TRUSTS ACT CASE

Dominion, Volume 6, Issue 1612, 2 December 1912, Page 6

TRUSTS ACT CASE

''■.v.' ; .;.'"'--..BiEARiNQ ENPEbi : ',■■■■'"; •fHE d^B MERCHANTS. ; *;i PUT BY CO.UNSEC. I OBJECTS OF THE ASSOCIATION. DECISION-BESEEVED. After extending .well into the sixth day, ; the hearing , of :tho■ Trusts - - Act rase wme f to aa enS'in'thb Supreme Court, before , the Chief Justice' (Sir' Eobe'rt 7 Stout) early on! Saturday afternoon. There were two ■ 'Casea.^one. an alternative action), teard together, in which prooeedings under the • .- .Commercial; Trusts Act, 19iO, were taken ;" against' several defendants for participa- ■ . tion in an''alleged sugar monopoly. ■ Par- | /ticulare of-the claim and the defence were published on Tuesday last. : .'. . ;..' -t~ Me-plaintiff'is his Majesty the King. ; The'defendants"aro the* Merchants' Asso- ■ ''iioiioi of. New Zealand, Incorporated,, a :." trade-protection society,-'"Wellington; the ;• Colonial Sugar Befining Company, Ltd., • jnoorp6"rated : in New South Wales, su&ar ■ : ■'• 'refiners and sugar merchants, Auckland,• .Lerai-and-Cp., Ltd., W. M. Bannatyne ," : -«nd-;jGo.V'Ltd. J ..and!;Joseph Nathan and t . C0.,-litd.V-all'merchants, of Wellington; ; . The.-Atttirriey-Generai, (the Hori'. A.. L. I (Herdinan),; Sir 'John.Findlay,. K.C., ard Mr. of ;the. Crown Law Ofappearing for the Crown. Ifr. C. ' • :Pii Skerrett, -K.C;, with Mr. C. H. Tread- :■■" siivell; i: is-f6r ,r ''thyMeTchants' Association; '. 'Mr."j.'H." r H6skingV. ; of Dunedin, ; ; . -.•with Mr. H. P. Bichmond, of.Auckland, ■forthe Colonial Sugar EefiningOo., iLW.; ; , Mr. Ml-'Myers for LeVin and Co., 'Jtd.; 1 .nnd Mr! T.' Young for'.W..M. Bannatyne ' '.'anji- Co., Ltd., and for Joseph Nathan and ;. .■'. ■ ''. '.■■,■■ '■". ;>f-r'iMß.sC/P. SKERHETT. : : V,/..-..,'..,K ■■ '■:.■; ■■, ■■ -.; ..-■'..•■ .-■ ■ •tin; ; resumin'g-ott Saturday, Mr. .Sktrrett '.■■ 'iWenton'.fco say that the statement 1 that ■ the merchants of New Zealand uad made . e. profit of .£29,000 per annum on siger !■' ..was merely forensic. It was true that '-^29,000-was'the gross profit, but tiiere '. ii'ad'^cb'e-'deducted' from that ihs- es- ■ .'penses"incurred'in"handling' it, and the final -result would probably, be. that the ; merchants '"either made a loss w else •.- : 'handled .the' sugar /without making any • profit at all:■•-Begarding the question of minutes,, counsel was'instructed that, the ! .'executive of■.the ■ Merchants' Association. ! ,of New-Zealand only met half-yearly, and 1 ' there was therefore no ground for the' i ■ ■ ■ Crown criticism on the absence of min- ' . utes.-:. It had been stated (by Mr. Bos- : ■ king) that the, Sugar Company had. been quite candid on.tneir own part, and he •' (Mr. Skerrett) submitted, that he vts eh- :■■" titled to say-the same thing on b>half ! :of. the,- Merchants' Association. There : .was nothing .in the letters to suggest any I ~ -.want of candour or want of- sincerity. Tiiey .were .plain, business';letters, suggest-. !'.' ing what was-in-the minds of the-parties ."' at the which they..were written. "Mr/Skeirett went on: to speak, of the expenses incurred bythe. merchants in the i Handling of merchandise,;and argued that the profit on sugar was.by no means wtat ■"■■■ iad been represented by the.Crown. ; . '. . .■•.:•.'!,',•"..'' ' Profits on Sugar? •-V '•.

. His' Honour asked if it were not a rule tinder'-the statute that .merchants were T'ntf'f to "be"coin'pelled I 'to"charge:a , c< > rtain ! -profit , '-because' | sonie" i meroh / ahts' require. ' *;! ~'" .;■, :•■:.: :- • , ■ " . ' ; '■ '■ Counsel submitted thaHhis was not the i *ule Y &nder the Act:: He'" proceeded to : "argue that the' statute should be given ; a restricted and limited meaning. Bead ';-"-. .literally, the definition of "trust" wonld ■ include any company. or:corppration which ! carried on. tno Business' of- manufacturing, eelling, or v trkding',ih; : go(>da,'because such : -. company or Corporation would be a com- '-' bination; that existeld for the purpose of !. influencing or controlling, the'supply or price of goods. Every:corporation—manui focturing or trading-i-would be a) trust. f ; ■" . His Honour: But it is;not a crime to ;■'■ -fe a commercial trust/'so 'there is;'no. harm in malcing this definition wide. : I Mr. Skerrett: The definition of a cdm- : •■ mercial .trust. is one of the ingredients of ■ the offences in the other, sections.' :'' . His Honour' thought that the Lejrisla- ■..•':• ture intended perhaps to place joint stock- companies .on 'a different footing. ' . ,;He. .also, remarked that, it .was singiilarly Btfange'that;this thing—trusts—existing . . 'i'owVwa's what a celebrated French writer predicted would follow the coming 'of >'■ joint stock companies. ... . ■ Mr. Skerre.tt. submitted, that the legis- ■ • lature had not'intended to do what his Honour'suggested. ' , Continuing, .counsel stated that if he .'were-right ia his contention that the deof "commercial trust" must necessarily include all combinations engaged in manufacturing, or'eelling, or trading in goods, then obviously some limitation i .toust.be' read into the Act. Now. what :•. .should there be? ' There was ■■■ -ippawhichMafc,,onco suggested itself.. He. • Tsubmitted.that.thesSope of the.Act could ' not be more comprehensively expressed than by expressing it as referring to in- ■ jurious combinations—that was, combina- ; .vtions- contrary to public interest. This was indicated in Section 5 and in the title : . ( of the Act, and was in tlie scope of the purpose of the Act; What Mischiefs is the Act Designed to • ' . ■ k -)^;c/?t!?*?:: , ...;v-'.-.:^.-,..-,.<.'. The next point-which he wished to deal ; with was the mischief which the Act .was designed':'to check'. The mischief which i, the Act;sought to check was.the system. •.: ' carriedv , .bn.;.by.'.manufacturers 'of'goods who we're in the habit'of selling their' Roods and allowing discounts to persons , who wo r iild-biDd' themselves to sell their: goods them at a price fixed The illnstrai tions were-the Standard Oil Co. and the i Tobacco;.' : Tfust. ,v ■'.'. : ~ The Sflgar Co. had not carried on their '-. tusiness;; in this , manner. They were 'only concerned with the price, which they themselves .received,. and. were, never con- ;' cerned with" either the'price at which the '. merchants dispose;! of the goods or with the price at' which the retailers chose to sell. He submitted that Sections 8 and 4 of the Act were complementary." Tt ' therefore followed that it could not be an offence to allow, to members' of a trust, discounts which were allowed to : anybody. The statute clearly dealt with preferential discounts. • His.Honour remarked that the point was that, if a discount were given at all. : it must be the samo to the large, and !' email buyer. The company had given preferential discounts. Mr. Kken-ett thought not. The New i ■ Zealand legislation hod not gone as far as that of Anierica,..which ; ordained'that, if a discount were'allowed, it must be irrespective of the'amount purchased. If the New Zealand legislation had gone as far, counsel would not have hcen there to argue tho case now. He submitted with all re?nect that his Honour was I Teadin? into Section 3 of fh« Act. the lijn--1 .guage of the American statute. The point which, ho wished to make was that you could not have an offence under Section 3 tho converge of which was not an offence under Section 4-. The meaning of the Act undoubtedly was that you must not offer a discount to a memlcr' of a commercial triist,.-becnuse'he is a member of the trust, and refuse tho rame discount to another person because he is not n member of the commercial trust, tor the Crown to succeed it would have 1 to' h» shown that it was tho object of th"; Sugar Company to allow the discounts to the Merchants' Association befi>ii'{. they wore .members of the cominrre'a.l trust, and to .prefer them. It w nnt euggested that this discount w'ild not be paid' to '.other corporations who pa rned it. ' . How the. Merchants' Association Regarded Fairhalrn, V/rTght, and Co. : ; The words "for reason", in the Act were discussed at length by counsel at tliis stage in dealing with the question of motive. He contended' that the Crown '■ should prove that'it was the sole, final, : and efficient motive of the Sugar' Com pany-to prefer the Merchants' Association, because they were a commercial i trust. Two other points made were that tlier-o was nothing .in. differeiLfciijijng be.

twean individuals in allowing discounts and there was nothing ogainet supplying a commercial trust. What ho hiul to meet was the allegation that tie Sugar Company raised tho scale of discounts because it thought that Fairbairn, Wright and Co. would not be ablo to earn the discount and Levin and Co, would be able to earn it. That was said by tho Crown to be an attempt to crush Fairbairn, Wright, and Co.. He would meet fliat suggestion by saying that it was not in the Act. But the prima facie reason for the allowance of a discount was to induce merchants to buy the maximum amount of sugar. Now what was the objective of the Merchants' Association? Their position was this: They could-not do business in sugar at less than .5 per cent., and they regarded-Fairbairn, Wright, and Co. as doing an illegitimate and improper business. They combined, therefore, to en-, force trade conditions that would enable them to carry on a fair lino of business, even though they should prevent Fairbairn, Wright, and Co. from carrying on a business which they regarded as improper: The Sugar Company's motive was to prevent the purpose for which the discount was given, being evaded, and to prevent the demoralisation of its own business. , He desired to point out the fact that the dealings of the Sugar Company were with combinations in no way affected the case. The scheme was in existence before the passing of the Act, and had no diS; tinct and separate relation to the scale of discounts. To give a discount or to raise a scale of discounts to prevent a person from earning that discount was not an offence within the Act. If Fairbairn, Wright and Co. were objected to by the Merchants'' Association it was for reasons necessary in the protection • of the Merchants' Association's business. Fairbairn, Wright and Co. really demanded from the Sugar Company more advantageous terms than were given to the Merchants Association, and more advantageous terms than were offered to any other buyer.

Nature of the Control on Sugar Exercised.'

An observation, -which he desired to inake in regard, to Section 5 was that the Merchants' Association in. no way conspired to control the supply or demand o! sugar in New Zealand. . The Sugar Company would at all times supply sugar upon equal terms. The control or the monopoly if it existed—and he disputed this-related entirely to the control of .price. This control so far as extent was concerned was negligible. ' It was very' doubtful if the discounts given away by Fairbairn, Wright and Co. had reached the consumer at, all. Then the expression "contrary to public interest" meant that unless the control of price resulted iii a price being unreasonably high it was not contrary to public interest. Sir John Findlay: Might be vicious in principle. Mr. Skerrett submitted that to hold the contrary to what he had submitted would necessarily mean to penalise every combination to raise prices. Every combination formed for trade protection must obviously raise : the price to some extent. In Whose Interests Was the Whole Case Brought? Finally counsel contended that there appeared to have been no actual demand, for these proceedings from the public or from the retailers. Nor. did. they appear' to be in the interests of the public nor the interests of the retailers, but only in the interests of a firm trading as he had indicated Fairbairn, Wright and Co. were trading. He concluded at 11.55 a.m., MR. M. MYERS. THE CASE FOR LEVIN AND CO. Mr. Myers followed. He stated that his argument would not be very lengthy on account of the fact that the ground had so fully, been covered by Mr. H< sking and Mr. Skerrett. He wished, however, to place before the Court some special features of the case on behalf of Levin and Co. To constitute an offence urder the second action, the discounts given must be given out, of, t the money of the, principal, but the discounts given were , given by the Sugar Company and Levin and Company simply paid away money ivhich they held in trust. His Honour: You say that Levin arid Co. are only distributors, not givers?. Mr. Myers replied that that was his submission. . They only received the money to hold in trust for their nominees by.' l reason, of an arrangement between them. Their action was not within the purview of the Act, unless they acted ns agents of the Sugar Company in distributing the discount.-' This was not the case, for it was no concern of the Sugar Company what Levin and Co. did with the discount. There was no contract as to what Levin and Co. did'with it, and they were not vendors of the sugar to their nominees. If there was any sale, it was by the Sugar Company to the nominees, and there was, still" only one d-seount, which was given to Levin and Co., as principals. If there were any evideuce of payments made by Levin and Co. in respect of discounts—and he submitted that there was not—then those payments were made under the .£IO,OOO scale, and under this scale Fairbairn, Wright;and 00. had earned the maximum discount. There could therefore be no offence. But be submitted that the Crown could not succeed at all on the second action, Where was the evidence to'show that Levin arid Co: had received a single discount from the Sugar Co.? Mr. Ostler: The correspondence is full of it. . . . • . '■ ,

' Mr. Myers asked for the reference. Mr. Ostler referred to a letter .regarding "allowanoe in sugar," and also to the cheque butts, to indicate payments by Levin and Co.

■ Mr. Myers pointed out' that there was nothing to indicate that the payments' were for sugar, but, if they were, still the Crown was not entitled to .succeed. Regarding the charge of refusing to supply Fairbairn, Wright and Co., counsel contended that'there had been no refusal to supply, but simply a refusal to act as buying agents. And there was evidence that Fairbairn, Wright and Co. wifhetl to buy on more favourable terms than any other of Levin and Co.'s .customers. Fairbairn, Wright and Co. were not refused by any other merchants. They could have applied to any other merchants for sugar. His Honour: I suppose that tbey applied to Levin anil Co. because I hey were sole buyers, ' Mr. -Myers said that that only went to prove his contention that Fairbairn, Wright, and Co. applied to Levin and Co. for the latter to act as agents for them. He submitted that Levin and Co. simply declined to deal with Fairbairn, Wright, and Co. because they believed that there was something that defamed them in a letter written by Fairbairu, Wright, and Co. to the Government. Counsel then submitted propositions of law covering much the same ground as had been traversed by Mr. Hosking and Mr. Skerrett. Finally, he submitted that it had been quite open to Fairbairn, Wright, and Co. to canvass the country and get orders to make up the quantity required to earn the maximum discount. They did not do that because they would have incurred additional expense. His Honour: They incurred the expense in bringing their orders up to £10,000. Had they Teached the .£25,000, mark the maximum would .have been increased to •£30,000, or, say, .£50,000. Mr. Myers submitted not because, had they been able to get orders up to .£25,000, the Sugar Company would not have had so much to fear from foreign competition. MR. T. YOUNG. i FOR TWO OTHER FIRMS. Mr. Young addressed the Court briefly on behalf of the firms he represented. He said they were both firms of good repute carrying on business on the orthodox lines. They found that the cost of doing business was from six to flight per cent, and they had to average this on the turnover as they could not treat the items separately. In taking , only five per cent, on sugar, they were .really not making a profit.; The.position with them was that they found that the cutting in sugar was becoming ruinous, and they had to combine to buy on the best terms. They had no desire "to injure the firm of Fairbairn, Wright, and Co., but they had of necessity to take measures to protect their own interests. They had done nothing more than this. There was no reply by the Crown, and his Honour reserved decision.