THE SUGAR CASE.

Dominion, Volume 6, Issue 1816, 31 July 1913, Page 3

THE SUGAR CASE.

MERCHANTS' APPEAL. DISMISSED BY THE COURT. FURTHER PHASE. MAY GO TO PRIVY COUNCIL. After twelvo months of litigation tho famous "Sugar Case" has now passed through tha Court of Appeal and has been decided in favour of the Crown and against tho merchants. It may, however, go on to tho Privy Council. In July last year preliminary proceedings in connection with tho first caso under the Commercial Trusts Act, 1910, camo before the Supreme Court. (Subsequently this preliminary matter was referred to the Court of Appeal, and then in November last the main action ivas heard in the Supremo Court before tho Chief Justice (Sir Robert Stout). The learned judge held all tho defendants (merchants) to be guilty of certain offences under the Act, and imposed penalties totalling ,£SOOO. This decision was appealed from and in April last, the case enmo before the Court of Appeal when the Bench was occupied by Mr. Justice Williams, Jlr. Justice Denniston, Mr. Justice Cooper, and Mr. Justice Chap-

Tho appellants were the Merchants' Association of New Zealand, Incorporated, a trade protection society, Wellington; the Colonial Sugar Itefiniug Company, Ltd., incorporated in New South Wales, sugar refiners and sugar merchants, Auckland; Levin and Co., Ltd., W. 31. Bannatyno and Co., Ltd., and Joseph Nathan and Co., Ltd., all merchants of Wellington. The respondent was his Majesty the King. At the hearing Mr. C. P. Skerrett, If.C., with Mr. T. Young, appeared for tho Merchants' Association, and for W. M. Bannatyne and Co., Ltd., and Joseph Nathan and Co., Ltd., Mr. ,T. H. Hcsking, K.C., of Dunedin, with Mr. H. P. Kiclimond. of Auckland, represented tho Colonial Sugar Refining Company, Ltd., while Mr. M. Myers was in the case as counsel for Levin and Co., Ltd. Tho At-torney-General (tho Hon. A. L. Herdman) appeared for the Crown, aiid ho had with him Sir John Findlay, K.C., and Mr. 11. 11. Ostler, of the Croivn Law Office.

.Faulty State of Documentary Evidence. Mr. Justice Williams was unable'to be present yestarday. and, in his absence, tho judgment of the Court was read by Mr. Justice Donnistou. At the outset of Hie judgment, the Court said:—The Colonial Sugar Company was convicted. of an offence under Section 3, Subjection (d), of the Act, and was fined JE2SO. That company was also convicted under Seotion 4, Sub-section (c), of the Act, and was lined ,£250. The appellants, tho Merchants' Association, Levin and Co., Bannatyne and Co., and Nathan and Co., were each convicted under Section 0 of the Aot for aidinj and iibeliting the Sugar Company in the cmnmission of the offences, and were each fined .£SOO. All the appellants wero convicted under Section 5 of, tho Act fcr conspiring to create a monopoly, and wjro each fined JCSOO. 'I'hfc caM is one of some difficulty, and that difiiculty lins been greatly enhanced by tho want of order in the way in which the exhibits have been and tile defectiveiwi-3 of the exhibits in important particulars. \Ye find copies of letters, and extracts from letters without signatures, nn.d without any indication by whom they vers written. Had the exhibits bfin placed in 'chronological order, and besn properly arranged the hearing of the case would have been consicWaMy shortened, ami a great deal of. troublesome labour would have brai"saved. ' If" tho case is to so before the liaghast tribunal -it will be Absolutely necessary that tho exhibits should be so arranged as to show clearly the sequence of events."

Sugar Company's Discounts, Proceeding, tho Court said:—"The Commercial Trusts Act is an cntiToly new departure, in our. legislation. Legtelaifcion cf a similar kind exists in Australia, but tho provisions of our' Act appear to be more stringejit in several respects than these of the Australian Act. Bv Sections 3 and i of tho Act. certain acts are made.offences. Tho Legislature lias considered thesa acts to be evil m themselves, and the Court has. not to 'consider whether any particular act which comes within tho words of either of tlieso sections is or is not contrary to the public interest. The first oft'cnce of which tho Sugar Company was found guilty was that charged in the first part of paragraph 29 of tho Statement of Claim. That charge that, in or about tho moiitli of Octoter. 1911. the Sugar Company (in breach of Section 3. Sub-seotdcn (d),) offered or agreed to'give to Levin and Company a "discount in respect ot purchases *of sugar for the reason tnajj Levin and Company was a mourner of a commercial trust, viz., the Ifartbanis A' cr '*'ciation of New Zealand. ... In orticr to establish"tliis charge, it must be shown linst, that the company had offered or cgiecd to give* to Levin and Coinpanj •the discount in question. The scccuul charge was tlvat Levin and Co. was n ni'cmkcr of a commercial tnist; and that lite third, that the discount had berai offered or agreed to be given for the reason that Levin and Co. was a member of a commercial trust."

Court on the Reason for the Discounts. After pointing out how the first two conditions had been proved, the Court passed on to the _ third, and summed up the position thus: "What the commercial trust (as representing t'lia merchants) wanted was to prevent Fairbairn right and Company earning discounts which they gave away to their subpurchasers. It was to aid tho trust in carrying out that object that the Sugar Company offered the discount to Levin and Co. The Sugar Co. therefore, in offering tho discount, offered it because Levin aid Co. was a member ot a commercial trust. It was only through the medium of the commercial trust that the Sugar Co. could protect itself against foreign competition. The endeavour of tho Sugar Company to protect itself against such competition may be harmless, or even laudable, but if, in order to attain that object, it 'offers a discount to a member of a commercial trust—a discount which would not have been offered if he had not been a member, and which there would have been no object in offering if he had not been a member—then, in our opinion, the reason for offering it is because he was a member of a commercial trust. We think, therefore, that the conviction of the company oil this charge should be affirmed."

The Refusal to a Retail Firm. The Court also held to bo proved a"ainst the Sugar Co. the charge that in October, 1911,, the company committed a breach of Section -1, Paragraphs (b) and (o) 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 members of 11 e Merchants' Association. Likewise the Court held that tho, convictions of Ihe oilier defendants must be .affirmed for aiding, abetting, counselling, and procur- • ing tho Sugar C0,.t0 commit the offences mentioned. Different From Coal Vend Case. Lastly, the Court, dealt with (lie char::'.' against all the defendants of conspiring together to create a sugar monopoly in Xew Zealand. In this connect inn the I'nal Vend case was referred to. "The circumstance;! of the Coal Vend case ate entirely different, from this," said the Court." "It appears from the cast, thai the Vend agreement was not in it-rlf unlawful under the Australian law, and tho only question for tlie Court was whether the comliination under that agreement was onferod into with intent to restrain trade or commerce to the detriment of the public. The Court held that tho Crown had failed Io prove any intent on tho part of the apuailaiits to cause detriment to tho \ oublic. aud also had failed to prove actual

detriment. The Court expressed the opinion that the agreement was intended to operate (and did operate) to the advantage, and not to the detriment, otthc public at large. If, however, the Vend agreement had been in itself unlawful, tne dceision would have been the other way. . . . That case is ail authority to show that an agreement or combination, although in fact it might operate to tho public advantage, yet, tf in itself it wad contrary to law, would be hekl "J '-® detrimental to the public interest. .that is in accordance witn the definition of t-ie offence of conspiracy us being an agreement bV two or more to do an unlawtut net, or to do a lawful act by unlawiul means. In tho present case tho sugar Company had clearly a monopoly m the manufacture of reliiiecl sugar m iNew Zealand, and practically a complete monopoly ill tho ia!e of it, as the amount ol imported sugar was negligible. The Sugar Company wished to preserve that liionopoly, and to exclude foreign competition. It also wished to secure the co-operation of the merchants as a distributing agcucj. The object of the merchants was to Fecure the exclusive control pi the sugar trade, to keep tho distribution of sugar in their own hands, and to provent compotition. Such a monopoly would, in our opinion, be of a nature contrary to the public interest. There may, however, be other considerations which negative tins conclusion. Thus, if the monopoly is reasonably necessary in order to prevent tho destruction or crippling of an important local industry, or if it is reasonably necessary in order to secure the emcient and economical distribution of the product of that industry, the monopoly migdit not be contrary to the public interest, although it tended to keep up prices. In the present case, however, it appears to us that there is no jusiifieatioi for the contention that a monopoly ot distribution bv the merchants is necess.u \ to protect the Sugar _ Company lroin foreign competition. Nor is there any reason to believe that the monopoly is necessary in order to secure ethcient and economical distribution of the mainifactured article. Mr. Fairbairn s evidence shows that, so far as sugar is con-cerned-and that is the only article- we have to consider—the distribution can be satisfactorily carried out without the necessity of levying so heavy a. toll upon it as the merchants combined to lev}. No evidence was called by an .>', o / . ' defendants to contradict Mr. lairbairn. A considerable number of purchasers of sugar were content to work under tho fecond scale. The effect of .'-he third scale coupled with the condition that _tlu'i should not give away tho discount, was to give those persons an additional piolit which thov had not asked for and which they had clone, nothing to earn. »« think, therefore, that the conviction under this charge must be . a™""®' l * Costs are allowed to the Crown in respect of each separate appeal, that is ici saj, against the Sugar Company and agam.,l the other appellants, and in each case on the highest scale."

Leave to Appeal. Mr Skerrett, on behalf of the New Zealand Merchants' Association, ■ and .Mr. Mrers, on behalf of tho Sugar Company, asked for leave to appeal to the Imy Leave was granted on the usual secui it} as on ono appeal.