AFFAIRS BF A LOCAL OIL SYNDIGATE.

Gisborne Times, Volume XXIX, Issue 3171, 17 March 1911, Page 2

AFFAIRS BF A LOCAL OIL SYNDIGATE.

VENTILATED IN THE SUPREME COURT.

AN .INTERESTING ACTION,

The ownership of certain oil rights was involved in an important civil action—AYm. Knox Chambers, of Gisborno sheepfarmer, and all other shareholders in the East Coast Petroleum Company versiis AVm. Lissant Clayton, land agent Gisborne, and Geo. Hutchison, barrister, of AVanganui, and the East Coast Petroleum Co., which was commenced , before his Honour Mr Justice Chapman alone yesterday, the nature of the proceedings being a claim that Mr Clayton be declared simply a trustee' for the plaintiff company of 50,000 shares which he holds in the New Zealand Oilfields, Ltd.

Mr Alorison, of AA 7 ellington, and Air J. AY. Nolan appeared for the plaintiffs ; Air Lusk for defendant Air AA 7 . Lissant Clayton.; Air Geo. Hutchison, the other defendant in person ; and Air Blair for the company. Plaintiff’s Case Opened. ,

Air Alorison,. in opening the case for plaintiff, explained that in 1906 four gentlemen in Gisborne, comprising plaintiff, Messrs. Hutchison, Clayton (the defendants), and Air Finn, formed a. syndicate for dealing with oil concessions in the Poverty Bay district. In January, 1907, Mr Finn retired, and the other three continued. A number of options had been otbained in the names of the several individual members of the syndicate. The case for plaintiff was that it was .mutually agreed that all concessions for petroleum and other mineral rights obtained in the name of any one of the aforesaid persons, or any agent on behalf of anyone or more of them, should be held jointly in trust for the said four persons. It was also agreed that the interest of each of the persons mentioned should be in the proportion of the funds advanced by them. On January 24th, 1907, the syndicate had obtained a number of concessions, and the three remaining members thought, that the time was ripe for the formation of a company. which was incorporated on June Ist, 1907. A large number of concessions continued to be obtained. All the concessions obtained, mostly in the name of Air AA 7 . L. Clayton, were sold to the Now Zealand Oilfields Company. His Honor wanted to know if the sale was with the consent. of the partners and Air Alorison replied that this was some of the points at issue, plaintiff contending these options were obtained and held under the agreement of the syndicate or company, and that Clayton, was merely a trustee of the partnership or company. The defendants contended the original agreement of the svndieatc was rescinded. !

Continuing, Mr Alorison said that the action was originally against. Alessrs. Hutchison and Clayton only, and it was contended that that action was properly brought. However, His Honor (Air Justice Edwards) considered that the company should be joined. Air Chambers had resided in the district for the past 37V,vears, and had become familiar with the oil bearing country. In 1906 he was approached by Alessrs Hutchison and Clayton for the development of the oil fields, and the rgsult was that, in June, 3907. lie entered into an agreement. Air Chambers was owner of adjoining property, and with his special knowledge and interest it was desirable to have his association.

Incorporation of the Company. In Jan., 1907, sufficient concessions had been obtained to justify the syndicate forming a company, but prior to this Air Finn withdrew. Air Rich, in accordance with ’-resolutions carried, reported on the concessions. He produced a copy of the report, which was used by Air Clayton in disposing of the concessions in his name within the area to the New Zealand Oilfields Co. Efforts were made shortly after Air Rich reported to float a cqinpany in Auckland, but these failed. Air Hutchison went Home in March. 4907, and Air Clayton continued to obtain concessions within the area reported on by Mr Rich for the syndicate. On June Ist, 1907, the East Coast Petroleum Co. was incorporated. It was important to note that the company was not expressly incorporated for taking over the then obtained concessions, but its objects were general and future. Quoting from the deed of incorporation, he stated that the subscribing shareholders in the East Coast Petroleum Company were as follows: Clayton 27-50, Chambers 2250, Hutchison 2250, R. R- Hunt, Auckland. 250, the balance of the 20,000 shares being taken up by Clayton and Chambers jointly. Air Alorison emphasised that there was no suggestion that tlio compa'ny was not formed merely for the handling of concessions obtained prior to that date. He explained that Air Hunt had rendered service in some way in connection with. the. attempt to float the Auckland company, and had been made a gift of £250.. That, however. was immaterial ; nothing turned on it. His friend submitted that there was a contract; if there was. he hoped it would' be produced. Air Hutchison, at this time, was absent in England’, but had previously signed the incorporation’ Mr Clayton, continued to obtain concessions right un to Jimp 29th, 1907. at all events. ’Phis company (the East Coast Petroleum Company) - was never much more than a name. It never really had the concessions actually, vested in it. The memorandum, lie pointed out, contained no newer of sale of the assets.

A Large Company Contemplated. AVhat was done later on amounted to a purported sale of the company’s interests. It had originally been contemplated that a large company would, be floated to develop these ' concessions, the smaller company being a mere vehicle to carry on in the meantime. The ori-

THE QUESTION OF- .DISPUTED OAVNERSHIP OF CONCESSIONS

ginal company had not even taken out a license to carry on business. Mr. Chambers went south on a visit to the-Camp-bell"lslands on October 30tli, 1907, and did noli return to Gisborne until May, 1908. During his absence, Mr Hutchison returned from England. It was understood and arranged that whilst in England Mr Hutchison was to endeavour to turn to account the concessions of the partnership. He did not, however, succeed and on his return an agreement was arranged between Messrs Hutchison and Clayton tjiat the company should give Mr Clayton an option over all the company’s concessions, the consideration being one-fifth of the net price which Mr Clayton might obtain in London. The resolution was to the effect that the company should make a firm offer to Mr Clayton for nine months to sell all the interest upon the options held by the company for a sum to be represented l by one-fifth of the whole amount, whether in cash or represented by shares, or partly by each, which he might be able to obtain from any company to he floated in England for the concessions held in his own name plus those above referred to belonging to the company, subject to such terms as to brokerage, etc., and with a provisions as to the stability of such London company. The resolution was passed, he said, by Mr Clayton and Mr Hutchison, directors of the company. Mr Morison submitted that the transaction was open to two objections. There was no provision in the incorporation for sale of assets, and Mr Clayton, the defendant, could not purchase from the company without the consent of au the shareholders, an undertaking lie would submit was grossly under-valued. This option was not exercised by Mr Clayton, but was renewed two years later. Again. Mr Chambers, who was then in the district, was not aware of the transaction. It was arranged between Mr Clayton and Mr Hutchison. From his return from the Campbell Islands until the receipt of a letterdated April 22nd, 1910, Mr Chambers had no official communication from the company. Counsel proceeded to toad from the letter, which was as follows : Letter Written to Plaintiff. “It is understood that I have not had an opportunity of discussing ilie ili proposition with you for some considerable time, but as you will' see by tiie results since you relinquished your interest in the matter, 1 have been pegging away, I had intended speaking io you, and 1 think made an effort in that direction on your return from the Campbell Islands, for while you were away I really think 1 should have appris'd you, but in any case your interests have been safeguarded. I enclose you a einorandum,explaining the position ci the Fast Coast Petroleum Company, v. inch was formed by us, and,the terms upon which that company transferred its rights to me, as I did not feel dispose 1 to put in more work on the same t ; :s:s, and thought than any further concessions I obtained on my own initiative after having done whatever 1 could in the interests of the syndicate should then belong to me. Any fresh efforts which'l made could not fairly, I think you will agree, be upon the same basis.'’ The writer then went on to refer to the position of the East Coast Petroleum Co., whose interests lie said, would be about £9OOO worth of shares.

It was not intended to attack the Oilfields Company, bat to have Mr Clayton declared a trustee of the original company. Mr. Clayton’s association with the company was merely a partner in the syndicate, or, alternatively, as a director in the East ■Coast Petroleum Company. His concessions derived their value in London on Mr Rich’s report, which 'fas paid for by the syndicate. Mr Hutchison pointed out that Mr Clayton was not responsible for framing the prospectus. The prospectus, Mr Moriscm declared, was tainted throughout by Mr Rich’s report. He could not see- on what ground it could be- sontended that Mr Clayton was not merely a trustee. There was nothing to rescind the relationship of the oarties. Mr Hunt taking expenses in the shape of shares did not affect the position. The first time Mr Chambers knew that Mr Clayton had received an option was in April last. He pointed out the fiduciary relationship between the parties, and Mr Chambers had all along maintained that Mr Clayton could only hold the concessions on behalf of the company. Mr Hutchison had since proceeded to place the East Coast Petroleum Company in liquidation. hut that did not affect the position. Mr Blair intimated that the company did not want to take any active part in the matter.

Mr. Chambers in the Witness-box. Wm. Knox Chambers, sheepi'armer, Poverty Bay, and plaintiff in the action, said that he had resided here since 18/3, and his property was situated in the oil-bearing area.. He had taken great interest in the. oil properties of this country and had studied the geology of the oilfields. .He recollected in 1906 having a conversation with Mr Clayton and Mr Hutchison as to whether lie would care to join in a syndicate, for oil-boring. As the upshot he signed an agreement, dated June 10th, 1906, which .was drawn up by. Mr Finn. After that agreement was signed lie proceeded to get oil options from owners of properties which had oil. All* Finn was only a member of the company for a short while. He recollected the meeting on January 24, 1907, when they decided to form a company and decided to get Air Frank Rich’s 1 report cm the 1 country. He met Air Rich, and' being familiar with the springs in the country, he took Air Rich round for two days. Air Clayton arranged with. Air Ackroyd to take him over the AVaimata district, as lie had a niore‘intimate knowledge of it. _ The company paid’him £5 for that service. His Honour'said that the plans showed two areas in Waimata, Witness said that Air Rich went east and north of Gisborne, and lie (witness) went as far as Pakarac. , • Mr./ Hutchison Proceeds to England. AVitness, continuing, said Air Rich’s report went to Air Hutchison, who was chairman of-the syndicate, and witness went to' the Campbell Islands dm October JO, 1907. Prior to that, Air Hutchison went to England, Previously, Mr Hutchison attempted to float a company in Auckland. Witness returned in May. 1908, and lie received no communication about the company’s 1 affairs during the‘time bo was away. About the time lie returned he -saw Air Clayton, whom witness asked if. Air Hutchison had been able to do anything at- Home. . He said! lie had not. On- Alarcli Bth,

, 1908, a meeting was held at which it ! was decided to give an option to Mr Clayton of the company’s interests, but lie received no notice of that meeting. In fact, ho knew nothing about it Mr ’Clayton never told him anything about the matter. He received a letter dated April 22nd, 1910, and until then was ignorant of what had been done. When he received the letter he took the earliest opportunity of informing Mr Clayton lie would not agree to it, and would hold them to the ■ original agreement of June 10th. Ho had not heard previously that Mr Clayton had acquired interests on his own behalf in the country where the company was operative. Witness insisted that all the concessions belonged to the syndicate and could not be acquired bv Mr Clayton. He had not departed from that position since th« letter of April 22nd was received. Denial of a Certain Agreement. There was never such an agreement that Mr Clayton should liaye certain concessions. There was-nothing to suggest that the partnership’s acquisition of interests had ceased, and it was not suggested at any other meeting. Alter April 22nd he told Mr Hutchison that he would not agree to the compact made—lie would not be any party to the agreement. He then placed the matter in Mr Nolan’s hands, i Mr Morison then read a letter from Messrs Nolan and Skeet to Mr Clayton asking that plaintiff should get an equal share of the assets with Mr Hutchison. A reply was received referring them to Mr Geo. Hutchison, who would act as his (Mr Clayton’s) solicitor. Witness said that lie attended a meeting of directors on May 16th. and when Mr Hutchison read his report to the meeting he then repeated his protest against Mr Clayton having any private interest in the oil business. Another meeting was called later to wind up the company. He protested against this procedure, and refused to take part in it. Between April 22nd and the meeting on July 18 he had a conversation with Mr Hutchison regarding the claim. Mr Hutchison suggested lie. should go to arbitration or make a settlement, but he told him the matter was in the hands of his solicitor. At Mr Nolan’s office Mr Hutchison suggested lie should settle by compromise, and not go to Court. At the Poverty Bay Club he told Mr Hutchison that he was going on the agreement, and'Mr Hutchison said that the agreement was for the formation of the syndicate. “Better Leave It Out.” The agreement was later referred to again. There w as- a discussion in Mr Nolan's office about a. transfer, and he (witness) insisted on its being rectified, as it omitted a. piece of land over which they had concessions. Mr Hutchison said that witness had better leave it out. He asked Mr Hutchison if this concession which had been omitted had been transferred by MrClayton to the New Zealand Oilfields Company. Mr Hutchison said 1 that they might keep it and go on getting concessions with a view to selling later on. 'That was practically the end of the conversation. He recollected the meeting of September 3rd to wind up the company. A passing reference was made to the Oilfields Co. Witness did not remember him saying the New Zealand Oilfields would leave the block out, as they did not care about it, 'Witness said later that as they had sold; the whole of the assets of the company, it ceased to exist. He protested against what he thought. was a peculiar action on the part of Mr Hutchison to urge getting further concessions whilst he was advising that the company be wound up. Witness pointed out that the original agreement was still in existence, and to that, lie did not get any satisfactory reply. He opposed l the winding-up of the company. When he signed the transfer on July 18th to the New Zealand Oilfields Company he did so without prejudicing his claim, and wrote to Mr Hutchison to that effect. The Beginning of Events. To Mr Hutchison : Going back to the beginning’of events, he would say that the first meeting he had had about oil with Mr Hutchison was in Gisborne. Mr. Hutchison : Did I not drive out with Mr. Clayton and Mr. Finn ? Witness: 1 don’t remember Mr. Finn. Mr. Hutchison: Do you remember an appointment to meet you at Ormond? Witness: I think you went to look at indications at McKenzie’s. Continuing, witness said his recollection of these events was not clear. Having been over the same ground with Mr Rich be was liazv about Mr. Hutchison’s visit. They talked over the matter of oil. It was after all these discussions he met Mr. Hutchison and Mr. Clayton in town. He remembered signing the document dated June 10, 1906, known as the syndicate agreement, and it was understood to be the preliminary of a limited liability company. It would have been quite out of the question for the four to undertake the work, and that was why the company was contemplated. He knew Mr. Hutchison had one concession, hut he did not know from whom lie obtained it. If he recollected rightly they obtained concessions before the • memorandum was signed. The first concession was Joyce’s, and the second Monckton’s. Witness got Monckton’s. The two on which ins name appeared were Moiiekton’s and McKenzie’s. All the concessions after a very little while were made out in Mr. Clayton’s name. There were several which he obtained that were subsequently made out in Mr Clayton's name.

Some Mention of the Finances. There was Peach’s. He had met many men whom lie asked to go to Mr. Clayton and give a concession. He thought Air. Sherratt was one of them. Air. Peach had since died. He remembered Air. Hutchison at one meeting in January going out, and returning and reporting the withdrawal of Air. Finn. He remembered proposing Air. Hutchison as managing director at a second meeting in January. He also remembered they agreed to put up £IOO each, and this was to be represented by shares in addition to the founders’ shares. Aliy man could put up as much as he liked, and received a proportionate interest. Air. Hutchison reported at the same meeting making arrangements with Air. Rich to report on the concessions, and it was with the concurrence of Air. Clayton and witness that he telegraphed to Air. Rich, but Mr. Hutchison was not here when Air. Rich arrived. Witness did not remember Air. Clayton complaining that all the work was thrown on his shoulders, and he did not want to go on. He remembered the schedule of all the concessions which had been produced at a meeting, and Air. Clayton saying he had been promised concessions. These concessions would belong to the projected company, He assumed that the schedule when completed was going to Air. Hutchison. The Crux of the Case.

He never heard any such suggestion that when the promised concessions were added any further concessions were to be Air. Clayton’s own private property. They had found it impossible to float the company in Auckland, and as Air. Hutchison was going Home ke

Fo v Ever!

Witness: Undoubtedly

was asked to try and float the in London, or, in other words, to. place. 10 000 shares out of 12,500 on. the market, which appeared jointly m the narm of Mr. Clayton and witness,, for xi orh hm capital. He did not remember an alternative proposition. 'Hie residt of their discussion on March 14th was whether the amount of their concessions would warrant them trying the London market. It was something under o<V 000 acres, and they thought it.was insufficient. He did not remember MrClayton saying lie had got soma concessions on his own account, and ed others. It was certainly not said nr his hearing. He never heard Mr., Claj ton mention concessions on his own account. He could not remember Mr Clavton saying that when he got enough concessions on his own account he would communicate with. Mr. Hutchison in London. If mention of concessions was made he would assume it was on behalf of the syndicate, and not on Mr. Clavton’s account. The end of Hie whole matter was that lie (Mr. Hutchison) was to do hfs best in London. He heard Mr. Hutchison say that he knew through Mr Hunt that Mr Rich s report was favorable. When the Company was Named.

Witness supposed be saw Mr. Rich's typewritten report, and some time after lie was a party to it being printed. He recollected a copv of a circular signed bv Mr. H. H. Hunt,-giving a precis of the position of the company, and subsequently that was printed. He remembered attending Mr. Clayton’s offic-e and signing the McKenzie concession produced) to the Gisborne Petroleum Company, Limited, the name they had decided to call the projected company. His Honor: That was really to a nonexistent company. Mr. Hutchison.: The objection to the name had not arisen then. Witness said lie remembered being shown a transfer by Clayton, to the company of twenty-five concessions. He saw letters from Mr. Hutchison to Mr. Clayton, written while Mr. Hutchison was at Home. STr. Hutchison: I li<? not result Home was failure? —'i es. Witness said he had left for the Campbell Islands before Mr. Hutchison returned. He met Mr. Hutchison in Wellington. Witness was prepared to say that the concessions they got were in oil-bearing country, hut Mr. Clayton’s concession might have been on barren country. The concessions they held were reported on as favorable country by Mr. Rich. He understood all the concessions got by Mr. Clayton had no stipulations as to the time they commenced work.

Mr. Hutchison: Assuming if the whole concessions were subject to the condition to start work after two years at six months’ notice, would the company have been able to comply with that condition ?

Witness: No, not financially. People owning sections might have given them notice, or they might not. If the East Coast Petroleum Company’s concessions were of no value some other company might have started. Witness, continuing, said that he had not looked into the concessions claimed by Mr. Clayton. In reply to his Honor. Mr. Hutchison said the grantor had to keep his land open for ever. His Honor: There Is no consideration except rovaltv.

Mr. Hutchison : It refers to mutual advantages, I think. Witness, continuing, said he remembered the letter of April 22nd, but did not receive a memorandum. He remembered meeting Mr. Hutchison at Mr. Clayton’s office on May 14th, 1906. hut did not recollect receiving the memorandum. He brought the agreement of June 10th, and may have had that memorandum, and Mr. Hutchison may have discussed it with him. He remembered Mr. Hutchison reading his report, and witness received a copy.

‘‘All Nonsense to Divide the Shares.” He said at the time that no doubt it was a correct report of the proceedings., and could be adopted with the exception of the clause relating to Clayton's claim. He believed the objection was general, and not to any particular clause.

Mr. Hutchison : If Mr. Clayton, Mr. Wilkinson, and himself said that he did not object would that he wrong?

Witness said he subsequently attended the meeting held for the confirmation of the minutes, and lie still raised his objection. He did not think becoming a director of the Oilfields Company would affect his claim. He said to Miv Hutchison that as the East Coast Petroleum Company had been sold it was all nonsense to divide the shares in a dead company. He only attended the meeting to confirm the minutes to suit Mr. Hutchison’s convenience, as Mr. Hutchison wanted to go away. A little later he received the report and the resolutions passed. He then went through the report and found several inaccuracies. The date was

wrong. Mr. Hutchison : Where ? Witness: You accuse me of being at a meeting when I was in the Campbell Islands. The report states I was present in January, 1908. Mr. Hutchison: That was a mistake in the year. “A Rotten Document.”

AVitness said it showed how carelessly I the report was drawn up. He did not I think he was under any misapprehension through the mistake, hut it showed that they confirmed a rotten document. Continuing, witness said that subsequently he put the matter in the hands of his solicitor. Later Mr. Hutchison met him at the Poverty Bay Club and said that there was only one reply to Alessrs. Nolan and Sheet’s letter—“fight”; but that need not interfere with the transfer of the AlcKenzie concession to the Oilfields Co. He protested against Air. Hutchison going and getting concessions and two days later having a meeting to wind up. He threatened to take action against Air. Clayton in his individual capacity, and not as a shareholder. The resolutions were all cut and dried at that meeting, and his vote would not count. To Air. Alorison: He had consistently protested against Air. Clayt-on’s position. He had refused to accept transfer of a portion of the 97,000 shares pending the decision in this case. A number of people from whom they obtained concessions were personal friends and he thought that that was the reason why they got concessions. One man refused to give Air. Clayton concessions. AA’itness never agreed to Air. Clayton treating some of the concessions as private. The Case for the Defendants. Air Lusk, in opening the ease for the defendants, said that- his Honour would no doubt have got an indication of the defence from the cross-examination. The agreement was rescinded by mutual’ consent, on January 24th, 1907, and itwas only entered into as preparatory to the foundation of the company as ft

was necessary, to have aJoundation for. the company. By the agrement if was intended they should obtain concessions and: have proportionate shares. Plain tilt obtained only two concessions—McKenzie’s and Monckton’s—and lie had very little to do with, the latter. • Mr Chambers sat quietly at liome while the others worked. Mr Hutchison did a considerable amount of work in Auckland, and Mr Clayton found the work so burdensome in 1906 that, in fairness to himself, he could not c-arry Oh; and said some other’arrangement would have to be made. It was in consequence of that that the meetings were held in -January. Under the resolutions, the formation of the company was agreed to, and it ivas contemplated .to admit other shareholders. The public were to be allowed to become shareholders, and the agreement of June 10th was therefore, of no value. He pointed out that Mr. Clayton was to be allowed to have the concessions outside the schedule _ submitted to the members of the syndicate. To some extent Mr. Chambers was not in possession of all that was going on. He pointed out that the plaintiff had ratified what had been done by the companv, and this would be shown in the evidence. Mr. Hutchison States his Version.

Geo. Hutchison, one cf the defendants, deposed that before 1906 he, like Mr Chambers, was interested in oil, and in June of that year lie came to Gisborne, and before lie met Mr Chambers he himself obtained a concession, dated June stli.. over 130 acres owned by Mr E. P. Joyce. Mr.JTinn introduced him to Clayton as a land agent who would probably be familiar with the district, and lie suggested' that witness should see Chambers, who 'had taken some, interest in the geology of the district. If .lie remembered rightly, Mr Clayton made an arrangement whereby they might go to Mr Chambers’. They went out as appointed and saw Chambers at his place. That was the first occasion on which they met. It was arranged by Mr Chambers that witness should go out the following day to Ormond, and lie would drive him to Totangi, where a bore bad been put down some years before and abandoned. They Visited the bore, but he was mistaken in stating lie went to McKenzie’s or Joyce’s places. Their route was m a different direction. They saw Mr Dobbie, and had a conversation as to his granting a concession, but Mr Dobbie explained there was a difficulty, as lie had granted a concession to other people. Mr Chambers met Messrs Finn, Clayton, and witness in town and they signed a document on June 10th and the three signatories were to obtain concessions. Ther* was a rival company in the district at that time. Mr Clayton later complained of the unequal work lie had to do in regard to the concessions. Witness arrived in Gisborne in January, 1907, and had two meeting—one on January 23rd and the other on January. 24th.

The First Meeting. At the first meeting there were present witness, Clayton, ancl Chambers. Mr Finn did not attend, and witness went out and interviewed Mr Finn, and when he returned lie reported the result of the interview. Mr Clayton clearly intimated that he was not going on. under the present arrangement. It was discussed as to superseding that arrangement. Mr Clayton said he was doing all the work. They met again on January 24th, the three of tht-m, and they came to a series of resolutions Continuing, witness said that there was a long discussion on January 24th, and the suggestion, made by witness, that a .company should be formed, was concurred in by all. The common object of the agreement was to get concessions to form the basis of a company. On January 24th there was no controversy, and it was decided the agreement of June 10th was to be superseded by the new partnership. They ascertained what concessions had been obtained and Mr Clayton produced a typewritten schedule which gave the concessions obtained to date. He said he had been promised some other concessions. and he fancied the names were mentioned, and Mr Clayton said if he could get those concessions he would add them to the typewritten schedule, and it was agreed that the concessions set out in this schedule, with the additions he expected, would be added and the schedule so completed should define the property of the company.

Position of Mr. Clayton. Mr Clayton was to forward the schedule to witness for the purpose of preparing the necessary legal documents. Mr Chambers assented to that proposition. Mr Clayton stated emphatically that the concessions beyond those promised to the company, which he was to add, would be his" own. That statement was made in the presence of Mr Chambers. He could not recall the actual words, but Mr Chambers; thought- it was only fair that- that should be so. Witness had arranged with Mr Rich to go and report on certain concessions and Mr Clayton would give him a general idea when lie arrived in Gisborne. He reported this to the meeting on January 24th, and was instructed to telegraph and ask Mr Rich to attend. He went to Auckland, and later received the schedule from Mr Clayton, He visited Gisborne on March 14th, prior to leaving for England, and lie was instructed to place 10,000 shares in London for working, capital. He had already tried to sell shares in New Zealand, hut was unsuccessful. The three discussed the question of concessions', and lie raised the question whether the area of their concessions would, be favourable to the mind of a London financier. The area was made up of dispersed areas, and he suggested there would probably be some difficulty in getting Lon dim houses to take the shares on the basis he proposed.

Talk cf n Second Company. Tlie alternative was considered whether they might not be able to dispose of their concessions to an English, firm, and again the area was suggested as pro. bably being too small. Mr Clayton stated that lie had got a few other conccsa ions oil his own account and expected to get more. These, he said, lie hoped would be sufficient for a second company, but if the adding of these would help to float the company, he was prepare dto consider terms and he said as soon as he got a sufficient num'ber together lie- would communicate with witness in London. The end of it w ashe received c'arte blanche to do the best he could in London. He reached there' in. May, and' while there lie received from Mr Clayton a schedule of further concessions, which he produced. At this stage the case was adjourned till 10 a.m. to-day.