Notebook “Trade and Finance 1869”. X. The trial of the Overend, Gurney and Co. directors: the speeches for the defence, the summing up and the acquittal, 21–22 December 1869

Newspaper cuttings, from the manuscript, MEGAdigital (MEGA² IV/19).¹ Traducción al español

THE OVEREND, GURNEY, AND CO. PROSECUTION.

This trial was resumed at the Court of Queenʼs Bench, Guildhall, yesterday morning. The Lord Chief Justice took his seat on the bench at a quarter-past ten.

The Solicitor-General resumed his address. He said he yesterday omitted to notice the allegation that there were no balance-sheets. Mr. Howell said he asked for balance-sheets, but could not get any, and yet in cross-examination he admitted that the documents before him, and which had been shown to him by Mr. Boys, were balance-sheets. The balance-sheets of the old firm were kept simply for the purposes of the old firm, and were not such as might be proper to be shown to a public company, but they were balance-sheets. Then as to the estimate of the private estates, Dr. Kenealy said they yielded only 730,000l., but it was in evidence that during the trading of the company 529,000l. was received on account of the private estates, which was in addition to the 700,000l.

The Lord Chief Justice, said but that was to make up a deficit on the other side.

The Solicitor-General—Yes, but the observation was relevant, as showing that the estimate was not put too high. He would now go to the excepted accounts. No doubt they were the thing that had broken up the company, and therefore he was not going to contend that the trading capital of the company was not locked up. But what he was going to show was, that his learned friend entirely misrepresented the nature of some of these accounts, and as to the others, that there were securities. His learned friend described the excepted accounts as rotten accounts, and being therefore adhered to throughout. Then he spoke of them always as “transferred as cash,” and he mentioned the items, item by item, as “transferred as cash,” and this though he had the deeds before him in which they were dealt with as locked up advances, and he knew that they were treated in the deeds as of the value of only 1,080,000l. The prosecution knew perfectly well that the excepted accounts were dealt with as worth only 5s. in the pound; and not only were they not transferred as cash, but they were not transferred at all, and were never intended to be transferred.

Mr. Moir remarked that the account was headed—“cash suspense account.”

The Lord Chief Justice—I felt the impropriety of the term and the endeavour to raise a prejudice by speaking of the excepted accounts as “transferred in cash,” and I made a strong note in my paper, intending to call the attention of the jury to that matter.

The Solicitor-General said he was obliged to his learned friend for the interruption. Did he mean to say that that entry in the book justified him in asserting that these debts were transferred as cash? Let them look at two or three of the excepted accounts. One was that of Kelson, Tritton, and Co., 291,000l. Possibly it would have been better if the defendants had caused the members of that firm to have been tried at the Old Bailey for the fraud they committed in obtaining money on fictitious bills of lading. As his lordship observed, those duplicate bills of lading, though not valued so far as to enable them to obtain the goods to which they referred, were good as against the estate of Kelson, Tritton, and Co. The defendants did their best to minimise their loss, and his learned friend endeavoured to prejudice the case by asking if the defendants had any further dealings with them. Then there was the account of Mr. Koch. His learned friend spoke of it as entirely fictitious and fraudulent, and as an absolute fabrication. At the close of the case Mr. Koch, who was supposed to be hostile to the defendants, was reluctantly called, and he said he was surprised at first to see his name among the list of debtors, but now he was satisfied that it was a mere matter of book-keeping; that he was the agent through whom the defendants made advances to various railway contractors and others, and that as against their advances they had in 1865 securities of the nominal value of 600,000l., which at that time were worth 90 per cent. of their nominal value, though in consequence of the general depreciation of that kind of property they were not worth near as much now. Most offensive imputations were made against Mr. John Henry Gurney in reference to the Ebbw Vale shares, but there had not been even an attempt to prove that those imputations were well-founded. Then there were the advances to the East India and London Shipping Company and the Atlantic Royal Mail Steam Packet Company. Overend and Gurney were second mortgagees of certain valuable ships, and they were compelled to make further advances for the purpose of getting the securities into their hands. They did so, and in some cases got considerable sums of money thereby. In others they did not. With regard to the Atlantic Royal Mail Steam Packet Company, when the Galway contract was in existence the company was a flourishing concern, and Overend, Gurney, and Co. might well suppose that they were advancing money on good security. With regard to the guarantee, which after all was the material question in this case, not only was it believed to be sufficient, but it was proved to have been sufficient by two most competent men, Mr. Turquand and Mr. Harding. Then as to the deeds, he submitted that everything showed the bona fides of the defendants, and Mr. Jones had sufficiently explained why there were two deeds, and why he only sent one to the Stock Exchange. Their conduct throughout had been the conduct of honourable men. They embarked their whole substance in the company; they stayed by the concern to the end. They could not gain a shilling; they could not relieve themselves from a shilling unless the working of the company was successful. Therefore they had the deepest interest in the success of the company. They had been, as had many other people, victims of circumstances over which they had no control. The company came out at an unfortunate time, when money was 3½ per cent., and the rate rose gradually till it became 8 per cent., by which they lost large sums. Then the fact that they were selling their private estates becoming known must have prejudiced them, and the failure of the company brought down the value of their property, and made the realisation of their assets a hundredfold more difficult. He now left the case in their hands. They might be told that this was an issue in which millions depended. Like many other statements of his learned friend, it was absolutely inaccurate. There were no millions dependent on this issue. Not a shillingʼs worth of money depended on it. Not a farthing could be extracted but what had been extracted from Messrs. Gurney and Mr. Birkbeck. As far as they were concerned they were ruined men. The world could do no worse to them than it had done already. But there was an issue, an issue of another kind, of the deepest and most painful interest, in their hands, and that was the honour and happiness and peace of mind of these gentlemen and their families for the rest of their lives. He had not made, and he did not intend at the end of his address to make any appeal to their feelings, and he would make no attempt to rival or to imitate the peroration of his learned friend. He would not follow his learned friend in his references to Lucius Junius Brutus, and Virgil, and Marcellus, and the South Sea Bubble, and the expectation of this country and of America. His learned friend talked of their having the courage to convict the defendants. Now he ventured to say that there was not much courage in bearing down gentleman who were already borne down. The real courage would be to stand up between prejudice and its victims, to set at nought popular prejudice and its clamour, and to do right simply because it was right. If he were disposed to quote on this occasion he would quote from a greater than Virgil, and from a juster than Brutus, from Him who said, “Whatever ye would that men should do, do ye so even unto them.” He would ask the jury to judge these gentlemen as they would like to be judged themselves. He was sure they would do so, and he left the case with confidence in their hands. (Much applause from the gallery.)

The Lord Chief Justice—If that is repeated I will clear that part of the court. That practice of applauding is a practice that has grown up; it was not known in my younger days, and what I am not going to allow. It is converting a court of justice into an arena, and is very wrong. If it is done again I shall clear the gallery. I do not wonder that so fine a speech should call forth an emotion of the kind, but it must be manifested here.

Mr. Mellish then addressed the jury on behalf of Mr. Barclay. He said he had not to go into the general question whether the prospectus was fraudulent, or whether there was a conspiracy to defraud, for as far as the charge of conspiracy was concerned, he was perfectly satisfied with what the Solicitor-General had brought before them. Of course, if his learned friend showed that Messrs. Gurney and Mr. Birkbeck were innocent, and should be acquitted, Mr. Barclay must be acquitted also. The whole case as against Mr. Barclay turned on this—what was his intention when he became a director of this company, and invited others to joint it? Did he believe that the old firm was insolvent, and that the new one would be a rotten concern, or did he believe that the new company, subject of course to the ordinary risks which all banking companies ran, would be a beneficial company to the shareholders? When Mr. Barclay became a director of the company he was entirely unconnected in business with the old firm. He had been in business in his early days, and had made a fortune, but at the time that this company was formed the only business that he had was that of director of the Telegraph Construction and Maintenance Company. He lived in Essex, coming up to London from time to time. It was perfectly true that he was a brother-in-law of one, and a cousin of another of the members of the old firm, but did that prove that he was guilty of fraud? If there were a scheme of roguery the Messrs. Gurney and Mr. Birkbeck must have gone to Mr. Barclay and said, “We are going to act as rogues, will you join us?” Could any one conceive such an invitation being addressed to a person who could not benefit to the extent of a farthing by what was contemplated? That Mr. Barclay did not become a director till shortly before the new company was registered was clear from the evidence of Mr. Jones, and also from the letter of Mr. D. Gurney to Mr. J. H. Gurney, dated the 24th of June, 1865, where he spoke about the old partners seeking a fourth director. In that letter mention was made of a Baring or Sir John Hay as a possible director. Would such persons have been dreamt of in connexion with a scheme of fraud? The old firm clearly wished for a fourth independent person as a director, and as such Mr. Barclay accepted the post at the last moment. The minutes of the meeting of the 27th of July showed that Mr. Barclay had not seen the deeds up to that time. His name was not even sent there in connexion with them. If he became a director just before the issuing of the prospectus, he could not have examined the excepted accounts, so as to have learnt the exact state of affairs. There was not, indeed, an atom of evidence that he was even at the offices before the 8th of August, and, considering that he went away in the Great Eastern on the 14th of July, and did not return till the 5th of August, it seemed very improbable that he took any part in the arrangements connected with the bringing out of the company. He could only have learnt what he knew about the concern from communications with the directors, and the jury was asked to believe that those communications must have been such as to satisfy him that the concern was a rotten one. Was that at all probable? If the Messrs. Gurney were honourable men they must have believed that the old firm was not insolvent, and expressed that belief to Mr. Barclay; while if they were engaged in a fraudulent conspiracy they could hardly have told Mr. Barclay that in order to induce him to become a director. This prosecution was, in fact, one of the most extraordinary prosecutions that ever occurred. It involved this assumption, that the old directors, contemplating a fraud, invited his client, a man of the highest honour and standing, to join them in committing it. One of the first things Mr. Barclay did after consenting to become a director was to subscribe for 1,000 shares, and thus incur a liability for 50,000l. Was that consistent with the belief on his part that the concern was a rotten one? Would any man in Mr. Barclayʼs position risk his reputation and fortune, and the future of his wife and children, from affection for a cousin? If Mr. Barclay believed the concern to be rotten, why should he have taken 1,000 shares when there was no difficulty in getting the public to subscribe? Moreover, why should he have kept all his shares when the price went up to nine premium? Dr. Kenealy had suggested no hypothesis which could reconcile that with a knowledge of rottenness on the part of Mr. Barclay. His case against that gentleman rested almost entirely on his having covenanted with the other directors that there should be a third deed, and he said the recitals must have conveyed to him the real state of the case. The third deed was not executed till the 4th of September, and, like deeds generally, it was drawn in that dreadful style which begins with sentences that never end. (Laughter.) In the Court of Chancery and at common law men were held to have read everything that was contained in a deed which they signed; but such a rule could not be applied in a criminal prosecution. He did not deny that Mr. Barclay was acquainted with the substance of the third deed. Without understanding the effect of the first and second deeds it was impossible to understand the third. The substance of the first deed was that the assets were to be transferred to the new company, subject to the condition that that new company might reject any accounts to which it objected, and that the old company was to wind up the excepted accounts, and to be responsible for any sum by which the assets might be less than the liabilities. The second deed provided that as the assets were realised every farthing should be paid over to the new company, unless the new company assented to payment being postponed, in which case it was to take place within two months. It was totally incorrect to say, as had been said on the other side, that by those two deeds the assets were taken out of the control of the new company. The first deed not having specified any period within which the excepted accounts were to be wound up, the second provided that it should be done within three years and five months, and that was the only provision which could possibly be said to be detrimental to the new company as compared with the old. The substance of the arrangement having, no doubt, been explained to Mr. Barclay, he thought there should be an agreement that if any member of the old firm died or became bankrupt within the three years and five months the sum due out of his estate in respect of the suspense accounts, instead of being postponed, should become payable immediately. Mr. Jones explained that matter by saying that Mr. Barclay knew at the time that one of the partners in the Norwich Bank was likely to die before the three and a half years had expired. Hence the third deed, which not only had a useful object, but had become operative in favour of the new [company]. There was therefore, he contended, nothing in the third deed which could justly be considered inconsistent with the bona fides of Mr. Barclay. There had been a great deal of unfair playing on the part of the prosecution upon the word “insolvent.” His learned friend Dr. Kenealy said the old firm were insolvent at the time of the transfer, and must have known the fact. If it were meant that the assets embarked in the business were not equal to the liabilities that view was correct; nobody could have read the prospectus and the first deed without perceiving that such was the case. Surely it was absurd to say that a common and ordinary partnership was insolvent because the liabilities were more than the assets, if the parties individually were men of wealth, and able to make up the deficiency out of their private means. It was on that footing that this transfer was carried out. And they had it in evidence, an estimate in the handwriting of Mr. John Henry Gurney of the private property of the defendants, by which it was calculated that after paying the whole sum which was calculated to be due on the suspense and guarantee account there would be a balance of 670,000l., including the amount to be received for the goodwill. Dr. Kenealy questioned the accuracy of that estimate; but as regarded Mr. Barclay, no one could doubt that he would believe that the estimate was a fair and right one. If he did not believe it he would not have invested his money in the new company; and if he did believe it, where was the fraud? Mr. Barclay returned to this country on the 5th August. He went to the office, and became a witness to the execution of the two deeds. Then he was present at the meeting at which the resolution was carried that Mr. Slater was to request Mr. Jones to do what was necessary to answer the requirements of the Stock Exchange. There was no evidence that Mr. Barclay knew there were two deeds, or that one was purposely kept back. Thenceforth Mr. Barclay acted as one of the directors of the limited company. Various imputations had been cast on the directors as to their conduct; but there was no proof of anything that he had done or said that could constitute a charge against him. But on the 1st January he made a deposit of 90,000l. without security. Between the 1st January and the 2nd May 19,000l. had been drawn out. It was said by Mr. Howell that he had drawn out the remainder. But it turned out that he had become a partner in the Norwich Bank just before, and was under an obligation to pay into the Norwich Bank 150,000l., and he transferred this 71,000l. from his own name into that of the Norwich Bank. The money was still there, but it was in the name of the Norwich Bank. Knowing he had to pay this money he got it ready. He had 90,000l., the Norwich Bank was not ready to receive it, and until they were he deposited it with the new company, and no inference could be drawn from that, except that he had the fullest confidence in the limited company. He now came to explain the transactions with the Norwich Bank. The partners in that bank had an interest of one-fourth in Overend, Gurney, and Co. The goodwill of the Norwich Bank was put down at 300,000l., a sum which Dr. Kenealy seemed to think was a great exaggeration, but which Mr. Turquand and Mr. Young thought was a fair valuation. The prosecution had no right to make allegations of fraud, and offer no evidence upon them, but Dr. Kenealy had not hesitated to charge fraud against Mr. Barclay with reference to the Norwich deed without offering a single atom of evidence in support of the charge. Capital having been withdrawn from the Norwich Bank in order to meet the demands on the London firm of Overend, Gurney, and Co., it was necessary to put fresh capital into it, and Mr. Barclay put 150,000l. of his own money into it, other parties also bringing in capital, the whole capital of the bank being 635,000l. It was estimated that the goodwill of the Norwich Bank would produce 300,000l. The counsel for the prosecution ridiculed the idea that it was worth so much, and then they inconsistently charged Mr. Barclay with entering into an arrangement for his benefit with the Norwich Bank, whereby the limited company was prevented from receiving that 300,000l. The fact was that there was a suspense account, which was to last till 1870, and during that period an account was to be kept of the profits of the company, and after deducting certain salaries, and 5 per cent. interest on the capital brought in, the balance was to be placed to the credit of the old firm, with compound interest, and therefore the actual sum to be obtained by way of goodwill would depend on the actual profits in the four years succeeding the formation of the new company, instead of the four years preceding. The result would come to the limited company because it came to the members of the old firm. His learned friend said the profits would depend on what was shown in the books, and it was insinuated that Mr. Barclay, a partner with five other gentlemen, would alter the books so as to show no profit. That was one of the monstrous insinuations made in this case. He submitted that it was absolutely impossible, with these facts before them, to convict Mr. Barclay. His learned friend admitted that Messrs. Gurney and Birkbeck might have been guilty of negligence, but he denied that Mr. Barclay had even been guilty of negligence. He never sold a share; he did all he could for the benefit of the company; and he confidently looked for an acquittal.

Sir John Karslake then addressed the jury on behalf of Mr. Gordon. He was one of the new directors, and his case differed widely from that of the members of the old firm, though he did not for a moment wish to say that there was any case made out against the members of the old firm. If that adamantine and granitic man, Dr. Thom, had desired simply that justice should be done, it was open to him to exclude from the indictment the three defendants who were not members of the old firm, but Dr. Thom had been a barrister, and knew well the effect of his course of proceeding was to shut the mouths of the whole of the defendants, so that none of them might have the benefit of the explanations which might have been given by the others. One charge which his learned friend had brought against Mr. Gordon was in reference to the Ebbw Vale Railway. Not one word of evidence had been offered in support of the charge, but his learned friend had not had the grace to retract it. Dr. Thom came there with considerable animus against Mr. Gordon, whom he had known for a long time as chairman of the Oriental Bank Corporation, in which he (Dr. Thom) was a shareholder. He said that he was influenced in taking shares by his opinion of the Messrs. Gurney, and of Mr. Gordon. At an Oriental Bank meeting he made a proposal that Mr. Gordon should be removed from the office of chairman, well knowing, as he said, that it would not be carried, and it was a fact that until he offered his resignation, Mr. Gordon retained that office, which he held for sixteen years, with the general approval of the company. He (Sir J. Karslake) asked the jury to consider what possible motive his client could have had for becoming a director in a bank which he knew must come to grief? So far as money transactions were concerned, he had had no previous connexion with the old firm; and why should he have taken 200 shares in the bank if he knew that its position was such that he might be a serious loser, the actual result being that he had lost 9,000l.? The absurdity of his learned friend’s case was that the new company could not fail to be ruined, and yet that Mr. Gordon, knowingly, incurred a risk of losing 9,000l. to obtain his salary as a director. His learned friend compared the case to that of a mock auction. If a person who was engaged in such an auction, took the articles himself, or made himself liable for large losses on account of them, the cases would be analogous. Dr. Kenealy said that Mr. Gordon had been acting on behalf of the National Discount Company in the getting up this company; but Mr. Slater gave evidence which entirely upset that theory. As to the framing of the prospectus by Mr. Gordon, he cared nothing for what was said on the other side. His learned friend said a great deal about erasures in the original draft, but they did not at all affect the question. Mr. Gordon had put in “The company have been fortunate enough to secure,” and Mr. Gurney struck out that phrase, and substituted for it “The company have secured;” for the word “peculiar,” as applied to the old firm, was substituted “well-known,” also by Mr. Gurney; and such alterations were actually made the basis of a charge of conspiracy! At the end of this wicked draft was the following:—“Allusion might be made to the fact of the immediate enjoyment of a large and profitable business.” To have omitted such an allusion would in his (Sir J. Karslake’s) opinion have been madness, as the public always showed a decided preference for a going concern over a business that had to be formed. His learned friend said that if Mr. Gordon neglected to make the necessary inquiries, he was guilty on that account. He was astonished at such a declaration, which was quite contrary to the law on the subject. Supposing Mr. Gordon to have made no inquires, that would be a ground of acquittal, even if he were proved to be the sole author of the prospectus; but he fully believed, as he had a right to do, in the representations of the old firm, and he acted on the faith of them. He acted as a director at an early period, but under one of the articles of association he would necessarily cease to be a director at the end of year if he were not re-elected. He attended the meetings held in St. James’s-square, at which Mr. Jones was present; and it was at his (Mr. Gordonʼs) suggestion that it was determined to have an independent solicitor to assist in the preparation of the deeds, the gentleman called in being the solicitor of that Oriental Bank in which Mr. Gordon and Dr. Thom were both shareholders. The purpose for which the company was formed must now be clear to the jury. It was only the money dealing and bill brokering business that was to be transferred. That was stated in the prospectus, and an examination of the past showed that that business had been a most profitable one. Mr. Harding having stated the profit in ordinary years at 180,000l. or 190,000l. If such a business might not be described as a “profitable” one, what business could be so described? The whole burden of the indictment was that the business was worth nothing. In addition to the assets to be transferred there were 4,000,000l. of assets which were not to be, and never were transferred. Those assets were excepted, but the old partners became liable to the new company in respect of them, and guaranteed their solvency by means not only of the securities of the excepted accounts, but of all the private property they possessed. The new directors entered upon office with a full conviction that the assets would be sufficient, and where was the fraud of Mr. Gordon’s lending his name to the concern under such circumstances? He protested against the supposition that Mr. Gordon was negligent, his case being that he duly satisfied himself as to the sufficiency of the assets. Such arrangements could not be carried out without a variety of parchment documents, and hence the deeds of which so much had been said on the other side. As to the allegation that the deeds involved fraud, only one intending shareholder ever thought of examining even the first deed. When Mr. Jones went to Mr. Gordon with the two drafts, as ultimately prepared by Mr. Braithwaite, Mr. Gordon at once said that he need not explain them, that the matter was of course one of great importance, and that he should consult an independent solicitor, and that accounted for the second deed not being mentioned in the prospectus. If Dr. Thom had examined the first deed carefully he must have seen that there were exceptions which must require a second deed. In the first deed it was stated that certain accounts were to be excepted, and in one clause it was expressly stated that further deeds were to be executed if necessary. Mr. Gordon was charged with sinister motives because there was more than one deed, when, in fact, there was a complete answer to that in the first deed. As regarded these deeds his lordship had well pointed out the antagonism between Mr. Fooks and Mr. Braithwaite, the counsel concerned in their preparation, as a material fact. The scheme of the deeds, as already explained, was perfectly clear; the object was simple and proper, and no charge of conspiracy could be sustained on that basis. Mr. Gordon had no personal share either in placing one deed instead of two before the Stock Exchange, or in the entry of the five resolutions so often referred to in a separate minute-book. In criminal cases it was customary to point the evidence against a particular person, but as regarded the separate minute-book, Mr. Gordon was not even present when it was determined that it should be kept. There were many other meetings which he might call attention to at which Mr. Gordon was not present. Let the jury ask themselves what Mr. Gordon did that was fraudulent, or rather ask what interest he had in joining in a fraud. On the other hand, if they took this case, that he had investigated the accounts, and found that the firm had assets in hand of between ten and eleven millions, and accounts amounting to four millions, which, according to the evidence, were covered by the guarantee of the old firm—looking at it with the eyes of men who judged of the matter from what they knew at the time, and not from what they know now, he would ask where was the fraud or where even the imprudence? He asked them to separate in their minds what took place in July, 1865, from what took place afterwards. After all, this was a question not of indiscretion but of fraud; and he asked where was the evidence that Mr. Gordon had been guilty of fraud? On his behalf he appealed to them not for mercy but for justice, and he submitted that it would be unjust to give any other verdict than that of acquittal.

Mr. Giffard then addressed the jury on the part of Mr. Rennie. Mr. Rennie was a partner in the firm of Cavan, Lubbock, and Co. It was in evidence that that firm at one time was under advances from Overend and Gurney to the amount of upwards of 600,000l., of which 200,000l. was on promissory notes. Those notes were all met, and as to the remainder of the advance, which was on bills to the amount of nearly 500,000l., they were all taken up by the parties at the proper time. It was suggested that Mr. Rennie was induced to join in getting up the limited company because his firm had deposited 56,000l. with Overend, Gurney, and Co., and that he was afraid, unless the new company were formed, that that would not be recovered. But there was no evidence of this. Another motive suggested was that the limited company would give accommodation to Cavan, Lubboch, and Co.; but there was no evidence that they had ever granted to them a penny of accommodation. At the time of the examination before the Lord Mayor Mr. Rennie read a long printed statement entering into all the details, but the prosecution had not brought that statement before the jury, not had they attempted to impugn it in any way. Then it was in evidence that Mr. Peek had sued the defendants in Chancery, but the answers of the defendants were not brought before the court; and he was entitled to say that was because the prosecution had not discovered a flaw or a single inaccuracy in them. Now, what the jury were trying was whether the defendants did in fact conspire to defraud the shareholders. While Mr. Rennie believed at that time, and believed still, that the members of the old firm were men of honour, no one could doubt that it would have been well if they could have had the evidence of one or more of the directors. The first allegation was that the defendants conspired to shift the burden from their own shoulders to those of other people, heedless of the consequences, and determined only to save themselves at the expense of other people. Then, it was said the concoction of the deeds was of itself a proof that there was fraud. But he would submit that the evidence given respecting the deeds was a proof of the bona fides of the parties. Upon what hypothesis was Mr. Rennie and the other new directors to deal with Overend, Gurney, and Co.? He admitted that if Mr. Rennie had had infused into him the poisonous spirit which animated the mind of Mr. Howell, he would have strictly examined every book and every account. But he had no such feeling. He had confidence in the estimate which was put before him, and Mr. Turquand and Mr. Harding affirmed now that it was a fair and reasonable estimate. Mr. Rennie saw others like himself, independent gentlemen of fortune, putting their money into this concern, and he put his in also. Where were they to find the secret bond which bound Mr. Gibb, Mr. Barclay, Mr. Gordon, and Mr. Rennie to pledge their fortune and their honour to save the honour of Overend, Gurney, and Co.? The jury would say, under these circumstances, whether it was possible to surmise a fraudulent motive if they took away the unfounded accusations which had been made, and put the case coldly thus:—There was a deficit in the business of Overend, Gurney, and Co. (the partnership); Mr. Rennie had put before him a statement showing that there would be a surplus. Mr. Rennie had no motive which could induce him to imperil his fortune and his honour in a fraudulent transaction; and now when things had turned out badly was it to be said that he at that time knew the catastrophe that would happen? He ventured to say that that was absurd. If Mr. Rennie had not believed that the new speculation would be a successful one he would not have engaged in it; and when the jury looked at the evidence which was before them, and took into account that which was kept back, it was impossible for them to doubt that Mr. Rennie was not guilty of what was alleged against him. It was easy to be wise after the event; but he maintained that his client did that which any man of honour and prudence might have done under the circumstances. Surrounded by such traditions as the house of Overend and Gurney was, any man might have been glad to take part in the establishing of the limited company, taking care that the bankrupt estates were not inflicted upon it. He asked the jury, therefore, to say that Mr. Rennie was not guilty of the crime charged against him; and putting aside unproved accusations and violent epithets, he contended that there was not a particle of evidence that he was guilty of anything unworthy of a gentleman.

The speeches of counsel for the defence having thus terminated, at half-past three the court adjourned till ten o’clock this morning, when the Lord Chief Justice will commence his summing up.

THE OVEREND, GURNEY, AND CO. PROSECUTION.

Yesterday being the last day of the trial of the Overend and Gurney directors, the court was very much crowded, and great interest was manifested in the result.

The Lord Chief Justice having taken his seat at twenty minutes to eleven, at once proceeded to sum up the case. His lordship said—Gentlemen of the jury, it is very satisfactory to my mind, perplexed as it is by the difficulties which surround this case, to know that the question which I have to put before you is to be decided by gentlemen belonging to this great commercial community familiar with commercial and monetary transactions, conversant with accounts, and thoroughly versed in and acquainted with all the incidents of mercantile affairs. It would be presumptuous in me to suppose that in such a case I could afford you material assistance. At the same time, I feel it my duty to bring before you in a connected form the materials on which your judgment will be formed; and having done that, I shall leave you to draw your own conclusion, satisfied that the decision of so competent a body of persons will be one of justice to all parties concerned. My first duty will be to state to you the law on the subject. And, in the first place, let me draw your attention to the indictment upon which the defendants are put upon their trial. That indictment contains various counts, between some of which and others it is necessary to distinguish. The first six counts are framed upon a recent statue, the 24th and 25th of Victoria, ch. 96, sec. 84, which provides that “whosoever, being a director, manager, or public officer of any body corporate or public company, shall make, circulate, or publish, or concur in making, circulating, or publishing, any written statement or account of the same, knowing it to be false in any material particular, with intent to deceive or defraud any member, shareholder, or creditor of such body corporate or public company,” &c.—(the learned Judge here read the rest of the clause, which was an amplification of its term)—“shall be guilty of a misdemeanour.” After the counts framed upon that statue come counts for a conspiracy to publish a prospectus with intent to deceive and defraud. Those counts are counts to commit the statutory offence to which I have referred. With regard to these counts, it is material to the present case that one of the defendants, Mr. Barclay, cannot be convicted upon them; and if the cash had rested there, I should have directed his acquittal, because it is quite clear that he had nothing to do with the issue of the prospectus. But in reference to the other counts the case stands differently, because if you believe that Mr. Barclay was a party to the general conspiracy to defraud (of which the publication of the prospectus was the overt act), then each member of the conspiracy is responsible for the acts of the whole body. There are also some more general counts—one for publishing a prospectus with intent to excite the public mind to the behalf that the firm of Overend and Gurney was carrying on a prosperous business, and was in a sound and flourishing condition, with intent to induce certain persons to take share, and that Dr. Thom was so induced; and there are similar counts in respect to other parties. As to those counts, I must say that, with the exception of one or two persons to whom the counts individually relate, in my opinion these counts cannot be maintained. Dr. Thom and the other persons mentioned were not brought into contact with the defendants at all. They went into the open market, and bought their shares from this or that parson. But in any case these counts are not material, because it is certain that at least one person was induced to buy his shares directly, and upon these counts I need not say that evidence as to one person is enough. I have thought it necessary just to draw your attention to these secondary counts, though they can have no material influence on your ultimate decision. There is also a general count, that the defendants published a prospectus which they knew to be false, with intent to deceive and defraud; and there is a count charging the defendants with obtaining the money of Dr. Thom and other persons under false pretences. The last count in the indictment in general in its terms, and sets forth the particulars in which the prospectus is false and fraudulent, especially that in the purchase of the business of Overend and Gurney the defendants know that it was the business of a firm that was in debt and was unable to pay its debts. That contains the substance of the charge against the defendants. That charge extends over the numerous counts of the indictment, and repeated in various forms is really that stated by the learned counsel for the prosecution. The charge is this, that the business of Overend and Gurney being hopelessly insolvent and worthless, the defendants knowing that fact, conspired to induce persons to take shares in a new company, to which that business was transferred, with the view of defrauding and cheating persons taking and paying for the shares. That is the sum and substance of the charge, and if you believe that a conspiracy did exist, that this business was worthless, that the defendants knew it was worthless, and that having this knowledge they acted with the intent to defraud the intended shareholders, there can be no possible doubt what your verdict should be. This is not the less an offence because it is directed against society at large; because there may be no particular individuals against whom the machinations of the conspirators were directed. If a number of persons have conspired together to cheat any particular individual, there is no doubt that that is a criminal conspiracy. It is not the less so if the individuals to be caught and to be deceived were not immediately in the eye and contemplation of the conspirators. It is quite plain that any conspiracy to defraud such of the public as may be caught is a continuing conspiracy until it has attained to its completion. As soon as a particular individual is wronged by that conspiracy the conspiracy becomes in that case, if I may use the term, “individualised.” That conspiracy to deceive the general public becomes a conspiracy to defraud an individual. Therefore, if you have come to the conclusion that this charge is made out, you need not trouble yourselves about the numerous counts of the indictment. Now, gentlemen, having stated the law as I conceive it to be, I must take the opportunity to point out a distinction. We are not here to inquire into questions which might have been made available to the shareholders in a civil proceeding. It may be that there was some degree of misrepresentation, and yet nothing fraudulent. You must be satisfied, in order to convict the defendants of the offence, that these was a deliberate, guilty, decided attempt to defraud the public in this matter. Unless you are satisfied of that you cannot convict the defendants, and I tell you that more especially in consequence of one or two observations that fell from one or two members of the jury. You are to keep in view that in this case we are on the very confines of civil and criminal law, and we must take care that we do not overstep the line. A man may be liable upon a contract, because he has stated something which went beyond the strict line of propriety, and has concealed some fact. A man may honestly misrepresent—that is to say, he may state something to be true which he believed to be true, but which turns out to be false, and if he had entered into a civil contract he might be liable on a civil action. But that is not the case here. Here you must be satisfied that that which is alleged to have been misrepresentation was known by the defendants to be such, and you must be satisfied that, acting upon that knowledge, they had a deliberate intention to defraud, deceive, and cheat, in order to find them guilty of this offence. This case involves four distinct questions. In the first place, what was the state of the business of Overend and Gurney—was it the worthless and hopelessly insolvent business which, on the part of the prosecution, it has been represented to be? If it was in that condition, was that known to the defendants? If it was, did they misrepresent its condition to the public? And if so, what was their intent—was it thereby to deceive and defraud persons into taking worthless shares and paying for them with money which was to be appropriated to their own use? These are the four questions which you will have to consider, and I will take them in the order in which I have placed them. First, was the business at the time of the transfer a worthless business, as the prosecution has represented it to be? To determine that question it will be necessary to go somewhat back in the history of this mercantile establishment. That the house of Overend and Gurney had been doing a vast, I may say a gigantic, amount of business for a great many years, is a fact which is within the knowledge of every one of you. But it is not unimportant to turn to the figures, and to see the amount of money that was turned over by it. It appears that during the six and a half years which elapsed from 1859 to the 31st of July, 1865, both inclusive, the money turned over by this establishment amounted to the vast sum of 1,115 millions. From the years 1859 to 1864, both inclusive, omitting the last six months, the average amount of the business was 156½ millions per annum. The bills discounted from 1859 to 1864 amounted to 321,320,000l., being an average of 64,265,000l. a year. The profits of the period have been given me by Mr. Harding in a tabular form, as extracted from the books of the company, and it appears that the profits were as follows:—In 1851, 156,706l.; in 1852, 186,386l.; in 1853, 212,977l.; in 1854, 153,500l.; in 1855, 155,256l.; in 1856, 148,617l.; in 1857, 144,060l. The last year was notoriously an unfavourable year. In 1858 the amount was 293,000l.; in 1859, 442,074l.; and in 1860, 343,373l. It appears that these profits were divided into two branches, one being appropriated as the profits of the partners, the other carried to the reserve fund. In 1853 there were not profits divided, in consequence of some serious losses the firm had sustained by fraudulent metal warrants. In 1857, which was notoriously unfavourable year, the whole of the profits were carried to the reserve fund. Nevertheless, though there were no profits in these two years, the ultimate result is that in the course of the ten years there was an average profit of 220,000l. a year, and an average division among the partners of 146,000l. The next remarkable feature in this case is, that from this period down to the stoppage of the company’s business the earning power of the company’s business had never undergone the slightest diminution. From 1861 to 1865 no profits appear to have been divided. The reason for this is now well known. The fact is, that the firm had sustained grievous losses by engaging in the most insane and foolish speculations. From 1861, though the usual amount of business was done, yet no profits were divided, the capital of the firm having begun to be absorbed in the extravagant speculations of the firm; and about the middle of 1865 they found themselves in this state, that on an account of 15 millions, in order to balance the two sides—to make the assets correspond with the liabilities—it was necessary to set down an amount of 4,213,000l., which consisted of bad, or, at all events, doubtful debts. Not, indeed, that they were all believed to be hopelessly bad. On the contrary, it was believed that out of this sum of four millions at least one million might be recovered. But even so, there still stood on the books of the company a deficit of at least 3,000,000l. What was to be done under those circumstances? It is clear that a deficit of 3,000,000l. was neither more nor less than insolvency; and it is plain that at any moment an alarm in the public mind as to the position of Overend and Gurney, or any one of those crises which take place from time to time in commercial history, might cause a run and bring down this bank. At all events it is clear that the firm was insolvent. One of the liquidators, Mr. Harding, said he saw no reason why the old firm should not have gone on. But would it have been right for them to do so? I think most assuredly not. A business which is conducted with other people’s money, like the business of a bank, if it gets into such a position that there is a deficit which amounts to insolvency, ought at once to be brought to a close. A man who takes your money or mine without having the means of replacing it, if he knows that he is insolvent, commits a fraud. Therefore I think the firm was perfectly right in declining to go on under the circumstances. Mr. John Henry Gurney was perfectly right it declining—as I see from one of his letters he did decline—to continue the business further. But what was to be done? There is one alternative which Dr. Kenealy says they ought to have adopted. They ought, he says, to have declared themselves bankrupt, and to have paid their creditors as far as their large assets and private estates would go. I cannot help thinking, however, that we ought to make some allowance for men placed in these circumstances hesitating to adopt that alternative. The effect would undoubtedly have been to scatter this great business to the winds, and something must be allowed for men in the position of the Gurneys, with such a business and such a name, shrinking from bankruptcy. One cannot blame them for seeking another alternative. What, then, was to be done? If you are called upon to meet your creditors to-morrow, and are unable to do so, what is the course to be adopted under the circumstances? You may either sell the business, or you may do that which is most usually done—endeavour to obtain some new party or parties who will bring in capital to supply the existing deficit, which may have the effect of restoring the business to its full activity and power. Now nobody would deny that such a course is legitimate, if a man, in disposing of his business, is perfectly honest and open, and makes known the whole of the circumstances necessary to enable the person coming into the business to understand the exact state of affairs. But, on the other hand, if a person finds himself in that position, and is guilty of misrepresentation, he is to all intents and purposes guilty of fraud; and if a body of men join together to carry out such an iniquitous proceeding, they are guilty of conspiracy. You must, gentlemen, if you please, form your own judgment as to which of these two courses the defendants have adopted. Now, they made up their minds to dispose of the business, but at the same time to retain a material interest in it. They proposed to dispose of the business to a joint stock company, in which they intended to take a number of shares themselves. In what form and in what terms ought they to have proposed to invite others to join them in the new undertaking, so as to make the position of affairs intelligible to the persons with whom they were dealing? Suppose the case to be that of one, two, or three persons, and one or two persons with whom they wish to join. What would they say? “Here is a business of vast power, and capable of producing an enormous profit, but it is crippled by losses and is not at present in a position to go on. Upon an account of 15,000,000l. there is a present deficit of 4,000,000l., and an eventual deficit of 3,000,000l. We propose to sell that business and take shares in the new firm. As to the 3,000,000l., that is reduced by the partners’ private accounts by a million, leaving a deficit of 2,000,000l. We propose to you to ask 500,000l. for the transfer of the business, but there still will remain a deficit of 2,000,000l.” But then suppose the old partners say to you, “Here we are, men of large property, and good for 2,000,000l., and whatever deficiency exists we will make up with our own private property.” Owing to other claims upon that property it only realised 1,000,000l., leaving still a deficit of 1,000,000l., That, gentlemen, is the state of the figures. Supposing that to be the result, and the deficit to stand at 1,000,000l., what was the business worth when those persons were invited to come into it? To make it, if possible, more palatable, the old firm said, “We will not ask you for a farthing in cash. We will take 250,000l. in shares and the remainder in paper, to stand against the guarantee; but even then we do not ask you to give us these shares, but they shall be held against that same guarantee, so that if we fail in any of our engagements to you, you shall be at liberty to dispose of the shares to settle whatever your claim may be against us.” The result is this, that the business with its working and earning power is to be transferred to the new proprietors without their having to pay a farthing in money. Was that a worthless concern, or was it not? If the earning power of the business was unimpaired. If the profits, as distinct from the dead weight of the bad debts, continued to be nearly 200,000l. a year, and if nothing but the introduction of 1,000,000l. was required to keep the business going, the question is—was it worth while that the million should be introduced? Suppose, gentlemen, that any of you were large capitalists, and were disposed to employ your capital in any speculation that seemed reasonably promising; suppose you had been made acquainted with the state of the business of the old firm of the Gurneys; suppose you had been invited to bring 1,000,000l. into the concern, and had been told that it would not be necessary to pay a single shilling down, and that the firm was in difficulties arising from some special circumstances wholly unconnected with its legitimate business—I ask you, would you have considered such an offer worth consideration, or would you have treated it as a proposal made only for the purpose of cheating or fraud? And observe, that as the balance of indebtedness of the firm has been shown to have been 1,000,000l., so it was about that very sum which the shareholders were asked to introduce. The full amount, indeed, of the 15l. per share was 1,500,000l., but from that sum 250,000l. has to be deducted on account of the shares taken by the partners. Now (the learned judge went on to say), everything in this case depended upon figures. The learned counsel for the prosecution denied the accuracy of the figures on the other side. In the first place, he said that the estates of the old partners had only realised 700,000l. or 800,000l. To that amount must certainly be added the half million in round numbers realised before the fall of the new company, and paid to the guarantee account. That, therefore, would make something above a million, although it was perfectly true that the assets and private property had not realised by any means what was expected. But then they must take into account the circumstances under which the securities were sold. They were told that they were realised under most disadvantageous circumstances. The jury will know from their acquaintance with the commercial world whether it was true that property which had to be realised within the last two or three years had been realised under disadvantageous circumstances. Now, with regard to the business, Dr. Kenealy said it had collapsed. Undoubtedly it had collapsed. It collapsed at the end of seven months. But was that owing to what was called its inherent rottenness, or was it owing to external causes? It certainly did not do less business than it did before, for they found that in that period of seven months 166,000,000l. were turned over, and that bills were discounted to the amount of 56,000,000l., which would be at the rate of 75,000,000l. a year, an amount, he thought, not exceeded during any similar period of the prosperity of the firm. The earning power, therefore, being undiminished, he did not see how they could ascribe to the inherent rottenness of the concern the rapid termination of its business which took place in May, 1866. It was shown that the profits during those seven months did not exceed 4,000l.; but then it was said on the part of the defendants that that was capable of easy explanation; that they went on with their deposits increasing till the 13th of January, but that a combination of circumstances tended to work mischief to the concern; that the interest of money gradually increased from 3½ per cent. to 8; and inasmuch as a great portion of the business must be done by rediscounting, they had to pay more for rediscounting than they had themselves charged. But the great cause which led to their downfall was a rumour that some of the Gurneys were selling their private estates. This created an alarm, and many persons who had deposited money with them began to withdraw it, so that between the 13th of January and the 10th of May no less a sum than four millions was withdrawn, a sum which was sufficient to paralyse any establishment however sound it might be. The Lord Chief Justice then referred to the evidence on that point, to the apparent discrepancy that at first existed between Mr. Harding’s evidence, which was founded on the statistics book, and the other books, according to which it appeared that only a little more than two millions had been withdrawn, and to the removal of that apparent discrepancy by Mr. Harding, who in his subsequent examination had pointed out that the prosecution had not included the reduction of the balances by the customers who had general accounts with the firm. The learned counsel for the prosecution said he distrusted the book of statistics, and he made some remarks, not supported by evidence but founded only on his own unsupported surmise, and he would almost say unwarranted suspicion, that Mr. Boys, the secretary of the company, had concocted this book, and that then, during some communication he had with the official liquidator, he shuffled the book in among the others, so that thereafter the defendants might have the benefit of Mr. Harding’s testimony, that four millions had been withdrawn from them, and so to account for their stoppage. He must say that in his opinion this was going far beyond the limit to which those who represented the prosecution had a right to go. If there had been any evidence to show anything of the kind well and good, but there was no evidence. Then with regard to the accounts of profits, it was very true that they were not brought out perhaps in the precise form in which the jury, as commercial men, might think they ought to have been, and if that had reference only to a recent period it would have borne perhaps a suspicious aspect. But they were not now considering whether the old firm kept their becks with perfect accuracy—that was not the question. These accounts of profits were of old date, going back as far as the year 1850 and 1851, and therefore in whatever form they appeared they could not doubt that the entries were genuine, and a true representation of the amounts carried to the account of profits at the time, and of the amounts divided between the partners according to their respective shares. But even supposing that they should think that these accounts of profits appearing in the books were not altogether satisfactory, yet could they doubt that upon a business of that magnitude the profits must have been very large, supposing that all the transactions had been confined to the proper business of the company? Mr. Harding told them that in his judgment the profits to be made from such a business might be fairly estimated at from 180,000l. to 100,000l. a year. At all events, the profits would be very large, and the jury would judge for themselves whether, if this business were capable of earning so much profit, the terms of the bargain for its transfer were fraudulent, or were such as might fairly be required by persons who desired to dispose of the business. Then it was said, “Your estimate of the property of the partners is altogether inaccurate.” Here again they must depend very much on what Mr. Hardy told them. The counsel for the prosecution said, “Don’t trouble me with estimates, don’t talk to me about calculations, I look only to the broad facts, and to the positive results. Here is an account showing a large deficit. It is an estimate of the private property of the firm, and it amounts to upwards of a million, but nothing of the kind has been realised. Don’t talk to me of the profits of the business that was to be done; it has all gone to ruin.” Now, it was not a question of what these things were actually worth, or what they might have been proved to be worth. The question was what they honestly believed at the time to be the worth of this property. If they were to judge, as the learned counsel wished them, simply by the light of events that had taken place since, that would very likely lead them to a conclusion which a more accurate analysis would show to be unfounded. They must see what those assets were honestly worth at the time that this transaction was entered into. They knew from what had transpired in the progress of this case that as between the old firm and those who were to come in as new directors, and who in fact were to be the representatives of the new shareholders, that calculations of this kind were gone into. A paper had been found in the handwriting of Mr. John Henry Gurney covered with figures, in which he estimated the private property of the partners at 1,658,000l., and the premises in Lombard-street at 40,000l., making altogether 1,698,000l., or 1,700,000l. in round figures. Then there was a sum in the Norwich Bank standing to the credit of the old firm, and which they were equally willing to give up, 590,281l. They had therefore altogether, in round figures, a sum of 2,300,000l. The jury would judge whether that was an honest estimate. That it formed the basis of the calculations which were gone into between the old firm and the new directors could not be doubted. The great disadvantage under which they laboured at the present moment was that those who alone could tell them what actually took place, what calculations were made, and what figures were gone into, could not open their mouths to give them evidence upon that which was all important for everybody to know. And here he must say that while he did not for a single moment question or impugn the motives of the prosecutor in this case, or of those who were assisting him, he thought it most unfortunate that in this case the new directors had been mixed up in the same prosecution with the old. He knew of no case which had produced on his mind such an impression upon a matter which had long been growing up, as his firm conviction that our system which committed the prosecution of offenses against the public to private prosecutors, a system which differed from that of every other European nation, was based upon a false principle, and that a public prosecutor was one of the necessities for the due and full administration of justice. If there had been a public prosecutor here he would undertake to say that he would not have put these three gentlemen upon their trial; but that he would have had recourse to them, if called upon to prosecute the members of the old firm—he would have called on these new directors to make their statements, and if in those statements he had found matter on which, in his judgment, a prosecution should go on against the members of the old firm, he would then have availed himself of their evidence; but if their statements had satisfied him that there was no ground for the prosecution, he would have abandoned it, or at all events, he would have left them free to call before the jury those witnesses who could have thrown light on this important part of the case. But as they were told by the Solicitor-General, inasmuch as the course taken by the prosecution would shut the mouths of those parties, and prevented the other defendants from having the advantage of their evidence, they were bound in common justice to see what was the conduct of these three gentlemen who thus entered into this enterprise. Did they suppose that men of business, men of fortune, men of commercial position would join themselves to a company of this kind, in which they were to embark large sums without going into mere calculations to see how far the terms proposed to them by the old partners were such as they could, as prudent men, entertain? Besides that, could they suppose that these men took that number of shares which they knew they did take, bringing themselves under large liabilities, without going into calculations? But what was still more startling was this. At a time when they were called upon to answer what was said to be a delinquency in having induced a mass of shareholders to take up shares on a representation that this was a sound company, what would the jury have expected men under such circumstances to do? Why, they would say, “Don’t blame us, we were the victims of the same delusion of which you are unfortunately feeling the consequences; we were taken in by the old firm. They told us that their assets were worth so much, and it turns out that that was delusive.” They now said, as far as they could say, that was by their counsel, “We do not complain of the members of the old firm; we believe that they acted in a spirit of fairness and honour. We do not deny that they disclosed every thing to us; we may have acted foolishly and imprudently, we may have involved others in the common loss; but we cannot throw the blame on the members of the old firm, because we cannot impugn the honesty of their calculation or the honour of their proceedings.” That being so, it was for the jury to say whether upon the whole of these facts there was sufficient to satisfy them that this concern was at the time that the transfer took place that worthless thing which the prosecution seemed to say it was. So much, then, for the first and most important part of the case. He passed on now to the second, which was whether the defendants represented this business as a second and profitable business when they knew it was otherwise. As he had before said, it was not because the defendants might have taken a very sanguine view of their affairs that they were to be visited with a criminal prosecution. The jury must be satisfied that the defendants knew that this concern was hopeless, and that knowing that they induced the public to take shares. He did not mean to say that the thing should be absolutely valueless; it would be sufficient if the value were so disproportionate to the amount set upon it that no man in his senses, if he had known all the circumstances, would have taken shares, and that the defendants knowing that, entered into a conspiracy to induce the public to take shares. Having dealt with the two first parts of the question, he came to what might be called the overt acts of this alleged conspiracy. The first and foremost of them was the publication of the prospectus. It was alleged that the prospectus was fraudulent in several particulars; and, first, in that it stated that it was not intended to call up more than 15l. a share. Now, the allegation upon that point would, as it struck him, materially depend on whether the jury believed that there was a deliberate conspiracy to defraud. If the parties believed that the undertaking was likely to be a successful one, then the probability was that, inasmuch as a payment of 15l. a share would realise, independent of the shares retained by the old firm, 1,250,000l., they did not intend to raise more than 15l. a share. If on the other hand the jury believed in the existence of a conspiracy, and that the defendants intended to get all the money on these shares to the extent of 50l. a share, and apply it to their own purposes, then it was part and parcel of the conspiracy. Then in the second place it was alleged that the prospectus was fraudulent in that it stated that the vendors would guarantee the purchasers against all loss. No doubt they did guarantee in point of law, but it was said that that guarantee was worth nothing in point of fact. That question would depend on what the defendants believed their private estates were worth when they undertook the guarantee. Then the prospectus went on to say that Mr. J. H. Gurney and Mr. Robert Birkbeck would retain a large pecuniary interest in the concern. He did not think much importance was to be attached to that. Two points of the prospectus still remained to which he had to call their attention. In the first place, what was the effect of the whole of this prospectus, including that part which spoke of the articles of association and of the deeds of the company? Would it produce an effect on the minds of those who should read it, that the concern was substantial and sound, in which persons might embark their capital with a fair and reasonable expectation of success? Now as to whether the prospectus had that effect they must judge partly from its contents and partly from the general evidence in the case, and he could not help thinking that looking at the fact that 500,000l. was said to be all that was to be paid for the business, and that there was a prospect of a large remuneration, the prospects certainly did appear to represent it as a sound concern. It was complete mistake to say that it made any representation as to the assets of the company so far as the 4,000,000l. of bad debts was concerned. They were told again and again that those debts were represented as the assets of the company. They were nowhere represented as anything of the kind, certainly not in the prospectus, certainly not in the deeds. On the contrary, the whole arrangement between the old firm and the new directors proceeded on the assumption that of these four millions only a limited proportion could be realised. He should say that there was a marked difference between this prospectus and almost every other prospectus that had ever formed the foundation of proceedings at law whether civil or criminal. Generally there was some misrepresentation or some material concealment which vitiated the whole of the statement—statements of assets which did not exist, and liabilities concealed, of anticipated returns which were all delusive und mere moonshine, of shares having been taken when in point of fact the number actually taken fell very short of that which was stated. And in many cases these misrepresentations had been the subject of legal proceedings not of a civil but of a criminal character. But here was this remarkable thing, that they did not import into the prospectus or into the representations made by the directors, to the proposed shareholders anything beyond that which the prospectus and the documents legitimately carried. At the same time, inasmuch as looking at this prospectus it was difficult to arrive at any other conclusion than that the directors intended to convey to the public that this was a concern in which if shares were taken there was the probability of a remunerative return, if the jury were of opinion that that was delusive, the defendants were answerable for it. It was said the prospectus was all delusive, and several circumstances were referred to, upon which the learned counsel for the prosecution dwelt at considerable length. The first was the meeting which took place in St. James’s-square. He could not help saying it would have been better if all that part of the case had been omitted. Then it was said, “Oh, here is a proof of fraud. Mr. Gordon drew out the prospectus in such glowing and exaggerated terms, that even before it was submitted to the directors somebody thought it necessary to modify many of the phrases, and, after all, the directors adopted a still more modest statement.” And it was suggested that the directors were prepared to go any lengths, but were deterred by fear of the law, and influenced by the necessity of keeping within the bounds of the law. Now he must say, having had a great deal to do with the administration of criminal justice, that the suggestions were not in the spirit that ought to animate those who conducted public prosecutions. He should have been disposed to draw exactly opposite inference, that when they found a body of men sitting down to determine in what way an undertaking which they proposed to bring out, that if they found them cutting down exuberance and reducing their statements to moderate and fair propositions, so far from believing that they had been actuated by criminal intentions, he should believe the contrary. He now came to the second ground on which the conduct of the defendants was impugned, namely, that the prospectus contained reference only to one of the two deeds by which the arrangement between the old firm and the new was to be settled. And undoubtedly it was true that the prospectus did refer to only one deed. Well, he thought it was equally true that to enable anybody to understand the exact nature of this undertaking, and the terms upon which the new owners were to be introduced into the concern, it was necessary that it should be made known to them that there were two deeds. Mr. Jones had given evidence on that subject, and they would weigh that evidence well and judge for themselves how far they could implicitly rely upon it. His account was this—“It was arranged that to the terms of the transfer should be comprised in a deed. I went to Mr. Braithwaite, the conveyancer, who thought it would be better that there should be two deeds. I did not think it right to interfere, and accordingly I gave instructions for two.” The drafts of the two documents were submitted to the new directors in the first instance, and upon the suggestion of Mr. Gordon and Mr. Rennie—to the effect that, as they were in effect the representatives of the shareholders, their interests might be antagonistic to the old partners—it was decided that the solicitors of Mr. Gordon should be consulted, and they employed their own conveyancing counsel, Mr. Fooks, to examine the deed. When Mr. Fooks looked at it he was not satisfied, but suggested a great many alterations in the interests of his clients, and there were consultations between the conveyancing counsel on either side, in which much time was consumed. It also appeared that a general election was pending; that Mr. Fooks went out of town for the purpose of a canvass; that the brokers had declared that the prospectus must be out by the 12th of July; that a meeting was called between Mr. Braithwaite and Mr. Fooks on the 11th, and that, after much discussion, the terms of the first deed were settled. The second deed remained. It was discussed again and again. The draft was cut about very much, as was evident from its appearance in court; but on the 25th of July the difficulties had been overcome, and on that day the draft was returned as finally settled with the assent of the two managers. On the 8th of August, or shortly before, application having been made by the brokers of the new company to the Stock Exchange for a settlement of the shares, the Stock Exchange, through its secretary, said the company must send certain documents, and amongst others the deed by which the interest of the old firm was transferred to the new company. The documents were sent on the 12th of August, and though at that time there were undoubtedly two deeds in existence, only one was sent. Mr. Jones said in his evidence that, inasmuch as only one deed was referred to in the prospectus, and that deed was the essential one as respected the transfer to the new company, he, acting on his own judgment, furnished only that deed. The learned counsel for the prosecution asked for the draft of the deed as finally settled, and he saw, when it was produced, that it purported to have been signed by the conveyancing counsel on the 11th of July, instead of bearing date the 27th of July, which was the true date, and Mr. Jones had told them that it was ante-dated for the sake of uniformity, and simply as a matter of business convenience. Now, though he did not feel inclined to disbelieve for a moment what Mr. Jones said, still it was a very unpleasant circumstance that such a material part of the transfer of the business should have been conveyed in a second deed to which no reference was made in the prospectus; that, although it had been executed for some days, it was not sent to the committee of the Stock Exchange, in answer to their requirements of all the necessary documents—

The Solicitor-General drew attention (in reference to the antedating) to the fact that there was an alteration by Mr. Fooks in the draft of the deed, the date of that alteration being the 18th of July.

The Lord Chief Justice said that was true. It had escaped his memory, and it showed no doubt that on that day the draft had been approved by Mr. Fooks. The question was, had the directors anything to do with the non-sending of the second deed. There were two witnesses on that point—Mr. Jones and Mr. Slater. Mr. Slater, the share secretary, said that the directors passed a resolution directing that he should send to the Stock Exchange what it required. He had, he said, no instructions to keep back anything, or to apply to the solicitor for one deed rather than another, the terms of the resolution being that he was to ask for such documents as would satisfy the requirements of the Stock Exchange. It was impossible not to feel that the withholding of the second deed was an unfortunate circumstance. The prospectus only alluded to one deed, but the true nature and effect of the transaction could not be learnt from a single deed, and he could not help thinking that the shareholders who were invited to join in that undertaking ought to have known that there was a second deed, and that the Stock Exchange, which exercised a wholesome and salutary influence over the formation of companies, through its promise of withholding a settlement if its rules had not been complied with, ought also to have known it. He could not help thinking that the public should take warning from this not to trust too much to others. It was impossible to look at the first deed carefully, and not see that something more was required to carry out what was contemplated. But the Stock Exchange passed the matter, and there it remained. He could not help thinking that the shareholders ought in some way or other to have been apprised what was the real nature of the arrangement between the old firm and the new company. Not that he believed that as regarded the great mass of the shareholders that would have made the slightest difference. It was all very well for men when they found that they had embarked in a ruinous enterprise to turn round and say, “O, dear me, if I had been told that there was a second deed, I should have gone and looked at it, and then I should have seen, not only that there was a deficiency of assets, but that the assets were to remain for three years and a half unsatisfied!” but when he found that after the issuing of such a prospectus, the number of shares applied for was upwards of 200,000, while only 83,000 could be allotted, he was very much inclined to think that it was not the deed or the terms of the transfer to which people looked, when making up their minds as to whether they should take shares or not. Mr. Peek, indeed, spoke on that point with admirable candour. When he asked him whether, if he had known that there was a second deed, he would have insisted on seeing it before asking for shares, he replied with perfect candour, “I donʼt think I should.” The applications for shares depended, he (the Lord Chief Justice) thought, upon the fact that three or four gentlemen of commercial wealth and standing in the commercial world were willing to embark their fortunes in the new company. This fact, combined with the names and reputation of the Messrs. Gurney, led the unthinking multitude without hesitation to invest in a concern which almost everybody at that time believed would turn out a profitable one. But that did not do away with the fact that an individual who might have been disposed to take a sensible and sound view of the circumstances of the case before he joined the new company should have had full opportunity of learning the precise state of affairs before he embarked his money. It was a wrong to such an individual if the information were withheld. That practically it was withheld there could be no doubt. There was nothing on the face of the prospectus, there was nothing on the face of the first deed, to apprise the shareholders that there was a deficit of large amount, and that with respect to it they must trust to the private fortunes of the old partners. He must say that he thought that if that had been known it would have made no difference. At that time the Messrs. Gurney stood in a high position in the commercial world, it was known that they were men of large property, and if it had been stated that there was a deficiency of one million, or even of two millions, but that the Messrs. Gurney had undertaken to guarantee the whole amount, persons would probably not have hesitated to embark their money. This reticence in a matter in which the defendants ought to have been outspoken might have arisen from a feeling that it was not desirable to tell all the circumstances of the arrangement, lest that should lead timid and cautious persons to withhold their contributions from a concern which must in the end turn out to be successful. There might, in that case, have been good ground for a civil action; but if there were no intention to cheat and defraud, the keeping back of the second deed would not amount to a conspiracy. Having now drawn attention to the three first of the four questions involved in the case—namely, first, what was the state of the affairs of the old firm at the time of the transfer? secondly, whether, supposing their affairs to have been desperate, and the concern worthless at the time of the transfer, what was present to the minds of the defendants? and, thirdly, whether there was any misrepresentation or concealment by them of the true state of affairs? He now came to the fourth question—supposing there were any misrepresentation by the old firm, and the new directors, what was their intention in making it? For he had more than once laid down in that case, intention was everything. The guilty mind, the malus animus, as it was called by lawyers, was essential to constitute the alleged crime in the eyes of the law. Simple misrepresentation, and that aided in the defrauding of the parties injured, the fair and legitimate inference was that the intention was that the act done should carry with it the consequences that ensued. But when it was doubtful whether the act was in itself criminal or not, and the intention became doubtful also, then it was most important to look and see what motives could have operated upon the minds of the parties who were charged with having done the unlawful act for an unlawful purpose. Now there was an obvious distinction which had struck everybody, the learned counsel for the prosecution as well as others, between the two classes of defendants. With regard to Mr. Gordon, Mr. Barclay, Mr. Rennie, and, he might add, Mr. Gibb, who was dead, it was obvious that, if there was any fraud in this case, they were as much sinned against as sinning, as much sinned against as any of the other shareholders who embarked their capital in the concern. The jury were asked by the prosecution to believe that four gentlemen, who were wholly unconnected in point of interest with the old firm, for the purpose of putting up that firm, and at the sacrifice in one case of 50,000l., in another of 25,000l., and in a third of 10,000l., embarked in what they knew to be a fraudulent scheme. The question was, what motive could they have for doing so? With regard to Mr. Gordon no motive whatever was suggested. With regard to Mr. Rennie, it was said that his firm had large transactions with Overend and Gurney, and that it would be more or less of a benefit to it if Mr. Rennie joined the direction. But it turned out that thought large sums of money had been received by Overend and Gurney, yet every shilling of that had been paid. Mr. Gordon, as he had said, had no interest whatever; and it might not be unimportant for the jury to consider what Mr. Gordon’s real position was. He was the chairman of the Oriental Bank, a concern to which Dr. Thom himself gave the highest possible character. He was a man of position and of wealth; and could they suppose that he, having no earthly motive to compromise, and to run the risk of sacrificing not only the 10,000l. for which he became liable, but to compromise, what was of more value, his name and his position, and that for this purpose he lent himself to a positive fraud? Then with regard to Mr. Barclay and Mr. Gibb, who were men fully conversant with business, did they suppose that they would be led to take 1,000 shares each, and make themselves liable for 50,000l. each, because they were connections of the Messrs. Gurney?

Mr. Mellish—My lord, Mr. Gibb was not connection of the Messrs. Gurney.

The Lord Chief Justice said he was much obliged to Mr. Mellish for this correction. Here, then, they had Mr. Gibb, who was no connection of the Messrs. Gurney, accepting these proposals, according to the prosecution, with a full knowledge of all that he incurred, because Mr. Gibb was a party to the deed, and making himself liable, not only for the large sum of 50,000l., but running the chance—almost the certainty—of the transaction at last appearing in its true character of fraud and cheating the public. Mr. Barclay was said to be a connection of the Gurneys; but so far as his experience had gone, he had not seen such family devotion as would induce a man to invest 50,000l. in what he knew to be a worthless concern, in order to benefit a brother-in-law, and to risk not only his money, but that which was more dear to him than money, his honour and his character, for that purpose. But then it was put forward that two of the directors were to get 5,000l. a year. But if the concern were really so worthless as it was represented that would soon come to an end, and in any case the directors were subject to removal by the shareholders at their first meeting. Then it was put to them as a fact, and a not unimportant fact, that these four directors kept their shares to the very last, that they had lost every farthing, that two of them had lost 40,000l. on their shares. Was that compatible with the notion that those men were aware that this was a rotten concern, and certain to issue in failure? If, as was common with public companies, they found men taking steps to rig the market to send up the shares, and to get out of it themselves as soon as they could, then they would naturally contend that there must be fraud at the bottom. But the opposite facts would lead them to a different conclusion. If they saw men embarking large sums of money, and periling besides their reputation and their honour, while there was nothing that they could get by it—when they might have got out of their difficulties by getting rid of their shares, and that they did not do so, and when they found that one of them in addition had 90,000l. in hard money for two months in the books of the company—if, looking at all these facts, they could not come to the conclusion that these men intended to enter into a scheme which they knew was based on fraud, and intended to carry it out to a fraudulent conclusion, they world express their opinion in their verdict. Now, what motive had Mr. Henry Edmund Gurney, Mr. Birkbeck, and Mr. John Henry Gurney—what motive could these gentlemen have had in doing what they did? They would observe that the defendants gave up all interest in the concern except that which was attached to the shares they held; that they gave up what they had standing to their names in their private ledger, and all claim to the house; that they pledged the whole of their fortunes, estates, and personal property against any deficit which might arise. They were to have for this 500,000l., of which they never received a shilling. As he had already pointed out, 250,000l. was to form part of the guarantee, and the other 250,000l. was to be taken as shares, which were to be held by the new company in case the property held by them was not sufficient to cover the guarantee, so that they had immediately no earthly benefit except that which should be contingent upon the success of the company. Mr. John Henry Gurney and Mr. Birkbeck were to get 5,000l. a year as managing direction for five years. Well, that might be some motive, but if the company was such as it was represented by the prosecution, it must have come to a standstill and breakdown, and there would be an end of the 5,000l. a year. It was said by the counsel for the prosecution that the Gurneys were already bankrupts, and that they therefore merely put off the evil day by establishing the new company, and that they had the advantage of the chances which might arise in the chapter of accidents. But then again, any advantage which they could secure would only be upon the hypothesis of the company going on, and what became of it if the company was rotten? The moment the company fell the Gurneys must have been involved in ruin, and what advantage would they get by putting off the evil day for a few months during which the bubble, if bubble it was, continued to exist? If they were of opinion that this was a bubble, and that, anxious to delay their own downfall for a time, the defendants held out prospects which they knew could not be realised, and invited persons to come into the business when they knew from the nature of things the company could not go on, they would have to find a verdict against the defendants; but before doing so they must be satisfied as to the intention on the part of the defendants. But if they thought that the defendants entertained an honest though a mistaken view in common with the other directors who were induced to enter into the new company, that all that was necessary was to get rid of that portion of its affairs which had been the source of embarassment; that if new blood, as it were, were infused into it, it would flourish—though they might think the defendants were rash, that was not the question, but they must be satisfied that there was an intention to defraud. They would have to say what was the impression upon the minds of those who proposed to form the new company—what was the state of their belief as to the probability of success. In the first place, he thought they must ask themselves what was the earning power, what were the profits, was that earning power continued to the last, and whether, on the whole, they were of opinion that the business, if relieved from the dead weight of the accumulated bad debts, was a business worth buying. They must say whether, at the time of the transfer, the defendants had the honest and reasonable belief that the business was worth the transferring—or, rather, if that was their honest belief—for though the reasonableness of it was also an element in the case, it was not the most important one. Did the defendants honestly believe that it was an enterprise in which, though the ship had become stranded for the moment, she could be get off again, and that, if relieved of the lumber and dead weight that oppressed her, she would again float upon the sea of commercial prosperity and success? If they entertained that honest belief, though it may have turned out to be fallacious, it was not to be concluded on that account that they contemplated the fraud attributed to them. After all, in deciding upon their guilt, the question again arose—what was their motive? Was it to induce the shareholders to join them in an enterprise which they believed would be for the benefit of all; or did they, for their own sinister and personal ends, induce them to embark their capital in a concern which they knew must fail? This was what they would have to look at—Did they suppose their design was to embark in a gigantic enterprise of fraud, which was to bring ruin and misery upon hundreds of families? You have been told—said the Lord Chief Justice in continuation—that your verdict is to effect great things—that the commercial world requires to be purified and regenerated. Gentlemen, you are not to be influenced by any such considerations. Independently of your verdict, it may be hoped that this memorable event—the downfall of this company, and the presence at the bar of this criminal court of men who once stood so high—cannot be without its salutary influence. We have been told that the commercial world is not animated by those lofty principles of honour—by those safe and sound principles of practical prudence—by which our fathers established the great commerce of the country, and made the name of the British merchant respected to the utmost ends of the world. We have been told that there has been established a spirit of reckless speculation and commercial gambling, and that the name of the British merchant dose not stand so high in the estimation of men as it did. If it be so, I trust that this memorable example will not be without its warning on those who are growing up around us. Here we have an establishment doing a business of an almost unequalled magnitude. The names of those who belong to it are known throughout the world as those of men of vast wealth and high commercial position. We have seen them fallen from their high estate. And why? Because they turned from the state and legitimate path of that commercial department to which they belonged. They went astray after vain and delusive projects. They embarked their capital, which they should have devoted to their own particular business, in wild speculations and rash enterprise. We have seen them, in consequence, fallen into absolute ruin. Their world-wide reputation is destroyed; their vast fortunes are scattered to the wind; their reputation is imperilled and tarnished; and, at last, we have seen them at the bar of this court as defendants on a charge of conspiracy and fraud. But it is not only the commercial world upon whom, as I hope, the lesson will not be lost. I trust it may not be without its influence upon the rest of society. There can be no doubt—any one who looks around him cannot fail to perceive—that a spirit of speculation and gambling has taken hold of the minds of large classes of the population. Men who were wont to be satisfied with moderate gains and safe investments seen now to be animated by a spirit of greed after gain which makes them ready to embark their fortunes, perhaps the result of a long life of toil and thrift, in the vain hope of realising immense returns by premiums upon shares, and of making more than safe or ordinary profits. We see that continually, and I hope this case will teach those who are ready to follow the ignis fatuus of such delusions that extraordinary profits cannot be sought without extraordinary risks; that it is unsafe to trust to names, however high they may stand; that it is dangerous to embark in enterprises of which they cannot comprehend the scope, and in the management of which it is impossible for them to have any share; and that by so doing, in the vain pursuit of great wealth; and that by so doing, in the vain pursuit of great wealth, they will too probably achieve disastrous ruin. If, I say, this memorable case shall have the salutary effect of checking the disposition to speculation which seems to pervade all classes, and which has led in this instance to high and illustrious names being soiled and tarnished—if this example shall be laid to heart by the world, and shall prevent men from engaging themselves and their fortunes in doubtful and disputable transactions—so much the better. I shall rejoice if such is the result. But that is altogether beside the question which you, gentlemen, have to consider. You have to say whether you believe that these gentlemen sold a business which they knew to be worthless. If not, gentlemen, the whole case falls to the ground. If you think it was worthless, you have to ask yourselves, did they believe it to be so, and did they, for purposes of fraud, induce other persons to embark their money in the concern? If they did, they are guilty; if they did not, they are not guilty. If you cannot see your way to the conclusion that their designs were fraudulent, then, although you may think that there were parts of the transaction which might well have assumed a different character, yet you will have the satisfaction of being able to acquit them; so that to that social, or at all events commercial, degradation, into which they have fallen there will not be superadded the painful consequences which must follow their conviction. At the same time, if you are of opinion, upon a full consideration of the evidence, that the case is made out, no consideration of compassion or pity ought to stand between the defendants and the duty which must rest upon your consciences as respects the verdict which you have to give. Gentlemen, I thank you for the great attention which you have exhibited throughout the whole of this case. Whatever may be the result of this trial, I take it upon myself to thank you on behalf of the public, and to say that no 12 men ever gave a more undivided, unbroken, and assiduous attention to a case, or even manifested a more anxious desire faithfully and honestly to discharge a public duty. (A spontaneous burst of applause followed the conclusion of this summing up.)

The jury retired at three minutes after 2, and returned into court at a quarter past 2. After they had ranged themselves in front of the bench.

The Associate (amid profound silence and breathless interest) said—Do you find the defendants guilty or not guilty?

The Foreman—Not Guilty.

A loud, prolonged, and apparently almost universal burst of cheers, accompanied by a vigorous waving of hats followed this announcement. When the manifestation of feeling had subsided,

The Lord Chief Justice, addressing himself to the crowd in the body of the court, said—That is very wrong; I ought to commit some of you.

Dr. Kenealy then applied for the costs of the prosecution, basing his application on the 24th and 25th Vic., under which the indictment was framed.

The Lord Chief Justice—Dr. Kenealy, if you had confined the prosecution to the three original members of the firm, although I entirely and unhesitatingly concur in the propriety of the verdict which the jury have just returned, yet, believing that this was a case for inquiry, as against them, and believing also that Dr. Thom was actuated by perfectly honest motives in instituting these proceedings, I should not have hesitated to allow the costs. But, inasmuch as in my opinion and judgment, the uniting of the other defendants in the same indictment and proceeding against them in the same prosecution was altogether unjustifiable, I cannot allow costs.

Dr. Kenealy—I hope your lordship does not include me in those remarks. I had nothing whatever to do with the matter.

The Lord Chief Justice—Of course I am quite aware of that; but I must say, that in the whole course of my experience I never heard of a prosecution which, as regards these three defendants, was less warranted, at all events, the including them in the same indictment, whereby their mouths were shut. I think, therefore, I ought not to allow the costs. His lordship added, a few seconds after—I am reminded by Mr. Davis (the associate), that I could not have allowed costs if I had wished to do so, in consequence of the case having been removed by certiorari.

The defendants then retired from the court, and as they successively made their appearance outside they were all greeted with hearty and reiterated cheers, which the seemed fully to appreciate.

In terminating the report of this long and important trial, it is but justice to acknowledge the courtesy and attention of Mr. Davis, the associate, and Mr. Wilson, the usher of the court, in providing, as far as possible, for the proper accommodation of the press.

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