FRAUD ALLEGED

Evening Post, Volume CXIX, Issue 31, 6 February 1935, Page 13

FRAUD ALLEGED

THE CEAFTSMAN CASE

EX-DIRECTOR'S EVIDENCE

RIGHTS FOR MOTOR

REFLECTOR

The trial of Ernest Mabin Gilmour and Charles Ernest Vickers for alleged conspiracy arid' false pretence in. connection with the Craftsman. Manufacturing Co., Ltd. (in liquidation) was 'continued yesterday afternoon. Evidence was given by Harold Murphy and Ashleigh Bruce Fitchett, two directors of the company, and by a number of shareholders, who described what Kelly, Vickers, and Gilmour had said about the light reflectors, their efficacy, and the rights of the company in reference, to their; sale and manufacture in New Zealand. The 'evidence • was in the. mainy as given at the Lower Court hearing, re*.; pportedin "The Post" in November. Mr. Justice Smith is on the Bench, Mr. P. S. K. Maca'ssey and Mr. D.;W. Virtue are prosecuting, and Mr. W. P.; Rollings (for Gilmour) and Messrs. W. E. Leicester and T.P. McCarthy, (for Vickers) are /defending. ','MEETING ON: STAIRS. ,:.,/.. Harold Murphy said that it *was moved by him, seconded .by, Mr. Fitchett, and carried unanimously that no more moneys be paid tojAustralia and that-no further operation be made: on the company's account-pending cofnpletion of the service station - and. until authorised at a further meeting. That was the substance of, the'reso-. lution passed on the steps at the office of the company when the door ' was. found locked. Those present were the witness, Walker, and Fitchett.' "Who was chairman?" asked. Mr. Rollings. "■ "Mr. Murphy?" ;"I suppose I was—not chairman, standing. The/meeting was held pri the stairs," said witness. (Laughter;) At a meeting on March 31,1931; some" time after witness and two other directors; had found that, the bank account, had been : operated on,'no complaint was made in the form of a resolution, but. complaints, were discussed. 'At that stage witness had thought there was something wrong, and decided' to; call a meeting of shareholders to: explain the position to them. "'"■•<':-' At the March meeting-witness; had objected to the transfer of so many vendors'. shares in proportion ,to ;the company^,, own. He had been legally advised that' he cduid"nbt;stop them going .through. Large, blocksof vendor shares had. been , going through. None of witness's prior objections were recorded in the.minutes, :; ;: : The question 'of patent rights'.had been brought up by Mr. Fitchett, but not.at a directors' meeting. If was well on before; witness found; there were no patent rights. Up to February, 1931, witness was one who thought there were patent- .rights. After February, when 'witness •called a special general meeting of shareholders, he warned people not to buy shares. '■ ' ■ '•-■•..v //■■ ■ ' ■■- Flight held a large proportion, of the shares, and'Vickers, as his attorney, by! the.agreement had the right to elect'a chairman of directors. It; was asked that Vickers relinquish that and other rights. Gilmour had wanted to resign as chairman of directors,- but-found he could, not, as he had been appointed by Vickers, Flight's representative.' By February, 1931, witness had contended' that the company would have done quite well if. the service station could have been established. On the face of ; things it looked as-though the sales of reflectors were quite good, but it was found that ■ : what .were: thought to be, sales were only., consignments. What had appeared as book debts were not. ■ . ■»'• PRpSPECXiS FIiOpRiSHING. i ; "If the lights* could have been put. out the company- would have been a flourishing' one today. The lights were wonderful' lights and' still; are," said witness. .. : Mr.' Leicester: And in fairness;to ■my client; if • the' companyv '■■ had flourished nothing, would have been heard against; him .today? ' < Witness: Not if the 'company had flourished,"certainly ndt. : •.■•■.■. ?: "What Mr. Leicester is seeking to show is that if the service station sales' had gone on; there would have been money for ; everybody, and I ■dp not. think I cart stop him," said his Honour when Mr.Macassey objected: to Mr. Leicester's questions. . ' i;■ The second half of the share capital' was called up on February 18, 1931, and in a circular hopes were expressed for the success of the company. Witness .was one of'the';directors who signed that circular:. '• - ' Re-examined, witness said the circular had been prepared by Mr. Gilm6ur;.r-ii:;''::i c- '''y\A 'T;-.;v5--; ■;'.-. At a meeting iri March, Gilmouf had seconded ~a motion that three directors should- sign' cheques in future. .-■'.■ :\ >:'■ :■■':.';,■■■: i' .r-.:..i .-,' . .;'• Mr. Virtue: And what did Gilmour do then?; : : .;,; :...;"•/.- v- , - 'Witness: He resigned'as chairman'of directors.' -. '.'.' '.-' " / /'•'"' '. '"::'.' "• ■ •"Immediately?"' •■ V: :•-. ; ■.■"■::. •.<:; ; Mr. Rollings: I desire to '-protest;' at the very unfair ■ way my • friend, is putting it. It'is quite unfair'and witliout foundation. Mr. Gilmour intimated in .February that- he \yished to be released as chairman of directors,, but he. was asked to remain in office until: March; yet Mr. Virtue suggests he. resigned because of' the motion as to the signing'of -the. cheques; .It is quite unfair.- ',: : .■•:.. -~;■-; .-,; v .; ~ His: Honour: Well, Mr. Virtue, .what do you say? '': ; ■ Mr. Virtue: I wished to suggest *——- ffis'Honour: You must' not suggest. What is it you want to do—get !the witness to give his evidence, or put some leading questions, to him?-; .'. '"• Mr. Virtue said that some of the evidence-that would clear up the point h'ad;not been called.- He did not wish to make any. inference. . i '■■>. Mr. Leicester::. You .put- the inference.- •'•• '■' ;" ■■■.:•"• '■■: .''• .-■■■-..- -.- ■::-".'"■; ■ • His Honour: You shouldn't have put the'question in the-way you did, then. Counsel apologised. .• \ Evidence as to the affairs of the company was given also by. Ashleigh Bruce Fitchett, engineer,, a director of the company; and.a'regular attender at directors' ; meetings after the statutory meeting. . ! • , ; ; '.'Dort't lead,", said his. Honour a little later to Mr. Virtue, conducting the examination-in-chief of.. -Fitchett. SOLICITOR'S ADVICE. Edward Montgomery Herrick, retired farmer, of Levin, said his solicitor had- examined the prospectus at, witness's request. His solicitor had said, "It seems all right—here's Mr* Hislop's name. It must be all right, because Mr. Hislop would not have anything to do with it if it was .'shady.1" After he had paid the money for shares he had not bothered about seeing Mr. Hislop. . ■■■•;• ■ .. ... "I thought at the time I was dealing with men, but I afterwards found, to my sorrow that I wasn't," said wit.ness as he left the box. ~-.'-.. : John. Thomas Benge, storekeeper, Upper Hutt, described how he came to acquire two lots of 100 shares in the company. TODAY'S HEARING. William Ferness Stevens, retired farmer, Marton, said that Gilmour told him the company was paying £20,000 for the patent rights '-tar. the Crafts-

man flights. Gilmour liad told witness also that arrangements had been made tor English cars to be sent out without lights so that they could be fitted with the company's lights in New Zealand. Witness bought 250 shares, on the faith of those statements, in the name of his wife. .They were contributing shares. Witness had had 250 shares in his own, name before that. Fifteen hundred and fourteen shares were sold by Archibald David McKin^ ley, who said he was an insurance agent, during a visit to several towns as a salesman of shares for the Craftsman Company. He had met Vickers, who got him to agree to sell 5000 shares. Vickers talkedi-to witness, for half an hour or an hour about the selling proposition. He called on J. J. Patterson arid told him that £ 12,000 was being paid for the patent rights and dies of the light reflector.

Some time after concluding his work with the company witness received a letter from "Vickers inviting witness to go to South Africa, and offering him 10s per share for up to 6000 he might sell.. Witness said he declined to accept.

Cross-examined by Mr. Leicester, McKinley said the selling of Craftsman shares had only been a sideline. He had been selling bonds, .called "Realty" for a Christchurch concern and earned £20 a.week salary and 6 per cent, commission.. '■'•"■■'■

If J. J. Patterson said that witness had told him the company had paid £15,000 for the patent rights arid dies, Patterson would be wrong.

Witness said he had read the prospectus—tliat is, "parts that appealed to him." He could not find anything in the prospectus about the; price paid for patent rights: Witness thought Tickers was an,- employee of. the company, even though ■ his ' contract with Vickers showed Vickers to be attorney for the vender. ,

William Claus Hanseh described how he had purchased 200 shares. He had asked if any cash was being paid to the vender. He was told none was to pass. He afterwards learned that £3000 had been paid.- *

James John Patterson, farmer, Manaia,. .said McKinley and another man called on him and demonstrated a light. McKinley told him the company had paid £12,000 or £15,000 for the patent rights in New Zealand. What one man said "the other would agree with."

Francis Marshall, carrier, Wellington, said Gilmour called on him in. July, 1930, and told; him. the Company hadbeen formed to buy the New Zealand patent rights of the light. .: Witness bought 50 shares;

Gross-examined by Mr. Rollings, witness said the demonstration of the light'was the-chief thing that influenced him.

, Re-examined, witness said that Gilmour had said the coriipany had the 'patent rights. -(Proceeding.)