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Fraud - Walter Watson Hughes & the Moonta and Wallaroo Mines
Patricia Sumerling
I should begin with a quote from Balzac, ‘Behind every great fortune there is a crime’.
Keep this in mind as I relate the colourful story about illustrious local, Sir Walter Watson Hughes, and one of the biggest frauds perpetrated in 19th century SA when he became involved with the discovery and establishment of the Moonta and Wallaroo Mines aided and abetted by the four directors of the Elders, Stirling Company. They were Robert Barr Smith, Thomas Elder, John Taylor and Edward Stirling.
Strong arm tactics in securing the Moonta Mine by Hughes and partners’ rewarded them not only with enormous wealth but with rapid upward social mobility which the new mining ‘frontier’ helped create, or at least it gave them the freedom to ‘rise’ up the social scale.
The Moonta Company was the first mining company in Australia to pay dividends of more than a million pounds by 1877. Apart from this claim to fame, what makes the history of the Moonta Mines notable is that from the time of their discovery in May 1861, there were allegations by rival mining syndicates that the leases of the mines were claimed fraudulently. Allegations and the protracted litigation that followed, went on for eight years.
Hughes as the central figure of this talk, was referred to in tantalising ways, such as ‘a sly old fox' by Thomas Elder, 'opium smuggler', [he] should have been hanged by the neck', ' a crook'. He even confessed in one of his last letters to his nephew John James Duncan shortly before his death, ‘I’ve been a sinner all my life’. So he had a certain character.
Hughes was born in Scotland in 1804 and lived out his last 20 years at his English manor not far from London where he died aged 83 on New Years Eve 1887. As a British ‘adventurer’ Hughes spent some years in India and the orient where he worked for business colleagues of the British trading firm of Ker Rawson as captain of one of their ships the Hero until 1838. In that year he came to South Australia and set up as an agent for his Singapore colleagues within the company of Bunce and Thomson who were successful merchants.
But when Bunce & Thompson went bankrupt in 1844, Hughes turned his interests to sheep farming on Yorke Peninsula where he took out an annual occupation lease in an area that covered a good third of the peninsula. This was two years after South Australia’s first copper mine at Kapunda, followed by that at Burra.
An 1887 Scottish publication stated Hughes ‘had only been a few months in the colony when a holiday excursion led him to York’s Peninsula’. Anyway, he took out his first mineral claims there in 1851. In the same year his occupation leases were replaced by 14 year pastoral leases. Hughes was ‘the man on the spot’, occupying this land from 1844 until the discovery of copper at what became the Wallaroo Mine in December 1859.
Then when copper was discovered 15 months later at Moonta in May-June 1861 and its ownership disputed, from this date onwards, until ownership was legally vested in Hughes and the Elders partners, there was always one of their men camped there to protect their interests. Who could doubt the power of the ‘man on the spot’ and when possession is nine points of the law.
Hughes found copper years before, but remained quiet and bided his time. He had no means to develop a mine for he was in debt to his former friends in Singapore, and in December 1858, he owed Elder, Stirling Co. £6000. A fortune at the time. And let’s think about it, no single person could establish a mine on his own account, and this was the experience of then Yorke Peninsula sheep farmer, Walter Watson Hughes.
When one of Hughes’ shepherds found copper on the site of what was to become the Wallaroo Mine in December 1859, he set up in business with brothers-in-law Edward Stirling and John Taylor who were both partners of the Elder, Stirling Company, the forerunner of the company Elders IXL. However, as Robert Barr Smith recalled when he found out what had been going on behind his back at the time of the discovery of the Moonta Mine, ‘the three of them would have gone bankrupt had they persisted with the Wallaroo Mine and not found the Moonta Mines, which was solidly backed by the company and come to me and Tom Stirling.’
While there was no dispute over ownership of the Wallaroo Mine, its business practices were much criticized by John Barrow, editor of Advertiser, who spotted serious irregularities, He believed a swindle was perpetrated when the mine was offered to the public as a Joint Stock Company in January 1861.
He noticed that the prospectus offering 40,000 shares at £5 each to total £200,000 was an outright swindle, for no part of the Wallaroo Mine was included, even though it was implied. Barrow saw that Hughes and his partners intended using only £30,000 of moneys raised to invest into the mine while pocketing the rest and reserving 10,000 shares for themselves. Public exposure by Barrow, saw the prospectus changed overnight to become a new mine called the Wandilta Mining Company, but it still included no part of the Wallaroo Mine, which the original prospectus had implied. Barrow pondered ‘But what is the difference? The rose by any other name will smell as sweet'.
In the select inquiry in May 1863 witness John Western, a merchant's clerk for Elder, Stirling & Co. revealed he was told by an informant that while editors of the Adelaide newspapers 'had got shares in order to gag them', Barrow received none because he had exposed the great Wallaroo Company swindle in his paper. Western also stated that unless the newspapers were gagged, ‘Captain Hughes would never have got the mine.’
Only months after the bad press of the Wallaroo Mine, one of Hughes' shepherds, Patrick ‘Paddy’ Ryan, discovered copper ore south of the Wallaroo Mine at Tipara (Moonta). (But this is debatable, for Eustace Reverly Mitford, better known as Pasquin, was the original discoverer.
Unfortunately for Hughes, when Ryan could not report the discovery directly to him, he called upon Hughes’ nephew, who turned him away believing his claims were due to his drunken state. Turning Ryan away set him on a series of events whilst in an alcoholic stupor, that included making two other legal and binding agreements on his way to the Adelaide Land Office, including one in the Black Bull pub in Hindley Street. When Ryan arrived at the office on 24 May 1861 with one of his new chums, Joseph Johnson, he was so drunk that when he was unable to describe the place of discovery, his first application was refused.
But at this point, the news leaked out in Adelaide about Ryan’s bungled attempt to lodge the claim, and helpful friends sent Hughes two notes in Adelaide. Usefully, one was from George Boothby, an employee at Stirling, Elder Company. (And son of Judge Boothby) who was rewarded with five shares three years later coincidentally, at the same time when the Supreme Court Moonta case was sitting in 1864 (This was 5% of the entire shareholding).
In the second note, a vague description from informant Robert Hall that the mine was ‘about three miles in from the Wilka–wat Hut, and about two miles and-a half to the south of Bald Hill’, saw Hughes make an application for four mineral leases on 25 May, a day after Ryan’s bungled attempt. Hughes’ application was accepted by the Land Office in the presence of the Surveyor General, George Goyder. This transaction was in the name of an Elder employee, on Ryan’s behalf, but without his permission.
In doing so, several abuses of the mining regulations were made and worse, there was no identifiable description marked on a map at the Land Office, because the map itself was inaccurate. We’ll come back to this fact.
When Goyder asked Hughes to describe the claim, Hughes could not be specific – because he hadn’t the foggiest idea where it was. Without realising the repercussions, the helpful Goyder directed Hughes what to write on the applications. He then instructed his assistant not to draw attention to them. At this point four irregularities were perpetrated - any one of which, when legally challenged, could have annulled the mining claim under the existing regulations. The application should have been refused there and then but it wasn’t. But then who could have predicted the repercussions of this transaction.
Then, Hughes rushed back to Yorke Peninsula to find Ryan and ‘encouraged’ him into signing an agreement that gave him ten percent of the mine’s shares as well as summoning him to show his surveyor, Gavin David Young, (Hughes brother-in-law) precisely where the discovery was made.
Meanwhile, one of Ryan’s syndicates, one of those made on his way to the Land Office, with Samuel Mills and Frank Thornton, was back at Yorke Peninsula surveying what they believed was their claim. When the news of their presence reached Hughes’, he moved swiftly into action. And this is where the tale of the great ride originated. With the promise of a fine horse as a reward, Hughes asked the 20 year old Will Horn to ride immediately to Adelaide to lodge a further 26 claims that would act as a buffer zone completely surrounding the original four claims he had applied for on 24 May. He didn’t do this with the Wallaroo and it caused a ‘rush’ that Hughes didn’t want repeated.
The epic ride is the stuff of boys’ adventure stories when Will Horne rode all night to ensure that Hughes’ man arrived at the Land Office before the Mills and Thornton Syndicate, on 3 June 1861. On arrival, another Hughes’ man, who was familiar with the lay-out of the Land Office, took over from Horne and dashed in with the new applications via the back door which was rarely used. This is why he was served first and why the rival claimants ‘pipped at the winning post’, believed they had been hoodwinked.
The disgruntled claimants who accused Hughes of fraud and deception, lobbied the government for an inquiry into the Tipara Mineral Claims which took place nearly two years after the mine was first discovered. It was set up to analyze the Land Office’s procedures for granting mineral claims. It was stated at the outset that it was not a court of law to decide whether Hughes was legally entitled to the mining leases or not. What came into scrutiny was how the Land Office dealt with the other claimants and came to reject them in favour of Hughes. Findings were that the Land Office, although strongly criticised, was not guilty of any misconduct. However, when the report was tabled in parliament, according to James P Boucaut, the Attorney General, ‘the House did not adopt the Report on the ground that the dispute was one for the law courts’.
And most important of all was the damming evidence of the mineral maps. Here they are.
Opinions given by two Crown Land Commissioners from NSW and Victoria each stated that Hughes was not morally entitled to the mining leases. But even if they were at fault, Hughes and his partners could not be deprived of the mine by the committee of the inquiry. In securing the Moonta Mine, evidence revealed much blame for the fraud was partly attributed to an incompetent colonial bureaucracy unable to accommodate the needs of the burgeoning mining industry and the serious infighting within the legal system throughout the early 1860s when Justice Boothby (who presided over the Supreme Court Moonta Case in 1864), as the only judge in SA history, was removed from the Bench.
Naturally, the claimants were dissatisfied with the outcome of the select inquiry. And when the hard-done-by syndicate of Mills, Ryan and Thornton were advised they would win ownership if they sought legal redress, they embarked on a long and costly legal journey.
To do this, they first needed to raise funds to pay for legal costs and set about to increase the size of their syndicate by advertising for sympathetic businessmen about town who were prepared to invest in a fund that would pay future legal costs. Because of the allegations of a fraud and the odds of winning in their favour, there was no shortage of applicants.
The case was heard in the Supreme Court in 1864 with the verdict given in August. When Hughes thought legal ownership of the Moonta was in the bag with all the riches to boot, even though still being contested, where was he? - Well, he was in Melbourne on his way to join his ship from Sydney to England to retire. But he was subpoenaed on 26 April 1864, and accompanied back to Adelaide to appear as a witness in the Supreme Court case.
In the Supreme Court this is where rising star Sir Samuel Way made his name, even though he lost the fight for the claimants, for the case broke down on technical grounds during the preliminary proceedings. (Scire Facias)
The frustrated claimants, advised by their lawyers, took the case to the Privy Council in London, the first such case from SA. When judgment was delivered on 1 February 1866, Hughes and partners remained as the legal owners, for the Privy Council upheld the decision of the Supreme Court that the leases could not be re-allocated when there existed a prior problem in the Lands Office.
At this time, Attorney General and Chief Secretary, James Boucaut was legislating for the new Equity Act that contained clauses that operated against the mining interests of Hughes and his partners. His position was dubious because he was also legal advisor for the claimants. With the taint of conflict of interest hanging over his head, Boucaut had no option but to resign along with his ministry in April 1867 in a year that proved to be South Australia’s annus horribilis. The Burra Mine closed in May for 3 years and threw many hundreds of men out of work; Judge Boothby was removed from office in August after several years campaigning to oust him, and there was the effect of a crippling drought in the north of the colony. Then in February 1868, Governor Daly died in office.
When the operations of the Moonta Mines were so profitable as well as providing jobs for a large work force, its contribution to the colony’s economic development was viewed critically important. In early 1867, when the new court case by the claimants was being planned, there were real fears that the mines would be closed. The newspapers were full of pleas not to close them, despite the fact that ownership was in dispute. Public meetings by miners and tradesmen in the Copper Triangle made pleas that mining operations were not obstructed. Of note was what the public couldn’t and didn’t know, was that the banks were secretly informed by the government that it had no intention of closing the Moonta down.
At this point with legal machinations underway to bring the case to court under the Equity Act, Hughes and Co were so outraged, that they could be deprived of the mine by bias legislation, they made three separate petitions. One was delivered in London to Queen Victoria and two were addressed to Governor Daly complaining about how the new Equity Act would interfere with their rights of ownership of the Moonta Mine.
But just as the case was about to begin, despite Hughes and co’s protests, the claimants admitted defeat because their funding had dried up. Hughes and his partners won only because they had no lack of funding.
After all this scrutiny, Hughes and his four business partners still owned the mine, despite the damning evidence they were not legally or morally entitled to it.
Further, when the Mills' syndicate negotiated for a settlement out of court for £8000, Hughes and partners conditions were that as proprietors of the mines, they be granted the freehold of their mines. This was organised by the premier of the day, HBT Strangways. The final event of the whole saga was that the technical errors of the Moonta mining claims, were retrospectively sanctioned in the Mineral Leases Validation Act of January 1869, which was specifically formulated to accommodate Hughes and his partners.
But how had Hughes and his mates pulled it all off?
Hughes and his partners in their interactions with banks, the Land Office, their employees and the legal system, in order to possess the mines, were those of bully boys made possible by the immeasurable financial support of Hughes’ partners of the Elder, Stirling Company.