Overlanders #2: Watson and Hunter (B)

Drovers and Dealers 1835-1845
Watson and Hunter (B)

The story of the overlanding firm of Watson and Hunter is. in brief, a big 'noise' followed by a big 'crash'. The first element is described here by the squatter, and successful competitor, George Russell of Clyde Company, and overlander and employee of Watson and Hunter Edward Bell. The second element is explored through a comprehensive newspaper report of the final court case in the saga. The judgment of the Supreme Court of New South Wales, on appeal from the Resident Judge of Port Phillip, supplies an overview of the firm from its Scottish beginnings in 1838 to the final desperate acts of its colonial principal in 1842.

1. A big 'noise'

PL Brown (ed.), [1881] 1935, The Narrative of George Russell of Golf Hill, OUP, London (Part II, The Clyde Company: Port Phillip 1836-50, Chapter XVIII, Speculation, pp 194-5)

"...[In 1839] Mr James Watson brought out a considerable amount of capital with him...entered into a partnership with a Mr John Hunter...and the firm of Watson & Hunter were well known for several years as being large owners of station property...bought a great number of sheep and cattle in different parts of the colony. Their headquarters were at Keilor, on the Saltwater River...But although they commenced with considerable capital, they invested beyond their means, and got into financial difficulties...Mr Watson...the principal manager...was rather extravagant in his management and inclined to speculate. The result was that in a few years this large firm came to grief, and their affairs collapsed...Nothing was afterwards heard of the important firm of Watson & Hunter."

TF Bride & CE Sayers (eds.), [1853] 1983, Letters from Victorian Pioneers, Currey O'Neil, South Yarra Vic (Edward Bell, Letter dated 12 August & 15 September 1853)

"...[In autumn 1840] I went back again with Mr [John] Hunter to Sydney to make further purchases of horses and cattle, taking some 16,000 Pounds with us for the purpose...We had altogether about 2,000 head of cattle and about 70 horses, with which we again started for Port Phillip, and after many losses and crosses, eventually formed our main cattle station on the upper part of the Broken River...From the Broken River to the Devil's River...a distance of about 20 miles, the whole country was claimed and stocked by Messrs Watson and Hunter."

2. A big 'crash'

The Sydney Morning Herald, Tuesday, 25 November 1845, p 2 ('Law Intelligence', Supreme Court, Banco Sittings, Saturday), http://trove.nla.gov.au/ndp...ArticlJpg/12883700/3

[Watson and Hunter came to a crashing close in 1842, but its complete, legal closure did not occur until the Chief Justice delivered the following judgment in 1845. At first reading, the Appeal Court findings appear complicated. This confusion is in large part resolved when the nub of the case is crystallised. What is really at issue is that, in the colonies, James Watson and John Hunter gave the impression, by their words and their actions, that they were the firm. However, they were actually spending someone else's money.]

Before their Honours the three Judges.
The Marquis of Ailsa, Alexander Hunter, James Ogilvie Fairlie, Lieut-Colonel James MacDowall, Sir Charles D'Oyley, and Others; - PLAINTIFFS
James Watson, John Hunter, and Henry Mason ... ; - DEFENDANTS
The Chief Justice delivered Judgment in the above case as follows: --
This is an Appeal, by the defendant, Henry Ward Mason, from the Decree made in this suit, at Port Phillip, by His Honour Mr Justice Jeffcott, the then Resident Judge, on the 21st day of September 1844, whereby a deed dated the 9th August 1842, executed by the defendants James Watson and John Hunter, assigning a very large property to the said Mason, consisting of sheep, horses, and cattle, was declared fraudulent and void, as against the plaintiffs;"

[In summary, the real owners of the firm Watson and Hunter are suing to recover what they believe are their assets. Their claim is against Mason, who currently has possession by his rights as an assignee of an 1842 agreement between him and James Watson and John Hunter. Essentially, what has happened here is that JW and JH ran out of money and 'mortgaged' the assets of H and W to get more. Mason is therefore similar to a creditor  who lends the money, but then forecloses on the security underlying the debt when due interest and principle payments are not paid. The plaintiffs, who are the original investors in H and W, have protested loudly that JW and JH had no right to mortgage the property on behalf of the firm without their consent and so Mason is relying on a fraudulent document.
The Victorian judge agreed with them. So Manson, the lender of 20,000 Pounds, has appealed to the New South Wales bench, to reinstate the legal power of his 'mortgage'.] 

2.1. The original 1838 agreement

[This matter is much simplified when we realise who the Hunter referred to by the firm's name Watson and Hunter actually is. It is not John Hunter (defendant). Nor is it either of the 'hard-riding Hunter brothers' Alexander (Alick) or James (Jimmy). It is Alexander Hunter, Writer to the Signet (a lawyer), of Edinburgh, Scotland. This Alexander Hunter is manager of the Scottish or investor end of Hunter and Watson, overseeing the financing of the operations of which James Watson was to be the Australian manager. He represented the interests of the Marquis of Ailsa etc, the owners of, or 'shareholders in', Watson and Hunter. He also happened to be John Hunter's uncle and father of Alick and Jimmy, but these family relationships with Watson and Hunter employees were of a different legal kind to those fiduciary responsibilties which he had to the Scottish investors in the firm, (who invested a total of 43,250 Pounds in the venture).]

"The facts in the case, as to which there was no dispute...are the following. The defendant, John Hunter, a nephew of the plaintiff Alexander, emigrated to Port Phillip from Scotland in the year 1838; having some money of his own...and some of other persons...his constituents. Shortly after his departure, the defendant Watson decided also on emigrating to Port Phillip; and on the 5th December 1838, an agreement was entered into at Edinburgh, between him, Alexander Hunter, and the latter's son Alexander M'Lean Hunter:...By that agreement, Watson undertook to receive the son as an apprentice in agriculture; and to invest 1,000 Pounds for him, then paid into Watson's hands for that purpose...Then, Alexander Hunter engages to send Watson not less than 5,000 Pounds, belonging to the said Alexander and his friends; which Watson binds himself to invest in stock, and to manage in the colony, receiving for his trouble and expenses therein, one third of the annual produce...Watson undertook to send home to Alexander Hunter, regular yearly accounts of the stock, and their increase; and to remit, to Alexander and his friends, such portions of the profits as they might direct -- retaining the surplus in the colony, on the same terms. It was lastly stipulated, that John Hunter should be entitled, if thought fit, to join Watson in partnership under that contract; and Alexander M'Lean Hunter, after November 1842, was also to be admitted as a partner, from that date: --- the share of each, as to their own stock, to be in proportion to their capital; as to the renumeration of the partnership, for managing the stock of others, the shares of each to be equal."

2.2. Bold beginnings 1839-1840

"Under this agreement, the defendant Watson sailed from Scotland; and, on his arrival, entered into partnership with John Hunter, the latter throwing in to the Company...the stock previously purchased by him from his own constituents...This was about the middle of the year 1839; when wages and provisions, and the prices of every description of cattle, in all parts of the colony, were at the highest. In the course of that year, and in the month of January following, large sums were remitted, making...no less than 23,250 Pounds. With this, sheep were purchased at 34 shillings a head; horned cattle at 7 Pounds; and other stock in proportion...In addition to the sum mentioned, it would appear that 2,000 Pounds of Alexander Hunter had been sent out; but that this was appropriated by Watson, to the expenses of the concern,  according to agreement, they being very heavy."

2.3. Coming unstuck 1841

"Some time afterwards, Alexander Hunter announces that, in addition to a third of the increase, one half of the wool would be allowed Watson and Hunter, in respect of the non-assignment to them of convicts [cheaper labour]; and a correspondence is carried on, in the years 1840 and 1841, between these parties. During this period, or at least the earlier part of it, money still poured in -- 18,000 Pounds additional and upward being remitted. All the moneys thus sent, from the commencement, were supplied by different individuals; but, after the agreement of 1838...the hand actually remitting was that of Alexander Hunter. Their names, and the amounts sent by each, were always mentioned with the remittance...

The profits of the year 1840 were not satisfactory; but in 1841, with the extraordinary depreciation which then occurred in every kind of colonial property, came complaints of severe attacks of disease among the sheep; annoyances from the native blacks; losses from unavoidable concentrations of the flocks; ruinous expenses; and inability to effect sales...At last, in July 1841, Watson writes to Alexander Hunter, asking to be relieved from the charge: he states that property has become almost valueless and announces that, in order to avoid sacrificing the stock, in the then state of the market, the firm proposed to draw on him, in the hope that within a twelvemonth, there would be better times. If their drafts be not paid, they say in a letter of May 1842, (on hearing of the bills being dishonoured,) every thing would be swamped."

2.4. Creative accounting 1842 

"In point of fact, Watson and Hunter drew on Alexander Hunter, between the months of July 1841, and February 1842, to the amount of 20,000 Pounds or thereabouts, which they procured to be indorsed by various parties in Melbourne, and then cashed by the Banks. Of these indorsers, the defendant Mason was one, to the amount of 8,200 Pounds. The several bills thus drawn, with the exception of one for 600 Pounds, the plaintiff Hunter refused to honour...there was a very large amount of these bills coming back dishonored; and the indorsers were, of course, anxious to know how they were to be provided for. Meetings took place, accordingly, between them...and the drawers, and two of the local banks, at which propositions were discussed for the advance of money, to take up the several dishonoured bills, with the heavy charges thereon, and for the making over of property to secure its repayment...the assignment of the 9th August 1842 was executed..."

[By the time Alexander Hunter and his investors in Scotland realised that their Australian manager James Watson was out of control, it was already too late to do anything but put a stop to the flow of funds. In response, the colonial creditors who had been hurt by this cessation of cash, who had gone on giving Watson credit in the belief that he would be able to meet his debts, were in no mood to bear the cost of the Watson and Hunter collapse themselves. They all had meetings in Melbourne, certainly, but it would be naive to believe that these commercial figures did anything more than dictate their terms to the spendthrift. They were looking after their own interests and had no sympathy for the company's creditors in Scotland,  (or the hapless Hunter family).]

2.5. The final 1842 assignment

"The arrangement on which that assignment was based was...Mason was to give his promissory notes, or acceptances, in Watson and Hunter's favour, at 8 and 12 months, for 20,000 Pounds; with which the several dishonored bills...were to be taken up...The property was to be carried on and managed, as far as possible, but sales were to be effected to raise funds as occasion might require; the 20,000 Pounds, with interest at 12.5%, was to be repaid; a commission also on all sales and disbursements, was provided for; and finally, after those deductions, and payment of...all expenses incidental to the management, and arrangement generally, the surplus property remaining, was to be restored [!] ...The deed recites...that Mason had consented...to lend them 20,000 Pounds upon the security of that property...and then...Watson and Hunter covenant to convey to Mason, all and singular their lands and real estate, and they convey and assign to him all their live stock and cattle, and other estate..."

[Ownership of the firm's heavily discounted assets were effectively transferred to the Port Phillip creditors. It was impossible for Watson and Hunter to trade out of the situation. Both the prevailing climate of recession and the initial high prices paid for sheep and cattle prevented this from being achieved before Manson's 8 and 12 month promissory notes were due. And the Appeal Court in Sydney, possibly applying the well know colonial legal precedent that the mother country was a long way away, decided that this arrangement was probably for the best.]

2.6. Judicial reasoning: the 'necessity' of taking a con-man at his word

"There was much controversy, on the hearing of the Appeal, whether the defendant Manson's admission, that he knew of the agreement of December 1838, was in fact read against him...But supposing that it was, we are not prepared to say that the admission, such as it is, will much assist the plaintiffs. Here are herds of cattle, horses, numerous flocks of sheep, depasturing stations, under the direction of these persons. The property appears to have been bought, and when thought necessary sold, at their sole discretion; and, it would seem, in their own names. The whole, or nearly the whole, of the stock, bore their brands, the letters W. and H., being merely arranged differently, in some instances...The wool is sent home, as they think fit; and they draw in their own name for the proceeds. Sheep and cattle are killed to furnish meat for their establishments, servants are hired, and supplies procured by them. Under such circumstances, will information that some other parties unknown had some interest, of some kind, on the property, or some part of it, defeat a creditor's right to deal with them for that property? If so, there will be few persons in this colony with large capitals invested in stock, with whom it would be safe to deal..."

[As for the Scottish investors claiming ownership of the properties: "They had trusted Hunter and Watson, not only with its possession, but with the indicia and appearances of proverty, in the stock; and having thus allowed them to obtain a false credit, by enabling and permitting them to appear as owners, the plaintiffs must take the consequences". Of course, having pronounced their real reasons for supporting Manson (obiter dicta!) the three judges then backed off: narrowing their decision to an arcane legalistic argument about what constituted a proper action under contract law, versus that of the equitable jurisdiction, concluding that the plaintiffs had sued in the wrong court! But whatever their reasoning, the decision was clear enough: "The Decree in this cause, made by the Resident Judge, bearing the date 21st September 1844, is now reversed".]

2.7. Postscript: 'the hard-riding Hunter brothers'

Alexander Hunter, Letter, State Library of Victoria, MS 5402, MSB 41/1, (No. 11, 'Devils River', July 1841)
"26th, Got My 100 head branded my brand is [four leafed clover] I have still to get 2 years increase branded. I only took 100 as they put a much larger price on them than I expected 6 Pounds was what I paid Bill Arundel got 240 head & paid 7 Pounds - the pound was taken off mine as I had the trouble of bringing them down I got the pick of 5 cows out of all WH cattle for 15 Pounds a head."

James Hunter, Letter, State Library of Victoria, MS 10300, MSM 152, (2 June 1842)
"...Howqua thinks you will not send Frank and Willie out when you hear of the smash...Alick is safe but I will most likely lose everything..."

Annie Baxter, Diary, State Library of Victoria, MS 7648, MSM 35, (29 June 1845)
"['I do feel sorry for the Hunter boys'] Yesterday all the gentlemen returned [from a reprisal raid on the 'Mt Eele's blacks'], with the exception of Mr James Hunter who is gone to seek a run on the Glenelg..."

Evelyn Sturt, Letter, State Library of South Australia, D6315/2L, (5 August 1851)
"We have persuaded James Hunter to go and live on his station this is the only means of ensuring success to their squatting efforts Alick is too unstable and Frank too fond of cutting about..." [Kalangadoo S.A., occupation licence gazetted to James Arthur Carr Hunter in 1846, pastoral lease no. 184 granted in 1851 to James Arthur Carr Hunter and Alexander McLean Hunter, lease sold in 1854]


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