For the descendents of Richard Dearie and his son John Russell
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How Archie bought the Goenoeng Batoe Besar Coal Mine at Pamoekan Bay, Borneo, from the Eastern Mining and Rubber Company and sold it to Malayan Collieries.
Transcription of his evidence to his solicitor at the trial in 1924.
Malay Mail April 3 1924 page 9, reporting on Wednesday April 2: the 13th day of proceedings. Mr. Russell’s evidence: When the court resumed at 2.40 p.m. after lunch Mr. J. A. Russell entered the box and was examined by Mr. Carver. In reply to Mr. Carver Mr. Russell said:
My name is John Archibald Russell. I live in Kuala Lumpur and am a partner of Messrs. J. A. Russell and Co. I have lived here for about 20 years. I founded the firm of J. A. Russell and Co. and I also carry on business under the name of W. R. Loxley and Co., in London, Hong Kong, Canton and Singapore. I also carry on business as Perrin Cooper and Co. in Tientsin, with a small branch at Peking. The firm of Russell and Co. has been established for about 18 years at the commencement of which I was sole proprietor. Mr. D. O. Russell, my brother, was my partner. Our first activity was connected with mining and throughout I have been interested in mining. I have acquired mining land in various parts of the Peninsula, and I have also developed mining land on my own account and in partnership with others. I have speculated in mining land. By speculating you mean buying up and selling at a profit? - Not necessarily buying up, sometimes getting options and speculating on them. Later on you began to act as agents for other firms? - Yes When did you first start acting as agents? - I cannot remember but I think the first agency we had was for the Singapore Tin Syndicate. How would you describe your business as it was in 1913? - Principally a speculator in mining land. But at the same time I held property and in fact did nearly everything but pure merchant business. If there was such a thing in this country I might even have called myself a financier in a small way. The Malayan Collieries Ltd. were formed in 1913? - Yes. You had a mine engineering staff of four gentlemen? - Yes Europeans? - Yes. If you go back to 1911, I think that is the year you became interested in coal mining propositions in China? - I became interested in coal mining propositions in a district near Canton. Then in 1912 you came into contact with the Batu Arang coalfields? - Yes I went to England, saw the proprietors and got an option over the property. And I think you were successful? - Yes I purchased the option. Then in 1913 you floated the Malayan collieries? - Yes And I think they have ever since worked the Batu Arang coalfields as a mine? -Yes I think you received a certain amount of cash? -Yes. I received some cash, but by an arrangement with the vendors, it was put back into shares. I think you got 50,000 shares as part of the consideration? - What happened was that it was difficult to get the floatation through and some underwriting commission had to be paid? At the end of all these adjustments I was left with 50,00 shares and nothing in cash. I think on the floatation of the company your firm were appointed secretaries and managing agents? - Yes Had your firm an agreement with the company? - No As secretaries what were your duties? -Secretarial, I suppose. As managing agents what do you say were your duties? - Our principal duties were the sale of coal and also the purchase of supplies to the mine. Batu Arang was the only property that the Malayan Collieries owned at that time? - Yes. As managing agents you managed the mine? -As agents we managed the mine subject to the Board. Was the business of Russell and Co. at any time exclusively connected with the business of Malayan Collieries? - No Did you at all times continue to do business which you did previous to the formation of the company? -Yes That included speculation in mining property? - Yes Members of the Board of Malayan Collieries knew of your activities in that respect? - Yes. Did they at any time suggest that your firm should discontinue their other activities? -No If they had suggested it would you have agreed? - No I would have refused. Was it ever suggested by the Board that it was part of your firm’s duty to search for coal properties for the Malayan Collieries? - No. Or to obtain options over coalmines? - No I am not talking about Seboekoe or Goenoeng Batoe Besar, but before these transactions did the Malayan Collieries ever spend anything on options over coalmines? - No Or did they ever prospect or send out prospecting parties? -They did not send out prospecting parties. But Mr. McCall looked at three properties. I am coming to that, but you would not call that prospecting? -I would not call a manager looking at a coal deposit a prospecting party. What do you mean by prospecting? - It is a technical term used to mean investigation or inspection. It is a definite mining term. What do you mean by prospecting party? -A party that goes out to prospect (laughter in court) Prospecting is something more than investigating and it is a more definite act. You say that a person who is prospecting is hunting for something of which he does not know? - Prospecting does not mean searching. It is more than that. It is testing either a deposit or something reputed to be a deposit. I can investigate a coalmine by sending a man to inquire into the production, the cost of production and various other things like that. But that would not be prospecting. I think you once said that the company on some occasions sent the manager to look at some local mines? - Yes. It might not be a property. It might be a coal deposit or a reputed coal deposit. On some occasions then the collieries sent their manager? - I can remember Mr. McCall looking at the Enggor coal deposits in Perak. Do you know about other occasions? -Yes I can remember Mr. McCall going to two other places. One was to look at a reputed deposit at Slim also in Perak and the third occasion was when Mr. McCall took a trip to Trang, primarily on holiday, and went across to look at the Ghirbi fields in South Siam. Was that deposit actually being worked? - No. Attempts had been made to work it and a company had been floated. But at the time Mr. McCall went to see it there was no work being done, the company having been wound up previously. There was one other place? - There was a deposit on which the company actually spent about $4,000. That was on the Perils Siamese border. We prospected the deposit at the request of the F.M.S. Railways. You mean the Malayan Collieries? - Yes and the Railways reimbursed the Company the whole of its expenses plus its fee of $1,200. Mr Muir saw that property. He was not there the whole time but went there once or twice during the time the company was boring. Who was Mr. Muir? -He was an employee of Malayan Collieries Now Mr. Russell, before Seboekoe can you say whether the Malayan Collieries had any other activities in connection with the search for coalfields outside its own territory of Rawang? - As far as I am aware they had not. I wish to be more positive and say they did not. And in all these cases you mentioned they spent nothing on the expenses of their employees? -I can find nothing in the books even for the expenses of their employees. I image that perhaps Mr. McCall included in his petty cash a small sum like $5 when he went to see Slim, possibly $50 when he went to see Enggor, and nothing when he went to see the Ghirbi fields, because he did that while he was on his holiday. My recollection is that it cost the company about $150. You are not speaking from say books but merely from recollections? – Yes. Carrying you back to 1918 where were you at the end of that year? In December I was in Hong Kong. And who was with you? - Mr. Henggeler. Did you and Mr. Henggeler take any interest in minerals (missing word)? -Yes We went up there in connection with minerals in China. It appeared to us that it would be worthwhile spending a certain amount of money in searching for mineral deposits in South China and prospecting them. What particular type of minerals did you have in mind? - Our first idea was wolfram coal and tin, perhaps wolfram bulked more largely in our mind than coal. As it actually happened I should say that five per cent of our activities in South China were devoted to coal properties I do not want it to be understood that we started with the idea but that’s what actually happened. The Armistice I take it, took place about the time? - I think I can give the exact date, November 11. (Laughter) I think after the Armistice the Government stopped buying wolfram? - No, sometime after that. Quite a long time. When the Government stopped buying the price went down? - If your point is that that is the reason why we did not get wolfram that is not so. The reason why we did not get wolfram was because we could not find it. So we went for coal. Suppose you had found a coalmine in South China what did you intend doing? –Mr. Henggeler and I discussed this matter. If we found anything we decided that we would give first refusal of any property that seemed worth acquiring or operating to the Malayan Collieries Ltd. That means that if you found anything good you would have given it at some profit? - We had no intention of handing it over at cost. I take it Mr Russell that generally in searching for coalmines there are many misses to? - All our searches in China were misses. I take it that the purpose of carrying out ?work you formed a company, did you? -Yes. Called China Minerals Ltd? - Yes. What was the capital of that company? 1000 Hong Kong dollars which were equal to about 200,000 Straits Dollars. And how much did you contribute? - I wish to explain that the whole of that $100,000 was the working capital. There were no ?prospecting expenses commission etc. How much did you contribute? - Directly and indirectly I contributed one third of that capital. Perhaps you may wish to explain to his Lordship what you mean by indirectly? - I contributed about one sixth of that capital in my own name and the other one sixth by reason of my holdings in Eastern Tungsten Co. who were large subscribers. And I think Mr. Henggeler also contributed part of the capital? - Mr. Henggeler also directly or indirectly contributed about the same amount namely a third of the capital. Do you remember how much capital Eastern Tungston put in? -I believe Eastern Tungston had $40,000 worth, I had $20,000 worth and Mr. Henggeler’s holdings in Eastern Tungsten were greater than mine, Mr. Beatty had $10,000 and the balance $20,000 were taken up by friends in Hong Kong. The directors of the company were myself, my brother R. C. Russell and Mr. Beatty. Messrs. Loxley and Co. were the agents of the company. I think they were agents and secretaries. The China Minerals obtained the services of Mr. Barr? - Yes they agreed the services of Mr. James Barr and my brother Mr. R. C. Russell. What was Mr. Barr? - He had worked before in the F.M.S. as a mining engineer. And your brother? - He was also working in the F.M.S., but not as a mining engineer. He had experience in mining and spoke a certain amount of Chinese. And I think at the beginning of 1919 you came back to the F.M.S.? - Yes Who was the general manager of Malayan Collieries then? -Mr. McCall. Did you tell him of the China Minerals Ltd? - Yes. And was any arrangement made as to what should be done on Mr. Barr’s reports on coal properties? - Yes. There was no agreement between China Minerals Ltd. and Malayan Collieries. What I told him was that if any coal property was discovered the company would undoubtedly give the first refusal of it to Malayan Collieries if it wished to dispose of it in some way. And, owing to the large interests in China Minerals which Mr. Henggeler and I had, we thought we could agree that China Minerals, not having sufficient capital to work any place themselves and found it necessary to float a company, would give the Malayan Collieries in any coal property they discovered and which seemed to them to be of any value. You see there a letter written by Mr. R. C. Russell to Mr. McCall? -Yes I think when that was written you had gone back to China? - Yes I beg your pardon. At the time of this letter I think I was in England or America. I had gone to China and from there to England via America. I take it that Mr. Barr continued his investigations under China Minerals for a considerable period? - For about 18 months. And during that time did they spend the whole of their capital? - They spent something like $98,000. I know there was a small balance left over. That was entirely lost? - Yes Your share of the loss directly and indirectly was about a third of that? - Yes Did you ever seek to reimburse that money from Malayan Collieries? - No Now after the end of China Minerals Ltd. did you discontinue the investigation or did you continue it? - Mr. Barr continued investigations for J. A. Russell and Co. for about 8 months more. China Minerals had been liquidated. Mr. Barr was paid by Loxley and Co. Hong Kong. Russell and Co. owned Loxley and Co? - Yes there was no difference between the two. While we are on the subject you do all your business on account of Russell and Co? - Yes Mr. Barr discovered nothing of commercial value? - No I think there was a mine which showed some promise? - That was on account of China Minerals that Mr. Barr discovered a very promising deposit of coal at Yau Mi Shau on the Canton Hunan border. What happened with reference to that? - This deposit although it appeared to be a very excellent one, required linking up with the Canton-Hankow railway. These negotiations fell through? - They lasted for a considerable time and finally fell through the Government being unable to get the permission. Was it at any time suggested that Mr. McCall should visit the property? - Yes Will you tell his lordship the facts relating to that proposal Mr Russell? - He was to have gone to Hong Kong, visited the property to see whether it would be of any use to the Malayan Collieries, and then gone on to American looking at some of the modern coal mining plants on the way. What actually happened? - When he arrived in Hong Kong negotiations had definitely fallen through. He did not go? - No, he stayed there a few days and then return. Apart form China Minerals Mr. Russell; can you give us a rough idea of how much the subsequent operations in China cost you? - About 30,000 Hong Kong dollars. Did you ever seek reimbursement for any part of that money from Malayan Collieries? –No Or get it? - No When did you or Russell and Co. first have dealings with Hong Guan? - If my memory serves me right very early in 1918. In connection with what? -Obtaining rights over a tin concession in Trengganu which belonged to a Malay lady. I cannot remember whether it was Tungku Nar or Tungku Asar. And I think Hong Guan became indebted to Messrs. Russell and Co. on that account? - Yes. How much was the indebtedness? -I think at the time it was about $23,000. Did anyone approach you with regard to giving time for repayment? - Yes I think that part of the debt was liquidated with the exception of $5,000. Was a promissory note given to you to secure this $6,000? - Yes Hong Guan transferred his rights in the Tek Seng kongsi. The arrangement was that he was to have the concession and I was to receive back $23,000. Did he pay that note on the due date? - No Did your firm write him that letter? - Yes it was written by Mr. H.H. Robbins.
Hearing adjourned until Thursday April 3 the 14th day of the trial.
Mr. J. A. Russell continuing his evidence said that although his brother Mr. R. C. Russell was not a partner, the bulk and certain of his shares and properties belonged to the partnership. He thought that Eastern Tungsten had 50,000 to 60,000 shares in China Minerals but this did not affect his interest or Henggelers. From the memoranda of Baku Tin, Ltd it had amongst its objects the acquisition of certain tin mining lands in Selangor, and also, later on, searching for among a number of other things coal. In response to a letter in September Hong Guan came up about Sept 5 or 6 to see him. He spoke English to him. Chong Kim was present at the interview, but knew no English. Hong Guan told him that he could not pay his debt at the moment and asked him to allow it to stand over. Hong Guan said that in return for any indulgence which the witness might show him in the matter of paying his debt, he would be able to put before him the opportunity of acquiring an option over a valuable coal property at GB Besar in Dutch Borneo. Mr. Russell stated that he was not sure whether Hong Guan mentioned G.B.B. at the interview on the 5th. He must have mentioned it shortly afterwards. Hong Guan also mentioned other matters. He spoke about a syndicate, mentioning that he represented a syndicate who wished to look into his tin mining lands. Hong Guan mentioned other coalmines. He mentioned other coal deposits in the Dutch East Indies, particularly a place in the district of Tehweh, which is up the Rito River from Banjermanasin. He gave me certain information with regard to that land. Hong Guan also gave particulars of G.B.B. he held out the prospect of being able to get me an option. He spoke of a free option. On Sept. 5 Hong Guan gave me a document of particulars which was unsigned. The document showed an output of 3,000 to 6,000 tons a month. I thought that if this statement was correct the property was one which merited investigation. The letter of Aug 25 mentioned the name of the G.B.B. property. The remarks about it were certainly not attractive. Hong Guan undoubtedly mentioned a price which the E.M.R. Co. wanted, but I thought I could get it at a cheaper price- something in the neighbourhood of $1,000,000. It occurred to me that if I acquired the property I might have to put up a large sum of money. At the time I had not readily at hand any large sum of ready cash. I would therefore have had to realise certain assets to get that sum. I had large holdings in Malayan Collieries Ltd., and the shares were not only at a high premium but also readily marketable. Moreover, if I was investigating a new coal property it would be a fairly safe thing for me to transfer the interest I had in coal to a fresh coal property rather than to sell other assets such as town property and put that money into coal. The witness went on to explain his statement saying that he did not want to have “ all his eggs in one basket”. Owing to this reason, he desired to pay half the purchase price in M.C. shares. He mentioned this to Hong Guan there was also a further reason. It occurred to him that if he was given an option over this coal mine owing to his very large interest in M.C., which at that date amounted to over 52,000 shares, he might possibly give the benefit of his option to M.C. Ltd, or he might examine the property himself, and if it proved valuable, offer to sell it to M.C.
MM April 4 1924
I mentioned this to Hong Guan and told him that if he brought me the option such a right would be very useful to me. The realisation of Malayan Collieries shares on a large scale by me would certainly bring shares down. I would have a doubly harmful result. I would receive a smaller sum for my shares realised and the balance of the shares which I still had would be greatly depreciated in price. The first interview with Hong Guan was on Sept 5 or 6. About that time I had two or three other interviews with him. When I suggested that he bring me an option I had no intention of doing so as an agent of Malayan Collieries, Ltd. I was not aware that there was anything in the way of myself or my firm acquiring options. It was quite clear that we could acquire options. In Stoutz’s letter of Aug 25 he offered one month’s free option to M. C. Ltd. I talked the matter over with Mr. Henggeler and I think Mr. Mackie. We decided that we must have at least two month’s free option involving the Company in no payment whatsoever, with the right of extension, if we desired an extension, on making a certain payment. We decided that if we secured an option on such terms Mr. England should go across to Seboekoe, with such assistance as he thought was necessary, and during the free period of the option make a report to the company on the advisability of acquiring the property. In the end we got such an option. This decision was arrived at possibly before we wrote that letter to him stating our terms. We must have discussed it before this letter, possibly also after. I received a letter from Mr de Stouz’s in Sept 23. In it he says “ I am glad we have come to terms”. The option was then fixed up. The date of this letter is wrong, it should be 22nd. Because he says “today I wired”, and the date of the wire was Sept 22. The actual option had been fixed up for Sept 22. Mr. Russell said that in the letter of Sept 17, the second paragraph referred to Tehweh. The particulars were supplied to him by Hong Guan. What he meant by “ negotiations with E.M.R. Co.” were the various interviews he had had with Hong Guan. Referring to the letter of Sept 28, the reference to gentleman he proposed to see was Dr. Birnie, and his Chinese friend mentioned there was Hong Guan. Witness remembered seeing Hong Guan on the 16th or 17th. Then he went to Singapore and as far as he could recollect the first time he returned was Sept 27. On that day he saw witness and brought with him what was described as the first option. He remembered Platt’s report on this mine which he probably saw on this date, Hong Guan having brought it. When he went through the option of Sept 25, it seemed to him to be of no value, because the time was far too short, it left barely 12 days to run and it would have been impossible to have visited the mine in this time. The boat left Singapore on Friday, this option was brought to him early in the week. He told Hong Guan that he would accept a free option for a long period and at a price of about a million dollars. I told him that if he wanted to obtain any consideration from me, in the matter of the payment of his debt he must bring me something more acceptable. Hong Guan said he thought he would be able to get a reduction in the price, but nothing very much because this was a producing mine and coal was selling at a high price in Singapore. He did not think he would be able to get any extension in the time. He said that if I wanted long term free options I would have to be content with undeveloped properties such as other places which had already been mentioned, particularly in coal deposits in Tehweh. He mentioned several coal deposits in Celebes, and he gave me to understand that there were several places in Sumatra and Borneo. All I can remember is what he told me about Lankat. He said he intended to see Mr. Birnie either in Singapore or Java and to go to the Dutch East Indies in connection with other places of which he had knowledge. But he said that he was known neither to Mr. Birnie, nor was he known in the Dutch Indies, and in order to show people that he was not wasting their time he suggested that I should give him some sort of letter of identification. I told him that such undeveloped properties did not interest me very much, but that possibly they might interest Malayan Collieries. Will you explain why? - Yes, they would not interest me because they would take, in all probability, almost certainly a long time to develop, while I could, owing to the high price of coal, acquire for myself, or in partnership with others or for the purpose of floating into a company, a producing coal mine. From my experience in floating Malayan Collieries, because money at this time was becoming tight, I felt that I would not be able to afford to purchase myself nor could I float an undeveloped property which would take, as was the case of Malayan Collieries, from three to four years before it would pay a dividend. I considered that if Malayan Collieries could get a long term free option over an undeveloped coal mine they could take their time in thoroughly prospecting the same, and as the price of such undeveloped properties was not likely to be high, if the property proved a sound one, they could probably acquire it at a comparatively cheap figure, and develop it slowly without greatly interfering with their dividends. I should like to add that the distinction is this: whereas I could not wait until an undeveloped property began to pay, Malayan Collieries Ltd., could. Whether I acquired it or Malayan Collieries acquired it, Hong Guan told me that it made no difference to him with regard to this letter of identification which he required. I then wrote and gave him the letter of Sept 27 on Malayan Collieries notepaper and I signed it for the agents and secretaries. In giving this letter did you think you were committing M.C. to anything? –No I did not consider that I was binding M.C. to anything. That is why I used the word “Apply” for option. Did you consider you had any authority to pledge MC to such a transaction? - No, I knew I had no such authority. What is meant by such a transaction? - To an option agreement. Had that letter any relation to G.B.B.? - No none at all. You also knew the name of the E.M.R. Co.? -Yes You also knew that Hong Guan had the document of Sept 25th? - Yes. Knowing those things, do you think that you wrote that letter of Sept 27 to refer to G.B.B? - I am almost certain that had I intended this to refer to the E.M.R. Co. the natural thing would be to write to them, and address to them a letter that Hong Guan was authorised to apply for an option over the property at G.B.B. Hong Guan started an action against you in Singapore in May 1922? – Yes That was struck out and he started a similar action in Kuala Lumpur? – Yes I think in October. There were criminal proceedings too? -Yes Hong Guan is not well disposed towards you? –No he is Mr. Braddell’s client. Mr Braddell: Did you say he is my client? – Yes Sir.
The court adjourned for lunch.
Hong Guan went back to Singapore after the interview on Sept 27. That same evening I wrote a letter to him. Comments have been made on that letter. You are familiar with the wording? - Yes There you have used the words “I”. “we” and “our”- Yes. Now these words, I think, are all used in relation to Malayan Collieries matters? –Yes Can you say how you came to use these words? Yes. I think the words were used loosely and colloquially. You will realise that I was the founder of Malayan Collieries, and have been closely identified with it, because I have so large a financial interest in it, and nursed it through bad times when its shares fell to about two dollars. In course of time Malayan Collieries became identified with (me in) the public mind. I have been chairman of the company since its inception, and my firm of which I am senior partner had been its agents and secretaries from the beginning, and they have frequently spoken about the mine as my mine, and about the coal as my coal. And I have been in the habit of doing so myself. My reason for writing that letter was to show that I was not too keen. The offer of Seboekoe to Malayan Collieries had a bearing on the question. If Malayan Collieries acquired Seboekoe I might not wish to run an opposition coal mine, and if they required Seboekoe it would possibly require a good deal of money in connection with Seboekoe, a large share of which would come out of my own pocket. In the fourth paragraph of that letter I compare Batu Arang, Seboekoe and G.B.B. coal. Comparing any coal in the East I would naturally take Batu Arang as my standard of comparison. In writing that letter I was not doing so on behalf of Malayan Collieries. Did you intend to use your position in Malayan Collieries to forward your private negotiations? - No I did not. The fact of the existence of the option of Sept 25, and the stipulation about Malayan Collieries shares shows, I think, that there was no need to forward my negotiations through in a way. The negotiations had already opened. I have looked at the carbon copy of that letter. The initials of the clerk who typed it are K.H. Who was KH? - Kim Huat. He had been in my office six weeks or a month. He was not one of my regular clerks. He usually worked for Mr. Dickinson. Mr Dickinson had joined me some months previously in connection with a large tapioca scheme for which we had obtained a 400-acre concession in Pahang. He occupied a separate room and had nothing to do with the rest of the office. I gave my clerks no instructions at all. They had to use their discretion as to what paper to use in typing letters. Two days after the letter I sent a telegram to Hong Guan. At the foot of that telegram there are the words “ account J.A.R. and Co” and my initials. Those words was our instruction to the Post Office as to whose account the cost of the telegram was to be debited. We had three accounts at the post office in the name of J.A. Russell and Co., Malayan Collieries and Malayan Matches. The telegram referred to the same matter as was in the letter. If the telegram was on Malayan Collieries business I would have passed a direction to debit it to Malayan Collieries account. The telegram of October 1 “Confirm arrangement” also refers to G.B.B. was also signed by me, and it also bears the same direction to the post office as the previous one. Referring back to the letter of September 27 I want to add that “we” in the last paragraph meant J.A. Russell and Co. Kim Huat, the clerk was Mr Dickinson’s private clerk and worked with him in the same room. This letter of Sept. 27 was filed in the Malayan Collieries file. How was the clerk to know on what file to put the letter? - Unless special instructions were given the filing clerk would go by the letter heading of the paper on which the letter was typed. Might I explain that coming back from China and having to write a lot of letters I used this clerk of Mr. Dickinson’s. I think this is probably among the first letters which he ever typed except for Mr. Dickinson and seeing the words “Malayan Collieries” in the draft, would very likely have taken up a piece of Malayan Collieries paper to type it. The clerk was not very satisfactory. That clerk typed up two other letters which were found in Russell and Co.’s file. Will you say what arrangements were made for visiting Seboekoe? - On Sept 23 or 24 immediately after receiving Mr de Stouz’s telegram of Sept. 22 Mr. England was told to take such assistance with him as he required and go to Seboekoe. What assistance? - He had, of course, the colliery staff available. He said he intended taking Brickman with him, and that he intended taking certain coolies. But he pointed out that neither Mr Brickman nor himself had done any travelling in the East, nor could they speak any Malay, having not long arrived from England. Did you make any suggestion? - Mr England asked me what I would do to assist him in the difficulty and I said, provided I could spare him, I would lend him the services of Mr. Hastings who was in my employ. What experience had Mr. Hastings? - Mr. Hastings had a very varied experience. At the time he was principally working for me investigating tin properties which were put before me, Mr. Hastings was originally a mechanical engineer, but he had also worked in the Trinidad Oil fields and he speaks Chinese. I asked Mr. Hastings to assist Mr. England and he was sent up to Batu Arang. On Sept. 28 I wrote a letter to Hong Guan and it chiefly refers to other coal properties. The last paragraph related to the engineers of the Seboekoe party leaving by steamer on Oct 1. That was the K.P.M. boat not the Nanyo Maru. That would mean a change of steamers at Banjermassin? - Probably. The ordinary route was to Soerabaya, and then to Kota Baroe. I do not know whether the steamer of Oct 8 would have necessitated changes. At this time I had in mind as to whether I would transfer at cost to Malayan Collieries the option which I might get or keep it for myself. I was thinking of Goeneng Batoe Besar. There was also a possibility of selling to Malayan Collieries after the tests and investigations. If the question of sale to Malayan Collieries came up would it have required some sort of inspection? – They would have required an inspection by their own representative before purchasing. When you found you were able to get an option over G.B.B. who did you want to see the property on your account? - I thought, under the circumstances, Mr. Hastings would be the person I would wish to send. In that case I suppose you would have to take him away from Mr England? - Yes, unless it was possible for them to travel together as far as Kota Baroe. I think Mr Stoutz’s option arrived on Oct. 5? -Yes Before that date you found that accommodation was available by the Nanyo Maru for both parties? - Yes. According to a telegram from Hong Guan received later, $120,000 was to be paid at once and no option was mentioned there at all. I wired back the same day rejecting the proposal. Hong Guan arrived in Kuala Lumpur the following day, Sept 30, and saw me. He had nothing further from me in writing. I recollect what he said. My recollection cannot be very good at this date, but so far as I can recollect and from my letter to him of Oct 1, I can gather what he said. I gather that he said he was able to get one month’s free option dating from the time of the sailing of the Nanyo Maru for Pamoekan Bay. If I remember rightly he said that the deposit was not a forfeitable deposit and that he could get the amount of $120,000 reduced. I can remember saying that I could not understand the reason for the deposit if it was not forfeitable, and therefore it appeared to me that what he was offering was not a free option which he promised to obtain. I said I certainly would not pay down any money until I could at least verify the title as I was well aware that according to Dutch mining regulations quite large mines can be worked on two and three year licences which are only renewable at the pleasure of the government and are not transferable without the sanction of the Government. I told him that one month was a very short time and preferred a longer period. Hong Guan said that the option was a free one, the only reason for the stipulation that I should deposit a sum of $120,000, or less, being to show he was in touch with me, as a reliable person who had command of certain amount of money. I said that if that was the only reason I would put up the money, and if the deposit were made in our joint names it would quite satisfy the E.M.R. Co. He said he would go to Singapore and see what he could do to get the option on the terms I outlined. If I remember rightly I said I could not agree to pay a fixed royalty of $250 as I preferred a sliding scale and I recollect writing out a suggested scale. And I also believe it was at this interview that I told him that instead of taking Malayan Colliery shares at market value in order to avoid fluctuation it would be better to take them at the fixed price of $30 a share. I signed the telegram sent by Hong Guan to Dr. Lim Boon Keng, but I cannot remember the circumstances under which it was sent. Hong Guan told me about the Nanyo Maru and he told me about another steamer. About Nanyo Maru he told me that it was chartered by the E.M.R. Co. and that it would be leaving Singapore for Goenoeng Batoe Besar, I think, on the 10th. He told me there would be no difficulty in people travelling by her, although she was not a passenger boat. Did he say anything regarding an issue of shares by the E.M.R. Co.? - He asked me to take up a provision of the new issue of the E.M.R. Co. shares for which he had promised to subscribe. What did you tell him? - I think I said that I would consider it, but I don’t think I gave him any definite promise. With regard to the value of G.B.B. what had you before you at the time? - I had very little at the time. I had the unsigned particulars supplied by the vendors. I also had a typewritten copy of a report made by a man named Platt whom I had never heard of and I may add never heard since. He was certainly not a recognised local mining engineer, local meaning the Colony and the F.M.S. Then I had Mr Hong Guan’s information. What else had you? - I don’t think much more. On Oct. 1 I had certain letters from Mr Vanderheist mentioning the property. I had no opportunity to verify the information about Goenoeng Batoe Besar, but I certainly thought there were promising indications. You regarded the matter as still a speculative one? - Yes, a highly speculative one. Do you remember when you first told Mr England when Mr. Hastings might not be available to him? - I think that was about the 30th. I told him over the phone. Mr. England I think came to see me on Oct. 3 or 4. In the long telegram from Hong Guan sent later he said, “ money will not forfeit”? –Yes Can you recollect what you were to confirm and what you confirmed by the reply you sent? - I cannot remember now. My impression is that it was to confirm the appointment to meet him on the following morning. Were you surprised by the term in Hong Guan’s telegram “Money will not forfeit”? - Yes he had represented that money would not be forfeited. I had doubted myself strongly. The reason for his putting in the wire was perhaps to reassure me on the point. It seemed quite inexplicable. Hong Guan came to Kuala Lumpur on Sunday Oct 3, and I saw him at my office on that day. What did he bring with him? - The option of Oct 1, 1920. What did he say about it? - He told me that it was a very favourable option and he wished to know what he was likely to get for it. He said that the option belonged to him, and that he would have no difficulty disposing of it. In fact his attitude of being anxious to please to me to get extension of time for the payment of the debt to me, quickly changed. He adopted a far more independent attitude having got the option. Did he point to the time of the option? - Yes. He said the option was very short. If I did not require it he must know at once so that he might sell it in Singapore. What did he ask? He made something like four requests. They were:- (1) That I should put up the $60,000 on the following day, Monday (2) That I should pay him down a sum in cash, probably something like $20,000 (3) If the option were exercised that I should give him a sum of $100,000 (4) That I should take up the share which he said he had promised to subscribe to in the new issue of the E.M.R. Co.
(The court adjourned at this stage till 10.30 on Friday 4 April)
I read the document of Oct 1 which Hong Guan brought. I looked to see if the facts confirmed the free option. I formed the opinion that it was not a free option. I told Hong Guan that I thought it was not a free option. He still maintained that it was and that he only asked me to put up the money to show that I had it. I said that it appeared to me that if there was any misrepresentation in regard to the title of the mine I should be able to get my money back, but that if the title were in order, and I examined the property and then did not exercise the option I should forfeit the money. That ended the discussion between us. He modified his four conditions. He agreed not to insist upon my taking over from him the shares for which he had promised to subscribe in the E.M.R. Co. new issue. He also agreed that instead of requiring a cash payment from me he would be satisfied with a loan. I said that I would pay him the $100,000 which he wanted; I would also deposit the $60,000 in the bank which was required by the terms of the option. I agreed to lend him a certain sum. I do not think I said $10,000, but I do believe I indicated that it would be round about that sum. If he had given me good security, I should have been prepared to give him more than $10,000. I acted without consent or authority of the Company, nor had I consulted any of my fellow directors I was acting on behalf of my own firm. I told Hong Guan that if the property proved valuable and I exercised the option I would first offer to sell it to M.C. Ltd, and that if they purchased it from me, as the mine was represented to be a coal producing one, they would probably pay me in M.C. shares and I therefore wished to have the right of paying him his consideration of $100,000 in M.C. shares at the rate of $30 per share. He raised no objection to this. I pointed out that the period was less than he promised, i.e. it was not one month but 14 days after the arrival of the Nanyo Maru at G.B.B. I said this was a very short time and I was running a great risk. I therefore asked him to do his bet to get the period of the option extended. I wrote out a document dated Oct 3, for Hong Guan’s signature. He still persisted that this was a free option, so I inserted the last clause. I did not consider that his view was a correct one. Hong Guan already owed me $6,000, which I had been unable to collect from him, and I had further promised to pay another sum of about $10,000. If this option were not exercised his financial position would be no better than it was before and I therefore did not consider that his assurance was of any value to me. I wrote another document of sale, dated Oct 4. I gave the document I drafted to Hong Guan to take to Singapore in order to obtain the signature of the E.M.R. Co. The copy on the file is taken from my own file, from the papers of J.A. Russell and Co. I have not seen since the actual paper I handed to Hong Guan. My impression is that I wrote a draft in pen or pencil. I kept one myself and gave the other copy to Hong Guan to take to Singapore. The following day on Monday, I would have given this rough pencil draft to my clerk and asked him to type out a copy for my file. This took place on Sunday, when there were no clerks in the office. Hong Guan never brought back that document signed. I told him on that Sunday that I might wish to send the gentleman from M.C. to Kota Baroe by the Nanyo Maru if it could possibly be arranged. He thought that it would be possible to send them by that vessel but was doubtful whether they touched Kota Baroe on her way to Pamoekan Bay. He said that she was sailing about the 10th or 14th. I thought that if the Nanyo Maru touched Kota Baroe, Mr. Hastings could take them as far as that port, where they could be handed over either to Mr. de Stoutz or his representative. Mr. de Stoutz speaks English fluently. When I had mentioned the matter to Mr. England on Sept 30 or Oct 1, he had complained about the difficulty I would put him in if I took away Mr. Hastings. At this interview Hong Guan made some reference to Tehweh. I think it was in this interview that he mentioned to me that Mr. Keng Seng would like to take over on certain rates a contract for the delivery of 3,000 tons of Tehweh coal a month. I said I would consider the matter, but could not do anything for a couple of months. On Oct 4 I drew a cheque for $60,000, on J. A. Russell and Co. on the Hong Kong bank. I paid that cheque into the Hong Kong Bank to the credit of deposit account on behalf of myself and the E.M.R. Co. It was a deposit for two months. It was to be cashed on my endorsement. I had this clause put in as Hong Guan still persisted in his contention that the deposit was non forfeitable, and pending the confirmation of this that I had asked him to obtain from the E.M.R. Co. If I was acting as the agent of M.C. Ltd I could have drawn a cheque on Malayan Collieries Ltd. At that date the M.C. had about $235,000 on fixed deposit and about $120,000 on current account. I had an arrangement with my bank that I could overdraw my account up to a limit of $850,000. On that day I had overdrawn about $832,095,15. That was on Oct 4th. This cheque of mine would put me beyond my limit. The Trengganu Corporation was a company which obtained mining land at Pakau. I knew the security to be of very doubtful value. I also wrote to Hong Guan on Oct 4. I was very anxious to have sufficient time not only for my own man Hastings to return but also to give him sufficient time to shepherd the Seboekoe party across to Seboekoe. On the 3rd or 4th, I should think on the 3rd, I telephoned to England telling him that I must take away Mr. Hastings as I had obtained an option over a coal property, G.B.B. and wished to send Hastings there to inspect it. He was very upset and said that he wished to come and see me on the matter. He came on the 4th. Mr Hastings also came to see me, I think on the morning of the 4th. I told him that I had obtained the G.B.B. option, that he must hand over the organisation of the Seboekoe party to Mr. England, and be ready to go to G.B.B. Mr. England asked me whether I could not make other arrangements, as the loss of Mr. Hastings services would put him in a hole. I said that it might be possible for the combined parties to travel as far as Kota Baroe, which would enable England to have the services of Hastings at that point, but it might be that the Nanyo Maru did not stop at Kota Baroe on her way to Pamoekan bay, in which case England would have to travel by the K.P.M. boat sailing, I think, on the 15th. England said that even if the Nanyo Maru did not put in at Kota Baroe on her outward trip he would still like to travel by her, go to Pamoekan Bay, and disembark at Kota Baroe on her return journey. He explained that it would not mean a delay of more than four days or so, which would be balanced by the extra time it would take him to travel to Kota Baroe by the boat of the 15th, and that by going to Pamoekan Bay he would have two advantages. He would have the services of Mr. Hastings to conduct the party to Seboekoe, and the visit to G.B.B. would enable him to see an actually working coalmine in the same district as was the coal deposit he was going to appraise, which would be of great benefit to him on reporting on Seboekoe. I told him that if I exercised the G.B.B. option I would undoubtedly first offer it to M.C. Ltd. I thought his suggestion a good one, as he would be able to look at the place if he so desired. I told him there was a possibility of obtaining an option over the Tehweh property for M.C., and advised him to make enquiries about the place in Banjermassin if he had the opportunity of doing so. Mr. Hastings was present at this interview. How long did you think it would take Mr. Hastings to inspect Goenoeng Batoe Besar? - As Goenoeng Batoe Besar was a working coal mine I did not consider that it would take him more than four or five days to examine it. In any case I should not afford him a longer period than this as my option was only for 14 days after his arrival there. Did you tell Mr. Hastings to go with him? – Yes I asked him to take with him two of my Chinese mining men to assist him. Did you tell him what to do after making his inspection at G.B.B.? – I told him that if he had time he was to take on England and his party to Seboekoe but that if there was any risk of his not arriving back in Kuala Lumpur before the option expired he was to leave them at Kota Baroe on the return journey. I think on Oct. 5 you received Mr Stoutz’s letter of Sept 30? - I think I received the option. Then I think you sent Mr Stoutz a telegram on Oct 5? - Yes And you confirmed that the same day by letter? - Yes Did you about that time have a conversation with Ho Man? -Yes Can you give us the date of that? - I should think it was on Oct 5. Who is Ho Man? - He is a large miner. He is also a contractor for open cast mining for Malayan Collieries and he is a gentleman with whom I have previously had mining business. Is he a man who goes in for larger business? - He is certainly the largest miner in Selangor, and perhaps in the F.M.S. When you saw him did you speak to him with reference to G.B.B? - Yes. I told him I had an option over a coal mine in Borneo and that if the same proved of value I intended first offering it to M.C. but that they might not desire to acquire it. If they did not wish to acquire it I asked whether he would join with me in either taking it up ourselves or floating a company. What did he say to that? - He said he was very glad of the opportunity which was a proposition that appealed to him and asked me if he could send two of his men with Mr Hastings to inspect the place. And in fact he did send two representatives? -Yes. Do you know their names? - No, I cannot remember at this date. Coming to Oct 6 did you see Hong Guan that day? - Yes. He did not produce that document which you gave him to be signed? –No He did produce however, the option of Oct 5 is it not? – Yes That option gave you five weeks from the arrival of Nanyo Maru to GBB? - Yes You went through that document I suppose? –Yes What conclusion did you come to on it being a free option? – I came to the conclusion that it was not a free option. Did you notice certain added clauses? -Yes Were they added in compliance of a request from you? –No Did you discuss these new terms with Hong Guan? -Yes I said I was disappointed that my letter had not been signed, that I had been given a new option with new conditions for which I had not asked. I particularly objected to Clause “M”. You see the word “allotment” in clause “M”. That word was not used in any of the pervious documents? -No. Do you remember your attention being drawn to that? - No, I cannot remember, but if my attention was drawn I would have noted that it was not used in any technical sense, meaning the issue by a company of new shares. What about the clause nominating a director? –That didn’t appear to me to present any difficulty. Whether I purchased the mine or Malayan Collieries purchased it from me, the E.M.R. Co. would be the proprietors of 20,000 MC shares which would make the second largest shareholders in the company. Under such circumstances I thought it was only natural that they would like representation on the board, and provided they nominated a suitable person I did not see why they should not have representation on the board. I did not consider that there would any difficulty in getting a suitable nominee to act on the board. That contemplates the probability of your selling the property otherwise than to Malayan Collieries. Would it have made a difference if it was sold to M.C.? - Whether it was sold otherwise or to the MC I did not think it would affect my using my influence in getting their nominee to be on the board as they would in any case be the holders of so large a number of shares. I think you wrote a letter on Oct. 6, addressed to Hong Guan, referring to the new clauses? - Yes. What passed at this interview of Oct. 6? - I gave Hong Guan a cheque for $10,000 as a loan. I gave him also the deposit receipt which I had from the bank. Did you take a receipt from him for the deposit receipt? -Yes I think you found that the receipt quite recently? - Yes. The body of it was written by me. I am acquainted with the signature of Hong Guan and it bears Hong Guan's signature. Do you remember when you found that Mr Russell? - It was found on March 20. I think in fact the E.M.R. Co. did nominate Dr Lim Boon Keng? - Yes He afterwards resigned? - Yes He was objected to? - He was not accepted. Coming back to the option of Oct 5, regarding the appointment of a representative to check the output of the mine, what mine was meant? -Goenoeng Batoe Besar. You took no objection to that? - No, if they so desired. Did you direct Mr. Hastings to make enquiries at Banjemassin? - I asked him to find out from the Government Offices there what sort of title G.B.B. had, whether it was a concession or a licence, and if the former what period there was still to run. I told Ho Man that the boat would be sailing on the 14th and that his men would have to be ready by the 11th. Who was to handle the funds of the expedition? - Mr. Hastings was to be the organiser and treasurer. He was given a letter of credit for $2,000 issued by the Hong Kong Bank. From my accounts he took a small sum in cash too in addition to the letter of credit. He drew on Malayan Collieries account a sum of $2,500 on various dates. How did he do that? - $2,500 had been drawn in cash from Malayan Collieries account for advances and payments which were made before the expedition stated. He could not say how much of this sum Mr Hastings took with him. You know that in April 1921 the expenses incurred by Russell and co on account of the expedition were refunded by Malayan Collieries Ltd? - Yes by cheque, signed by me. Were you in fact conscious that the money had been refunded? - No When did you first become conscious? - In July. I think that Hastings, England and the rest left Kuala Lumpur on Oct. 11? - Yes On Oct. 15 the annual general meeting of Malayan Collieries took place? - Yes At which you made a speech? - Yes What had you in mind when you said that the company’s representatives had inspected coal deposits in China? - I was thinking of the inspections made by China Minerals and Mr Barr. The company had never actually carried out any inspection of actual deposits in China? - No Then you said two properties were under consideration. What were the properties which you spoke of? - Seboekoe and Goenoeng Batoe Besar. Mr. England had then left on the expedition? - Yes the party left Kuala Lumpur, and, as far as he knew at the time, had left Singapore on Oct 15. But I found out later that they did not leave until the 16th. Mr England left to inspect Seboekoe on behalf of the Company and also to have a look at Goenoeng Batoe Besar. I think the first communication you received from the E.M.R. Co. was the letter of Oct 19? - Yes, saying they had sent me a letter on Oct. 11 which I never received. It appears from the post office vouchers, Mr. Russell that there are some telegrams, two to Hong Guan on Oct. 8 and Nov. 23, one to Mr. Brickman, dated Nov 8, another dated Nov. 10, one to Mr. Hastings dated Oct. 14, and another telegram addressed to Emarco, Singapore dated Oct. 6 which have not been found? - Yes Mr Russell you have had a thorough search in the office for the telegrams? - Yes Have they been found? – No. Any recollections about the copies? - I could tell the contents of the telegram to Mr. Hastings and the contents of one of the telegrams to Brickman. If it is suggested that you have in any way concealed these telegrams is it true? - No. Or have you at any time caused them to be removed from the files? - No. Have you any idea how it is possible that copies are not found in the files? - Yes our telegrams, I find have not been properly filed. We do not appear to have attended very carefully to the filing of the telegrams, and it is also possible that they were sent off from the office by someone who kept copies. Chong Kin, at this time was having business on my behalf and on his own behalf with Hong Guan regarding tin mining land and he would have very likely have sent off a telegram on such business. The telegram to Mr. Brickman might have been sent off by Mr. England. I cannot explain the telegram to “Emarco Singapore” because there is no such address as “Emarco Singapore”. With regard to the telegram to Mr. Hastings I might have written out this telegram at the post office on my way home after office and kept no copy. I think that at the end of October you received two letters from Mr. Hastings reporting what he was doing? - Yes on Nov. 2 or 3 you received a telegram from him? - Yes That was the first news you received of the outcome of the visit to Goenoeng Batoe Besar? - Yes And you were surprised that England was returning? - Yes I could not understand it. On Nov. 4 you wrote to Poey Keng Seng? -Yes In that letter you referred to England’s return from Batoe Besar. Why did you refer to Mr. England? - Because this letter was in reply to a telegram asking whether we could accept an order to supply 10,000 tons of Borneo coal per month. I replied to that telegram and this letter was in continuation of that correspondence. I considered that such an order to supply 10,000 tons of coal per month would be an exceedingly valuable one if Malayan Collieries purchased the property from me it would be an order which they would not like to miss. If Malayan Collieries did not purchase the property and I took it over in conjunction with Mr. Ho Man then it would take a considerable time in making the necessary financial and other arrangements before we could be in a position to supply 10,000 tons of coal per month. The reply to the Eastern Mining and Rubber Co.’s inquiry depended therefore upon Mr England’s recommendations or intentions with regard to GBB.
The court adjourned for lunch at 1.10 and resumed at 2.10
After the expedition left Kuala Lumpur I think a sample of coal came? -Yes Mr. Hastings sent a sample from the Nanyo Maru. That is the sample I sent to Mr. Nutt. No covering letter came with this coal. A part of my instructions was that he should send me a sample. I have not been able to find a covering letter. I know that three other samples were analysed by Mr. Harrington. I remember that Mr. England brought back some samples from the mine. I remember that when Mr. England and Mr. Hastings were in Singapore on their way to G.B.B. they went to see some of the users of the coal. Among them was the Municipality to enquire about a probable market for Borneo coal. I remember the return of the party. I cannot be certain but it may have been the 7th pr 8th that I saw Hastings. I now know that the Nayo Maru got back to Singapore on Nov 6 I saw Hastings the day after that. I saw Hastings as far as I can recollect in my office. England did not come to see me at the same time as Hastings. I saw England, I think, for the first time on Nov 8 or 9, a day after Hastings saw me, or possibly two days after. How did Hastings describe GBB? - He spoke in very high terms of it. He also said that I ad undoubtedly secured an option over an exceedingly valuable property. He said that he had examined the mine and was convinced that there was a large quantity of good coal there which, with the reorganisation of the mine, could be produced at a low cost. He also told me that he had tested the coal under working conditions on the Nanyo Maru and had found it to be good steam coal suitable for bunkering purposes. Mr. Hastings made a report which he completed in my office. My questioning Mr. Hastings coupled with this report made me believe the mine was an exceedingly valuable one, and that Malayan Collieries would most likely purchase it from me when I offered it to them. Did you consider what profits you were likely to derive? - Yes, I made several calculations and as far as I can remember, at present, I calculated that the mine could produce coal and ship it to Singapore at round about $14 per ton, and that this coal could be readily sold in Singapore for $22 per ton. Can you remember what price Malayan Collieries Ltd. coal was selling in Singapore at the time? - I think it was selling at 416 a ton. I considered that the mine could easily be made to increase its output to 100,000 tons per annum which would give a profit of $800,000 per annum. I thought that if the price of coal fell this profit would be more than maintained by the increase in the yearly output, and a decrease in mining costs. In the face of that possible profit did you come to a conclusion as to the price you would ask? - Yes, after considering the matter I concluded that I would offer it to Malayan Collieries for 100,000 shares of $10 each and $600,000 in cash. This would mean an increase of their book capital by $1,600,000. I was advised that a sum of about $100,000 would be sufficient for reorganising the mine. You were advised by whom? - By Mr. Hastings. I also had the benefit of the two Kepalas who Mr. Ho Man had sent. And I allowed a sum of $400,000 for development instead of $100,000. This should make a total of $ 2,100,000 in all, $800,000 of which should be profit. You thought that a proposal on these terms would be welcome to the Collieries? - I undoubtedly thought that they would be only too glad to acquire the property at such a price. Mr. England saw me one or two days after Mr Hastings. He told me that he had not visited Seboekoe because not only had he learnt the physical difficulties. The unfavourable reports which he had received coupled with the very favourable reports on GBB had induced England to return to Kula Lumpur without visiting Seboekoe. He made no report to me. It was evident from Mr England’s attitude that he had formed a very favourable opinion of the property. He gave you no detailed figures? - No he said that Brickman was boring the property and that he was not prepared to make any recommendation to the board before he had received the result of that bore. Mr. Hastings told me that Mr. England had been rather exuberant in Singapore and that at the office of the E.M.R. Co. he had given out his opinion as to the value of the G.B.B. property. That made you somewhat uneasy as regards the option? - That caused me uneasiness because of the letter and telegram dated Nov 4, asking whether he was going to exercise the option. From these it seemed to me that the E.M.R. Co. might be going to adopt the attitude that the option had expired. I realised that I had not accepted the option of Oct. 5, in toto. It was not an unqualified acceptance. And it might be that the E.M.R. thought they would adopt the attitude that it was the option of Oct. 1 that was in force. If it were the option of Oct. 1 the option would expire on Nov. 8 or 9. On Nov. 9 you wrote a letter to Mr Poey Keng Seng? -Yes In the second paragraph you refer to the engineer, that is Mr England? - Yes Why did you refer to him? - I wrote that letter for two reasons. First of all it was in continuation of the previous correspondence when I told him that I would inform him when the engineer returned; and my other reason was so that the EMR Co. might not think that the value of the property was beyond doubt, and thereby be more likely to change their attitude. It was for this purpose that I referred to the bore being sunk. I set a copy of that letter to Hong Guan. On the next day I received a letter from Mr. Poey Keng Seng saying “as Mr. England had now arrived and made a report”. Mr England in fact made no report. This is pure surmise on the part of Mr. Keng Seng. Mr. England about this time told me that he would like to have aboard meeting held as soon as he received a cable from Mr. Brickman. Was anything else discussed regarding the holding of the board meeting? - Mr. England told me that he was not making a long report but he wanted to see the directors personally and give them his opinion verbally. I told him that if he adopted that course he ought at least to have some plans or sketches with him showing the present position of the mine and what he intended to do in the way of reorganising it. Did you see Ho Man about this time? - Yes. What did you tell him? - I told him that I my opinion Malayan Collieries would undoubtedly buy this property from me and that there was not much chance of his being able to join me in exploiting the property. That was somewhere about Nov. 10 or 11. He said that he heard very good reports about the property and asked me what chance there was. I told him there was very little chance, as Malayan Collieries would most probably be buying the property. Hong Guan came to see me on the 15th and I expressed to him my doubts as to the attitude that the E.M.R. Co. might take up. Hong Guan said that as the property had turned out so well I ought to really give him something more than the $100,000 which I had agreed to give. I promised that I would give him something more but I did not mention the exact amount. My object in promising this was because I wished to secure his good will to the transaction being completed without a hitch and also because as I had made such a hit, I did not think his request an unreasonable one. I told Hong Guan that I would be going down to Singapore on the 16th and that I intended to exercise the option and that I relied upon his influence. In connection with the proposed increase in his amount Hong Guan told me that the fact that he was going to do very well out of this transaction was known in Singapore. To his creditors? - No my Lord, to his relatives. He said his relatives would press him for loans and assistance which he might find difficult to evade if the exact amount of his profit were known. He therefore suggested that a certain amount of this profit he would like to be put in the name of a nominee. What did you say to that? - I said that I myself would also like to put part of my profits in the names of nominees. Why did you say that? - I did not want the world, the people in general, to know what profits I was making and to have a knowledge of my firm’s private affairs. I have found that if I sell shares of any company with which I or my firm are immediately connected the result is unduly to depress the value of those shares. Hong Guan suggested that we should use Chong Kin as our joint nominees Did you agree to that? - I said that I would prefer Khoo Wee Chuan who is my head Chinese man. I left for Singapore on the afternoon of 16th arriving there on the 17th. In Singapore I met Hong Guan first. He told me that EMR co expected me to exercise the option. He thought there would be no trouble with regard to it. I discussed with him the total amount of profit I would give him and fixed it at 10 per cent of what I intended to make. That is to say 8,000 shares? - Yes. What did he say about that? - He said that he would like 4,000 to appear in his own name and 4,000 by nominee. Then did you see Mr. P. Keng Seng? -Yes I went to the E.M.R. Co.’s office. There I met Poey Keng Seng. I told him I wished to exercise the option and I drafted a letter which he had typed out in duplicate. I signed both copies and gave one to him. What did you do with your copy? - I took it to Mr. Robinson of Messrs. Drew and Napier and I left it with him. That is dated Nov 18. I may have seen Mr. P. Keng Seng on the 17th but I certainly saw him on the 18th. You say there, “ I hereby confirm the legal part to Messrs. Drew and Napier?”- I was not sure, the option being in the name of Hong Guan, whether I could exercise it myself. So I wished to leave it for Drew and Napier to do it in the proper manner. I asked Mr. P. Keng Seng for a deposit receipt so that I might cash and remit the money to Drew and Napier to be paid to E.M.R. Co. I did not get it then. He asked me to come later. When I went later he made a proposition namely instead of paying the $60,000, I should deposit $200,000 with the Banjermassin branch of the Netherlands Trading society. And the balance of $400,000, and 20,000 Malayan colliery shares to be handed over at the exchange of titles on Feb. 1921. When exactly was the $200,000 to be released by the Banjermassin bank? - I think when the titles were transferred to the Goenoeng Batoe Besar Co. the trustee Company of the EMR. The definite terms were not fixed up then. I had a talk with Dr Lim Boon Keng in the evening on the subject and the details were finally settled by Mr Robinson the following morning. I agreed in principal to Mr. Keng Seng’s request and the details were fixed up later. At the second interview on Nov 18, was anything told about when the $200,000 was to be paid? - I told Mr. Keng Seng that I intended to offer the property to M.C Ltd and I could therefore not bind myself to the exact date when the $200,000 would be paid. Why would that affect the date of payment? - For two reasons. First of all I could not be quite certain, when the matter went before the board meeting, and secondly if for some unseen reason MC decided not to buy the property it might take me a day or two to make other arrangements and send down the money myself. Did you give Mr. Peng Seng any indication when a board meeting was to be held? - I may have said that it might be on Wednesday. Did Poey Keng Seng give you a deposit receipt? -Yes and to it was attached a telegram from the bank to Hong Guan dated Oct 4. I gave Mr. Keng Seng receipt for that. It is suggested that you had that receipt introduced to the E.M.R. Co., at some subsequent date. Is there any truth in that? - No, the deposit receipt was not transferable. It could only be cashed by me. Its period had not expired. The deposit had therefore to be broken, and I had to collect what interest I could on it. I cashed the deposit receipt on my return to Kuala Lumpur. I went to see Mr. Robinson of Drew and Napier. I told him I wished to exercise this option and also that I wished to have sub options showing a transfer from Hong Guan to Khoo Wee Chuan and from Khoo Wee Chuan to me; that the consideration of the transfer from Hong Guan to Khoo Wee Chuan should be so much in cash plus 24,000 shares. I mentioned to Mr. Robinson the arrangements I had come to with Mr. P. Keng Seng, asked him to settle the details in legal form and exercise the option. I told him that it was my intention to offer the option to Malayan Collieries Ltd. I went with Mr. Robinson to Messrs. Simms and Delay’s office. We saw Mr. Dickinson there and arrangements were made with regard to the sum of $200,000. Then the documents were duly prepared in Mr Robinson’s office and signed by Messrs. Hong Guan and Khoo Wee Chuan. I came back to Kuala Lumpur on the afternoon of the 19th. Mr Robinson drew my attention to Article 92 of Malayan Collieries Ltd and advised me that I should not vote at the meeting. When I returned I bought none of the documents with me. A board meeting was convened for Nov 23. I received a letter from Mr. England on the 22nd and he probably spoke to me on the morning of the 23rd. he wanted to know whether, firstly supposing M.C. bought the G.B.B. property there would be any objection, in my opinion, to M.C. equipping the G.B.B. with certain plant which he could spare from the colliery at Rawang; secondly whether if I thought that this, to bookkeeping or other reasons, was not possible, I would let him know whether there was much chance of picking up locally such plant as he required.
The hearing resumed at 10 Am on Monday, the 16th day of the proceedings. MM Monday April 7 1924 page 9
Replying to Mr. Carver, the witness said he had a doubt regarding China Minerals. He had reason to believe that the shares might not have been fully paid when the company was wound up. The only document which he had in Kuala Lumpur to check his statement was the liquidators report. He had sent a cable to Loxley and Co. Hong Kong regarding the question but had not yet had an answer. He had doubt in his mind on the subject. Mr. Henggeler passed to the witness de Stutz’s letter of Aug. 25 1920, which mentioned Goenoeng Batoe Besar, but the reference did not cause him to take action or form any intentions reading GBB. Messrs. Loxley and Co. Singapore became agents for Malayan Collieries not before January 1921. At the time he was carrying on correspondence with Mr. Vanderhirst in December 1920, they were not agents. In September 1920 Rawang coal was being sold in Singapore at $15.30, including railway freight. At the meeting of Nov 23, 1920 the witness saw England, who showed him a document dated Nov 14, in his private room at his office. The witness could not remember the time, but it was before the meeting. England said that he would attend the board meeting in order to amplify verbally his report. The witness could not remember having any further conversation with England before the board meeting. Who attended the meting? - Beside myself, Mr. Mackie and Mr. Henggeler. Was Mr. England allowed to attend? - Mr England was called in. There were two other directors of M.C.? - Mr. Brash and Mr Chew Kan Chuan. Where was Mr. Brash? - In England. And Mr Chew Kan Chuan? - In China. Will you describe what took place at the board meeting in connection with Goenoeng Batoe Besar? - I read the report given by Mr. England to the board and stated that Mr. England was waiting outside in order to explain and amplify the report verbally. I told the board that I had an option over this property, that it had been inspected on my behalf by Mr. Hastings, and that Mr. England had also examined it on behalf of Malayan Collieries. I told the board that I was prepared to sell it for a sum of $600.000 in cash and $100,000 in fully paid up shares in Malayan Collieries. I told the board that I was not pressing them to purchase it because if they had doubts upon the advisability of doing so I would keep it myself, and deal with it otherwise. I told the board that I had paid the sum of $60,000 as option deposit. Anything else that you can recollect? - Not that I can recollect at the moment. Had you any documents beyond the report at the board meeting? - No. Had you with you at the meeting in particular either of the documents of Nov 19? - No. I mean the documents of transfer, Hong Guan to Khoo Wee Chuan and from Khoo Wee Chuan to Russell? - No. Where were they? - In Singapore with Messrs. Drew and Napier. Do you remember if any mention of Khoo Wee Chuan was made at the meeting? -No. Was any mention made of the Article 92 of the articles? - Yes. I was asked whether it was in order for me to sell the property to the company, and I referred the board to Article 92 of the Articles of Association. Can you now tell what happened when Mr England came in? - Mr. England was told the price I was asking, and he was asked to give his opinion on the property to amplify his report, and to say whether he thought it advisable for the company to purchase the property. Did he do so? - Yes. Did you take part in the deliberation of the board on the subject? - No I did not sit silent the whole time during the board meeting. Te other directors, if I remember rightly, asked me certain questions, such as “How much Rawang coal are we now selling?” and “What is the analysis of the best Rawang coal?” and I answered those questions. What opinion did Mr. England express? - He informed the board that he thought Malayan Collieries would be very well advised to purchase the property from me at the price which I asked. Did Mr. England and the board arrange particulars? - Yes Did he have any papers with him besides the report? - He had sketches showing the layout of the mine, a plan showing the probably position and thickness of the seams, and the analysis of the coal which had been made by the Municipal Analyst, Singapore. I believe he produced his notebook, and a few other papers. The analysis was done by Mr. Harrington. Do you know what became of the other papers Mr. England had with him? -I believe he took them over with him when he went to G.B.B. Do you know were they are now? - No. Can you give me an idea as to how long this stuff remained there? - I believe about two or two and half hours. My recollection is not quite clear. Did the board come to a decision on the matter? - Yes. Did you cast any vote on coming to a decision? -No. What did they decide to do? - They decided to purchase the property. For the price you asked? -Yes. Mr. Carver referred the witness to the minutes of the meeting, which said that the price was to be the price mentioned in the Khoo Wee Chuan agreement. You said that the name of Khoo Wee Chaun was not mentioned at the meeting. Can you explain how this name came to be mentioned in the minutes? - These minutes were drawn up some time after the meeting, and Mr Coutts, whose duty it was to write up the minutes, asked me what the for of the option was. I described the transaction to Mr. Coutts, and he said... Mr. Braddell objected to the conversation being repeated by the witness he said that evidently what the witness was saying was that these minutes were drawn up to his instructions. The witness- I did not say that. They were drawn up by Mr. Coutts after I had explained what transactions had taken place in Singapore.
MM Tuesday April 8. 1924
Mr. Coutts left at the end of February or in March. He was not in the F.M.S. now nor was he anywhere in the.F.M.S. About 18 months ago he heard that Coutts was in Alberta but he did not know where he was now. The minutes of the meeting of Nov.23 were circulated on Dec. 10 and then Mr. Henggeler enquired who Khoo Wee Chuan was. Witness told him that he was witness’s nominee in whose names he had put the option. Witness might have said that Khoo Wee Chuan was his employee but he could not recollect it. Was the preparation for the allotment return to be sent to the Registrar of Companies a matter in which you were actually concerned? -No. Shortly after this a conference took place with regard to rights? -Yes. A claim was made to certain rights on Malayan collieries shares by the Eastern Mining and Rubber Co? - Yes. In respect of certain shares being issued to them at $16 per share? - Yes. And also certain bonus shares being issued to them? - Yes. I think the Eastern Mining people abandoned their claim to bonus shares did they not? - Yes. And did they get satisfaction with regard to their claim? - Yes. From whom? - Messrs. Russell and Co. On June 31 you sent in an application of allotment return and in that you gave a number of Chinese names? - Yes. Where did you get those names from? - From Hong Guan and Khoo Wee Chuan. Not all, but with the exception of the names of Khoo Wee Chuan, Hong Guan and myself the other names were given by them. Did Khoo Wee Chuan give you anything? - Yes. He handed you a paper? - Yes. Which you found last week or so? - I think it was found on the 20th with the other documents which were found by Mr. Brown. That paper is written partly in ink and partly in pencil. In whose handwriting is the writing in ink? - In the handwriting of Hong Guan. In whose handwriting is that part in pencil? - That is my own handwriting. It contains the names of the nominees and the number of shares allotted? - Yes. Was anything said about Khoo Wee Chuan’s interest on the transaction? - I promised to give him a certain number of shares. Was anything definite ever arranged? - No, I cannot recollect that I arranged anything definite, but in my own mind I thought of giving him 500 shares. You signed the agreement in this transaction for both parties? - Yes. I think there is an alteration in the financial year of the company from June to December? - Yes. Was that alteration in any way connected with this transaction? - No. Yes as far as it was concerned with the purchase of Goenoeng Batoe Besar. Was it intended for the purpose of concealing this transaction, as far as you were concerned? -No.
Mr. Carver finished his examination in chief at 11.15. Mr. Braddell started his cross-examination.
September 27 1920 "To whom it may concern. This is to authorise Mr. Ng Hong Guan to apply for options over coal properties in the Dutch East Indies signed “ For Malayan Collieries, Ltd., J. A. Russell and Co. Managing Agents and Secretaries.”
The Straits Times, 9 June 1922, Page 10
September 27th 1920
Dear Mr. Hong Guan, With reference to your visit of this morning, I have considered the proposition which you put before me, and wish to say that though I am prepared to send an expert to prospect and report upon Goenoeng Batoe Besar, I consider the price asked is a high one. I am not anxious to obtain an option over the Goenoeng Batoe Besar property, because I have just secured one over Seboekoe. I understand that Seboekoe is more difficult to work than Goenoeng Batoe Besar, but the quality of the coal is about the same and the quantities are greater. We should have to spend more money in developing Seboekoe, but against this would be the fact that the price asked for Seboekoe is much cheaper than you and your friends require for Goenoeng Batoe Besar. Once Seboekoe were developed would be able to compete with Goenoeng Batoe Besar, and I would point out that although you are getting a very good prices at the present time for Goenoeng Batoe Besar coal, with competition these prices cannot continue- and I expect to see the price drop to about $15 a ton cif Singapore. Both Seboekoe and Goenoeng Batoe Besar coal are the same as Malayan Collieries coal, that is to say they are high class lignites or sub bitumous coal of the tertial measures. The two Borneo coals are better than our coal because they have less water and will store, and therefore can be used for shipping- but, if we briquette our coal, it can also be used for shipping, and a briquetting plant is now on its way out from England. In regard to ash, our coal is much superior to the Borneo coal, and while we have two seams each 30 to 40 feet thick, have an area of nearly 10.000 acres and over 1000 million tons of coal Goenoeng Batoe Besar appears to be a very small place and only contain 12 million tons of coal. Mr. Platt says that 12 millions should be confirmed by further investigation, and this means that we ought to do a good deal of prospecting. In view of the distance of the Goenoeng Batoe Besar from Kuala Lumpur, of the absence of prospecting work done on the property, and of the high price asked, and the further large amount of money we should need to sink in development, (say for the latter $1,500.000) we should want an option for at least six months. Yours sincerely (sgd) J. A. Russell.
The Straits Times, 9 June 1922, Page 10
Malayan Collieries Ltd. October 1.
Dear Mr. Hong Guan, I have received your wire reading as follows:- “Jar Kuala Lumpar “ Fixed up option put deposit five per cent, sixty thousand Hong Kong Bank in joint names yours and Eastern’s money will not forfeit boat leaves tenth visiting you Sunday morning confirm wire Eastern share balance one thousand shares pay half fifty dollars each how much you taking wire or wait till I see you. Ng Hong Guan.” To this I replied as under:- “Nghongguan 227 Telok Ayer Street Singapore I confirm arrangement will meet you in office Sunday morning at ten. Russell” I then sent another wire reading:- “In drawing up option please ask for six weeks from time of boat leaving Singapore as one month insufficient for my men to go and return with report also ask that deposit be with Kuala Lumpur branch of bank. Russell” I sincerely hope that you will do your very best to get six weeks instead of only one month’s free option dating from the time of sailing of your boat to Pamoekan bay. It would be almost impossible for my men to report to me by cable, while a letter would take just as long to come as it would for Mr. Hastings and the others to get back here themselves. The only safe way would be for Mr. Hastings to return to Kuala Lumpur and make his report to me personally. He would have to get back a few days before the expiration of the period of the free option. I estimate that one month would be insufficient time, but that six weeks would be just long enough. Please do your very best to get the free period increased to six weeks. Also please arrange that I pay the 5 per cent. deposit into the Kuala Lumpur branch of the Hong Kong and Shanghai Bank. It would be much more convenient for me to do this and would make no difference to the Eastern Mining and Rubber Co. Perhaps Mr. Phoey Keng Seng would have to come up here, but I think it would be a good thing if he did so in order that we could have a private talk about future arrangements. He could go out and have a look at the colliery. If you bring him up I suggest that you do not bring him up on Sunday, but that he comes later in the week. However we can talk over the advisability of asking him to come to K.L. on Sunday morning when you are here. Perhaps you think that it would be absolutely necessary for me to go to Singapore in which case there would be no need for Mr. Keng Seng to come here. Yours sincerely, (sgn) J A Russell
The Straits Times, 9 June 1922, Page 10
Option. This option is given to Mr. Ng Hong Guan to send his representatives to prospect and report on the coal concession at Goenoeng Batoe Besar, Dutch Borneo of Messrs. Eastern Mining and Rubber Co., Ltd within a period of 5 weeks after the arrival at Goenoeng Batoe Besar of the steamer Nanyo Maru No. 1 or any other first steamer on condition that he deposits the sum of $60.000 in the joint names of J. A. Russell and Eastern Mining and Rubber Co., Ltd., for the exercise of the option to acquire the following rights:- (1) The right to work the Goenoeng Batoe Besar mine for the period of sixty years on the terms of the lease held by the Eastern Mining Co., Ltd., on payment of (a) $600.000 in cash (b) $600.000 in shares in Messrs Malayan Collieries Ltd. At $30 a share. (c) To pay the Royalty to the Eastern Mining and Rubber Company, Ltd. as per annexed schedule on the sliding scale according to output (d) The completion of this transaction is to take place two months after the exercise of the option by transferring the above mentioned $60.000 to the credit of Messrs. Eastern Mining and Rubber Company Ltd. (e) Should the option be exercised the sum of $60,000 shall be deducted from the price of the lease consideration, and should, at the end of this further period of two months the option not be exercised, the above mentioned sum shall be forfeited. (f) The option holder or sub –leaser undertake as an essential part of the contract to acquire the charter party relating to the steamer Nayo Maru No 1 on the same terms and conditions held by the eastern Mining and Rubber Co., Ltd., (g) To take over the labour force and refund proportionate amount of advances incurred by the Eastern Mining and Rubber Co. Ltd. (h) to pay for at cost all materials, machinery and plant not yet used lying in store at the time and also for all materials, machinery and plant bought as shewn in our books as from July 1, 1920. (i) In respects to conform to conform to the conditions of the different leases and requirements of the Netherlands Indische Government, and to guarantee the Eastern Mining and Rubber Co. Ltd. from all losses, claims or demands for breach of different conditions of the lease passed over to the sub leaser. (j) The sub -leaser will pay all the rents due to the Government and royalties of the Mine charged by the Government, also the taxes to be charged by the Netherlands Indische Government, now, or in future to be levied. (k) After the allotment of the 20,000 shares of Messrs. Malayan Collieries, Ltd., the Eastern Mining and Rubber Company, Ltd., has the right to nominate a director on the board of the Malayan Collieries, Ltd., and to appoint representatives to check the output of the mine. (l) To take over all the stock of coal already brought to the surface by the Eastern Mining and Rubber Co., Ltd., and shall be paid for at current market rate. (m) This option is, however, subject to the approval of the shareholders, which the directors will endeavor to obtain within the five weeks after the arrival of the steamer Nayo Maru No1 or any other first steamer at the mine at Goenoeng Batoe Besar. This option cancels all previous options. Eastern Mining and Rubber Co., Ltd., Sd. P. KENG SENG, managing Director.
The Straits Times, 22 December 1922, Page 9
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