Story: Russell, Thomas
Page 1 - Russell, Thomas
Lawyer, businessman, politician, financier, land speculator
This biography was written by R. C. J. Stone and was first published in the Dictionary of New Zealand BiographyVolume 1, 1990
Thomas Russell was arguably the outstanding commercial figure in nineteenth century New Zealand. He is said to have been born in Cork, Ireland, in 1830, the son of Thomas Russell and his wife, Mary Roberts. In 1833 Thomas and Mary Russell with their two children, Thomas, aged three years, and Sarah, aged 22 months, sailed from Liverpool, England, as steerage passengers in the Lady East, bound for Australia. For the next seven years Thomas Russell the Elder, as he became known, was a farmer in Maitland, New South Wales. In April 1840 the family sailed to New Zealand in the Lady Leith. After some months at Kororareka (Russell), they shifted to the new capital of Auckland. Over the next few years Thomas the Elder was by turn farmer and carpenter. Mary Russell ran a small drapery store at the foot of Shortland Street to help support the growing family. Of an evening husband and wife joined to give their four sons and two daughters 'strict' and 'regular' school lessons.
The sudden death of Mary Russell in 1847 at the age of 36 was a sore blow to the family, whose unity was further disrupted during the Californian goldrushes when the father, infected by the 'yellow fever' like so many Aucklanders, departed for the diggings with two of his sons. Thomas Russell junior, now 20, and mature beyond his years, was left behind in Auckland to be custodian of the remaining family.
Young Thomas Russell was tall, dark, energetic, intelligent and masterful. He was also extraordinarily ambitious, and even as a youth showed the resourcefulness to realise those ambitions. The story was later told how, when he heard at the height of the Californian goldrushes that there was a dearth of vegetables at the diggings, he bought up all the onions he could obtain in Auckland, and sent them to San Francisco where they realised 'enormously high prices'.
At that time he was an employee of Thomas Outhwaite, the foremost Auckland lawyer, to whom he had been articled since 1844. In November 1851, as soon as Russell was licensed to practise, characteristically, he asked Outhwaite for a full partnership. When Outhwaite turned him down, he set up in practice on his own.
Russell's new firm soon prospered, helped by his connection with the Wesleyan church, in whose affairs he had immersed himself from his youth up. The 'modest piety' he showed as a Sunday school teacher and lay preacher won him the esteem of church leaders, especially the Reverend Walter Lawry, general superintendent of the Wesleyan mission in New Zealand. Russell became Lawry's protégé. Much of the legal work of the Wesleyan missions was put his way. It was later reported that portions of the church's accumulated funds were entrusted to Russell; these he 'managed with such prudence and care, …he soon amassed a considerable sum of money'. It is also known that Lawry diverted much of the private business of Auckland Wesleyans towards him. The relationship was further strengthened when on 18 July 1854 at Auckland Russell married Lawry's niece Emeline Vercoe. Lawry officiated at the ceremony.
Thomas did not exploit his early success for his own advantage, but used it to help his younger brothers, towards whom he had a strong sense of family trust. He articled to himself his brothers, William in 1856 and John Benjamin in 1857, and took James into his office in 1858. By the early 1860s all three had been admitted as solicitors. Each of the four brothers founded legal practices which have endured to the present day.
As a lawyer, Thomas Russell's forte 'was more in conveyancing and in consultation': he was 'too speculative, enterprising, and energetic for the sedentary life of a barrister'. He was a businessman first, and a lawyer second. While still in his 20s he became an acknowledged member of the settlement's commercial élite, and an active supporter of the Progress Party which in the 1850s represented the interests of Auckland's business community. Largely through his initiative the New Zealand Insurance Company was formed in 1859. In the following decade he was behind the promotion of a number of financial institutions and goldmining companies.
In 1861 Russell was taken into partnership on a basis of full equality by Frederick Whitaker, his senior by 18 years and an outstanding lawyer, who was already established as a leading politician. Within two years the firm of Whitaker and Russell was reputed to be the richest practice in the colony.
Russell more than any man was the founder of the Bank of New Zealand in 1861; of that there is no question. What is less certain is his motive in promoting this bank. A story told by his enemy Falconer Larkworthy is that the manager of the Bank of New South Wales in Auckland, having doubts about Russell's credit, 'shilly-shallied' about renewing his account, thereby inducing Russell to establish his own bank. There is independent evidence that Russell was at that time entirely solvent: in 'good practice and in good circumstances'. Nevertheless in subsequent years Russell used his influence within the bank to get generous if not improper advances, in order to build up a substantial private fortune.
In 1861 Russell began a career in colonial politics which, though brief, was brilliant. Within a year of his election as MHR for Auckland City East he was appointed minister without portfolio in the Domett administration, and on the outbreak of war in Waikato in July 1863 was made minister of defence as well. This post he continued to hold in the subsequent Fox–Whitaker administration. Russell and his legal partner Whitaker represented the views of many Auckland settlers in pursuing a policy of no compromise towards the 'rebel' Maori. Schemes for financing the war by confiscating Maori lands, for recruitment of militiamen from abroad, and for the establishment of military settlements to ensure pacification had Russell's unqualified support. Governor George Grey, who by 1864 had become deeply uneasy at the scale of the confiscations planned in Waikato under the New Zealand Settlements Act 1863, fell out with his ministers. He also developed an invincible distrust of Russell, whose enthusiasm for opening up the lands of Waikato regardless of Maori rights seemed to serve the private land-buying schemes of his own legal firm.
After the fall of the Fox–Whitaker administration, and the shift of the capital to Wellington in 1865, Russell withdrew from formal politics. However, his partner Whitaker was, in the years ahead, Russell's parliamentary coadjutor. Further, over the next two decades, there were persistent rumours that powerful friends of Russell in government were all too ready to grant favours to him. The most notorious instance cited was the sale by the Crown in 1873 of the huge Piako swamp at 2s. 6d. an acre to a syndicate Russell headed. In turn, from time to time, Russell was called on by various administrations to act as overseas agent on important matters, such as the arrangement of a steamer service between San Francisco and Auckland, or the raising of loans on the London capital market. This close association led William Rolleston to observe that 'the vulgar idea…is said to exist, that Mr Thomas Russell is not the representative of the Colonial Government, but the Colonial Government is the representative of Mr Thomas Russell.' As late as 1883 scandalised General Assembly members heard that the next session during which legislation on native land companies would be presented was already being dubbed 'The Tom Russell Session'. Whether this reputation for political wire-pulling was justified or not, there is little doubt that had Russell decided to fulfil himself in politics not business he could well have risen (as did Whitaker) to the position of premier.
Long before he was 40 Russell was undisputed leader of Auckland's business community. Two developments made him so. First, Russell had prevailed on the other directors on the Bank of New Zealand and its 'barnacle' – for so banking competitors called the New Zealand Loan and Mercantile Agency Company Limited – to allow him to dominate their boards, and the boards of a number of interlocked commercial companies in Auckland. Second, lesser businessmen tended to defer to him because of his wealth. He had purchased goldmining claims and ore-crushing batteries on the Thames field, and shares in many of the companies working there. Moreover, his determined acquisition of Maori lands made him seem a perfect 'Dragon of Wantly'.
Russell was strong-willed, yet persuasive and plausible. Those who knew him were rarely neutral: they either admired or feared him. He had an unenviable capacity to arouse suspicion. Kindly and loyal to those who uncritically supported him, he could be vindictive towards those who did not. He never lacked enemies.
One of these, Cyrus Haley, an American, made a spectacular attempt on Russell's life. In January 1872, demented by losses in goldmining companies which he attributed (quite unjustly it seems) to the boardroom machinations of Russell, Haley made a midnight raid on the homestead of The Pah, Russell's fine suburban farm near Onehunga. Shouting 'Thomas Russell, I want your blood', Haley moved around the house firing shots into each of the bedrooms. He did not harm Russell, who by coincidence had had to stay overnight in town, nor did he injure Emeline Russell or their seven children. At a much publicised trial in Auckland, Haley was convicted of attempted murder and gaoled for life.
In 1874 Russell, now a man of considerable means, although not quite the millionaire that gossip made him out to be, migrated with his family to England, where he could live in style and raise his children as gentlefolk. At the time of departure he was plagued by stomach ulcers. But he did not intend to be a retired, expatriate invalid. Instead he set about maintaining and expanding his colonial investments, which he planned to supervise from abroad. He soon became the most influential figure in the colony's mortgage banking affairs in the City of London. Through 'an overriding power of attorney' from his co-directors in the Bank of New Zealand at Auckland he was able to over-rule the London board while continuing 'to control the policy both of the Bank and of the Loan Company in the Colony'. Moreover, by his practice of making lengthy visits to inspect his estates in New Zealand he was able to maintain his ascendancy over the directors in Auckland. He alone was regarded as having intimate knowledge of both sides of the banking equation – fundraising in Britain and investing in real estate in the antipodes. This reputation he exploited to the hilt.
The financial arrangements Russell made to support his speculative land ventures in New Zealand were ultimately to inflict much damage on the Bank of New Zealand and even more on its allied mortgage institution, the New Zealand Loan and Mercantile Agency. By the later 1870s he held many small parcels of rural and urban land throughout the Auckland province. But the bulk of his landed estate he shared within three partnerships. In the South Island he was the joint owner, with his brother-in-law John Grigg, of the famous 32,000 acre Longbeach farm. The second and most renowned of the Russell estates was the 90,000 acre Piako swamp near Hamilton, bought and developed by a syndicate of five calling themselves the Piako Land Association. Russell had a 40 per cent stake in this enterprise and with Whitaker, another member of the syndicate, effectively controlled it. His third landed interest was in Maclean and Company, a partnership formed in May 1877 to develop 23,600 acres of Waikato land for later speculative resale.
In each case, apart from the cost of buying the original blocks, financial outlays for land development were very high. These improvements were carried out initially on money provided by banks and the NZL&MA. In effect Russell was using funds, originally provided by British investors, to develop his own estates, thereby duplicating in the private sphere the public programme of borrowing for development associated with Julius Vogel.
The failure in 1878 of the City of Glasgow Bank, some of whose difficulties were attributed to its rash advances on landed securities in Australasia, led to a panic withholding of funds by British capitalists who had been depositing in, or taking up the debentures of, the colony's financial institutions. Finding himself in consequence unable to lean so heavily on the Bank of New Zealand or the NZL&MA, Russell resorted to a new strategy. In order to get the working capital his swamp speculation still needed, he decided to establish a company. He persuaded members of the London board of the loan company to act as trustees between the Piako Land Association and potential holders of mortgage debentures. On 24 December 1879, in London, Russell floated the Waikato Land Association, a company with a nominal capital of £600,000. The majority of the 20,000 shares were allotted as vendors' shares to members of the original syndicate.
The initial success of the new company in setting its four year debentures encouraged Russell in 1881 to convert Maclean and Company in the same way into the Auckland Agricultural Company, with a nominal capital of £800,000. Once again the NZL&MA acted as trustees for the mortgage-debenture issues.
In the early 1880s debenture holders provided the two companies with funds to prepare their Waikato lands for subdivision and sale, and more ominously (although this debenture holders did not know) to pay interest on past borrowing. In the process the NZL&MA's affairs became dangerously entangled with those of the new companies. By allowing the loan company's debenture agents, mainly in Scotland, to canvass for the debentures of the Russell companies, it appeared to give those land speculations the stamp of approval of the NZL&MA. Furthermore, Russell arranged for some of his shares to be sold at nominal figures to some of the bank and loan company board members so that they could become directors of the land companies: thereafter self-interest was to compromise them whenever Russell asked for loans.
In September 1882 Russell began a year-long visit to the colony. Exuding optimism, he promoted a number of new companies and put up a four-storeyed shop and office block in Auckland's main street. Appearances of affluence were deceptive. Before the year was out Russell's liquidity problems led him to force on Grigg an auction of the Longbeach estate. He took out his share of the proceeds in cash while Grigg used his to buy back a portion of the original holding. Russell's money difficulties could be traced to the estates in Waikato. Continual expenditure on development was necessary and sales of land to cover interest on debenture borrowing were disappointingly low.
By 1886 the colony was in an economic recession and the plight of Russell's companies was desperate. Only by promptly paying the interest in debentures now totalling over £½ million could the Waikato Land Association and the Auckland Agricultural Company ensure that maturing debentures would be renewed. But the companies had no income from land sales and were virtually insolvent. So were almost all of Russell's fellow investors: in particular, Frederick Whitaker, James Williamson, Captain W. Steele, Henry Reynolds and Thomas and Robert Maclean.
In a desperate attempt to retrieve his position Russell made an emergency visit to Auckland in April 1887. He admitted to an executive committee of the BNZ board that he and Williamson were in dire straits. The bank agreed to take over the agricultural company and its indebtedness, on condition that Russell assume responsibility for the liabilities of the Waikato Land Association, in whose continued solvency the loan company was vitally interested. Russell then turned the full force of his persuasiveness on the colonial board of the loan company. The board agreed to recommend an advance of £40,000 to Russell so that he could pay a call on his Waikato Land Association shares to meet debentures falling due. Thus the NZL&MA was virtually taking shares in a large land company earning no income whatsoever.
But that was not the end of it. In 1891 Russell managed to foist on the NZL&MA a scheme by which he could be released from swamp company debts amounting to £162,000. In a complicated arrangement the loan company took over the Waikato Land Association, and then reconstructed it as a new company, the New Zealand Land Association. Russell, together with D. L. Murdoch, the only other 'solvent' member of the original syndicate, exchanged their debt-ridden shares in the old company for fully paid-up shares carrying no liability.
As a consequence of this and similar financial follies at a time when the 'Australian' colonies were depressed and their banking system in crisis, the NZL&MA was forced to suspend payment in London in July 1893. The report of the official receiver and a general uneasiness in the financial community gave rise in the following year to a cross-examination of the company's directors and senior officials in the chancery division of the High Court. The judge, R. Vaughan Williams, whose task was to determine whether there was a case for prosecution for fraud, found much in the company's affairs that was highly questionable. Russell was identified as the chief culprit: in the judge's view the evidence showed 'irresistibly' that the directors had the 'fixed belief that everything recommended by Mr Russell must be right and for the interest of the Company…. They left him absolute master of the situation.' Despite these criticisms no charges were laid against Russell or any of his fellow directors.
Although he was unable to continue his land speculations or his association with the colony's financial institutions, Russell partially restored his fortunes before he died. The Waihi Goldmining Company, which he floated on the London market in 1887, became, after the installation of a cyanide plant at the mine, a spectacularly successful venture. By 1897 the mine was yielding the now deaf entrepreneur 'a happy income'. His finances were sufficiently restored by that time to enable him to begin investing profitably in the Australian cement industry, and to buy Normanswood, 'a nice place in the country near Farnham, Surrey.' There he died on 2 September 1904. His estate was valued at £160,778.