In re Jubilee Cotton Mills Ltd

Julian Burnside

In re Jubilee Cotton Mills Ltd arose out of a company promotion in which the business of the newly floated company was sold to it by the promoters for a gross overvalue. It was a misfeasance summons, heard by Astbury J (reported at [1922] 1 Ch 100; on appeal at [1923] 1 Ch 1; in the House of Lords [1924] AC 958). However it is interesting in a quite different way, as the last visible reminder of England’s most charismatic corporate fraudsters, Ernest Terah Hooley. Hooley’s story is an eloquent reminder that some things never change.

In 1897, Hooley was one of the best known men in Europe. He was feted by the public, lauded in the press and befriended by the titled heads of Europe. He was a financier with the Midas touch; a man of charm, wit and huge generosity. Unfortunately, he was also inclined to take liberties with the truth and other people’s money. This led him in turn to vast wealth then bankruptcy (twice) and ultimately to gaol. The curious thing is that, despite Hooley’s popularity and fame during his lifetime, he is now all but forgotten.

Hooley was born into a modest middle-class family in Nottingham. He was tee-total and a non-smoker. His only hobby was playing the harmonium for the Baptist Church. He gravitated to the City of London and came to prominence in the 1890s. In 1896, he saw that the bicycle trade was on the cusp of great expansion, and he recognised that rubber tyres were an important commodity for the bicycle trade. He floated the companies which manufactured Swift, Singer and Raleigh bicycles respectively. He bought the company which made Schweppes products and sold it into a public float. But his greatest coup was his float of Dunlop.

He negotiated to buy the Dunlop Pneumatic Tyre Company for 3 million pounds. He borrowed the amount stipulated as the deposit and floated a public company. The proceeds of the float were used to pay the balance of the purchase price and he then sold Dunlop into the newly floated company for 5 million pounds. The transaction was completed within a few months, and Hooley’s personal profit out of it was 2 million pounds.

In the 2 years 1896 and 1897, Hooley made personal profits totalling 7 million pounds. This is a handsome amount even now: but it was a staggering figure at the time: a time when the great leaders of the English Bar (who were later to profit handsomely from Hooley’s business dealings) might earn 40,000 pounds in a prosperous year.

As Queen Victoria’s diamond jubilee approached, it seemed certain that Hooley would receive a baronetcy. He was at the height of his wealth and fame. He had given vast amounts to the Conservative party, which was thought to be helpful to his quest for a title even though Maundy Gregory’s lucrative trade in royal honours lay several decades in the future. But the 1897 list did not include Hooley’s name; and in 1898 he went bankrupt with a deficiency of 1.5 million pounds.

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Hooley’s chief characteristics were his dazzling skill with financial figures and his magnetic personality. The first helped him see an opportunity when it presented itself; the second helped him carry an opportunity into completion. He liked to deal in millions: a million pounds, he thought, was tidy amount, a nice round figure. In 1900 he negotiated the purchase of a concession from the Czar of Russia to exploit the Siberian goldfields. The price of the concession was 75,000 pounds. He floated a public company which acquired the concession from Hooley for 1 million pounds. Even more striking, he acquired the Newfoundland pulp and timber operation for 3000 pounds and sold it into a new float for 1 million pounds. The audacity implicit in these mark-ups is magnified when allowance is made for the fact that he was, at the time of the Siberian goldfields concession, an undischarged bankrupt.

In these examples you see the pattern of Hooley’s technique. In those heady days of bubbles and bucket-shops, Hooley would buy a prospect for a modest price on borrowed money, and then sell the idea to an enthusiastic public by the medium of a public float. His personal charm helped him get the seed capital, and was invaluable in selling the idea to the public who saw in Hooley a new Midas.

Hooley’s successful floats were helped along by several things. First, he could spot an emerging trend: his successful harnessing of the cycling boom has much in common with the recent boom in dot.com businesses. He later latched onto the emerging motor car industry – with a kindred spirit, Harry Lawson he floated a number of motor car companies.

Second, he offered secret deals to financial journalists who obliged him by ramping his floats in the press. (In the wake of Hooley’s bankruptcy, the periodical Nineteenth Century noted in May 1898 that it was now well-known that: “… the City has a large number of ‘reptile’ journals, which will praise – and for that matter condemn – anything as long as they are paid for it …”). Among the expenses paid by Hooley and revealed during his bankruptcy examination were payments to enable journalists to take up shares in advance of a public float.

The third element of Hooley’s successful technique was the use of members of the aristocracy as puppet directors. To give respectability to his companies he paid members of the aristocracy to sit on the boards: the prevailing tariff was 10,000 pounds for a duke; 5,000 pounds for a baron, and so on down through Debrett’s, although he paid Earl De La Warr 25,000 pounds to sit on the Dunlop board.

His prospectuses – prominently disclosing the glittering names of the directors – held out the promise that those who took the opportunity of subscribing for shares would stand to make fortunes for themselves. And the promise of wealth seemed entirely plausible, because Hooley himself was the owner of several of the great estates in England and was known for his extraordinary personal generosity. He spent and gave with such profligacy, that it seemed there must be enough money for everyone to profit.

Hooley was the squire of Risley Hall in Derbyshire, and of Papworth Hall in Cambridgeshire. Each of these great estates had been bought for huge prices, and Hooley lavished more money on them in improvements. When he bought Papworth Hall, Hooley thought it would be appropriate to become High Sheriff of Cambridgeshire. He put the proposition to his solicitor, who objected that these things had to be done in accordance with tradition (“one has to be nominated, the Privy Council has to give its approval … a fellow can’t just decide to join Boodles …”). There were already 2 candidates ahead of him. In short, Hooley could not simply buy his way to the office. Hooley told him not to worry about the details: he got hold of the names of the candidates and enlisted the help of a friend who had more noble blood than ready money. Between them, they discovered the personal weaknesses and financial difficulties of the candidates and shortly afterwards those candidates withdrew. To everyone’s astonishment Hooley became, overnight, High Sheriff of Cambridgeshire.

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Bankruptcy cramped Hooley’s style somewhat but it did not suppress his enthusiasm. He became active in land transactions. One of these led to his first conviction. In 1911 he sold a parcel of land to George Tweedale for 6000 pounds, with 2000 pounds on the signing of the contract. Hooley signed a statutory declaration stating that the land was not charged. That was false: in fact, not only was the land subject to several charges, when Tweedale tried to enforce the transaction, it emerged that Hooley had also charged his interest in the sale transaction!

Although the offence was a relatively trifling one, the Crown briefed Sir John Simon, Sir Richard Muir, Travers Humphreys and Ernest Wild. Tim Healy (later Governer-General of the Irish Free State) appeared for Hooley. His defence was carelessness: he had not read the document. He was convicted and sentenced to 12 months imprisonment.

In 1920 Lancashire experienced a cotton boom. It is no surprise that Hooley saw an opportunity. The float of Jubilee Cotton Mills Ltd had all of Hooley’s hallmarks. Because of his past, Hooley had used others to advance his scheme, including a retired Cardiff ship-owner Tom Lewis. The company foundered soon after the float. The liquidator issued a misfeasance summons which was heard by Astbury J. Those at the bar table included Sir Patrick Hastings KC, Luxmoore KC, Jenkins KC, Tomlin KC, Mathew KC, Norman Birkett, and 6 juniors. The main factual issue was whether Tom Lewis had been a promoter of the company, or whether he had been Hooley’s unwitting tool. The same facts gave rise to conspiracy charges against Hooley, Tom Lewis and others involved in the float. The trial lasted 5 weeks (a long trial for those days) and Hooley was convicted and sentenced to 3 years imprisonment. He was quite philosophical about his fate: he treated it as part of the game, and arranged to work in the prison library which he regarded as a quite congenial occupation.

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Hooley died in 1947. He is the exemplar of a pattern which has been seen many times before and since. His contemporaries included Whittaker Wright, Horatio Bottomley and Gerald Lee Bevan. His successors can be identified readily enough in any financial boom in any country. But from first to last, Hooley had a measure of personal charm which captured all who met him. Sir Richard Muir, who prosecuted him in 1911 and in 1921, reckoned him the most genial, and the most able, person he ever prosecuted.

Julian Burnside