TRUST INQUIRY

Dominion, Volume 28, Issue 97, 18 January 1935, Page 9

TRUST INQUIRY

Commissioner’s Final Report FUTURE OF COMPANIES Suggestions to New South Wales Government CABINET CONSIDERATION By Telegraph.—Press Assn.—Copyright. (Received January 17, 9 p.m.) Sydney, January 17. Simultaneous liquidation in New South Wales and New Zealand of certain companies is suggested hy Mr. Justice Haise Kogers, the companies inquiry commissioner, in his final report on the investigation‘of the affairs of a number of investment trust companies. The report was before the State Cabinet to-day. The commissioner says: “Unless the Investment Executive Trust of New Zealand Ltd. and the British National Investment Trust Ltd. are to be put into liquidation concurrently, I think there is danger of depletion of the assets. The Southern British National Trust Ltd., by its continued existence is not so important as to counterbalance difficulties which would probably' arise from its liquidation alone. My view is that the State Government should act only after consultation with and in conjunction with' the Government of New Zealand. It is essential that some scheme should be evolved by which the affairs of the principal companies may have co-ordinated control, either in carrying on or in liquidation. “I think the interests of debenture holders in the Southern British National Trust would be best served if liquidation is decided upon, provided it is concurrent liquidation, but I do not think this expression of opinion should be used as by any means a determining argument for putting into liquidation, the Investmeiit Executive Trust, my view being that the future of that company should be decided. by the proper authorities on consideration of what will be best for debenture holders.” Kesult of a Ballot. The report- states tli'at a ballot of debenture holders in the Southern British National Trust resulted in 148 voters, representing paid-up capital of £64,209 favouring reconstruction in accordance with the plan for appointment of directors from among debenture holders. Fifty-nine, _ representing £24,140, favoured immediate winding up. Twenty-one, representing £4840, favoured allowing the assets to remain in control of the Public Trustee. Twenty-eight, representing £10,940, favoured winding up with control by the Public Trustee. The report continues: “Since the publication of the interim report counsel for McArthur has submitted a scheme which involves winding up a large number of other companies. Even if that scheme is not adopted there still exists in my opinion no reason for their continued existence. Most of such companies are purely New Zealand companies, and any steps taken in connection with them must be taken in New Zealand. Investigation revealed quite clearly that McArthur had used several of the companies named in the schedule presumably for the purpose of covering up his own transactions, also for the purpose of diverting for his own ends the capital subscribed by the public from the companies to which it had been subscribed.”

The report proceeds: “Companies were called into existence when McArthur needed them either to hold some assets or to act as a conduit for money from one holder to another. They ceased to function when he had no further need for them. Many of them had no assets, yet they issued debentures for thousands of pounds and made purchases of real estate with these debentures. The directors, secretaries and company officials were mere puppets of McArthur.” Comment on Company’s Name. Referring to the British Medical Investment Trust, the report states that there was no justification for the name adopted by the company. It was not British, and had no connection with the medical profession. “I think it clear,” the commissioner states, "that Major M. L. F. Jarvie, M.L.A., did not take proper steps to inform himself that everything was in order before allowing himssif to become associated with the company. It was obviously the intention of McArthur and Mclnnes to attach a public man to their organisation, and Major Jarvie, according to his own evidence, took those gentlemen at their own valuation and associated himself with their projects without any inquiry at all." The report continues: “British Consolidated Investments Limited is a share-selling organisation and its foundation was an agreement with the British Medical Investment Trust under which it was to receive 10 per cent, of the value of shares applied for in that company. Mclnnes was a considerable shareholder in this company and I draw the inference that it was in some manner under his domination. It scarcely functioned at all.” Regarding the future of the Southern British National Trust the commissioner refers to a division of opinion among debenture holders as shown by a ballot, and comments that the reconstruction plan was really inspired by McArthur. “If there had been anything like unanimity in favour of the plan I should probably have recommended that the wishes of the majority should be regarded and, whatever my own opinion, should have recommended that the scheme of reconstruction be allowed to proceed.” Suggested Course of Action. He says: “So far as people who complain that their investments were induced by misrepresentation are concerned their position will be no worse on liquidation than if the company continues in existence. The plan which has been put forward involved the reconstruction of the two principal companies, and the British National Investment, Ltd., Trust, and it is obvious that the interests of all three are very intimately connected. The essential thing in the interests of everybody is to obtain the best possible price for the Trust building, and that may involve postponing the realisation for a period of years. Perhaps the best course would be to put the three companies mentioned, and the British National Investment Trust into liquidation at the same time and have the affairs of each subject in* the winding-up to the same—or co-ordinat-ed —control./Eliat,, however, would Jn-_

volve legislative action outside New South Wales, and could only be done with the help of other Governments. “To some extent the Investment Executive Trust stands in a different position from the Southern British National Trust and it may be that deben-ture-holders may wish to carry on and that the New Zealand authorities will sanction such a course. In that case the position of the Southern British National Trust must be considered from another angle. In my opinion the New South Wales Government cannot dispose of the matter simply by'deciding to put the Southern British National Trust into liquidation. McArthur and Alcorn undertook to give their aid to the plan put forward by their counsel. The plan itself involved surrender by them of some profits they had made as the result of their transactions in connection with the purchase of the Trust building. It must be realised that this surrender will not be voluntarily made if the companies are put into liquidation. It will be a matter for consideration by the proper authorities whether legislative action should be taken to make their profits available for debenture-holders through the employment of whose money they were able to make them.” Legislation Recommended. The commissioner proceeds to deal with recommendations concerning company legislation. Referring to sharehawking, he says that any disadvantages which might arise from the abolition of the system are of small moment compared with the grave evils where it is in operation. The commissioner comments on the methods used in persuading depositors of the Primary Producers’ Bank, which is in liquidation, to assign their deposits for debentures in the Southern British National Trust, He strongly suggests that lists of depositors were obtained by bribery, and refers to the difficulty of resisting the persistence of a trained agent. He recommends that no investment trust should be allowed to issue debentures except in some fixed proportion to paid-up capital. Other recommendations deal with the appointment of trustees, the holding of annual meetings of debentureholders, power for debenture-holders to be represented on the directorate and to appoint auditors, the issue of prospectuses and the percentage of capital to bo paid up before a company proceeds to allotment. NO STATEMENT ISSUED New South Wales Cabinet (Received January IS, 12.10 a.m.)

Sydney, January 17. Cabinet issued no official statement upon the commissioners’ report.