DEAL IN OPTIONS

NZ Truth, Issue 1202, 13 December 1928, Page 4

DEAL IN OPTIONS

Leslie Johnson's Transactions With Sir Kenneth Douglas Discussed Before Official Assignee BANKRUPT WHO FELL A SECOND TIME (From "N.Z. Truth's" Special Wellington Kepresentative) , | Away back m 1914, Leslie Cecil Johnson, now of Welling- j | ton, was made a bankrupt m New South Wales. He was never | j .discharged, but that fact apparently did not worry Johnson 1 j overmuch, for when he came across the Tasman to New Zealand J | he again started dabbling m high finance — and again he has 1 1 fallen with a heavy thud. | iiMirtiitiiiiiiiiirttMiiiiitiMiiiiiitriif iiriiiiiititiiiriiiiMitiiiiiriiiiiiTiiiiirttiiiiriiuiifiiiiiittiiMittiiiiiiiiiitiiiiiiiiiiiniiiiiii?^

IN New South Wales, Johnson had liabilities amounting 1 to £40,000 and assets of £30,000, but he never stopped to inquire what dividend was paid to unsecured creditors. Johnson was again recently adjudged a bankrupt m Wellington, and. within the past three weeks two meetings of irate creditors have been held before the official assignee. At the initial meeting- it was shown that the deficiency m bankrupt's estate was £8204/12/8. Unsecured creditors [stood at £7552/8/7 and secured creditors £13,412/4/1, less £12,760. The assets were valued at £4. The chief secured creditor was Sir Kenneth Douglas, a well-known solicitor, of Wellington. His claim was £7667/18/5. .The main interest m the bankruptcy proceedings centred m Johnson's business associations with Sir Kenneth, and although the interrogation of the bankrupt at the hands of the creditors' solicitors elicited some interesting information, it was not until the adjourned meeting, when Sir Kenneth was examined, that details of relations between the parties were gleaned. Verbal brickbats were hurled back and forth across the floor of the assignee's office with candor, and some heated exchanges between counsel and Sir Kenneth resulted. Fully a' dozen solicitors, with their disappointed clients, attended both meetings. Johnson's trouble m Australia appeared to be real estate, and dabbling m land deals brought about his downfall m New Zealand. He secured options over various tracts of land m the Hutt Valley, and Sir Kenneth Douglas financed him m the deals. A farm property at Waverley also came prominently into the limelight. When he first name, to New Zealand, Johnson became involved m a, paint business and also an alleged cure for mammitis m cows. He wen t into partnership with a man named Tonks. He also secured the rights m other uncertain undertakings, which ultimately, for him, proved a failure. His partnership with Tonks was dissolved, but Johnson-alleged that Tonks owed him money and the matter had to be settled by arbitration. It was decided by the arbiters ;that Tonks- owed Johnson nothing. , ; Johnson, who is described as an advertising agent, about this time als*o secured the rights to advertise on the back of the Wellington City Corporation trams, but he subsequently sold his interest m this venture to others. Bankrupt, m his ■ statement, attributed his downfall to various causes — the flax company which bought one of the properties m the Hutt Valley, the early greediness of Tonks, and other adverse circumstances and conditions over which he had no control.. Lawyer E. Parry, who appeared as a legal adviser for the official assignee, said it wasn't a case of Tonks becoming greedy; he began to find out something about Johnson, who was an undischarged bankrupt m Australia. Johnson had alleged that Tonks delayed arbitration, but this was not so, and the arbiters awarded Johnson nothing: Johnson also induced Tonks to guarantee the fur* niture m a residential letting proposition m which he became involved. If there was one man m New Zealand who regretted Johnson ever coming to this country it was Tonks. Lawyer C. A. L. Treadwell, who appeared for a number of creditors, examined Johnson at some length concerning his dealings with the Mungaroa property, which he purchased for £4500. * Bankrupt said he had put up £500 on this proposition, his solicitor, Lawyer Luckie, having found the money. Later, Sir Kenneth Douglas had advanced £ 500 to pay off that amount, advanced by the bank through Lawyer Luckie. Sir Kenneth also took the place of the second mortgagee. Asked when he first came m contact with Sir Kenneth, Johnson said it was when he took an office m the former's place m 1925. It was about this time also that he entered into financial arrangements with Sir Kenneth. Bankrupt said he had entered into a contract to buy the flax lands at Wallaceville for £ 10,500 and paid a deposit of £10 to bind it: He paid this sum out of his own. pocket, and followed it up a few days . later with £190. This latter sum was borrowed money— part of £200 or £250 borrowed from A. E. Preston. Lawyer Treadwell: Did you give him any security? Johnson: No. Preston (appearing from behind a sea of heads): You are a liar, Mr. Johnson. (Laughter.) Johnson said he gave a power of attorney to Sir Kenneth, and it was about this time he began to give orders on that gentleman to his creditors, as Sir Kenneth had power to collect all his assets. In September of the same year he sold a portion ,of the property to the flax company. He had put' £500 m cash into it. ,Sir Kenneth had known of his precarious position during the period of his land deals. When they meeting resumed last week, Sir Kenneth Douglas, who had been notified to attend, arrived laden with deeds, agreements, options, mortgages and powers of attorney. Sir Kenneth was subjected to a running fire of questions from counsel, and for thi'ee solid hours stood up to the barrage with complacency. In answer to Lawyer Treadwell, Sir Kenneth said that any scheme there had been concerning the development of the Wallacevilie and Mungaroa properties had originated m Johnson's brain. Sir Kenneth supplied the finance on the understanding that , he could, at any time within seven years, acquire a. half share. "I have an option over half the Mungaroa property that neither 1 the official assignee nor. the creditors can upset," he said. The -power of attorney he" got from Johnson was dated October 12, 192 G. Lawyer Treadwell: In these schemes

Awarded Nothing

"You're A Liar"

you were supplying the hnance and Johnson the brains? Sir Kenneth: I have some braina, ] hope. They may not be much. Is there anything inconsistent m tht whole business with Johnson being the dummy for you? — You amuse me Mr. Treadwell. ' Lawyer Treadwell: It may be m a little while that your amusement will die. At this stage questions were fired ai Sir Kennetli from all corners of tn« room, which led his, counsel (Lawyei Cornish) to remark: "For God's sake let Sir Kenneth answer one questior at a time." To Lawyer Parry, Sir Kenneth said that had a profit been made from the sale of the land, Johnson would have got half. It might have been anything between £5000 and £6000. What has Johnson done to deserve a, half interest m such a valuable property? — Well, I have done it before when someone has put me on to a good •thing. Sir Kenneth stated, that the £150(] mentioned m the documents as a bonus was m lieu of half interest had he not taken it up. He was not lending money for the good of his health. In November, 1926, Johnson was debited with between £9000 and £10,000. Lawyer Parry: How much did Johnson owe you when the first charge was made? — About £1000. Lawyer Treadwell : You say you want to help creditors, but you come here without having looked at any of the papers and say you have been too busy? — No, I'm glad I haven't. You don't deserve help when you make the suggestions you do. Discussion for a time centred m the orders given to creditors by Johnson on Sir Kenneth Douglas. The latter claimed that the power of attorney given him b y Johnson gave his , claims priority over the orders of other creditors. He denied that any of the orders were dated prior to the power of attorney. Lawyer Treadwell: Did any of these orders get 'less? Sir Kenneth: Yes, from time to time. When ? — How the deuce can I tell you. To the official assignee. Sir Kenneth said: "If this matter had been settled up th,ree years ago when it should have been, Johnson would have had no . difficulty m paying off his debts. "Had the flax company met their obligations when they should, Johnson would have met his." ■ Lawyer Treadwell: Did you ever tell any of the creditors that you would protect them with money coming to Johnson? — No, I considered that all money I had advanced to Johnson had priority over all others. To Lawyer Parry, Sir Kenneth said not one order came m before he got his power of attorney. Counsel: Did you know at the. time you got it that Johnson had given orders on you? — No. Lawyer Treadwell wanted to know what interest Sir Kenneth was charging Johnson for money advanced; whether it was just straight out interest or at a compound rate. Sir Kenneth was unable to say. ■ Lawyer Parry: These orders are all dated one day after you got your power of attorney. Can you suggest why Johnson should date them on the 13th?— No. But it gave you an advantage when the power of attorney was dated the 12th. He could have dated them before? — I would not have accepted them. (Laughter.) Sir Kenneth said he did not know Johnson was borrowing. He could do so from anyone. "I might borrow 5/off you m a soft moment," he added with a smile. i Lawyer Treadwell: It would have to be a very soft one. Lawyer Herd wanted to kn o w whether Sir Kenneth would deny having told hi m that he (Sir Kenneth) was a trustee for the rest of the creditors. "After I had been paid arid any money left I. would be trustee. I can't pay Johnson any money," he said. "There was some £6000 to come from the flax company. He was entitled to it; but if there was any left it would go to the other creditors." Lawyer Parry:. If you lend Johnson, say, £2000, and then he gives you a power of attorney; other debts come m and subsequent to them you lend Johnson more money. Do you say that this later money you loan him takes priority over the other creditors? — Certainly. (Laughter.) When the official assignee wanted to know what the meeting intended to do, ( Lawyer Parry said Sir. Kennetli wpuld have to prove his claim along with the other creditors. Lawyer Treadwell: If the official assignee rejects his claim then it is put to the proof. "Statements have been put m my mouth," remarked Sir Kenneth, "during my cross-examination, and several creditors have- been cross-examining me during the same time. It is quite possible that mistakes have been made during the proceedings. Further, all my statements are subject to the documents." Lawyer Treadwell: Sir Kenneth has been represented by able counsel who comes prepared after fourteen days without any papers. It was agreed upon that Sir Kenneth's claim as a creditor, either secured or unsecured, be not admitted until the solicitors for the official assignee recommended their admission. The meeting was adjourned sine die.