CROWN'S CASE

Evening Post, Issue 37, 12 August 1936, Page 6

CROWN'S CASE

JUDGE'S SUMMING UP

.■> Mr. O'Leary's address to the jury - was reported yesterday. " Mr. Meredith concluded his address ;' after "The Post" went to press yester- ■; ( day with a detailed examination of " r> the various financial transactions. He contended that it was not surprising . that the Legislature of two. particular ."-- countries should take steps to see that " a possible recurrence of the transactions such as had,been outlined shouldbe stopped. It was idle to. suggest that the charges were miserable. They arose out of the transactions. Mr. Meredith asked the jury to con--1 sider whether McArthur let investors ■./ knq,w where their money was going, ' •"- and his attitude when questions were ;'■' put to him. When he said at the meeting of debenture holders in Christ- .' church that they had been too busy .',.' to make out a balance-sheet for the ~.,, year ended December 1, 1932, that was ■ ' distinctly false. A balance-sheet had been made out, but it had been tagged «- and that balance-sheet had not been published. Mr. J. Anderson, the auditor, had certified the balance-sheet subject to a report, which referred to a large sum of money which.' had been invested in associated companies. Mr. Anderson refused to fall into line with the views of McArthur and had resigned. Not only this: Mr. Dowdy, public 'accountant, of Wellington, had asked McArthur a specific question about investments in interlocking companies. McArthur had completely ''" evaded the question from' a man who '•' had taken the, trouble to go to Auck- '" land from Wellington and ask McAr- ' ' thur if certain rumours were true. "'" Then there was the dispute with Hope. ' A resolution concerning the invest- ■ ments had been passed and Hope rather than be bound by ft-resigned' from the directorate. McArthur also '' had sent out a letter referring to the '.'companies in which the I.E.T, had in- "; vestments. They were some of the ' finest companies in the-world but in them the investments of the I.E.T.

were a mere bagatelle. •' There was not a word of where the bulk of the money was going. .'.. . . HIS HONOUR SUMS UP. "Counsel have helped hie greatly by reviewing the-facts in this case," said his Honour, summing up to the jury. "There are just one or two matters I should'mention to you. The first is that almost a red herring has; been attempted to be drawn across the scent by various matters that have been suggested. First of all: the suggestion was made more, than once that some unfairness has been practised by the Court—l take it myself—in allowing evidence to be admitted that should not be admitted.. The question of the admission or otherwise of evidence is a matter purely for the Judge. If a Judge wrongfully admits evidence, or wrongfully refuses evidence, then there is another Court which will correct him, but as far as these proceedings are concerned the Judge's.duty is to see that only evidence that is admissible is allowed, that it is correctly and properly admissible, and therefore there-can be no suggestion that evidence admitted here has been admitted for any other purpose than to prove' the case. The reason this type of evidence is admitted is in order for you to be in a position to judge as to the accused's state of mind. If none of the evidence admitted, therefore, had been : produced, would it have been possible for you to consider the- ques^ tion as to whether there had been misstatement owing to an omission in the prospectuses. and reports that were issued. I trust you will not think for one moment.that there has been any unfairness in; this respect. At any fate, it should not influence your findings on the issues before you.

"The next matter is that there have been veiled ..suggestions of a conspiracy .by interested capitalists . against the accused, and that there have .-been'" unfair laws passed by the two Governments concerned, passed, it is suggested, for political purposes to injure the. accused. Now with, regard to the alleged actions of capitalist interests, instances are given. I understand these are the instances:—(l) Refusal of certain companies to register transfers of shares of the companies controlled by the accused. (2) That there has been a warning issued by the Stock Exchange to shareholders against surrendering shares to become debenture holders in the companies controlled by the accused. (3) That an ■ action was brought by the Guardian Trust Company for the purpose of securing the return to a client of theirs of some thirty-odd' thousand pounds, that had been invested by her in the I.E.T. Now, gentlemen, of course, these moneys were ' refunded, and the IJS.T: paid the costs; KNOWLEDGE OF TRANSACTIONS. "I think if you consider tne matter as men of common sense that the question can easily be answered. If any of you were possessed of information which included something of the transactions which have been shown to you to have taken, place in connection with the use of debenture holders' money in connection with the Sterling Company, and. in connection with the Trust Building, and you owed any duty to persons who were surrendering perfectly good investments in established companies to go into the accused's companies, would you or would you not warn them to take heed? I put it to you as commonsense men. Very well, the companies that did warn their shareholders warned them against the surrendering of their shares and'putting them into their companies. A duty would be owed by a company, to its shareholders; and that duty could only be carried out, performed,' by warning them, if knowledge of transactions such as we have heard of here, came to their'ears. The same thing applied to the Stock Exchange. The Stock Exchange owed a duty to those persons—those shareholders in companies listed upon the Stock Exchange— -and if the information in the same way came to those responsible for the,management of the Stock. Exchanges it would be ; their duty if they had information of "transactions which were likely to affect their shareholders to ..communicate with theni. That is only common sense, and I put it to you that it is ridiculous to suggest that because these precautions were taken by the companies and by the Stock Exchange that that shows, a capitalistic conspiracy which has been dogging the accused. * \- TEE PASSING OF LEGISLATION. "Then there is the other suggestion that this matter has been made a political issue. Let us consider what that position is. An experienced Magistrate, Mr. Barton, who is also an economist of some standing, is appointed as chairman of* a Commission to inquire into companies. He gives • a report which is apparently simultaneously laid on the table or the floor of the House— I don't know which you call it—in New Zealand and Australia, and that same day'legislation is introduced in both countries, the. legislation which is here suggested was passed for the purpose of injuring the accused while actuated by political motives. * Gentlemen, can you accept such a suggestion? Is not ttie inference irresistible that those Legislatures, upon the information supplied to them, conceived it to be their duty, as it was their duty, to protect the small shareholder buying shares in companies and legalised in the direction of protecting him. It is an absurd suggestion, that there was some political reason that actuated the passing of this legislation. These two matters have really nothing to do with tho case because as a matter of law it is immaterial in what circumstances a case comes before the Court. The question for the jury is: Is the offence proved? They are introduced, of course, for the purpose of suggesting to the jury,that they have before them a persecuted innocent man pursued by powerful interests; I imagine that the common sense of this jury will not allow such a suggestion to affect their verdict, because it is the duty of the jury to decide the question upon the evidence,before it, if that evidence is sufficient to warrant a conviction, even though it were shown that it were improper to bring the proceedings before the Court. I think I have shown you that it is quite impossible for the jury to accept the suggestion that either capitalistic interests, or political influence, has been used to injure this man.

"Now. another matter. Much has been made of the fact that after exhaustive inquiries the only charges of breaches of the criminal law presented are first a charge of theft which has been dismissed by the Magistrate, and these present charges. We have not much information in connection with the charge of theft, but it would appear to be in connection with money received by the accused in one of these Sterling transactions. It may have been thought that the actual receipt by him of money in certain circumstances would amount to theft, but apparently the Magistrate considered that the circumstances were not such as to actually create a criminal offence, and we do not question his decision. And so with the other matters that were the subject of these inquiries it was apparently discovered that none of them, actually came within the criminal law. However much you may think that some of these transactions were reprehensible, they apparently cannot be attacked by a criminal prosecution. ; FUNCTIONS OF JUDGE AND JUUY. "Having disposed of these matters I still have some preliminary observations to make, and first I would point out to you what are the respective functions of the Judge and the jury in the administration of the law. You are the sole judges of fact; whatever I view a Judge may take in that respect is of no consequence, the responsibility for finding on those facts is yours and yours alone. My function is to rule on questions of law, and just as I am bound by your findings of fact -so are you bound to take your law from me. If lam wrong another Court will correct, me. Now, the accused when he enters that, dock charged-with a criminal, offence is presumed by our law to be innocent, and that presumption is not removed until the Crown satisfies you by evidence that he is guilty. If after hearing all the evidence, there remains in your minds a reasonable doubt as to his guilt the presumption of innocence has not been rebutted and you should find him not guilty. The doubt, however, must be such as, applying your common sense; would affect your conduct in the.more important affairs in your life. It must not be a fanciful doubt, but a real doubt based on' the application of your common sense to the facts that you consider proved."

His Honour went on to refer to. the nature of the offence with which the accused ,was charged, and the section of the Crimes Act under which he was charged. "In the event of your coming to the conclusion that the statements were false in the sense that that word is used in the statute," he continued, "there will still remain the question, as to whether it constitutes a criminal offence. A false statement! in a prospectus may be a ground of civil liability." His Honour next referred to certain provisions in the Companies Act. There was, he said, a civil remedy for false statements in addition tp a criminal remedy. "That was quite in accordance with ordinary criminal offences," he said. "If a burglar breaks into your, house and steals some of your goods he can be prosecuted and sentenced' to imprisonment, but you still have your personal remedy. When a man assaults you and is prosecuted, and' convicted and sentenced, you still have your civil right! of action against'him. And then there is the everyday case of persons driving motor-cars negligently. There is therefore nothing in the fact that under this Act a proceeding could have been

brought on a civil action, but only by a person who can prove that they were injured. You know something of the nature of this case and the expenses in connection with it. For a private person to bring an action consequently would be very expensive indeed. Hence it can hardly be suggested1 as any ground for blaming the Crown that where they could see that the public had been injured they took the proceedings upon their own shoulders. THE PROOF REQUIRED. "In order to find-the accused guilty in this case the Crown must satisfy you that the accused, being a director of the parent company (the Investment Executive Trust of New Zealand, Ltd.): (1) made circulated or published or concurred^ in making circulating or publishing the prospectuses and reports mentioned (2) which he knew to be false in any material particular (3) with intent to deceive members shareholders .or debenture holders or to induce persons to advance any property—which includes handing over securities —to the parent company. As to the first of these, that he made circulated or published, it is disputed in connection with the second prospectus that accused was a party to publishing it, but that point I shall deal with when I c,ome to discuss the issues-separately. Otherwise' than as regards that prospectus it is not disputed that the accused was a party to publishing and circulating the other documents. As to what constitutes the falseness of a prospectus or a report the law;is as follows:—'A prospectus or report may be false in a material particular although no one specific statement of fact contained in it can be proved to be false if, when the prospectus or report is taken as.a whole, what it implied is false on account of what it does not state. There must be such a non-disclosure as to render the document misleading.' . Mr. O'Leary has adopted the summing up of the learned Judge in-the Bishergian case.-'--.l'.will adopt that also."! His Honour read from the report of.that case. "Now you have got to be satisfied," he proceeded, "that the accused in making these- statements knew, perfectly well that the omission of any statement with regard to.having shares in these subsidiary companies would convey a wrong impression, that the investing of the moneys of the I.E.T. were in ordinary everyday securities. This was the reason for the large amount of evidence that was introduced.

"The third point which the Crown must prove is that the accused when he issued these documents did so with intent to deceive. That is a pure question of inference,' and may be inferred from its tendency to produce the effect intended, that is to say,, that the funds were invested in . and spread over diversified securities. I had intended to draw your attention to the various.letters that have been read by. Mr. Meredith, but it is unnecessary to do so now. They were read for the purpose of. showing the state; of mind of the accused—showing that he was prepared, for instance, in the first letter he wrote—to the Crown Solicitor of Auckland-—where he' made an untrue statement by stating as to what his property consisted of,- where he represented his only assets to beYthe sum of £400 odd, when later it appears that he had concealed assets. There were other references in those other letters where he avoided direct answers and gave answers which, even if. they were not strictly, untrue, were ..calculated to produce- an impression of lother than the truth. ■.? \:-■:■.

"Taking things broadly, the first matter that I wish to take is what duty did the accused as director of the parent company owe to persons who had invested their money in that company. It was suggested yesterday that he was not a trustee. Gentlemen he was a trustee. The law is perfectly clear on the matter. He was a trustee for all those persons who had put money and investments into the company. His duty was to them and to them only. In those circumstances in lending to himself the £50,000 required to carry out the purchase of the 'Daily e l ,e|n^ h'^ bUildin? and a £115,000, he was doing an unlawful act. He was committing a breach of trust, which, however reprehensible is not an act he is responsible for criminally. But it was a breach of trust. He says that in buying the building he knew he was getting a bargain and that a large profit would result. That is no excuse. Even if he thought there was a sure and certain profit which would accrue to the company, of which he was a director, he had no right to do it. But what actually was the position? It was, we know from his own statement, purely a speculation, on his own behalf He reserved to himself the right, if he chose, to give such amount to the I.E.T. as he thought fit, but it was speculation on his behalf done in his own interests. He was thus committing a clear breach of trust in taking £50,000 belonging to the company of which he was trustee and spending it in this way. . ■

"By the use of these interlocking companies, formed for that purpose, he manipulated shares, which resulted in his coming out with the large sum of money ;of which you have been told. He claims to have benefited the I.E.T. by a transfer of B.N.T. debentures; that has been sufficiently discussed.

"Then he claims that, owing to the precipitate action of Governments, he has been prevented from carrying out a wide scheme that he had fomenting in his brain with regard to the future of the . company. What are these schemes?. He has given us some idea of them. One.of the schemes was to take up a defunct bank—to re-establish the bank, which; was on the market. There was. an insurance company, or something of that sort, that he was also going to take up. \ Gentlemen, it may have been possible that it may have been in the back of the minds of some of the legislators that wellknown figures in fiiiance have gone in for all sorts of things like this. Hooley, for example. For. years they may manage to carry on with interlocking companies, the main financier living extravagantly, and suddenly there is a crash. This' sort of thing, the taking over of a bank and the forming of an insurance company, are not matters that are good securities that could be purchased—properly purchased—in a company such as this.. It is highly improbable that small shareholders would be attracted into buying shares in a company that proposed that sort of thing." DIRECTION TO JURY. His Honour then dealt with each count in'the indictment separately. It would not be right, he said, referring to; the last prospectus in the charges, to find the accused guilty of publishing certain figures at the end of it, as he was away ;from New Zealand at the time it was issued, but as far as his actiqn generally was concerned they were at liberty, if they ■ thought it proved; to find the accused guilty, but eliminating that particular portion of the charge. •