Rex v Asner

• Jurisdiction: South Africa
• Judge: De Villiers JA, De Wet JA and Feetham AJA
• Judgment Date: 25 April 1938
• Citation: 1938 AD 416
• Court: Appellate Division

De Villiers, J.A.:

This case is a point of law reserved by the Witwatersrand Local Division. The history of the case, as appears from the facts mentioned by the learned trial Judge in his summing up, is as follows:

The accused (an American citizen) arrived in Johannesburg early in 1936. There his met Bamber, a mining agent. The accused also met McGarvie, an experienced journalist. In February or March, 1936, he incorporated the "Counsellor Investment Service Limited," of which the chief shareholder was Bamber, who held 38,000 shares of the total of 40,000; but he held half of those shares as the accused's nominee. One of the "objects" of this company was to "act as advisers in regard to investments and speculations and to carry on business as stock and share brokers." The company was financed by the accused, who was the directing spirit of the concern. The company began, in March, 1936, to send out thousands of circulars (and also pamphlets) to persons living in the various Provinces of the Union, inviting them to consult it about their investments. The circulars were edited by McGarvie under the nom de plume of "The Old Counsellor," but the accused was admittedly responsible for the substance of the circulars, which were usually submitted to him for approval before being mailed, and were often inspired by him. In March, Cairncross (a director

De Villiers, J.A.

of the Magaliesberg Gold Mining Company who had also underwritten the capital of that company) wrote a letter to Bamber with a view to obtaining a loan of £750. This letter contained some optimistic statements about the prospects of the company; but that (as the learned Judge remarks) "is what one would expect, considering that the object of writing the letter was the raising of a loan." Bamber showed the letter to the accused.

The result was that the accused, on the 7th April, 1936, entered into a preliminary contract with the Magaliesberg Company and in May the

"Western Extension Gold Areas Limited" was floated, with a capital of 800,000 five shilling shares. The accused underwrote 400,000 shares and he was entitled to a commission of 10 per cent. on shares for which he subscribed or procured subscribers., J e accused had also a valuable right in regard to another 300,000 shares which went to the Magaliesberg Company, viz., that he was entitled to one fully paid up share for each share for which he subscribed or found subscribers, up to a limit of 200,000 shares. It must be mentioned also that the underwriting agreement contained a clause that the accused had the right to cede the whole or any part of the contract and that Western Extension should be bound to accept in his place any person or company to whom or to which the accused might cede the whole or part of the contract. He thus secured for himself a most favourable position for the purpose of gathering in much money in a short space of time, if only he could make a quick market for the sale of the shares. He proceeded at once to do go, through the agency of Counsellor Investments. As early as the 14th April "Old Counsellor" was mentioning in the circulars the prospect of a "new share in the West" coming on to the market soon, and in May and June Western Extension shares were being strongly recommended to the recipients of the circulars, as being one of the beat investments on the share-market. The accused also made great use of the long-distance telephone, either personally or through Bamber, or through Henley (an "expert salesman" whom the accused had imported from New York to assist him in selling Western Extension Shares). The selling campaign was vigorously conducted. In May and June some £58,000 was "netted," and everything went according to plan until the 15th of June. On this date, a certain firm of stockbrokers (Emdon & Co.) issued a circular to its clients criticising the Western Extension Company, and asking some searching questions about it.

De Villiers, J.A.

Five days later the accused said goodbye to McGarvie And Bamber on the pretext of going to visit the Game Reserve and Rhodesia for a few weeks. He made his way however (with some £12,000 worth of Cook's travellers' cheques in his pocket) to Lourenco Marques where he took ship to Mauritius. On the accused's flight, Western Extension shares collapsed, and became unsaleable, and were still unsaleable at the date of the accused's trial some 15 months later (October, 1937). The accused was extradited and brought to trial on a charge of falsity. The indictment (as amended) reads as follows: "That, between the 26th March, 1936 and the 21st June, 1936, and at Johannesburg and in the district of...