MOREWA OWNERSHIP

Evening Star, Issue 22442, 12 September 1936, Page 22

MOREWA OWNERSHIP

COURT FINDS FOR NTARTHUR INVOLVED TRANSACTION [Per United Press Association.] WELLINGTON, September 11. The ownership of the yacht Morewa and the complicated financial dealings connected with it were the subject of a judgment delivered by Mr Justice Johnston in the Supreme Court today. The plaintiffs, the Pacific Exploration Company Ltd., financiers, and Sterling Investments Company (N.Z.) Ltd., investors, two companies formerly in business in Auckland and elsewhere and now in liquidation, sought a declai’ation that John William Shaw M'Arthur, company promoter, was liable to pay the plaintiffs either £10,335 4s 4d or the value of the yacht at the date of its acquisition by M'Arthur, together with interest at 6 per cent., and an inquiry as to the value of the yacht at the date of its acquisition by M‘Arthur and all necessary directions as to the holding of such inquiry. The case occupied four days last month. The judgment covered 18 typewritten pages, and dealt exhaustively with various aspects of the evidence and submissions.

“ In this case,” said His Honour, “ I have felt that so far as regards the particular transaction involved—namely, the disposal of the yacht Morewa, I cannot deny to the companies their legal status and that the control of the companies by the defendant is not in itself sufficient to entitle me to impute fraud without better proof than has been offered in this action. I think it clear tliat.the weight of evidence is against the interpretations placed on the transactions by the plaintiffs, and judgment must be for the defendant.” Mis Honour said: “I can see no reason why, if the defendant wished to purchase this yacht, he had any object in deceiving or defrauding the companies he controlled. If they were mere aliases he would be deceiving and defrauding only himself and primafacie it appears on the construction of the entries in the books of the Pacific and the balance sheets of both companies, that the sale relied on by defendant saved both the Pacific and Sterling Companies the considerable loss that in all probability they were both bound to suffer if, to liquidate the Pacific Company’s debt to the Sterling Company, the yacht had been put on the open market. It is clear from the evidence of the accountants that by the taking over of the whole of the indebtedness of the Pacific Company to the Sterling Company the Pacific Company was properly credited and the defendant debited with the whole of the moneys spent on the construction and equipment of the boat, leaving the Pacific Company reimbursed for all expenditure on the yacht. As, in my opinion, the only interpretation to he put upon the Al-

corn receipt is that given to the accountants, Messrs Glenn and Johnston, 1 find it impossible to hold that the plaintiffs have proved either a sale by the Pacific Company to the Sterling Company and delivery to the defendant to hold upon trust for the Sterling Company or failure to pay the stipulated consideration in the event of it being hold that an agreement for sale was made by the Pacific Company to the defendant. I have not forgotten in , the consideration given to this case that 1 should entertain the gravest doubt about the truth on any statement made by the defendant wlien it is to his advantage that that statement should bo made. His credibility as a ivitness is gravely shaken by his conviction for issuing false xrrospectuses. "Nothing that J. can do in this action can assist or in any way affect the members of the public who subscribed to the Investment Executive Trust Company to recover their losses. It may be that the manipulation of the companies allowed by the Companies Act opens the way to fraud and control as was exorcised here provides a good target for attack.” Judgment was entered for the defendant with costs, witness’s expenses, and disbursements. On the application of Mr Watson a stay of execution was granted provided notice of appeal is filed within 28 days, the costs to be paid into court within seven days, and to be paid to the defendant if an appeal is not lodged within 28 days. Leave was given to the defendant to move to set aside the order on seven days’ notice.