature defined a commercial trust. Tho definition was in the very', widest terms because attempts at legislative remedies kid very often proved that if tho net were not wide the escaped, it was necessary tor the.'Crown to establish that tho. Merchants' Association' was a commercial trust existing for the purpose of influencing and controlling prices. The Crown rciied mainly on Section 3 (but they also relied on bection i). of the Act, on.tho ground that discounts were.allowed and given by tho Sugar Company and by Levin and Co. to members, because they wore members of a commercial .trust or had agreed to submit to the directions of tho trust. Secondly, they would show that Levin and Co. and the Sugar Company refused to6upply goods to Fairbairn, Wright and Co. on relatively advantageous terms- because Fairbairn, Wright and Co. were hot membei's of the commercial trust or because f-hey refused to obey .the,direc-. tions of the trust. Lastly,' the Crown' charged tho defendants with conspiring to establish' a monopoly. It was not necessary to prove that a monopoly existM so long as it were proved that a system existed whereby discounts were allowed 'to members of a commercial trust, aiul refused others because they would not.be-' come members of-the trust. Nor were they bound to show that the operations of this trust were prejudicial to the public interest, although, he b'elieveil that there' was ample, proof before the Court that the public interests in this Dominion were being-seriously invaded by tho operations of the defendants: -

' Counsal reviewed ,the events responsible for' bi'caking down:,tho restrictions and limitations of trade and the new dangers that had arisen in .'every part of the world through the operations of combines.He then proceeded to. review tho evidence and the correspondence' in tho present case, submitting that the plain object was to gain control of..tlie .'sugar supplies of the Dominion';' It, ,ha<l been suggested .that ■the,,evil .effects .of the combination could., .bo I checked, by n ,thc importation of foreign sugar, but' counsel pointed out tho forces tha't.would be arrayed against the importer .in such a case. ,He then referred more ■ particularlyi' The "View settle, it .was submitted' '-with' confidence, was established entirely 'at the instance of life Merchants' Association, and the' preferential" terms' secured by them to shut. ; 6,ut from competition Fairbairn, Wright , and Co. 'and; other like ,competitors. : Counsel submitted that tlie correspondence was eloquent of a combination'.between . the' Merchants'' Association- and, the Sugar Company,. for the purpose of." crushing Fairbairh, Wright and Co. '- He .read portions of letters .in which the Sugar. Company stated-that the altered scale ...wasEspecially ..intended to meet the case of.Fairbairn, Wright arid Co. Why should .the Sugar. Company object to Fairbairn,: Wright a lid Co. giving awayUheir discounts?. Thev had no such obicetion* When the Act -first , came, 'foyJie. How did the new idea eonio, there unlea it-was' sown, by tlie'. Merchants' Association? ! . •, ■ ii - Counsel Drtceeded to trace thf course of cventk- through'' the. correspondence,-, and contended that it. was clear, that tho officials of the Sugar Company, were .well aware.of-tbe true position. of. affairs, .and that the-', company-, had in .'.fact .become joint ciJnspiratcu';witli the/Merchants' Association. • The whole purpose-of : Mr. Mowbray's visit, to Sydney and the, move to alter • the scale ■of discounts was an. unequivocal determination to* c\'ush out Fairbairn, Wright and Co., and give. the. whole control of. sugar "in Neiv Zealand to the Merchants' Association.' The crowning evidence of the' Sugar Company's hostility to Fairbairn, Wright and Co. was to bo found in" a letter from -.the general manager to the New Zealand -.manager suggesting that' there might be : objection to giving Fairbairn,. Wright and Co.. the same notice as.,.'other merchants of tlie last alteration ■in the scale of discounts. The matter was' inexplicable. except; that the company's hostility was. a, joint hostility. shared • by tlie. Merchants' Association. ' ~ . : ■ ■, . Taking the whole';of the-correspondence he submitted.that'there'could scarcely be a more complete proof that there'existed botweeu' the' Merchants' Assaciatioirjand. the . Sugar Company a clear combination to drive out Fairbairn, Wright and Co. It could, not. be..contended . that the new scale was . designed. as a special '-scale- to., the -company's large, customers; -The concessions . now granted by the, company'were ,at '-least .11 per cent.: less than, were granted:.to: tho'small retailers before the . Commercial'.' .'.Trusts 'Act came into force, and besides'this: the company had concentrated their , business in one'hand. It was not necessary .to prove a complete monopoly; It was sufficient if : the Crown could prove that, tho system partially.'controlled the supply of sugar in New-Zealand. . ' Sir John Findiay then: referred; to the minutes'- of,.the'Merchants' Association, and to the : general operations' of' that body, arguing that, everything pointed, to "the "clear consciousness of .the", association as to: the illegality of their position. He commented-on''the fact'that the. other side had offered: no evidence to ''answer, tho - charges'mado against-,'them, and. >'submitted that. it was because the Cr'own, by cross-examination', could .have proved that all along..the-.defendants-had', been , endeavouring to secure-a .monopoly. . Finally, Sir : John. Findiay ' submitted .that the charges had', all been conclusively proved, and; while the: matter of penaltywas entirely one for his Honour, it was .submitted, that the;case was not- one] in ■which, a.moderate penalty would act as a deterrent. The. ring,, by. its operations, had , Wren'out of the pockets of tho consumers in this country a sum of ,£29,000 iu twelvo'months, and this sum would no doubt go on increasing. Based:on the last six months, it w-as equal. to-.£37,000 per annum, .and the penalty should be commensurate, with the, olfenco. ; ,

Mr. Hosking Leads Off on the Other Side. Mr. Hosking Announced, just at' 4 p.m., that it had been arranged that hp should speak first for..the defence, flo asked'.if •his Honour would prefer;.to,;ijo on or adjourn. His Honour:. Wo must do'• I can't spare an hour., I have-no time .for anything but work, you.know, but' I'll adjourn at 5 o'clock. , ;; < Mr. Hosking thereupon proceeded. ' He submitted that the Act upon which the charges were hosed was': a highly penal one, and should be construed, strictly. He did not think that the.'pdrposo cif tho Act was to. catch every" person and make a criminal of him. It was,more to deal with malignant trusts'. It- wasfors-, wen that at the trial of 'the Sugar Co. the minutes of tho Merchants' Association would be produced,- a'nd that probably the effect of that would be that the charges against tlio Sugar Co, (with 'tho exception

of the conspiracy charge) would bo mixed up with the charges against the other defendants. Tho judge, however, to whom tho application was made, did not see his way clear to separate the' trials, but counsel now asked his Honour to only consider so much of the evidence against the ' Sugar Co. as was directly applicable to tho independent charges against the company. In connection with all the charges against the Sugar Co. (except the charge of conspiracy), ho submitted that tho minutes of the Merchants' Association, the correspondence, except that to which tho company had been party, and tho evidence tendered by Mr. Fairbairn, except that directly referring to his dealings with the company, was all irrelevant. As for the reason tor not calling any witnesses, the only one they had here was Mr. Philson, who was in England during the more important negotiations. But apart from this, tho Sugar Co. felt' that it was no party to any conspiracy to raise prices, and it was quite prepared to stand or fall by the correspondence, which showed clearly its reason for the course it had taken. Going on, Mr. Hosking dealt with the construction of Sections 3 and 4 of the Act.

Sir John Findlay here remarked that this point should have been mentioned in raising nonsuit points. Air. Skerrett protested against this remark. They had. all along been waiting for the Attorney-General or for Sir John Findlay to deal with the construction of the Act, and they had not. His Honour remarked that it would be time to argue the question if Sir Jchn Findlay made any speech, but he had not done so. Mr. Hosking proceeded, and commented on the fact that the Grown had made no attempt to apply the evidence to any of the particular charges, while Sir John Findlay, though he had mado many very iine points in his eloquent address, had principally devoted himself to proving that tho Sugar Co.- and the Merchants' Association had combined for tho purpose of driving Fairbairn, Wright, and Co. out of the business. Even if that were so, that was not a crime. Counsel then returned to the construction of the Act, and submitted that tho Sugar Co. was not a commercial trust—a single company could not, life contended, be a commercial trust within the definition of the Act. There was an area in which commercial trusts could operate without committing any breach of the Act. _ There wera even occasions when combinations were very proper to prevent any such evils as undue cutting. He quoted, from Hansard, a speech by the Attorney-Gen-eral made at the time when the present Act was being introduced,. to show the vevils then existing. There was a celebrated political economist named Walker mentioned.

Some Legal Interplay on "Walker." His Honour agreed that "Walker was a well-known authority.' Mr. Hosking went on to say that he had recently been referred to a number of political economists, but lie could not .discriminate between them. Sir John Findiay remarked that Walker was one of the most reliable. Mr. Hoiking: Then I'm right in calling him celebrated. I might say that this is ono of the chief benefits I've derived from reading Hansard—to- find out the existence of Walker. Counsel proceeded with his address, and later quoted Jenks on "The Trust Problem." He asked if Sir John Findiay knew Jenks. Sir John Findiay said that Jenks had written an article in the Encyclopaedia Britannica. His Honour added that Jenks had been in New Zealand, and had been professor at the Melbourne University. Jlr. Hosking admitted that he had only recently, made the acquaintance of Jenks, but ho had evidently got hold of a right persM. He was apparently better than Walker. Just before tho adjournment was talcen, Mr. Hosking was elaborating the proper purposes for which a trust might exist even in this country, and was contending that previously there had been undue cutting in the sugar trade in the Dominion. The case will bo proceeded with at 10 a.m. to-day.