£5000 IN FINES.

Dominion, Volume 6, Issue 1629, 21 December 1912, Page 3

£5000 IN FINES.

IN SUGAR CASE. FINDING OF CHIEF JUSTICE. THE FULL DECISION. MENTION OF APPEAL MADE. Heavy ponaltaes—totalling —have been imposed in the case in which soveral defendants .were recently prosecuted for alleged, participation in a sugar monopoly. Th« caao, which was taken before, tho Chief Justice (Sir Robert Stout), was-tha first under .the .Commercial Trusts Act, 1910. The hearing took place last month, and reserved judgment, was delivered yesterday afternoon. The plaintiff was his Majesty .the King. The: defendants were ,the -Merchants' Association of New Zealand, Incorporated, a trade protection society, Wellington; the Colonial Sugar Refining Company, Ltd., Incorporated in New South Wales, sugar refiners and sugar. merohants, Auckland; Levin and Co., Ltd., W. M. Bannatyne and Co., Ltd., and Joseph' Nathan and Co., Ltd., all merchants, of Wellington. At the hearing, tha Attorney-General (the Hon.,A. L.'Herdman),.Sir John Findlay, K.C., and Mr. H. H. Ostler, of the Crown Law Office,' appeared for tho Crown. Mr. C. P. Skeirett, K.C.,,with Mr. C. H. Treadwell, was, for tho Merchants' .Association; Mr.--'J. H. Hosking/IC.C., of Dnnedin, with Mr. H.. P, Richmond, of Auok3and,' for the ;; Colonial Sugar .' Refining Company, Ltd. ,*'Mr. M. Slyers for Win and Co., Ltd.; and Mr. T. Young'for W. M Bannatyne and Co., Ltd., and '' for Joseph Nathan' and Co.; Ltd.

The Allegations. sin the statement of claim it was allejte.il that tho Merchants' Association of NewZealand (one . of the defendants) \ was established and carried on business for the purpose (among, other things) of . restricting competition among its. members in the isalo of. raercliandisa rind'of creating and -maintaining-aimonopoly'for its members.: It was;'in reality a commercial trust "within the meaning of. theCommeraial Trusts Act, There are'fifty-fivo members of th® association, including tho three defendants, Levin'and Co.; Bannatyne and Co.; and; Nathan, and Co'.,- who are also;members of-, a ring, of supiar buyers established- for the purpose of buying sugar in concert 'or .'arrangement. from the Colonial Sugar -Refining Company (another of.the defendants), arid of controlling, determining/ and influencing the price of sugar in the Dominion. Now, it appears • that practicnlly the whole of the .swat, consumed in New Zealand is manufactured, sold, and supplied by the.Colonial,Sugar Refining Company, and of the' sugar, purchasedvin. New Zealand from this cbmpany, the prosecution said more than half the total amount is purchased by thei "ring" of sngar buyers referred to, which . "rinß," it is .said, is a commercial trust within the meaning of the Act. Altogether there are some nighty-three membe-rs of this ring—fiftyfive of them beinj members of the .Merchants' Association of "New Zealand— "and Levin and Co. (so the statement of claim alleges) act as as-ents for all members of the :™g in ; dealing with, the .Colonial • Sugar. Refining. Company. A Bonus and Scale of Discounts. Before January 1, 1911 (the date of tho coming into operation of;the Commercial Trusts A cf, 1910) the Colonial Sugar Refining Company was in the habit of allowing, a bonus of.-10s.-per-ton to all purchasers of sugar who agreed to deal exclusively with the company, and it .also allowed certain discounts varying with the amounts purchased. When the Act came into force, .however, tho company abolished the.. bonus ■ system,' ■ and . established .'a} sliding., scale' :of., ■ discounts.,. Tun? 'for .-a'purclia'se .of worth'- per ' month, ';t6 4}-' per cent", for d purchase of ,£2500 worth per'month; On April 1, 19U, another, scale'was ■sub-, Btitutedj in' w.H'ch; tho.-discount ranged from l : :pe'r. : oent..'for >£500 . per. month to. 4J per bent.'for \£lo,ooo per month. This second scale was later done away with,, and on' October ,1,1911, the following new Bc'ale of discounts was established, and is still in force:— Purchaser of .£SOO worth of sugar per " nionth, l..per cent. , Purchaser lof. i'lOflO worth', of sugar per month, 1J per cent. ' Purchaser. of worth of 6ugar per month, 2 per cent. Purchaser of J65000 worth i'f sugar per month, 2J- per cent. Purchaser of .£12,500 worth of sugar ■ per month, 8 per cent. Purchaser of ,£25,000 worth of sugar per nionth, 5 per cent.

For What Purposo? This last Bcale of discounts (it is alleged) was adopted by the company at the suggestion and request of the Merchants' Association, and the of sugar , buyers Already referred to. The purpose of the Colonial Sugar Refining Company and of the Merchants', Association, and of the "ring" in adopting this system of discounts is (it was alleged) to secure a monopoly in the sale of sugar in New Zealand, and to enable the Merchants' Association and the members thereof to fix,' control, and'-determine the price of sugar in New Zealand, and to exclude from the business of dealing an sugar ■ all persons who refuse to become members of the association or "ring," or to conform to the.. conditions imposed by that , association or "ring" .in respect of the sale of sugar; The Breaches Alleged. As'regards the definite breaches of the Commercial Trusts Act, 1910, the' statement of claim alleges that in the month of October, 1911,- the Colonial Srigar Refining Company (in breach of Section S, Paragraphs (d) and (o) of the Act) agreed to give Levin and.Co. the maximum discount of 5' per cent, on' all; purchases. Similar breaches of the Act were committed by the company mating similar agreements with the-other defendants (Bannatyne and Co., and Nathan and Co.).' In .October, 1911, also, the company committed a breach of Section 4, Paragraphs (b) and (c), in refusing to supply sugar to Fairbairn, "Wright, and Co., of Christchurch, except on conditions relatively disadvantageous as compared to the conditions on which it was supplied to mombcrs'.of .the Merchants' Association. All the other defendants were charged with "aiding or ■abetting, counselling, and procuring".the -commission of these offences. Again, Levin and Co. were charged separately . with , a-refusal to supply Fairbairn, Wright, and Co., and all the other defendants with "aiding and abetting" this offence. Finally, the five defendants were charged with a breach of Section 5 of the Act in that they conspired together to 4reate a sugar monopoly in New Zealand. Where Did the Discounts Go? In pursuance of the conspiracy, illegal discounts have been from time to time paid by the Colonial Sugar Company, with the knowledge and consent of all the other defendants, or by Levin and Co., Ltd., with the knowledge and consent of oil the other defendants to the persons, firms, or companies who are parties to the conspiracy, and particulars of these discounts were set out. What the Crown Claimed, The Solicitor-General therefore claimed on behalf of the King (a) Judgment for a penalty of ,£ooo against oaoh of the defendants in respect of each of the breaohes of tho Act al(b) An injunction against each of the defendants prohibiting each from continuing or repeating any such breach. (c) Tho oosts of the. action. The Dcfence a Denial. Separate defences were filed in every ca<4>, and every defonda-flt separately deni«d every breach of the Act alleged, and denied that there had been any conspiracy te create a monopoly. .Moreover, op behalf of tho Merchants' Association, it was said that it is, and always has i, OT tu open to any persons to join inwholcpiln puTcbaws for the purpose of obtaining the ' maximum wholesale discount, and that it is lawful, proper, and customary to do so. This statement was also

repeated in tho defence of the other defendants. A Second Case. Thero was a second prosecution in which the samo defendants were proceeded against. In this case tho prosecution took the alternative course of charging Levin and Co., Ltd., with paying illegal discounts in respect of.purchases niado for six months ended September 30, 1911, and with agreeing to pay illegal discounts for purchases made' during tho six months following that period. The other defendants were-charged with aiding and abetting Lovin and Co., and with being knowingly concerned .in tho commission of these offences. • As in the first case, separate defences were filed' denying tho breaches of tho Act. ! THE DECISION. At tho outset of his judgment, his Honour outlined what the statuto had enacted, and said that it would be noticcd that there were five plas9es of. Acts which had been declared "principal offences," and there was also one section providing for the offences of aiding, abetting, counselling, or procuring, _ or being participants in the commission of an offence. "The third section," said his Honour, "deals with the giving of concessions in consideration of exclusive dealing, or restrictive dealing, or because a purchaser is a member of a ■commercial trust, or acts, or intends, or undertakes to act in obadience to or in conformity with the determinations, directions, suggestions, or requests of any commercial trust, with respict io the'sale, purchase, or supply of any goods. Section four deals with persons who . refuse to except upon conditions to supply persons with goods on tho ground that the purchaser does not deal with tho wller, or has not undertaken to, deal exclusively: with, or will not become a member of a commercial trust, or does not act in accordance with the directions, ctc.,' of a commercial trust. The, fifth is what is called the coiispir-' acy clause. The sixth deals with per-, sons who pell goods at a price which is unreasonably high, or who, in obedience ,to the directions, etc., of a commercial trust, sell goods at a pricc which is unreasonably hij-h. The. seventh clause also deals with the high price of goods, and it has been already stated that the ninth section deals with tho aiding and abetting of .offences" Proceeding, his Honour reviewed tin charges in the action,: and gave a short statement of the history of the Merchants' Association, referring specially to its dealings in. sugar and to the fact that no minutes had been kept at one stage of the association's carter. He then touched upon the position of the Sugar Company, and quoted correspondence leading up to the time when th; special scale of discounts had been fixed. "That both tlie second and third scales were fixed to prevent Fairbairn, Wright and Co. ssllincr sugar except on tho terms of the tariff laid down by tho Merchants' Association is, in my opinion, abundantly proved," said his Honour. "I may refer to paragraphs from some letters to show that this is so."

Facts Proved, After reviewing circumstances prior to the date when Tairbaini, Wright and Co.' could not purchase sugar on the same advantageous terms as Levin and Co., the learhcd Chief Justicc continued: "I find the following facts to be proved:— "That the Scales 2 and 3 were mado to prevent competition in the salo< and disposal of sugar. "That they were made to enable a commercial trust or association or group of buyers to get "the control of the distribution of sugar. "That they we/e ma-do 'so as to prevent Fairbairn, AVright and Company or other persons from purchasing sugar and giving-ce-iain discounts to purchasers from them. "That the defendants were acting in consort or conspiring together'to,get thi3 control.;. "That th'ey : ' were 1 made fo 'as 'to' erisurd" a profit that might otherwise not . have pone to the members of the trust go- . rag to the members of tils trust. "I find also the paragraphs of the statement of claim in the first action that were admitted by some of the defendants proved, . * , 1 ''The question then arises: Have any offences against the Commercial Trusts Act been proved? It was argued that the Commercial Trusts -Act is a penal statute, and that, consequently, it must be strictly construed. All the New Zealand statutes, as their Lordships of the Privy Council have pointed out, are remedial. Tcrmes do la Ley Quoted. "The statute appears to me to be clear and precise, and it is not really necessary to rely on any interpretation Act'to' explain its meaning. It is Slid that this is a new law and a very stringent one, and thus necessitates a stringent tion. The law is new in a cense, 'But it must not bo forgotten that beforO English industry was developed as it is now, there were many laws that infringed individual lib:rty in the buying and selling of goods more than this statute does. 1 need only refer to the offence of. ■ fore r stalling, which included engrossing, and regrating, which was then defined in am old law book—'Tcrmes de la Ley'—as 'Forestaller is he that bnyeth corne, cattell, or other merchandise, whatsoever is saleable, by the way as it cometh to. markets, faires, or other like places to b:o sold, to the intent that he may soil the same againe at a moro high and deer price, in prejudice end hurt of the commonwealth and people.' It- was not until July 4, 1814, that a statute was passed abolishing tho offences of forestalling, regrating, and engrossing. "There have been many laws in recent years passed to supervise and control monopolies, the aim being not to limit liberty, but to promote true, freedom. I apprehend that such is. the aim of our many labour laws. That there are vast and difficult industrial problems before all civilised communities is admitted by all who have studied our present-day industrial conditions. The industrial condition has been considered in the United States, in Australia, in tho Continent ofEurope, and in New Zealand, and the question really is: Is the State to be dominant and to see that such liberty is granted as makes for the liberty of all? Or must the State be placed under the control.of large industrial organisations? "There have been struggles in the past between, tho State and various organisations. At one time they dominated the State, and there liavo' sprung up in. the development of industries, in the concentration of industries, and especially in the growth of capital and the easy mode :of transportation, huge combinations recently termed trusts, and the question really is: Ought tho State to'interfere with those trusts ? This is really' for the Legislature to answer, and not for the Courts.

"it may bo that this present law may fail,' or it may 1m that this present law only touches tlio fringe of the question. It is not the provinco of this Court to criticise the method which .the Legislature has adopted in dealing with indus-. trial questions. The duty of tho Court, as well as of all good citiiens, is faithfully to obey tho provisions of our statutes. If tho statute is ineffective or wrong in principle, the appeal must bo to tho Legislative poweT to alter it—not to the Courts to construe it so as to set it aside. "J proceed, therefore, to inquire, first, whether the facts which I have found, point to an offence having been committed by one, any, or all of the defendants. I propose to refer, first, to tho offence charged in Paragraph 37 of tho statement ot claim in tho first action, namely, tho charge of conspiracy as defined in Section five of the statute. The fact that the defendants „ agreed together to raiso the scales, it was agreed that lievin and Company should bo treated as a purchaser for the company alone, and as a prinoipal (when, in truth and in fact, Levin and Company was a mere agent for the members of the association, who desired to purchase sugar, and bound by its tariff and by its directions), cannot, in my opinion, be disputed. ... It was urged that to get a fair prico, and, to prevent wholesale merchants such as Fairbairn, Wright and Company, giving larger discounts than th& members of the association had sanctioned was not against tho public interest. What is Public Interest? ""What is meant, it must bo asked, by the public interest? Suppose the price were kept up, would this be against tho public interest? It was contended that the more keeping up of a price, or tho non-reduction of a prico to an amount at which, merchants could sell sugar, would

not be'an offence under the statute, and, as an authority lor tins proposition, what is culled tlie Uoal Vena case—decided by tho iligti Court of tho Commonwealth ox Australia—was invoked. "1 am of opinion that the Court must hold that tho keeping up the price of gouiis, or not reducing them when they could bo reduced (if there was l'ree competition) is contrary to the public interest. To hold that, when tne price of articles is lowered by the manuiacturer or importer, tile consumer; will get no benefit if the lowering of price is only a matter of •! or 5 per cent., and ! if there is free competition in sales, would be to ignore what is the universal belief of all political economists. The assumption made in our laws is that the beiielit of lowering prices goes ultimately to the consumer. This is ulsu tho evidence, and, as I have said, it has not been contradicted. If, then, the inoiiopoiy or control keeps prices up, I am of opinion that the doing so is contrary to tlie publio interest. "This Commercial Trusts Act is for the repression of monopolies. Monopolies, thereiore, in the supply, demand, and prioe of certain goods—of sugar—are thought to bo things should bo| repressed. That must mean that they, are deemed by the Legislature to be 'contrary to the public interest.' Further, if the Sugar Company carries out (or arranges to carry out) schemes thai the statute declares to be offences, such schemes must bo deemed to bo contrary to public interest. What, then, was the aim of tho defendants in altering the scales '< "There can, in my opinion, be only one answer. It was to prevent persons who wero not members of the commercial trust getting goods at the same price as persons who were members of tne commercial trust. It was to arrange a discount for one class, and not lor another class: to arrange a discount for a class that would obey a' commercial trust, and to give another discount to a class that would not obey a commercial trust. Such conduct is, in my opinion, distinctly prohibited by Section.3. If it is prohibited by Section 3, it'must be assumed that rll th® Acts declared offences under Secton 3 are Acts done contrary to the public interest. It is unnecessary,'.therefore, to rely upon the raising of the price or tho lowering of the price as evidence that the acts done by the Sugar Company and the other defendants were contrary to the public interest. What they conspired to do was to violate the provisions of Section 3of tho statute. lam therefore of opinion that an. offence was committed under Section 5.

Sugar Company's Position, "Was there an offence committed under (d) or (a) of Section 3 by the Sugar Company? < It was contended that it must be j proved, before an offence can be shown to have been committed under Sections 3 and 4, that the Acts done were contrary .to the public interest. 1 do not think so. The words of the statute'are plain If a person, in respect of dealings in the goods mentioned in the .schedule to the Act, gives a discount to a purchaser for the reason (or upon tho implied or expressed condition that the latter person is a member of a commercial trust, or intends to act "in obedience to a tariff fixed by a commercial'l rust) that is all tliaj; is necessary to b? proved to constitute ail offence. The statute considers such an Act by a person an offence, and the Court has not to inquire what injury, if any, this Act does to' the. public. This is not a case to which the doctrine of msns rea'or guilty knowledge applies. Is the set prohibited by statute and declared an offence ? If if be so, then it is an offence whatever its effect, on the public .niay bo. Were any other interpretation accepted in Acts similarly framed, there are scores of offences that it might be impossible to prove. ''Another contention—and, perhaps, the main one—was that tho acts, done by the Sugar Company were to protect its trade; that is, to prevent the importation of foreign sugars, and to give the discount arranged for to wholesale merchants, so as to propitiate them, and get them to act !as distributors of the Sugar Company's products, and of the products, of no one ■else. The way to test this argument is to ascertain whit was the immediate cause or reason for tho company's action. The answer must bb that they gave the discount because the purchaser was a member of a commercial trust. The ultimato and final end of an action is not to be sought for; it is what led immediately and directly to the act done. "Does the end justify the means? This would open a question of casuistry that this Court is not, in my opinion, called upon to -discuss. The Sugar Company made their scales and gave their discounts to Levin arid Co.-for the reason that Levin and Co. was a'member of a commercial trust. If tho company had not boen such a member it would not have got that discount, and tho whole arrangement or had the giving of such, discounts in view. It was also becauso Fairbairn, Wright and Co. werc'not members of the coriimercial trust that tho .company raised its scales, and mado it 'impossible for Ktirbairn, Wright and Co. to get their discount, and this offence was committed under Section i. It was said that the Court should look at the. real aim of the Sugar Company, and not at a mere phase of the question. No doubt the Court should' in every transaction try and ascertain what the truth,"is independently of the modo in which the transaction may have been carried out. But I do not think that, in discovering the true transaction, it can ignore—that is practically what the Court is asked to do—the means that were employed to carry out the aim in view. "The means employed weTe, a 9' I have said, in my opinion, contrary to the statute. Although there was' an aim beyond, that it not what the Court has to -look at. "It.was urged that this case should be treated as a case of fraudulent preference under the Bankruptcy Act is treated. I do not see the analogy. Here all that can be urged is that tho Sugar Company did, in fact, prefer a member, or members, of a commercial trust, but for an expected reward, namely, that those members would not purchasa foreign sugars, and would be the distributor of its 'sugar. Tho reason that the discount was givento Levin and Company and to the other members was, therefore, that they were members of a commercial trust ... no membership, no discount. If this contention were to prevail—that the giving of some reward were to be an excusa for the company's action—then it would have to be held that the company could dictate, as its terms, the carrying out of the behests of a commercial trust. The Act would, be reduced to impotenc© if this suggestion were'listened to. All the Defendants are Guilty, "It was urged, further, that there was nothing wrong in making scales which gave a large nuichaser an advantage over a small purchaser. It may bo that the statute does not provide against such a differentiation. Such a differentiation of rates has not been allowed in England, and in the United States, nor in New Zealand in reference to publio utilities such as tho transportation of goods on railways. It may be that such cannot .bo permitted under this Act. It js not, however, necessary to consider this question, as the raising of the scales wa3 done for a definite purpose, to give a concession to members of a commercial trust, which is an offence under Section 3. It was not a bona fide exercise of any power the company had, and I doubt, also, if fixing the -scales, as was dono in this case, would not be an offence under Section 6 of tho Act. The offences, therefore, which I find proved, are: "1. All the defendants are guilty of the offence charged in Paragroph 87 of tfct- Statement of Claim in tho first action, being an offence under Section 5 of the Act. ' "2. Tho Sugar Company is guilty of an offenco under Section 3 (d) in giving the discounts given to Levin and Company, Limited, as charged in Paragraph 31 of tho Statement of Claim in the first action. "S. Tho Sugar Company is guilty of tho offonco under Section 4 (c), charged in Paragraph 32 of the Statement of Claim iu tho first action. "L The defendants other than tho Sugar Company are guilty of tho offence under Section 9 of tho Act, charged in Paragraph 31 of tho Statement of Claim in. tlio first action. "As to tho second action, I am of opinion that Levin and Company was not a principal in tho transaction of giving discounts to tho persons mentioned in Paragraphs 28 and 20 of tin; Statement of Claim in the sccond action, and they were not agents of tho Sugar Company. They were agents of the members to whom tho discounts wero distributed, and I read tho word 'agents' oa meaning agonta of tho vendors, 1 am therefore.

of opinion that the plaintiff cannot succeed in the second action. The Penalties. "Regarding the penalties to bo imposed, I am of opinion, looking at the magnitude of the transactions: > "That every ono of the defendants should bo liablo to a penalty of ,£SOO for the offence committed mentioned in the foregoing Paragraph (1). "That for the offence mentioned under Paragraph (2) the Sugar Company; should bo liablo to tho penalty of .£250. "Tliut for tho offence mentioned in I* ara : graph (8) the Sugar Company should be liablo lo the penalty of .£250. "That for the offence mentioned in Paragraph (1) every one of tho defendants save tho Sugar Company should bo liable to the penalty of J!500. . "Judgment, therefore, will be for .£IOOO against every one of tho defendants in the first action, with costs of issuing writs and Statement of Claim and preparatiorL for trial according to the scale of .£IOOO. Extra counsel for five days at .£8 Bs. per day; i!ls lus. for second, third, fourth, fifth, and sixth days' of hearing. Also witnesses expenses and disbursements. All these costs to be" added together- and divided into five parts, and every one of the defendants to pay one part. Tho cost of hearing to be paid by each as on the scale of i! 1000. _ . "As to the second action, I give judgment for the defendants with J2B Bs. to every one of the and any in that action." An Appeal Mentioned, Mr, Myers asked if His Honour allowed extra days in the costs of the second action. His Honour replied in the negative. Mr. Myers pointed out that the costß seemied small in comparison to the amount claimed in the second action, vir,., .£412,500. His Honour did not think there was any reason, to make an alteration m tho amount allowed. The Attorney-General inquired as to the question of interlocutory costs. His Honour said ho would allow lo guineas for discovery of documents. Mr. Skerrett applied for a stay of pto-, ceedings pending appeal. He understood the Crown was willing to consent so long as Eecurity was found and the appeal proceeded with at the earliest sittings. The Attorney-General intimated that he agreed to this, provided was found by January 21, the date mentioned by Mr. Skerrett, . His Honour accordingly granted a stay.