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Title: Notebook “Trade and Finance 1868”. VII. The Charges against the Directors of the Merchants’ Company and the Laffitte Judgment, January to May 1869
Description: Newspaper cuttings in the notebook “Trade and Finance 1868”: Daily News reports of January to May 1869 on the two prosecutions of the directors of the Merchants’ Company (Limited), the end of the review of the trade circulars for 1868, and Vice-Chancellor Malins’s judgment in Gray v. Lewis (Charles Laffitte and Co.).
Author: Karl Marx
Date: 1869-01
URL: https://marxismo.school/archivo/marx-engels/originales/1869%20Notebook%20%E2%80%9CTrade%20and%20Finance%201868%E2%80%9D.%20VII.%20The%20Charges%20against%20the%20Directors%20of%20the%20Merchants%E2%80%99%20Company%20and%20the%20Laffitte%20Judgment%2C%20January%20to%20May%201869
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*Newspaper cuttings, mostly from the Daily News, cut out and pasted in for Karl Marx by his daughter Jenny Marx in the notebook “Trade and Finance 1868”, London, 1868-1869 (IISG, Amsterdam, Karl Marx and Friedrich Engels Papers, P 1). Text from MEGAdigital (MEGA² IV/19), without the editorial apparatus; words in square brackets are missing from the cuttings and supplied by the MEGA editors.[^lic] [Traducción al español](https://marxismo.school/archivo/marx-engels/1869%20Cuaderno%20%C2%ABTrade%20and%20Finance%201868%C2%BB.%20VII.%20Las%20acusaciones%20contra%20los%20directores%20de%20la%20Merchants%E2%80%99%20Company%20y%20la%20sentencia%20Laffitte%2C%20enero-mayo%20de%201869)*

#### THE CHARGE AGAINST THE DIRECTORS OF THE MERCHANTS’ COMPANY.

Mr. Richard Stuart Lane and Mr. James Childs, two of the former directors of the Merchants’ Company, appeared again yesterday, before the Lord Mayor, at the Mansion House, to undergo further examination upon the charge of having published a false statement with regard to the affairs of the company, in a call circular issued by them in May, 1866, with intent to deceive and defraud the shareholders and the public.

Mr. Straight, barrister, again attended on behalf of the prosecution. Serjeant Parry and Mr. Ledgard appeared for Mr. Childs, and Mr. G. Lewis represented Mr. Lane.

The case for the prosecution, it will be remembered, was closed at the last examination.

Serjeant Parry addressed the Lord Mayor for Mr. Childs, and he said he hoped to satisfy his lordship that he ought not to commit either of the defendants for trial upon the charge that had been under investigation so many days. It was important to consider, in the first place, whether a jury was likely to convict upon the evidence that had been given in support of the charge; and, if his lordship should entertain any doubt upon the point, he submitted that he ought not to send the case for trial. He then referred to the statute and to the grave nature of the charge, and said that the substantial offence imputed to the defendants was that they had falsely stated in the call circular that had been issued by them on the day in question that the company had not sustained any losses. He would remind the court that it was not pretended that the public had been deceived by the statement in question, or that any one had been induced to part with his money in consequence of it, and the only question was whether the statement must come within the scope of the Act of Parliament. He then contended that there had in reality been no losses upon the ordinary business of the company, and that there was no case whatever against the defendants, unless his lordship should be of opinion that the non-payment of the calls upon the shares held by the defendants constituted losses. If the company had been prosperous there would have been no loss upon the forfeited fact in favour of the defendants. The real question as it appeared to him was whether there had been any trade losses, and if there had not been any such losses he contended that the defendants ought not to be committed for trial. Another point for his lordship to consider was whether what had been done was done with the cognisance of the defendants, and he argued that there was no evidence that this was the case. It was proved that no balance had been struck, and that the business actively carried on was a profitable and legitimate one, and there was nothing whatever to show that the company might not have tided over the difficulty, and have become prosperous; and even upon the case for the prosecution, the total amount of loss that had been incurred on the 25th of May, when this circular was issued, was only a loss of 5,000l. at the very utmost; and at this time all the ventures of the company were current, and it was impossible to know what might be the actual result of those operations. Serjeant Parry then on to say that he should call witness to show that no losses whatever had in reality been incurred, and that the defendants were perfectly justified in believing that the company was in the condition they had represented, and that at all events there was no ground for charging them with fraud. The learned serjeant next proceeded to refer to the transaction with Mr. White, with regard to the absence of 5,000l., said that although he could not justify such a proceeding or attempt to contend that it was a legitimate mercantile transaction, still, he said it appeared to him that it had little or nothing to do with the present charge against the defendants. Serjeant Parry went on to analyse the various business transactions that had been carried out by the company and endorsed, to show that they had security of firms which were then considered of high character, and that subsequent panic only showed that these securities were worthless, and he contended that it would be very hard indeed upon the defendants to make them amenable to a charge of fraud under such circumstances. He concluded by expressing an earnest hope that the Lord Mayor would not feel himself called upon to commit either of the defendants for trial.

Mr. Straight said he wished to correct one inaccuracy in the speech of the learned serjeant, namely, that at the time the circular was issued the losses were only 5,000l. In point of fact the amount of the losses was 13,000l.

Serjeant Parry said he did not understand that this was so.

Mr. Lewis then addressed the Lord Mayor on behalf of Mr. Lane, the arguments he adduced being pretty much the same as those brought forward by Serjeant Parry on behalf of the other defendant. He contended that the operations of the company were entirely bona fide, and that for anything that appeared to the contrary the company would have been a prosperous speculation if it had not been for the fearful commercial panic which swept them down in company with so many other large establishments. In the course of his further observations Mr. Lewis particularly called the attention of the Lord Mayor to the fact that the statement in the call circular that there had been no losses was a perfectly gratuitous one, and need not have been made. The defendants had complete power to make a call on the shareholders without giving any explanation, and it was monstrous to suppose that they should have put in the statement that there had been no losses, for the purpose of rendering themselves liable to a charge of misdemeanour. He then referred to the question whether arrears of calls constituted losses, and said he should call some of the most eminent accountants in London to show that arrears of calls were never so treated or regarded by any company or large mercantile establishment. Mr. Lewis next proceeded to refer to the transactions relating to the loan of 5,000l. to Mr. White, but,

The Lord Mayor interposed and said that although he considered this transaction to be an irregular one, it would not have any weight with him in his decision, and it was, therefore, unnecessary farther to allude to it.

Mr. Lewis then concluded by stating that the case was no doubt a proper one to be argued into, but he expressed a confident opinion that if it was sent for trial upon the facts, it would be stopped by the presiding judge on the ground that there really was no evidence to support the charge against the defendants.

Evidence was then adduced for the defence.

Mr. William Quilter, accountant, of the City, said he had examined the circular, and the meaning he should attach to the expression that no losses had been incurred referred only to the trading transactions of the company, and that it would be improper to treat arrears of calls as losses.

In answer to a question put by the Lord Mayor.

Mr. Quitter said that if the directors of a company purchased shares in the company speculatively, with the funds of that company, and a loss resulted, the amount so lost should be state among the losses, but not otherwise.

Mr. Robert Harding, partner in the firm of Harding, Whinney, and Co., accountants, was next called, and also said the statement in the circular implied only losses in trading.

Mr. Charles Fitch Kemp, accountant, Walbrook, in examination by Serjeant Parry, gave similar evidence to the two previous witnesses, namely, that the statement in the circular implied losses in trading. Witness’s firm was concerned in the liquidation of Gellatly, Hankey, and Sewell. The condition of the firm depended mainly upon the realisation of considerable coffee plantations. If the plantations had realised the original value, there would have been a surplus. The Merchants’ Company would not have been justified in saying there was a loss on the advance to Galllatly, Hankey and Sewell on the 25th May. A valuation of the estates was made subsequent to the 25th May, and they were then worth 1,000l. more than they were when a previous valuation was made.

Mr. John Young, of the firm of Coleman, Turquand, and Young, accountants, Tokenhouse-yard, examined by Mr. Lewis, said he considered arrears of calls should not be treated as losses. Witness was a holder of 100 shares of the Merchants’ Company, and had paid 1,500l. in respect of those shares. He was called in by Lane, Hankey, and Co., to examine their books before the formation of the Merchants’ Company. He was then an entire stranger to the firm. He investigated the books accordingly, and made out a statement of the commissions earned by Lane, Hankey, and Co. In the six years preceding the transfer the gross commissions earned were 140,745l. After deducting the return commissions, there was a balance of 106,000l. He gave the firm a certificate of that fact, and he thought so highly of the business that be took 100 shares, on which he had lost 1,500l.

Mr. Charles Joseph Braine said he was chief manager of the Colonial Company (Limited). His attention had been called to a valuation of two coffee estates in Ceylon, amounting to 20,000l. That was a fair valuation. (The estates referred to were those of Dickson, Tatham and Co., which the Merchants’ Company held as security for the advance of 10,000l. to Getatly and Co.)

Mr. James Gregg, of the firm of Quilter, Ball and Co., in reply to Serjeant Parry, said he examined the books of the Merchants’ Company in 1866. On the 31st May they had advanced by bills 129,517l. 2s. 6d. Subsequently they advanced about 13,000l. The account sales to the 31st May were 10,100l., and subsequently 80,000l. There was no actual trade loss on the 31st May, so far as he could judge from the books of the company. The amount advanced on shipping and goods for sale was about 100,000l.

The Lord Mayor, in giving his decision, said the charge was that of making, circulating, and publishing, and concurring in making, publishing, and circulating a written statement which they knew to be false in a material particular, with intent to deceive. He had gone vey carefully into this matter, and examined the books, not merely there, but many hours besides, with special reference to the evidence that had been given, and commissions earned on transactions that had not been closed, and he did not hesitate to say that with regard to Mr. Nichols’s account, if the books had been placed in his (the Lord Mayor’s) hands, he would have made the account less favourable to the company than Mr. Nichols, who had given them credit for something like five times the amount of commissions posted up in the books. Of course the matter he (the Lord Mayor) had decide was whether in his opinion, there was sufficient evidence of the intention of the directors when the circular was issued. He quite agreed with the remark that fell from Mr. Lewis, that the defendants were not obliged to state whether the company had made any losses, but at the same time he had no doubt that the real object of introducing the statement was to convey to those in whose hands the circulars should fall that the company was in a sound and satisfactory condition. He also agreed with the statements of the well-qualified accountants who had been called, that the whole circumstances connected with the company should be looked into; but at the same time they must take the expenses of the business into consideration as well as the profits; and if they had not lost a single shilling by Hinde, Gladstone, and Co., or Gellatly and Co., it was patent at that time that the company was in a hopeless condition. The books themselves showed it. If he took the whole of the assets as worth 20s. in the pound, there must even then have been a great loss incurred. Although he did not allow the arrears of calls to weigh much in his mind, undoubtedly it tended very much to weaken the position of the company. In fact there was 26,000l. unpaid, and out of that than 13,000l. was due from the directors themselves. He had not allowed a single expression to fall from him reflecting on any of the directors, still he did not think they were right in issuing that circular, because the facts were so clearly known to them, without the aid of a balance-sheet. It was sufficiently clear to his mind that the company had made losses, and another tribunal must determine how far the opinion he had formed was correct.

Mr. Oke then told the defendants on what grounds they would be committed for trial, after which the Lord Mayor asked them if they had anything to say in reply.

Mr. Lane said he had endeavoured to listen to the evidence impartially, and he could not understand that a single case of real loss had been proved. And not only had there been no loss, but no knowledge of any loss. had been proved home to them (the defendants). He contended, however, that there was no loss. He could only say, speaking for himself, that the circular was laid on the table, and he might have indited it, but it did not take five minutes’ consideration. They believed they were right in encouraging the shareholders, and stating that no losses had been incurred. After if he (Mr. Lane) was innocent, Mr. Childs was ten times more innocent. Mr. Childs subscribed nearly 4,000l. of his own money, and never received any benefit from it but that to which he was entitled, namely, his fees as director. He (Mr. Lane) considered that there were circumstances in connection with this prosecution, and also in connection with the other prosecution, respecting which some further steps might be necessary. He did not wish further to allude to them now than to say they might be brought before his lordship in another guise. He had had some experience of commercial life, and if directors were to be held criminally responsible for issuing a circular like that which form similar proceedings. He must now leave the case to a higher tribunal. He came into the court with the full belief that the case would be dismissed and he had only to add that he was entirely innocent of the charge preferred against him.

Mr. Childs said he had only a very few words to say. Mr. Lane had done him ample justice, not only before his lordship, but also before the public. He, as a good citizen, would bow to his lordship’s decision in this case, but he wished to say most emphatically that he had not the slightest knowledge that any loss had been sustained, and after hearing the evidence he believed there was no loss, and he, therefore, felt confident that he would be acquitted of any intention of fraud. He never believed it possible that he would be committed for trial, and he could only say the decision just given had taken him by surprise. At the same time it did not affect his consciousness that he had not done anything beyond what was right; and, speaking as a commercial man, he affirmed there was no evidence that there was any knowledge on the part of the directors of a loss. No one reading the circular would believe it to refer to other than trade losses such as were occurring every day at that period. He was quite sure the public would judge of their conduct, not by light of to-day there was no evidence that there was any trade loss. He wished to state emphatically before the public and his friends that he was entirely innocent, and he believed they would acquit him of any fraud. There was not the slightest evidence of any fraud.

The defendants were then formally committed to take their trial at the Central Criminal Court, and were in the meantime admitted to bail—themselves in 2,000l. each and one surety each in 2,000l.

Mr. Land and Mr. Stephenson were bound over as prosecutors in the sum of 500l. each.

#### THE MERCHANTS’ COMPANY PROSECUTION.

Mr. Richard Stuart Lane, Mr. Horace Edward Chapman, and Mr. Fred. John Helbert, late directors of the Merchants’ Company (Limited), attended again yesterday, before the Lord Mayor, at the Mansion House, to undergo further examination upon the charge of conspiring together to defraud the public of large sums of money, by making false statements with regard to the position and affairs of the above company.

It will be remembered from what transpired at the former examination that the Merchants’ Company was registered in October, 1865, and only existed ten months. It took over the business of Lane, Hankey, and Co., of which the defendants were partners, and that firm was stated to be in a very flourishing condition. The defendants became directors of the limited company, at a salary of 500l. a year, and guaranteed a dividend of 10 per cent. for three years; but this guarantee they were unable to carry out, and the allegation against them was that at the time of the transfer of their business, for the good-will of which they received 62,500l. in debentures and shares of the new company, it was in a hopelessly insolvent condition, and that they were perfectly aware of the fact. Proof was given of the incorporation of the limited company, and the prosecutor deposed to taking 36 shares.

Mr. Humphreys again attended on behalf of the prosecution; Mr. Taylor, Mr, Montagu Williams, and Mr. G. Lewis, watched the case on behalf of the defendants.

The case was specially fixed for 11 o’clock; but when it was called on none of the witnesses for the prosecution were in attendance.

Mr. Lewis, on behalf of the defendants, complained of the delay. He said he was prepared to answer every statement that had been made by Mr. Humphreys, and he thought it was unfair to the defendants, particularly having regard to the very serious nature of the charge, that no witnesses should be in attendance, if any evidence was really to be given.

Mr. Humphreys said the witnesses who were to be examined had been summoned, and he could not account for their absence.

It turned out subsequently that the summonses by mistake stated the hour of twelve instead of eleven for the witnesses to be present. After some farther delay the case was proceeded with.

Mr. G. A. Capes, the provisional liquidator appointed by the Court of Chancery to wind up the Merchants’ Company, proved that he examined the books and papers, and all the documents relating to the company, but he was unable to get possession of those relating to the firm of Lane, Hankey, and Co., although he made application for permission to do so, and instructed his solicitors to do the same. The defendants were all upon the list of contributories to the Merchants’ Company. The company was wound up upon the petition of Mr. Henry Moore, Mr. John Somerville, two of the shareholders, and a creditor of the company. There were 7,229 shares allotted to the public. The number of shares applied for was 9,034, but only 7,229 were allotted upon these applications. The secretary of the company, Mr. John Langton Bucher, applied for 200 shares, and only 100 were allotted to him. Mr. Horace Chapman, one of the defendants, applied for 590 shares, and he was allotted 450. Colonel Daubeny applied for 250 shares, and that number was eventually allotted to him.

Mr. G. Lewis objected to the evidence, and contended that it really had nothing whatever to do with the case, and did not in the slightest degree show any criminality on their part.

Mr. Humphreys said that Colonel Daubeny was relative of one of the defendants, and his object was to show that the shares had been fraudulently dealt with, and had been transferred when a call became necessary.

The Lord Mayor said that if it was proved that when the company was in danger the shares were transferred from a solvent person to some one else who was unable to pay the calls, he considered the evidence was admissible.

Mr. Capes then stated that in May, 1866, Colonel Daubeny transferred the whole of the shares to Mr. Helbert, one of the defendants. A call had been made in the previous month of December, but the call had not been paid.

Mr. Humphreys observed that according to the articles of association, shares could not be transferred upon which calls were in arrear.

Mr. Cape then stated that on the same day the above transfer was made, Mr. Richard Stuart Lane transferred 250 goodwill shares for the business of Lane, Hankey, and Co., upon which 15l. were represented to have been paid, but upon which, in point of fact, nothing whatever had been paid, to Colonel Daubeny. Three hundred shares were allotted to Mr. Henry Edmund Gurney, and forty to Mr. Harry George Gordon, directors of the firm of Overend, Gurney, and Co. Mr. Albert Grant, late M.P., also applied for shares.

Mr. G. Lewis said he really could not see what possible bearing these facts could have upon the present inquiry.

The Lord Mayor said he must leave Mr. Humphreys to exercise his own discretion. He could not say at present that the evidence was irrelevant.

Mr. Cape then stated that it appeared by the register that the shares allotted to Mr. Albert Grant were transferred to Mr. Horace Edward Chapman, one of the defendants, after the call was made. The witness then proved that a great many other shares were treated in the same manner, the object of this evidence being to show that it was not true, as state in the prospectus issued by the defendants, that a large number of shares in the company had been issued bona fide to the public. A sum of 5,000l., it appeared, was given to Mr. Heritage, one of the company, on the 10th of November, 1865. Mr. D. W. Chapman, Mr. Lane, Mr. Childs, Mr. Pembroke, and Mr. Helbert were the directors present when the transfer of those shares was made. On the 19th December, 1865, it was resolved that a call be made of 5l. per share, payable on the 15th January, 1856. There was a circular accompanying the call in the following terms:—“London, 25, Old Broad-street, 19th December, 1865.—The directors have much pleasure in informing the shareholders that the company has commenced business under very favourable auspices, and they have every reason to believe that the prospects held out in the prospectus of the company will be fully realised. In answer to many inquiries, they beg to state that they do not anticipate that any further call beyond the present will be required—at any rate not during the ensuing year—but in deference to the wishes expressed by numerous shareholders they have decided on receiving prepayments of an additional 5l. per share, making 15l. paid up, from shareholders who may express a wish to avail themselves of this option on or before the 15th January next. The minimum guaranteed interest of 10 per cent. per annum will then be payable from the 15th prox., on the amount of 15l. per share thus paid up; such prepayments must be made to the secretary, who will give special receipts for the same.—By order of the board, J. LANGTONS BUTCHER, Secretary.” The second call (the witness continued) was made on the 25th May, 1866. It was 5l. per share on all shares on which 15l. had not already been paid up. The following circular accompanied it:—“London, 25, Old Broad-street, May 25, 1866.—Sir,—In making the call announced on the other side the directors have the pleasure of stating that notwithstanding the great severity of the financial and commercial crisis, the company has made no losses; at the same time the directors have considered it necessary in the interest of the shareholders to make this call, the state of the money market being such that it may be considered impossible to procure money satisfactorily on securities which in other times would be easily convertible. The directors fully believe that the shareholders will appreciate and support the line of conduct which dictates this call—a call which, under other circumstances, the directors had proposed to defer at any rate until next year.—By order of the board,—J. LANGTON BUTCHER, Secretary.”

Examination continued—When the first call was made the directors present were Messrs. D. W. Chapman, Lane, Childs, and Pembroke; and when the second call was made there were present Mr. R. S. Lane, Colonel Daubeny, Mr. Helbert, Mr. Childs, and Mr. Pembroke. I got the circulars which have been read amongst the books and papers of the company. According to the share register Mr. H. E. Chapman paid on his 450 shares 2,250l. That is the 1l. on application and 4l. on allotment. No money has been paid on any of the calls. He acquired another 50 shares transferred from Nix and Grant, and he is debited with 5l. on each call on the whole of the shares. David Ward Chapman paid 5l. on 250 shares, and there is owing 1,200l. in respect of one call. The shares were transferred to Helbert before the second call. Mr. Helbert paid cash 2,250l., being 5l. on deposit and allotment on 450 shares. 9,250l. is credited altogether in his account, being the amount of deposit and allotment, the first call on 450 shares, the second call on 700, and the 1,250l. on the shares transferred from Colonel Daubeny. 2,250l. was the only cash payment. In Mr. Lane’s account there is on the debit side—“Deposit and allotment on 450 shares, 2,250l.; Dec. 19, first call on 710 shares, 3,550l.; May, 25, 1866, second call on 710 shares, 3,550l.; June 9, interest, 15l. 12s. 6d.—making a total of 9,365l. 12s. 6d. On the credit side there are the following entries:—October 7, 1865, by cash 500l.; November 7, by cash, 1,750l.; June 1. 1866, 460 shares forfeited, 4,600l.; June 9, cash, 625l.; bills receivable, 640l. 12s. 6d.; July 20, 50 shares forfeited, 500l.; cash, 375l.; bills receivable, 375l.; total, 9,365l. 12s. 6d.” Although in that account some shares are entered as forfeited, I have got Mr. Lane on the list of contributories for them, and they are not, in fact, forfeited. When the order for winding up was made Mr. Lane was owing to the company 5,600l.

The articles of association were referred to, and it appeared that the directors were empowered to refuse to transfer any shares upon which the calls had not been paid up, but it was not obligatory upon them to refuse their consent.

The Lord Mayor observed that it was an almost universal practice for the directors of a public company to refuse to register any transfer of shares unless the calls were paid.

Examination continued—I produce an affidavit by Mr. Lane, alleging his inability to pay his calls. I have received from him, under the sanction of the chief clerk to the Master of the Rolls, a sum of 600l. and a bill drawn on Mr. Childs for 900l. at four months, to compromise his debt.

Mr. Lewis—It is a promissory note.

Examination continued—On the 2nd February, 1866, Mr. Lane received 129l., being part of his salary as a director. He also received 112l. on the 30th April, and 148l. on the 31st July. He received credit for another 159l.; but he did not get cash. It was carried to the credit of his account. In respect of the 10 per cent. dividend, he received on the 30th April, 1866, 921l. 17s. 6d. The entry did not state on how many shares. The first call was made on December 19th, 1865, and that call was unpaid on his shares when he took the dividend. An interest on debentures given for the goodwill, 614l. 11s. 8d. was paid on 12th May, 1866, to Lane, Hankey, and Co. Mr. Horace Chapman received as dividend 460l. 18s. 9d. As his fee for being director he was paid on 2nd February, 1866, 132l.; and on April 3, 143l. Nothing was paid in July. There wee meetings held on those days, but no minute ordering the cheques to be drawn. On the 2nd February, 1866, Mr. Helbert was paid, as director’s fee, 132l., and on 3rd April 116l. As dividend he received in April, 1866, 460l. 18s. 9d., the same as Mr. Chapman. There was no minute ordering these amounts to be drawn. The books did not show on what shares these dividends were paid.

Mr. Lewis said these dividends were paid on good-will shares.

The Lord Mayor said as a matter of fact twice the amount paid in dividend was due by these gentlemen on shares standing in their name.

Examination continued—The 125 shares transferred by Loder to Lane on 2nd May, 1866, were on the same day re-transferred by Lane to Appleby and Upjohn, Appleby was a clerk in the employment of the Merchant’s Company, at a salary of 200l. Upjohn was also a clerk in their employment, at a salary of 110l. 10l. was paid on these shares. The clerks had been made by them. James Pembroke had paid on his 400 shares 2,000l.; and, in respect of the 4,000l. due for calls, he had paid 250l., and been credited with 6l. 15s. for travelling expenses. On the credit side of his account there were entered:—By cash, 200l.; Oct. 12, 1865, ditto, 200l.; Oct. 21, ditto, 600l.; Nov. 7, ditto, 1,000l.; June a, shares forfeited (200), 2,000l.; June 26, cash, 50l.; July 2, cash, 50l.; July 18, ditto, 126l. 12s.; July 24, ditto, 23l. 8s.; Oct. 16, shares forfeited (200), but no credit carried out; Nov. 23, travelling expenses, 6l. 15s. In February, 1866, Mr. Pembroke received, under the heading “directors’ fees,” 138l. 19s. 8d.; on April 3, 158l.; on the 18th July, 126l. 12s.; and on the 10th Oct. his account, under the same heading, was credited with 150l. 3s. 5d. When the company was wound up he was due in calls on shares 5,581l. The amount paid to Lane, Hankey, and Co., for the lease of their premises, was 3,000l. This wLas paid in February, 1866. As official liquidator I have endeavoured to dispose of the lease, but could not get a farthing for it. I got rid of it upon an agreement to take the fixtures. The rent is 450l. The limited company paid 500l. for the furniture and fixtures, and I got 373l. for them. I produce the promissory note for 900l. to which I have already referred. It was drawn on the 3rd July, 1867, and payable on the 6th November, but has not yet been paid. Mr. Child has proposed to give me securities for the amount. I intend to take proceedings against Mr. Child and Mr. Lane on Monday next.

At this stage Mr. Humphreys applied to the Lord Mayor for another remand. He had still to ask the witness a great many questions in respect of the accounts, and this would be a convenient opportunity to break off.

The case was then adjourned till Saturday, and the defendants were admitted to the same bail as before.

The summons against Mr. R. S. Lane and Mr. James Child, who are charged with issuing the circular of 25th May, 1866, accompanying the second call on the shareholders, well knowing it to be false in a certain material particular, with intent to defraud, will be heard at the Mansion-house to-morrow (Thursday).

#### THE MERCHANTS’ COMPANY PROSECUTION.

The further investigation into the charge of fraud against Mr. Richard Stuart Lane, Mr. Horace Edward Chapman, and Mr. Frederick John Helbert Helbert, three of the late directors of the Merchants’ Company (Limited), was proceeded with on Saturday before the Lord Mayor, at the Mansion-house.

Mr. Humphreys again appeared for the prosecution, and the defendants were represented by Serjeant Parry, Mr. Taylor, Mr. Montagu Williams, and Mr. G. Lewis.

Mr. George Augustus Cape, the official liquidator, was now recalled, and said he desired to state that since the last examination the promissory note drawn by Mr. Lane upon Mr. Childs had been paid. In justice to Mr. Childs he desired further to state that he had had in hand 800l. of Mr. Childs thought should have been appropriated towards the note, but witness said it should be appropriated in respect of shares, and Mr. Childs had since acceded to this view.

The Lord Mayor—So that he has paid the note, and that 800l. has been reserved for the shares.

The witness said that was so.

The examination of Mr. Cape was then proceeded with, and he said there was a minute, under date April 3, 1866, as follows:—“A statement of the directors’ fees up to the 31st March was placed before the board, and cheques for the respective amounts were ordered to be drawn.” Under date July 17, 1866, there was the following minute:—“A list of directors’ fees for the three months ending June 30, was placed before the board for examination, and it was resolved that, as regards the chairman, the payment should be deferred in consequence of the non-payment of his calls. As regards those due to Mr. Horace E. Chapman and Mr. Helbert, that they be cancelled, in consequence of their resignation and non-payment of calls. As regards those of Mr. Stuart Lane and Mr. Pembroke, that they be credited to those gentlemen towards the payment of their calls; and as regards Mr. Childs and Colonel Daubeny, that they be paid to them, and cheques drawn for that purpose. Under date 3rd July, 1866, there was a minute in the following terms:—“Mr. Stuart Lane arranging to pay the balance, 15l., on 200 shares, being his qualification, it was resolved that the remaining 50 standing in his name, with 5l. paid, be forfeited, with that sum paid thereon. This arrangement to be carried out before the date fixed by the solicitor for the forfeitures of the other shareholders not paying up.” At the next meeting, on the 6th July, the solicitor attended, and expressed an opinion that this resolution as to Mr. Lane’s shares was objectionable, and it was therefore rescinded. On the 20th July the question of the forfeiture of shares was gone into; and it was resolved that the secretary should write to each shareholder who had paid the first, but not the second call. The directors, acting in the interests of the company, had reluctantly decided that unless the amount due for call and interest be paid on or before the 23rd instant, they would forfeit the shares absolutely at the board meeting on the 24th inst. It was at the same meeting resolved that fifty shares, with 5l. paid, standing in the name of Mr. R. S. Lane, be declared forfeited. The directors present were Mr. Stuart Lane, Colonel Daubeny, Mr. Pembroke, and Mr. Childs. On the 22nd June he found from the board minutes that letters were read from Mr. Helbert and Mr. H. E. Chapman respecting their resignations; and it was agreed to accept them subject to the opinion of the solicitor that they were right in doing so. Referring to the ledger, he found an account headed Lane, Hankey, and Co., “Holms and Gruniage.” The total on the debit side was 9,778l. 5s. 6d., and on the credit side 9,531l. 7s. 3. After realising all the securities on this account there was a balance of 246l. 18s. 3d. indebtedness. There was another account headed Lane, Hankey, and Co., “Copperberg,” on which the debits amounted to 19,507l. 6s. 10d., and the credits to 19,960l. 13s. 11d., showing a profit of 453l. 7s. 1d. There was also a “general account” of Lane, Hankey, and Co., the total on the debit side of which was 15,206l. 1s., and on the credit 13,876l. 6s 8d. In the “advance account,” under the heading Lane, Hankey, and Co., the total on the debit side was 23,665l. 6s. 2d., and on the credit side 12,284l. 18s. 5d., leaving a balance to the debit of the account of 11,380l. 7s. 9d. One of the items was, “Bills payable, 10,000l.,” consisting of four bills of 2,500l. each, drawn by C. B. Strauss on the Merchants’ Company. Referring to a minute of 23rd March he found that the proposition of Lane, Hankey, and Co. the for a credit of 10,000l., being bills drawn from abroad, was agreed to. Witness had a claim upon these bills, and directed his solicitor to make inquiries as to Strauss, and he reported the result of his investigations. There were also entries in the account, “cash, 8,000l.,” and “sundries, 5,660l.” in reference to which there was a minute, dated March 2nd, 1866, agreeing to advance Lane, Hankey, and Co. 13,000l. for a month. In round figures the indebtedness of Lane, Hankey, and Co. to the Merchants’ Company at the time of the stoppage of the firm was 36,000l. This was the sum appearing in the books; against it there were securities to be realised. That 36,000l. was exclusive of the 3,000l. paid for the lease, the 937l. dividends paid to Mr. Lane on his shares, the dividends paid to Messrs. Chapman and Helbert, the sum paid for furniture (532l._, the interest in debentures to Lane, Hankey, and Co. (625l.), and the directors’ fees, all of which, added to the 26,000l., would bring the total up to 43,000l.

The Lord Mayor said that the items beyond the 36,000l. could not be included in the indebtedness.

Mr. Humphreys said he was going to show that the amount received by Lane, Hankey, and Co. was equivalent to the amount paid by the public to the Merchants’ Company.

Examination resumed—The total amount of paid-up capital, irrespective of goodwill shares, was 44,078l. 14s. 9d. Then there were forfeited shares 4,000l., making a total of 48,000l., which was about the amount drawn out by Lane, Hankey, and Co.

Cross-examined by Mr. Lewis—I was appointed official liquidator hostilely to the board of directors. Mr Lane was a director to the last. I received a letter from him shortly after my appointment. It was dated 7th February, 1867, and said he would be happy to co-operate with me to bring about a successful and speedy liquidation, and with that view he and Mr. Childs offered to meet me. I stated in my examination that 250 shares were transferred from Colonel Daubeny to Mr. Helbert. Upon the same day Mr. Lane transferred 250 shares with 15l. paid up to Colonel Daubeny, and produce the minute back showing the attendance of directors. Colonel Daubeny was appointed a director on the 17th October, 1865, his duties commencing on the 1st January, 1866. The first meeting of the board he attended was on the 24th April. I don’t know that he was in Italy till that time. I produce the warrants issued for dividends. I find one issued to Colonel Daubeny for 184l. 7s. 6d., dated 16th April 1866. The warrant was made out in Mr. Lane’s name, and “Colonel Daubeny” was written on it in a different handwriting.

The Lord Mayor said Mr. Stuart Lane signed the receipt for the money, and the name of Colonel Daubeny being written on it did not affect the instrument.

Cross-examination resumed—It is crossed to Messrs. Hoare and Co., bankers, Fleet-street. The crossing is in the same handwriting as the warrant. The other warrants are crossed to Messrs. Prescott and Co. I do not find a dividend warrants in respect of the 250 shares, with 5l. paid, transferred by Colonel Daubeny to Mr. Helbert. There were no dividend warrants at all with respect to shares in respect of which 5l. only was paid. I produce a transfer of shares from Mr. Albert Grant, M.P., to Mr. H. E. Chapman, dated 9th December, 1865. The consideration stated on the transfer was 350l.

Mr. Lewis—Was there anything wrong in that transaction?

The Lord Mayor—That is a matter of opinion.

Mr. Humphreys said although an amount was stated on the transfer, that was no evidence that the money was paid.

Cross-examination resumed—I produce a transfer of 50 shares from Hioks to Chapman, the consideration stated being 275l. No dividend was paid on either of those transfers. I find on reference to other transfers spoken to in the previous examination that they were for a valuable consideration.

By the Lord Mayor—There was a nominal consideration of 5s. paid by Colonel Daubeny for the 250 shares transferred to him by Lane. 15l. was paid on each of these shares. The amount of consideration for the transfer of shares from Daubeny to Helbert was likewise 5s.

Cross-examination resumed—I have seen numerous transfers for a nominal consideration. I produce a transfer of 50 shares transferred from J. Wilson Heritage to Mr. Lane, the consideration being 300l. Mr. Lane does not appear as accepting the transfer, but he appears on the register in respect of them. They ought not to have been entered on the register in his name.

Mr. Humphreys said Mr. Lane was present at the meeting of directors at which the transfer was approved on the 12th of December, 1865.

The Lord Mayor—Well, that is an acceptance.

The witness looked at the minute-book, and found that Mr. Lane was present at the meeting when the transfer was approved of and at the subsequent meeting when the minutes were confirmed.

Mr. Lewis said he wanted to show that there was a dispute about the transfer, and that was the reason why he did not pay the calls upon the shares.

Cross-examination resumed—Altogether the number of shares standing in the name of Mr. Lane, of which he did not accept the transfer, was 260, and his solicitor disputed them. Eventually he was placed on the register in respect of these shares after a compromise with regard to these and other shares. There was no minute forfeited forfeiting these particular shares, but they were included in 460 shares which were forfeited. Mr. Lane held altogether 1,660 shares, of which 1,000 were goodwill shares, leaving 660, of which 460 were forfeited.

Mr. Lewis said he would now show that Mr. Lane paid his calls in respect of the remaining 200 shares.

Cross-examination resumed:—I produce a transfer of 250 shares on 22nd May, 1866, from Giles Loder to R. S. Lane, the consideration being 5s. The sum of 10l. was paid on those shares, and no call was due. I produce a transfer of those shares on to Appleby and Upjohn, two clerks in the company’s office, on the same day.

Mr. Lewis said he had received a letter from Mr. Upjohn, of the Master of the Rolls Office, stating that he was not the Mr. Upjohn referred to as the person to whom the shares were transferred.

Cross-examination continued:—The consideration for the transfer was 5s, There is a minute approving of the transfer of the shares in equal divisions to Appleby and Upjohn, and they have been inserted as contributories. The shares were treated as securities of the company. In the ledger I find White and Company debited with 5,000l. cash, and on the other side is, “Share capital, 5,000l.” being a deposit of 1,000 shares, with 5l. paid.

By Mr. Humphreys—There is no address given to White and Co.

By Mr. Lewis—There is no address given on any account. The substance of the entry is that 5,000l. was advanced to White and Co. upon 1,000 shares. The Merchants’ Company had received 5l. on those shares, and there was therefore no loss to the company by the transaction. It would come off the capital.

The Lord Mayor said he differed from the witness. It depended upon the condition of a company whether a forfeiture of shares was a loss or a profit. If the company was a flourishing one, forfeiture was equivalent to a profit; but if, on the contrary, the company was insolvent, it represented a loss; inasmuch as there would be no person holding the shares and liable for the calls.

Cross-examination resumed—The 5,000l. was written off the share capital in June, 1866. As a matter of booking there was no loss. The company had received 5l. per share, and they advanced 5,000l.

The Lord Mayor said he took the results of book-keeping, otherwise book-keeping was a farce.

Cross-examination continued—Mr. Lane is credited with 4,250l. Deducting from that 1,250l. in respect of 200 forfeited shares, there was left 3,000l., which would be 15l. per share on Mr. Lane’s 200 undisputed shares. At the stoppage of the company there was an amount of 410l. standing to the credit of his private account, but that was arrived at by taking credit for 1,015l. in bills which had not been paid, and he was therefore a debtor to the company on that account by about 600l. On the 16th April the following dividends were paid to the defendants on good will shares with 15l. paid up, and at that time they held no other shares with 15l. paid up:—Mr. Lane, 798l. 14s. 3d.; Mr. H. E. Chapman, 468l. 19s. 8d.; and Mr. Helbert, 468l. 19s. 8d. As to the mode of paying the directors’ fees, there was a minute dated 31st March to the following effect:—“It was resolved that remuneration of the directors be thus calculated—500l. for each director and 1,000l. for the chairman, to be added together; and that one half of this sum be divided into a number of portions exceeding by one the number of directors for the time being, and that one of such portions be given to each director and two portions to the chairman, and that the remaining half be divided in proportion to the attendance of the directors and chairman, the attendance of the chairman being calculated as double attendance. That a division on this principle be made for the quarter ending 31st December last.”

The Lord Mayor said the period had now arrived at which they had arranged to adjourn.

Mr. Metcalfe said before adjourning he wished to refer to one matter.

The witness, in reply to the learned counsel, then said that, at a meeting of the board on the 18th of May, 1866, Mr. H. E. Chapman brought forward two propositions—the first, to appoint a committee with the view of cutting down the office expenses and clerks’ salaries: and the second, to reduce the fees of the directors from 500l. to 100l., and those of the chairman from 1,000l. to 500l. The first motion was carried, but the second did not find a seconder. Mr. Chapman never received anything as director’s fees after that.

Mr. Lewis intimated that he had yet to cross-examine the witness at the considerable length.

The investigation was then adjourned till Friday next at 11 o’clock, the defendants being released on the same bail as before.

#### ANOTHER CHARGE AGAINST DIRECTORS.

At the Justice-room of the Mansion-house, yesterday, Mr. Richard Stuart Lane and Mr. James Childs, directors of the Merchants’ Company (Limited), appeared before the Lord Mayor to answer a summons charging them with having on the 25th May, 1866, published a circular accompanying a call upon the shareholders, they well knowing the same to be false in a material particular, with intent to defraud. The circular alluded to was as follows: “To the shareholders of the Merchants’ Company (Limited). London, 25, Old Broad-street, May 25, 1866. Sir—In making the call announced on the other side, the directors have the pleasure of stating that notwithstanding the great severity of the financial and commercial crisis, the company has made no losses. At the same time the directors have considered it necessary, in the interest of the shareholders, to make this call, the state of the money market being such that it may be considered impossible to procure money satisfactorily on securities which in other times would be easily convertible. The directors fully believe that the shareholders will appreciate and support the line of conduct which dictates this call—a call which, under other circumstances, the directors had proposed to defer at any rate until next year.—By other of the Board, J. LANGTON BUTCHER, Secretary.”

The summons was issued at the instance of Mr. John Land, of Litchurch, in the country of Derby.

Mr. Straight, instructed by Messrs. Dubious and Maynard, conducted the prosecution; Mr. George Lewis appeared for Mr. Lane; and Serjeant Parry and Mr. Ledgard defended Mr. Childs.

The learned counsel for the prosecution opened the case at some length, and he explained that the specific charge imputed to the defendants was that they, while directors of the Merchants’ Company, had issued to the public a false prospectus, in which they stated that the business of Lane, Hankey, and Co., of which the defendant, Mr. Lane, was the principal partner, was in a perfectly solvent condition and had not made any losses, and was in point of fact in a flourishing condition and the effect of which was that the public were induced to take shares to a large amount, and a very considerable loss was incurred. It will be unnecessary to go into detail of the particular facts relied upon to support the charge, as they were nearly the same as had been adduced in support of the charge against Mr. Lane, Mr. Chapman, and Mr. Helbert. It appeared that the prosecutor had written for a hundred shares, not expecting that the whole number would be allotted to him, and he was not in a position to taken up such a number. The whole 100 shares, however, were allotted to him, and it was admitted that he had not paid his calls upon these shares, and upon that ground he was prevented by Mr. Lane, the defendants, and Mr. David Ward Chapman from addressing a public meeting of the shareholders that was convened to consider the position of the company. He stated that the reason why Mr. Horace Chapman was not included in the present charge was that he was a very young man, and it appeared that he had taken a good deal of interest in the working of the company, and upon one occasion made a proposition that the salaries of the directors and the clerks of the company should be reduced; and it appeared that the last-mentioned resolution was agreed to, but the former did not find a seconder. (Laughter.) The case on the part of the prosecution was, that at the time of the transfer of the business of Lane, Hankey, and Co., for which a large sum was paid in the shape of good will, that business was in an solvent state, and was only kept on its legs, according to the expression made use of by one of the defendants, by the Merchants’ Company, and, eventually, the whole concern fell to the ground, and a very large loss was incurred by those persons who had become shareholders. The learned counsel stated that owing to the way in which the arrangement of the business was carried on at the time of the stoppage, the shares of a great many persons were transferred to directors of the company, and other persons who were utterly insolvent, or whose estates were at the time in the course of liquidation, so that the calls due upon the shares held by them were utterly irrecoverable, and this was a portion of the fraud that was complained of. It was stated that so far from the business of Lane, Hankey, and Co. being a good and profitable business, it was nothing of the kind, and it appeared that during nine months of the year 1866, all the profits that were made amounted only to about 4,000l. Among the persons who were supposed to have entered into business transactions with the Merchants’ Company was a firm of S. T. White and Co., but it was stated that no such firm could be discovered, and the leaned counsel said that probably before the termination of the inquiry some information might be obtained upon this subject. A sum of 5,000l. was represented to have been advanced to this firm of S. T. White and Co., but the suggestion on the part of the prosecution was that this was merely a colourable transaction, and that the real transaction was that this sum of 5,000l. was in reality advanced to Lane, Hankey, and Co., to enable them to purchase shares of the Merchants’ Company in the Stock Exchange, in order to give an impetus to the undertaking. Shares of the Merchants’ Company were deposited as collateral security for this amount, and a bill of exchange was also given by S. T. White and Co., but this was dishonoured and turned out to be perfectly worthless. It appeared that the total amount received from the public upon shares in the Merchants’ Company was 46,000l., and a sum of 62,000l. was paid to Lane, Hankey, and Co. for the goodwill of their business, and the total amount of debts due at the winding up of the company was 280,000l. The separate debts of the defendant have been 69,315l., and the assets were only 5,000l. There was also a very large deficiency upon the private estates of Mr. Helbert, and Mr. Chapman said at the time it was stated to be perfectly clear that Mr. Lane, one of the defendants, was not in a condition to pay the calls upon his shares. The learned counsel then proceeded at some length to deail the particulars connected with the position of the different firm that had done business with Lane, Hankey, and Co., and the Merchants’ Company, whose estates were subsequently wound up, causing considerable loss to the latter, with a view to make out the charge of fraud.

Serjeant Parry, interposing, said he wished it to be understood that none of those firms had been wound up in May, 1866, when the circular complained of was issued.

Mr. Straight said this was the case, but he submitted that there could be no reasonable doubt that when the circular was issued the defendants must have been perfectly aware of the hopeless condition of the affairs of the company, and the only inference that could be drawn from the proceeding was that there was an intention to deceive and defraud the public. The learned counsel admitted in the course of his address that there was a considerable distinction to be drawn between the case of Mr. Childs and that of Mr. Lane, and he said that if, after hearing the evidence, the Lord Mayor should be of opinion that the charge of fraud had not been established against Mr. Childs, he should be perfectly satisfied with any decision that his lordship might come to upon the matter.

Mr. Spier, the chief clerk in the Registrar of the Joint-Stock Companies’ Office, produced the articles of association of the Merchants’ Company, which were registered on the 6th of October, 1865. The subscribers were D. W. Chapman, 200 shares; R. S. Lane, 200; H. E. Chapman, 200; Frederick H. Helbert, 200; J. Pembroke, 200; and Mr. Heritage (the solicitor to the company), 10 shares. The directors were to be paid a fixed salary of 500l. per annum each, and they were to receive a share of any dividend that might be obtained after the payment of a 10 per cent. dividend to the shareholders. The company was wound up on the 7th of December, 1866, and Mr. Cape was appointed liquidator. One of the rules of the company was that the directors might refuse to register the transfer of any shares upon which the calls had not been paid. The directors were each empowered to forfeit any shares upon which the calls were not paid. Another rule was that no dividends should be paid except out of the profits or estimated profits of the company.

In answer to questions put by Mr. G. Lewis in cross-examination, this witness said that any person by paying 1s. could see the articles of association, and become acquainted with all the conditions of the transfer of the business of Lane, Hankey, and Co. to the Merchants’ Company.

The deed of inspectorship was produced from the Court of Bankruptcy having reference to the affairs of Lane, Hankey, and Co. The amount of their liabilities was 282,000l., but 244,000l. of those liabilities was secured.

Mr. G. A. Cape, the official liquidator of the Merchants’ Company, produced the books of that company, and he said he had examined the contents.

Mr. Straight said he did not propose to go any further with the evidence of Mr. Cape on the present occasion.

In answer to questions put by Serjeant Parry, Mr. Cape said that at the time this circular was issued, in May, 1866, no profit and loss account had been made up, but the only entry having reference to the subject was one of 34l. to the credit of the company, and no bad debt appeared in the books at this period, and no losses were shown in the books. The firm of Lane, Hankey, and Co. did a very large Swedish business in wood, and they also did business in East India cotton, but this was not so large as the wood business.

By Mr. Lewis—In the case of forfeiture of shares the forfeiture would be a profit to the capital of the company. There were 1,600 shares forfeited in June, 1866, and 5l. had been paid upon each of those shares, which would be a profit of 8,000l. to the company. It was not customary for public companies to issue any statement of the amount of calls that were unpaid until the balance-sheet was published. The stock of wood in the possession of Lane, Hankey, and Co., realised, under the liquidation, a sum of 19,960l., which reduced the amount due to the Merchants’ Company by that amount. The amount was further reduced by the sum of 9,000l. by another transaction in wood. A ship called the Buffalo, which was held as security for an advance by Lane, Hankey, and Co., realised 5,456l., and this sum also went in reduction of the debt due to the Merchants’ Company. The witness said he inferred this was the case, but he could not state positively that it was the fact.

Mr. Straight said he proposed, on a future occasion, to go into the matters referred to fully, and he suggested that at present the witness should not be examined upon them.

Mr. Lewis complained strongly of the course that had been taken by Mr. Straight in making a damaging statement against gentlemen of high position and respectability in the City of London, and then merely putting a witness in the box, and asking for an adjournment. Mr. Lane was most anxious to meet every charge that could be made against him, and he thought he had a right to make a strong complaint with regard to the course of proceeding that had been adopted by the promoters of the prosecution.

Serjeant Parry made a similar complaint on behalf of Mr. Childs, and also said that he courted the fullest inquiry, and had a boná fide answer to the present accusation.

The inquiry was then adjourned until Monday week, the defendants being allowed to go at large upon their own recognisances.

#### THE CHARGE AGAINST THE DIRECTORS OF THE MERCHANTS’ COMPANY.

Mr. Richard Stuart Lane, Mr. Horace Edward Chapman, and Mr. Frederick John Helbert Helbert, three of the late directors of the Merchants’ Company (Limited), appeared yesterday again before the Lord Mayor, at the Mansion House, to undergo a further examination upon the charge of unlawfully publishing a false prospectus of a certain public company, called the Merchants’ Company (Limited), with intent to deceive and defraud the public. They were also charged with conspiring together to commit the same offence.

Mr. Humphreys again appeared for the prosecution, and Mr. Metcalfe and Mr. Moody appeared for Messrs. Chapman and Helbert, and Mr. G. Lewis appeared for Mr. Lane.

It may, perhaps, be as well to state that the defendant Mr. Lane is also charged, upon another prosecution, with Mr. Childs, also a directors, with making a false statement in a call circular with intent to defraud the shareholders, but the charge above mentioned was the one now inquired into.

Mr. Cape, the official assignee, was re-called and further cross-examined by Mr. Lewis on behalf of Mr. Lane. He said that only 73l. was paid to the defendants for dividends, except what was paid to them upon the good will shares. All the calls had been paid upon the shares on which the dividend was so paid. There was a minute of the board of directors with reference to the payment of the dividend upon the good will shares. The sum of 3,500l. was paid to Lane, Hankey and Co., for the lease of their offices and furniture, and he considered this was a fair amount. The amount was fixed by valuation, and other parties were quite ready to have taken the lease at the same price. Mr. Goslett, the surveyor to the Gresham House estate, wished for the refusal of the lease, if the Merchants’ Company had declined to take it.

Mr. Lewis observed that it had been made a ground of complaint against the defendants that they had obtained 3,000l. for the lease of their premises, and from the evidence just given it appeared that it was quite a fair sum for the property.

Mr. Humphreys objected to Mr. Lewis making speeches at this stage of the inquiry. He said he would have ample opportunity for doing so before the case was concluded.

In further cross-examination the witness said he was unable to state whether the accounts handed over from Lane, Hankey, and Co., to the Merchants’ Company resulted in a profit or a loss. The witness then proceeded to say that several of the transactions handed over by Lane, Hankey and Co., had resulted in reducing the account that had been advanced to that company by the Merchants’ Company. The firm of Lane, Hankey, and Co., received considerable commission upon the payments where they had advanced money, generally about 4 per cent.

A number of other questions were then put to the witness by Mr. Lewis, with a view, as he stated, to show that no money was, in reality, advanced to Lane, Hankey, and Co., but that it was used for the purposes of the business that was carried on by the Merchants’ Company, and they held accounts for all the money that was so advanced.

Cross-examination continued—After the stoppage of the company the securities realised the sum of 29,400l., and this sum went in reduction of the sum of 43,000l. which was originally handed to Lane, Hankey, and Co.

The Lord Mayor asked if he was to understand that the total amount actually due to the Merchants’ Company upon balance was only about 14,000l.?

Mr. Lewis said that this was the fact.

Mr. Cape further stated that the sum of 14,000l. appeared by the books to have been further reduced to about 11,000l., which was the total amount of the actual indebtedness of Lane, Hankey, and Co. to the Merchants’ Company at the time of stoppage. Part of this sum also consisted of 10,000l. of bills of exchange, accepted by the Merchants’ Company. There were some American railway debentures of the nominal value of 6,000l., as securities to meet this balance, but they would not realise anything like that amount.

Mr. Lewis asked how much they would realise.

The witness said not more than 2,000l. or 3,000l. He should like to get 3,000l. for them. (A laugh.)

Mr. Lewis asked the witness whether he would take 2,000l. for these debentures? If he would, perhaps he could find him a customer. (Laughter.)

The witness intimated that he could not accept such an offer at that moment. He went on to say that most of the bills discounted by the Merchants’ Company were duly honoured, and this part of their business appeared to have been conducted very satisfactorily and carefully. He went on to sate that Mr. Lane had paid over 5,000l. to the company, and 400l. were due to him at the time of the stoppage. The other two defendants, Messrs. Chapman and Helbert, had each paid in over 2,000l., and the Merchants’ Company had been benefited to that amount. These sums consisted of payments upon shares. The witness said he was unable to state whether supposing all the calls had been paid, the Merchants’ Company might not have been a successful speculation; but the total amount of the liabilities of the company was only about 57,000l. at the time of the stoppage, and deducting the debenture bonds and the disputed liability upon the bills the amount would not have been more than 34,000l.

Mr. Lewis—What was the amount of capital necessary to be called up?

The witness said about 70,000l. He added that no doubt the capital was employed in carrying on the legitimate objects of the company, but some of them had resulted in a loss.

The letter written by Messrs. Coleman, Turquand, and Co., in which they estimated the profits of the business of Messrs. Lane, Hankey, and Co. at an average of nearly 20,000l. per annum for the six years previous to the transfer of the business to the Merchants’ Company, was then produced, and the witness said that this firm were men of great experience, and employed a high reputation as accountants in the city of London. He also said that an application was made by Mr. Young, one of the firm, for 100 shares in the Merchants’ Company, and 1,500l. were paid upon these shares, and Mr. Young held those shares at the time of the stoppage. The witness proceeded to say that no call had been made upon the shareholders since the stoppage. The amount of commission earned by Lane, Hankey, and Co. after their connection with the Merchants’ Company was over 8,000l., and the amount actually received was 5,422l. This was during a period of about 11 months. He did not find from an examination of the books that there was any connection whatever between the Merchants’ Company and the Credit Foncier Company, and only one transaction with that company appeared in the books.

Mr. Lewis said it would be remembered that it had gone forth to the public that the Merchants’ Company was merely a creature of the Credit Foncier. The fact was that neither the company nor the directors had anything whatever to do with the Credit Foncier.

Mr. Lewis then put some questions to the witness with a view to show that all the capital that had been placed to the credit of the firm of Lane, Hankey, and Co. had been lost by legitimate trading transactions, and that no portion of it went into the pockets of the defendants; and the witness said that there had been undoubtedly large trading losses, but they all took place during the panic of 1866. They lost 7,500l. by the firm of Gallatly and Co. The sum originally advanced to this firm was 10,000l., and they held securities, but these securities only realised about 2,000l., being sold during the panic.

By Mr. Metcalfe—Generally there were other losses besides these. The panic commenced in May, 1866. I have not looked in the books to ascertain whether there was any trace of unsoundness up to that time. I cannot say there is. Mr. Chapman resigned on the 22nd June, 1866, and in the letter accompanying his resignation, dated 21st June, addressed to Mr. Butcher, the secretary, he said:

Dear Sir,—I shall be obliged by your informing your directors that I consider it my duty to tender them my resignation, and I await to hear from you that the same has been accepted. You will explain to them my deep regret in adopting this course, but as my calls have remained unpaid for so long, and as I have neither the means nor the prospect of being able to pay them, I feel that I can no longer, either in justice to myself or others, hold the position which as a director I ought.—Your truly,

HORACE E. CHAPMAN.

Mr. Helbert resigned at the same time, and addressed the following letter to the chairman:

London, 19th June, 1866

Dear Sir,—I think it due to the board and the shareholders that I should at one place any resignation in your hands. I find it quite impossible to raise the money requisite of pay the call on my shares, and as a director I ought to be the first to suffer if I am not able to fulfil the contract which, on becoming a shareholder, I entered into with the company. My position is well known to the board. I beg they will allow my shares to be forfeited, and release me from a liability which I have no prospect of being able to free myself from. I wish the company every success, and there is no reason why it should not prosper. I regret being forced to dissociate myself from those with whom I have worked with so much pleasure.—I remain, dear sir, yours very faithfully. F. J. H. HELBERT.

In re-examination by Mr. Humphreys,

The witness was referred to the advance of 5,000l. to S. F. White and Co. on their promissory notes, and the deposit of 1,000 shares with 5l. paid. They did not appear as holding any shares. Their promissory notes were for 2,703l. and 2,500l., but they had not been paid. They were cancelled before the stoppage. He now remembered of a firm of White and Co., in Great St. Helens. In the register, he continued, each share has a name and number to show in whose possession they are. The shares 417 to 616 (200) were in the name of Horace E. Chapman. The shares 1,067 to 1,266 were in the name of James Childs. The shares 2,953 to 3,152 were in the name of F. J. H. Helbert. The shares 4,674 to 4,873 were in the name of R. S. Lane. The shares 5,989 to 6,188 were in the name of James Pembroke. The deposit and allotment of 5l. per share were paid on all those shares.

Mr. Humphreys—Can you tell me whether the deposit and allotment on these shares were paid with the 5,000l. advanced to S. F. White and Co.?

Witness—These were the shares deposited by White and Co., and the 5,000l. was advanced on the 7th November, 1865, the same day on which the allotment on these shares were paid. The shares stood in the names of the directors already mentioned, and were not transferred to anyone, but on the 1st June, 1866, a letter was written to the Bank of England, requesting that a discount account might be opened, and it was stated that 7,229 shares, with 15l. paid, had been taken up. These 7,229 shares would include the 1,000 referred to. A second advance of 3,000l. was made to S. F. White and Co. on the security of 600 shares on the 1st of December, 1865. In the minute book I do not find any entry to show that the notice required by the articles was given in regard to the forfeiture of the 1,000 shares. When the letter was written to the Bank of England the first call was due, and the second call had been made. After the shares were forfeited the 5,000l. were credited to capital, but the real effect was to cancel White’s advance, and reduce the capital by 5,000l. The directors practically by the forfeiture got rid of a liability of 10,000l. on calls, and the company lost, besides, 5,000l. In the abstract of accounts of the Merchants’ Company, dated August 31, 1866, the number of shares represented to be forfeited is 425, but the minute-book shows that on the 1st of June 1,600 shares were forfeited.

Mr. Lewis said that in the balance-sheet the 1,600 shares were entered as “cancelled” at the request of the auditors.

Mr. Humphreys said “cancelled” and “forfeited” meant very different things. Cancelled gets rid of obligation, but forfeiture does not.

Mr. Lewis said he desired it to be known that the shares were forfeited subsequent to receiving a letter from the Bank of England declining to open a discount account.

At this stage the case was further adjourned until this day (Saturday) week.

#### FEBRUARY 9

##### THE MERCHANTS’ COMPANY PROSECUTION.

[Mr. Robert Barlow, general] agent, deposed that in November, 1865, he was appointed colonial manager of the Merchants’ Company and his salary was 800l. a year. He knew the defendants as directors of the company. They were regular in their attendance at the board meetings. He “did not wish” to become acquainted with the amount of capital paid up in the Merchants’ Company, but he learned the amount about two months after he joined the company. He was aware that 62,000l. were to be paid for the goodwill of the business of Lane, Hankey, and Co., and he remembered money being advanced to that firm in the beginning of 1866. He had a conversation afterwards with Mr. Childs upon the subject, and he told him he had a character to lose, and property to lose, and if he lent Lane, Henkey, and Co. money, his character would be affected, and he would run the risk of his property being diminished. The reply he made was that Lane, Hankey, and Co. must be kept on their legs. He had another conversation with Mr. Childs about a fortnight afterwards upon the same subject, and warned him of the danger of locking up their money, and Mr. Childs replied that he was not afraid of lending money to Lane, Hankey, and Co. At a board meeting which took place on the 12th of January witness was called into the board-room by the chairman, Mr. David Ward Chapman, and inquires were made of him as to the result of his application to various bankers for an advance of capital, and he reported that the manager of the City Bank told him they would not think of touching their bills at any price, and that there never was a neater swindle than to pay a large sum of money for the business of an insolvent company, and that Lane, Hankey, and Co. would go and bring the company down with them. Mr. Heritage, the solicitor of the company, was consulted as to whether an action for slander might not be brought against the City Bank, and be said an action might be brought, but he thought it had better not be done. Witness afterwards informed Mr. Lane what had taken place. Witness occasionally acted as secretary while Mr. Butcher, the appointed secretary, was ill, and at some of the meetings he was politely requested by Mr. Chapman to withdraw from the board-room. The witness went on to say that he remembered some negotiations for a loan by certain companies, and he knew that one of the companies proposing was insolvent. The proposal was for the Merchants’ Company to give a guarantee for 15,000l. with certain London bankers, and they offered to give copyhold and freehold estates exceeding in value the amount of the guarantee by 25 per cent. as security. Mr. Helbert, one of the directors who was specially entrusted with the arrangement, reported that Messrs. Barnett, Hoare, and Co., and Overend, Gurney, and Co., informed him that the firm requiring the advance was “good enough” for anything.

Mr. Lewis submitted that this evidence could not be taken as admissible to support the charge of making a false statement in the call circular, that no losses had been incurred. The circular was issued on the 25th of May, and no loss was incurred by the transaction in question until several months afterwards.

The witness then went on to state that he remembered the call circular being published, but he could not say by whom it was composed.

Mr. Lane said it might be assumed that it was he who composed the call circular.

Serjeant Parry observed that it was not intended to deny that the circular was issued with the knowledge of the defendants, and he should be prepared to contend that the statements contained in it were true.

Mr. Nicholls, of the firm of Chatteris, Nicholls, and Co., accountants, deposed that he had examined the books of the Merchants’ Company, and had also read the statement contained in the call circular that no losses had been made by the company. This statement was not true. He had carefully examined the profit and loss account, and found the company had earned by commissions and brokerage about 3,289l., and their losses and expenses were 16,528l. 5s., which included a dividend of ten per cent. paid to the shareholders, and the sum of 5,000l. lost by the firm of S. F. White and Co. At the same time the company was liable upon bills accepted by them to the amount of over 100,000l., and they also owed to sundry creditors the sum of 37,000l., making a total liability of nearly 138,000l. Their assets to pay this amount consisted of divers bills of exchange, and the sum of 62,000l. advanced to Lane, Hankey, and Co., and other items, making a total of 104,000l., but this was subject to the realisation of the securities. There were securities given to cover every advance that was made by the company. At this time 10l. had been called upon 7,000 shares in the company, but only 46,000l. were paid up, and the remaining amount was in arrear. The witness continued.—As regards the advance account, 10,000l. of that consisted only of the company’s acceptance. I have looked through the security book and find that a large number of securities were given for these advances. Of the 20,000l. advanced to Mr. Alibert, 18,876l. is unpaid; and on the 23,000l. advanced to Hinde, Gladstone, and Co. there is a loss of over 5,000l.

Mr. Lewis said it must be shown what loss there was on the 25th May.

Serjeant Parry said Mr. Straight asked how much they owed on the 25th May. What they owed was not a loss. The liquidator informed him (Serjeant Parry) that as regarded the 5,000l. he held securities against it at that moment.

Mr. Lewis said it was not an advance to Hinde, Gladstone, and Co. at all, but to another person. There is mentioned in the profit and loss account the payment of a dividend. The books on the 25th May only showed a profit of 3,000l. Mr. H. E. Chapman received 625 goodwill shares with 15l. credited, amounting to 9,375l. Mr. Helbert also received 625 goodwill shares, and Mr. Lane received 1,250—altogether, 2,500 shares with 15l. credited, amounting 37,500l. With respect to Mr. Lane’s shares, 250 were transferred to Colonel Daubeny on the 1st May, 1866, and 1,333 shares were deposited with the company for an advance of 10,000l. to Lane, Hankey, and Co.

Mr. Lewis—There were collateral securities.

The witness then read a list of the names of the persons who had not paid the first call, and said that the shares upon which the calls were unpaid were, with few exceptions, forfeited on the 1st June and the 16th October. The sum of 995l. was paid to Mr. Lane as dividend on 1,225 shares with 15l. paid and 200 shares with 10l. paid, the dividend on the 10l. shares being 73l. 15s. The dividend on the 10l. shares was paid on the 9th June, 1866. It was due in April, but Mr. Lane had not then paid the first call on those shares. On the 9th June he paid half the 5l., and gave a bill for the other half. Witness took it that he was not entitled to the dividend on the 200 shares.

Mr. Lewis said there was a minute allowing every shareholder to pay in the same way—half in cash and the other half by bill.

Examination continued—3,000l. was advanced to Lane, Hankey, and Co. on the security of 600 shares with 5l. paid. In the ledger there was an entry on an account headed “S. F. White and Co., London.” Cash paid them, 5,000l. On the same day, 7th November, 1865, 5,000l. was paid by five directors on 1,000l. shares held by them. On the 1st June 1,600 shares were forfeited, and 8,000l. was due upon them in respect of the first call. These were the shares which were deposited as security for the advances to Lane, Hankey, and Co., and S. F. White and Co. A number of the shares on which calls were unpaid were held by persons in the employment of the company. Apart from the unpaid calls there was a loss of 13,000l. by the Merchants’ Company.

Cross-examined—That 13,000l. includes 3,000l. lent to Lane, Hankey, and Co. It was overdue. It had been lent for six months, and at the end of that period it had not been paid. The advance was made on the 1st of December, 1865, and became due on the 1st June, and I am, therefore, wrong in saying it was overdue. I was confusing it with another matter. The 1,000 shares which were deposited in respect of the advance of 5,000l. to S. F. White and Co. were held by the directors. In making up the commissions on business transactions which were current but not concluded on the 25th May, 1866. I should say that the commissions up to that time did not about to 8,000l.

At the request of the counsel for the defence, Mr. Capes, the official liquidator of the company, was put into the witness box. In reply to Serjeant Parry, he said that Hinde, Gladstone and Co. had two accounts in the ledger. In one of them there was a balance of 600l., which he considered lost. In the other account the balance was 3,805l., against which he held certain securities which, he thought, would realise altogether 1,500l. There was no reason to suppose that on the 25th of May. If he had at that time been called in as an accountant he would have called attention to the 5,000l. advanced to S. F. White and Co., but there was no trade account that he would have written off as a loss. No balance sheet appeared to have been made on the 25th May.

By Mr. Straight—The commissions earned by the company during the eleven months it traded were 5,420. I do not think the 3,000l. from the suspense account should be included as a loss on the 25th May.

Mr. Barlow recalled, said Gellatly, Hankey and Swell failed on the 19th May, 1866. I had a communication with the board on the subject. In pursuance of instructions I had a conversation with the manager of the Asiatic Bank. My instructions were to see if the bank would not take the mortgage held by the company, and relieve them of all responsibility in connection with the advance to Dickson, Tatham, and Co. I reported to Mr. Lane that the bank would not take the mortgages over, as they did not consider them worth a penny, and thought the whole thing a swindle, and they expected the money to be paid at once. I do not think I spoke to Mr. Childs on the subject. I reported to the board meeting on the 25th May what I had previously told Mr. Lane.

By Mr. Lewis—I will swear it was not on the 28th May I reported to Mr. Lane the reply of the Asiatic Bank. It would have been beneficial to the Merchants’ Company if the Asiatic Bank had taken over the mortgage, and relieved them of their responsibility.

Mr. Cape, in reply to Serjeant Parry, said the coffee estates, on which the mortgage was granted, were valued at the time to be worth a considerable sum, but their value decreased very much, and only realised something over 2,000l.

Mr. John Land, the prosecutor, said he was bookkeeper to a firm of silk merchants in Derby. In October, 1865, he received the prospectus of the Merchants’ Company, and applied for 100 shares, upon which he paid 500l. In December he received a call circular. Upon receiving it he came to London, and saw Mr. D. W. Chapman, Mr. Lane, and Mr. H. E. Chapman, and had a conversation with Mr. Lane respecting the company. Mr. Lane said the company was going on prosperously. After my return to Derby, witness continued, I offered to sell my shares to Mr. H. E. Chapman, but he did not take them. I was unable to pay the first or second calls, having previously embarked all I had. Mr. Davenport, my employer, received two letters from Mr. Lane in June, 1866. (The letters were read. They urged the payment of the call of the 25th May on the shares of Mr. Davenport and the prosecutor, and said the money would be of great importance to the company. Another letter was read stating that if the call was not paid the shares would be forfeited.) I was present at the first general meeting of the company on the 4th of October, 1866.

By Mr. Lewis—I borrowed part of the money to pay the 500l. on the shares. I was never in a position to pay the calls.

By Mr. Straight—I borrowed part of the 500l. on a mortgage.

Mr. Straight said that with the exception of formally proving the failure of Hinde, Gladstone and Co., and giving some other formal evidence, he had finished his case.

The inquiry was then further adjourned till Friday, and as on former occasions, the defendants were liberated on their own recognisances.

#### THE MERCHANTS’ COMPANY PROSECUTION.

Mr. Richard Stuart Lane, Mr. Horace Edward Chapman, and Mr. Frederick John Helbert Helbert, again surrendered yesterday, before the Lord Mayor, to undergo further examination upon the charge of having, in the capacity of directors of the above company published false statements relating to its affairs, with intent to defraud.

Mr. Humphreys again appeared for the prosecution, and Mr. Lewis, Mr. Metcalfe, and Mr. Montagu Williams appeared for the defendants.

Mr. W. Smith, a clerk in the registration office of the Court of Bankruptcy, produced a certified copy of a deed of inspectorship in the affairs of Kane, Hankey, and Co. The deed was filed on the 24th of August, 1866. The amount entered as debts under security was 242,353., and the unsecured debts were stated to be 42,000l.

Mr. Humphrey said he should be able to show that the amount of unsecured debts was very much larger than was represented in this statement.

Mr. Lewis denied that this was the case, and said that, in addition to the securities mentioned in the deed, bills of exchange were given which were paid as they ran off, and thus reduced the debt.

Mr. Humphreys said his object was to show that the accounts were incorrectly stated, and that the unsecured debt amounted to 120,000l. instead of 42,000l.

Mr. Lewis said that the business of Lane, Hankey, and Co. was disposed of to the Merchants’ Company in 1865, and the condition of that firm in 1866 had nothing to do with the inquiry.

The Lord Mayor said he certainly thought they were going beyond the question at issue by entering into an inquiry as to the condition of the firm of Lane, Hankey, and Co., in 1866.

Mr. Humphreys contended that the evidence was admissible as tending to show that the accounts of the firm were false and incorrect.

The Lord Mayor decided that the evidence was inadmissible. The further examination of this witness was, therefore, not proceeded with.

Mr. James, the accountant employed to examine the books of Lane, Hankey, and Co., for a certain number of years previous to the sale of the goodwill of the business of the Merchants Company, was then called—but previously to his being examined, a long discussion took place as to the advisability of the witness going over the books with Mr. Young the other accountant, who, it will be remembered, reported favourably of the firm and the amount of business carried on by them, in order to see whether they could agree upon a report. The counsel for Mr. Chapman objected to this course, and the Lord Mayor said he thought he ought at all events to have some evidence from Mr. James before he allowed a further adjournment.

Mr. James was accordingly examined, and he stated generally that from his examination of the books he had come to a very different conclusion to that arrived at by Mr. Young with regard to the amount of commission earned by the firm of Lane, Hankey, and Co. during the six years prior to the sale of the business to the Merchants Company in 1865. The witness had several questions put to him as to the details, and it appeared that there was only a difference of 6,000l. in the amount of commission represented to have been earned during a period of six years, by the witness and the other accountant, Mr. Young.

Mr. James was then further examined, and he stated that the firm of Lane, Hankey, and Co. appeared to have commenced business on June, 1858, and at that time the firm consisted of Messrs. Richard Stuart Lane, H. A. Hankey, Leopold Brosewitz, and E. F. Brosewitz. In Dec., 1861, the firm only consisted of Mr. Lane and Mr. Hankey, and the latter appeared to have left the firm in 1863. The defendant, Mr. Chapman, appeared to have become a member of the firm in 1863, and Mr. Helbert in January, 1864. It did not appear by the books that Mr. Lane brought any capital into the firm when it commenced business.

Mr. Lewis said that this was not the case, and Mr. Lane brought 10,000l. into the firm.

The witness said that no entry of any capital brought in by Mr. Lane appeared until December, 1861, when there was an entry of 11,920l. to his credit as capital. Mr. Lane did not appear to have brought any other capital into the concern.

Mr. Lewis remarked that it was stated in the opening by Mr. Humphreys, that the capital of the company was only 4,000l., whereas it appeared that Mr. Lane’s capital alone was over 10,000l., and besides this there was the capital of the other two partners.

Mr. James said that the capital brought in by Mr. Hankey was 14,200l., and Mr. Frederick Brosewitz brought in 10,000l.

Some further evidence having been given.

The Lord Mayor intimated that the principal facts now being before him, he was of opinion that although the defendants were morally guilty, yet they had kept themselves within the law, and were not legally guilty, so that he could not commit them for trial. At the same time, he was of opinion that the company was formed with the view of relieving the members of the firm from the difficulties they were in.

The defendants were then discharged.

#### TRADE AND FINANCE.

RETURNING to our examination of the Trade Circulars for the past year, we find in the less important departments of commerce features much resembling those which have been already reported. Diminished business, with an occasional, though not generally maintained, recovery in prices, remain as usual the chief characterisations. The varying prosperity of the nation is best gauged by the demand for those articles which come more or less under the generic denomination of luxuries than of those which represent the mere necessities of life. Happen what may, the industrious millions must always have a sufficiency of corn, no matter how many other things they may have to forego. No more instructive lesson can be afforded by contemporaneous history than that shown by the consumption of the homely luxuries of the poor. The records are dry and uninviting, but at least they tell their tale.

As regards the working classes, there can be no doubt that one of their chief luxuries is tobacco. Messrs. CLAGETT, BRACHI, and Co. mention that the trade during the past year cannot be considered as satisfactory, owing to the high first cost imposed upon importers, and to the manufactures having suffered from constantly increased competition among themselves. The result as concerns the latter is described as a reduction of profits to a minimum, and the numerous failures of retail dealers throughout the country. We are forced to agree with the remark that this last feature is clearly traceable to the want of employment by the working classes, the yet remaining consequences of the financial crash of 1866.

The circular of Mr. W. CAUDERY upon the consumption of chymicals states that a more discouraging year for manufacturers may be looked for in vain. Prices of nearly very article have been gradually falling, notwithstanding, somewhat to our surprise, a sound and healthy demand has continued throughout. This is a little contradictory, but we are recommended to look to the new year as a recompense for the misfortunes of the old, although the market closed without animation.

Currants are among the most favourite indulgences of the bulk of the population. Messrs. WITHERYBY and SON report that until the end of February, 1868, the market was inanimate, stocks being heavy, and the few sales made being at the lowest quotations. For ten years prices had never been so low. The reason, we apprehended, is simple—people had little or no money to spare. The reports of a short crop in April (which by the way may be invariably looked upon each year—somehow or other there is always a report of a short crop at that time) caused the price to rise for a time, but it speedily fell back again. Valencia raisins have maintained their value chiefly because the arrivals have been moderate, although the actual crop was unusually large.

It is difficult to define whether in England rice is more a necessity than a luxury. Leaving aside this point, it is stated that the rice trade has been decidedly unremunerative during the past year, stocks having accumulated not only from Bengal, but other parts of the East. Messrs. JACLSON and TILL observe that the disastrous results of the later importations are due to their inferior quality. Hence a large quantity was gradually stored which was practically unsaleable, and thus proved an insuperable barrier to the legitimate working of the dealers’ business, since they have been constrained to use all their efforts to getting rid of their surplus stock. Apparently there has been less demand for the better sorts, since we can scarcely think that the necessity would not have been supplied if it had supervened.

The cheese trade has on the whole not been unsatisfactory. The market, according to Messrs. CORDEROY and Co., opened dull, but there was soon a better demand, which was increased by the prevailing drought in the summer. Buyers, although cautions at first, were, towards the autumn, ready to take off all descriptions at improved prices, especially old English cheese. The stocks of all descriptions are at present said to be limited.

The price of oils is stated by Messrs. ROSE and WILSON to have been comparatively high in the first part of the year, but in the autumn to have declined, owing to the expected large crop from olive oil. It is worthy of remark that, with regard to fish oils, not only has the price gradually fallen, but that this product has been, and is to a great extent being supplanted by cotton and other seed oils, and that the former have thus attracted no attention during the past year. The use of petroleum, as Messrs. PHILLIPS and WOOD report, has experienced a remarkable extension.

Linseed ruled high in the beginning of the year, and has fallen since. Holders seemed to base their anticipations upon the drought in the summer, and the consequent demand for cake. Messrs EDWARD, EASTLY, and Co., while mentioning these facts, also note that the supply has latterly been without parallel, and that the greater facilities of transit, both in Russia and the East Indies, lead up to hope and expect an annually increasing quantity.

Reverting to articles chiefly classed under the head of luxuries, it appears that as regards silk the trade has been on the whole unsatisfactory to importers. Messrs. JACOMB, HOGG, and Co. nevertheless think throwsters have benefited, thrown silk throughout the year having been current of sale at a large margin on the price of raws. Manufactured goods have been in better demand, and the prices realised fairly remunerative.

We here close our annual review. There is much left unsaid, but the subject is so diffuse and so extensive in detail that it is impossible to do justice to the whole in less than the space of an elaborate volume. The salient features have been described, and we must leave the issue to the judgment of the public.

VICE-CHANCELLOR MALINS yesterday delivered a judgment of much importance upon the bill filed against Mr. Harvey Lewis, M.P., Major KITSON, and other defendants connected with Company of CHARLES LAFFITTE and Co. (Limited). The primary object of the suit was to compel the National Bank to restore to the unfortunate shareholders of CHARLES LAFFITTE and Co. (Limited) a sum of 230,000l., their moneys, which, it was alleged, the National Bank had improperly paid away. The Company in question was formed to take over the business of M. CHARLES LAFFITTE and Co., of Paris. That gentleman, however, would not sell his business unless he could receive the assurance that 40,000 shares would be subscribed for in London, and moreover a certain subscription was necessary in order to the appointment of a settling day upon the Stock Exchange. Under these circumstances, the Ottoman Financial Company, of which LEWIS and KITSON and another defendant were respectively chairman and directors, was brought into the business, and was to subscribe 35,000 shares, and be absorbed into the new Company. In the end another Company, of which several of the defendants were also directors—the International Contract—proceeded to guarantee a subscription of 40,000 shares, taking in turn a guarantee of the Ottoman Company. In fact, neither of these two companies could find the money from its own resources, but raised it at the National Bank upon promissory notes, which it was agreed should be repaid our of the subscriptions expected to come in. The public, believing that the 40,000 shares had been really taken as alleged, subscribed, and their money which should have established the concern went to pay off the promissory notes. All the Companies—Ottoman Financial, International Contract, and Charles Laffitte and Co. (Limited)—very soon came to the ground. The VICE-CHANCELLOR said yesterday he was satisfied that it was well known to the officers of the National Bank, when the transactions in question took place, that not one of the notes would be paid except by means of the funds of LAFFITTE and Co., and yet the fact of the existence of a guarantee which practically took 230,000l. of the funds standing to the credit of the Company at the National Bank out of the control of LAFFITTE and Co. was wholly concealed from the Committee of the Stock Exchange. The object this arrangement, his Honour said, was “to impose on the public;” the arrangement was “clearly illegal,” and “no party to such a transaction could derive any right from it.” Upon the whole case the VICE-CHANCELLOR pronounced the proceedings of the parties to be “false, fictions, and fraudulent.” The national Bank was bound to treat all moneys paid into its hands for shares as paid absolutely and unconditionally. The guarantees which it took were of no legal validity, and the Bank must pay bank the 230,000l. to CHARLES LAFFITTE and Co. (Limited), with interest. Mr. HARVEY LEWIS and Messrs. HENSILAW, KITSON, and BATE, having been the main promoters of the scheme, and having taken an active part in its accomplishment, were “guilty of a breach of trust, and were therefore liable with the National Bank to restore the funds in question.” This is a trenchant and wholesome decision, and will be received with satisfaction with the public, which has so long looked on with sorrowful wonder while fraud was going unpunished.

#### EQUITY COURTS.—FEB. 17.

##### (Before Vice-Chancellor Sir [R. Ma]lins.)

##### GRAY v. LEWIS, M.P., AND OTHERS.—[CHAR]LES LAFFITTE AND COMPANY.—JUDGMENT.

This bill was filed by one of the shareholders in Charles Laffitte and Company (Limited), on behalf of himself and all other the shareholders except the defendants, for the purpose of compelling the National Bank, and the directors of the plaintiff’s company, to restore a sum of 230,000l., which the plaintiff contended had been illegally and improperly taken from its funds. The company was established and registered under the Joint Stock Companies Act of 1862, on the 8th December, 1865, on which day the first of the transactions complained of took place. The object of Charles Laffitte and Company (Limited), as stated in the prospectus and articles of association, was to purchase and extend the old established banking business of Charles Laffitte and Co., of Paris, and the capital was to consist of 3,000,000l., divided into 20l. shares, of which 1l. was to be paid on deposit and 4l. on allotment. The prospectus also stated that an arrangement had been concluded for the purchase of the goodwill of the business of the Paris firm for 150,000l.; two-thirds of the purchase money was to be taken in shares, credited as paid up, and Charles Laffitte was to give the assistance of his influence and experience to the new company. It also stated that negotiations were pending for incorporating with the company other banking establishments, and the memorandum and articles of association, dated the 8th of December, 1865, provided that the directors might commence and carry on the business at any time after registration, notwithstanding that the whole of the shares might not have been subscribed for or allotted. The first directors were to be Charles Laffitte, President; Sir John Ennis, Sir John Gray, Harvey Lewis, F. B. Henshaw, J. P. Kitson, J. Bate, Amedée Gawtray, Leon Charles Grimoult, Henri Bourlon, François Pierre Bayvet; and one clause of the articles empowered the directors to invest any portion of the money of the company in the purchase or acquisition of the business of any other corporation or firm, but provided that the company should in no case purchase any of its own shares. One of the establishments alluded to in the prospectus as a company for the incorporation of which with this company negotiations were pending, was the Ottoman Financial Association (Limited), of which Major Kitson was chairman, and the defendants, Lewis and Henshaw, were directors. Preliminary arrangements had been made under which the Ottoman Company were to take 35,000 shares in Charles Laffitte and Co. (Limited), hand over all their assets in payment for them, and then go into liquidation. Mr. Charles Laffitte, the head of the Paris firm, would not agree to sell his business to the projected company, or to allow it to be registered, till he was assured that 40,000 shares would be subscribed for and taken in London. It was arranged that the company should be brought out in or about December, 1865, but it was found that no assets of the Ottoman Company would be forthcoming to enable them to take the 35,000 shares as proposed. Under these circumstances the Ottoman Company went to the International Contract Company, with which they had formerly been much connected, the two having been in the habit of assisting each other. The International Company, of which Major Kitson was also chairman, accordingly wrote to Charles Laffitte and Co., guaranteeing a subscription of 40,000 shares, and the payment into the National Bank of 5l. per share upon them, and they in turn took a guarantee from the Ottoman Company to secure the subscription of 35,000 of the 40,000 shares. Neither the Ottoman Company nor the International Company appeared to have the means of paying the deposit and allotment money, and it being absolutely necessary that it should appear that 40,000 shares had been taken up, both for the purpose of satisfying the requirement of Mr. Charles Laffitte, and to put the company in a position to procure a settling day on the Stock Exchange, the National Bank, of which Mr. Harvey Lewis and Mr. Henshaw were directors, was applied to, and it was agreed that that should be one of the bankers of Charles Laffitte and Co. (Limited). The National Bank was to discount the promissory notes of the International Company for 200,000l., and the new company was to secure the payment by agreeing not to withdraw the money paid by the International Company or their nominees for the 40,000 shares till the notes had been duly taken up. A meeting of the new company was held on the morning of the 8th of December, at which Major Kitson, Mr. Lewis, Mr. Bate, Mr. Gawtray, and Mr. Henshaw were present, and a letter was forwarded to the National Bank, by which the directors undertook not to withdraw from the bank the subscriptions arising from the 40,000 shares during the currency of the promissory notes. This letter was objected to by Sir J. M’Kenna on the part of the National Bank, because it was signed by two of the directors of the bank, and they would consequently appear on the face of the transaction as borrowers, while they would have accede to the arrangement on the part of the bank as lenders. To meet the views of Sir J. M’Kenna, a second letter was prepared, signed and sealed with the signetting of Mr. Harvey Lewis. This letter was to the following effect: “To the Managers of the National Bank.—Charles Laffitte and Co. (Limited) hereby request you will be good enough to discount the promissory notes of the International Contract Company (Limited) to an amount of 200,000l. The makers thereof have undertaken, if requested by us to do so, to apply for shares in this company (Charles Laffitte and Co., Limited), and to apply the proceeds of the notes to that purpose, and on behalf of the parties who will take up the said shares. We hereby undertake that until the amount of the said notes is referred to you there shall stand to the credit of Laffitte and Co. (Limited) an amount equal to the sum that remains unpaid of the said notes, and if the said notes shall not be paid at maturity, you shall be at liberty to pay the same out of the balance which shall so stand to the credit of Laffitte and Co. (Limited), without any further order or authority, and to cancel the notes.” Upon the faith of that guarantee the National Bank discounted twenty promissory notes of 10,000l. each of the International Company, and placed the amount to the credit of Laffitte and Co., Within an hour after the company had been registered a board meeting was held, at which resolution was passed approving of the arrangements with the International Company and the National Bank. Application was made to the committee of the Stock Exchange on the 31st of January for a settling day, and it was accompanied with the usual documents, to show that the company had complied with the rules, and had bona fide and unconditionally issued two-thirds of the capital to the public. Under a guarantee precisely similar to the first, but signed only by Mr. Henshaw and Mr. Bute, and dated Feb. 5,1866,promissory notes for a further sum of 30,000l. were discounted, the proceeds were applied in the same way, and the money was retained to meet the bills. Certificates were sent in to the committee of the Stock Exchange by the various bankers of the company, and amongst them was a certificate from the National Bank that on the 27th of January, 1866, application had been made for 79,522 shares in Charles Laffitte and Co., and the deposit of 1l. per share paid thereon, and on the 12th of February the sub-manager of the bank certified that that the balance standing to the credit of Charles Laffitte and Co. (Limited) amounted to 237,550l. None of the notes were taken up by the International Company, and the whole of the sum of 230,000l. was paid out of the funds of Charles Laffitte and Co. as the notes became due. The object of the present suite was to compel the restoration of that sum of Charles Laffitte and Co. by the National Bank and those of the directors of Charles Laffitte and Co. who took part in that which was alleged to be an allegal and unwarrantable application of the funds of the company. The case was argued at considerable length in December and last month, and his Honour reserved judgment until this morning. Mr. Huddleston, Mr. Cotton, and Mr. Fischer appeared for the plaintiff; Mr. Jessel and Mr. Lindley for the National Bank; Sir R. Palmer, Mr. Druce, and Mr. Wickens, for Mr. Harvey Lewis and Mr. Henshaw; Mr. Glasse and Mr. Robinson for Sir John Gray; Mr. Jackson for Major Kitson; Mr. Roxburgh and Mr. Caldecott for Sir John Ennis; Mr. E. K. Karslake and Mr. W. Pearson for French directors; Mr. J. Pearson for the liquidator of Chas. Laffitte and Co. (Limited); Mr. V. Hawkins for Mr. Bate; and Mr. Bowring for Mr. Chas. Laffitte.

The Vice-Chancellor was satisfied that it was well-known to the officers of the bank when the transactions in question took place, that not one of the notes would be paid except by means of the funds of Laffitte and Co., and yet the fact of the existence of a guarantee which practically took 230,000l. of the funds standing to the credit of the company at the National Bank out of the control of Laffitte and Co., was wholly concealed from the committee of the Stock Exchange. Charles Laffitte and Co., without having secured the business of Laffitte and Co., of Paris, continued an unsuccessful existence till the 3rd of February following these transactions, when it was ordered by the Master of the Rolls to be wound up. The International Contract Company was ordered to be wound up on the 9th of July, 1866; and the Ottoman Company was also ordered to be wound up in the same year. All the three companies were complete failures, and their existence had been disastrous to their unfortunate shareholders. But upon these transactions it was contended, on the part of the defendants, that even if the bill established a claim for relief it could not be given upon the application of this plaintiff. The first ground of objection was that the plaintiff was in fact a mere dummy. In the case of “Forrest v. the Manchester, Sheffield, and Lincolnshire Railway,” to which his attention has been directed, Lord Westbury dismissed the bill because the plaintiff avowed that he had been put forward to sue the defendants by a rival company who had indemnified him against costs. Now, in this case, though the plaintiff admitted that the deposit and allotment money upon the 200 shares for which he applied had been paid for him, and that he was a cousin of Sir John Gary, and a clerk in the office of the Freeman’s Journal, of which Sir John was part of proprietor, he was settled upon the list of contributors, and there was nothing to contradict his statement that neither Sir John nor any other person had engaged to indemnify him against the costs of this suit. It had been suggested that he was not in a position to pay the calls, but the call was a legal liability which the court was bound to assume he might find the means of meeting until the contrary was shown, and if not able to pay in purse he might be compelled to pay in person. Though it might be conjectured that the plaintiff was put forward by some other person, in the absence of all proof the court could not act upon that assumption, and he was unable to come to the conclusion that the plaintiff was disqualified upon that ground from maintaining his suit against the company on behalf of himself and the other shareholders. Then it was submitted that to entitle the plaintiff to relief the acts complained of must be ultra vires of the company. But here the very ground of complaint was that the guarantee was beyond those powers. The last objection was that the bill having been filed after the order to wind up, the official liquidator was the only proper plaintiff. There could be no doubt that the official liquidator would have been the best plaintiff, and the court would have been better satisfied if he had appeared in that character; but the part he took at the hearing, when his counsel was unable to say whether he supported or opposed the bill, afforded little hope that he would have taken any steps in the matter if the plaintiff had not; and there was nothing in the Act of 1862 which deprived a shareholder of the right of filing a bill after an order to wind up. The case, therefore, must be decided upon its merits. There could be no doubt that the object of the arrangement of the 8th December, 1865, for the discount of the notes for 200,000l. was to give an appearance that shares of the company had been taken which had not been taken, and thereby impose upon the public, who were next day to be invited by the prospectus to subscribe for shares, and upon the Committee of the Stock Exchange, who, on the faith of a certain number of shares being taken, were to grant a settling-day. The object was clearly illegal and fraudulent, and no party to such a transaction could derive any right out of it. Charles Laffitte and Co. (Limited) was expressly forbidden by its articles from purchasing its own shares, a provision which the Committee of the Stock Exchange insisted upon before they would grant a settling day; but though the International Company was made to appear as the owner of the 40,000 shares, they were really to be paid for out of the funds of Laffitte and Co., which were to be retained in the hands of the National Bank for the purpose. The bank was bound to treat all money paid into their hands for shares as paid absolutely and unconditionally. It was possible official liquidator against the bank for the money now sought to be recovered, but as the bill raised a case of fraud and breach of trust, it was clear there was a concurrent jurisdiction in the Court of Chancery. Upon the whole case he must pronounce their proceedings false, fictitious, and fraudulent. The National Bank could derive no right under the guarantees of the 8th of December, 1865, and the 5th of February, 1866, and must consequently restore the 230,000l. with interest, to Charles Laffitte and Co. Messrs. Lewis, Henshaw, Kitson, and Bate having been the main promoters of the scheme, and having taken an active part in its accomplishment, were guilty of a breach of trust, and were therefore liable with the National Bank to restore the funds in question, and they and the National Bank must pay the costs of the suit. There must be an account taken of what was due to Charles Laffitte and Co., and an order to pay within a limited time after the certificate. With regard to the other defendants, as no relief was pressed for against them, the bill, as far as they were concerned, must be dismissed; but, as M. Laffitte had been to a certain extent mixed up with these irregular transactions by agreeing to pay 25,000l. to the International Company for taking up the 40,00 shares, and as the French directors, though no parties to the transactions, had agreed to become directors upon a present of their qualifications, the defendants must pay their own costs. Sir John Gray was in Ireland when the transaction took, but having tacitly adopted what had been done by his co-directors without remonstrance, the court would not give him his costs. As regarded Sir John Ennis, though his name appeared upon the prospectus as a director, he had distinctly sworn that he was not a director or shareholder, as no evidence had been offered to contradict his statement, the bill as against him must be dismissed with costs.

Mr. V. Pearson explained that the reason the official liquidator had taken no part in these proceedings was that, under the direction of the Master of the Rolls, he was prosecuting another suit with the same object. That suit would of course now be stayed.

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[^lic]: Text from MEGAdigital (Berlin-Brandenburg Academy of Sciences and Humanities), MEGA² IV/19, licence CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0/); the editorial apparatus of the MEGA is not reproduced.