H,— 27.

Streets, Sydney), to the British National Trust, Ltd., acquired a credit in the books of the latter company amounting to £229,600. The facts relative to this transaction are set out in the report of the Inspectors on the affairs of the Investment Executive Trust of New Zealand, Ltd. To discharge part of this debt to J. W. S. McArthur the British National Trust, Ltd., issued to him a number of debentures in denominations of £1,000 each. By handing over fifty-nine of these debentures Mr. McArthur purchased from the Investment Executive Trust of New Zealand, Ltd., the debentures issued by the Sterling Investments Co. (N.Z.), Ltd., amounting to £60,000. In consideration of the transfer of certain assets from the Sterling Investments Co. (N.Z.), Ltd., to Wynwood Investments, Ltd., the debentures issued by the former company were treated as redeemed and were cancelled. Cheques supporting the transaction were passed between the two companies, the Sterling Investments Co. (N.Z.), Ltd., issuing a cheque for £60,000, made payable to J. W. S. McArthur personally, to redeem the debentures. This cheque was banked to the credit of Wynwood Investments, Ltd., and contemporaneously the latter company issued a cheque for £60,025 in favour of the Sterling Investments Co. (N.Z.), Ltd., to pay for the assets acquired. It is difficult to report the details of this transaction with any certainty for the following reasons : — (a) The books of the Sterling Investments Co. (N.Z.), Ltd., containing a record of its transactions prior to Ist March, 1934, are stated to be " lost," and although exhaustive search has been made both by the officers of the company and by Inspectors appointed under the Companies (Special Investigations) Act, 1934, they have not been found. (b) No agreement fully recording the transaction has been produced either to the Royal Commission in Sydney or to the Inspectors. (c) There is no record of the transaction in the minute-books of Wynwood Investments, Ltd., or the Sterling Investments Co. (N.Z.), Ltd., and the particulars in the books of account of the former company are very meagre. During the years 1931 and 1932, as is shown in the report of the Inspectors appointed under the provisions of the Companies (Special Investigations) Act, 1934, relative to the Sterling Investments Co. (N.Z.), Ltd., J. W. S. McArthur experienced financial difficulties. He was being pressed for payment of debts, which he professed inability to meet. A bankruptcy notice was served on him. In order to protect certain assets in which he was personally interested he transferred these to the Sterling Investments Co. (N.Z.), Ltd. This latter company, which was wholly under his domination, advanced substantial sums of money to preserve and develop these assets. These and other assets were subsequently transferred to Wynwood Investments, Ltd., and J. W. S. McArthur personally in the course of a transaction referred to in this report as the Sterling-Wynwood transaction. Although this, the largest and most important transaction undertaken by either the Sterling Investments Co. (N.Z.), Ltd., or by Wynwood Investments, Ltd., involved the transfer of very substantial assets, there is no record of it in the minute-books of either company, nor has any document fully recording the transaction been produced to the Royal Commission in Sydney or to the Inspectors. The only relevant documents produced to the Royal Commission were a document designated " Annexure 3," which J. W. S. McArthur handed in as an annexure to a formal statement which he made before that Commission on 11th September, 1934, and a document referred to as the " Alcorn receipt." A copy of " Annexure 3" is appended to this report as Exhibit " H." The " Alcorn receipt " was handed in to the Royal Commission in Sydney as an exhibit, but I have not now a copy of this document. I inspected the original in Sydney, however, and this appeared to be a list of assets similar in form to " Annexure 3," with a receipt appended signed by C. G. Alcorn, as attorney for the Sterling Investments Co. (N.Z.), Ltd., acknowledging receipt of £60,000 in payment for the assets transferred. As already stated in this report, the books of the Sterling Investments Co. (N.Z.), Ltd., recording transactions prior to Ist March, 1934, have been " lost." An attempt was made by me partially to reconstruct these " lost " books from cash records available in Sydney and Auckland. These reconstructed books cannot be regarded -as final or complete, as there may have been transactions recorded by journal entry only, of which no particulars are available. From these reconstructed books I am convinced that at least £60,000 in cash was expended by the Sterling Investments Co. (N.Z.), Ltd., on the assets which were transferred in the Sterling-Wynwood transaction, though, for the reasons given above, the exact figures at which these assets stood in the books of the Sterling Co. cannot be stated. Certain of the assets involved in the transaction were immediately transferred to J. W. S. McArthur at a valuation of £11,000, and on his instructions, contained in a pencilled memorandum, which was produced to the Royal Commission in Sydney, the remaining assets were entered in the books of Wynwood Investments, Ltd., at a total value of £50,284 15s. 7d. No detailed list of the assets taken over by J. W. S. McArthur is contained in the books of Wynwood Investments, Ltd., and, as the books of the Sterling Investments Co. (N.Z.), Ltd., at that period cannot be found, particulars cannot be stated with certainty, but it appears from the reconstructed books of the latter company, and also from an examination of " Annexure 3 " referred to above, that they comprised principally items which affected J. W. S. McArthur personally.

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