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Title: A romance of trade and politics : (an object lesson for the young)
Author: Braund, Victor M. (Victor Maurice)
Published: V.M. Braund, Wellington, N.Z., 1905
( All Rights Reserved )
Dedicated to the Colonial Bank Shareholders.
A ROMANCE OF TRADE AND POLITICS
( An Object Lesson for the Young)
IN TWO PARTS
Part 1.- THE WAY TO KNIGHTHOOD
■Oosprislng 15 chapters and 122 pages)
Part 11.- THE COLONIAL BANK 'TRAGEDY
Comprising 13 chapters and 77 pages.-
By VICTOR U. BKADKD,-
Price- TWENTY SHILLINGS.
Cyolostyled and Published by the Writer, Victor Maurice Braund, Accountant
4,Peatherston Street, Wellington, New Zealand.
1905.
TO MY m t!JfDS.
o In order to help the sale of this work, you are asked to favor me by not lending your copy before,say, one month after the date of purchase. If a perusal of its contents will,meantime, permit you to recommend it to your friends, you will confer a further favor upon me by recommending it and will at the same tine assist the cause which X am advocating,.
V. U, Braund,
PREPACE
This work is in two parts- Part 1 entitled " The hay to Knighthood" was written in the year 1901 and Part 2 entitled " The Colonial Dank Tragedy" has just been written. The whole is entitled " A Soaance of Trade and Politic:
The first portion has not previously been published because it has not been possible to find a printer willinp to print the work. The reason plven for the printers' refusal was invariably that they would lose more by offendlnn valued customers than they would make out of the job.
It was not until the advent of the Cyclostyle that the writer could see his way to produce this work. The whole has had to be typewritten on wax sheets and then cyclostyled. Tho process has been very laborious and expensive having occupied the writer and a staff of assistants the best part of three
months.
Directly and indirectly Sir Joseph Vard is the hero of this "•rtonance", and the following letter to him speaks for itself:-
•11st nay 1905
Sir Joseph Vard K.C.k.C.
Wellington.
Sir,
I have made arrangements for the early publication of a work dealing with the affairs of the Colonial Bank, the Ward Farmers' Association, the Ocean Beach Freezing, Vorks, the Southland Freezing Company, Nelson Bros. Ltd., and other concerns with which you were more or less connected. I desire to be perfectly frank and fair, and to afford you an opportunity of perusing the book and of correcting any statements contained tnerein which you me,y be able to prove are inaccurate. In the coranilation of tne narrative I have endeavoured to be sf-ictly accurate and just, and to confine myself to legitimate comment. In this, I believe, I have been successful. I am now engaged completing the revision o” the work and bringing it up to date by the inclusion of a final chapter dealing with the various phases o-. the Colonial Bank 11 jv-ldatlon up to and since the passing o. the Companies Act of 1901, and with the attitude of the Government, Parliament, and the Official Liquidators ( including the Official
Assignee, Dunedin) towards the shareholders of the Bank, particularly the last phase as to the destruction of the books and papers after the expiry of six months from the date of the dissolution order. In view of my correspondence with the Official Assignee (which is all set out in my book), I am very indignant at that Government official's omission to give me notice of his intention to move for an order dissolving the Bank, If you desire to avail yourself of my offer to afford you an opportunity of reading, and maybe correcting, my work, you may see it, or your duly-authorised agent may see it, by appointment, at my office, as above, at any time before Thursday,Bth prox., on one condition only, that you first agree in writing not to take any legal proceedings before the work is published which might have the effect of delaying its publication. After publication you would, of course, be free to take any proceedings you might think advisable, I feel that the time is ripe for the circulation of the history which I have compiled, and which I hope will have the effect of arousing public attention to the present serious state of things.
I am. Sir,
Your obedient servant,
V. M. Braund."
The fact that Sir Joseph Ward did not accept the offer made to him, but chose instead to describe the above as a blackmailing letter from his Ministerial seat in Parliament and under cover of privilege, will no doubt be correctly interpreted by the reader.
The difficulty experienced In producing this work has been followed by a difficulty in advertising it.
In 1901 the newspapers freely advertised " The way to Knighthood'’, but in 1905 the following newspapers have refused to advertise the sane work under the title " A Romance of Trade and Politics":-
Auckland Herald, Auckland Star, Evening Post(Wellington) ,Christ church Press, Lyttelton Times, Otago Daily Times, Dunedin Star, Southland Times and Southland Hews.
Out of ten leading newspapers that were asked to insert a perfectly
harmless advertisement, only one-The New Zealand Times- inserted It, and, strange to relate, that paper Is the official organ of the Government!
As the gag has been bo effectively applied to the writer, in order to prevent the exposure of this banking and commercial crime, the reader is asked to help the circulation of the full history of it, by making known the fact that " A Romance of Trade and Politics" is out and can be procured either direct or through any bookseller or newsagent from the publishing office as at foot of this page.
Wellington. 13th December,l9os.
'■'yolostyled and Published by the briber, Victor Maurice Bxaund, Accountant,
4.Peathereton Street, Wellington,
Hew Zealand.
CONTENTS.
Part I. The way to Knighthood.
Chapter 1. Launching the Barque Page 1.
„ 2. A Dissertation on Mutton in its Relation to Finance „ 6.
„ 3. The Sun of Southland at its Zenith „ 15.
„ 4. Finesse and Fireworks „ 22.
„ 5. The Value of Political Pals „ 30.
„ 3. Desperate Measures „ 36.
„ 7. The Apotheosis „ 42.
„ 8. Sweet Seclusion „ 46.
„ 9. The Storm Bursts „ 64.
„ 10. The Strong Arm of the Law „ 67.
„ 11. Getting through a Bole „ 81.
„ 12. Fixity of Finance „ 92.
„ 13. Jerry Journalism „ 97.
„ 14. Braving the Elenents „ 101.
„ 15. Fortune's Favors, „ 118.
Part II. The Colonial Bank Tragedy.
„ 1. A Sea of Doubt „ 123.
„ 2. The End of the Voyage „ 126.
„ 3. The Bargain is Struck „ 133.
„ 4. Burying the Remains „ 139.
„ 5. Breakers Ahead ! „ 143.
„ 6. The Triumvirate Triumphant „ 149.
„ 7. Compromising Events „ 152.
„ 8. Cast-off Clothing „ 156.
„ 9. In a Quandary „ 160.
„ 10. The Belated Report „ 169.
„ 11. Covering up the Tracks „ 174.
„ 12, The Coercion Bill „ 183.
„ 13. The Anomalies of the Law , „ 188,
PREFACE. (1901)
The Imperial distinction of "Knight Commander of the Most Distinguished Order of St. Michael ind St. 3eorgo" hao been conferred upon Mr. Ward, notwithstanding the oft repeated assurances of the Premier that Mr. Ward has not boon recommended for the honor. With Mr, Sodden*s conduct in this setter, it is not the writer’s intention now to deals the object of this work la not political, but is to express a feeling of intense disgust - which is doubtless shared by every right-thinking person in the colony - that the Imperial distinction of Knighthood, or indeed any honor of the kind, should have been conferred upon Mr. V.'ard. The effect must Inevitably be to cheapen all Imperial honors; in fact to loser them almost to the same level of appreciation as that of the Colonial J. P-chip, which honor (for it was originally intended to be one) is now almost wholly reserved for political supporters.
It is asserted that Hr. Ward was recommended for knighthood because of his services to New Zealand in giving her penny postage, and for his efficiency as Minister of Railways. These are mere pretexts, for there are many public men who are far more deserving on all grounds. Penny postage for this colony 1s no new Idea, and It is the purest accident that the prosperity of Ken Zealand, with its attendant “Surpluses, at the time Mr* Ward was pitchforked into office warranted - Indeed called for the experiment. Any other Minister would have beer, forced by the exigencies of'the moment and by public pressure to take a similar step. As for Mr, Ward’s claim to Imperial distinction as Minister of Railways, rhat has he done beyond cheapening certain (but only certain) passenger fares and freights and cutting rates againstthe Manawatu Railway Company? The effect of this was to cause a heavy fall In the market value of the Company’s shares and so enable a clique of unscrupulous individuals behind the scenes to buy them up at a mere song in anticipation of Mr. Ward’s confident s&US at the very close of last session with the Manewatu Railway Purchasing Bill, which device was fortunately seen through by Capt. Russell (the late Leader of the Opposition), who imposed such conditions upon the passage of the measure as at least prevented any damage to the colony’s interests during the recess.
1; Mr, Ward’s knighthood can be logically defended cn the gron of Mr, cervices to Mcr Zealand, then Ms Poynj Highness the' Duke of Cornwall ere, Yov';, on bohc,lf of th.o loverelgn, would have rewarded a gt, service te the colony thv con bo credited to Mr. V.ard, had the Icnlghttu conferred uron Mu. Vlr.rd been conferred upon Capt. Bussell, for his time! action just mentioned roved tho colony about 8350,000. The figures jun ifiring this statement are on record in Hansard.
Mr, Ward has not only done no good service to the colony sped attributable to his ova norlt, but he has positively Injured It In the « of the consuni.ty both here, cad in London, for it suet not bo thought the orpotruroe of 18SH5 - which by the ray tho IT. 3. Times hns been pleased to describe as ' private misfortune that threatened once to blast his oaroej hare 'Aces forgotten just because those papers which In 11SC had the coat to write according to their convictions are now either silent or raisin) their voices ir. fulsome adulation under tho influence of a painful const neon tfep.t an Colonial Secretary Mr. Ward has tho solo privilege of conpj tho '’'list* of papers which heads of Government departments are allowed t IM Rdvortico, as well as the sole privilege of issuing Press passes ( avail able at all fcjvrM.cun and. everywhere) cn such high occasions be the Royi visit and at all tiros.
Although this.norlc nay, and probably will, bo the only protesl iMorfls#. in lion Zealand against the ecafcrrihg of Inperial distinction t Hr, Ward, It it; not, tho writer's intention to shirk an obvious duty. 1 reason for the protest, is that the facts elicited at tho hearing, in June before Mr. Justice VilUmo, at Dunedin, of a proposal made by two of tt Word's friends to buy from tho Colonial Bank liquidators, at come 520,0( under their real value (as shown ir this work!, the debts of the Ward Ptvraors’ Association ar.d of Mr. Ward, to that Benk, wore of such a snspr£alcslj—flhesßoffnl character as to ovoko from tho Judge strictures severe as to render Hr. Went entirely unfitted for any position of trail or hono" - at •ry r?,to xrtil ~uc> tins as ho has rrafflciently atoned f« the wrong inflicted by hla upon tho Colonial Bank shareholders, end for distress and ruin which ho has carried, to bo aeav homes. No amount of service to tho colony ■'ll7. alone blot out. this stain upon Kr, Ward's character - rot. if ho should, live to tho ago of Methuselah.
The Imperial authorities are not in the circumstances ti be ’binned for recommending the Sovereign to confer a knighthood upon Ur, ffa:?d. The colony helped the Jfother Country at a really critical nonant, and „he Imperial authorities desired to show their appreciation of the spontaneous act by placing certain honors at Mr. Seddon's disposal. The Fronler -In spite of hie bold emurareas to the contraiy - rrcomon-ded, tinong others, Mr. Ward for knighthood, and the Sovereign accordingly knighted hlr, relying of course, upon Kr, neddon'n good faith that In rßOonrondinj; l’r. Ward he was not rec«ißsn4lng an undeserving person. It ray be that the laperial Government assumed that as Mr. Ward was occupying such high positions as Colonial Secretary, Minister of Railways and low toaster-General In this colony he was hold deserving of those positions by tho people of the Colony. But this was not so - Hr. Ward was pitchforked Into office by the Premier, not by the colony. Further, the people ef th© colony die' not even return Parliament, but only a very snail proportion, rarely the Aiana electors who are shown by thin work to have so benefited financially, fren Mr, Ward's manipulation of the Colonial Bank's shareholders' nonnv r.c to b© entirelydisqualified from expressing an acceptable opinion as to whether Mr. Word's moral character 1b such as to admit of hts occupying even a neat In Parliament much less such high positions cf rerpocslblllty and trust r.s those he Is now filling.
The writer cannot ba accused of want of loyalty to the Sovereign In questioning the conferring of a knighthood upon Mr. Ward, for hie reasons i . are here given: he rather claims that the recording cf thin protest against the act during the present *selgn of Terror* is practical proof of a stronger In p loyalty to hie Sovereign and his country than Ir shown by L'r. 'lard accor.’.inp the honor, knowing as he rurt hot? unworthy he le. If the offset of “The Sey to Knighthood" lr only to put the irpeiial authorltiCß tope on their guard In the future, rnr. present "an object lesson for the Voting". Its goal rill have been reached. The nmistaaoe in the Ti-obuotioi of tho uork Is ref now lodged of perhaps tho cleverest, cost, harl-wor’rlng aafi enthusiastic ; journalist the,t this colony has so far inotm. and who, unfortunately for tho colony, has passed away. To this gentleman - whore nano for special rearern Is not here nertioned - the writer In Indebted for much of tho inf emotion, and evidence In support, upon which tho earlier
portion n arc based.
Ihc public dm asked to accept "The '.Tap- to Knighthood." as the on.tooß© of an honest. dons.ro on tho part of tho writer to offer to the colony as ccaplete end reliable a history as possible of tho stirring -cronta of tho pant decade 1892-1901, insofar as they rolato to the extraordinary public career of tho Honorable Sir Joseph decree Ward, Knight Conaander of the Most Distinguished Order of St. Michael end Et. George, and the two non fanor.B institutions nith which he nee so Intinttely oorrrectod. - the J. 0. Ward Parsers’ Aseoclatlon-of Ten. r.ealvul-Ijinlted, end the Colonial Bank of New Zealand.
■ivLs way to knighthood"
A ? . nance -i- r.’w-e aid fe litres, «!ld An Object Lesson 'or the Young.
Chapter I. - Launching the barque.
Eon “sty’s a fool, aid lost*-- that it works for Shakospear3. i« JJ O hard and fast line has ever been drawn by which the uprightness and aoormptibllity of the statesman could he held to absolve the improbity end ommercial laxity of the private individual. Wien the Hon. A. J. MvndelJa and his associates on the directorate of the Hew Zealand loon and Mercantile ompany in London were found to have been guilty of certain lachos against ,he high standard, which British politicians arc expected to maintain, they were compelled to resign their scats r.n cho Oabine... 1- hay -1; h-.. mwritten la?" docs not prevail in the Colonics, othcrw_EC we c ~ lad the ex-Colonial Treasurer making such mournful uistory, nor would -he 3 reml9r's speeches in defence of his colleague he 113,7 so r ,c -e ■ more V- ho deplored than if they had been the mere special pleading of an advocate.
The records of the Ward Payors' Association furnish the most discreditable story of headlong plunging ever dragged ot o_ witnesses end participators. -he report of the official liquidator tells in terse end explicit terms the rise, p-ogress, decline, and 'all or the overdraft-fed concern, which began its career with a swamring liability, and ended it by carrying desolation to tbe homes of hundreds of innocent victims, who depended on the honesty and good faith of the trustees cf the -.0r.0y they had invested in the ill-fated and misdirected Colonial dtr.’t. Te “ neport does not disclose the f ill history o+ the a - v 1 equivocations, or the falsifications which for a period of two and a half years deceived end threw dust in the eyas cf the deluded people who put their trust in men whoso even' nerve was strained to .ml* black appear white, and who with r-olcloss daring declared surpluses, and distributed dividends and bonuses when black ruin and. disgrace staged them in the .aco.
It has been shown by the liquidator, of the Colonial Beak that..
2.
two dam befer’ tho hard Association tar fortsed. Hr. Herd owed the Colonial Bank £51,073; thw.t ■ -s> e Anpo-iiatirn oorjwsnccd business with a fiEOitiii balance on Docoabrr 2nd 1332, cf 3787, which on tho sth had been contorted into rn Overdraft, of 315,239. rhlle Mr. lard * n private debt to tho Bank had boon on that date direct correspondingly reduced to 370,376.
Seven Tenths later tho first general Reeling of shareholders in the Association woe hold, cad tho overdraft duo to tho Beak was stated in the bales-se-rheot ',5 rvith Juno, 1893, at 326,273, aid tho tjtal liabilities at «B?,SSO, But It, has since transpired that Mr. lord’s cheques for 221,0 CC were accepted 1 r reduction of the actual'overdraft, end this sua was re-debited to the Association and credited to Kr. Bard threo days Afterwards, and on that rare day „ rlp 3rd, 1893 - a further addition was cals to the Assoo.ißt.icb.'B liability by the purchase of tho Carswell business for 38,492, tho total loiist debts of the principal shareholder, Mr, ’lard, and his Association bavShr; swelled by this tine to tho respectable total of 2112,139
It, vi IJ. elucidate the progress of events If wo hero leave the 3onh liquidators’ report for R aosent, and look hack at shat Ur. Mnrd himself had to r'jr regretding the position of affairs at that tine. He bad .lust delivered hinsclf of his first Budget, lu which he repeated the belief of tin predecessor (Hr. Ballsuce). that the best Interests o' the colon;’ would be oornuited by adhering to the policy of self-denial, end he placed on record his firs oorriotfon that ««* *•« Oovernaent has decided to conduct the business of the country ulthouu having recourse to It.*’
It Ton Id tore been htghlv inconsistent for Er. 'Yard, ns freasuror, to have ■prcmirr.toc this doctrine for the State, end have thou uroc inxr.e to his follss-fJhiwohoidora that buying sheep end oats on Beak overdrafts was r goof thing for thei, Such a course rrould hare been fatal, and tho ■even -port’’ $ ■ roper'., end balcnce-ahcet of his Association oas therefore quite Jr. keeping with his Budget utterances.
Aacng other-comforting assurances to his sharehoiders sere the following: "Our cuetos Is always to buy for cash; we never buy on bills ; and, again, ’Nothing whatever of a speculative nature Is entered on by the Asedcirticn."
3.
Towards the close of a speech full of confidence end fervour ho sa:.. in reference to the Carswell end other firms he had absorbed, "They did little or no good. It could not be expected they would; they were crippled for want of capital, and handicapped greatly by the. strong competition of cy fin's business."
Then he went oh to tell his hearers that his Ocean Beach Freezing Works were p.ore worthy of support than the rival rest feoncem, the Southland y ■ Freezing Co., for he gave "the highest cash price for fat sheep."
This subject calls tor a slight digression In order to show how Mr. Ward's generous policy towards the Southland farmers (generously reciprocated later on) affected the position of the Association. Mr. J. B. Reid, the "Dear Jla" of the cause ealebre heard in Norenber 1895, wrote to his principal In April, 1892: “I don't see how he (Mr. Ward) can be ■aking the works pay, for he Is paying lS:6d to 14:6 d for sheep, and selling again at 12s; but he says it Is gnlte satisfactory."
The seven months’ balance-sheet already referred to showed a net profit of £4414 on a paid-up capital of £8276, and a dividend of 10 Ney cent, was paid, bonuses distributed amongst purchasers and employees, £lOOO placed to the reserve fund, and a balance carried forward. These amazing results i '•> i- ’ ’ i naturally led to demonstrations of Joy on the part of the Word.Association shareholders, and confirmed the opinion that the architect of that year's Budget was a veritable "wizard of finance", at whose touch all things were transmuted into refined gold.
But the belief In Mr. Ward's Infallibility was not universal . A Journalist on the Wellington Evening Press critically analysed the seven souths' results, and was not only incredulous,, but drew unflattering Inforenc surmising that It was open to question whether the Bank r;as running the Association, or the Association running the Bank. Mr. Ware wae Indignant and replied lengthily and sngrlly In the Ministerial organ (the Her Zealand Times) on August 30th, 1893, accusing the critic of cowardice, malice, >nc so on, and then proceeded to unburden himself to the world as to his om and his Association's standing, end it is hers that ;e have on record. Kr. W.ar 1 nsi BBria verba as to his then commercial standing. It will bo seen hor diametrically opposite his statements are to those of the llquidatoro with
4.
reference to tLa:. particular time - August, 1893. Regarding his private affairs Mr. then wrote:-
"Last year I was one of seventy-five people ih the colony who paid income tax on an income of over £3OOO a year, and I - r- ■ )r. was not then in receipt of any Ministerial salary. I also paid a considerable sum for land .tax - the whole of my warehouses and private properties, with one small exception, are unmortgaged, unencumbered. I shall not state their value here further than to say that it is very considerably in excess of any sum that the Farmers’ Association had from its bankers for the accommodation of its business at the date of its balance."
Yet, according to the Bank liquidators, the said bankers’ ledger had no less than £112,139 debited against the Association and its founder at that date. And, so far from Mr. Ward’s properties being “unmortgaged,-unencumbered," the Bank held an unregistered mortgage over the majority, as part cover for his obligations to them amounting then to £53,000...
Having demonstrated, to his own satisfaction,_ that he was personally among the magnates of the land, Mr. Ward proceeded to show what a magnificent 4 - r - • \C>:\ structure his Association was. Its ramifications were, so extensive that it published a trade journal of its own, a 32-page pamphlet, trumpeting forth in gorgeous sentences the infallibility of the Ward group of companies. In its Interesting pages binder twine and cures fpr dyspepsia were • >: a. ■ artfully sandwiched with taking paragraphs, such as:-
"The Best Investment you can make at the present time is to take five shares in the J. 0. Ward Farmers’ Association of N. Z. Limited, and follow up your application by buying your goods, &c. from the Association. TRY IT."
In his letter to the New Zealand Times, and copied in his own ,rade journal, he wrote respecting his Company:^.
"No advertising of any description for shares was done, and no brokers were employed. The times of balance were made half-year. It was in no sense like the establishment of a new business; it was taking over a profitable, healthy, and live business, which every year from the time I started it, paid considerable profits.
5.
I require to state only one fact to show the utter unroliance that is to be attached to the Press writer's strictures. Three lays preceding tho balance two large sums were paid for the purchase of stocks fnd "advance taken over from another business.
Now the balance referred to here was that of June 30th, 1893, and the liquidators say that on that date
"Two cheques, one for £6OOO and one for £15,000, drawn on Mr. Ward's grain account, were placed to the credit of the Association i account, reducing the overdraft by £21,000 and increasing Mr. Ward's by that amount, while on July 3rd, 1893 we find a cheque for £21,000 drawn on the Association^and placed to Mr, Ward's grain account. Between these dates the J. G. Ward Farmers' Association of New Zealand, Limited, balance-sheet war made up;"
and on that name July 3rd - three days after the balance - not three days preceding it - the Carswell business was bought and the transaction added a further debt of £8492 to the institution. It would ajpear from this that Mr. Ward rather mixed matters up in his reference to the "two large sums. Mr. V’ard next threatened the Press writer with an action for libel, and seems to have consulted solicitors in Invercargill, as well as two leadin solicitors in Wellington. He went the length of publishing Sir Robert Stout's opinion, who briefly stated: "I am of opinion that the article could not be held a libel;"
This was followed by another blast from Mr. Ward's tnunpet:"I never during the whole course of my own business gave a bill or promissory note to any man or firm. I never had an accommodation bill in my life. The Farmers' Association with which lan connected has laid down the same lines, end will follow then • . . The secret of my success, to a large extent, has been that I have never entered into an undertaking until I first knew how I was going to pay for it."
These brave yet remarkable words had their intended effect, and th 3 •!. . Ward Association entered upon its second year with an abiding trust in its founder and its accommodating bankers, and the democracy believed that a veritable prophet had arisen.
6.
Chapter 11.
A Dissertation on Mutton in its relation to Finance.
. Kevenons a nos moutons.-(Pierre Patelin, French Proverbs.) The fame of the J. Q. Ward Association of New Zealand, Limited,
together with the renown of the binder twine monopoly, the Hokonui coal mine and railway, the Ocean Beach Freezing Works, and the Colonial Treasurershlp spread throughout the Southern Hemisphere after the "wizard of Finance" had flattened out his critics in the Mlnirterlal morning paper and the Southland Parmer, the trade Journal issued from the great nan's own office.
The estimation he was held in by his colleagues, by members of parliament with few exceptions, by Labour Unions, and especially by the farmers of Southland, can only be described as altitudlnous. No citizen in the colony, whether as statesman or merchant, had ever soared to such heights He was at once the Colombus of Commerce and the Napoleon of Finance.
Previous to the meeting of the Association to receive the seven months' report and balance-sheet, to 30th June 1893 and to declare a dividend,the Ocean Beach Freezing Works - an extensive concern run by Mr. Ward and intended to be run altogether apart from the Association - had virtually undergone a change of proprietorship, and as it was through this business that the most of the Association's losses arose, its chequered career entitles it to a passing notice in this narrative.
The full history of the Ocean Beach hive of industry, where .ethers costing 14:6 d were converted into freezers realising 12:0 d, .as told very fully in the Supreme Court when a rival concern sued it for damages and got a verdict, though the full court set aside the Judgment.
The evidence of the cloud of witnesses gave the general public a good deal of insight into .hat is known as high finance, and as there had been ranch mystery for a long tine as to whom the Ocean Beach Freezing Works belonged, the revelations were eagerly read.
Prom 1888 to 1891.the Southland Preening Company (the pioneer of the district) had a monopoly of the business, and its profits ranged from 20 to 50 per cent, on the paid-up capital. In June 1891, the directors entered into a three years’ agreement with Nelson Bros, to sell their .hole output to that firm, and as a fluid flflo the firm agreed not to erect nr be in anv wav connected with any rival concern in the counties of
7.
Southland or fallaoe.
At the time this agreement was made Mr. Ward was a director of the Southland Freezing Company, hue he resigned shortly afterwards. The Company was very prosperexxs ani had made arrangements to add to its plant and buildings when it was whispered that Mr. Ward Intended erecting works on his own account somewhere in Southland.
The whisper grew to a rumour and there was uneasiness and excltenen among the shareholders in consequence, and the telegrdfh wires were kept very busy during the month of July after the agreement with Nelson Bros., had been made. Mr. J. B, Reid, the agent In Southland for Nelson Bros,, appears to have been desirous of keeping to the spirit of the agreement made by his principals.
It soon, however, became evident that Hr, Ward was determined to proceed with the erection of rival works at the Bluff, and Mr. Raid, who kept his weather eye open as to what was going on, wrote to his chief his views on the situation as follows:- "Ward has a very large business at the Bluff and finds it does not suit him to allow all the neat to go away without getting anything out of it in the shape of commission. I know Ward is anxious to work with us.
Negotlations continued, the Nelsons and Mr. Held wishing to keep faith with the Southland Freezing Company. In order to propitiate the exdlreotor and threatened rival. It was proposed that Mr. Ward should abandon the Idea of erecting freezing works, and, as a solatium, should be appointed joint agent for the Tyner lino of steamers and be allowed a discount of pe cent, on the freezing charges on all the sheep supplied by the Ward Farmers' Association's clients, as well as other minor advantages which -ere described as "real good business.”
For some weeks there was much diplomacy displayed on both sides, and by August 17th, 1891, Mr. Nelson appears to have arrived at certain conclusions regarding Mr. hard and in a letter to Mr. Held - who was always addressed by his chief as "Dear Jin“- be put the position tbus:-
"CM I p.ffi satisfied that Ward neons to build;
(i.) the machinery has left, or is about to leave England;
8.
(S) we must work with him;
p) p think b. Cabinet minister a useful addition to our firm;
(3) 1 like Vard."
Here was the key to the whole position - Kelson Bros, wanted a Cabinet Minister ir, 1391, end they afterwards secured two of then for the Colonial Distribution Compony, a concern controlled by Kelson Bros, and of which Hoorn'S, J. e„ Kurd and John McKenzie were Colonial Directors, drawing their f5OO a year each from it.
Nelson Bros, had an embarrassing game to play. Their agreement with tho Southland Company had tied them down to neither erect nor be in any way connected with any other freezing concern in Southland and {although be it reremberod he was a pe.rty to the contract between the Company and Nelsons) Mr. Ward gave out that if Nelson Bros, did not work with him ho would arrange for freights outside their steamers, and, as It was e.pparont that cut-throat competition was Inevitable if a basis of conciliation was not arrived at, it was agreed by the end of January, 1892, that Mr. Vara should be given terms that amounted to his being paid higher rates for his mutton than the Southland Company received and the bargain was closed, but kept secret. Competition in sheep—buying then set in, and the older Company ceased to earn large or. Indeed, any profits.
A letter "rom 'Jr. Ward to Mr. Kelson at about this time Indicates the interesting method by which the mutton growers were to be kept in the dark. He wrote
*1 think it better, both In the Interest of Nelson Bros, and myself, that no publicity should be given to our relationship. It, would certainly render the buying of sheep more difficult for ne, and Kelson’s opponents would feel that a large monopoly of Southland was in his bonds, and thus might create further opposition The plot against the farmers on the one hand end the Southland
Tkreezln r. ■Corrpao y on the other Is abundantly clear here. The former were to be hold in the grip of r, monopoly, but, for the sake o? their peace of rim they t»ero to be tout ignorant of Its existence while Mr. Ward raked in the profits, and tho Freezing Company was to be squeezed out by the Ward
e.
works being granted terms the other was denied.
In the one case the favored Cabinet Minister could keep his works clear, by means of his first claim on the Tyser line of steamers, get his cash at once, and draw 24 per cent, commission on the freight, besides other advantages; while the unfortunate pioneer company had sometimes to actually cease work for the want of steamers to take their mutton away.
There were also complaints that all sorts and conditions of sheep were accepted as "prime” from the Ward establishment, and Southland mutton which previously had the reputation of being the best, ( after Canterbury) produced in the Colony, was depreciated in the London market in conseguenc
Competition set in vigorously, the Southland Company's buyers rai the price an eighth of a penny per lb. The Ward buyers went one bettor an bought the sheep at per head, accepting light and heavy weights as they happened to come along. It was a lively time as long as it lasted, and it is not surprising that the farmers of Southland feel genuinely grateful to the man who gave them half-a-erown per head more for their sheen than be got for them himself, and then with characteristic callousness, transferred the aggregate losses to the shareholders of the Colonial Bank.
It may be here incidentally mentioned that "Dear Jim" about this period wrote to Mr, Nelson that it was desirable "to keep Ward alongside the Southland Company," and prices were adjusted to enable him to do this.
By October 1892 a new feature entered into the relations between the parties. Negotiations were opened with a view of Nelson Bros, becomii pa’-tners with Mr. Ward. The latter wrote to the firm as follows:-
"I would be glad If you would consider whether your firm would cone Into the concern Independently of all other people .... 1 want to keen entirely free from farmers as. once associated with them, the works become a lever to grind down the profits of the worhg to assure additional value to their stock. As far as you are concerned, and as far as the works at Ocean Beach are concerned, the less independent they are, which of course means the farmers, the better It will be for the works and you. My own Idea, roughly, Is that I should company the concern, you
25
taking an Interest to be agreed upon, and that we should work for our joint Interest.”
Displaying commendable tact, Mr. Nelson did not reply direct to Mr. hard, but wrote to "Dear Jim", suggesting that ho should have a little chat with the Cabinet Minister, and he sketched out the following basts of agreement
■ (1) Wo Bust buy right out, but would like to give some of Nelson Bros. Limited, shares r.s part payment.
(2) Should not give aoney for goodwill as I consider sheep have been bought so dear that we shall start on a worse bottom than If the business never commenced.
(5) I do not look with favour on "the large amount of business' Ward has done, as X an sure a largo amount of i; has been bad." Mr. Nelson was evidently endowed by this tlmo with sose of the
wisdom attributed to the serpent, and was not prepared to accept all Mr. Ward's geese as swans. A good deal of strategic correspondence ensued for some months when finally, on February 30th, 1895, a definite offer was considered.
Mr. hard was to sell the Ocean Beach Freezing Works for £52,000, half cash, and half In paid-up shares in Nelson Bros., Limited, and the offer was sent to London for approval. It was accepted on April 18th, 1895, the arrangement to cone Into force on January 1, 1894, and Mr. Ward,(Cabinet Minister) was to receive £BBO salary to conduct the business management of the Nelson Bros. In Southland.
On this latter point the London Mr. Nelson seems to haws had an eye to contingencies In the future, for he Bade the following stipulation: "It Is understood that the annual payment to Mr. Ward Is to be Bade only as lona as he Is useful .tO-Ug.'
Nelson Bros. Ltd. then practically became the owners of the Ocean Beach works In May, 1895, a month or so before the first general meeting of shareholders of the J. 0. Ward Farmers' Association.
Hr. Ward suggested to Mr. Nelson that terms should be made with the Southland Company, and If they would not agree, that the Ocean Beach
11.
concern should give J of a penny per lb. more for sheep until the end of the year to stop any sheep going to the rival establishment. He also suggested an amalgamation between the two, pointing out that this would give Nelson Bros, absolute control over the Southland meat trade and the firm could then fix any price it chose for sheep.
Later on came further proposals for amalgamation, and then the Ocean Beach Company’s capital was raised from £32,000 to £50,000.
While these negotiations, having for their object the setting up of a meat monopoly, were proceeding, Mr, Ward wrote special bulletins from Wellington which were published in his own trade organ, the Southland Parmer, to reassure his constituents that he had nothing but their welfare in his heart of hearts. Here Is one of them
"Wellington, July 17th, 1893.
To the Farmers of Southland-
I have to say that should I decide to
sell to Nelson Bros, the Ocean Beach Preening Works, the same system of purchase for cash, free of commission, and at the highest ruling price, will be persistently followed.
J. 0. Ward. *
At this very date the purchase by Nelson Bros, had been completed three months previously, and Mr, Ward had persistently endeavoured to form a ring whose object was to "make any terms they pleased" with the growers of mutton.
As a Cabinet Minister about this period he waxed exceedingly eloquent on frequent occasions on the benefits of co-operation, and rose to oratorical heights in his ™nrta«matinn of monopolists ■ As managing director of the Ward Association, and business manager for Nelson Bros., he bombastically announced that the rival Southland Co-operative Companies "did little or no good. It was not expected they would. They were crippled for want of capital, and handicapped greatly by the strong competition of my firm's business."
Somehow -these fluctuations In opinion on the part of a patriot are difficult to reconcile, and to the average citizen are a trifle discordant
27
Sventually the Southland Freezing Company, out of sheer defence, sued Nelson Bros, for damages, stating that while the Southland Company's balance-sheet showed a profit in 1891 of £5,485 on freezing account when there was no competition, they suffered losses by 1894 of £16,053. The Company however, only claimed damages for what happened in 1892-3, and were awarded £7,000 and costs. This decision was reversed on appeal.
Mr. Ward seems to have stood from under when this happened. As a pendent to this narrative and with a view of doing full justice
to the splendid talents of the ex-Treasurer, it is due to him to reproduce portions of a letter in the Ward Farmers' Association trade journal in September, 1894, seventeen months after the purchase of the freezing works by Nelson Bros. It was a sort of official counterblast to certain criticisms which appeared in several Southern Journals regarding the constitution of the Ocean Beach Company -
"As the Southern correspondent is anxious to know all about the works in question, we may state for his information - and we hope it will gratify bio - that the company which owns the Ocean Beach Freezing Works have paid up 550.000 In cash: that neither the company nor the works are indebted to anyone; that they have neither an overdraft nor debenture capital, nor unpaid share capital So that if their ownership has been a puzzle to traders, we daresay the owners of the works are quite willing to let them puzzle their brains to the utmost,'
and so on.
This was very high-toned and, coming as it did from the official organ of the Ward Association, and having a twang about it suggestive of the managing director's own particular style, It ought to have satisfied any person not afflicted with incurable bias. But an unbeliever made investigations and discovered that in the previous May (only a few months before) the Articles of Association had been registered, and contained the following clause:-
"Purchase money of ;550,000 to be paid to J. 0. Ward as follows viz., £55 in cash, balance by the issue by the Company of
28
9995 shares of £6 each, forming part of the capital of the Company, and credited in its books as paid-up."
The list of shareholders on the register was as follows!-
a, L. Sutherland, sheepfarmer ... 1 share
W. Kelson " ... 1 *
a. 0. Warren " ~. 1 ’
J. B. Reid, Merchant ... 1 *
P. T. Boye, Superintendent of Preening Works ... ... 1 ’
3. T. Parker, clerk Kelson Bros. ... 1 "
J. 0. Ward, Merchant ... 1 *
John Pißhor, manager Ward Parmer*' Association ... 1 *
Here is evidently another misfit. It must be apparent to anyone capable of doing a sum in multiplication, that it was one thing for a company to pay Mr. Ward £56 in cash, and £49,966 in shares, and quite another to assert, as Mr. Ward's trade Journal did, that the Company owning the Ocean Beach Freezing Works had "paid up £60.000 in cash.*
This narrative of the inception and progress of the Freezing department of the Ward group of concerns has necessarily been somewhat tedious, but it will give an insight into the subsequent events which made Southland famous, and led the London financial journals to pay more attention to Hr. Ward than he would otherwise have received when acting as ambassador from the Colony at the Court of St. James.
To conclude this chapter on mutton, the following extract from correspondence between the Chairman of the Southland Freezing Company and the Minister of Railways, will show that political influence seems to have been used to the detriment of Mr. Ward's commercial rivals:-
Mr. McQueen to the Hon. A. J. Cadman. Your Department since the erection of our works at Matanra lowered the rate for live sheep about 50 per cent, thus changing the relative coat In favour of our competitor tho Hon. J. a. Ward, and after his day, Kelson Bros.
29
Tha following comparison of rates will show how this handicap worked:-
Mataura to Bluff, 49 miles, 22:6 d per ton.
Oamaru to Port Chalmers, 68 miles, 12:Sd per ton
Bluff to Port Chalmers, 163 miles, 25:0 d. “ "
16.
Chapter IXI.
The Sun of Southland at its Zenith.
And the Devil did grin, for hie darling sin Is the Pride that apes humility. #1 .B . AJ __ /mV . J 1 •r. fDIIMI O \
- Coleridge (The Devil's Thoughts)
The strategical position of the Ward group when the campaign of 189S-4 opened was an enviable one. The bold policy adopted by the then Treasurer of the Colony In his denunciations of those who questioned the stability of his affairs disarmed the critics If It did not convince them. Although he was Indebted to the Colonial Bank In a su« equal to on*-fourth of the shareholders ’ capital and alleged reserve fund, the Directors and administrative officers were content) rival trading firms had been absorbed; the Invitation to the public to take up shares In his Parsers' Association was freely responded to, for the contributing capital rose during the year fron £5276 to £12,061, although it subsequently transpired that Mr, Ward himself took up 8000 five pound shares during the Zi years between the first nesting and the final one (upon which sheres by the way he never paid a penny as will appear later on, although he took the dividends); the rival freezing company was held in shackles; and the Binder Twine ring had the Hew Zealand farmers at Its mercy, the formers having to pev about 1J per lb. more for • twine made In the Colony than the sane article could be purchased for in Australia with freight added, owing to a protective duty which the Treasurer subsequently consented to abolish with a very bad grace.
In addition to this, the political influence of the Party Mr. Ward wae then the leading light of had increased by the well worn but ever popular royal road of playing to the gallery by every manoeuvre and catchpenny device known to politicians of the opportunist class.
With all these advantages the erection of the house of cards by the talented architect proceeded merrily and the mana of Joseph George Ward was powerful in the land. These roseate signs were what the public saw, but there was even then a skeleton in the cupboard.
The Hon. W. H, Reynolds in his evidence before the Upper House
31
Bank Enquiry Committee said that, as a director of the Colonial Bank, he had declared at a board meeting four years before, that there would be a loss of from £50,000 to £60,000 on the Ward accounts, and that the directors protested at every meeting against the magnitude of the overdrafts.
Mr. Larnach, another director, gave corroborative evidence. But nothing could stem the tide then flowing in favor of the gifted Treasurer. He and his staunch friend Premier Seddon had the ball at their feet, and they merrily kicked it for all It was worth.
Nor was Mr. Soddon Ignorant at that time Of the position of affairs with his fldus Achates, and his subsequent defence and successful blocking of any enquiry by a committee of his own selection into the mass of bogus bills, cheques and transfers will rebound on him when the future historian sums up the records.
His knowledge of the state of matters at that time was confessed by himself at his mass meeting at the Wellington Skating Sink on the night before the session of 1896 was opened, in the following words
"All he could say was this - and he was in a position to say it because he knew - that in respect of the banking legislation Mr. Ward's financial position never entered into the matter at all. In the session of 1894 the Bank of New Zealand offered to take over Mr. Ward's account and Mr. Ward's business, and Mr. Ward refused the offer."
This candour on the part of the premier in volunteering information which up till then had been a Cabinet or Bank parlour secret ( the terms are nearly synonymous) affords food for reflection and a means of testing the information which may now be gleaned from other sources.
The alleged offer by the Bank of New Zealand must have been made at some time between the months of June and October, Just before or after Mr. John Murray came to the Cabinet with his story of impending ruin and disaster to the Colony and then cajoled the People's Oovemment into guaranteeing two millions to save the Bank he was the pilot of.
On Jims 30th, 1894, the second balance-sheet of the J. 3. Ward Farmers' Association, Ltd,, was made up, but the shareholders' meeting was not held until Oct. 20th. The balance-sheet showed a net profit of
17,
''7777. 19. 8 and a bank overdraft of £28,664. But the liquidators of the l olonlel Bank in their report node tho following statement respecting the *hen position!- *O3 tho 50th Juno, 1894, the overdraft wen £60,160.11,,0 'but on that day it was reduced £55,000 by a cheque of Hr, Ward's making Pi, Is overdraft as follows)- Ordinary account, £01,874) froomer account, :>.i18,884) total £76,528, On the 2nd .Tuly, 189 v, wo find this transaction ;r )f £BB,COO reversed.'’
- 4. Two Bonviis later Mr. Ward discounted a British bill for 585,000 on Cooper, Son sad Nephew, and the proceeds were placed to his credit( this bill was sent to London but was never presented and was about a yeor subsequently relumed to the Colony and according to M?• Vigors - ftn official of the Colonial Bank - taken up In cash "remitted by sore people in Wellington.’’ Here then is tolerably clear evidence tha& when tho bold John Murray made his demand for two millions Hr, Ward t;sb la financial straits.
Tho Cooper bill was a temporary shift bo reduce Mr. Word'n overdraft at the Colonial Bank at a period when Mr, Seddon oayc he knew that the Bank of New Zealand was willing to take over the Ward accounts. Why the transfer nos not made is not stated, but in tho light of what has happened since, it nay safely bo enraieoc that the Colonial Bank would have been required to write down the account to bring the assets and liabilities within some reasonable ratio to o&oh other.
It la to bo regretted that Premier Sodden, when ho made his Skating Rink speech, did not go a little further into details and toll his audience what mutual advantages were to be gained by the proposed, adoption of Mr. Ward os a client of the Bank of Now Zealand.
The political situation during that session was somewhat carious. Ministers had, hy moans of a legacy of £967,080 loft in the Treasury by Sir Horry Atkinson and secret borrowing under the nano of conversions, contrived to fraae their financial statements Tilth professions tbr.t borrering ras act ncceesary and that the Colony could progress without a servile dependence on foreign dealers In money. The 1804 Budget, however, abandoned this position. Popularity was a necessity cf omistonce; and’ popularity can only bo bought by a liberal crrponditnro on public verts rad
33
a duo selection of the fittest to share In the spoils.
Accordingly Mr. Ward, as Treasurer, acting on the well-known
adage that one might as well be hung for a sheep as a lamb, asked Parliament for, and was granted, authority to borrow tho following amounts: One and a half million* per annum for two years for advances to settlers; a quarter of a million per annum for five years for purchasing land for settlement} half-a-mllllon for lands Improvement and purchase of Native loads; and the two million guarantee given to the Bank of New Zealand, altogether a respectable total of elx-and three-quarter millions sterling.
At the annual meeting of tho Ward Farmers' Association Ltd. on Oct. 20th, 1894, the report wae as flattering to the shareholders as they oonld wish for. A dividend of 10 per cent, was paid; a refund of 25 V»r cent, was returned to the shareholders on charges paid: a bonus of Si per oent on goods purchased was given; salaried officers received a bonus of 5 per cent., and £lOOO was carried to the rosorvo fund, and although the capital outside Mr. Ward's £15,000 paid up shares only amounted to £12,189 and there was still £6675 of Issued capital unsubscribed, it. was proposed in the report to Increase the nominal capital to £250,000 "to render the sphere of Its future usefulness considerably greater.”
Thlc suggestion did not catch on, but in place of it the Association issued, in December, debentures for £50,000. Regarding this operation, Mr. Ward stated at the next annual rooting that £lO,OOO had boon floated "which debentures woro hold in London."
To entioipato what subsequently transpired it Is aa well to state horn that tho Colonial Bank liquidators give tho following eccount of these debentures:- "To relievo this large overdraft, in Dec., 189 i, debentures were Issued for £50,000. Of these £20,000 went to the Bank of N. Z. and £50,000 were placed with tho Colonial Bank."
There la not a word about their being held In London as Mr. Ward led hla Association to believe.
Regarding the £20,000 advanced by tho Bank of New Zealauj, on the Association'b debentures, Mr. Watson, President, owned to tho Parllansntary Committee that he recommended the advance as soil as another amount of £5OOO, and on being pressed said:- "The Bank of. N. Z., being guaranteed further advances by tho Colonial Bank, losses cannot occur." Thin, of
34
onrro. must bo very consoling to those interested in the Colonial Bank.
Before tho year 1894 closed and just about the time the debentures were issued the directors of the Colonial Bank grew uneasy and on tho 19th Dec. in that year the position was laid before them in cold, pitiless figures, showing that the total indebtedness of tho Association to tho Bank was £122,189, while the value of the securities held was estimated at £68,244; but this fact was not known outside the sacred circle until nearly two years had gone by.
There were at that tine three Mr. Wards.
The nan known to the general public was Colonial Treasurer,
Postmaster-General, Minister of Marine, Industries and Commerce, and the Commissioner of Customs,
Tho capacity for statesmanship of this Mr. Ward may be judged from the fact that these departments were all controlled for the major portion of the year from a room in the J. 3. Ward Association buildings in Invercerglll on the door of which was painted: "The Hon. J. 0. Ward, Colonial Treasurer, &c." There, assisted by two private secretaries he ran tho Treasury and Customs, the Post Office and the rest of it mainly through the telegraph wires.
Tho cost of official telegrams during that year rose over £4OOO above the normal expenditure.
Sosotlnea the departments were administered from saloon cars on special railway trains, and occasionally the great man prepared State documents while the steamer Hinemoa conveyed him from one port to another, sometimes on public service, sometimes to attend functions of the Colonial Bonk people.
As a statesman and representative he did not forgot his people. Over 700 appointments were made to the Poet Office and Telegraph branch alone during his period of power end patronage.
had
He justified tbs faith the people of Southland in bin by finding that applicants for official positions aaong his own constituents sere better fitted than those in other parts of tho Colony.
It will, in the days to cone, be for the Philosophical Society to explain in a learned paper on Kow Zealand Anthropology, how it cane about
£O.
that, while Invercargill provided the State with Post Office clerks and telegraph cadettes, Walheno supplied rabbit inspectors and agricultural experts, and Westland furnished policemen and permanent artillery.
This No. 1 Mr. Ward perfected a system of converting deficiencies Into surpluses, and so acquired the well-deserved title of the "Wizard of Finance."
The second Mr. Ward was the successful merchant, who, after some vicissitudes, made a lucky hit in oats, was taken under the wing of the Colonial Bank, and allowed to pull a string which precipitated a shower of golden sovereigns for him to play with.
To the outside public the capital was hie own. On every possible occasion he paraded his personal wealth, and right royally did ho disburse it.
He cornered the oat crops, paid high rates for them - and lost;
He chartered ships, sent them to the uttermost parts of the earth and lost;
He bought flocks of sheep without regard to weight or quality at higher prices than his rivals did Button by the pound - and lost;
He undersold rival traders in sheep dip and sugar and sacks - and lost;
But those losses represented increased wealth to his clients, and constituents: and as the ultimate disaster was bound to fall on an incorporated Bank, and the proverb tells us that corporations have no souls, the merchant Ward hoisted a banner with the device, "Bat,drink, and be merry, for to-morrow ye die," and went on merrily declaring 10 per cent, dividends and liberal bonuses, always paying out with the Colonial Bank '’bareholders' money, thus gaining a popularity among his neighbours which has since stood the test of disclosures which would have wrecked a dozen ordinary commercial men..
The third Mr. Ward was only known to a limited and very select circle, which Included the Directors of the Colonial Bank, his own manager - the famous John Fisher - "Dear Jim" and a few others, among whoa Premier Beddon claims to have been, for he said so himself.
The Bank Directors' meetings must hove been sad functions.
36
It gradually dawned on the Directors that they had given their versatile client more slack rope then they could haul back again; but to the outer world the Bank was flourishing, and, although they reduced dividends to six per cent., they assured their shareholders that ample provision ims made for bad and doubtful debts; that their strong rooms held " an exceptionally large amount of reserves, and that they could not employ the money they had at the present time."
This was the statement of the Hon. George McLean regarding the balance-sheet of February 28th 1895, although on December 19th. 1894- about two months previously- it was known to the Directors that the Bank only held £08,244 securities against £122,189 of liabilities due by the Ward Association
But the speech was not delivered until March 27th following, so that It must be owned that the Hon. George McLean was not deficient in the spirit of romance when he met the deluded victims of the institution of which he had the honor of being the Chairman.
These three Mr.V'ards finished the year 1894 amid the plaudits of the multitude and entered on 1895 joyously and confidently, and, as will be seen in the next chapter, eclipsed all previous achievements before 1896 dawned.
37
Chapter IV.
Finesse and Fireworks.
Still you keep the windy side o f the Lav.
Shakspeare (Twelfth Night) o
It became evident about this time to those who were not wilfully blind, that a game was being played upon the political chess-board which had for Its object the salvation of the Ward affairs at any cost.
The Ministry of the day had for its potentates Premier Seddon, Treasurer Ward, and Land Administrator John McKenzie. Mr. ’ward's position gave him an influence over the destinies of both the Bank of New Zealand and the Colonial Bank, which enabled him to pull the strings much as he liked.
Mr. McKenzie was allowed to know just sufficient to fire off threats of what might happen if his estimable Government were overthrown. He said at a Dunedin meeting in February 189b that Ministers knew the Bank of New Zealand was weak ten months before the passing of the Guarantee Act, and as this state ment was found to be too much like letting the cat out of the bag, he altered it at another meeting at Hastings in April by alleging that he meant that the Government knew that the Bank was not in a strong position, but did not then know it was in difficulties,
Both the original statement and the explanation pointed to a knowledge of something being wrong, and when one calls to mind the manner in which Ministers had denounced all monetary institutions, and the one under notice with special rancour in the immediate pest, ana uhen suddenly come to the rescue of the pernicious institution when Mr.Murray gave them twenty-four hours* notice that he wanted a couple of millions to place it in an unassailable position, it became very clear that there were influences at work not made manifest to either the Parliament or the people.
It was,moreover, a very strange thing that the Colonial liable, with £05,000 of a reserve fund to a small capital of £400,000 , should have its shares hawked about in the open market at half-price; and the criticisms which sometimes were printed regarding the evident exaggeration and garbling of the Ward Farmers' Association accounts, and their avowed, but purposely minimised, indebtedness to the Colonial Bonk- all these matters afforded considerable food for reflection, and led commercial men to evolve from their
38
logical minds a connection between the three concerns.
Suspicion was aroused, and it was more than hinted that had there been no Ward Association overdraft there would have beon no Bank of New Zealand guarantee, and that the trump card would be played in a proposal to absorb the Colonial Bank and its overdrafts into tho safe shelter of the Bank of Hew Zealand, and thus bury up the huge losses on mutton and oats in the lodgers of what was to become a State Bank, end hide for ever tho results of cold-blooded plunging with other people’s money.
That this project had beon duly debated by tho three Ministers may well be inferred from the subsequent advocacy of Messrs. Seddon and McKenzie in Parliament, and tho vehement and scandalous language of Treasurer Ward himself.
The other Ministers constituting the Cabinet wore mere pawns on the chess-board for the three confederates to novo at their pleasure, and they were supported in all they said and did by their obedient followers in the ranks.
Tho battle-cry the three loaders appear to have adopted and to have rigidly stuck to was, "Save Ward at all hazards.’ That they did not fully save him was no fault of theirs; the partial failure, as will be shown later on, was because Mr, Ward was so far in tho dark as to the aotdal gap between his assets and his liabilities, owing to bin keeping no proper books of account, that he was only forgiven 555,150, when It would have taken double that amount to have made his account acceptable to the Bank of New Zealand. This forced his friends to come before tho Court with e. proposal to compromise.
Tho way had been paved for the amalgamation of the two banks. For some years previous to 1894 this had been a si'b.loot of consideration and the first practical step was taken in on agreement between then which was laid before Parliament on September 11th, 1894, ten days after Mr. Yfp,rd had discounted the British bill on Cooper for £25,000, which was never presented.
This proposal was blocked by the Banking Act of that session, which prohibited amalgamation without the consent of Parliament; and the Hon. George McLean a fortnight later - on September 28th - when presiding at the
24.
half-yearly meeting of shareholders in the Colonial Bank, and commenting on the proponed amalgamation, referred to the guarantee given to the Bonk Its* Zealand aa a cruel blow to the local institution, which wan at the "exceptionally strong' , and that it courted the fullest enquiry. He farther said that the Colonial Bank had to refuse hundreds of thousands of the hast business In the Colony because It had "to pursue a Conaorvstive policy."
Mr. Keith Ramsay, subsequently appointed one of the official liquidators of the Colonial Bank, expressed the opinion that the proposed aaalgaaatlon was politically bad and morally wrong, and ho was glad that the Oovernaent had put an end to the matter, "and after a rote of thanks had been passed to the directors and officers for their services on behalf of the shareholders, Ur. McLean volunteered the information that the Colonial Bank was the strongest In the Colony, as Its reserve fund was In the ratio of 17.85 per cent, to Its capital, and no other Bank could show anything near that proportion. The delighted shareholders received a dividend of seven per cent., applauded the statement, and tbs Directors felt that they had another period of respite.
On October 12th, 1894, a fortnight after this congratulatory function, Mr. Vllllan Watson was appoint ?d President of the Bank of He* Zealand at a salary of £2260 per annum by the Ministry ( Including Mr, Ward), the tenure of his office being "during good behaviour and efficiency." The directors of the Bank had no voice In the matter, and Mr. Watson was granted a poser of veto, and he, eleven months aftersards, clinched the bargain by obtaining from the directors a deed ratifying his appointment.
Mr. Watson left the Colonial Bank, In which he held a prominent position, as Inspector of Branches, to preside over the Bank of New Zealand, and he was also a shareholder In the J. 0. Ward Association. It is Impossible that he could In these circumstances be Ignorant of the state of affairs between the Bank he had left and the Association ho was Interested In, and evidence was given before the Parliamentary Committee hii~ >.* nnn of the Bank Directors (Hr. Booth):-
• I "Approaches were made to na for the pnrohaee of the Colonial Bank
25.
at various times. Mr. Watson was practically always the man who was prominent in moving so far as we were concerned There was a good deal that was not prudent or proper. It was impossible for us, after we became fully acquainted with the position of the Colonial Bank, to understand a good deal in connection with the conduct of the President and the present General Manager. *
The General Manager referred to wee Mr. Mackenzie, formerly General Manager of the Colonial Bank and subsequently appointed to a similar position In the Bank of New Zealand, with the concurrence of the Ministry (Including Mr. Ward) and on the special recommendation of Pres Ident Watson, as related by Mr. Booth, who salds-
*Mr. Watson, as President of the Bank, was very anxious that Mr, Mackenzie should be there, and it was quite plain that it would be very difficult for us to get anybody else past Mr. Watson's veto. I was asked particularly to see Mr. Seddon about this business, The Treasurer, Mr. Ward was flj officio the organ of the Government in banking natters. I cannot say why he was passed over. Mr, Watson arranged the matter."
These transferences of the two chief officers of the Colonial Bank to the Bank of New Zealand Indicate that at that time the need of smoothing tho path for the rehabilitation of the Ward Association was clear to Premier Seddon, Treasurer Ward himself making the balls and his colleague providing the weapons. Neither of then dreamed at the time that their schemes would fail, far less be exposed to tho public gaze. They commanded a passive band of followers in Parliament glorying In their servitude to Ministers who could make or unmake then M.s H. H. by means of favors to constituencies, and they proceeded, with tho aid of the shrewdest legal talent obtainable, to construct an agreement, which had for Its object the forgiveness of the Southland losses and weighting the already overburdened Colonial Bank shareholders with tho mass of debt.
An act was passed during the session of 1894 which the most astute minds among the Opposition seem to have failed to grasp the drift of. This was the New Zealand Consols Act. In its preamble its object
41
wao set forth thus:-
"Whereas it is expedient to encourage thrift by affording the people of New Zealand facilities for the safe investment of their capital";
and anong Its provisions was one providing that the aonles so raised were -
"to bo Invested in such securities as tho Governor- In-oounoll (1.0., the Ministry) nay authorise The Colonial Troasuror shall lay before Parliament an annual statement of all investments made."
When Mr. Ward introduced the measure it was generally believed that it was a new form of borrowing for roads and bridges. He did not deny this, nor did any of hie colleagues, but he gave as a reason that"some people were fastidious" as to the places they should deposit their money in. Ho intended that it should be used in lieu of Treasury bills, and for promoting "the development of the Colony," and was earnest in his assurance that it was not for wild-oat proposals.
So that all the people should be enabled to participate in the satisfaction of being holders of consols it was enacted that minora of ten years and upwards oould purchase them. Mr. Seddon predicted that the old women of the Colony would rush to invest the hoards of wealth they were compelled to keep in old stockings, arm-chairs and tea-pots in these desirable securities.
As soon aa tha session was over, the Government Printing Office wan employed in printing console for £150,000, and the Bank of Her Zealand took the paper, and handed over tha cash. It wan a curious transaction, Tha Government had Just bsfore assisted the Bank by a guarantee of two millions at 4 per cent., and then borrowed back £160,000 at a higher rate. And thin sun neither went in promoting development nor in Treasury bills, an Mr, Vfard said it would go, but it wont into the wildest of wild-cats, which wan exactly where he promised it should not go. It wan handed over to the Colonial Bank, which professed to he very unwilling to accept it, but as the amalgamation proposals had dropped for the time being, there were very good reasons why the Colonial Bank was extremely glad of the windfall, because at that very time the concerns known by the extremely comprehensive title of the J. 0. Ward Banners' Association had
42
crippled the Bank through being indebted in a sum in excess of the amount raised by th; CenPclß.
Events followed very fast on one another at that time. Towards the end of Decs- ber, 169; it war announced that Mr. Ward was going to London on private buolnena, A protest went up throughout the Colony that it was undesirable that tho Treasurer should leave his post, and a change of front took place, Mr. Ward made it known that he was "deputed by hie colleagues to proceed to England to attend to matters of an Important character affecting the welfare of the Colony." That was what the Ministerial press said and what the public saw, A reason, If not the real reason, was that Hr. C. H. Valentino, who bad cost the colony 31700 for a trip out and Hone, had arranged to fora a company to exploit the New Zealand produce trade. It wan to be called the Co-operative Produce Agency Company, the capital to be a million; and, among other objects for the good of the Colony and Its shareholders, It was to amalgamate some going concerts, suoh as Nelson Bros, and the J. 0, Ward Farmers' Association. This company did r.ot float, but another more modoet one did a year or so later, with a capital of £lOO,OOO and Messrs. J. 0. Ward and John McKenzie as directors at salaries of £6OO each. Who provided tho money has never been authoritatively stated, although it was persistently reported at the tine that it was found, by a certain large financial institution in the Colony,-
But while attempting, however unsuccessfully, to persuade London financiers to ley up their treasures In his Association, it is fair to Mr. Ward to here cay that he did not neglect the Colony he represented. Or the voyage home he made a treaty with the Premier of South Australia, In which oats end binder twine wore to have special favors shown then. Thin treaty nas subsequently kicked out ignoninlously by the Parltanonts of both colonies.
On Ms arrival in London reporters were invited to Interview hln, he addressed tho Metropolitan Chamber of Commerce, and told fairy tales of our wealth and resources; ho hobnobbed with lords and marquises, he was presented to royalty, and he floated the million and a-half loan with far less trouble than the Advances to Settlers Department has had to lend
the money.
He returned via Canada, and while the express train he travelled kj stopped for refreshments he mads another treaty on the basis of a tariff which had been repealed two years previously, and then, in due time, again landed la Wellington, where the faithful had prepared a reception for him Intended to eclipse pay pageant in the history of Wellington. This assumed the semblance of a funeral rather than a demonstration of Joy, but a subsequent banquet (for true Liberals only) afforded opportunities for Ministers and friends to gush over the unparalleled deeds performed by the hero of the day, both as a colonial ambassador and a successful merchant prince.
As a specimen of Mr. Ward's magnificent ability in romance it would be unkind not to reproduce a specimen of his powers of varying bin speech to suit his audience. The following extracts apeak for themselves:-
In Parliament, July, 25th 1894. We have not, and we ehall not have on the 31st October, sufficient money In England for the payment of interest.
At the London Chamber of Commerce, April 2Bth, 1395. Instead of being hard up for cash st that date (October) the Colony had lying to its credit, and it still had, throe millions* worth of unpled ed securities.
Parliament was in session when Treasurer Ward arrived, and he was soon brought to book regarding the London statement. Most men would have folt at a loss, not so the "Wizard of Finance.” He produced a cablegram from the Agent-General which mbstltuted the word "pledgeable" for unpledged, and even this referred to securities held against trust funds. This was a mere detail, however, and the faithful whitewashed the hero of the 3-per-cent, loan, and then went to work on more banking legislation.
It would be a weariness to the spirit to recount all that followed. Two banking bills were passed. It was found that the two-million guarantee would have to be supplemented by another half-million; that ths Colony would have to take upon itself the remarkable hotch-potch of runs, farms, breweries, hotels, sheep, and other odds and ends which had been pawned to the Bank of New Zealand to the extent of two and three-quarter millions sterling, and, to crown all, it was found that the Bonk of New Zealand could not struggle along without more earning power, so it wan decided to
ze.
purchase the Colonial Bank, which had, nine months before, been kept afloat with £160,000 of Consols borrowed fron the other '.Track.
Strenuous endeavours havo been nado to show that It '.ran Mr. Sodden, and not Mr. Ward, who took the leading part in arranging the basin of agreement for purchase. The noro one pores over the endless pages of evidence given and evidence refused, tho noro is the reader convinced that both Ministers acted in concert, and the oh.ioct sought wac the piloting of the Ward Association Into the safe haven of the "People's Bank’ without any disclosure being Bade as to what an awful sink the Southland concern had been for the capital of the Colonial Bank. Information was refused by both the Premier and Treasurer, Pointed questions were sometimes airily, sometimes dodglngly, but oftener Insultingly evaded, or replied to with consummate Impudence, while the forty Ministerial followers looked adalrIngly upon the bravado of Ministers as a trlnmph of ntatesnaashlp, and so the legislation parsed, and tho confederates, having a clear course, as they believed, brought the session to an end, congratulating themselves that their labours, which began by cajoling Parliament into guaranteeing two millions, had now received the finishing touch (as they thought) by the saving of the Honorable Joseph George Ward from exposure and Bankruptcy.
45
Chapter V.
The Value of Political Pals.
Men's Bvll Manners live in Brass. - Shakespeare (Henry Vll)
The astounding oats transaction by which the balance-sheets of both the Ward Association and the Colonial Bonk, os well as the famous "C* Hat of debts in the agreement for the purchose of that Bank wore made to appear better to the extent of £50,000 than they really wore, was not by cny moans a new system of book-keeping. It was merely a variation of tho bogus cheque system adopted by Mr. Ward to reduce the Association's indet badness on ths balancing days of June 50th, 1895, for £21,000 and £55,000 in 1894, and the bill drawn on Cooper's on August 31st. 1894 for £26,000. These, like the oats draft for £50,000, were mere ’kites’ which served their purpose of deoelving those who trusted to the evidence of balance-sheets, end it Is interesting here to compare the dates on which certain historical events happened, to indicate what a close connection existed between the legislation of the session of 1896 and the J. 0. Ward Association.
Tho Bill authorising tho purchase of the Colonial Bank was introduced and passed at one sitting on October 26th, 1898. On the previous day, Mr. William Wataon reported on the agreement arrived at between the two bonks for the purchase, which contained among other things the following;
“The Directors of the Colonial Bank anticipate that in addition to tho £155,906 agreed to be paid in cash, they will receive out of the £827,505 a further sum for distribution among shareholders,"
Mr. Sedlon, In advocating the purchase, waxed eloquent on the bargain the colony was making. 'Whore is the Increased earnin'! power?" ho asked, and replied himself to the question as follows:-
*You have the fact that there are accounts to the value of two millions, and gilt-edged accounts to the extent of a nllxlon in round numbers. Now, what would it take any bank starting tomorrow to get together a million’s worth of gilt-edged accounts and business?"
He did not condescend to particularise. He did not oven pause to inform Parliament that such gilt-edged business as the Word Association and tho Kov. Mr. Ryley formed the cream of the product of the Colonial Bank's dairy; and yet ho said ho knew all about it, and stated in his ovldeno, before the Parliamentary Committee - *1 am solely responsible for the drafting of the Banking Act of 18BB."
Ths condition of tho Ward accounts was known then. Thn Assistant Inspector, Mr. Davidson, went to Invercargill in August, end found tho Ward
31 .
Association insolvent according to its own books, and its defiolonoy from 260,000 to £56,000. Tho Colonial Bank become aware of the "oats" transactlo in September.
The agreement between tha two banks for tho purchase of tho Colonial was drafted on October 12th, and one of its conditions was that £56,150 should bo put to tho credit of tho Ward Association, in order, so it has been alleged, "to make it s. saleable concern.' Tho agreement was signed on 18th October 1895, and Hr. Ward gave his acceptance for 265,150 on the following day, after tho Association's debt to tho Colonial Beak had been written off to that extent.
Tho Bill to authorise the purchase was introduced and passed on the 25th by the Lower House and next day by the Legislative Council, and the load of anxiety was removed from the rinds of the politicians who had worked so hard for two sessions to attain this desired consummation. Something nore was necessary, however, to prevent officious interference by high banking officials, so Mr. Henry Mackenzie loft the service of the Colonial Bank on Nov. 22nd and was appointed General Manager of tha Ban’: of Now Zealand on Nov. 25th, 1896.
It 1b worthy of note here that the last balance-sheet of tho J. 0. Ward Association was made up on June 50th, 1895, it was signed by !'r. Ward himself on August 13th, and the shareholders' mooting was held on September 7th. when the "Oats” transaction was known to the Bank, to Mr. Werd and to his manager. At that meeting Mr. Ward announced that the ’goodwill’’ would be written down from 515,000 to 511,000; end ho wan generous enough to also announce that he had decided to devote £lOOO of hie own dividend” to reduction of "goodwill." Ho referred to the 540,000 debentures "held in London" which would "greatly asslet in putting tho finances of tho Association on a permanent baeln, and made a forecast ihat the year then being entered on would be a prosucrous one for tho Association, and the result would be oven better than any since tho -ontatior of the Association.
Tho 1895 balance-Enoet took no account of draft.® or bills discounted, which tiro items in the pre"lous year totalled £86,860. Theac -labilities noro simply Ignored. The overdraft at tho Bonk was set down
47
at 21186, the total liabilities having apparently, but of course fictitious!; decreased from £166,846 in 1894, to £87,255 In 1895, and a net profit on the year's operations was shown of £6516, which included a bogus credit to profit and loss account of £l5OO referred to In another chapter.
Just before this meeting, Mr, Davidson, Inspector of the Colonial Bank, had been sent to Invercargill In consequence of news having reached headquarters that there had been heavier losses than anticipated in the Association, Mr. Davidson discovered the vast gap to exist between the quantity of oats in store and what was represented on paper. The local bank manager, who was In charge of the local branch because, as Mr, Mackenzie said, ho hod experience in the oat trade, appears to have been amazed at what was going on under his very nose, and wrote as follows to the Oensra.l Manager. This letter It will be noticed was dated four days before tho Association meeting, when Mr. Ward generously "devoted £lOOO of his own dividend to reduction of goodwill," and spoke so glowingly of the position ui prospects of the concern.
(Private.)
Invercargill, 3rd September, 1895.
Dear Mr. Mackenzie, - Before this reaches you Mr. Davidson's report on his Investigation of the affairs of the Ward Farmers' Company will be in your hands, and you will see by It that terrible disclosures have come to light. The day Mr. Davidson appeared an engagement was made with Mr. Fisher for hal! past seven In the evening, and half an hour before that time the latter came along to the bank and made a confession of his crimes that fairly staggered me. The amount owing to the Association by Mr. Ward is a perfect revelation and fully explains why I never could keep the account down. The outcome now Is that Instead of Mr. Ward being a rich man, as he led me to believe, and I always thought, he has lost every shilling, end is somethin) like 830,000 behind besides. Fisher owns up to being 75,000 sacks of oatu short of ay warrants (exclusive of the 80,000 Backs attached to the British bill for 250,000), and says he has lied and deoolved mo hundreds and hundroc’s of times during the past five years; in fact, ho says the truth has not beet In him. This Is a nice confession for a man holding the position ho does, and from one I had the greatest respect and trust In. It Is truly appalling to me, and Is the rudest shock I have over experienced in my life. My own opinion is that we could put Fisher, Anderson, the directors, auditor, &c,, in gaol over this, to me, huge swindle If necassary. You, of course, will know what Is best to be done, and I therefore await your directions before moving further. With very much rogrot at the outcome of things, - I an, &0.,
0. A. Birch.
Then in the Supreme Court in March, 1897, Mr. Solomon asked witness If he did not know after reading that lottor that Mr. Ward was ruined?
Mr. Mackenzie: No.
when Mr, Birch wan before the Parliamentary Coamlttreo ot' Aug 12th next year, the following comedy wa» onactodi-
Hozi* Mr. Bonar to Mr. Birch. What was tho nature of the loan
33,
which occasioned surprise to the hank authorities, and I presume to yourself, in September, 1896?
Mr. Birch: That is exactly what I should like to know myself. Mr. Bonar: And you have not elnoe become acquainted with tho . cause of the loss?
Mr. Birch: No.
The answer by Mr. Mackenzie to Mr. Solomon shows how much stronger blind faith is than the testimony of branch managers, and it is curious to look bock on the game that was being played la Parliament on the same date on which Mr. Birch expressed his indignant belief regarding the huge iw indie.
Hansard, September 3, 1695.
Mr. Sodden: I do not think, as far as I on informed, there is any truth whatever in what has been stated - that the agreement is already out and dried.
Dr. Newman: Well, X will tell the honourable gentleman what T. know. For months past, negotiations have been going on between the managers of the two banks (Messrs. Watson and Mackenzie), and the position of General Manager la being kept vacant. And, sir, we shall find that the present manager of the Colonial Bank, Mr. Mackenzie , will bo put in that position.
Was it to he wondered at that the publlo and the press commented on the 1896 balance-sheet when placed side by side with the legislation that was proceeding when they were published?
The remarkable success of the promoters of the Banking Bills spurred the critics on to discover the realities then hidden by the curtain Messrs. Seddon and Ward declined to allow Parliament to peer behind. Their efforts to got at the truth were branded as unworthy motives and base suspicions, and it was held desirable during the recess for Ministers to stump the country and instruct the people how patriotically and virtuously they had oome to the rescue of the colony, end bow their efforts had boon opposed by a selfish Opposition and a vile Conservative press.
Mr. Ward Bade a tour round Taranaki and delighted the Liberals of the Garden of New Zealand hy his vivacity, his lightning elocution, “d his social attainments. At Stratford he brought down the houna by th » characteristic Banner in which he sang that singularly prophetic song *Thero*s Bound to bo a Row," and at Wanganui he convinced hie audionoo hy the completeness of his rout of those who had ventured to hint that h j» had profited by, or had anything to do with the Bonking legislation.
49
Thane people, he said, made strong efforts to impeach his veracity and integrity, and they deserved to he treated with contempt. At New Plymouth, on May 12th, 1896, at a crowded meeting ha sald:-
"I give you my word of honour as a man, that no member of the Ministry know the proposals between the banks in connection with any account on any list. The imputation is grossly untrue. No man has a right to ask me, although I am a public man, what my private affairs are. If any man stated that X had then been guilty as a pbllo man of improper conduct In connection with the Banking legislation, I would have called him a liar." (Cheers).
Comparing this with the evidence given before the Parliamentary Committee, that on October 18th the directors of the two banks agreed as a condition of the sale and purchase of the Colonial Bank that £66,160 should be written off the Association's indebtedness to the colonial Bank; that on the 19th, Mr. Ward gave his acceptance for the amount which was duly credited to him as "cash” in the Association's books, and the document then ignominlously put in a safe with other "kites* and considered of so little value that it was taken no subsequent account of; and that the Banking Bill was then prepared and passed through the Legislature Just a week afterwards; - it does seem that Mr. Ward's New Plymouth assertions, and the final epithet quoted above, would have a nearer application to some person more closely allied to the Ministry than to the people he denounced.
Leas than one month after his triumphant campaign through Taranaki, the aarne Joseph Osorge Ward atood before Judge Williams in the Supreme Court at Dunedin, and chere he testified aa follows in reply to Mr. Young:-
"Then you are personally responsible to the bank for £96,000 on paper? - Yes, that la so.
"And agalnnt that you have property worth. In round numbers £4000?
That is the value of the property.
"So that at present you are hopelessly insolvent? -
That 1b bo according to my books."
"When did you become aware of your position? - I first became aware of the responsibilities I had on my shoulders when I became aware of the loss of the Farmers' Association. I think it was in August 1895."
This fixes his knowledge of the position of his Association as being fully two months before he introduced the Bank Bill, which had for its real object the absorption of els affairs into the Bank of New Zealand. But, that his knowledge of his own position and its hopeless entanglement was no secret long before this was logically sot forth in Judge Williams'
35.
tle summing up when ho concisely related the history of the business thus:-
'Here, then la a company, or association, with a capital actually paid up in cash of £12,450. When it has been only three years in existence that capital has been loct and tha association has become hopelessly insolvent, showing a deficiency of over £lOO,OOO. It has been shorn that the association obtained credit for a large amount by fraud; that it put forward an utterly false balance-sheet and that its affairs wore managed with a reckless disregard of ordinary business principles. Of this association Mr, Ward was managing director. Of the £12,450 of paid up capital he hold £BOOO, which carried with it a contingent liability of £32,000. Ho also held shares of the par value of £16,000, which had been allotted to him as fully paid-up. His private account with the association was in debit £55,150, showing that ho freely used the credit of the association for his own private ventures. In such circumstances it is hardly too much to say that in substance Mr. Ward and the Association must for most business purposes have been identical. Mr. Ward is now hopelessly insolvent. A few pence in the pound is the utmost that his estate con be expected to realise. What, under ordinary circumstances would happen, would be that the association would go into liquidation and that Hr. Ward would become bankrupt. That tha career of the association should be brought to an end and its proceedings investigated, and that those who were responsible for its management should no longer be permitted to roam at large through the business world is a result so obviously desirable in the interests of commercial morality that it ought if possible to bo attained.
36.
Chapter VI - DESPERATE MEASURES.
Emboldened by despair, he stood at bay. Dryden.
The triumphant tour through Taranaki terminated, as narrated In the previous chapter, in Mr. Ward standing before Judge Williams at the Supreme Court, Dunedin, on June sth 1896. Many heads had been put together - some of them wise, others foolish - with the object of devising a scheme that would effectually drag the Southland hero out of the financial quagmire into which he had fallen, and at the same time wear upon Its face the semblance of honest merit. The result of all this deliberation warn that two trusty friends of Mr. Ward - Messrs. A. Lee-Smith and J. B. Reid (“Dear Jin’) - either came or were put forward with a proposal to find the modest sum of £62,750 with which to purchase from the official liquidators of the Colonial Bank not only all the relative securities but also all the debts and obligations, direct and indirect, of the Ward Association and of Joseph George Ward to that ill-fated institution, aggregating no less than £168,229, thus:-
J. 0. Ward Farmers' Association £ 92,179
Hon. J. O. Ward £ 56,150
Hon. J. G. Ward £ 16,000
Hokonui Railway and Coal Co. £ 4,900
£ 168,229
Bvery available soul ready and able to assist In the salvation of Mr. Ward from the consequences of his acts was pressed Into the service In the hope of securing the Court's sanction to the scheme. The three liquidators of the Colonial Bank - Messrs. Ramsay, Simpson and Vigors the Ward Association's liquidator - Mr, Cook; the last manager of the Ward Association - Mr. R. A. Anderson; the manager of the Hokonui Railway and Coal Co. - Ur. John Hayes; Mr. P. Vi, Thompson, dentist, of Christchurch, and Mr. Ward himself filed affidavits, all, of course, In the one direction. Two counsel also appeared In support - Mr. Haggltt, representing the liquidators, and Mr. Woodhouoe, representing Mr. Ward.
A statement had been pripared by Mr. Cook of the position of the Ward Association, which purported to show that if the Association went
52
Into liquidation the Colonial Bank would not obtain so much, by some thousands of pounds, as was being offered under the proposal before the Court. The writer of this story had, some time previously, heard that a compromise of importance was likely to bo attempted, and on behalf of certain Colonial Bank shareholders he instructed a solicitor to give notice that he required due notice of any application about to bo made to the Court. In this way it came about (fortunately for the shareholders, unfortunately for Mr. Ward) that the writer and his solicitor, Mr. Young, were "alongside" when the application for sanction to compromise with !lr. Ward and his Association (to all intents and purposes the same) wan made.
An affidavit was filed by the writer closely analysing the publlshei balance-sheets of the Ward Association elnoo its Iniquitous birth, pointing out extraordinary discrepancies, and stating that, on the strength of information in his possession, he believed the Association's assets had been greatly undervalued in the statement prepared by tho Association's liquidator (which formed the basis of negotiations and the price finally fixed as the purchase money), and that, setting aside tha question of principle involved, it would bo more to tho advantage of the Colonial Benk shareholders if the Association were liquidated in the ordinary way. The Court, after a prolonged examination of many witnesses, threw out the application on the ground of principle set out in the extract from the judgment quoted at the conclusion of chapter 6, namely that the proposal was “in effect an offer of hush money". Judge Williams was bound to accept the array of affidavits above mentioned, as to tho value of the Association s assets, as against the solitary affidavit of the writer, but it is on record, nevertheless, that seven months after tho rejection of Messrs. A. Dee-Smith and J. B. Reid's offer, the liquidator of the Association admitted that "owing to a successful season in oats, enabling tho farmers to pay their debts, the estate would benefit by about £lO,OOO.
"The Guardian" (edited by the writer) of November 26th 1896 - one aonth previous to Mr. Cook's admission - said:- “We no* say upon tho best authority and without tho slightest four of contradiction, that from £lO,OOO to £20,000 will be absolutely saved to them, (the Colonial Dank
53
shareholders) by the action of this same smallband who threw themselves against the formidable phalanx of the enemy and won. Time alone will prove the accuracy of our assertion.* The writer's Information was to the effect that the Improved position of the estate (a month afterwards admitted by Mr. Oook at £10,000) was caused by something more than "a successful season in oats" - in other words an Inspection of the Association's hooks might reveal, for Instance, that binder twine and other assets were actually sold for considerably more than they were valued at In the liquidator's statement. The reader Is asked to acquit the writer of any desire to be egotistical, but as further proof of "The Ouardlan’s" forecast, the following, taken from the affidavit of the Ward Association's liquidator filed In April 1897 (only about four months after hla £lO,OOO admission) may be quoted:-
Total claims against the Association
admitted and not adjudicated upon £ 97,031
Assets In hand £ 55,233
Uncalled capital, estimated at 8,460 63,683
Mr, Cook's Estimated Deficiency £ 33,348
Mr. Cook's ectlmated deficiency
in statement for proposed compromise £ 48,466
showing an improvement in the estate of £ 16,108
Judge Williams' Judgment that caused such consternation In the Liberal camp was In Itself - apart from the financial aspect - a complete answer to those who were inclined to upbraid the writer for what they were pleased to term “meddlesomeness" on his part. No doubt those high-souled individuals looked strictly at the £.s.d. aspect of the question, and, perhaps, few will blame them for doing so. But the writer was a little struck by the fact that one of his chastisers was a Wellington clergyman. This gentleman seems to have been among those who viewed the proposed compromise solely from the fi.s.d. stand-point, but, on the writer expressing surprise that one of "the cloth” should. In face of the severe strictures contained In Judge Williams' Judgment, shut his eyes to the principle involvei the reproach had its effect and the sinner became duly penitent.
54
Another incident, not altogether devoid of interest, that followed immediately after the rejection of the offer made by Mr. Ward's two friends properly forms part of this narrative. When Mr. Ward had returned to Wellington from Dunedin, and, metaphorically speaking, fallen into the willing arms of his sorrowing colleagues, a caucus of the Liberal party was urgently summoned for the purpose of receiving their shattered Idol's report, with full brazen accompaniment of course. This caucus was an exciting function, the main feature of which was the flourishing in the faces of those present of what Mr. Ward declared was an original anonymous letter which had reached him the morning after the disaster in the Supreme Court. The pride of the party went whirling along in his usual soul-stirring fashion, assuring his listeners that this anonymous letter (which was alleged to exultantly taunt him with his downfall) was written either by the writer of this romance or his solicitor. Hie audience seemed at first incredulous, but Mr. Ward (who is never at a loss in an emergency) had the proof ready at hand. Presto I and a cheet of blotting paper dangled in the air. Here was the damning proof of guilt - an exaot .facsimile of the letter which poor Mr, Ward had received I By this time the excitement, as may easily be Imagined was at fever height: members scarcely knew whether they were on their heels or on their heads, such was their indignation, and they were dying for more information as to how the victim of this dastardly outrage had become possessed of the blotting paper. Again rang out Mr. Ward's voice sharp and clear: ho would tell them - the blotting paper was found upon the pod that the writer of this story and his solicitor had been using In their private room in the hotel, which room happened to adjc'" the one Hr. Ward occupied. What a chain of circumstantial evidencet A Coup such as this whs destined no bo the success that it was, and members dispersed with tears of sympathy in their eyes, seeking what solace they could in the establishment known as Bellamy’s.
Hews travels like lightning, and it was not long before a member of the caucus who was less gullible than the others and who evidently thought that such a serious charge should not be made under cover of the caucus, whispered what had occurred into the ear of somebody who promptly
55
told the writer of this story. The result was the following letter:-
"Wellington. 16th June 1896.
The Hon. J. 0. Ward
Club Hotel,
Wellington.
Sir,
( name omitted here ) has Just mentioned to me that you have received on anonymous communication of an objectionable nature relative to the recent proceedings in the Supreme Court, Dunedin, and that you have attributed it to Mr, Young or myself. I can say that so far as Mr. Young is soncemed I know him well enough to acquit him of any imputation of the kind, and, so far as I am concerned, X emphatically deny having addressed you at any time whatever, either by letter or by word of mouth. I will go further and characterise the writer of any anonymous letter of an offensive character to a man in the unfortunate position in which you find yourself as dastardly in the extreme.
Should you allude to the receipt of any such communication at any time to any person or persons and connect Mr. Young or myself with it, I shall be glad if you will, in fairness to each of us, make known the contents of this letter.
I am, Sir,
Yours obediently.
V. M. Braund."
Thlc letter was delivered into the handr 0? Mr. Ward's private secretary. Not only was no reply received, but Mr. Ward was careful not to bring the matter up in open parliament, and he Justified once more the prefix to his name "Honorable" by refraining (so the writer understands) from reading the letter to a caucus of hie party. If any such anonymous letter, as alleged by Mr. Ward, was really received by him in the ordinary way - which 1c open to question -, it was undoubtedly a most "dastardly" act on the part of somebody, but not more dastardly than the omission of Mr. Ward to either give those whom ha had accused an opportunity of disproving the charge against them (which would have been no difficult matter), or apologise. Mr. Ward's conduct was from the outset self-condemnatory,
41.
for the proper place to make auch a charge waa In open parliament whore ho would have been protected by privilege from legal consequences, but where thoae who were secretly accused would have had an opportunity of being hoard either through the medium of a member or at the Bar of the House.
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Chapter VII.
The Apotheosis.
Hope withering Tied and Mercy Gighod Farewell. - Byron (Corsair).
Tho nunaing up of Judge Williams was anxiously looked for. Parliament had Juct assembled end l'r, Ward was still Treasurer, PostmaeterOeneral, &c., pjid looked upon as the sheet-anchor of the Ministry by his colleagues and the three dozen pitiable followers who bad been elected by the Sovereign people to pass laws, which with marvellous inconsistency they contrived to evade or break as if they approved of the sentiment in Macklln'a play of love a la mode, "The law is a sort of hocus-pocus science, that smiles in yor face Thile it picks yer pocket.*
All business at Parliament House ceased on the morning of Juno 17th, 1890, when the telegram telling of the fate of the application of Mr. Ward's Intimate friends to purchase his debts and so make him free, owing no man anything, was approved of or refused began to come through the wires. The first fen sentences of the Judge's finding seemed favorable, and began as follows:-
I agree »ith the liquidators, that upon the figures brought fonard by Mr. Coo’: the suggested purchase Is a fair one and that it »ould probably be more beneficial pecuniarily to the liquidation that the agreement should be carried out than that tho Hcsrd Farmers' Association should be compelled to liquidate."
Ministers gripped their colleague by the hand and fervently thanked Providence that Mr. Ward would still be enabled to aid them during the troubles of the session; the aovonunent supporters, from the alleged Independents of tho Loft Wing down to the last joint In the dumb dog's tail. Jubilantly congratulated each other on the victorious outcome of the Supreme Court proceedings, and for half-an hour there was joy unspeakable In tho lobbies. Then oamo more telegrams and natters assumed a doubtful look, and as shoot after "hoot wan received culminating In the positively awful opinions cf Justice Williams quoted at tho end of chanter 5, a wall went up and long visages and vacant hopeless looks took tho place of the prevalent good humour of tho morning. A caucus was called after a Cabinet meeting had decided that Mr. Ward should retire from the Ministry he had graced so long and. led so brlllisutly through the quicksands of finance.
43.
That evening leave was given to him to occupy an hour in making a "personal explanation."
To those who are curious in such matters his two fervid deliveries of hatred, malice and ur.charltableness are enshrined in the Chronicles of Parliament, and stand there as a living proof of what manner of man the hero of the Party was. His friends and admirers, Premier Seddon and the Minister of Lands, emulated hia efforts in the way they let their tongues run riot in vilifying members of tho Opposition end journalists who had seen through the game which had been played, and when the House rose that night the audience felt, and with them the people of New Zealand next morning, that the high estimation in which the Parliament of New Zealand had been held by tho sister Colonies had been forfeited and that It would be years before the stain would be wiped out.
It is not a happy remembrance to those who heard and saw what occurred; hut it must have a brief reference in these pages, because immediately afterwards the Ministry, smarting under the exposures, set up a Committee to enquire Into the afflrs of both Banks with "special reference to all the circumstances leading up to the Banking legislation and the position of tho Colonial Bank at the time of tho first proposal for amalgamation or purchase. . . . the information in possession of the Government or any member thereof at tho time of tho Banking-legislation of 1893, 1894 and 1895 and since that time, . . to report in twnety-ono days."
Tho Committee consisted of tho following Ministers and Government followers:- The Hons. Mr. Seddon and McKenzie, Messrs. Graham, McGowan, Guinness, Stewart, Maslln, Tanner and Montgomery. The only representative of the Opposition chosen was Mr. George Hutchison, who at the end of the so-called enquiry described himself an the “irreducible minority of one."
For fifteen we;okn that select band wrestled with witnesses - not to obtain evidence, but to burko enquiry. Mr. Seddon's art of Government and political supremacy Is mainly founded on hln intimate acquaintance with Parliamentary procedure and the operation of the nice points of standing orders. This knowledge ho used to the utmost of his powers for the Protection of his friend and colleague, daily and hourly blocking tho Proceedings by declaring that any question leading up to a connection between
59
tho Colonial Bonk and Mr, Ward or hln Association, or to any circumstances linking In tho forgiveness of Mr. Ward's debt of £55,150 with the legislation of 1893, with the agreement between the two Bonks of 1895 and other Incriminating matters - that all these were"not in the order of reference," and when cornered (as he often was,) he would move that "the Committee do now deliberate," and his pliable chairman (Mr. John Oraham) and obedient followers always said "Aye," and then the reporters would retire and the day be wasted.
In the end a tremendous mass of printed matter was produced and a report which took Chairman Oraham on hour to read to the House, and told a groat deal the members knew twelve months before but which only referred to the real issue in the following delightfully brief and innocent manner:"Your Committee were unable to make any investigation into private accounts."
The Committee of the Legislative Council did not have quite such a tender regard for Mr. Ward's feelings, and in their report gave a summary of the famous “Oats" transaction, but eased him down by reporting that when this took place Mr. Ward was absent from the Colony, yet regretting that he should have held the position of Colonial Treasurer while the Banking agreement was under arrangement. However, with the usual effrontery it was claimed by him and his ex-colleagues and friends that ha had coma out of the fiery ordeal with honors, and the Ministerial journals sang poans of triumph.
Side by side «o place tiro Journalistic opinions on the result of the Parliamentary Enquiry:-
Now Zealand Times, Wellington, September 28th, 1896.
Tho second salient point la the rehabilitation of Mr. Ward. All the insinuation!, and all the charges levelled at him for his share in tho negotiations of 1895, 1894, and 1895 are swept away by the report. Mr. Ward has stood tho test of the fullest enquiry, and he has come out unscathed.
Tho report says he was concerned only so far aa to read the draftsmen's notes of the purchasing Bill, for which tho Premier had taken the responsibility. The report also declares that Mr. Ward was treated throughout the business
Financial Hews, London, August 6th, 1896.
Mr. Ward appears to have given promissory notes with a reckless indifference as further security, imd It is stated that he is personally liable to the Colonial Bank for £96,00(1 while his p-ssetn amount to only a few thousands.
Tho transactions between Mr. Ward anti the Colonial Bank are, after all, *4 of small moment to English investors; it is the lax view which the Premier and his colleagues seem to take
very unfairly by being kept in the dark; and in that he has long had tie public sympathy.
Mr. Ward is, we are glad to see exonerated in the matter of the 'oats" advance, which took place in his absence, and was notified to tho Ban!: by him as soon as he arrived in the Colony and became aware of its oheractor.
Mr. Ward in fact, comes out of the enquiry without e. stain on his honour. The report censures him for not resigning when he became swore of hie hopeless financial ■, position. But as the report also takes c. great deal o? pains to show . that Mr. Ward has shown that a Colonial Treasurer who is in deep water • can behavo with scrupulous honesty and commendable delicacy of forl;2lng, the finding imputes no more than an error of judgment. Wo, too, once regretted that Mr. Ward had not resigned. Vie did so because of the thousand misunderstandings and misrepresentations which -assailed him. But as these have been swept away by tho report we feel there is no longer any reason for regret. Mr. Ward did his duty fearlessly, faithfully, and loyally , and that is all thero is to be said > on the subject after the pronouncement of a committee of men for the aoet part not enthusiastically friendly towards him.
4b.
of what is tarried in the Colony Mr. Ward's "indiscretions" that will strike honourable people with dismay. . . An entire change must take place in the policy of tho Government if investors are to have any faith la tha Colony, and it is a thous and pities that the good name of Mow Zealand should bo thus tarnicbod after tho admirable manner in which, c, few years ago she successfully reorganisod her finances, After what has recently transpired, it is not too much to say' that tho first essential is a keener smso of commercial probity; but until public opinion openly condemns the iltillsatlon of Ministerial nests for private ends and sees Mr. Ward’s conduct in the same light a,a Mr. Justice Williams has done, we cannot feel much confidence that tho present scandals will not at any moment recur.
What a distant, although influential and Impartial, paper thought carried no weight with the Inspired opinions of the Ministerial props. The mibßldlßod organs declared that thj ux-Cclonlal Treasurer had behaved *ith scrupulous honesty and commendable delicacy of feeling," and that ho »aa the victim of "noli tic el persecution;" and so when :he session had closed Md Berbers departed to seek ro-oloction. the news that ‘ho horses had been taken out of Mr. Ward’s carriage by the Knights of Labour of Dunedin, who had drawn tho hero of the day from the Rail way Station to .lie hotol (but now do not appear to hold him in quite such high esteem), ard later on that a great reception was accorded him at Invercargill; - those indications of Popular feeling put fresh life into tho elections, and the Government Pot only came back with a majority, but Mr. Ward came back with then, for the Awarua electors had been too generously treated to forget to vote for 'such R J oi ly good fellow."
61
Chapter Vlll.
Sweet Seclusion.
But when the breezes blow
X generally go below
And seek the seclusion which a cabin grants
Gilbert (Pinafore)
His sorrowing colleagues having decided that, in view of the disclosures in the Dunedin Supremo Court and Judge Williams' severe strictures, Mr. Ward could not continue in the Ministry without endangering its existence and that the best thing for him to do was to retire, for a while at any rate, from the blame of public life, he accepted the Inevitable and sought seclusion ard sympathy in sunny Southland, although those who profess tc bo cognisant of natters political ever that the ex-Colonlal Treasurer always nulled tho strings of the public purse, his staunch friend and ally Premier Seddon being merely the nominal holder. Be this as it may, Mr. Ward was to all intents and purposes politically dead for the time being, and whilst it was widely alleged that the Premier was keeping the position of Colonial Treasurer warm for his fallen friend, there was not the slightest chance, whatever else might happen, that the people would tolerate Mr. Ward s re—instatement in that position.
Twelve months after Judge Williams had ignominiously sent Messrs. A. Lee-Smith and J. B. Hold and the numerous supporters of the proposed compromise to the rightabouts, yet another proposal was brought before the Cocrt of a similar character e,nd having again as its object what Judge Williams described.-in these words on the previous occasion:- "It is thus an offer to buy off from bankruptcy and its consequences a man who ought not to escape them."
The only particulars in which the second pn?otttl differed from the flraVwer** these - the proposed purchaser was one John Bntger, of ’lnvercargill: only Ur, Word's debt to the Colonial Ban": (about £96,000 was to bo bought instead of the Association'e debt also, and tho relative purchase money t;as increased from about £5OOO to £8,603. The facts elicited at the previous hcaria* vero, however, on record, and it was felt by the ..ri+.tr - indeed he eo publicly stated in his paper “The Guardian’ in order to explain his inaction - that the Court could not come to any other conclusion than that como to a year before. The fact - somewhat significant, perhaps - that the proposed purchaser was Mr. John Batger, of Invercargill, (to whom reference is again made later on)
47.
was not material to the real Issue; therefore the writer did not deem it necessary to Journey to Dunedin to oppose the application, relying upon the Integrity and consistency of the Bench, and preferring to assume that, as a natter of course, the application would share the sane fate as did that In 1896.
This conclusion was justified, for Judge Williams refused to sanction the much-desired compromise, notwithstanding the fp-ct that the official liquidators of the Colonial Bank had once more thrown over the proposal the aegis of their approval by again entering into a preliminary agreement. The rejection of the scheme was a severe rebuke to them, but they brought it on themselves.
Here is an extract from Judge Williams* judgment (May 1897):*To sanction a compromise In such circumstances would be for the Court to allow Itself to be made the instrument to protect persons guilty of commercial Irregularities from legal consequences If there is evidence of the existence of grave commercial Irregularities, then the bettor the terms of compromise offered the more probable It Is that the offer Is made with a view of hushing up such Irregularities."
This second, and, as It turned out, final refusal of the Court, was a poser, and It must be her© mentioned that Judge Williams would not accept the responsibility of giving it without taking the opinion of hi f follow Judges. The majority of them, said Mr. Justice Williams, concurred In the Judgment which h© delivered, but it did not transpire wao was, or ier in favor of, or who were against the proposal. It was clear, however, uo Mr. Ward and his friends that there was at that stage no possible loophole of escape left to him, and about two months later he fell Into the arms of the Official Assignee for protection fro E the wolves who hungered for his very heart's vitals.
Before proceeding further with the narrative the reader should learn something more about this second attempt to save Ur. >*ard. .here *ere peculiarities about lt:-
(1) That any one could be found to offer £8,500 for Mr. W -rd debts to the Colonial Bank, seeing that the relative securities were sworn on June 6, 1896, to be worth, no more than
63
£4,250 including equities of redemption £3,850 and shares said to be of no value.
If the increased price was the result of an increase in the value of the securities, then the Court's refusal of the first proposal was all the more justified.
(2) That a condition of the preliminary agreement entered into b;r I the Colonial Bank liquidators with Mr. Batger was that if it sale was sanctioned by the Court Mr, Ward was to give his undertaking to pay off some £7,000 owing by him to the Bari of Now Zealand.
This B«me to suggest a doubt as to whether Mr. Sard would otherwise pay the debt and looks very mnch like an attempt to drive a bargain for the Bank of New Zealand as an extra Inducement to the Court to sanction the scheme; otherwise what had Mr. Batger's purchase of Mr. ward's debt to the Colonial Bank to do with the Bank of New Zealand? Mr. 'ward's facilltie for raising money at this date (only two months before he filed) were indicative of his latent resources.
(3) That Mr. Satger wanted to withdraw from h.ls agreement after the Court had announced its decision to reserve judgment but the Court would not allow him to do sc.
This was th© more remarkable because the agreement provided that the deposit of £4OO was returnable less the costs of the application if the Court refused Its sanction. Perhaps a lack of confidence in the scheme induecorrect diagnosis of what was passing in the Judge's mind, and the promoter did not want NO for or. answer.
It may interest the reader to learn that this Mr. Batger is the gentleman to »hom Mr. Kelly referred in his speech in Parliament on Octet r 8, 1897, in connection with the s-.le to the Crown some little tine previous" of certain land at Otahu of doubtful value.
About 14 or 15 years ago, the estate, said Mr. Kelly, fell into the hands of the Loan and Mercantile Agency Company-, through foreclosure of a mortgage: and the company leased It to farmer • 1 a purchasing clause at the price of 30s rn aero. The farcer,
49.
the termination of the lease, declined the purchase as he found it a losing concern, and but for a rise in the price of sheep, had would have lost every penny he put into it. Then the estate changed hands. It was sold over three years ago to Mr. Batger at 15s an acre. This Hr. Batger, Mr. Kolly explained, was the gentleman who offered to purchase the liabilities of the Hon. J. 3, Ward from the liquidators of the Colonial Bank. "At the present moment he is In partnership with a near relation of the "member for Awarua." As to the value of the land, Mr. Kelly proceeded to say that this celebrated estate of Otahu adjoined that of Merrlvole, purchased some time ago. Now, when the Qovemment valuator was sent to classify this Merrlvale land it was divided into first, second and third classes and the land adjoining Otahu was valued at 12s 6d per acre, although 22s per acre had been expended in laying it down in grass. "Strange to "say, the land over the fence, upon which very little had been spent in improvements, was vp.lued in the recent purchp.se from Batger and Menzies at 25s an acre. If further evidence was "required," Mr. Kelly said, "here is a map showing a block of 689 acres right in the middle of this estate, which the Government "tried very hard to sell some time ago at 10s an acre." The whole land round about, he continued, with very little exception, is exactly on a par with these 689 acres; and other land belonging tc the Government on the other side of the Otahu block, is valued at 5s to 7s 6d an acre. There are in the estate 1200 acres of swamp and a few hundred acres attached to the homestead which are fit for settlement. The balance of 4000 acres was nothing but a shingle bed. "So far as this land is concerned, had it belonged to any other person but the gentleman to whom it belonged it would never have been purchased for settlement. Not only is the estate not worth 25s an acre, but for purposes of settlement it is not worth 25 pence, and it will be a great shame if settlers are Induced to take up a few hundred acres of shingle bed, , • • 1 say that the parties who recommended this purchase either knew
50.
•absolutely nothing about the nature of the property, or there “were other considerations that wo are not aware of, as no man in his senses, would have purchased this estate for subdivision, *
At 25 shillings per acre - the price seonlngly paid by the Crown for .Messrs. Batger and Menzles' land - the 5200 acros would yield 26,500 and if its true value was 10 shillings per acre, the maximum according to the momber for Invercargill, they must have made a profit of something like £3,900 on the transaction.
To resume the story, the first meeting of Mr, Ward's creditors was held at Invercargill on July 13, 1897, when the following resolution was carrled:-
'That the debtor be requested to prepare and deliver to the Assigns at his public office, before the 3rd day of August, 1897, or within such reasonable time as may be fixed by the Deputy Official Assignee, full, true, and particular accounts and balance-sheets showing the particulars of his receipts and expenditure, of his stock-takings, and of his profits and losses during the period of three years before the commencement of the bankruptcy"....
Mr. Ward stated at this meeting that "he had not been in business on his own account since December 1892 when the Association took his business, and his operations since were kept in the books of the Ward Farmers' Association" (extract from Southland Times). Why the liquidator of the Association, who moved the resolution, by r™zy. should confine the period of investigation to three years from the date of bankruptcy, is one of the things that the writer cannot explain with certainty, although there is any amount of room for conjecture. However Mr. Ward was not called upon to go back farther than July 1, 1894, leaving a hiatus of about 19- months. It should here bo noted that Mr. V'ard did not file un„il July 1397 although he admitted in June 1896 that he was then hopelessly insolvent.
In this connection the following from the Official Assignee's accountant's report is interesting
• Business Journal and Lodger - These are large volumes adapted to the extent of business oeing done by Mr. bard as an Individual
66
previous to the flotation of the Association in December 1892. Since that date to 51st August, 1894. these books are continued and large transactions in grain during that period are recorded therein."
If, then, Mr, Ward was not doing business on his own account after December, 1892, (and Mr. Chapman, counsel for Mr. Ward, confirmed tho assertion. Southland Times, November 6, 1897), why were his private books written up to August 51, 1894? It may here be incidentally noted that the "order of reference" to Mr. Ward and to Mr, Brown, the accountant, only related back to July 1, 1894.
Next w 0 have what reads first like further confirmstion, and afterwards like a denial of Mr. Ward’s si»atenent that he ?7rs not carrying on business on his own account since December, 1892-
Kztract from sworn evidence in the Dunedin Supreme Court, June 5, 1896:-
You were apparently carrying on business outside of the company (Wp,rd Farmers' Association)? i was not. I have said the shipments were debated to me, end the losses were debited to me.
Bis Honor: I cannot sea how that was dono, for the shipments were made oa behalf of the company,
Mr. Ward: They were not made on the Association's behalf
Then they were made on your behalf? It practically was 20.
Up to this point the reader will be sorely perplexed as to which statement to accept, but all doubts as to whether Mr. Ward wan or war not engaged in business on his own account - and in a fairly large way too - will be set at rest by the following quotation from the report of the Association's liquidator, Ur. Cook:-
In the agreement for tailing over Mr. Ward's business, care was taken to make it clear that the business carried on by the Ocean Beach Freezing Works was exempted from its operation. In the face of this it is interesting to note that the operations of the Association flh_katfvlf Of Mr. Ward's business of freezing were exceedingly heavy, and within three months of the Association's
67
In.cosrwsTtlon the debit on this account was over £26,000. Tho Asoocietion 1 s payments on thin account for the balancing periods wore as i’olloyc:-
For seven months to 30th June 1893 £93,787:18:0
For twelve loathe to 30th June 1894 101,625:18:4
For twelve months to 50th June 1895 23,988: 0:9
£219,401:17:1
8o that, not only was Mr. Ward actually doing business in a large way first, seemingly on his own account, and afterward:-, on joint account with Kelson Bros., but, according to the official liquidator of the Court, he borrowed the Association *s fends from time to tlno, In distinct breach of a specific agreement with the Association, to the fabulous extent above indicated.
This, again, la In striking contrast to Ur. Ward's sworn evidence In the Dunedin Supreme Court, June 5, 1896:-
Yon borrowed from the Association apparently? - I did not in the ordinary ponse borrow. I paid everything I had Into the Association.
I paid altogether £27,000 into the Association during the time It was In existence.
There was a current account? -There was a current account in my name. What rs.c the total debit In the current account? The total debit in the current account in ny name In November I think we.a £55,000 (£55,160). Included In that were the whole of the Investments and losses that had been Bade In various shipments that had been debited to me.
Thus Mr. Ward la cade out not only to havo done business on hie own account since December, 1892, but to have done It with money tahen from the Association * o treasury (not borrowed 'ln the ordinary sense', to ufo Hr. Ward’s ocn words), and to hove cloned his operations with an overdraft in the Association’s books of 855,150. It won this tidy PUS of £65,160 that Mr. Ward was forgiven by a panic-strlkoa body of so-called directors under the Colonial Bank Purchase 3111, which ha hed charge of and succesafully engines rod through Parllaaent, end shlch gave effect to the agreement between tho two Banka of 18th October 1395.
Thin present of f.55,160 was of eren greater value than la denoted
53.
by the immensity of the amount, for the Hard Association s liquidator has put it on record that "in the agreement for taking over Mr. Ward's business "(by the Association) care was token to make it clear that the business "carried on by the Ocean Beach Freezing Works was exempted from its operation , and the using of the Association's money in this - Mr. Ward *s-buslness, resulting in a final debt to the Association 0 f £55,150, would have meant that Mr. Ward might have been called to account in a very serious way under the Criminal Code by the creditors and shareholders of his Association, who were also largely his constituents.
It 1b but fair to Mr. Ward to state here the evidence which he gave on oath at the Dunedin Supreme Court, June 5, 3396:-
Mr. Vioodhouse (his counsel) - As to this £55,000 (£55,150) which has been referred to as the amount written off between the two banks, I want to know whether you had anything to do with that arrangement?-
Mr. Ward: I had not. I did not know cf it until after the agreement w BB lai.,; upon the table of the House.
Assuming Hr. Ward’s memory to be good on this point, he must also have been unaware when giving his personal promissory note for £55,150 on October 19, 1895, the day following the execution of the agreement between the two Banks to which he refers, that on that very day, or the day before, a precisely similar amount had been written off the Association's indebtedness to the Colonial Bank and the amount credited as "cash” to Mr. Ward’s current account with the Association, thus giving him a clean sheet with the creditors and shareholders of the Association - and many of his constituents.
It is remarkable that the promissory note should, in these circumstances, have been given everything had been settled between the two Banks and the formal agreement signed under which that very amount was to be forgiven to Mr, V.ard with the Association by being written off the Association * s debt to the Colonial Bank. It is also singular that Mr. Ward should have given his promissory note on 19th October, representing the exact amount written off, if he was not aware of the writing off-until after the agreement was laid upon the table of the House” which was on 25th October, about a week later.
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The evidence given on June 5, 1896, by Mr. K. B. Vigens, one of the liquidators of the Colonial Bank, and Acting-General Manager of the Bank when the agreement was signed, may help the reader to a solution of the mystery:-
Extract from Otago Dally Times (official report):Hls Honor: "You are one of the liquidators as well as being a banker.
Have you any notion of what paragraph 18 of the agreement means? What is the point of it? What is the point of writing off the amount of this particular bill, for the bill was not given on that day?- Witness: My own impression is that that was the amount the account was supposed to be short. All the rest was supposed to be good. His Honor: That is what puzzles me. This account on the 18th was supposed to be bad, hopelessly bad. It locks like that?Wltness: Yes.
His Honor: The next day a promissory note is taken by the bank for that amount. Ordinarily, if a promissory note 1b given by a man of business, it is supposed that he believes at the time he will be in a position to meet It. Also, when a promissory note is taken by a man of business, as, of course, the representative of the Colonial Bank was, it may be presumed he looks at it as a valuable security. As the circumstances were, which were probably known to both parties, this promissory note was simply a worthless piece of paper, the giving and taking of which seems to have been a farce perpetrated between Mr. Ward and Mr. Mackenzie for no understandable object. Can you as a banker suggest any explanation of it?-
hltnesß: Not an a br.nker. I can Rive you my Inpreaßion. I think it was taken by :'r. .’aokenzi ■ junt Ith a view to r-tp-in a hold anon Mr. Vard for the aoount.
Hits Honor: But, y.r, V.ard wan not liable to tho bank before thatTWltneßs: No, but ho wag to the company. That was written off to the company, and the company were credited.
56.
His Honor: I wont to get as much light as I can.
Witness: I thick it was to retain a hold of Mr. Hard.
This evidence is very remarkable and the quos.lon naturally suggests itself to an enquiring mind - Has the hold to be retained until after the Colonial Bank Purchase Bill had passed both Houses end become lew by the ratification of the shareholders? This is a question which only those who were parties to the writing off could answer, although others have no doubt formed their own conclusions.
It is significant that Mr. Vlgers - late Inspector and Acting General Manager of the Colonial Bank - has admitted that no account was taken of the promissory note for £55,150 in either of the lists of advances settled between the two banks, and was not Included in the list of securities to be handed over to the Bank of New Zealand. The question is suggested as to whether, in these circumstances, the promissory note was ever intended to be enforced against Mr. Hard.
Mr. Hard’s sworn testimony, quoted in Chapter 5, shows that he knew in August 1895, more than two months before he introduced the Colonial Bank Purchase Bill, that £55,150 was required to be written off the Association' indebtedness to the Bank in order, so it was said, “to make it a saleable concern," but really to free Mr. Hard from the danger he was in with the shareholders of hla Association.
The effect of this peculiar transaction upon the Colonial Bark shareholders was this - they lost recourse for £55,150 upon the free assets of the lard Association (which have proved to be considerable) and could °hly cone upon the free assets of Mr. Ward (which have proved to be inconsiderable .in facp nil), Ur. Hard's bankruptcy and unconditional discharge, Jhst about two years afterwards, finally and effectually dispelled any chance 7 &lue that might have attached to the bit of paper, If it really existed, the Colonial Bank agreement of sale had been ratified by the •bareholders and the Bank Bill had so become lan, saving, as it was thought by t!l9tl at the tine no doubt, all those who were parties to the shufflings, *lll vocations, falsi fictions end mal-adninistratlona of the past from the <,n *«<]ucßcoB of their acts.
71
If the £55,150 debt of Mr. Ward to the Association had remained upon their books and, as a consequence, the Colonial Bonk had not written off that amount from the Association's debt to then, the effect upon the Colon, lal Bank shareholders' pockets rould have boon considerable, in this way:-
Total assets of the Ward Association, as per the liquidator’s affidavit filed in the Supreme
Court, Dunedin, in April 1897 £ 63,683
of which secured to the Colonial Bank by debentures having a first charge over all the assets, including the uncalled capital, £ 30,000
leaving distributable as dividend £ 33,683
Total claims upon the Ward Association as per the liquidator's report £ 97,031
Less specially secured os above £ 30,000
£ 67,031
showing a probable dividend of about 10s in the £.
The Colonial Bank's claim (after writing off the £65,150) was sworn on June 5, 1896 at £ 72, 179
Deduct the specially secured debentures as above S 30,000
Bonking for Dividend £ 42, 179
A dividend of 10s in the £ on this would give the Colonial Bank shareholders £ 21,089.
Now, If the £55,150 had not been written off by the Colonial Bank, the total claims of nil the creditors ranking for dividend would have been increased from £67,031 to £122,181, which would have reduced the Association'; dividend from 10s to ss.Bd in the £.
The Colonial Bank's claim wan swcm on Juno 5, 1896, at £ 72,179
Add the amount written off £ 55,150
£ 127,329
Deduct the debentures £ 30,000
Banking for Dividend £ 97,329.
07.
A dividend of 5s 9d, in the ft, or. this would give
tho Colonial Bank shareholders Z 26,736
Amount produced by dividend at 10s on -.42,179 a 21,089
Diffo ranee £ 5,973
which would have given the Colonial Park shareholders en additional devidond of about sevenpenoo per share on the 200,000 shares In the Brnk. Then there was the probability of yet more to come from e, bettor realisation of uncalled capital and throwing out of claims not adjudicated upon at the tine. The loss of even this small additional dividend was a cruel deprivation and a striking comsentary on the management, or more correctly mismanagement, if not dishonesty, of the Colonial Bonk directors who made tho present to Mr. Ward, for the shareholders of that 111-fated institution have v.p to date only received one dlvidond of 10s. per sharr, which on 200,010 chares equals £100,000: moreover the money with which that war, raid was obtained from the Bank of Hen Zealand by extreme pressure thusi-
Purchase nonoy of "goodwill'' £75 qqq
Anount paid for Colonic.! Brnk premises adaittedly in excess of tholr tins value £3",000
£llo,ooo.
Thus it will bo seen that only about £25,000 has yet come to the Colonial Bank shareholders on account of the assets representing their -
Paid-up Capital £400,000
Undivided "profits" 19,980
"Reserve fund” 65,000
ft 484, 980 = .t u xx s = ae at e = = = r;
IMb colossal sun of money has virtually disappeared li the vortex tfhat has become of It, too writer cannot, bayard a guess, for the ways of liquidators are dark. These gentleman hsve for mcro than two years now be,n dangling a second rnd final dividend of, porhaos Is. or ls.6d before the eager eyes of the deluded shareholders, but it has not nado its appearM 'qs - yet it was distinctly stated to the unfortunates that they might look for at least immediate dividends of about 125.9 d. to ISs.kd. po- share,
73
with almost certainly ooi siderably more - prnbab?y Ibp - from tho reset* rejected by the Bank of New Zoala’d,
It may be here noted that Mr. Ward aid his Associa-icn are rjsoc *- iblo for more than £lOO,OOO o’ tho lost savings of the Colonial Bank sharahold* yet, although many of these shareholders have been virtually beggared : y v's this "honorable” gentleman publicly boasts that he will not trouble him? Of to pay one penny to the Colonial Bank shareholders because ho claims that their Directors showered gold dezzllngly upon him so that he could not resist the temptation to plunge with it, on the principle always of “heads I win; tails you lose."
What Hr. Ward in affect says is - Because tho directors and responsible officials of the Colonial Bank were black, the innccont end victimised shareholders are likewise black, whilst he must be considered *c wear "the white flower of a blameless life". This line of argument, may ror to deceive Mr. Ward into a false belief that the community has forgiven bli past acts, but he is deceived, of that there can be no doubt, although far may compel or judiciously distributed favors may Induce sllencj.
The reader's attention is at this point invited to some figurei affecting Mr. Werd's financial position, gathered from official documon .3-
The liquidators have stated that on November 30, 1892, t.io day before Mr. Ward sold his business to the Ward Farmers' Association, tla private debt to the Colonial Bank was £81,635 Then thero was Mr. Ward's sworn evidence in th Supreme Court, Dunedin, June 5, 1896,
Mr. Young: Would you mind stating what is your private indebtedness to the Colonial Bank?
WitneSß: £16,000.
Mr. Younn: Anything elpo?
WitneßP: So far as I a:a concerned there Is £6750
which the Colonial Bank has transferred to the Bank of Now Zealand but which I have not.
This would make Mr. Ward’s to till private debt to the t»o Banks;
on June 5, 1896, 522,750
the difference £68,883
74
must therefore have been paid off by Mr. Ward, or by somebody on bis behalf, between November 30, 1892, and June 5, 1896. It will here be appropriate to quote Mr, Ward's further sworn testimony in tho Dunedin Supreme Court, June 5, 1696,
Mr, Young: You say you do not know anything about the matters stated in paragraph 11 of Mr. Braund's affidavit?
Witness: X cannot say of my own personal knowledge. X know there was a payment o f £25,000 in cash, less £4OO or £5OO, for a contra account, made by Nelson Bros. (Limited), and that amount was paid in to the Colonial Bank. I think that would have been some tine In July or August. I am not certain of the month.
Mr. Young: That would be after the balance sheet?
Witness: I cannot give the date.
Mr. Young: Your books would show the whole transaction?
Witness: The transaction is shown. Tho freezing works wore sold for £50,000. I received £9OOO and 1600 fully paid up shares, and afterwards £25,000 in cash. These are the particulars of the payment. Ido not know anything of tho circumstances respecting tho draft referred to in the affidavit of Mr. Bro.und.
This would account for payments to tho Colonial Bank of £64,000
leaving unaccounted for £24,885
Wr, Ward's emoluments in the shapo of Ministerial, find other salaries, dividends, bonuses etc. amounting to from £12,000 to £16,000 in years, 1 ere on Mr, Ward's own admission not paid into the Colonial Bank, and do n °t therefore come into account.
"I paid everything I had Into the association. * P ald altogether £27,000 Into the association during the tlno it was in existence. (Mr, Ward.)
75
Now comes the mysterious "notice of motion" given to Mr, Ward by Mr. Solomon(counsel for the Ward Association liquidator) in tho Dunedin Supreme Court on July 15, 1897 - about a year later - when Mr. Ward was under examination:-
"When at the date of the 1895 balance-sheet Mr. Vfard was Indebted to the Farmers' Association In the sum of £55,000, and during the three years that that Association had been in existence ha had been paid by it in tho way of salary and other emoluments a sum which we moke out to be £12,000, so that in these two and a-half or three years he had either lost or spent £67,000." Counsel said, "We cannot moke out where it has none to. and we want Mr. Ward to explain it. Wo can only account for £43,000 out of the £67,000, and want Mr. Ward to explain to us what has become of that money. Of course it would be unfair to expect an answer without careful consideration."
The difference referred to by Mr. Solomon is £24,000 in round figures, and is approximately the same as the difference which the writer has arrived at in his own way. Needless to say Mr. Solomon never received a satisfactory answer to his question as to what had become of the £24.000 and Mr. Brown's vacant report leaves much room for conjecture. In this connection it is interesting to note Mr. Ward's evidence in tho Dunedin Supreme Court twelve months prevlously:-
. Mr. Young: Did that £6s,ooo(amount written off) represent any losses taken over by the ftasoclatlon, fron. mi2
Witneaa: Previous to when?
Mr. Young; When the association took over your buslneai
Witness; No; I don't, think so
This question was not put to Mr. Ward out of more idle curiosity, and tho unsatisfactory nature of tho reply made a deep impression upon the writer at the time. In the light of the above figures the significance of tho question will be apparent.
It la Impossible, of course, without, access to the boobs of the Colonial Bank and of the Ward Association for anyone to say so positively,
61.
hot it looks very much ph if about £21,000 of tho £55,150 debit to Hr. Ward In the Association' s books rcj-rf seated ironies actually paid out of the Association's recount off Mr. Ward's private indebtedness of £61,635 to tho Colonial Dank existing prior to tho sale of his business to the Association. Kr. Young on June 6, 1393, tried to elicit some definite statement es to whether this was not so, and Mr. Solomon made a similar effort a yoar later but tho point was evaded end p. dark cloud of mystery still envelops that sum of £24,000. It is not rendered eny tho more penetrable by the fact that the "order of reference" for tho bankruptcy Investigation related back to July 1, 1894, only - not to tho comnerceaent of tha Ward Association on December 2, 1892, and it is at least a coincidence that the official liquidators hare reported -
(1) That Hr. Ward owed the Colonial Bank £81,636 on November 30, 1392, and £70,376 on December 5, 1892.
(2) That the Ward Association was in credit with the Colonial Bank £787 on December 2, 1892, and owed tho Bank £15,269 on December 5, 1892.
(3) That on the first day of the Association'b operations an advance of £5OOO was made to Mr, Ward without the knowledge of the directors.
lt will thus be seen that five days after Mr. Ward Bold his business - act fnr but for 215000 in fully paid up shares in tho Association - hie private debt to the Colonial Bank had been reduced by 211,260, whilst the Association's debt to that Bank (allowing for the wiping out of the credit balance) had been decreased by £16,066.
But whilst it is impossible, without actual reference to the bookr, ' ,O get at the precise amount* paid to tie Colonial Bank, all doubt as to •tether Hr. Ward helped himself to the Association's money ( apart from the B * om appropriations pt different times of over £200,000 of its funds for kl» Ocean Beach Works, as disclosed by tho liquidator) will be set at rest b 7 quoting from tho Colonial Benk inspector's report dated August 31, 1E98,-
The Ilea of J. 0, Y/ard's indebtedness, £55,150, is represented by tho following itomc:-
77
(1) Purchase of Association's shares £ 8,000
(Z) each paid on account Dee street (Invercargill) property 2,000
(3) Improvements Doe street (Invercargill) property p 4B
(4) Interest on account with Association £6OOO-7000 say c,OOO
(5) Estimated loss on freezing works and business in connection therewith £7OOO-£lOOOO say 7,000
J ' f ovy (6) Loss made In oats speculation In 1889-CO 5,000
(7) Grain store built adjoining ’’ine Creek, Inv'gill 1,960
(8) Grain store built on Gore leasehold section
(9) Payment of rents on Wellington leasehold section?, 100
(10) of private
How Mr, Ward distinctly led the Court and everybody to believe in Juno, 1836, that tho £55,150 debt written off hla account with tho Association represents! tho net bp.lanco of losses debited to his account In respect of shipments of grain etc. on behalf of the Association, which losses he mode out ho was generous enough to take over. Hr. Yfarrt was clotoly pugged cn this rworr testimony - not only by counsel but also by the Judge. With characteristic sangfroid, however, he adhered to It. Apart from tho Association liquidator 1 ! denial of this magnanimous treatment, what a refutation is presented by tho above statement! How was It (particularly in view of item 3 above) that to Mr. Young's question - "Did that £65,150 represent any losses taken over by the Association from you, previous to the date when the Association took over, your business?", Mr. Ward could reply on oath "No: I don't think so." Was his memory so very defective Just at that particular tine?
Let us now arrive at the figures rhloh the Colonle," Bank Inspector with singular modesty did not supply, namely tho equivalent of his word "balance"
Debt written off £55,150
Items 1 to 3 £10,145
" 4ft 5 say 13,000
" 6to 9 8,600 31,745
« 23,405.
Here then 1b positive proof that Mr, Ward did use tho Association'n money for the purpose of liquidating not only losses of £5,0C0 on grain rpeculations, of discharging old private debts and paying caal, to tho Colonial Fa r .k In liquidation of private account", to the extent of, sr.v, 833,4? C.
This amount bo nearly agrees with tho amount of tho !i Bcrorancr
53.
foirad by Mr. Solomon one way, and by the writer another way, that it may be accepted as practically certain that about £24,000 of the £55,150 presented by Parliament to Mr. Ward remains unaccounted for.
Mr. Ward drew that fortune from the Association in hard cash, and paid It into his ulvgtil account with the Colonial lark. Now what has not been explained, end what the Colonial Bank shareholders may yet insist on knowing, is - How was this money spent by Mr. Ward? Where is it? He has sworn that his business flourished and that big profits were made before he sold it to the Association for £15,000, fully paid up shares, therefore the £24,ooocould not have consisted of losses, which are separately accounted for to the extent of £12,000 in the above statement. What, then, docs that large sure of money represent? Surely it carnet have molted away into thin sir - even a "wizard of finance" would be unable to accomplish that miracle - therefore it must be represented by money or money's worth in some shape or form and somewhere or other. The Colonial Bank liquidators' final report has not yet been presented: is it asking too much that Parliament -fb trustee for the Colonial Bank shareholders - should see that the mystery is creditably cleared up, having regard to the fact that Parliament was a party to the Bank agreement of October 18, 1895, and therefore shared with the Colonial Bank directors the responsibility, as well as the pleasure, of the £55,150 jreeentEtlon to Mr. Ward - not out of the Colony's pocket but out of the Colonial Bank shareholders' pockets.
79
Chapter IX.
The Storm Bursts.
"And put In every honest hand a whip
To lash the rascals naked through the world."
-Shakespeare (Othello),
While the electors throughout the colony were being assured vj Mr. Seddon that Mr. Ward was a martyr, and that If similar circumstance to those which led him (Mr. Seddon) to savo the Barks occurred again b would repeat what he had done, there were two separate Investigations a prosecuted to unravel what the two parliamentary committees had signall] failed to accomplish; these wore by the Liquidators of the Colonial Ei and by Mr. W. B, Cook who dissected the books of the Ward Association,
The Colonial Bank inquest reported ca January 20th, and Mr. 1 on March 20th, 1897. Between the two dates Mr. Henry Mackenzie tondei himself for examination to the Supreme Court and his confessions havei tally assisted to enlighten points which were previously very hazy.
It is a singular coincidence that Mr. Cook's report was delta the day after Mr. Mackenzie's examination was closed. This enabled ti ex-banker to escape questionings regarding the peculiar system Ms bani countenanced of discounting bills for the Ward Association, drawn uponj in all parts of the Colony who had nevor had dealings with it, and then allowing the bills to bo returned an! solemnly handing back a portion J exchange.
However, It Is better for the parties to speak for themselves the following extracts from the sources mentioned will demonstrate that Solomon with all his wisdom was hardly correct when he wrote, "The bon Is servant to the lender." (Frov. XXI-7).
First let us taka the mysterious methods by which all the profits were supposed to go to the Association and the losses to Mr. l! Judge Williams was puzzled at this phllpnthroplcal "heads I sin, tall* lose," system, and asked:-
Supreme Court, June 6th, 1896
1 understand those operations wore carried on on this basis: If there was a loss you were to bear It
Mr. Cook’s report, March SOU 1897, In the course of Mr. Ward's w inatlon during that appllcatli It was stated that the Aosocll
65.
and if there wau any profit the company were to get it. That in the result, in it not? Mr. Ward - That la how it has worked out. I may state that the whole of tho sheep purchases made by the Ocean Bench Freezing Works v/oro carried to that account.
Tbs Judge - Those would bo really on 1 your own account? Mr. Ward - Yes, on ay t own account. Very heavy losses wore 1 Incurred, and they wore debited to j BO
The Judge - The association then did not speculate In grain? Mr. Ward - Ho, It practically did not. If there had been profits In grain the association would have got the credit, but unfortunately there were losses.
The Judge - Aad you boro thomT
Mr. Ward - I bore then.
had been credited rith any galno Brining from nhlpmonta, but that any loeeob had boon placed to the .debit of hie private account.
I have investigated the transactions, and they were very numerous, but I have been unable to discover that any losses made by the Association y/ora debited to him; on the contrary I find that the Association has borne all its own losses.
legislative Council Committee, page, 203.
Hon. Mr. Bonar - Of course, I understand you, that in connection with these speculations, if thore had been a profit you would have reaped the benefit of it, naturally? Mr. Ward -"Strange, after all, as it may appear, that is not so.”
In passing, it must be remembered that all tho above statements were made on oath. Then as to the £30,000 bogus draft, -against imaginary oats-
Mr. Ward in Parliament June 16, 1896 (Hansard).
I was charged with having signed a false balance-sheet; but the amount never came back to tho Association. The Association never had a debit of £30,000, and therefore that ought not to appear and the balance-sheet submitted to me for my signature, I can, and will, prove, is correct. I wish to say that, had it not been for tho Banking legislation my private position would have been solvent to-day (June 10, 1898). If it had not been for tho legislation put through in the interests of tho Colony as a whole you would never havo heard of any of ny commercial troubles.
Judge Williams. June, 1896.
That some traders may habitually make out balancesheets in this way is possible, just as some traders may unfortunately, bo guilty of other dishonest practices; but notwithstanding that, the practice is obviously a dishonest one.
Mr. Cook's Report. On the 23rd Juno, 1893, Mr. Ward was In debit with hie Association £21,587.7.4, and on the 30th June, before the £lOOO was debited the amount of his debit balance wan £25,188.1.3
Mr. Ward's 5000 shares wore applied for and allotted at the meeting of directors on the 31st May, 1894, being the Inst hold before the accounts wore closed for the year ending the 30th June. The sun of £5OOO wes payable to the Association In respect of these shares, but no part of this sum was paid
81
Mr. Beddon in Parliament,
June 16th, 1896. I will ask now, are they (the Opposition) satisfied? They have accomplished their evil object. They have the Colonial Treasurer ruined. They have those near and dear to him practically on the streets. Why, I say, should the Hon Mr. Ward's private affairs have been singled out for such publicity. I say as I said at the start, that the whole of this is persecution and conspiracy.
Wo ought to do justice to the Colonial Treasurer, to do justice to ourselves, end to the people of this colony.
Southland Parmer, September, 1898. (The Trade journal of the Ward Assn.) V/e havo nothing to fear from the wl dost publication of our Association and its position. “Wo live by deeds, not words."
M- . H. Mackenzie (General Manager Colonial Bank) to the Premier, July 20th, 1891.
Our aim haß been to encourage and support the trade and industries of the Colony, in support of which I would mention the important dairying industry of the South Island, which, since its inception, has been fostered and brought to its present state of usefulness chiefly through tho instrumentality of this Bank. . . However, wo have managed to pay our shareholders a return for tho past 12 years of 7 per cent, per annum, augment our reserves, and maintain our capital and business intact.
in cash, the amount having been debited on the 30th Juno to Mr. Ward in account with the Association. On that day, before being i el ited with tho £6OOO, his debit balance was £43,376.9.11.
Judge Williams, same date. By the present arrangement every debt of Mr. Ward's on every account is purchased and is lumped in one purchase with the debt of the Association, though Mr. Ward's debt will yield but an infinitesimal dividend. "We only buy the Association's debt on condition that you throw in all Mr. Ward's debts" is evidently the attitude of the purchasers. It is an offer to buy off from bankruptcy and its consequences a man who ought not to escape them. This is in effect an offer of hush money.
That tho career of the Association should be brought to an ond and its proceedings investigated, and that those who wore reopens!-* bla for its management should no longer bo permitted to roan r.t large through the business world, is a result so obviously desirable in the interests of commercial morality that it ought if possible to bo attained.
Mr. Ward, June 16th, 1096
Why should the Evening Press at that time (1893) wont to know the details of the business with which I am associated?
Supreme Court, Dunedin,
March Bth, 1897.
Mr. Solomon: You wrote a letter to Ur. McLean on the 12th August, 1895. What do you moan by saying that it would take £150,000 to clean up the Bank? Mr. Mackenzie: That was simply a suggestion to the Chairmen. Mr. Solomon: I want you to say how you could sign the baltnco-shoot having in view that £150,000 would have to bo written off? Mr. Mackenzie: This balance-sheet was simply the accounts brought to a conclusion on that date.
What a story of deception and fraud these extracts toll I
82
Chapter X.
The Strong Arm of the Law.
Laws grind the poor
And rich non rale the law
no x.ne xaw. - Goldsmith.
When one reflects upon the punishment meted out, rightly enough, no doubt, to, say a friendless Bank tsller on, perhaps, a pittance of £2OO a year with a wife and family to support, who, driven by sheer necessity, in a weak moment appropriates a £lO note the property of the employing bank, hoping to be able to replace It before the Inspector cones round, and then one contrasts with this the exoneration of the man of Influence who diverts the funds of hls employer for hls own private benefit to the extent of over £BOO,OOO and finally Is brought up with a round turn after gambling away Irrecoverably over £lOO,OOO of the hard-earned savings of others, the belief Is reluctantly forced upon one that there la more truth In Goldsmith's words at the head of this chapter than Is right.
The "strong ary of the law* is strong to protect as well as to iafllot: this Is as It should be, provided its protection is afforded when the hand of the oppressor Is at work, But whsn the avenging hand of Justice seeks to strike, the 'Strong arm of the law" should not be raised to shield the culprit from the consequences of his guilt but should help Justice In her efforts. Let us see now whether the “strong arm of the law was raised to strike or to protect In the case of Joseph George Ward the ei-nanaging director of the Ward Farmers' Association Limited, when he was before Judge hard In the Bankruptcy Court, Invercargill.
The reader has already been reminded at the conclusion of chapter 5 «f the unequivocal terse in which Judge Williams denounced the reeponaible official* of the Association. This able Judge's words have sunk deep into the nenory of the people and still live in spite of the lapse of five years “d the studied efforts of Mr. Ward's friends to cover up the hideous past ty every kind of misrepresentation. The fact remains, however, that the •huff! lags, the equivocations, the manipulations and the falsifications that characterised the operations of Mr. Ward and his Association have not been
83
wiped out or atoned for by this mere lapse of time, although there are manv persons -ho have been deceived by the bluster end bounce of those who frrn tho outset of tho negotiations for the emalgamatlon of the Bank of New Zealand and the Colonial Bank made it their task to “save Ward at a. 1 1 honardn."
Addressee, resolutions, telegrams of sympathy and confidence, certificates of character, purses of sovereigns, banquets, horses and carriages, have all been pressed into service and well they have answered - yet that Just Judgment of Judge Williams still lives I - “It is an offe- to t-uj off from bankruptcy and its consequences a man nijgfrf, not to escane *■ u ~ This in in effect an offer of hush money. , . . That the career of the Association nhculd bo brought to on end and its proceedings Investigated, .;sßi ip. uto-tara-Eagraxalttlft-gor ita.i anagnßßnt should no longr.- h x y.W.TnWdMn ■»<•>. rpn? tt largo through M e businenu world, is a recult so cbviou.nly doairable in the Interests of commercial morality that It ought if possible to be attained."
Koforence was mads in ths last chapter to Mr, Ward's having to Book the protection of the Bankruptcy Court, and the date of the first meeting of creditors was given no July IS, 1897, Two days later Mr. Ward was boing examined by the official liquidator of the Ward Farmers * Association befon Judge William in Ihuiedln. Still more revelations then came out of on itaizli; character, among which was the fact that on June 50, 1898, the last balancenheot issued by the Association, a sum of £l5OO, was debited to Mr. Ward'? private account with the Association and carried to the credit of another account the effect being to make it appear that the alleged profits the Association I'Wie.r.S) were £l5OO more than they would have otherwise beer shown at. As to this, Hr. Word's sworn testimony is interesting: -
Hr. Dele * n (liquidator's Counsel). What we say was, why was nothing said to the eharoholdom about the £l, FOO profit?
Mr. Ward: "Did it niter the result to the shareholders?" Hr. Solomon; "Of course it did."
Mr. Ward: "Of course it did not."
89.
Mr. Solomon: "It led them to bcllovo that a profit had been made in the ordinary way?"
Mr, Ward: "As a natter of fact the 51, 500 did not alter the result to the shareholders, tho not result was tho same."
Mr. Solomon: "Very well, if you think that is sufficient that la all right."
The Ingenuity displayed by Mr. T.'ard in parrying the point of this thrust is characteristic. According to him the “net" result was the same, presumably because if the fictitious debit to Mr. Ward had not been made, the fictitious credit to nrofit would not have boon made.
This kind of argument is pocullar and does not destroy Mr. Solomon's point that the shareholders, tho creditors, and the investing public were deceived by tho transaction Into tho belief that the association had nado £l5OO more profit than was the fact.
Tho Hank of Now Zealand would also b« docei”od for it must be remembered that tho negoclntions for the absorption of the Colonial Bank (which were then proceeding) end of the Ward Association account depended much upon the position of tho Association end therefore upon tho healthy appearance of this particular balance-sheet from a profit-earning point of view
Again, one thousand fully paid shares (£5,000) in the Ward Association were allotted in payment for tho goodwill of Carswell's business, by an agreement which by a singular coincidence took effect on July 1, 1893, (the day after the Association's balance-sheet to 50th June 1893), but in the Association's following balance-sheet of 30th June, 1894, this share liability •as not included and Mr. Ward would have tho public believe that his plea, that “he felt, satisfied thu shares 'TonldLhi ttltiAifttei-V— g.MCJllsd. Justified bis deliberately signing and issuing what was nothing short of a falsified balance-sheet; he saw no reason, so he said, to explain the omission to the shareholders, on the ground - to use his own words - that "if the whole of tho details of a business are to bo discussed at a shareholders’ meeting no company could carry on business."
What manner of men most Mr. V.'ard he 'hen he can suggest such nanlfont absurdities ns truthful answers to serious cuestions before n Judge of the Supreme Court?
85
It is Indeed difficult to understand how his present exalted position in the Government of this colony can be justified since ha is capable of describing the omission (to his knowledge) of a liability of £5,000 from the balance-sheet of his Association as a "detail" not to be disclosed to the shareholders.
Again, what can be thought of a man who could state on oath that he took up several thousand shares (upon which, by the way, nothing was ever paid)-
"In connection with the position the Farmers' Association had got into, and in view of that position it was desirable that he should do so."
And when asked in Court whether he did think it would have been proper to have informed the Association that ho had not paid anything on those shares, Mr. Ward replled:-
"It was not my business to go and discredit the Association for which I was working."
The plain English of all this is that Mr, Ward first created fictitious credit for the Association by issuing bogus capital to himself (upon which, by the way, he drew substantial dividends) and afterwards, of course, did not undeceive the creditors and shareholders for obvious reasons. But let us pass on.
It is noteworthy that the official liquidator of the Ward Association was not personally present at the meeting of Mr. Word's creditors in Invercargill on July 15th, 1897; he seems to have been it. busy in Dunedin preparing for his public examination of Mr. Ward in the Supreme Court on the 15th - two days later.
The reader would do well also to mark the fact that Mr. Kelth-Raimj (one of the Colonial Bank liquidators), who seconded the resolution proposed by the representative of the Ward Association's liquidator, said "it war no hardship to Mr. Ward to adjourn for three weeks" and, amusing as it nay be, the "hardship" was actually inflicted upon Mr. Ward of an adjournment until August 6, 1897, the day after the date fixed for the Awarua election.
Thus, although the resolution provided that Mr. Ward should "deliver to the Assignee at his public office, before 3rd August, 1897, days
86
prior to tho Awarua election) , , , , full, true and particular accounts end balance-sheets showing the particulars of his receipts end expenditure, of his stocktakings, end of his profits and losses during the period of three years before tho commencement of the bankruptcy." Mr, Ward's mm position was to bo known only to tho Official Assignee. There wore to be co unpleasant disclosures at a local public meeting before the Awarua election came off.
This was a mere coincidence of datee, Mr. Ward's friends will no doubt say, but all tho seme the reader will agree with Mr. Kelth-Kamsay that t tho "hardship" to Mr. Ward was not severe, taking It all round. However, it Is now history that Mr, Ward who had to what he temod "resign" on July 14, 1897, after ho had filed his schedule, stood for Awarua as an undischarged bankrupt and romped In au easy winner on August 5, 1897.
Joy unspeakable was rampant throughout the electorate and Mr. Ward has reason to congratulate himself upon his having paid (out of the Colonial Bank shareholders' money) 2s.Od. per head for sheep mono than ho sold then for.
In such a crisis, the like of which has been unknown to the Colony and probably to tho world, the unfaltering friendship of his faithful farmers »as cheap even at tho n-loe of sacrificing the widow and tho orphan.
Nothing of any moment occurred at tho second meeting of creditors, hut at a meeting on August 20 Mr. William Brown (by tho way one of tho Dunedin Committee of Colonial BanJt shareholders) accountant, of Dunedin, was employed by the Official Assignee to ’'examine Mr. Ward's financial statement emd his transactions for throe years prior to his bankruptcy and report thereon."
This order of reference went bach, pb stated In a previous chapter, to July 1, 1894, only.
A few excerpts from Mr. Brown's report - a most interesting document - rill not prove amiss at this stage In order to help tho roader a full understanding of the singular developments that followed.
(1) Alluding to Mr. Ward's ’'financial statement", which by the way chewed a deficit of £72,42(5.1.8, Hr. Brora said:”ln the first list of oeonred creditors the estimated balance
87
of the securities transfer-ed from the filed schedule list “B" has been inadvertently entered twice. A correction of this will add to the above deficit £10,211."
This trivial accident - a mere slip of the pen no doubt - would bring the deficit to £82,636.1.8 end adding another potty amount of £16,000, said to be secured by scrip valued by Mr. Brown at next to nothing, he brought the Deficit up to the respectable total £98,836. 1. 0. "This deficit", oontinv Mr. Brown encouragingly, "may be increased."
(2) An account appeared in the Association's books styled "J. 0. Ward's wool account" resulting in a debit balance, which "was absorbed by transfer to the Association's profit and loss account."
In plain language this was coldly charging the Ward Association shareholder; with Mr. Ward’s private losses.
(3) Mr. Brown takes upon himself the responsibility of making the extraordinary assertion that because the copy of the bankrupt's general account with the Association furnished to him was "a recent extract, it follows that Mr. Ward has never been in possession of the details during the whole of the time’ covered by the Association 1 s operations.
This, of course, served aa an apology - like the "inadvertently" in paragraph 1.
(4) Mr. Brown proceeds thus - "on receipt of such an account current the first care of the principal would naturally be to systematise the items and post them up in his own books to the various accounts affected and produce a balancesheet of his own affaire. This, howovor, does not appear to have been done and now that systematised results are called for they aro not available in hook lorn "
Neither were systematised results in :aiy other reliable form available. Nevertheless the Official Assignee told the court that he was satisfied that Mr, Ward had kept usual and proper books of account,"
(5) The statement, of transaction a" furnished by the bankrupt "covers the period of throe years from 1 July, 1894
88
* to 8 July 1807. It opens a 'summary of the various balancer duo by Hr, Wail (1) to the Association and (2) to the Colonial Bank on general end freezer accounts.
It 1» precisely the particulars of how those "various balances due by Mr. Ward" *«re made up that ought to have been ascertained, but, after all it night haws Inconvenienced Mr. Ward to have pressed him to supply then. So he was not pressed.
(fl) The bankrupt’s statement shows loon on freezing works, 212,518, lons unascertained 8745. 7. 0 Hr. Brown says: "tho first, two of thorn tiro adopted from Mr, Ward's statement of lessee, but, do not appear to have been ascertained, and, Indeed, could not have been ascertained from the books as these at present stand, Tho item, Ijobs on freezing workm, 812,518, has this peculiarity, that it Is one which apparently gathers together all other unstated lesson, or which represents all other looser less any undisclosed pro ‘ to, and ctatod at •• that figure to square off tho round sun of 892,000 which Mr, Ward's statement sets out to account for."
Brlofly put, this appears to mean that the figures in Hr. Ward'r financial statement” were In accountancy language "cooked."
The conclusion of Mr. Brown's report in remarkable and deems to have satisfied th® Official Assignee, and tbs Court (presided over by Judge Ward) that Mr. Ward had kept "usual and proper" books of account within the meaning of the Act.- Here is tho conolusion:-
(7) In reply to the instructions to "verify" the receipts and expenditure, Mr. Brown enyni- "The Assignee's inquiries in the first pairgraph are no doubt sufficiently answered by the statements herouith - the dotallo of which, under tho circumstances, I can only submit with the fallowing reservationsl-
(a). The uncertainty r.r to whether further explanation or an examination of vouchors, if accessible. night not involve the transfer of mono of the items fro* one hoadlnß to another. Ab it stands the items have been gathered fron the nurfaoo.
89
(b). An uncertainty of results gathered up out of old and disjointed materials, having no balancing figures to confira then, cud also t-ho amounts having boon exaggerated or diminished by the influence of other sums undisclosed but related to or set off against them.
"An uncertainty of results gathered up out of old disjointed materials having no balancing figures to confirm them I" What significant phraseology! Nevertheless the Official Assignee and the Court, wore satisfied.
If the Official Assignee's instructions had been to confuse the Issue as much ae possible, Mr. Ullllan Broun, accountant, of Dunedin, could not have discharged Me duties more faithfully. His full report Is the essence of ambiguity but when critically reed It spells nothing leas than that Mr. Ward non guilty. If net of n breach of subsection 3 of section 137 of the Bankruptcy Act of 1892 which enacts "If ho has, with intent to "conceal the true state of his affairs, wilfully omitted at any time to keep "proper books of accounts," certainly of a breach of subsection 4 which enacts:. "If he has, within throe yearn boforc the commencement of the bankruptcy failed "to keep such books of account as are usual end proper In the business carried "on by him, and as sufficiently sot forth his business transactions and "disclose his financial position;"
The reader Is loft to fora his own conclusions as to whether the extraordinary nanlpulatlons and falsifications by neons of Mr. Ward’s private cheques, by bogus drafts, temporary transfers of other people’s credit balances tc his own s.ccount and fictitiously-created share capital end profits render Hr. Ward open to the charge of having also committed breeches of the following, subsections:-
"(VI, > If he has, in Incurring any debt or liability, obtained credit under falsa pretences or by nouns of any other fraud
"(IfJ..). If hio bankruptcy is attributable to rash and hazardous speculations, ganbling, drankonneos, or unjuetlfinbl oktravaganco in living;
but Mr. Weird in cuch oircumstencos, and for the reason that the two years period had just lapsed would apparently not be liable under the following
78.
fab-section-
(XVI.) If, after the presentation of a bankruptcy petition by or against him, or within two years (last balance-sheet Ward Association June 30, 1895. Mr. Ward filed July 3, 1897) next before such presentation, he,(a.) Conceals, destroys, mutilates, or falsifies, or is privy to tho concealment, destruction, mutilation, or falsification of any book or document affecting or relating to his property or affairs, unless it is proved that ho had no intent to conceal the state of his affairs, or to defeat tho law;
(b.) Makes or is privy to the making of any false entry in any book or document affecting or relating to his property or affairs, unless it is proved that ho had no intent to conceal the state of his affairs, or to defeat the law;
(c.) Fraudulently parts with, alters, or makes any omission, or is privy to the fraudulently parting with, altering, or making any omission, in any document affecting or relating to his property or affairs;
If Mr. Ward was guilty of any of the above acts he was guilty of a misdemeanour within the meaning of the Bankruptcy Act, punlsh-
able on conviction by imprisonment "for any term not exceeding two years, >lth or without hard labour."
On November 6, 1897 ( a day celebrated for "gunpowder, treason and plot ) the Honourable Josanh George Ward stood before Judge Ward upon an application for his discharge. Mr, Chapman of Dunedin appeared for tho applicant In support and Mr. Solomon to opposo on behalf of the Colonial Bank liquidators. The liquidator of tho Ward Association (Mr. W. R. Cook) ioea not appear to have tahen my part in the proceedings.
The Official Assignee, who attended, had presented a report to the Court purporting to be basou on the report of Mr. Brown, his accountant, from which have boon ouoted. But strange to say the Official ■ selgnoe made no reference to tho gross irregularities underlying Mr. Brown
91
remarks from beginning to end of his report. He did, however, venture bo much as to inform the Judge that:-
"The debtor did not keep books of account for five years prior to the dato of the bankruptcy."
) This in itself was an emphatic condemnation of Mr, Ward under subsection 4 of tho Act above quoted, which seems to the writer to leave no room for any qualification or exouse for non-fulfilment of the provision, for the word "foiled" in subsection * Is used In contradistinction to the words "wilfully omitted" In subsection S. Nevertheless the Official Assignee went on to report: -
" His explanation of this is that he thought as he had no business of his own, it was not necessary to continue a set of books for his private accounts."
At this point the reader will appreciate some side by side evidencei-
Mr. Ward baforo Judge Ward.
"I always considered I went ont of bumlnooc In December, 1892, and from that date forward I ceased to keep books. My accounts were kept Is tho lodgers of tho Association. Tho only bocks I kept referred to ny personal matters. I furnished tho whole of tho details from the data of my going out of business mvnelf to the Assignee. . ,*
Tho principal business was the grain trade. I went completely out of that on the formation of the Association, (December 1892) end no speculations in grain were entered into by me after that date,
I went out of business completely In December, 1892, ’
Mr. Brown's Hsport to Official Assigns*.
*Large transactions In grain are recorded In the business journal and !»J. ger (Ur, Ward's) from December 1892, to August 1894 but tho entries then ceased. ..."
Hard Association Liquidator's report. : "In tho agreement for taking over Mr. Ward's business, care was taken to make It clear that the business carried on by the Ocean Beach Preening Works was exempted from its operation. In tho face of this it is Interesting to note that the operations of the Association on behalf of Mr. Ward's business of freezing were exceedingly heavy, and within three months of the Association's incorporation the debit on this account was over £25,000. Tho Association's payments on this account for the balancing periods were an followi-
77.
7 months to 50th June, 1893
£93,737,18. 0
12 months to 50th June, 1894
101,635.18. 4
12 months to 50th Juno, 1895.
__ga.!?BB. 0. 0
£ 219,401.17. 1
In f&oe of the above comparisons, Mr. Ward cannot claim to bo placed on the highest pinnacle for veracity, but the awkwardness of the situation any have occasioned slight confusion of memory. However, returning to the Assignee s report, after first making what seems to have been a distinct charge of an offence under the Act, that official proceeded to soften it off with the tenderast of words, and finally wound up wlth:-
"1 an not aware of sufficient reason for withholding Mr. Ward's discharge.*
Mr. Solomon, counsel for the Colonial Bank liquidators, in addressing the Court upon the Assignee's report said:-
"The concluding paragraph stated that the assignee saw no sufficient reason why Mr. Ward’s application should ho withheld. Turning, however, to the fourth clause, that and the report Itself showed grounds why the discharge should not he granted, It was In vie* of these contradictions that his clients had been induced to take action. As shown by that statement Hr. Ward had not kept books. It was true that the paragraph went on to say a record of his transactions was kept in the books of the Ward Farmers' Association, from which end from other data his true position could have been ascertained. That, however, counsel contended nan not keeping books within the meaning of the act. It was not sufficient for the requirement of the act for the debtor to say his position could bo ascertained through the aedlun of the Ward Farmers * Association and as the paragraph referred to significantly added, other data. His position ought to be ascertainable from books kept by himself. That was whet the law required, and after citing the provisions of the act counsel continued to say that upon what was declared In the report the court was left no discretion but to refuse the application
TB.
It had been uniformly held by the Judges throughout the colony that failure to do bo constituted the offence even although nothing fraudulent had been made out,"
Here 1b Judge Ward’s Judgment:-
"I aa fully aware there have been numerous charges of offences by bankrupt In connection with the liquidation of the Colonic,! Bank and of the Ward Farmers * Association. But none of those iv~o under question now, the simple point on which the matter has to be decided being whether or not the bankrupt within three years before the commencement of bankruptcy failed to keep such books as are usual and proper In a business of the bind carried on by him. The situation was very properly described by Mr. Solonon an unique. Here we have a nan In a large way of business selling out his business to a company and himself being the proprietor of a large proportion of shares In the company. He Is the managing director, and the company taka oyer practically the whole o' hln business, excepting certain freezing contracts, which are partly oarrled on by the company, but which are eventually taken ovor by the Kelsons, It appears since this that the whole transactions of the bankrupt have been through the Ward Farmers* Association and that the whole of the transactions appear In the books of the association. There lw no question about these books being accurately kept. Whatever the character of some of the entries nay have been, that In not for me to decide. What I have to decide is whether any Jury, having consideration for the whole of the facts before the court, would find that because the accounts of the bankrupt were kept by a company, of which he was managing director, and In which ho was three-fourths Interested, practically proprietor, whether eny Jury would find hln, taking these facts before no, guilty of a charge under subsection d. Technically, the faot that ho allowed his books to bo kept by the assoolatio n of which he was managing director did not amount to r, misdemeanour, and I don’t think any jury would convict on such a charge. That, Is the only point of the position. What night have been caid if
79.
other natters wore brought forwent I have not to decide. There he* been enough weld in the press regarding such accusations. Those who have made then have had an opportunity to come here and prove then and havo not done so, and I can only say I trust that these proceedings Till show tho futility of the accusations Bade elsewhere. According to tho assignee's report it appears to Be there is no sufficient cause for delaying the order of discharge, which I consequently grant.”
This, perhaps, constitutes one of the most remarkable Judgments mr delivered in the colony and is in striking contrast to that of Judge Williams dellvarod a year previously. The one was logically severe li lt« denunciation of tho wrongful acts of l!r. Ward, the other ran ijelcgetlc and chiefly singular for what was generally accepted at the tine (»1 though it nay not have been co intended) an a studied effort to silence tho(» who oontenplatod further neacures against the delinquent. Shat is more to be condemned in a judge than any remark calculated to prejudice proceedings li othor Courts, such as; -
"There has been enough said in the Presc regarding such accusations* io.T
As indicating the feeling in Invercargill after Mr, Word's f / tWoaditloaal discharge had been granted, the following may be quoted frw tho Southland Tines
'Wm It an ordosl at allf To our Rind it partook more of the character -of a pleasing cerenony . Tho applicant irao certainly -«ubaltte<rto ao-lndlgnlty, not even to harshness or close scrutiny. On the contrary he received tho utmost consideration and courtesy all round. The "opposition' iras of the pettiest character, a sort of fomaJlty in honour of the occasion, and shorlnfl clearly that tho liquidators had no "aallgßßirt" disposition to gratify. Indeed the fact that the discharge applied for was opposed ot ell sen of distinct advantage to tho applicant. Objections raised sero stated with conspicuous consideration for his
95
feelings, and afforded his counsel opportunities for getting In exculpatory and laudatory content that he nould not otherwise hare enjoyed) and It la duo to that astute gor.tletan to Bay that he was not negligent in the discharge of hlr duty to hie client. Surely ofter such an affecting display of leniency - wo night coy of generosity and goodwill - on tho part of hie creditors, eretwhils stigmatised as cruelly exacting, we should hoar no more of the "Ingenuity of Bailee," But for the Icnowledgo of his great consideration for associates end rubordlnatec, it, '.night, oven be i expected that Mr. Ward would now in reciprocation, join with the shareholders in prosecuting investigations with tho object of discovering who were really to blone for transactions that have brought so such odlun upon hlaself and others connected nith the Association of which he wan chairman.' (And neaaglnr, director at £5OO a year. V.M.8.)
81.
Chapter XI.
Getting Through a Hole.
Humpty Dunpty oat on a wall
Humpty Dumpty had a groat fall
All Sodden's horses and all Sodden's non
Quickly put Humpty Dumpty together again.
-Adaptation of nursery Rhyne.
The shock of tho double failure of the attempts of June 1896 and lay 1697 to persuade Judge Williams to be the medium of saving Hr. Hard fron the consequences of his acts was in part deadened by tho remarkable success which he achieved at his first moating of creditors on July 13, 1897, and the sympathy shown to him in high places.
Telegrams of condolence were showered upon him after he filed his schedule in Bankruptcy on July Bth .and had thus caused tho Awarua seat in Parliament to become vacant.
Prominent among his sympathisers was the then and present Speaker of the House - Sir Maurioo O’Rorke - a gentleman who has held that honorable position for quite a number of years, Her: is tho Speaker's moGse.go'-
"Very sorry to hoar of your resignation. Hope your retirement from Parliamentary lifo will bo only temporary, and that the country will soon regain tho benefit of your services.'
telegram, Btrango to relate, wa« published in tho newspapers on July ‘'though Mr, Ward's "resignation’’ by telegram wan annonnood by tho OsmUs to have been received on tho 14th. The "resignation" was e. farce bp. “ler the Electoral Act 1893, a member's seat becomes Ipso facto immediately , *csot on being adjudged a bankrupt. The pdjudlcation took place Bx2 days "‘fore the "resignation:" although the Registrar appears to have failed to !lTe not loe to the Speed:or as required by Act of Parliament, and to have liability to a penalty amounting to some hundreds of pounds. Mr.. art Prefers had nothing to resign. This telegram was made every uso of " the '’“'’He press and, coming as it did on tho ore of the Avarua election, served the purpose of a certificate of merit with tho electors; nn *' " a ' h j« result of the election could over hare been in doubt, for tho Southland »ho received Zo.fld. a head more for their sheop than what Mr. rtard
97
sold them for, would not be likely to desert their benefactor In his hour of nood. Still, there wore many persons who questioned the propriety of the Speaker's action, having regard to the position of strict neutrality and Impartiality that he Is expected by the colony to maintain. However, the "hardship" alluded to by Mr. Kelth-Eansay at the mooting of creditors on July 13 having given Mr. Ward time to attend to hlc electioneering, and deferred the publication of hla "financial statement" until after the polling day, Mr. Ward was not seriously Inconvenienced and contrived to secure an easy victory on August 5, 1537, when he was In the anomalous position of not only standing as a candidate for Parliament but of being returned to Parliament whilst an undlscharg<l bankrupt, and with Judge Williams' words still ringing In the oars of the electors.
The session opened In September, 1897. but Mr. Ward, from motives of delicacy no doubt, did not attend for a few days. On the 28th, however, ho faced the House, and the oath of allegiance to his Sovereign was on that day administered to him by the Speaker who gave him a hearty shako of tho hand and the sweetest of smiles upon completion of the edifying ceremony.
It would occupy too many pages to place tho roador in front of tho picture that was presented to tho onlooker and listener: suffice It to say
(1) That a feeble protest was raised on September 33 by one or two members against the Speaker's ruling that Mr. Ward, if present, could take his seat;
(2) That in due course Mr. Ward did attend on the 28th and took his seat, and
(3) That on September 30 the Privilege Committee of tho House was set up for the purpose of arriving at a solution of tho extremely difficult problem whether or not an undischarged bankrupt was privileged to sit in Parliament and take part In tho administration of this Colony’s affairs, whilst ho was an undischarged bankrupt. This Committee consisted of the following membors;-
Government. Opposition.
Mr. Joyce
Captain,Spssell
" Guinness
Hon. Mr. liolleston
Montgomery
Ur. J. Allen
Duncan
" Sodden
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Tha proportion wan thus 5 to 3 In favor of any decision the Government required from the Committee. As to its constitution, the following fron Hsneard will prove interestlnp:-
CAPTAIIJ HUSSELL: The Premier yesterday Invited ms to submit ; a certain number of names, which ho told me , If reasonable he would accept as members of the Committee, I gave him the names today officially, having shown then to him last night Informally. X find, however he Is not prepared jo acoept these names,and demands a largo majority on a non-party tribunal."
This Is not surprising seeing that the Premier had said on the previous day:-
"I Intend to consult the honourable gentleman as to what honourable meabarn shall be put upon that Committee, I, of course rely upon hln not suggesting names for the Committee which are likely to be taken exception to.'
And it iw not without a humorous aspect when contrasted with another portion ef th» Premier's speech
Sir, I desire to bring under the notice of the House a somewhat delicate end involved question. There are. Sir, occasions when personal friendship and party consideration* must be set aside and *luty be paramount."
The student of Hansard - indeed of the public press - will be used to this klad of eloquence, so wo will pass on.
Upon the motion for the setting up of the Committee the following ■•wbers, to their credit,, spoke their minds very freely:-
l!r. HONE: The Premier rightly expressed himself a short time ago that the privileges of this House are in his hands; and I contend, instead of its being relegated to a Committee, it was the duty of the Premier to have taken the matter into his hands and declared the privileges of this House are Invaded. At the present time, I contend a stranger is sitting in this House, and 1 say this is a natter which requires no interpretation by Judges of the Supremo Court, and I should claim that it is not for the P real or to say so; because the language of the Act is so oipllc ,
84.
and by your leave I shall read it. The Act of 1893, paragraph 130, clauses 4 and 5, declares that a seat is vacant if a member becomes a bankrupt within the meaning of the laws relating to bankruptcy, r and if he is a public defaulter. Now, Sir, you know, and every one knows, that there has been a notification in the Gazette of a certain person being bankrupt; and if that person should occupy a meat la this chamber the natural consequence* are that it le the duty of the Premier to declare there is a stranger in the chamber. I know it is very unpleasant to speak in a plain manner like this; but I aa certain of this: that, had the condition of things now under discussion occurred to any one on this side of the chamber, the Premier would have been the strongest to assert the duty I have indicated.
MR. CROTTTHKR: *1 am strongly of opinion that this House should not have been put Into this humiliating position this afternoon by any one man in this country."
MR. CARSON: "As to making provision for the future, that ce-n stand The question is whether the honourable member has a right to sit here. There is no dispute or difference of opinion, I suppose, as to whether a gentleman in the unfortunate circumstances of the honourable member for Awarue. should be allowed to occupy a seat in this House. There is no doubt about that. The Premier has laid it down distinctly in a Bill he has submitted to this House with regard to local bodies that no person who is a bankrupt shall hold a seat on a local body."
MR. SEDDON: “That is the law now in respect to some local bodies."
MR. CARSON: "The honourable gentleman makes a distinction with regard totho honourable member for Awarua."
MR. 3EDDON: "That refers to local bodies."
I£R. CARSON: "Then, in the opinion of the Premier, a person considered should bo entitled to a seat in this House who is not fit to sit OB a local body."
100
MR. SBDDOH: "That is the law at the present tine."
Tho right nail ,aB fcor9 hit ° n tho hcad » yet th 9 HouS9 allowed itself to be nhoni of control over legislation affecting Its own privileges. Members presented a sorry spectacle wrestling with their consciences in their efforts to get over the difficulty. Only one or two of then could find tongue enough to give utterance to their honest convictions, for the question was t Party question from start to finish. And yet the issue was so simple, las It right that an undischarged bankrupt should rlt in the House of
Boprouentatlves and enjoy the usual privileges of membership? Subsection 150 of The Blectoral Act 1895 says: -
“The seat of any neaber of the House of Representatives shall become vacant if he Is a bankrupt within the meaning of the laws relating to bankruptcy."
Ii pumiaac* of this provision Ihe Aw am a seat had become vacant, when Mr, Ward im adjudged a bankrupt, but he claimed, and his friends claimed for him, with all the vehoaenoe they could muster, that whilst bankruptcy after •lectioi Ipso facto rendered a seat vacant, there was no bar to the bankrupt, ulthough sncertlflc&ted, being again returned to Parliament and taking hie Mat la tie usual way. This contention, ridiculous as it aeons, was based upon the fact that clauses 8 and 9 of the Electoral Act, 189?, headed
'Qualifications of Electors" does not provide for the disqualification of a baihrupt, and that, as such a person la not excluded fron being registered m elector, he is not excluded fron being a candidate for 3j.tcti ’’“’lianent. The weak point of thla argument la that an evident omission ro lie disqualification clause, (for bankrupts are expressly and admittedly Ueqtalifled for election to the Legislative Council, to a Local Body, or to a Conciliation Board) vac Bade to override an express provision tithe vacancy claoae declaring a vacancy to exist If a member is a r
The incongruity of ths situation was so palpable a- the time 8 « not but feel compassionately disposed towards the House as a whole, or di »as evident that sympathy towards the elect of Awerna - on Justifiable ground the writer cannot surmise - had obtained complete mastery ° VBr Its Judgment, though, knowing what the House did at the time respecting
101
the causes of Mr. Ward's bankruptcy and the monstrous nature of the transactions between himself, the Hard Association and the Colonial Bonk, which Judge Williams had denounced in such stringent words, it was difficult to understand how even an allowance for "human frailty," to quote a nembefs words, could sin such strong sympathy. The reader will have formed his own conclusions on this point long before reaching this chapter.
But the Committee of Privilege, with the 5 to 5 Government majority duly satj went through the process usual to Committees of the kind, and finally reported to the House the result of their wrestlings with the weighty subject. The House solemnly received the report and In the end the Awarua Seat Enquiry Act was passed appointing the Court qf Appeal of the Colony a "Court of Construction," Its Herculean task being to find out what Parliament really meant by its own words:-
"The seat of any member of the House of Representatives shall become vacant .... If he Is a bankrupt within the meaning of the laws relating to bankruptcy."
A simple resolution of the House interpreting the law as, of course, it was intended to apply would have ended the matter in half an hour but that would not suit, so the novel process of a costly reference to the Court of Appeal gave an importance to the Awarua electors and to Mr. Ward that they did not deserve, and established a precedent that can bring no good to the colony, if it does not bring actual ham.
An entire day was taken up by the argument in the Court of Appeal: the Bench, however, were only deliberating for about five minutes when they delivered the following Judgment
"The Court is unanimously of opinion that the seat of the Awarua member has not become vacant on the facte mentioned.
The reasons will be put into writing as soon as possible."
The points of the written judgment are here given so that the student nay follow thlc historical Incident from start to finish
". . . . There is nothing which prevents an undischarged bankrupt from being registered as an elector, and in consequence from being elected as a member. Section 150 which renders the seat vacant after it has been filled, cannot be construed so as to alter
87.
the express provisions of section 9 and disqualify from election a person qualified by the earlier sections.
The question, therefore, is whether, when an undischarged bankrupt has been elected, his seat at once becomes Vacant under the provislono of section 130, subsection 4. The contention that It does so become vacant is based on the circumstance that the words in the subeection are in the present tense. It is contended that the words thus refer to an existing state of things, and to a person whose status is that of a. bankrupt. It is obvious that if this be the true construction, it would les.d to the absurd conclusion that although an undischarged bankrupt can be registered as an elector and is therefore qualified to be elected a member, he cannot eit as a member but ceases to be a member at the very instant of time at which ho becomes a member. To support such construction the Court would require to be satisfied beyond doubt that such was the intention of the Legislature .... Therefore, if bankruptcy disqualifies a person from being elected, or vacates his seat when elected, there must be some Statute which expressly, or by implication, imposes the disqualification or creates the vacancy.
Comparing the sections of the Acts relating to fications, one would naturally suppose that the draughtsman of the Act of 1893 conceived that to use the present tense was a neater fore of expressing the same meaning, and that he had no intention of altering the section in substance. It contemplates, therefore, events happening after the seat has been filled ....
Por those who have, perhaps, skipped the nain judgment ~ l '°* Irsad of legal phraseology, the writer commends the following gi'-t i ' translated into his very best doggerel
Justices (loquuntor):-
The Legislature thought it wise
To use with future sense
The aliaple ”prudent" rather than
The fogging future tense.
103
We've turned it over in our minds
(It nay seer, very rum);
The Court unanimously finds
That "is” neons "shall become."
Just as If to show its appreciation of Mr. Ward's goodness in raising such a nice point of law. Parliament resolved that the costs of both sides of the appeal to the Court should be home by the Crown, whatever the result might hj«,
It struck most people at the time as strange that under this extremely magnanimous arrangement two counsel, Messrs. Theo. Cooper and C. P. Skerrett, appeared for Mr. Ward, whilst Mr. Gully was the sole representative of the Crown, although, to use the words of Sir Thomas May - the recognised authority in procedure in the British House of Commons - the "dignity and independence’ of Parliament were at stake.
Now let the reader ponder for a few moments over some of the argunents advanced by the learned counsel for Mr. Ward. They will at least amuse. if they serve no better purpose, and will furnish fair samples of the ingenuity common to leading lights of the law which places the New Zealand Bar In the foremost rank of the profession throughout the civilised world - a profession which. In spite of the sentiment expressed in Hacklin's play of love a la mode - "The law is a sorb of hocus pocus science, that smiles In yer face while It picks yer pocket" - has for centuries past earned the respect of nations.
The studious consideration previously shown towards Mr. Ward on all occasions was carefully continued, for he was allowed the privilege of opening hie case which gave him the right of reply after Counsel for the Crown had addressed the Court.
This was an advantage that will bo appreciated by the laynan, for it must be borne in mind that Mr. Ward was making an effort to over-ride a specific provision of the Electoral Act - in fact to alter it.
In these circumstances, go the writer is adviced, the Crown had the right to olein the privilege which Mr. Ward enjoyed, and ought to have claimed it.
Mr. Ward's two counsel, in order to give color to their contention that "is a bankrupt" meant "shall become a bankrupt”, resorted to repealed statutes and quoted the Constitution Act from which the Electoral Act 1893
89.
was drawn.
Now it is a little singular that the "vacancy" provisions in the two Acte - Constitution Act and Electoral Act - are similar in terms, with this exception - that in tho repealed Constitution Act the words of section 49 are "if he shall become bankrupt," whereas in the existing Electoral Act (drawn from the Constitution Act) the words are "if he is a bankrupt."
It will thus be seen that the Legislature deliberately altered the "shall become" of the Constitution Act to the “is" of the Electoral Act.
But, marvellous as It will appear to the lay mind. Counsel for iir. Ward used this fact as on argument in Mr. Ward's favor, contending, one of thee that:-
'The Legislature seems to have thought it was better to use the present tense with a future meaning instead of using tho future tense,"
and the other that:-
"the draughtsman of the Electoral Act must have thought he was a better grammarian th&b that of the Constitution Act.
Yea, seriously, these were Counsel's words carefully noted down by the niter. They further argued that:-
"What the Legislature really Intended was that the constituents should have the option of saying whether a person was fit to sit as a neither,"
which will strike the reader as a somewhat incongruous contention, otherwise why Is It that the disqualification clause does debar aliens, convicts “d others; why did not the Legislature give the constituents "the option of saying" whether such persons as convicts are also fit to alt as members, and why are undischarged bankrupts denied the privilege of election to the Legislative Council, a Local Body, a Road Board, or a Conciliation Board? *galn, counsel for Mr. Hard sald:-
"You must not so construe a statute as to take away a right unless the wording is specific, and why should this be Inferred because the present tense "is" has been used?
The nan of common sense will probably answer: Could any word in the
105
English language be more specific than the word "is"?
To another argument of Counsel
"The civic rights of a nan are as high as the rights of property and should not be interfered with unless the Intention of the Legislature is plain?"
The answer at once suggests Itself:- Is It reasonable to infer that the Legislature's intention was that the National Assembly of this land should be singled out for exemption from protection by a statutory disqualification provision made applicable to every petty public body?
To quote once more the words of Sir Thomas May, when justifying the complete disqualification which exists in the English Act, it is "In order to maintain the dignity and independence of Parliament." The sene dignity and Independence should surely be required to be preserved in New Zealand, in an assembly responsible for the making of its laws?
With all respect to their Honors the Judges who sat upon the case and delivered the judgment already quoted, the impression upon the lay mind at the time was that, having regard to the principles governing the qualification of candidates for election to other bodies, and having regard to the English Act and to the words of Sir Thomas May, above quoted, their decision would at least have been as sound had they found that a techi cal omission of the word "bankrupt" had been made in the disqualification clause of the Electoral Act and that that clause as it stood, was repugnant to the express provision, "is", contained in the vacancy clause, instead of finding that the provision in the vacancy clause, "is" (expressly implyli the present status which, while continuing, creates a vacancy), was repugnant to the spirit of the disqualification clause, end must therefore be read as "shall become."
Hr. Sully seemed to he logical when he argued, as the interpretation of the disqualification clause as it was and is: "If a person stands for election, and the electors elect him, in face of a statutory provision, that is their look out - their votes are thrown away."
With the decision of the Court of Construction, however, Mr. Ward
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b«MM a legally qualified aonbor of the House of Representatives; the Crows paid the three lawyers * bills of coats sad every one looked pleasant - excepting the taxpayer.
107
Chapter XII.
"Fixity of Finance."
One Illicit transaction always lends to another. Burke.
The co-operative nature of Mr. Ward’s private accov -s with hla Association and with the Colonial Bank was of groat value In furthering the transactions between the two oonoerne. According as the accounts of the one or the other were about to coma under the scrutiny of the directors and shareholders, so the figures of Hr. Bard’s private accounts contracted and expanded respectively.
It was a marvellous exemplification of the Ingenuity of mankind, and the performers proved themselves to be 1 as expert as the professional gentlemen who used to frequent the Spson racecourse In England and beat the public with the thimble and the pea. There was no saying where Ur. Ward’s main overdraft would be at any time - It might bo with the Association, or It might be with the Bank.
The reader hews no doubt picked up a wrinkle or two in the courseof this rosemes for which the writer can claim no credit, end seeing that the Prosier of Hew Zealand (also one of His Majesty the King a Privy Councillors) only the other day (H. Z. Times July IS, 1901) held up Mr. Ward as as example for the rising generation to “follow In the footsteps of, it is manifest that the title of this work has been well selected and that, according to Mr. Sodden, the reader has only to be a wizard of finance gifted with the necessary amount of nerve and he will have the world at his feet.
It will, of course, bo absolutely Imperative to follow precisely in Mr. Bard's wake, otherwise the goal may just be missed, which soul be disappointing after haring trodden a soaewhat stony path. In order to complete the lesson, therefore, the remainder of this chapter will be devoted to a few more Instances In- which the art-cf figure manipulation was practised with conspicuous talent.
93.
In an earlier page It was shown how, notwithstanding the specific agreanent to the contrary, the funds of the Association wore used for Mr. Ward's private freezing business to the extent of over £200,000 at one tine and another. This Interesting item of news cones from no less an authority than the official liquidator of the Ward Pamers' Association, bnt the sane authority tells how these advances to the Ocean Beach Freezing Works were cleared off on each balancing day by transfer to the debit of Mr. Ward's private account with the Association and re-transfer Immediately afterwards to the debit of the Ocean Beach account, Mr. Ward's private debit being in turn reduced to the vanishing point by further operations about to be referred to.
If this process was not for the express purpose of concealing the fact that the Association's monies were being used by Mr. Ward for his private freezing works' operations, the writer would like to know what its object was.
The Ward Association directors would naturally want to scrutinise the list of advances on each balancing day, not to mention the probability that, having regard to the risks run, the list had also to undergo the inspection of some official of the Colonial Bank.
It Is obvious that If, ae the liquidator says, Mr. hard was specially debarred by written agreement from employing the Association’s funds :.n the Ocean Beach Preening Works (of which for the most tine he was the sole owner, and for the remainder of the 2i years he was owning a half-share), this In itself would be a motive for these peculiar transfers.
Then, referring once core to the £40,000 of debentures issued by t-.e Association, of which, as the reader has been Informed, £20,000 wore tahen up by the Colonial Bonk and £20,000 by the Bank of New Zealand, the cash received for those debentures, as Ur. Ward admitted under examination the Dunedin Supreme Court, should have gone to the credit of a debenture account in the Association’s books, but, instead, the cash was placed to credit of Mr. Ward's private account.
The effect of this transaction was, of course, to deceive somebody 53 40 the extent of Mr. Ward's indebtedness to the Association.
94.
On June 30, 1895, the Association's balancing day, It became necessary to show these debentures as a liability In the balance-sheet, and the amount wan therefore transferred out of Mr. Ward's private account to the credit of a debenture account.
Simultaneously, however, the celebrated bogus draft on Messrs. Connell & Co., London, for £30,000 against imaginary oats was negocl&tod by the Colonial Bank, and instead of the proceeds of the draft going to the credit of that firm, they were placed to the credit of Mr. Ward’s private account In the Association's books and helped to blind the Directors and others and so carry on the deception as to his true debt to the Association.
Mr, Ward whs In England at the time this draft was negociated and he said In evidence before Judge billions, in June 1896, that when he discovered on his return, in July 1895, that there was something wrong about the credit (cabled out while he was in London) under which the draft was drawn, and that there were no real oats to prop It up, he would not allow the draft to go forward to London: nevertheless he did allow that same draft to remain current as a genuine draft with the Colonial Bank and the i proceeds to remain at his credit until after the bard Association meeting on September 7; until after the agreement had been signed between the two banks on October 18, end until after the Colonial Bank meeting on November 8. the draft not being debited back until November 13, 1895.
Then, again, at the same dato - Juno 30, 1895 - Messrs. Bohert Brooks & Co., London, wore creditors of the Association for 618,000, and Messrs. John Connell <! Co., London, wore also creditors for £B, POO, but both those amounts koto boldly transferred fron the credit of the parties to the credit of Mr. V/ard’s private account in the Association's books. Thus the effect of those wrongful transfers of £30,000, £lO,OOO, and £6,500 - to the credit of Mr, bard’s account was to completely wipe out his ror.l indebtedness to the Association at that time, and conceal liabilities tf >■ corresponding extent.
The question of the Bank of Nov; Zealfind taking over '■; Associ ■ olou account among others of the Colonial Bank was Just at on acuto point of nogociation, and the operations which have been described would have n
110
poierfnl effect in blinding an inspector instructed to enquire Into the condition of the largest account with the Colonial Bonk.-
This chapter mill bo suitably closed with, some edifying correspondence about a little cheque for 840,000:-
'The Colonial Bank of Hew Zealand, Invercargill, 80th June, 18P*.
Dear Mackenzie,
The Ward Parson 1 balance on 30th Innt.., and Mr. T/ard proposes drawing his own cheque for £40,000 on that day, and bending the amount to the Farmers' until Monday, 2nd July. 1 presume thio transaction will be in order. We must not chow all the overdraft to the public this tine, as there are toe many tinld people about at present. If 1 do not hear from you X take it silence gives consent
Yourr. sincerely,
O. A. Birch."
(Hanegor Colonial Baer.)
Private.
Wellington. 29th -Tunc 1694.
My dear Ward,
I Intended to show yon the enclosed letter, but remeabered to do bo only after I left your office. I have not replied to it - fact in, I cannot - but 3 have no objection to your wiring that you have Been no and 1 have no objection to the natter being .rranged in the way Indicated.
Yours,
K. Jtaolccnrie.”
{(Jon. Manager Colonial Bank)
The subtle wording of Hr. Ua-ckeuu.'.e * n letter in ta -’-rid contract the openly brazen style of Mr. Birch.
An specimens of bonking correspondence the°e letters cnci. cla 88e< i an unique, but the sequel in that Mr, Tlard apparently put Hr. Mac!:ea,io B and Ito enclosure In tbo :flro, without, &a ho £&b ado..* to j--* not soo the eoianuilcatlnr in any rre.y nlth the Bonk at Invercargill- *e - »e»d for transacting business nlth Hr. Birch In the nemo of the Bssu.
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(although, no doubt, ho appreciated the complioent paid to hiim by Mr. Mackenzie's exhibition of trust) knowing that "silence gives consent."
All these operations would, perhaps, be described by Mr, Ward n.E being for the purpose of securing "fixity of the finance," which was given as his reason for the issue of the £40,000 of debentures, when he was under examination in June 1896, although, as the reader is aware, the proceeds went to the credit of Mr. Ward's private account in the Association's books and were left there for six months when they were transferred of necessity, the bogus draft for 630,000 and transfers of other person's credit balances doing duty in its place.
If the writer had the naming of this kind of process, be would cal it securing "shiftiness rather than fixity of the finance."
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Chapter Xlll.
Jerry Journalism.
When it cones to the push, *tis no
more than talk. -
L* Bartrange,
The British Muoeun Library has the finest collection of prints In the world, representing every variety of literature from the ponderous toss of occult science to the handy book of "light reading."
The collection Includes bound volumes of most journalistic publications, some dating back to the ee.rly days and of quaint style - others of the modern school; but If it cannot boast a complete set of "The Southland Parmer" - the S2-page trade journal and "Official Gazette" issued monthly by that philanthropic invention. The J. 0. hard Farmers' Co-operative Association of Hew Zealand Ltd., - then the writer would suggest that any person possessing a set should earn a nation's gratitude by presenting it to the authorities of the British Museum. The writer cannot part with his eet as it forms a portion of his records which might be required in certain contingencies.
The following are fairly entitled to bo classed as glittering gems Of jerry journalism: they are culled fron the columns of the famous organ for July and August 1893. Per contra are quotations from other documents and comments by the writer:-
Southland Parmer
' 0 have always been loyal supporters of the port of Bluff."
The August nunber of the SouthIsad Parser should prove an tnterest*one, as It will contain the report of the first annual general meeting of the shareholders of the J. G. Yard Pamero* Association when iiope to ca>e plain to farcers * at can be don© under true cooperation."
Contra
And they were always supported by bluff.
Mr. Ward to Mr. Kelson.
"I think It batter, both In the interest of Nelson Bros, and myself, that no publicity should be given to our relationship. It would certainly render the buying of sheep more difficult for me, and Nelson’s opponents would fael that a largo nonopoly of Southland was in his hands. . . •
113
"We auk no favours In business from friend or foe, but we ask justice."
"Are you a shareholder In the J. 0. Ward Warners* Association of Bov Zealand Ltd.? If not it will pay you to become one at once."
“I want tc keep entirely free from farmers as, once associated with then, the works become a lever to grind down the profits of the works to assure additional value to their stock."
Mr. Ward in the Dunedin Supreme Court.
Counsel: ‘The total amount of debts that they are to take ever If 1 make It out rightly, is £l6B, 000. Can you tell me whether that is correct?"
Ur. Ward: "1 should like to see the statement."
Counsel: "That gives £166,000 altogether?"
Mr. Ward: "Yes."
Counsel: “So that the Colonial Bank stand to lose £101,000?"
Hr, Ward: "That Is so.”
Balance sheet June 30, 1696.
Alleged paid up capital £27,4S
Liquidator's sworn balance-sheet March 20, 1896.
Liabilities (not Including share capital) £12,797
Assets 64 r 341
Deficiency £48,456
Total Deficiency, Including liability to shareholders, £75,906
"The Southland Parmer is Issued with the object of educating farmers to the fact that It will pay them to do their business with the J. 3. Ward Pamers* Association of New Zealand, Ltd.”
Mr, Ward to his shareholders August 5, 1893:-
"I may also state that nothing whatever of a speculative nature Is entered upon by the Association; our capital is not risked In this way and has not been to the extent of one pound; on the contrary the greatest care Is made In the selection of business; our advances are, wherever necessary, well secured-"
The farmers did not require much "educating." They quickly discerned the advantages of doing business with the Association, for they received 2s.Cd a head more for their sheep than the sheep were sold for.
Liquidator’s Report.
"I found that indiscriminate credit had been given and little or no' security taken, .... The greater part of the deficiency amounting to £46,456,16.4 shown in and by the said statement is caused through looses -ado in book debts, which amount, after making searching inquiries, I deem necessary to writo off fiS7,3Vi. 3. 8 as absolutely bad and worthless.
"The Association being a vigorous and progressive company, it necessarily has its enemies, who nay take the present opportunity of pointing out what are the apparent weak points in our balance sheet.
"Our financial arrangements are such that we are in a perfectly independent position. We have at all times received fair and reasonable support from our bankers for the carrying on o t legitimate business".
"ffe could not be cornered , . . Our assets are promptly available , . , He have made most excellent arrahvenents outside the colony, enabling us at any time to obtain the whole of the necessary capital to carry on our business should such a contingency ever arise.”
"Personally, I have been looked upon during my business career as a speculator. I have no cause to regret being counted as such • . . And I think everyone in this district has reaped some benefit from the undertakings I have embarked upon".
. ... at the same tine I wish you to clearly understand that the credit of this Association will never be used by me for any speculation I may elect to go into". (The reader will note carefully the date of this speech August 5, 1893 which dealt with the balancesheet to 50 June 1893.)
A singularly prophetic uvteranoe The enemy duly appeared in the columns of the Evening Press, where a remarkably accurate diagnosis of the Association's diseased condition was put into print .
If owing the Colonial Bank £112,130 was being in a perfectly independent position”, then they wore. They certainly did receive very/ fair support-from their bankers, but the money was employed in carrying on illegitimate business.
The contingency did arise; they were cornered; the assets when called upon proved to be £48,456 short of the liabilities and the "excellent arrangements” appear to have been defective.
Probably if there were a thorough search into things it would be found that Mr. Ward was strictly correct in saying that ho had no great "cause to regret being counted” as a speculator. There is no doubt about every one in the district. especially the farmers, having had a deep dip into the Colonial Bank lucky bag".
Liquidator's Report.
"In the agreement for talcing over Mr. Ward's business care was taken to make it clear that the business carried on by the Ocean Beach Freezing works was exempted from its operations. In the face of this it is interesting to note that the operations of the association on behalf of Mr, hard s business of freezing were exceedingly heavy and within three months of the Association's incorporation the debit on this account was over £25 000. The Associations payments on this account balancing periods were as follows:-
V .mtta to 30 June 1895
£93,787
■XJijyj 7 I ~ mnnt.h.K to 30 June 1894
£101,625
„ to t.o 30 June 1895
LUIO £ 23,988
£219,400
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A glance at the report and bal-ance-sheet sill demonstrate to you that this Asßoclr.tJ.ca Is run upon true co-operative linen. AaC 2 think It conplotoly holies the predictions of those nho, at its Inception, could fain have you believe that the vholo thing was a bogus affair.”
"The business is not a thing of to-day. I an sanguine enough to believe that chon X en deed and gone this Association sill still be in existence and I fimly bollevo that it sill do good service to the Tourers of Southland.”
Out of £.07,450, the total paid „ capital of tho Association. Mr Uard held £23,000 (including the £BOOO supposed to have been peid by hlo "in cash* but nhlch sas never paid). This is Indeed tree co-operation 11
This prophecy sas not shelly ful filled, for the Association is dead and gone end Hr, Ward is still la existence. The Assocle tlbn, honevor, did do good service to the faraorn of Southland no doubt, about that.
116
Chapter XIV.
Braving the Elements.
Loud howl the winds and the seas roll high, Swift scud the clouds o'er a nrurky shy, But the gallant ship rides o'er the foaming wave, And .the skipper laughs while the storm fiends rave.
(Adaptation of Song)
The Awarua ark, favored by fair winds and with a good pilot or two aboard, succeeded In safely negoolatlng the Scylla of the Bankruptcy Court and the Charybdis of the Appeal Court, and on emerging from the straits the strain of anxiety was lifted from Its precious burden and he breathed again freely after the Judge had legally pronounced him to be a bona fide member of Parliament, the Awarua electors having already declared his fitness from the point of view of good character. This happy state of things cane about on Guy Fawkes Day, and it nay not be inappropriate to here mention a singularity about certain dates. The fifth day of the month's seems to have had a fatality about It for Ur. Ward, for instance
On December 5, 1892, the fabulous debt of the J. G. Ward Association to the Colonial Bank began to pile up:
On August 5, 1995, he was haranguing the multitude of favored farmers at the first annual general meeting of shareholders in his Association and draining his fountain of veracity to the very dregs;
On June 5, 1896, he stood before Judge Williams and made confessions that startled the colony and brought upon him the direst strictures that man ever deserved;
On August 6, 1897, he was elected member for Awarua;
Oh November 5, 1897, he was granted hie unconditional discharge from bankruptcy by Judge Ward in the Invercargill District Court, and, wonderful to relate,
0a the same date the Appeal Court delivered its written judgment pronouncing the member for Awarua a duly qualified member of the House of Representatives.
117
But passing on from the crowning triumph achieved by Mr. Ward ever the "persecution and conspiracy" of those whe were "hounding* him to political destruction, it was not long before the clouds ber.en to gauher once more just as the memory of the storm was beginning to fade away.
A few months later rumours were in circulation that certain shareholders of the J. G. Ward Farmers’ Association bad been roused into action by the revelations that hod been made in the Dunedin Supreme Court at various times from June 1896 to July 1897, capped by the easy fashion in which Mr. Ward had slipped through thw Bankruptcy Act and Slectcral Act and emerged from the "ordeals" with "the white flower of a blameless, life" in his button-hole.
These rumours eventually took shape and after it had been announced that some "friends of Mr. Ward" had purchased back all his Invercargill properties running into many thousands of pounds and Intended giving him a fresh start in life, a petition signed by a number of the Association's shareholders was presented In the Supreme Court, Dunedin, praying that the liquidator be directed to prosecute Joseph George Ward and John Fisher, late managing director and manager respectively of the Association, under the penal clauses of the Companies Act.
The case cane on for argument on March 8, 1898, before Judge Williams at Dunedin. Just before the petition was called on, His Honor delivered judgment upon an application cade to the Court by the liquidator of the Ward Association for on order directing that the costs of the public examination (already held ) of Mr. Ward and others should be paid out oi on? assets of the Association, wbioh (including the uncalled capital) were alleged to be insufficient to moot the mortgage debentures.
His Honor held that although the liquidator of the Association was the nonlnee of the Colonial Bank llouldators who held the debentures, "in "order to nake them liable for any particular amount it must appear clearly "thnt there was an implied contract by thorn with the liquidator to Indemnify ’him against it. There was no sufficient evidence before the Court of such "implied contract to indemnify the liquidator against an expenditure in resect "of the liquidation which could not be said to be for tbs benefit of the
118
debenture-holders." The order whs therefore refused.
Thls judgment ban been referred to because it has an important bearing upon what followed (the same day) upon the petition to prosecute the two principal officials of the lard Association, so far as the question as to whether or not there were free assets, or whether or not the petitioners' indemnity should be accepted, is concerned. On thin point the irlter will have something to say leter on in this chapter.
Plrst of all, the reader should become familiar with the precise charges preferred against Messrs. Ward and Fisher. Those were clearly set out in the petition, which was as follows:-
*The humble petition of the persons whose names are hereunder signed showeth as follows-
Your petitioners aro all shareholders and contribntorlos In the J. G, Ward Farmers' Association of How Zealand (Limited) in liquidation, and are interested in the winding-up thereof, and in this matter are acting for themselves, and also for other shareholders
The said association was duly registered as a company under The Companies Act, 1882.
An order was mad© by this bcnomblr court on the 14th dry of July 1896 for winding up the said association, and it is now in course of being wound up.
William Richard Cook, of Invercargill, commission agent, •as on the -.th day of August, 1896, appointed to be, and he still is, official liquidator of the said association. It has appeared in the course of such T;lndlng-up that e. certain director of *'■ said association - to wit, the Hon. Joseph George Sard - end aloe a certain manager or officer of the said association - to wit, John Plohor - have been guilty of offences in relation to the said association for which they arc criminally responsible - to wit -
(a) They made, circulated, published, and concurred in Baking, circulating, and publishing ctr.tcnontn and accounts
119
which they know to be false In material particulars, with Intent to induce persons to become shareholders, and with intent to deceive or defraud the nonbarn, shareholders, and creditors of the said Association.
(b) And they p.lbg, with Intent to defraud, falsified certain books belonging to the said asmdfAlcr.
(o) And thoy also, with Intent to defraud, made or concurred In making false entries, and omitted or concurred In omitting to enter material particulars In the books of account and balance—sheets of the sp.ld association.
(d) And they also falsified the books of the said association and were privy to the poking of false and fraudulent entries In the 1 books of account of the said asßcoip.tlon, with Intent to deceive.
*Tour petitioners therefore humbly pray -(1) That this honorable Court rill direct the official liquidator of tee said association to institute and conduct prosecutions for the said offences; and (2) that the costs and expenses thereof pad of this application be paid out of the assets of the said association.
And your petitioners will over pray, etc
(Signed) Thomas Planing, Invercargill, flcumlller;
William Ronald, We.iani.on; Janes Young, Wright's Bush;
A dan Drysdale, Myroes Bush; Miliar Lolng Kerr, Otersaika;
George H'Laod, t'alaniwa; Thornes Kirkpatrick, Walrlc;
Richard Janos, Otautsu; Robert Baird, Lines toco Plains -fairer
Having carefully absorbed the occon t rlclties of the financial trmnaaotioiß recorded In the foregoing chapters, the rec dcr will be In a fit state of Bind to forn b conclusion as to whether they, or rry of then, substantiate the charges, or pay of then, that irero preferred by the petitioners.
105.
Next in order come the affidavits that were filed. They were not very material to the precise issue before the Court, but they are none the lose interesting and deserving of room in this narrative. The reader must not be alarmed at their length, for they will repay perusal. Here is a summary
According to the affidavit of Thomas Fleming, flourmlller, Invercargill, he was visited on February 11, 1898, by V. K. M’Caughan of Melbourne, an intimate friend of J, 0. Ward, who said he had come from Ward to see if anything could be done to withdraw the petition to have Ward and Fisher prosecuted. He said that no doubt Ward had dona many illegal things, but that the matter had gone far enough, and it was no use going further with it, and he (M'Caughan) would pay all the costs out of his own pocket rather than it should go on. He also said that he was financially interested in, and had lent a good deal of money to Ward and that Ward had already apologised for his attacks on Fleming. Fleming refused on his own account to entertain M'Caughan's proposal to have the petition dropped, hut after a good deal of conversation and a strong appeal by M'Caughan, Fleming said that, while totally objecting himself to do as proposed, he might perhaps meet some of the other petitioners the following day, and, if so, would submit M'Caughan's suggestions to them, but that all the petitioners must be consulted and agree about the matter.
After M'Caughan left, Fleming jotted down for hie own recollection, and in the fora of notes, a nemo, ae a record of the suggestions made. At a later interview Fleming referred to these notes, end M'Caughan asked for the lean of them. This was refused, but after considerable pressing by M'Caughan, and on M'Caughan promising on his honor to return the notes at o-.ee, an on Fleming’s partner saying he might trust M Caughan, the notes wore handed over.
Very shortly afterwards M'Caughan returned, and said
106.
handed the notes to Ward, who had promised to return them on Monday morning. These notes were not returned as promised on the 15th, but M'Caughan brought him a note from Ward. Fleming read it and saw it was all a piece of trickery between them, end said that he would have M'Caughan arrested for his conduct in keeping, or making away with, the notes, but M'Caughan said he had done all he could to get them returned.
The notes were, Fleming believed, to the effect that a public apology should be made by Ward for his attacks on him., anl, that all costs should bo paid by Ward, and that no action should bo taken against those who had signed the petition. Fleming had been informed and believed that some of the petitioners had been threatened with, and that Ward openly stated his intention of bringing, an action for £15,000 damages against all those who had signed the petition, unless the natter was dropped. Fleming believed that the notes were obtained froa him, and shown or handed to Ward, by deceit and trickery.
Attached to this affidavit was a letter from Fleming to M'Caughan, stating that the notes taken away were not in 'any sense a proposal as construed by Ward, and asking for their return.
Fleming’s story was corroborated by the affidavit of Peter tindsay Glikinson, to the effect that
On February 11, 1899, Fleming (his partner) showed him soma private notes or memoranda ha had made relating to the Ward Fanners' Association, and to an interview he had had with M'Caughan; that on February 12th he (Gllkinson) entered the office of his firm at Invercargill and there found his partner and M'Caughan; that his partner told him that M'Caughan wanted to obtain from hin the said notes, and that he strongly objected to hand them over, as they were evidently private. M'Caughan urged Fleming to lend then to him and said he would return them, but Fleming still objected until he (Gllkinson) suggested that as M'Caughan hod promised on his honor to return them, Fleming might trust M'Caughan.
107.
Then there was an affidavit by J. 8, Ward stating that - the following writing was handed to him by M'Caughan, in Invercargill, on February 12th, in order that ho might reply to it, but he had not taken any notice of the same, and further stating that the handwriting was that of Thomas Fleming:-
"I.Public apology of anything J . 3, Ward had said against reputation or character. 2. All and evory expense whatever, in connection with this prosecution, also examination. 3. Nothing whatever will be withdrawn until the points have been satisfactorily settled, and moreover, it will be on the distinct understanding that the other shareholders who have signed agreed to it. Our position would be prejudiced by withdrawal and failure to proceed and all righto of action against the petitioners arising out of tho petition, or the filing of the same, to be abandoned by Mr. Ward."
And a second affidavit, also by J. 3. Ward -
That on February 12th. P. K. M'Caughan, of Melbourne, cam© to him at the Invercargill Railway Station and asked him to look at a paper which he then produced and said Thomas Fleming had given him to submit to Ward, and which he (Ward) believed to be in Fleming's handwriting. It indicated the terras upon which the petition would be withdrawn by Fleming. The terms were that he (bard) should make certain public apologies, and pay certain monies and expenses. M f Caughan said he was authorised by Fleming to make such a proposal, tmd the proposal was made to him (Ward) by and on behalf of Fleming, Before ho (Ward) had time to consider reply the train started, and ho retained the paper in his. On February 15th he wrote a letter to M'Caughan, and he was informed and believed that tho letter was handed by M'Caughan to Fleming. He(Ward) never at any time requested any person or persons to ap. the petitioners, and although the paper had been demanded from him by M'Caughan and also on behalf of Fleming, he deemed necessary for his own protection, and in the interests of justice, that the same should be brought under tho notice of the C
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Then there was the affidavit of W. J. H. Hall, solicitor, Invercargill,.
That one Kirkpatrick (another petitioner) asked him If he was liable for the costs of the prosecution, as Fisher and others were telling him he would he, and wanted him to withdraw; that Hall replied that the petition asked that the costs come out of the assets, whereupon Kirkpatrick said he was satisfied. That Hall was Informed by one James (another petitioner: that Thomas Pyper (a director of the Ward Association) had threatened him and another petitioner that Ward had gone to Dunedin to Issue a writ for £15,000 damages against all the persons who had signed the petition, and that unless they withdrew their names by a certain hour It would be too late, and that no notice of any desire to withdraw from the petition had been given to him or to his firm by any of the persons signing the withdrawal.
There was yet another affidavit by J. 0, Ward stating -
That he had been Informed of the sworn statements made by Thomas Fleming and that he denied ever having directly or Indirectly authorised or requested M'Caughan to Interview on hie behalf, or aa his agent, Thomas Fleming or any other person In connection with the present application or his affairs. He also denied that he had ever been or was at the tine Indebted to M’Caughan In any sum of money. Upon being Informed of Fleming's statements ho cabled to M'Caughan In Melbourne that Fleming had filed an affidavit that M'Caughan had represented himself aa hie (Ward's) agent, and had also obtained the memorandum from Fleming by trickery. To this he had received a cablegram from M'Caughan denying that he had in any way acted as Ward's agent, or that he obtained Fleming's memorandum by any Improper means. M'Caughan*s cablegram could be produced to the Court. With reference to the sworn statements of Fleming and Hall, he denied that ho had ever threatened or authorised any person to threaten any of the petitioners with an action for damages; neither had he solicited, or authorised any person to solicit, any
109.
of the petitioners to withdraw from the present proceedings. He had given instructions, upon information then only recently acquired, tc proceed against Fleming and Gilkinson for fraudulent misrepresentations made by them to him in connection with the sale of the Hokonui Coal Company (which he had originally purchased from them) but he was advised that he should refrain from so doing at that time in order to prevent even the suggestion that he was bringing pressure to bear upon then to withdraw the proceedings.
The following is the exhibit referred to in the above affidavit as a cablegram from Melbourne -
The Hon. J. G, Yard, Invercargill
If Fleming asserts I obtained letter by any unfair or unworthy means, or that I acted as your agent or in any way represented you, I must pronounce both as absolutely without foundation; in fact I will publish details of the whole matter.
You can make any use of this.
Melbourne, February 22nd. .
M'Caughan
The gist of all this hard swearing and counter-swearing is that, according to Messrs. Fleming, Gilkinson and Hall, there was a deliberate attempt made *irst to cajole and afterwards to intimidate the petitioning shareholder., into an abandonment of the proceedings, which allegations were stoutly denied by Mr. Ward, who offered to the Court a telegram from Mr. M'Caughan (‘the mysterious man from Melbourne”, as he was described at the time; denying Mr. Fleming's assertions. The value of Mr. .M'Caughan's denial as evidence - was not considerable, as it was not made on oath. As to the sworn testimony, it is clear that either Messrs. Fleming, Gilkinson and Hall were swearing to what were not facts, or Mr. ward was. reader will be able to accurately weigh the probabilities.
We will now pass on to the fate of the petition itself, and, in doing so, touch as lightly as possible upon any features in the g arguments that occur to the writer as likely to help the student to an understanding of the iituatlon.
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Counsel for the petitioners "aid he petition was net that of the liquidator but of the shareholders and con. rrbu .-.es, ■' said:
"We have been deceived by criminal acts on :.he part of persons who professed bo represent us, and we ask the Court to direct its officer to prosecute. Xf there are free assets, we ask the Court to order the costs to be paid out of such free assets; if not, then we wish an opportunity of indemnifying the liquidator against such costs within a reasonable time.
Section 228 of the Companies Act in force in this colony is similar in term to section 167 of the English Act, and says:
“Vhere any order is made for a winding-up of a company by the Court, or subject to the supervision of the Court, if it appear in the course of such vrindLing—up that any past our present director, manager, officer, or member of such company has been guilty of any offence in relation to the company for which he is criminally responsible, the Court may, on the application of any person intereE ed in such winding-up, or of its own motion, direct the official liquidator or the liquidators ;as the case may bo) to institute and conduct a prosecution and prosecutions for such offence, and may order the costs and expenses to oe paid out of the assets of the company."
Counsel contended that unde; this section it was the duty oi t.-.e Court to direct the liquidator of the Sard Association to institute -nd conduct a prosecution either
(a) at the expense of the Association's assets, or
(b) at the expanse of the petitioning sh:--rahc.tders. upon their entering into a satisfactory indemnity with the liquidate’:.
Counsel submitted that it was the more the duty oX the Court to take ea order one way or the other, because N Ze:-'. ait was :.u tjio ancmalou:' r-ooi tci' of having no Public Prosecutor In England lb is the duty ’ -■ at ' to institute proceedings In criminal cases rhereas in this colony, r pointed out by Judge Williams, under t.iie regulations no:. -., u:.. or or. toe Criminal Code end still in force, it' a person, b" charged with an off ones,- ■■
Ml.
Crown Prosecutor may or may not take up the matter at the preliminary stage. "It Is always open, said His Honor fox- the Crown Prosecutor to do so, tut "unless that is done the party who institutes the prosecution has to pay "the costs up to the time the person accused is committed ty the magistrate. "After that, however, in certain classes of offences the nrosecutiou is carried on by the Crown, and this class of offence is one of those in which the "prosecution would, under ordinary circumstances, be carried on by the “Crown in the event of the magistrate committing for trial.”
The reader will carefully note the significance of the words that are italicised: they seem to the writer to convey a strong hint that the Crown would be morally bound to take up the case if the magistrate committed, yet almost in the next breath His Honor said: “It is open for the 'Crown Solicitor or the representatives of the Crown at any time after Jonmlttal, even though the offence is one which, under ordinary circummances, iould be paid for at the public expense, to notify the parties that the "Crown will not conduct the prosecution but leave the parties to bear the costs
If this be the state of the law in New Zealand (and there can, perhaps, be found no sounder exponent of our laws than Mr. Justice \ti_liams), then it is remarkable, for it practically means that however etronp the prima facie case upon which the magistrate commits, may be the (which, of course, signifies the Ministry) can always virtually decide as to who shall be punished and who shall go unpunished. According to .vdge Williams it has the power to "leave the parties to bear the costs 1 of the initial and inexpensive proceedings in the Magistrate s (.ou_b, of the subsequent costly procedure in the Supreme Court.
At this stage the logic of Counsel's argument will he readily grasped. He said: there being no Public Prosecutor; ‘-h- onlj to an order of the Court, as prayed, was that a private individual should an information. This would, of coarse, have meant that -.he person layin,, the information would not only have to personally beer the costs o- uhe p oeedings in the Magistrate's Court but, if a committal followed, he Jigh. have either to incur the expense of the ulterior proceedings, or auaidon
112.
The Crown might step in and say: "You have proved a prlma facie case and we will take up your cause", or they might say: "be decline to take up your cause you may go on with it yourself if you please. As to what would have happened if an information had been laid, say, against Mr. hard, the writer would not care to venture an opinion. This much, however, is clear - that the criminal law, as expounded by Mr. Justice Williams, might, under certain conbingencies, prove very defective in bringing criminals to justice.
The first question considered by the Court was - Should the official liquidator be directed to prosecute? Counsel submitted that there could be but one answer to that question - yes. The offences were of two kinds -
(a) The publication of false balance-sheets and reports.
(b) The falsifying of the books of the company from which those balance -sheets were prepared.
Counsel quoted in argument the case of the Northern Counties Bank, in which Mr. Justice Chltty refused to grant a similar order on the ground that no I evidence had come before him establishing a prlma facie case of guilt. All that judge had before him was an affidavit of the liquidator that he believed a conviction would ensue. In the present case, however, there could be no question as to whether the evidence was sufficient to establish a prlma facie case. As Counsel pointed out to the Court, there was overwhelming proof that not only false, but deliberately false, balance-sheets had been uttered, and that the books had been glaringly falsified. The facts had come before His Honor, said Counsel, several times in his judicial capacity and Els Honor had already had an opportunity of expressing his views upon those very balance-sheets. Counsel then dealt with some of the offences committed but the reader is familiar with them all, so that there is no need for recapitulation.
Up to this point the narrative has covered the first question - whether or not the Court should direct its officer, the liquidator, to prosecute: the next question was whether, if such.an order was granted, the costs were to come out of the assets, or be defrayed by the petitioning . shareholders and contributories. 1010- reader's attention was drawn at the
113.
commencement of this chapter to Judge Williams 1 judgment affecting an application in another matter which was based upon the liquidator's statement that there were not sufficient assets to meet the debenture-; which were a first charge; His Honor sp.id; "It now turns out that the assets and uncalled capital will not realise sufficient to pay the "debentures, and that there will be nothing left for the unsecured creditors."
This judgment, as has already been stated, was delivered on the same day that argument was taken on the petition for a prosecution, namely March 8, 1898. But, although, there were still strong stiggestions put forward that there were no "free" assets - that Is to say, assets that were not mortgaged - Judge Williams towards the conclusion of the argument elicited from the liquidator that when he told his counsel that there was plant which would bring £lOOO and profits of the business £l5OO he had “made a shot at it" - the profits "might be more and might be less;" he could not say whether there were sufficient free assets to pay „he costs of realisation, examination and liquidation, because he did not know wjat were the free assets.
The liquidator's seeming Ignorance on this second occasion c the position of the estate is in narked contrast to the specific statement that appears to have been made to the Court on the first occasion referred to at the beginning of this chapter and which drew from Judge Williams the emphatic remark - "It now turns our, that the assets end uncalled capital will no>. realise sufficient to pay the debentures, and that there will be nothing left for the unsecured jereditors. "
The liquidator's application was made only a for days before ohe shareholders' petition came on for hearing - say at the commencement of March 1893 - and was in fact heard on the same day; let ns non see nha.. the Position of the Ward_Aasoclation liquidation was about a yeer previously . hen toe liquidator made his application to the Court for power to make a oalj of P er share upon the- shareholders, namely m Aprtl v 897 Her„ a--extracts from the affidavit of the liquidator (Mr. V, R. Cook) on tn t r ’'caslon:-
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Claims allowed, including £20,000 of debentures held by Colonial Bank, which carry interest _ at 6 per cent £32,069. 6. 7
Estimated expenses of liquidation z,500. 0. p
Hib uixntt ocu i : 34,569, 6. 7
ww ~ • ' Claims not yet adjudicated upon 62,461.15. 4
Total I.U
The assets are thus stated:-
Cash In the Bank of New Zealand £24,746. 8. 6
Value of stock and plant in hand, estimated to realise 1,900. 0. 0
Book debts, estimated to yield 20,000. 0. 0
In addition, amount which, if not allowed to be operated on by the official liquidator would still go in reduction of liabilities - viz., bank balance, "trust" account (£4 987. 3. 5), and bank balance "special" account (£3,599.16.2) 8,5_86.19. - 7
55,233. 8. 1
Value of the coll on shares at £4 per share, estimated to yield 8,450. 0. 0
£63,683. 8. 1
The Colonial Bank liquidators were supposed to hold £30,000 of first mortgage- debentures of which £20,000 appear to have been actually subscribed for and £lO,OOO given as security for past advances. Seemingly the Association's liquidator had allowed the £20,000 claim at the date of his affidavit but was holding the £lO,OOO in suspense. Assuming, however, the worst from the unsecured creditors' point of view and that the Colonial oank had a first charge of £30,000 over all the assets, even then, adding £2500 for the liquidation costs which would also be a preferential claim, there would seemingly be a surplus of free a,ssets amounting to £63,683 minus £32,500 = £31,183. That £31,183 should seemingly be available in April 1897 over and above the preferential claims and that there should be only perhaps "£lOOO from plant and £l5OO from profits" in arc! 189E without any dividend being distributed in the meantime, is indeed remarkable.
But it may be taken for granted that there were free assets, and very substantial free assets, out of which the costs of the preliminary stage of a prosecution could have been paid had the Court granted the order petitioned for: moreover -the costs would have amounted to a mere song - perhaps £5O for one or two days. The case was so clear that the evidence
46,646, W. §
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for the prosecution would have been very short. But Judge Williams decided not to grant the order petitioned for, on the ground that it was not equitable that the creditors' money should be utilised for the benefit of the debtors - the shareholders. His Honor, in the course of the judgment, referred to the English case in re Chas. Denham i Co. Ld., in which the application was granted, although it was opposed by creditors to a considerable amount. In that case, however, the Court was satisfied from the relations which existed between the opposing creditors and the alleged delinquent, that the opposition arose not from a desire to save the assets but from a desire to protect the alleged delinquent. Conversely, therefore, His Honor found that the opposition of the liquidators of the Ward Association and of the Colonial Bank (the only opposing creditors) was not to save the delinquents, J. 0. Ward and John Fisher, but to save the assets. Although Judge Williams doubtless considered there was no connection between the two cases, it is on record that both the liquidator of the Ward Association and the liquidators of the Colonial Bank gave all the weight of their support to the offer of Messrs. A, Lee Smith and J. B, Held, of June 5, 1896, to buy the debts of the Association and of Mr. Ward to the Colonial Bank which was described by His Honor as being "in effect an offer of hush money.
Aa. to the petitioners' prayer that the Court would order the,liquidator to institute a prosecution at their own expense, Judge Williams refused it, saying: "A similar application had never, so far as he could find, teen made in the English Courts .during the 35 years that the English Act ted been in operation," His Honor declined to accept Mr. MacGregor .= Interpretation of section 228 of the Companies Act, which reads: ‘The Court may, on the application of any person interested, direct the liquidator to institute and conduct a prosecution or prosecutions ,or 'One offence, and may order the costs and expenses to be paid out of assets of the company."
Mr. MacGregor contended that the meaning was two-fold, -o , 59re 11 aot so, there would be no reason for the repetition of the word
lie.
"may* (which was disjunctive) in the second clause;* and that the Court had Jurisdiction under the section to order the liquidator to prosecute a' at the expense of the applicant, or (b) at the expense of the company's assets.
The reader has been ‘taken through a lengthy and of necessity somewhat tedious chapter, but on© not entirely devoid of interest to the student It is the last but one in this romance and may be said to have virtually sealed the safety of Mr, Ward from the "persecution and conspiracy" of these who were "hounding" him into obscurity. Had the result of this petition been different and had Mr. Ward been prosecuted and had he been convicted under the penal clauses of the Criminal Code, the effect upon his career would necessarily have been disastrous and New Zealand would have been robbed of its brightest political star, for clauses 8 and 9 of the Electoral Act 1893 exclude from registration as electors (and therefore as candidates for Parliament) persons "convicted of any offence punishable by imprisonment for one year or upwards,"
Here are the penal clauses referred to:-
Section 234 -
"Every one is liable to seven years’ imprisonment with hard labour who, being a director, manager, public officer, or member of any body corporate or public company, with intent to defraud -
!• Destroys, alters, mutilates, or falsifies any book, paper writing, or valuable security belonging to the body corporate or public company: or
2, Makes or concurs in making any false entry, or omits or concurs in emitting to enter any material particular, in any book of account or other document, **
Section 235 -
Every one is liable to seven years’ imprisonment with hard labour, who, being a promoter, director, public officer, or manager of any body corporate or public company either existing or intended to be formed, makes, circulates, or publishes, or concurs in
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making, circulating, or publishing any prospectus, statement, or account which he knows to be false in any material particular -
1. With Intent to induce persons (whether ascertained or not) to become shareholders or partners; or
2. With intent to deceive or defraud the members, shareholdres, or creditors, or any of them (whether ascertained or not) of such body corporate or public company; or
3. With intent to induce any person to intrust or advance any property to such body corporate or public company, or to enter into any security for the benefit thereof."
118.
Chapter XV.
Fortune's Favors.
How fickle Fortune is; her smiles
Are fleeting as the winds that blow:
They come; they go, at her command.
Of nature frail and mind unknown.
bet no con trust her.
The reputation which "Pair Portuna" has - earned for fickleness of character is world—wide. Perhaps there is no lady , either substantial or mythical, who has come in for more “blessing or curse whiche’er it be" than she. Dike others of her sex, she has her likes and dislikes. She enriches those who win her smiles: she withers those who make her frown. Her principles have been the talk of mortals from the commencement of history, and the prudent man might do worse than accept the writer's warning at the head of this chapter.
Fortune's lucky bag is spacious: it carries prizes of immense value and they are many in inumber, but there are also many blanks. This fashionable goddess has countless worshippers at her golden shrine, and the utter want of discrimination which she persistently displays ( so unlike her sex as a rule) has been a popular theme for writers of poems and prose for centuries past.
So marked, indeed has been this eccentricity that it has become a question whether the lady is any longer entitled to the pet name of “Pair Portuna". However, with yet riper ape ( though even now she would not be taken for 55 in the dusk with the light behind her"), the world cay itness a change in her disposition. Meantime, let us resume this romanc» &*- its last chapter, and see what befell some of the characters who hcve figured in its pages.
Mr. William Watson, late Inspector of the Colonial Bank, was appointed by the Government, President of the Bank of New Zealand, at a salary of £2250 a year, with a power of veto over the Directors of that State institution, which power he used, with conspicuous judgment - foremost among his efforts on behalf of the Colon) being
119.
aJ ances of £20,000 and £5,000 to the Ward Farmers 1 Association. Public opinion eventually compelled Parliament to remove Mr. Watson from his exalted position, but not before he had sent a circular to members intimating that he possessed a knowledge of circumstances in regard to certain accounts specially legislated for by Parliament that he could not previously divulge (he was fined by the House £5OO for his refusal), but that he then had no objection to divulging. Mr. Watson was soon afterwards bought out of his "ten years during good behaviour" contract for the sum of £4,500. He had at that time been President for about four years. Here is the little bill that the taxpayers had to foot:-
Pour years at £2250 £ 9,000
Compensation 4,500
£l3, 500
But with his Oriental experience Mr. Watson was cheap at the price. The colony has fortunately not entirely lost his valuable services, for, on vacating the Presidency, he was appointed a director of the State Bank, and is one to this day.
Mr. Henry Mackenzie, late General Manager of the Colonial Bank, was appointed General Manager of the State Bank soon after Mr. Watson migrated thither, and under circumstances already described. He also was subsequently retired under pressure, and is now adorning London society and giving the great commercial centre the benefit of his Oriental training and general financial experience.
A. Birch, late manager of the Colonial Bank at Invercargill* was appointed Manager of the State Bank at Timaru, presumably owing to his special knowledge of oats transactions, and his ability as R correspondent. His present camp is not known to the writer, tut he should prosper.
Pisher , the former manager of the J. G. Ward Farmers* Association, drew a blank from the lucky bag (in this colony at any rate), perhaps because, according to the sober Otago Daily Times ( leading Wide, November 8. 1897, > he was ’’a young and inexperienced man.
135
Mr. John Fisher was last heard of from somewhere in Australia, whither, no doubt, he journeyed Japhet-like "in search of a father" to look after him.
Mr. Hugh Carswell, whose business the Ward Association purchased, became a valuer in the Advances to Settlers Department of the Government.
Mr. John Hayes, the former manager of the Hokonui Railway and Coal Co. was appointed an Inspector under the Mines Department of the Government.
Mr. W. J. M'Keown, late canvasser for the Hokonul Company,was gazetted an Inspector of Factories under the Government.
Mr. A. Lee-Smith, one of the two whole-hearted friends who tried to buy the debts etc. of the Ward Association and of Mr. Ward to the Colonial Bank for £20,000 less than they have been proved to be worth, has been honored by a seat in the Legislative Council. As to the offer to compromise, the following, reserved until now, will be a bon bouche for the reader:-
Dunedin Supreme Court - June 5, 1896 -
Mr. Woodhouse (counsel for the proposed purchasers - Messrs. A. Lee-Smith and J. B. Reid): "The position of the purchasers was this - they arrived no benefit whatever from the transaction. What had been said by Mr. Ward was perfectly true. What they were doing was a matter of friendship to Mr. Ward in the hope of being able to put the Association on its feet again."
His Honor: "Do you mean to say that these gentlemen are going to pay £62,000 without any hope of getting anything for it?"
Mr. Woodhouse: "They hope to get £62,000 again, but they do not expect to get any profit."
His Honor: "To pay £62,000 out of friendship without any hope of profit - astonishlngl If it is so it is the oddest thing I ever heard of, but X suppose it is a business transaction, and they hope to make something out of it."
Mr. Woodhouse: "X repeat that they do not hope to make any profit for themselves."
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Mr. Young: Then for -whom do they make it?”
Mr. Voodhouse* “For the Vard Association."
3ut a draft ninute in Mr. Voodhouse's handwriting and which was produced in subsequent proceedings in the same Court showed clearly the,t £32,000 o-f the Association's debt to the Colonial Hank, proposed to be purchased, was to be applied to the amount unpaid on Mr. Ward's 8000 shares; Mr. hard was therefore to have benefited to that extent under the proposal; £6OOO was to be paid to Messrs. Smith and Reid, and those gentlemen were to be elected Directors and joint Managing Directors of the Association.
By a remarkable coincidence the secretary to the Association removed the leaf embodying the original minute from the minute book. The reasor assigned by the secretary for his act was that Messrs. Smith and Reid asked him if he would send them a copy of what he had entered on the minutes. He did so, and they wrote back that there was a mistake -"that it was open to inference that they were to get £6OOO for doing the business, for which they were to get not a solitary cent." This, be it remembered, was after they had sworn that they did not benefit.
'Hie secretary then appears to have "altered the minutes in accordance with the request of Messrs. Smith and Reid," although they had no connection with the management of the Association; and his method of alteratic to tear out the leaf in the minute book without reference to his directors, notwithstanding the fact that the minute, as drafted by Mr. WDodhcuse, ended thus:- Moved by Mr. Green and seconded by Mr. Baldey, That the offer of Messrs. Smith and Reid be accepted ’’
Nevertheless, although the agreement under which Mr. Ward was to oeneflt to the extent of £32,000 was drafted but a few days before t-e application to compromise the fob" wing took place in Court.-
Mr. Woodhouse (examining Vlard):- You have nothing to do *ith any arrangement they (Messrs. Smith and Held) make, and get no oene fit from it?"
Mr, VJard:- "None whatever.
122,
The Hon. J. G. Ward, ex-managing-director of the Ward Farmers 1 Associate after his chequered experiences, found a haven of rest in the combined positions of Colonial Secretary, Minister for Railwaj and Postmaster-General, and was eventually recommended by the advisers for Imperial honor. Accordingly, on June 1901, at an investiture held at Government House, Wellington, His Royal Highness the Duke of Cornwall end York, by a touch o magic sword he was transformed into
SIR JOSEPH GEORGE WARD,
KNIGHT COMMANDS! OF THB MOST DISTINGUISHED ORDER OP ST. MICHAEL AND ST. GEORGE.
Strange to relate, the landing of the Royal couple was .unexpectedly post for a day; but for this delay, the most striking of all the coincidences dates would have arisen, for the knighting of Mr. Ward would have occurr exactly five years after Judge Williams 1 judgment was delivered - June 1
My pen is at the bottom of a page
Which being finished, here the story ends;
‘Tis to be wished it had been sooner done,
But stories somehow lengthen when begun.
Byron.
IZS
APPB H D J
THE COLONIAL BANK TRAGEDY.
Chapt r 1.
A Sea of Doubt.
Ambition is no Exact Calculator - Burke,
This work could not claim to bo complete without a history of the defunct Colonial Bank of Now Zealand - an institution founded in 1074 by P, "Pro visional Committee" of eighty one of the leading Colonists of the South Island with the following laudable object amongst others:-
It will bo the chief ala of tho Promoters of this Bank to aid and conserve tho interest of the whole community in the Colony and tho laboring classes will have' -fair treatment and support from the Colonial Bank"
Had the destinies of this unhappy Bank remained with tho Promoters, the shareholders of today might not have had to bemoan their wretched t-< fate, and there might have been fewer ruined fp-cllloo and penniless widows and orphajis in tho Colony.
But instead there was appointed " Gen oral Manager, of high professional standing, to guide the operations of the Bank, with a Board of qualified Directors elected to advise with the General Manager .
What irony there is in all this)
but to proceed with the prospectus - "Ad e. thoroughly Colonial Institution the Promoters have much pleasure in strongly recommending tho Colonial Bank of Ho;, Zealand to tho support of all colonists having the real welfare of Row Zealand at hj ;art. Such an Institution is wanted at the present time • • ..as on investment for tho savings of the People and as a useful Bank .
''bother the Colonial Bank ..as wanted In 1874 or not, to ere can bo no doubt but that it was very much wanted later on by certain speculators demonstrated their appreciation of the Prompters’considerate foresight by Providing practical proof that it was a r»ally " useful bank .
m,
The prospectus winds up by saying It is certain that no el®n ar Institution has ever yet boon launched in the Southern Hemisphere under better auspices".
The auspices nay have been good, but what can be said of * The General Manager of "high professional standing" and the " qualified Directors"?
The facte and figures that follow will supply the answer.
Little did the Promoters of the Colonial Bank dream that their efforts to establish It on an honorable and lasting basis, would be fruatrated, hut they never, of course, imagined that its helm would fall Into the hands of men such as those who shaped its course during the latter half of He comparatively short, though decidedly eventful, voyage.
Any student of this work, or indeed anybody who has followed Colonial hank natters since the Bank went Into liquidation at the end of ■f*P, will wonder how those who are responsible for its management ccv.ld advance ( ldS.OOO out of a capital of £400,000 to the Hon. J.G, »ard ar.d Ms group of companies, which generosity has resulted in the . hareh,-' here of the Bank losing, on these accounts alone, about £lOO,OOO, >' ag one fourth of their paid up capital.
to stretch of the imagination can conceive a state of things ... . t c i.stify a banter taking a risk of this kind, for it la quite »■ «»... >nt "Ton the cutset, .rose particular advances sere never ad- ... ... . • c- erw atprcilnately secured, and were never lx a liquid font.
Ptwo be tr.-.m testimony of two of the Bank's directors - tie ’ 1 Pevnclde and the Hoe V.J.M, Lamach, C.K.S - it must have been • * ’ edge ,-f all the directors, for sons rears prior to tie clos’d ■ ta> i • rw rs, that heavy loes on the hard group of account* ■ ’ e- '*a ' the "ace nevertheless those accounts were treated up . ... . . pe-rfertir pooc and safe sc far as the balance- sheets of f»e, Mr d\vldnnds continued to be distributed in the - *-*■ ■ ■ . ...
... .... ...... ■.bout, Tor a cause of this peculiarity, °®* ' 8 • to whs: the relationship of tap Hoe. J.S. ■ .... -..a ,v <h. : arc th« following questions sugge»-
140
1. Was th? relationship intimate and, if so, did the Bank officials 'slosettheir heads under the intoxicating Influence of a Cabinet Minister's connection?
2, Did the Bonk officials accept all the Hon. J.G. Ward's geese as swans, and did they ever take any real trouble to put the swans to the test?.
3. Did the Bank officials regard the Hon. J.G. Ward as a veritable " Wizard of Finance" destined not only to make him own fortune but their fortunes also’
Was the Bank running the Hon. J.G. Ward, or was the Hon. J.O.
Ward running the Bank?.
These questions are capable of being answered by the interested parties only - others can only resort to conjecture. It seems reasonably certain, however, that the Hon. J.G. Ward was practically running the Bank, or at any rate, nearly one half of its capital spread over himself, and his group of companies.
• The drain upon the Bank's treasury appears to have dated back to long prior to the floating of the J.G. Ward Farmers' Cooperative Association, United, for the facts and figures set out in the earlier chapters of this work leave little room for doubt as to whether th 9 floating of the Association had the effect of relieving end was intended to relieve the private account of the Hon. J.O, Ward with the Colonial Bank.
If, therefore, the underlying motive for the launching of the Ward Parsers' Association wan to relieve the Hon. J.G. hard s private account, i 8 evident that, so far back as 1892, the Bank directors were apprehensive la regard to the safety of their advances to him which at that time amounted to the respectable total of over £ 81,000.
126.
Chapter 11.
The end of the Voyage.
Strokes of calamity that scathe and scorch the Soul -W.lrvi n g
me remarkable career of the Colonial Bank was closed by the sale of its business to the Bank of New Zealand under an agreement between the two Banks dated iSth, October 1895 which was ratified by the Banking Act of that year ( passed in one sitting on 25 October ) and confirmed by the shareholders of the Colonial Bank on 8 November following.
Before considering the terms of this singular transaction, it is as well to review the position of the Colonial Bank as disclosed by the balance- sheet made up to 31 August 1895 ( which formed the basis of the agreement between the two banks ) and by the directors* report.
The paid up capital of the Colonial Bank was £2 per share on 200,000 shares £400,000
The Reserve Fund was stated at 65,000
And the Undivided Profits ( so called) at 19,980
Excess of Assets over Liabilities - £484,980
The Bank of New Zealand paid for the goodwill of the Colonial Bankas business £75,000
Amount of various adjustments between the two banks. 6,972 81,972
£566,952
Deducting from this -
(a) Amount written off Colonial Bank furniture and stationery £ 3467
(b) Amount paid for Colonial Bank officers * salaries 2,113
(c) Cost of liquidating Colonial Bank 17,631 & 25,211.
there remains a sum of £543,741.
which should have reached the pockets of the shareholders assuming that the balance sheet was accurate. This is equal to £2:14:0 per share, but the shareholders have only received 11 / If per share (including a final dividend) namely a total of £111,454
Total Loss sustained by the shareholders of the Colonial Bank £432,287
127.
This result is confirmed by the report of the Official Liquidator (The Official Assignee at Dunedin) which was delivered to the Court in February 1905. The figures will not therefore, admit of contradiction.-
It is clear that the unfortunate shareholders' capital of £400,000 has more than entirely disappeared.
The shareholders* accumulated funds having reached a total of £484,980, as shown by the balance- sheet to 31 August 1895, let us pass on to what the Directors had to say to the shareholders in regard to that balance- sheet, and the position generally.
The balance-sheet in question was signed
"Goo. Me.Lean, Chairman
Mackenzie, General Manager and the report was signed
“Geo. M'liean, Chairman" -
The report said:-
“ The not profits for the half year, after deducting mont, rent, etc, amount to ..12,935.11.
To this has to bo added 700;15: 6 Balance from last half year - »
£21,636: 6: 8
And there must be deducted Land, Income and Note 656 . 3; io. Tax - r~!~r r>. i n
N £l9 980: 2:10 Leaving available
. . aB a whole, can only The statement abovw quoted, re that according to the balancehave been taken by the shareholders to mean . f ig 980 “available for sheet submitted with the report there was a su. - > appropriation.
The concluding words “ leaving available" were the word. t-ks when dividends were reased by the Directors in their previous report. ■fora only admit of one comuended and duly declared. The words, there , donrtructlon.
There was no actual recommendation for the pe 1896. ißßtead the Directors sald:-
143
Vending tho result of negotiations opened by the Bank of New Zealand for the purchase of this Bank as and from the 31st. August, 1895, it is not the intention of the Directors at present to deal with the balance, but to adjourn the General Meeting on tni* 25th September until a date in October by which time she wlehes of shareholders, as expressed at an Emergency Meeting, will be known .
There, again, the use of the words " at present to deal with tho balance" clearly implies, in the absence of any statement to the contrary, on intention on the part of tho Directors to "deal with the balance’in the same way as they had previously dealt with the balances" availsble" provided, of course, the shareholders declined to confirm the agreement that was then being negoclated between the two banks, and elected to carry on . -
Turning now to the "Profit and Loss account" in the balancesheet under notice, tho following is found -
"Gross Profit for Half year (after making provision for Bad and Doubtful Debts, Interest paid and accrued on Fixed Deposits and Rebate on Bills Current) amounts to £35,773“
Thus according to the' balance-sheet signed by tho Hon. Georgs MaLean, Chairman, and Mr. Henry Mackenzie, General Manager., "provision for bad and doubtful debts" had been duly made. That was clearly the moaning of the words.
Moreover, His Honor, Mr. Justice Williams put the position concisely and clearly in his judgment of 28 February, 1896:-
" Tho 103 rd paragraph of the Bank's Deed of Settlement makes it the duty of the Directors, in making up the balance-sheet, to deduct from the gross profits of the half year, or to charge against tho Reserve Fund, not only all debts due to the Company which shall appear to the Board of Directors to be bad debts, but also all such as shall appear to them to be of a seriously doubtful character"
Now the balance shown by the profit and loss account 1b £19,980, the amount which tho Directors state in their report is ' Available". If it was available" at all, it could only be available after satisfying the requirements of the 103 rd, paragraph of the Bank's Deed of Settlement. Therefore the shareholders would naturally infer from the statement in the balance-sheet as to bad and doubtful debts that not only was thoir paid-up
capital intact at £400,000
but that they had a Reserve Fund of £ 65,000
and Undivided Profits £ 19,980
Total Funds to their credit £484,980
144
In a pamphlet issued by the Hon. Geo. Mc.L an in 1897, he psks the shareholders of the Colonial Bank and others to accept a most extraordinary statement from him in regard to the way in which the bal--Bjc- sheet to 51 August 1895 was prepared.
Having pointed out, correctly enough, that on that occasion the Directors omitted from their Report the usual formula " after making prevision for bad and doubtful debts" he adds
" I may mention that the omission from the report ought also to have occurred in the balance-eheot. The report wae prepared in Wellington and the Directors struck out the words, believing that such omission, and the omission of any recommendation as to profits, would be regarded as very significant of change in the position of the Bank, which would have to bo disclosed to shareholders if the negotiations with the Bank of New Zealand came to nothing"
If the Hon. George Me.Lean has derived any consolation from the owing of those weak, words broadcast among his conotltsonta, he may rest assured that they have not fallen on fruitful soil.
To expect nen of common sense to accept what amounts to a confession of wrong-doing as a salve to their wounds is like rubbing vinegar Into than.
The whole plea 1b evasive and ridiculous.
To cap matters, the Hon. Gao. He.Lean proceeds -
"The balance-sheet was prepared by the staff in Dunedin and they soeia not to have noticed the change made by the Director;! in the report and given effect to it in the balance-sheet
Ho. unfortunate it is that one part of this document was prepaid in Wellington and the other in Dunedin, and that it was left to the "huff in Dunedin to " Notice the change aado by the Director.. I
Surely such an important change in the policy of the should have been specially advised to the staff, but thin seemingly was not f and by oversightre we are tcld, the shareholders and in W shareholders were deceived into the belief that provision for bad and
130
doubtful debts had bean nad and that the divisible profits were an st-tod in the report and balanco-sbent, o many of them, no doilfct, wore indue- - to remain shareholders or to become shareholders by the creeping Into tt K balance-sheet of that little error about the bad and doubtful debt-- .
the But in advancing the story about ' bellinguon - Dunedin bang! as a reason for the deceptive nature of tho report and balance-sheet, the Hon. George Mo.Loan appears to have forgotten what Hr. Justice Killians co significantly pointed out - that the 3,--r.ki Deed of Settlement required tbi Blr-'ctors when making up the balance-sheet to provide for bad and doubtful debts. They therefore had no option in tho matter, and as they admittedly did not moke provision th .7 fail d to comply with th- Deed of Settle, nont, but the Staff would naturally assun. that they had so complied in the absence of notification to th.’ contrary.
Further, although tho balanco-shoet EP.y hav , been proparod ii Dunedin , does the Hon. George Me.Loan mean that the Directors did not hue i copy of tho balance-shoot before thou when they wore considering the report! If so, it is very singular.
But, in any case, wherev-r the balance-sheet was prepared and whoever prepared it, there is no getting away from tho fact that it, a- well as the report, was signed by the Hon, George Me.Lean, upon whom, an Chairman of tho Bank, must rest the responsibility of issuing a decaptive balance-shoet.
The Bank had resolv d on a. change of policy, so the Hon. Georg-. Me, Lean has written, and that chong; involved important alterations in tho report and balance-shoot. notwithstanding this he signed both documents and did net take the trouble to ;;o or von to enquire whether the change of policy had boon giv, n off.ct to in both documents.
This conduct appears to tin. w-lter to bo altogether incocpatiblc with honesty of purpose end he regards the whole story ic a story pure and simple - just another in itolaont of th- shufflings and deceptions practised by tho Bank in balance-sheet after balance-sheet.
It is almost amusing to rend how it always happened that the Hon. George Me.Loan was"ln Wellington at the time" all the bogus cheque end bill transactions wore carried through, and it is positively refreshing to cone across an admission such as this in his pamphlet.
Vdl.
Referring to one cf the thimble and pea transectlona, hj writ a:-
"Mr. Mackenzie nev * inform d . tho transaction, but 1 rone.uber saying to him in 'Wellington that I won-der,-a where- Ward had buried up the Bank account in his bal-nca-choet and expressed dissatisfaction at such a thing having bean done".
This was the 1894 balance-eht ,-t. Fhr burying-up process again successful In 1895, in npit- cf - the Hen. George cc.L ,n -.avln • et jetnd the trickery in the previous balance-sheet and in pint of his having "expressed dissatisfaction".!
The Hon. George Mo.Lean's way of -xpressing dinsatisfaction and th way that would - in ell probability adoptee by Cht-lmon of ‘ other banks are, no doubt, v.ry different, otherwise the Hon. J.G. Ward would had the opportunity of arranging that cable credit under which tho celebrated draft for 550,000 against phantom oats wan made to do duty as temporary overdraft reducer for the Ward Farmers' Association.
It is as veil hero to note what the Hon. 3 very c.L.;an had to ■ff.y in regard to the Bard Pam ro’ Association's account in his pamphlet which may be tontd hi. iefonoe:-
“ In r.plts of all the injunctions of the directors, th business of the Association whs net beet in bane, out extended nor* and core and the indebtedness largely increased. Speaking generally, this increase was brought about by deliberate and dote rained opera*ticas on the account in defiance cf the reiterated expostulations md threats of the directors. r. Ward wa ■- -r toned »ith dishonour Of hi W lls * ' ;Ild the Branch Manager at Invercargill -at t-r. dismissal To th<J uninitiated it uay seen easy enough to say stop the cheques and dishonor the bills To stop tho account at a tiue like this, noant to stop the u<r..: .
~ x ' ' ( p(j iiati fiit t. n l^ at sirongst <M>ul •' - j tine so completely threw. Mr t- ntacle» around the nd O.M
132.
money bags that they wore aa powerless to do thoir obvious duty as new born babes.
"To stop the account at a time like this meant to stop the Bank" Ifi'hat a confession to make and how fully it demonstrates that Mr. Ward was really running the Bank!
Havlng shown how the unfortunate shareholders of the Colonial Dank were deceived by what has since been admitted to be a false balance-sheet, wo will pass on bo another chapter in which the compact between the two tanks and its bearing on the balance-sheet win be considered.
Before doing so, however, let the following extract from the Hon. Georgs Me. Lean's "defence" apeak for itself:-
"It was ny duty to knotf the position of the Bank and X clearly recognise my responsibility in respect of such duty".
The honorable gentleman proceeds:-
"And I say at once that the business of the Bank was managed by the Directors during the whole time that I sac on the Board with absolute integrity of purpose, for the sols purpose of doing the very best possible for the shareholders’.
This plea of everything having been done in the interest of the sharoholders was the plea advanced by the directors of the City of Glasgow Bank, but it availed not in their case - neither can it avail in the case of the Colonial Bank directors.
To advance £168,000 out of a total paid-up capital of 3-.400,000 to practically one nan, and th n to own that to stop further advances to that nan meant to stop the Bank, can hardly, by any 'tretch of the imagination, be classed as " doing the very' host possible for the shareholders".
Very f>'w people could b:> found capable of seeing eye to eye with the Hon. George Me. Lean in this natter.
155.
Chapter 111.
The Bargain 1c Struck.
Thus they their doubtful consultations! dark ended - Milton
As narrated in the last chapter the Directors of the Colonial Bank, for reasons best known to themselves, resolved on selling their business to the Bank of New Zealand. Accordingly on 18 October 1895 the b«rgaln was struck which was to carry ruin to so many of th. less favorably circumstanced -hareholders.
The reader was made familiar in the preceding chapter with the apparently healthy condition of the Bank as disclosed by the balancoshoet to 51 August 1895.
This balance-sheet war- laid before th ah reholders at a meeting held on 25 September - not a month afterwards. The report which accompanied it, vjhilst referring to nugoclation ■ then proceeding with the Bank of Now Zealand, contemplated the possibility of the shareholders rejecting any agreement that night bo arrived at by the Directors provisionally.
Nothing indicating aught but a sound state of affairs wen even so much as hinted at, beyond the singular omission - from the report only - of the words relating to provision being made for bad and doubtful debts, which words, however, as has already been stated, wore allowed to r main in the more important part of the document, nanoly, the balance-sheet.
At this meeting the Directors, with the nano reckless disregard of their duty, preserved the buoyant tone of their report and balancesheet, and again gave no hint as to the disastrous condition of ...furwhich, by that time at any rate, was fully known to every one of thorn.
Less than a month later the contract for sale and purchase of tl Colonial Bank was oigned by
Goo Me.Lean )
V.'illlaa H. Reynolds ) Directors
«Vte Stewart
149
on behalf of the Colonial Bank and by
W. Watson - Government Officer
Walter V(. Johnston) Directors
Wn.Booth )
on behalf of the Bank of New Zealand.
As the Directors of the Colonial Bank have sought to defend themselves by alleging that the terms of this contract did not indicate the true condition of the Bank, and was one-sided, it is appropriate to quote from tho judgment of Hit Honor Mr. Justice Williams, dollvtrei in February 1896.
After analysing tho figures of the balance-sheet to 31 August 1895 in a masterly manner His Honor said:-
it follows that not only is ths capital originally subscribed Intact, but also the reserve fund and the balance of profit- and less - in short, tho entire £484,980. This, therefore, is the sum which, if the statements in the balance-sheet aro correct, night be expected, aft-r deducting any necessary expenses, ultimately to reach the pockets of tho shareholders if the business of tho bank were taken over as a going concern by another bank, and nothing at all given for the goodwill of the business. Ho person reading ths present contract could fairly suppose that it would work out so as to produce anything like such a result".
His Honor then summarises tho contract in tolling fashion thus;-
“Shortly, therefore, the purchasing Bank has, out of the total debts of £1,731,549 duo to the selling Bank, treated £102,274 as absolutely valueless, £98,333 so doubtful as to require an absolute guarantee on the part of the Colonial Bank, and £604,695 as containing such an element of doubt as to require £272,072 to be retained as security in respect of them. This is, of course, inconsistent with the implied statement in the balance-sheet that no part of the £1,731,549 consisted
135,
of bad or seriously doubtful debts. It is suggested that tho estimate is merely that of tho buyer and was over-cautious. That may be so, but the director;; nevertheless, by entering into the agreement, have to a certain extent made thnnaelv r parties to the buyers' estimate. If tho etatouonts in the balanco-sheot are correct they have nado a bad bargain. If they have raado a good bargain the balanco-v.h,et is delusive".
In his last two rent ncoa,the Judge presented a solution of the problem in a nutshell. Any Impartial reader the full judgment can gauge fairly correctly what wav passing in His Honor's alnd as to the accuracy or inaccuracy of not only the balanoo-sheot to el August 1895 but also tho balanoo-ohoete for years past.
It must be presumed that as non of conaon sense ( which they, of course, were ) the Directors of the Colonial Bank made the best possible bargain in tho circumstances, and it may also be avo-unod that the Directors of the Bank of Non Zealand did not neglect their own interests.
A bargain was, at any rate, struck. Both parties appear to have entered into it calmly and dolib .ratoly, and neither party should argue that it was seriously one- ided. It it wa , th. n the party claiming to have suffered by the exchange should not have concluded the bargain.
This conclusion scene to bo an obvious on;., and the Directors of the Colonial Bank - especially the Hon. CJ-orge lie.Lean, who has advanced this plea so often in his laboured efforts to screen him-elf and hlo colleagues from the consequences of their misconduct - "hould think it ovoi in solitude.
Have the. results of the wlndlng-up justified the claim of the Colonial Bank Directors?
Let ua go into the figures and r . 0 for ourselves.
The total advancer; to cu toaer; of the Colonial 1 cl b ? balance-sheet to 3 1 August 1895
£1,73*, 549 anounted to
_ a ov r for dayn which advances level-hoadcd non from both banks po e n ights at a stretch.
136,
. These gentlemen stem to have established the principle th tank-buelness-buying there arc four degrees of comparison sc f.-r t as custorers* accounts are concerned, nacoly.
"A" equals Good
"3" equals Doubtful
"C" equals Very Doubtful
*D* equals Bad
So the various accc unto naklng up the above total advancoc were ” after auch battling, deposited ultlnatoly in one or other of the four jv 0 . "Lists".
Many a customer of tho Colonial Bank speculated in 1895 as to nhei he was finally deposited after being tossed about within the range of the four lists and having all sorts of things said about hie and hir financial standing.
Some customers have, no doubt, gone on speculating to this day, it with little chance of their curiosity being satisfied, for by the Banking Act 1895 , took good care that no-ono - not oven a shareholder ol the Colonial Bank, in any law proceedings or otherwise - should have access to these lists. They are sacred lists, for do they not contain the Icc-y? to the real position of the Ward affairs which must never be revealed?
'Bhe 0 List was wholly composed of tho t ard group of accounts ant to that list wore appended - aric- du plclous tags -which have toon hinted at during law proceedings at various tlr.es and night, if a little l ore were known about then, furnish further proof of the falsification of the balancesheets, not only of the Ward Farmers 1 Association but also of the Colonial Bank.
Be this os it nay, tho representatives of the two tanka classed tl debts as follows:-
A £926,197 Good and taken over at 20 in tho £
604,695 Doubtful to the extent of £272,072 which was reserved.
98,383 Doubtful to tho extent of £55,233 t .-155,150 of which was written off to credit of Mr. Ward)
■ J 102,274 Bad find absolutely rejected by the Bank of New Zealand.
£l, 731,549.
Thus it will be seen that of the total debts due to the Colonial .. tl „ M25i579 __ Wh. .Ivor ... or foobtfol. .. . „„„ „ u b “ ““ “• O" 1 "*-' In ISOf „ Q „ t . d to 257
SO ... ........ ...Wo Of ... „J ... ,„„ a „„„ liolly justified but to have been lr sufficient by nearly £3,000.
S “ r " " iU ,o hi,
(a) that tho estimate was that of the buyer
(b) that the capital of the Bank was Intact at 31 August 1895 according to the evidence of the balance-sheet
(c) that the capital was, therefore, nec-.ssarlly Intact six weeks later (18 Octoberjwhen tho contract was signed ; and
(d) that tho Bank of New Zealand staff, with malice aforethought, so arranged the liquidation of the accounts that their estimate night work out correctly!
Bat, unfortunately for the Hon. Goorge Mo, Lean, it was Mr.Watson, ex- _ specter of the Colonial Bank, who was the deus ex nachina so far as Ifying for the Bank of Now Zealand was concerned. No officer of the Bank knew none about that bank and the position of its ouctoners than and whatever may be thought of Mr, Watson in other natters, it is ivable -hat he could bring himself to deliberately cheat hie • ate Mployers.
this roar,on, supported by tho actual outcome of the winding-up, it b f- taken as proved that the estimate of the contract of 18 October 1895 led, that the best possible bargain was driven, and that, therefore, C °~‘ , '~ ee b 1"° 31 August 1895, to use His Honor's words, was " delusive
°" Mr. Watson thought of tho Colonial Bank directors' opinion lr advances, his report ( as Government Officer) nay bo quoted;-
examination by the Directors, Auditors and Officers the Bank of How Zealand was of a most searching and exhaustive character,and I may hero state that the Directors of the Colonial Bank ant icipate that in addition to the £133,906 agreed to be Paid in cash they will receive out of the £327,305 a further sum
153
for distribution aaongst its shareholders".
Clearly, Mr. Watson suggested that it was only the opinion of the Directors of the Colonial Bank and not the opinion of hlnaelf or any other Bank of Haw Zealand official that anything more would come to tho shareholders in the shape of " a further sun for distribution* beyond the £133,90e
Ae a matter of fact the shareholders have not received ae much ae e 135,903, but only £111,454, and they have no more to cone, at leant not through the liquidators, although they may yet recover something in other ways
Th reader hss been In thin chapter acquainted with soae of the terne Of the bargain between the two banks and Its bearing upon the balance-aheot and hp„s,no doubt, forced conclusions concerning the genuineness of tho latter which do not materially differ from the writer's,-
Of the raofft striking feature of the Bank agreement* nanely the wriUsi R ofT, with the sanction of P«*l«u*ent . sf £56,150 as a present to the Hoa*, G, Hard, under th-i most peculiar circumstances, an earlier chapter ta the first half of thlo work has already informed the rc--d«r.
Thff ensuing chapter will tell of what followed the elocution of thic agyeaaent*
139.
Chapter IV,
Burying the Remains.
And lest the fulsome artifice should fall
Themselves will hide its coarseness with a veil. Cowper,
The burial of the Colonial Bank remains was begun by three provisional undertakers - Messrs, ft. J, M, Larnach ( an ex-director ), B. Vigors ( an ex-inspector ), and Keith-Ramsay ( an ez-auditor ) after the shareholders he.d confirmed the agreement between the two banks which was presented to then, with the hall-mark of Parliament upon it, but in all Its nakedness, without a suggestion from the Directors as to what the contract really meant in pounds, shillings and pence.
Had the shareholders been told the true position, they would have ignoainlously rejected the compact and turned their Directors out of office for proposing it for acceptance.
They would have elected a new Board, and agreed to a general washing up, by writing down their paid-up capital and making a call. They would, in short, have faced the situation with stout hearts, as did the National Bank of New Zealand shareholders when they consented to their capital being written down by €250,000 and to a substantial call upon their shares.
But the circumstances of the Directors and responsible officers o_ the two banks was different. In the one case there was nothing to foar froc exposure, and in the other there was much to fear.
The Directors of the Colonial Bank probably felt that a Committee of Investigation mould be set up, and tM fact become known that they had r lßks connection with the hard group of accounts and others which ao pru< tent banker would have taken.
They relied, no doubt, upon the secret nature ol -he Ban .? Eent ’ and upon the strength of the political arm, for protection consequences of their acts, as well as upon the friendly dispoß. to whose appointment they contemplated, and who nero c.ppoJ- - Ue reason that there was no opposition , no notice, as a fact, having
155
been given of the Directors' Intention to apply to the Court,
They little dreamt that the searchlight of Justice would be let -'ll on their dolngi and that the very nan whose skilful performances ae an ovoa. draft-raiser and overdraft-reducer they were mainly desirous of covering no in the sale to the Bank of New Zealand, would be exposed.
But exposed he was, although he was never punlahed, and tc-d&y i 3 to be found occupying high public offices, notwithstanding the transactions fer which he was responsible , which have already been enumerated and which would have brought a term of imprisonment upon any ordinary man.
Dot us once more follow the funeral cortege.
On 4th. Pabruary, 1896, the Dunedin Supreme Court ordered the windlug up of the Colonial Bank under the Companies' Act 1882.
This order was made upon the petition of the Directors on 19th. December, 1895, and, so that no grass should grow under their feet, on the day following, the same Directors applied to the Court for the appointment of throe provisional liquidators, Messrs. Lamach, Vigers and Kelth-Kaassy, all of whom were nominees of the Directors , as well as being ex-officers of the Bank.
The shareholders had at that time no opportunity of opposing the appointment of these men. As a fact, there was no need for then, since the Banking Act provided for the conduct of the liquidation by the officers of the two banks until the appointment of permanent official liquidators.
Of course, the advantage to the Directors of having their nominees branded with the hall-mark of the Court's approval Is veey manifest. It gave the three a good " leg In" for the permanent positions, and so it even! uated that when the Court was considering the question of the appointment oi the permanent official liquidators, the argument was advanced by counsel ’( the Directors that, all things being equal, the authorities showed that the Court always gave preference to those already In charge of the liquidation,
This fact weighed, of course, to a considerable extent, but not to the extent the Directors wished, although they did very well in securin’ tt appointment of two out of their three nominees as permanent official liqul* dators— too well for the pockets of the shareholders.
Almost the first act of the provisional triumvirate was to obtain * sanction of the Court for the payment of a " first* dividend of Tea ShilliW
141.
per £2 share. This was a stroke of true genius, and stamped the men who conceived it as past-naeterc in the noble art of liquidating under difficulties.
At the tine this nova ras made, the writer was very deep in the gut of chess that was being played. Ho had Just begun to deploy his ren, so to speak, and to feol the strength of the eneny, when ho was surprised md, for the moment, completely routed.
Cooing to plain English, the effect of this ten shilling dividend me was very magical. The question of the appointment of permanent liquidators was Just about to be referred to the shareholders by order of the Coart, and it was of the utmost importance to the Directors to get into the shareholders' good books.
Knowing that Bank shareholders are but mortal, with all the frailties of human nature thick upon then, and with a wonderful weakness for filthy lucre, the Directors pulled the strings and the figures worked.
The way in which a dissatisfied minority of the shareholders were beaten was this. The dividend put the majority in a good hunour with thenselves, and, coming, as It did, at so early a stage of the liquidation- a first dividend too- it ras proof positive, in their opinion, of the competency and fitness In every respect of the Director-chosen triumvirate, this reason, they were not disposed to disturb the tranquillity and peace of mind of the happy family, and, *7hen warned of the rocks ahead, they continued to be fascinated with the voice of the siren luring thdn tc th©~doon, and waited for the " further " dividend of " about Fifteen shillings P«r share, the prospect of which was so cheerfully held ou + to
"hey got on to the rooks, but not on to the dividend I vi.lci - ln hied down to a " final’ one of One shilling and one penny three far-hin t . Per share. It ires lucky that the proposed compromise with the t hen hard was thrown ont, for, had it been sanctioned by the Court, holders would not only never have seen the second dividend, but would hj h&d to refund about one shilling of the ten shilling first dlvl
The shareholders as a .hole havo to th«* * -11 Verity of their
142,
number for bearing the cost of opposing that compromise and saving them about two shillings per share.
When the selection of candidates for submission to the Court as permanent liquidators was progressing, the provisional liquidators issued proxy forms themselves and thus directly solicited the support of the share holders.
It has not transpired who paid the cost of all this, but the provisional liquidators had an additions,! advantage- they had access to the register containing the full names and addresses of the shareholders and refused to allow certain shareholders who were supporting other candldatesincludlng the writer- to see the register.
Other candidates had to be content with old printed lists giving the names of the towns only in which shareholders resided, and were deprived of the opportunity of communicating with those who had recently become share holders and had, therefore, the greatest grievance.
When subsequently appointing the permanent liquidators, 'Us Honor Mr. Justice Williams commented on the refusal of the provisional liquidators to afford access to the share register and said:- "it was reasonable they should place other shareholders in a similar position to themselves".
Those shareholders who opposed the appointment of the Directors' nominees maintained that this conduct alone was a disqualification, but the Court did not take the same view.
143.
Chapter V.
Breakera Ahead!
Cold fearful drops stand on my trembling flesh, Shakspero.
Although tho Court could not see its way to reject the whole of the Directors’ nominees for the Board of Liquidation, it did reject the Ken. I. J. M. Lamoch, on the ground that he was an ex-director of the Colonial Bank, but the other two provisional liquidators- Messrs. W. B. Vlgers ( ex-Inspeotor and Acting General Manager ) and Keith-Ramsay ( ex-Auditor ) were confirmed as permanent official liquidators; and Mr. hj, L. Simpson, who •aa one of the candidates put forward by the Dunedin Committee of sharehoJdere, was appointed the third liquidator in the place of Mr, Lamach.
Mr. Simpson, although on otherwise admirable gentleman, was not regarded at the time as being entirely independent, because ha was the paid servant of a Dunedin joint-stock company, the directors of which were»ose, If not all of them- directors or ex-directors of the Colonial Bank,
Before proceeding further with the story proper, the remainder of this chapter will be devoted to a matter of a somewhat personal character, not, however, entirely devoid o* interest to the thoughtful reader, because it throws considerable light on this historical liquidation with its multitudinous peculiarities,
The intensity of tho desire to secure the appointment of the throe noalnees o' the directors as permanent official liquidators was, perhaps, «mllod by the intensity of their determination to prevent the writer from b *lng appointed.
At tho general meeting of the Colonial Bank shareholders held or. 6th Member, 1895, there «t» a very strong feeling that the shareholders be hepresentad on the Liquidation Board by some capable person with bunking experience, but not an officer past or present of the Colonial Bank.
Mann* held a position of responsibility and trust in one of the banks in the colony, and knowing that efforts were to bo oade to m ttMnffh certain compromises to tho disadvantage of the shareholder the writer, at the request of a number of shareholders, stood us C( *didate for the Liquidation Board,
U4.
Wit* the aid of the Incomplete list of shareholders , already raf er red to, he managed to secure proxies representing scout 7000 shares.
Proxies for about 7000 additional shares were sent direct to tfcs care of a Committee of Dunedin shareholders, who were generally understood, at the time, to be opposed to the appointment of the three Directors' noeinees, and who were running four candidates of thel r own, namely, *llu M Brown, accountant (already introduced to the reader)) A, C. Segg, general manager of B. Campbell ■ Sons; W. L. Simpson, manager of the Trustees, Sk>. outers and Agency Co.— all of Dunedin—, and B. J. Beld, of Wellington, the latter being described in the Committee's circular as a banking expert not now connected with any bank •
Another proxy for 1000 shares was sent to the care of Mr. Vigors, one of the provisional liquidators and a candidate for permanent appointment,
In each case, instructions were given that the votes were to be recorded in favor of the writer; thus about 15000 shares, or £30,000 of catital' supported his candidature in advance of the meeting to be held for the purpom of selecting candidates to be recommended to the Court.
Considering that there were eight candidates in the field at the time, and that a large number of shareholders did not commit themselves to support either set of candidates but left it to their representatives preset in person at the meeting to decide, it will be seen that the writer's chance of success were far from remote.
What happened? The writer went to Dunedin, carrying a letter of introduction from a leading Wellington citizen to the Chairman of the Conrai tee of shareholders there. He had an interview with the Committee; ln-onted them that he did not know a single shareholder in Dunedin, end naked r'’ p t v.iithoy would undertake to secure his nomination at the approaching meeting.
The Chairman- Mr, William Barron- replied that, apart from the tor's request, the Committee would be bound to undertake his nomination, because they were trustees of proxies for about 7000 shares, with spools directions to record the votes for him end two other candidates.
The writer regarded this assurance as an honoraole compact and
145
rolled upon it; but, although reminded more than once by messages sent into the room of their undertaking- which messages certainly reached them- the Committee failed to carry it out.
The following extract from the Dunedin Committee’s circular proves that they invited and accepted the responsibility of properly applying proxies sent to them:-
" In case you should not find it convenient to be present in person at the meeting, I enclose a form of proxy, which you will please sign and forward to any shareholder you may wish to act for you at said meeting, and instruct him for whom you may wish to vote. In the event of your not knowing any shareholder resident in Dunedin, any of the undermentioned will use your proxy in the direction you may indicate:- William Barron, William Learmond, A. J. C. Brown".
The shareholders in due course met on 22nd. January,lB96, but the ueetlng was of an Informal nature, because the Bank was then in liquidation under the Companies' Act.
For this reason, the writer intended to ask for leave to he present, In order that those shareholders who attended ralghw see what sort Ox he wa«, in appearance at any rate.
It seemed reasonable that the candidates should be allowed to present themselves for inspection and, If the shareholders desired, for orami But the gentlemen in charge wore of a contrary opinion and gave their opinion in a manner very forcible.
Some years age there was a well-known policeman whose lot it was to stand at the Mane ion v louße* in Lon don c
He was a very tall policeman ana had phenomenally large faBt.
So conspicuous, Indeed, sere his proportions in these directions that the street arabs used to ask him “Is oold up tnere ' ’ lowed up the insult by walking round him in a wide sent -i » avoid his feet.
Well, it nan a policeman of Just such huge dimensions she was by the organisers of the meeting to keep out undtoi
Beinß theholder of a considerable number o. I,hn>e '
161
registered shareholder, the writer considered this a further reason entitlin him to be present at the meeting, certainly as it was an informal one and an unusual purpose.
A big Bank officer and the big policeman, however, took a differ n * view and barred his way to the room.
But one or two shareholders seemed to have got wind of the little comedy that was being enacted in the passage and took up the cudgels.
They urged, on the two grounds mentioned, that the writer should be permitted to enter the room, to answer questions, if necessary, but not to take part in the discussion and not to vote.
The Directors strenuously opposed the suggestion, but a motion was put to the meeting, nevertheless, and, on a show of hands, declared carried by the Chairman, Mr, Keith-Rarasay, bytwo or three vote?-.
Mr. W. Dovnie Stewart, one of the Directors, at once jumped up and challenged the declaration of the Chairman,
A re-count followed, and the Chairman declared the motion lost by two or three votes.
The Directors, as well as the Liquidators, voted on the second occasion, but not one of them did so on tne first.
The writer maintains that neither the Directors not? the Liquidator? had the right to vote. If they had not done so, or if the Liquidators only had not done so, the resolution would have been carried the second time.
Clause 91 of the Bank's Deed of Settlement says:-
if the person whose vote ha?« been objected to has i interest in the question on which the vote has to be taken, beyond that which he may hove therein in common with the othe: Proprietors then and in every such case the Proprietor whose vote has been objected to shall not be allowed to vote on the question "
Both the Directors and the Provisional Liquidators- all Proprietor? of the Rank- wore obviously Interested in the question of the writer’s p-p--polntment, especially the Liquidators, who were not only ex-officers of the Colonial Bank, but also candidates for appointment as permanent Liquidators.
I- 7
The Chairman 'b attention was drawn to the fact that the Director? and Provisional Liquidators, or some o them, had voted on the second count, but he, nevertheless, aliened their votes, with the result that the writer us kept outside.
It was reported to the writer alter the meeting was over that there ,ere more than sufficient vote? unpledged at the meeting to have rendered his election not only possible but probable. This, np doubt, was known to the Directors and accounted for their determined opposition to the wishes of one half of the shareholders present.
It was remarked that the Chairman o, the meeting was r. KeithRansay, himself a Candida,te for the permanent llquidatorship, ana that he was moreover a self-constituted chairman.
If the meeting had been afforded an opportunity of appointing a chairaan- and decency would seen to have demanded that opportunity- the whole course of the liquidation might have been changed; the shareholders might have been far better off financially, and the Directors and responsible Officers, or wne of them, might by this time have undergone trial for uttering false balance-sheets, and might have been compelled to refund many thousands, of pounds which they wrongfully distributed in dividends, well knowing that the dividends had not been earned and were being in effect p?id out of capital.
Before closing this chapter a wore or two regarding Mr, J. Held* candidature will , perh p.ps, not be out c place.
This gentleman, as many know, vae tne manager o. the Colonial Bank in Wellington, but the Dunedin Comnittee o share.noldert naively described ‘•is in their circular an " hj TBankin- lix.pert not now connected with kenk .
The Committee *? circular was d-tted scra»? little time the riter aild the Orttor hue often wondered whether kr. Seid*s candidature was intended 10 *®Ut the Wellington and ,iorth Island votes. The feet is tnat, after ‘aenriny a number of proxies, he went not to the poll hut to .hirlar-o i■■ - -d.
writer bas never been -.Me to reconcile the Dunedin Con; -i-- • lection o -,r. Reid - - one of their candidates, with their pro.' SiUon the nominees on the ground that they were ex-officers of the Col °nial Bank.
163
The writer was in the field before ;ir. Held, but the Dunedin Co-i-- i tee steadfastly ignored his claims as a candidate with the necessary bankin qualifications.
The sequel is that two leading lights of the Committee have since petitioned Parliament in two separate sessions for an enquiry into the ooadi of the liquidation.
If Parliament should ever do Its duty- a not very probable contingency, bo long as it Includes many old tainted pollticlano- It would, perh; cone within the scope of the “order of reference" to enquire also into the conduct of the Dunedin Committee of shareholders, especially in regard to t failure of that Committee to fulfil the important trust which they not on?y accepted but actually invited, on behalf of the holders of 7000 shares in t. Colonial Bonk. It would be a part o' such a Commission's duty to endeavour to find out whether the failure was due to accident or design.
164
Chapter VI
The Triumvirate Triumphant
A Cool Suspense from Pleasure and from Pain. Pope.
The danger the.t threatened the directors and responsible officers of the Colonial Bank, as well as certain customers who had been a little too free iltb the funds of its shareholders, having been for the moment cleverly engineered away, and the three director-chosen, provisional liquidatorshoeere. Vigors, Larnach and Keith-Samsay having been declared to have polled the highest number of votes at the shareholders' meeting, joy unspeakable was rsapant in the camp of the conspirators; there was a general shaking of hands and mutual congratulations were the order of the day.
But although the conspirators had managed things very well so far, they were not entirely out of the wood. They had yet to undergo the ordeal of an application to the Court for the confirmation of the chosen of the directors and of the shareholders as permanent liquidators.
Thls ordeal took place on 13th February, 1896, and, as the reader has already been bold, it resulted in the Court rejecting i«!r.Larnach on the grcund that he was an ex-director, .r. Simpson, who polled the next highest luaber of votes, being appointed in his place. it this tine an application by certain shareholders was before the Court for an order to inspect the books of the Bank, on the ground that an inspection rould disclose that the directors and responsible officers, or some of then, lad been guilty of misfeasance or breach of trust.
The Court decided to take the two applications together and, when delivering judgment, sald:-
* What 1b suggested if* that all three gentlemen have been more or less connected with the management of the bank, t,ha>reason to believe that the affairs of the bank have be-.. managed, and that if that is the case they oug..t no - appointed as liquidators. In order, however, to aac-rt whether the affairs of the tank have been mismanaged, an., i- 80 » whetherany persons connected with the management i 4 *l hj it, in obvloucly themselves liable to proceedings c* any < > necessary, not that there should be an inspection o.
165
at the instance of individual shareholders, but that there should be an investigation of the affairs of the bank by lnd e . . pendent persons. The duty of conducting this investigation ijp, of course devolve upon the permanent liquidators,"
The Court then proceeded to exhaustively P-nalyse the Colonial r>ank' s balance-sheet to 31st August,lB96, ( the last issued ), also the terms of the agreement for sale and purchase of the Bank; and sald:-
* There is quite enough before the Court to show the necessity f or a careful investigation of the affairs of the bank. What the result of such on enquiry may be it is of course impossible to anticipate. As was said in re the Varieties Company (1093, 2 ch, 241), it may be when the whole matter is gone into, there will be no ground for making any imputation against the persons who nave been concerned In ths conduct of the business of the company. On the other hand, it may turn out that the directors or officers of the bank have incurred a civil or criminal liability. ?o possible explanations can settle the natter one way or the other without an investigation of the bank's affairs. To make such an investigation is the duty of the liquidators. As stated in'Palner's itlnding-up "Forms", page 193, it is the duty of the liquidators to investigate ths affaii o? the company in detail, and to ascertain whether any of the officers and I employees have committed any misfeasance or breach of trust. For that purpoa. he should examine the books and documents of the company, and nake all neces- » sary enquiries, and should, if need be, examine persons capable O' giving ) information under section 177 of the Act o- 1832, and, further, should take summary proceedings against the delinquents under section 226 of the Act or b; action as he may be advised."
Thus, in appointing Uesers. Vigors and Keith-Hamsay (both ex-officer of the Bonk) as two out of the three liquidators, and in refusing a thorough!; independent inspection of the books, against the wishes of a considerable minority of the shareholders, the Court accepted a responsibility which, in the light of subsequent events, would perhaps have been better avoided.
The Court, did,however, take the precaution oT specially charging the three liquidators with the duty of making ’ a careful investigation of the
Ibl
iffalr* of the bank* and of ascertaining and reporting whether * the directors or officers of the ban’: havo incurred a civil or criminal liability* and, havln thus charged the liquidators, in face of the serious allegations against the late lanageaent of the Bank, the Court expected them to do their duty.
That the liquidators failed in their duty, there Id no room for doubt, and the question is how far was the Court bound to sea that they did discharge their duty.
Section 228 of the Companies* Act 1882 says:- " hher# any order it lade for Binding up a company by the Court, or subject to the supervision of the Court, If it appear in the course of such winding-up that any past or present director, manager, officer, or member of such company has been guilty of any offence in relation to the company for which he is criminally responsible, the Court *ay, on the application of say person interested in such winding-up or of its own motion, direct the Official Liquidators or the liquidators ( as the oik lay be) to institute ana conduct a prosecution or prosecutions for such offence, and may order the costs and expenses to be paid out of the assets of the eoipany."
Thus the Court has and had the power “ of its own motion to order Hi# Official Liquidators to prosecute if the Court Is or was of opinion that say past or present director, manager, officer, or member of the Colonial Sani had been guilty of any offence in relation to the Bank " for which he is ertnlnally responsible*,
The question, of course, arises- Ha« it appeared to the Court at “J tine during the ten years* liquidation of tne Bank that any director, *“Mer or officer has been guilty of .any offence for which he is criminally Reading the judgment of the Court when appointing and charging Official Liquidators, it would seen that no other conclusion can be arrived 11 that the Court had , at- least, grave suspicions ir the matter, to say MtW »* of the affidavits that sere filed in Court on that very notion alleging "iifoaesaoe and breech of trust on the part of certain officials.
This to the wrgtsr to be beyond ardent- that, bavins reflMl shareholder. who made the allegations access to the books ir. order 10 1,1078 charpea, the Court was bound to Bee that the O.ficial hlqui 1410 **rtled oatego-lcally to the charts of niefeaeance and breach of trust.
167
Chapter Vll.
Compromising Events.
With mean complacence ne'er betray your trust. Pope.
With the Court's solemn charge ringing in their ears the newlyfledged Official Liquidators had a difficult row to hoe, and it was not long before the expected came to pass.
It had for a long time been an open secret that the Ward affairs » engrossing the minds of those who were behind the scenes pulling the strings and that a bold attempt to save the Managing Director of that Southland prod the Ward Farmers' Association and the Association Itself from exposure was going to be made.
The power sought only a few months previously from the Court for t provisional triumvirate to compromise with the Colonial Bank's debtors as 1 director-chosen triumvirate thought proper., having been refused by His Horn Mr.Justice Williams, the painful necessity arose for the permanent liquidate to apply in every case of a proposed compromise for the sanction of the Com before it could be given effect to.
These gentlemen, however, proved equal to the occasion and, losing time, on sth June, 1896, the Court was asked to sanction the sale of £168,00 C of debts of Mr, bard and his Association for the sum of £62,750, which prop* n has already been fully dealt with in Part 1 of this work, the intending purs chasers being two of Mr. bard's whole-hearted friends hessrs. A. Lee Smith, was afterwards honored -with a seat in the Legislative Council, and J. B. P.el the "Dear Jim" of the celebrated mutton case, with which the reader has teen made familiar.
The Court's denunciation o' this " offer to buy off from bankrupts and its consequences a nan who ought not to escape then" was a crushing tlo to Mr.Ward and his many kind friends, but they were highly-nettled liquidate who never lost heart, and who in less than a year again crossed swords with the Court in a second attempt to achieve the salvation of their hero, even a the cost of the sacrifice of the Colonial Bank shareholders.
153.
This second humane effort was also ignominiously abortive, as the reader has previously learned, so finding that it was only beating the air to try to bamboozle the Court into acquiescence with their designs, Hr, Ward's champions threw up the sponge and the inevitable followed so far as he was concemed.
Almost immediately after the failure of tho first proposal, the revelations in regard to the part the Colonial Bank officials had taken in connection with the historical bogus cheque and draft transactions of Mr, Ward and his Association- especially tne part played by Mr. Vipers- so exasperated certain shareholders of the Bank that they held a meeting in Wellington when the following resolution was carried with only one dissentient:-
" That this meeting is of opinion t::at Mr. Vipers should be called upon to relinquish his liquidatership and that failing his consenting to do this the Judge should be approached to ascertain i he will remove Mr, Vigors."
The services of Mr. T. feunv. Solicitor, who conducted the proceedings on previous occasions, and the writer were engaged, and the Court was moved "or an order removing Mr. Vipers "ron the Liquidation Hoard.
Whilst In Dunedin, and before the motion cane on for hearing, the •rtter uas apnroached through a friend in a most peculiar respect.
This friend said that an influential deputation had waited upon him Mi Intimated that Mr, Vipers' resignation could be procured and they were ■tiling to arrange for the writer's nomination for t'"e vacancy, on condition Hat the writer would agree not to prosecute the Directors.
The answer tfteae gentlemen received was that if r • nove ' i the Court, or resigned, the writer would only accept nomination with 1 Meetly free hand to do his duty as a liquidator, not necessarily to prosecute unless an investigation of the af'eirs of the Bank disclosed a fcta “ e ‘■Hn.es calling for a prosecution. Megoclatlons were then broken oft I
Ihis incident is related "or what it is worth. however, of whet took place, but the writer cannot, of course, say ■' the deputation had any authority or just .round for asserting that Hr. P ' r? resignation could be arranged.
In due course, the notion to remove him uns heard, and
169
refused it on the ground that there was not sufficient evidence before the Court to justify Mr. Vigors' removal.
Shareholders were wild with indignation and disappointment, but could do nothing: so matters remained quiescent for a time.
In March 1897, a few months later, the second effort to save Mr. i'fard was made, and beyond periodical spirit-raising announcements that a fur*, ther dividend might shortly be expected by shareholders, nothing occurred to relieve the melancholy monotony of the situation, and the liquidation draggec along for four years more , during which time, no doubt, much happened that r not come to the knowledge of the shareholders, but which they would very auct like to know something about.
The triumvirate had preserved a magnificent silence for all that ? length of time when commercial circles were startled hy the introduction cf Companies Act, 1901.
This measure followed the bursting of the gold-dredging boom, and 4 , was held out at the time as being the outcome of certain transactions by cer gold-dredging company liquidators, rendering it advisable In the Interest of the Colony generally to take the liquidation of these companies out of the hands of the existing liquidators ( appointed by the Court), and to substltu for them the Official Assignee for the district as the Official Liquidator.
As In the case of the Banking Act,1895, ( the £55,150 presentation measure) the Companies Act,l9ol, was In the keeping of Mr. Ward, and with hi: usual ability he managed to pilot It safely through the shoals and quicksand, of Parliament, and it became law.
What the rank and file of the Colony’s legislators were about it ii difficult to surmise, but they, like Messrs, Seddon and Ward, appear to have given not one thought to what the effect of the Act might be upon company liquidation other than dredging company liquidation.
The fact that the Colonial Bank had then been In liquidation for s) years seems to have caused that concern to pass out of the minds of our eve: worked legislators. Including the Hon. J. Ci. Ward; at least that Is shat the public have been led to understand.
This fortuitous blunder occurred at a time when the Colonial Bar
155,
trluivlrate were, no doubt, wondering how they could wind up the liquidation 80 as to satisfy all parties concerned, including themselves. Perhaps they were in a flw- who can tell? Whether they were or not, the effect of the Companies Act, l9ol, was to take the liquidation out of their hands and place it in the hands of the Official Assignee at Dunedin.
The triumvirate could not wind up the liquidation without presenting t final report to the Court, and it was, perhaps, the difficulty of drafting this report that caused Its non-appearance.
Whatever may have been the cause the Colonial Bank triumvirate did not report, and although they may have had the best intentions in 1901, of complying with the terms of their appointment in 1896, and of reporting as to rhether any director or officer had been guilty of misfeasance or breach of trust, they were deprived of the opportunity of doing so by the officious Interference or careless oversight of our legislators, including the Hon, J. 0. Ward and several lawyers.
Joking aside, the three liquidators were, no doubt, glad enough to be quit of their irksome load of responsibility and to have it placed by statutory enactment upon the shoulders of the Official Assignee, so they bundled ell their books and papers into his custody and at the same time banded over e balance of Colonial Bank cash in their hands amounting to £ll,OOO odd.
Thus it came to pass that the three gentlemen who had been in charge for six years and knew all about the affairs o' - this complicated liquidation *ere suddenly dethroned, and the Official Assignee, who knew absolutely nothing concerning the liquidation, was as suddenly compelled to take up the running at rtoet was for the old liquidators and those who had been guilty of mis-t*. ,rJSC ' Ml * breach of trust a very critical period.
Thin was the act , be It remembered, of a Parliament consisting Bhre '" l “embers many of whom are to-day seeking re-election to the Parliament 1906.
171
Chapter Vlll
Cast-Off Clothing.
" A Pence betwixt us and the victor's wrath 1 Addison.
It is nowhere on record what the Official Assignee's opinion was 0 f the cast-off clothing of the deposed liquidators bequeathed to him by the vil of a great and august Parliament.
Whatever that worthy officer of the Court may have thought of the transaction, he was , no doubt, toe tactful to forget that, as an officer ala of the Government, it would never do to allow his thoughts to find expression in words.
To imagine, however, that he appreciated the ill-fitting garments passed over to him would be to ascribe to the Official Assignee less common sense and discernment than he deserves.
3ut being ordered by his masters to don them, don them he did, and then tried to think they were a good fit and became him.
The legacy comprised-
1. Piles of books and papers;
8. Gash £11,000;
3. Responsibility under the Court's charge.
The books and papers appear to have been packed off to the Stock exchange, but the Official Assignee has not told us what protection is being afforded to these important records- that is to say, whether they are safe fi fire or theft.
Being an officer of the Court and at the same time a servant of theGovernment, it may be presumed that the Official Assignee has received very strict instructions to take every precaution to preserve all the records inta so that when the time comes for looking into things, it nay not be discovered that some indispensable record is missing.
No doubt the Official Assignee will have taken a careful inventory of all books and papers handed over to him, in order that, in the event of anything being conspicuous by its absence, he will be able to prove that it never cane into his possession.
167.
In this change of liquidators there was plenty of room for trickery, i? such we” contemplated, but the Oovemneut and Parliament took upon tn..-c--selves the responsibility of the safe-keeping of the records, and the ihsreholders are entitled to rest assured that everything has been done in their Interest.
Sir Joseph hard may, indeed, be relied upon for having seen that Hero Is no possible chance whatever of discredit falling upon the Oovernnent tr Parliament which he adorns, in consequence of the Companies act 1901 which hi Introduced .
The evident omission of the Official Assignee to acquaint himself with the Ins and outs of this complicated liquidation by means of a personal study qfthe books can hardly come as a surprise in the circumstances. On the contrary, one can understand his readiness to stow then away out of sight, hoping that nothing night happen to disturb the duet upob then until such tine as the friendly flanes of a fiery furnace consumed the lot.
But this much waa expected of tne Official assignee, namely, an effort to acquaint himself , in the manner common to Assignees in Bankruptcy, dtt the cain features of the liquidation, bv means of an examination on oath f his predecessors, the director-chosen triumvirate.
It was his duty to ascertain, for instance, what were the terns ottelr appointment and what trusts, if any, remained unfulfilled at the data he over the liquidation.
lad the Official assignee dona this, he would hare discovered that predecessors had been specially or reed by the Court with the duty of aa- *** * 8 careful investigation" and cf ascertaining and reporting whether any “Nctors or officers of the bank nave Incurred a civil or criminal liability*.
He would also have discovered that his predecessors ha. nCt ** 1119 Court specifically on that Inportant point, and he would have ai. cc ICr9over - that the shareholders of the Bank had not been called toretner since J-hvary. 1 893 , when they net “or the purine of selecting candidates for the “h-h- Liquidation a period of about five years*
Official Assignee arrears to nave been either indit Pn -****i to remain ignorant of all that had been dona and all that „■ 1 bMn undone.
173
Knowing nothing about the Bank and its affairs, and, seemingly c little more, this Court-Qovemment official appears to have been anxious to rid of his burden of books, papers and cash to best advantage, if not of thi shareholders, certainly of hinsel 0 .
Having disposed of the books and papers in his own particular way could not think what to do with the £ll,OOO cash. It never seens to have o. red to him that there might be Bone persons responsible for the disastrous state of things , a-ralnsf. whom proceedings ought to be taken civilly or crl nallyi neither does it seem to have occurred to him that he himself t call the shareholders together and confer with them.
Instead, he rushed off to the Court for its sanction to the diatr tlon of the £ll,OOO in a final dividend to the shareholders, which was duly paid, the first intimation received by then of this step being the arrival the dividend warrants.
It is contended that the Official Assignee's duty under the extrt ordinary circumstances was clearly-
1. To examine the previous Liquidators;
2. To submit evidence to counsel;
3. To call a meeting of shareholders;
4. To ask shareholders whether they wished to proceed civil, or criminally, if counsel advised that there was a prli facie case of misfeasance or brea-ch of trust;
5. If not so advised by counsel, to ask shareholders whethe; they desired an entirely independent investigation of ' books and affairs of the Bank, including an audit of ti previous liquidators * accounts;
6, In the alternative, to notify shareholders that the balai of cash in his hands would be distributed and an order the dissolution of the Bank applied for.
The Official Assignee's action in reyard to the £ll,OOO is one wi the writer has altogether failed to understand.
It. was a common "und available for prosecuting the proceedings ' should lonp ago have been prosecuted by the liquidators.
lost
It was a fund which was under the control of a majority of the share Holders of the Bank, present In person or by proxy at a meeting convened by th liquidators.
If a majority of the shareholders resolved on-
(a) Legal proceedings;
(b) Further investigation,
the cost would have been borne by the fund, and thus all the shareholderspresent or not at the meeting- would have teen contributors to that cost In proportion to their holdings of shares and whether they liked it or not.
If civil proceedings had been taken, and noney had been recovered froc the delinquents, as would assuredly have been the case, all the shareholders of the Bank would have benefited in a sicilar proportion. But as things have turned out, the common fund has been distributed without the shareholders being consulted; no information can be obtained; the old liquidators and the Official Assignee have not reported on the question of misfeasance and breach of trust; there are no funds in hand for a separate investigation, and none for taking proceedings, although the Official Assignee’s so-called report brings with it the finality necessary to complete the proof that the balancesheets Issued by the Bank during the last fev years of its existence- especially that to 31st August,lB9s- were falsified.
Any proceedings now taken have to be at the expense of individual shareholders, whilst any benefits derived by then would indirectly be shared -y other shareholders.
This places the smaller and poorer shareholders in a most unjust Position, for they cannot be expected to embark single- handed against a solid PlaUu of wealth who world apply every legal remedy in order to exhaust then.
2ven if a few shareholders combine, it is unfair that they shou-c tave to fi pht tt „ battloB or the whole body of shareholders. Therefore, in disputing the final dividend as he did, the Official Assignee inflicted a cruel vro "P on the shaller shareholders, for which he should be called to account.
There is all the more reason because the Official Assignee of the Government and one of the Ministers is involved in the liiuidatlos "f the Bank.
175
Chapter IX.
In a Quandary
Let this pernicious hour
Stand aye accursed in the calends,r," Shakspeare.
To those shareholders whose powers of endurance had not broken d( under the strain of the prolonged liquidation, and who were still watching things, the silence of the liquidators was more eloquent than words.
No attempt having been made by the liquidators to take the share' ders into their confidence , it was quite evident to those capable of putt two and two together that the liquidators had no encouragement to offer an nothing creditable to tell.
Their story, if told, would of necessity have been one of reokle. ness; fraud, and unutterable disaster; so, being prudent men, they wisely held their tongues.
They never once during the ten years of the liquidation paid theslightest heed or respect to the shareholders, although the Companies' Act 1882 clearly contemplated the propriety of liquidators summoning the share holders in general meeting to receive periodical accounts of their steward and to obtain the shareholders' views upon natters of importance concemln the liquidation.
Section 154 of the Act ox 1882 says:-
" The Court may, as to all the natters relating to th winding-up, have regard to the wishes of the creditors or contributories ( shareholders) as proved to it by any sufficient evidence, and may, if it t. expedient, direct meetings of the creditors or contributories to be summon held and conducted in such manner as the Court directs, for the purpose of ascertaining their wishes ..."
The original liquidators thus had the power to call the sharehol' together, had they desired to meet them, at any time from the year 1896 to year 1901, but they did not do so.
The Official Assignee, as the substituted liquidator under the Ai
161.
of 1901, had the same power from the year 1901 onwards, but he also failed to avail himself of it.
By the Consolidated Companies Act 1903 this power was converted into e mandamus: it was no longer left to the liquidator to decide whether or not the shareholders should be called together.
Section 251 of the Act of 1903 aayo:-
In the event of th 6 winding-up of a company
continuing for more than one year, the liquidator shall summon a general meeting of the company at the end of the first year and of each succeeding year from the commencement of the winding-up, or as soon thereafter as may be convenient, and shall lay before each such meeting an account showing his acts end dealings and the manner in which the winding-up has been conducted during the preceding year.'
How the liquidation continued for about two years after this Act »as passed- one financial year was at least completed- yet the Official Assigns failed to call the shareholders togetherl
Although the Official Assignee had distributed all the funds that cane Into his hands, with the exception of 130 odd, this amount was more than sufficient to pay the cost of convening a meeting of the shareholders.
That officer cannot, moreover, plead that he was not aware of the requirement of the statute In regard to the compulsory summoning of the shareboldera, for his attention was specially called to the matter by the writer le January 1906. Ho was ashed whether he proposed to summon a meeting of shareholders " in order that they may have an opportunity ox as •hat further action, if any, shall be taken’.
This question was put by the writer, and the Ofiicial Assignee plle<l - ’ X see no object in summoning a meeting as ay final accounts have been P&BBe < by the Court and I have nothing really to lay before the shareholders’.
That he had nothing to lay before the shareholders nay have beeu literally true, but was nothin,- in the way of information procurable from the Pilous liquidators? Certainly it was: moreover, that course had Just be Rested to the Official Assignee In the following worde, also by the 0f tw »=- • I would suggest your allying to the Court under sections 17? ar.u
177
178 of the Act of 1982 for an order to examine the previous liquidators uuon written interrogatories".
To have done this would have cost the Official Assignee nothing, and as the writer furnished, free of cost, the material for the liquidators' examination in the shape of 28 interrogatories, the Official Assignee could, with little trouble and no expense, have procured for submission to the shareholders all the information they required to enable then to decide whether further action was advisable or not.
As for the Official Assignee being without funds, if the examination of the previous liquidators had been earnestly conducted on the lines of the writer's interrogatories, the replies must have been such as would have caused the shareholders to have subscribed the necessary funds to indemnify the Offlclal Assignee against the expense of civil or criminal proceedings, as might have been resolved upon.
Official Assignees in bankruptcy proceedings usually consult in the fullest manner with the creditors, and it is difficult to understand why the Official Assignee at Dunedin should have resolved upon a different course with the shareholders of the Colonial Bank ( who were the only creditors ) as Assignee under the Companies' Act.
The Official Assignee was evidently determined to have no oommunica tion with the shareholders, as the extracts from the writer's correspondence with him will show, and he seems to have considered that, as an officer of th Court, he was bound only to act upon the initiative of the Judge- that, in fa it was no part of his duty to lead in the matter by making any suggestions to the Court in order that the manifest wishes of the shareholders might be give effect to.
So far from acting on his own Initiative, the Official Assignee hai had to be driven. Although he was in charge of the affairs of the Bank free 1901 until 1905, he never so much as attempted to communicate with the shareholders, excepting to pay the final dividend as already narrated •
On 12th August,lBo4, oone shareholders moved the Dungdln Supreme Court for an order instructing the Official Assignee, as liquidator of the Bank, to issue a report.
163,
Hearing of those proceedings , the writer, acting on behalf of certain shareholders, instructed a Dunedin Solicitor to apply for an adjournI9 nt, on the ground that a special application would be made to the Court in the natter.
It was intended to apply for the appointment of a supervisor of tbs Official Assignee, but the Court refused an adjournment. In the course of the legal argument, Mr.Sim, counsel for the applicants, said-" If there sas any natter in regard to -which the Wellington shareholders wished the Asal.-nee to report specially, they could ask, and the Assignee could do it".
Actlng on this suggestion, the writer opened correspondence with the Official Assignee on 21st December, 1904, and the following is the gist of It.
After referring to the Judge's judgment of 28th February,lB96:-
There is quite enough before the Court to shou the necessity for a careiul investigation of the affairs of the bank. *»hat the result of such an enquiry nay be it is of course impossible to anticipate, ' It may turn out that the directors or officers of the bank have incurred a civil or criminal liability. No possible explanations can settle the matter one way or the other without an investigation ot -he ban.-. .. a. ■ To make such an investigation is the duty ox the liquidators 1 it is the duty of the liquidator to investigate the affairs of the com- ' pasy In detail, and to ascertain whether any of the officers ana employees have committed any misfeasance or breach or trust, for that pure 1 should examine the books and documents o: the company, !/ necessary enquiries, and should, if need be, examine per...on- c p of giving information under section 177 of the Act of 18fu > nJ ’ should take summary proceedings against the delinquent., un 226 of the Act, or by action as he nay be advised", afte r referring also to the fact that the Court had been .novou shareholders in 1896 for an order for a separate independent mv- E ot the fc>oks of the Hank, and after drawing the Official l - nc < the fact that the order had been refused on the -round that fetors sere directed to investigate and report generally and speci the whether there had been misfeasance or breach of trust on
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165.
There was a hopeful ring about the concluding words of the Official tiei&> ee might have set the mind of the casual observer at rest, but the to years' training In bonk liquidation uhicjj the writer had by this time mier-one, had caused hin to grow very sceptical, and he accepted the words rfththe proverbial grain of Balt, wonaering with a great curiosity what would be the outcome of the " expert accountant's" investigation.
Five days later the writer ventured to again address the Official Assignee, and, amongst other things, asked for the name of the "expert".
Later on, again, he renewed the request, but the Official Assignee never vouchsafed the name. It was "or some occult reason to remain o State necret.
Continuing, the writer said:-*' 7 gather from your letter that you have handed my list of interroratories to the investigating accountant, in order that he nay enbody in his report to you specific answers to such of them as concern the Bank's figures. If you have not, perchance, done so, night I • snpsest that you instmct hin definitely on these lines. It will doubtless involve your giving hin an order on the Bank of K. Z, for production of all t h e necessary books of account, officers' reports etc, of the Colonial Bank, "v it Is the only way of getting et whet the shareholders want to know".
Then the broad issue was put to the Official Assignee, thus:'tat we want to know now is broadly- there been misfeasance or breach °- trust, and, If so, by whom and in what way,"
In the first place, the Official Assignee carefully refrained from Bering whether he had or had not instructed the ' expert accountant to «ith the interrogatories ’.r his rerort, and we know not to this day, ouph one can hazard a guGor ■pha i he did not, do so*
The Official Assignee alt-aye pleaded poverty whenever information ht f ro-i him, and it «as strange, therefore, to find him, as the result c? t; - e application to the Court referred to in this chapter, instructing an ntert accountant" to .make an exhaustive investigation, with nothing in hana haj hin ~Ith, and declining to give his name.
lowever, in order to help tnis poverty-stricken bank liquidator oat ° 5,18 troubles and enable hin. to do hir arty, the writer made him the I’ollowhc offer:.
181
" If the Colonial Bank books of account, or any of then, are in Wellington, I am prepared on receiving instructions and an authority f ro „ you, to do my best to procure what information we want from them. I do this, if necessary, free of charge to you. I further offer to assist in Dunedin on the same terms, if that will hasten matters to fi. ality of some /-nj I suppose your expert accountant has had banking experience , but even so two heads are sometimes better than one in a case of this kind, especially as 1 think I may fairly claim to have Colonial Bank matters at my fingers' ends".
This, surely, was an offer which should have been welcomed, but the Official Assignee was not at all grateful and replied- Xam afraid that I cannot accept your offer of personal assistance, as the natter 1s purely ar. official one and must be doalt with by my staff which is already supplemented for this special purpose".
The Official Assignee evidently began to feel that the situation sas becoming decidedly volcanic and that he had better sheer off, so he prudently added- " I think it will perhaps be as well if I do not enter into a correspondence with you over this matter, as you will readily appreciate the fact that I cannot be expected to correspond with individual shareholders, ani I am desirous of confining myself to the discharge of my official duties".
This letter was dated 13th January 1905 and was the last with which the writer of this work was honored, 3e was not to be denied, however, and fired the last shot five days later, when he had sufficiently recovered from the shock of the Official Assignee’s rebuff.
As the letter summed up the Official Assignee's attitude, it is freely quoted from here:- lam disappointed at the tone of your letter of 13th instant. You seem to pay little respect to the fact that holders of upwards of 16000 shares throughout the Colony desired my appointment as one of the original liquidators of the Bank, and obviously,therefore, desired ne to obtain all information concerning the Bank's affairs. I am for this reason ( apart from the fact that I am representing at this moment the holders of a considerable number of shares in Wellington who did not previously support ne) hardly to be classed as an isolated shareholder making enquiries from you ao
167,
or less out of idle curiosity. I would point out also that when a petition from certain shareholders in Dunedin was before the House of Hepresentatives last the Premier stated that the shareholders had not exhausted their legal resedlea and that their proper course was to ask for information through you. (St questions which 1 put to you in ny last wore not unreasonable, but they nostly remain unanswered, including the most important of them- as to your Intentions in regard to a meeting of shareholders. I must take strong exception ■ tc the suggestion that I have asked you to do anything outside the scone of your official duties. But why should you- a Government Official- be reticent with ne, even if you are going to report tc the Court. Is every shareholder ihc desires legitimate information which can readily be given to be compelled to incur the expense of applying through the Court for it? If you were being Inundated with separate enquiries, I could understand your reluctance to correspond, tut that surely is not the case, fowever, as you refuse to answer the -• questions contained in my last, I must be content to await your report which ■ you say may be looked for at an early date. The reported absence of funds to enable you to procure expert assistance was my reason for offering my services, and I cannot agree that if you had availed yourself of my offer you "Ould have departed from custom, for you, of course, know that the law permits ?ou to employ experts, and I have often had the honor of acting for the - ‘iCial Assignee at Wellington In such a capacity and been appointed his iep-ty for the purpose of myself conducting examinations of witnesses and nrocuring evidence. This in itself, I should think, would be a sufficient Whlifi cation and Justification for you to appoint ne in a similar way. I certainly gathered from your first letter that you had put the matter into the ,aa is of an outside expert accountant, also the books- others -or whom I s =«hg had the sane impression. It is, however, satisfactory for one reason " h£t the investigation is being conducted by your own staff and in your o-... C "’ ice > °«cause the Government has the responsibility of seeing that all the bcoiE 50(1 Papers are fully safeguarded against destruction by fire or I° EB other ways ■
tohat conclusion is to be drawn from the attitude o_ th r ee U P to this point?
168.
He was an officer of the Supreme Court, but he was at the same time a servant of the Government.
As an officer of the Court be had a free hand to give what Information he pleased to the shareholders concerning the liquidation, without having to ask the Court's sanction.
As a servant of the Government he was aware that the Premier had said in Parliament that " the shareholders had not exhausted their legal remedies, and that their proper course was to ask for information through the Official Assignee".
This statement of the Premier was in attempted justification of the Government's refusal to grant a Parliamentary inquiry into the conduct of the liquidation of the Colonial Bank, although Committees of both Houses had re oo ram elided the Government to grant an inquiry, upon the petition of shar holders, into the conduct of the liquidation generally and particularly into the allegation that a sum of £127,960 actually received by the liquidators during the liquidation had not been accounted for.
Does it not strike the reader as strange that the Official Assignee should have refused the gratuitous services of a professional accounte having general banking knowledge and a close acquaintance of Colonial Bank matters?
Further, is it not singular that the alleged investigation wat commenced by an accountant on the staff of the Government, and, as the Offici Assignee has told us, that officer was taken off the work just as he was well into it, in order to fill a high position in the Civil Service?
Seeing that Ministers of the Crown were implicated in this banking scandal, would it not have been more seemly and would it not have given less occasion for suspicion if an outside pro esslonal accountant had been engaged to provide the material for the Official Assignee's report.
If the Official Assignee wanted a Government servant to sake the Investigation, why did he not accept the offer of the writer to assist that Government servant free of charge?
These are all pertinent questions, and the answers would furnish the key to the extraordinary report which the Official Assignee eventua. delivered to the Court and which is dealt with in the next chapter.
169.
Chapter X.
The Belated Report.
The truth appears so naked on my side
That any purblind eye may find it out. Shakspeare.
Two months after the Official Assignee had informed the writer that le ias ’ shortly expecting a report from an export accountant", the belated 'final report" arrived from the Official Assignee, namely, on Ist March, 1905, icre than nine yearn after the commencement of the liquidation.
This report replied to only six out of the 28 questions put by the inter to the Official Assignee. The really material questions were not anwered.
The writer, being very indignant, referred the Official Assignee to his own words-" Until I receive the report I shall not be in a position to reply to the various queries submitted by you", also to the writer’s reply-" I gather froi yonr letter that you have handed my list of interrogatories to the investlgatlng accountant, in order that he may embody in his report to you specific answers to such of them as concern the Bank’s figures. If you have not, perstance, done so, might I suggest that you instruct him definitely on these lines', s
The writer added- * I have now to request that you will be good BM ugh to furnish the information for which I have asked and which the report fees not furnish, and in particular full details of the amount 45127960 ’Wch you describe in your report as "payments with respect to 3,C,an accounts and items covered by clause 25 ( b and c ) of agreeme ' lf necessary I am prepared to pay the usual charge for copying these particu- * lrs roa the liquidators' accounts".
The writer at the same time renewed his demand for a neeti g ‘•“‘reholders of the Colonial Bank.
The Official Assignee's reply Is as characteristic of his pre »rief. Here it is in full:- Vour letter received. 1 see no otject “ * a nesting as my final accounts have been passed hy the Court and 1 *“»• nothing really to lay before the shareholders. As to the various your letter I am not in a position to reply to them ulthout calling
185
in the services of the accountant, and I have no funds from which I can pay him for such services. Your proper plan if you are dissatisfied with the re port io to apply to the Court in reference thereto".
Notwithstanding the mandatory clause of the Companies' Act isos he says- " I see no object in summoning a meeting".
Notwithstanding the Court's charge to the three previous liquidators and, therefore, to himself as their ’ representative" ( to use His Honor's words) as to enquiring into and reporting upon the question of misfeasance and breach of trust, the Official Assignee says-" I have nothing really to lay before the shareholders".
Notwithstanding the fact that the writer had offered his services free of charge, and that the Official Assignee had had two "expert" accountants engaged on an investigation covering about three months, he says- " As to the various queries in your letter, X am not in a position to reply to thorn without calling in the services of the accountant, and I have no funds from which I can pay him for such services".
It seems incredible that the Official Assignee could act in this * fashion without some powerful Influence behind him that was driving him into an indefensible position.
What influence was at work? Let us see if the "final report* throws any light upon the subject.
The Official Assignee therein says:- " The total loss on 261 accounts in B, C and D lists and out-payments under clause 25 ( b and C) of agreement, amounted to £432,203.. I find, after careful consideration, it would not be possible to give the results of losses on individual accounts without necessitating an investigation of 761 separate accounts*.
No doubt, some labor would be involved in tracing how all the individual losses arose, but this has not been asked- all the writer wants to know is why, in these circumstances, the Official Assignee took pains to present a garbled account of the outcome of the Vard Farmers' Association, or did so by accident.
The report says:- " An account in the C list which was a ade the subject of special investigation, namely, the Vard Farmers' Association for which a separate liouldptor was appointed, calls for special remark*.
171
That the account did call for - Bpeclal romark - no on 9 followed the history of this Association can deny. But what was wanted was a clear and straightforward statement of the actual position, beginning with the debt prior to the writing off of the £55,150 and ending with the actual loss sustained. The sane information should have been furnished in relation to Hr. Ward s account, the two accounts, for all practical purposes, being one.
But, instead of this, the Official Assignee started with the amount of the Association's debt on 20th June 1896, about seven months after the £65,150 had been written off under the Banking Act, 1895, and then gave particulars of certain transactions on the account. The result, if worked out, ahous a loss of £32,013, but the Official Assignee did not work out any result.
In order to arrive at the real loss on the \ ard Association account alone, on the basis of the figures supplied by the Official Assignee, the £55,160 must be added, which would give a loss of £87,163.
To this, again, would have to bo added such proportion of the unexplained £127,960 referred to on page 168 as might be chargeable to the Ward Association account.
Assuming, however, that the loss was only £87,163, there is a vast difference between that amount and £32,013 which the Official Assignee s report would lead one to infer.
The way in which the account was stated by the Official Assignee is Waaly nisleading, and it is difficult to understand why he failed to refer u the fact that £55,150 had been written off the bard Association’s account, tt “ B increasing the loss to the Colonial Bank shareholders.
Another singular feature of the report has an important bearl g tte way in Which the Official Assignee stated the outcome of the account.
Whilst giving the total losses on the B, C, and D Lists, and the tctal iowsea on the B List, the Official Assignee omitted to give the .otal C " a 6& 011 Ihe C and D Lists respectively.
Now, with the exception of two anal 1 accounts Involving c List contained the Ward Association account only. Xi, there < ° f * lcla l assignee had given the losses on the C List, or even we should have .noun at once what the loss on the Ward Association
187
account really was.
Let us try to work out the loss for ourselves.
The Official Assignee stated the losses on the B, C, and D Lists at £432,203
and the losses on the B List at 268,933
Tho losses on the C and D Lists together, therefore, amounted to the difference £163,270
Now the total debts in the D List were £102,274
and the Hon, Oeo, McLean stated in his defence, dated AugustlB97 that there had been recoveries on account of the D List at that date -220,902 and that the recoveries would amount to £40,000 But putting them at £30,000
the losses on the D List would amount to, say, 72,274
This would leave losses on the C List, say, £ 91,000
which is within £4OOO of the loss arrived at on the basis of the other figun supplied by the Official Assignee as above.
The losses on the Ward group of accounts may be put down at not lei than £lOO,OOO, including the loss on Mr. Ward's private account with the BaaJ to which the Official Assignee does not allude.
In the course of the examination in the Supreme Court Dunedin, on sth June 1896, when the proposal to compromise the debts of the Association and of Mr, Ward amounting to £168,000 was under consideration, Mr. ward was taken carefully through the figures making up that colossal debt which was piled up in the marvellously short time of 2+ years, and the following questl : was put to hln:-
So that the Colonial Bank or the liquidators stand to lose £lOlOO and Mr. Ward replied:-“ That is so".
If the shareholders of the Bank ever get at the truth- which is very doubtful, unless the funds for taking proceedings against the directors are forthcoming- it will in all probability be found that the estimate of Jun 1896 was not very far out.
Reading the Official Assignee's report critically, one is impelled to the conclusion, however reluctantly, that, being a servant of the Oovem-
188
,enti which included Sir Joseph Lard), he was desirous of showing the affairs of the Association of which the Minister was the Managing Director, in as favorable a light as possible.
On no other ground can the writer account for the Official Assignee venturing the bald remark that c*40,000 of the Association's debsntures had been paid in full and omitting to add how much in the £ had( or had not) been paid on the remainder of the debt.
Sir Joseph hard has declared In Parliament that he never raised his little finger to influence in any way the ordinary run of matters, either as effecting the Official Assignee's administration or in any other respect.
The Minister is entitled here to the benefit of his denial, though to say have raised his first finger. Nothing, however, can remove from the till of the writer the impression which the Official Assignee's one-sided report on the bard Association account has made upon it.
It is appropriate to close this chapter with an extract from a letter toe the Liquidator of the hard Farmers * Association to the Cireymouth Star at the time the Official Assignee's report was published.
The letter says:- " I regret that his statements are incorrect. As the liquidator did not take over the estate on that date (30th June 1!M) the report is misleading and incorrect, and I call attention to tnese Miracles In the interest of the public in general and the shareholders of *fo Colonial Bank in particular".
The liquidator proceeds to call the Official Assignee to task !tltlEp that £40,000 of the Association's debentures had been paid in full. ,e Mints out , correctly enough, that the Colonial hank held £50,000 of Ventures- not £40,000 as the Official Assignee's report would lead the horned to infer-and that 243,500 was paid to the Colonial Bank on account C?ti « £50.000- This would leave £5,600 of mortgage debentures having a first ‘force over all the assets of the Association unsatisfied. If this was so, the rsaalnder of the debt could not have returned one penny in the t, and “fore did .v, the other creditor.- cor- in?
189
Chapter XI,
Covering up the Tracks.
This hour’s the very crisis of your fate. Dryden,
Having delivered himself of the irksome task of filing his report, extracted from him at the point of the bayonet, the Official Assignee was within easy reach of his haven of reat- an order from the Court dissolving the Colonial Bank, which order was to relieve him of the liquidation and of any responsibility excepting for any of his past acts of omission or commission.
When the application for en order compelling the Official Assignee to report was before the 001111: in August, 1904, the Judge asked whether the dissolution of the Bank had not been ordered.
Mr. Sira, counsel for the applicants, replied in the negative and said ( Otago Daily Tines , 13th August, 1904) :- ’ if it had not been for some question of an investigation by a Parliamentary Committee, such an ordei would probably have been asked for."
His Honor;- VJas it not Mr. Graham’s duty to apply under the rules to : dissolve?
Mr. Sin:- An order was not asked for before because there was a ques tion of a Parliamentary investigation, and Mr. Graham (Official Assignee) was told by the Speaker of the Legislative Council to keep all the records in viei of such enquiry taking place.
His Honor said " he did not see how that could affect the natter, Mr, Graham's duty was prescribed by statute."
The Official Assignee was not present in Court up to this stage, hut was then sent for and questioned by the Judge.
Kis Honor:-■ Was there an order dissolving the Bank?
Mr. Graham:~ Ko, your Honor, I got notice from the Speaker of the House and postponed making application.
His Honor: - Cf course, that has nothing to do tilth your statutory duties under the Act,
It t?iil be seen tnat the suggestion as to a dissolution order caae from the Court, Mid the Court further was clearly of opinion that the Official
175.
Assignee ought to have applied for an order immediately after the final dividend had been distributed.
The Speaker of the Legislative Council seems to have token the very unusual course of Ordering the 0.. ticial Assignee not to apply for a dissolutlon, in view of a Parliamentary .Inquiry,
What could have prompted the Speaker to do this? 'The circumstances met have been very peculiar; and what caused him to remove the embargo?
The Court, when suggesting a dissolution, must have been under the lipresslon that its charge to the original liquidators, of making a B cereful investigation into the allegation of misfeasance and breach of trust which were then made by affidavit, and of reporting whether any of the directors or officers had been guilty of either or both of the offences alleged, had keen answered.
But the Court’s charge had not in August 1904 and has not to this day test answered, and the shareholders of the Bank are justified in saying that tie Court has not fulfilled its functions in this respect, and that they have Buffered in consequence.
The Court undoubtedly accepted a very grave responsibility when refu•log the shareholders ’ application in 1896 for an inspection of the books of “ e Sank by their own expert accountant, as well as in appointing two ex-offi-c *re of the Bank and a third man, who was not regarded by some as sufficiently as the liquidators.
Some months later, the Speaker of the Legislative Council must ha' e the embargo upon the Official Assignee, or, backed up bj the Court 'sauries, he must have resolved to defy the Speaker’s edict, for the Official kaigaee applied for a dissolution order and got it, the Court at the Ba ” e “■ another order- whether upon the motion of the Official Assignee or lta#f# motion, the writer can not say- directing the destruction of the books *“*»"• the Bank on Ist November. 1905, unless the Court ordered in the to the contrary.
j _ low bv t#he Bsuk** No * section 27 of the Bank Agreement- which was m I,W renders it on ... -1 * »•> “‘ 1 “ d “ *“ *"’■ «• - ... ... Colonial *»« ’ »“> " 4 ““’“ U “ “*
191
selling bank", but inferentlally, of course, not after dissolution..
The writer drew the Official Assignee's attention to this in Jgjj u 1905, and added * This will not have escaped you and will doubtless cause yoto refrain from applying for a dissolution of the Bank until everything has been cleared up to the satisfaction of s,ll concerned, including those -’or I am acting".
Tha Official Assignee appears to have ignored this reminder, and to have considered it no part of his duty to notify the writer of his intention t apply for a dissolution order.
A petition from the shareholders of the Colonial Bank, praying for an enquiry into the conduct of the liquidation, was at that time before Parliament, and it was deemed advisable to await the result before taking any action in connection with the proposed destruction of the books.
A petition had been before the previous Parliament, and had been favorably recommended to the Government by both Houses, but the Government had refused, or at any rate had failed, to comply with the Committee's recommend ations.
The second petition was passed on to the Committee of the Lower louse as a matter of "urgency", but months passed before the Committee brought down their report. It was again, however, a favorable recommendation. The same happened in the Upper House.
The Committee's report was brought up for discussion in the Lower 'louse one afternoon and "talked out" by the 5 o’clock adjournment.
Phe Opposition made no effort to force the Government's hands in the matter, although it was one of the finest opportunities they have had to coupe compliance with the recommendations of two Committees of two successive Parlia ments on a question of the gravest Import to the Colony.
Moreover, the recornisod leaders of the Opposition who are in buslne in Wellington declared to the writer, after theCommlttee's last recommendation had been talked out" that the wae d eac i and that they ddd not intend to do anything to revive it.
The writer claims that the public from Auckland to the Bluff are »H1 the sharehcldam cf tha Colonial Bank in their almost superhuman efforts to
177,
obtain justice, ana that it the Opuosition had fought a pitched battle and, if necessary, gone to the country upon the question of justice to an injured section of the community, they would have turned the Government out of office.
To take this stand, however, did not suit the Opposition party, principally, no doubt, becauoe whenever the Colonial Bank inquiry was seriously pressed upon the attention of and discussed by the Opposition, the Government .ireys talked loudly about a Bonk of lew Zealand enquiry also. The Opposition then shut up like an oyster, because some of their political friends of the past vere not too creditably connected with the disasters that overwhelmed the ■ latter bank.
Then, again, the softening influence of time and ether considerations - have worked wonders in the direction of converting the strictures of 1895 into the condonations of 1905.
Thus the unfortunate shareholders of the Colonial Bank nave had to '• :oa^9n d as&inst the disadvantage of appealing to a Parliament composed of men g lice the liquidators of the Colonial Bank, have not been free to do their duty and are in active sympathy with Sir Joseph \»ard who would, of course, be indirectly the chief sufferer from exposure if the iniquities of the liquidsliot of the Colonial Bank were fully enquired into by an honest Parliamentary tribunal,
Parliament, however, having failed in its duty, it became necessary certain shareholders, through the apency o' the writer, to do their oe&t to v^e records of wronp-dolng fron destruction, with the view of subsequent Poceedinps,
Accordingly, the writer commenced to agitate in the puclic pres- and ot public platform.
Several meetings were held in Wellington City end suburbs which were Vely attended by the public, who showed their sympathy in a practical way.
The indignation aroused In Wellington by the proposal to destroy the °‘ ‘' he spread with lightning rapidity over the Colony, with the * Ut that Dunedin Supreme Court was moved for an extension of tine and °oUn h° s tponed the tun ing of the bocks for a further period of six months, laosly - ®til lßt Mayfl9o6>
193
In the course of his addreaces, the writer, with a full sense of responsibility upon him, brought specific chargee against the directors and managing officials , as well as the liquidators of the Bank, and for the purpose of proving his case against them, he was compelled to introduce some of the peculiar dealings of Sir Joseph Ward and of his Association with the Colonial Bank.
Stung by the truth of these utterances. Sir Joseph Indulged in a violent attack upon the writer from his Ministerial seat in Parliament, and so demonstrated to every unbiassed thinker that he was a guilty man.
What this courageous i.iinister of the Crown said from under cover of Parliamentary privilege is on record in Hansard as the second monument to Mi lasting shame, the previous tirade having been hurled at the writer because be was the means of causing the Dunedin Supreme Court to reject the proposal of June 1896 to compromise the debts of the then Hon. J, 3. Ward and of his „s3o- I oiation to the Colonial Bank, which act saved the shareholders of the Bank abut £20,000.
Sir Joseph hard declared in the House recently that his solicitor aid shorthand reporter were present at the writer's meetings, and that he would have prosecuted the writer criminally for what he had spoken concerning hi; if his solicitor had not advised that the st te o " the criminal law would not admit of his prosecuting.
The public were then startled by the sudden appearance of a Crinlnel Code Amendment Bill No. Z, just as the session was about to close.
Barlier in the session, the Criminal Code had already been amended. It was suggested by those who desired to cover up the real motive for this Sc.2 Bill that it was designed to suppress Messrs. Melkle and Taylor, who had for o year and more been severely handling the Premier, but if the measure had teen Intended for them, the amendment would surely have been embodied in the wn.enr ing Bill passed in the earlier stage of the session.
?ew Ciin entertain a doubt but that the 80. 2 Bill was designed to protect Sir Joseph Ward from the criticisms of the writer- indeed the orocthis is to be found In the words spoken by Sir Joseph in the Bouse during tf® prolonged debate on the Bill.
17 9*
Here are a few extracts from his sppeech { Hansard N0.33, 19th Oct. 1905)
* As a free man outside Parliament I or any one else should be able to take up a prosecution against any scoundrel or blackguard who chooses, for reseons of his own, to traduce the name either of myself or ay family"
• The whole country is asked to take the word of a our who professed M be acting from disinterested notives on the subject. The most venomous lies cane out of the mouth of a man who originally was paid to do his best to put ce under. • *
I do not blane the creature who has maligned me for making his living by such means- he has a right to make it in this way if be thinks proper.., *
I want to make it clear that if I get the opportunity I will make wee of these people who are ready to act a dishonourable part towards a man aiaply beca:se he has attained to a high position in public life, which he has fought for fairly, and won with the help and assistance of his fellowmen and yoeea In this country, wince, and regret that they have not left me alone."
If those who say that will do so in such a way that I can prosecute t-fcec, I win undertake to do it at once".
Then members of my family were introduced into this speech by this at his meeting", ( Mr, Taylor M. H, R. who was impromptu chairman at the *rUer s meeting, here interjected " No reference to them whatever , Mr, Paylor absolutely correct. The writer made no allusion either directly or indirectto Sir Joseph bard’s family, and characterises the st tement that he did so 48 a base lie which this degraded Minister dare not repeat on a public platform. •'as already been challenged to do so, and has since been on a Wellington Wstiorc, previously announcing in the newspapers that he would reply to tne “tacks nade upon hin outside the douse, but hot a word passed his lips in ’ ereßce to the natter. Discretion was the better part o' valour.)
Sir Joseph »»ard described the writer under cover o IrlVil8 " e > iL the course of nis violent harangue as a " miserable, f crawllnp creature - ( but the epithet is more auplicable to himself UlB he " h ° is the wretched man and the coward. It is he who has the skeleton
195
in the cupboard, the rattling of the bones of which he cannot endure, it i 8 he who la the coward, for shooting from behind the hedge of Pari 1 amenta**” lege and not daring to face a Wellington audience on a public platform and repeat the dastardly words which he has aimed at the writer.
What did Sir Joseph Ward aim at when desiring to prosecute the writer criminally? Was it to satisfy a craving for revenge that he wanted to incarces rate hi critic, or was it to get him out of the way of doing further damage to what a New Plymouth celebrity has just described as Sir Joseph's " vindicated honour and fame" ?
Surely if Sir Joseph considered his fair name was being besmirched, there was a remedy at hand by civil nrocedurc!
Why did not this worthy knight avail himself of that remedy? bas his reputation not worth the sum of his own costs, or was he afraid that the charges would be sustained?
When twitted in the House with his failure to proceed civilly in ■ order to ' vindicate hie honour and fame", he excused hinself ou the ground 1 which has been taken up by many other men of his stamp, namely, that his assailant was not worth powder and shot, and that he would have to pay both sides' a costs I
This ridiculous statement ca.used on outburst of laughter in the House, and a member remarked that Sir Joseph would only have to pay both sides costs if he failed to " vindicate his honour and fame"!
Sir Joseph had evidently fallen in badly, but with his usual sanr.froi begotten of frequent similar " corners", he boldly announced that although, in the ordinary course, it was not so, he had as a matter of fact on one occasion to pay the costs of both sides, notwithstanding that he won the suit!
This statement was received by the louse in silence. No doubt neater with their sympathetic feelings towards Sir Joseph bard getting the Upper hand with them, thought it would be unkind to suggest that such a situation could not arise excepting in a case where, in order to save his face politically, other side permitted him to enter up judgment against then upon conditior that they received some consideration, including payment of their costs.
For the sake of example, supposing Sir Joseph ward- whose auscspt— l
181.
Uty in natters affecting his honor is well known- were hurt at soaetning published in a newspaper, and that he issued a writ claiming damages for libel, and supposing, further, that ha had not the ghost of a chance of succeeding in his action, but, for the aaie of saving his face, the proprietor of the pauer «as willing to insdet an ample apology and consent to judgment being entered up against him for, say, one fe.rthing damages, Sir Joseph bard might feel very grateful to the owner of that paper for getting him out of tne fix, and sight be willing to show his gratitude in a variety of ways, including the pay-sent of the newspaper proprietor's costs as v?ell as his own.
It may have been a case of this kind that Sir Joseph bard referred to, Ho can tell?
However, coming back to that monument of folly, the Criminal Code Aaendrcent Bill No# 2, the Government made a big effort to rush it through in one sitting as originally drawn, and actually succeeded in getting it through in one sitting a c amended, the universal opinion outside the louse being that the 3111 as amended was far more dangerous than in its original form, bo much bo that there are sonq*. who think tnat the Bill was never intended to be passed in its original form, but was drawn to include private slander so as to cover the reel motive for the Bill, which was to prevent the exposure of a public Jan's offences by means of the public platform.
Had the Bill been originally drawn to include public slander only, its nission would have been too glarin'- to escape the perspicacity o- menbe.s.
A remarkable feature o'* the debate upon the UII was .he stone set up i n Committee. It was well sustained by members of the Kew Moeral p *rty, assisted by a few waifs and strays from the Opposition Party, but tne Opposition proper significantly held aloof, ana so virtually approved of a Pousure which has been universally condemned from Auckland to the ’’luff.
But the surprise cane in the suddenness of the collapse of the ’ stonewall*, just when connoisseurs outside the douse were confident that It ou Id be sustained lone enough to 1-111 the Bill.
.ho .iioiißd " compromise » The justification pleaded by members was the aHepea ,hlch »*■ Just what the .promoters of the 3111 wanted.
In acceptin'- the comprise, the stonewallera were either very
197
or very stupid, for the defeat of the Oovemnent in the House on this misohie vous measure would have meant their certain defeat at the General Ulectior
This was opportunity N0.2 which the Opposition Party threw away, ar yet they continue to hold forth upon the iniquities of a corrupt Oovemnent.
They waste time in heckling on snail side issues and let broad isj, ~ go by default.
185.
Chapter XII
The Coercion Bill.
It was Imposed upon us by constraint
And will you count such forcemeat treachery? - J. Webster.
The Directors of the Colonial Bank have pleaded that the Agreement between their Bank and the Sank of New Zealand, which was ratified by the Bathing Act of 1895 was the best bargain they could drive at the tine, and hsve argued that a sale of their business upon the terms of that Agreement ..'an preferable to the alternative of writing down the shareholders' capital and uhlng a call to strengthen the position of the Bank.
This view was not taken by many of the shareholders at the time, and the outcome of the liquidation has justified the opposition of the minority to the scheme which the Directors had carried out, not so much in the interest of the shareholders as of a certain favored connection of the Bank, namely the Jot. J, Q, Ward and his Association.
It is interesting to note that when the first proposal to sell the Sash taa before Parliament in September 1894, it was blocked by the Banking Act of that session, which prohibited the amalgamation of the Bank o. New Zealand with any other bank without the consent of Parliament,
By that time the Bank of New Zealand had become a semi-State Bank, *lth the Colony's guarantee of £2,000,000 at its back to prop it up, an Government had then the whip hand of both institutions, being in a position lo dictate the terms upon which It would allow any other bank to amalgamate 'lth the State-guaranteed Bank,
Speaking at the shareholders' meeting on 26th September Ho °- Oeo. McLean excelled himself in the veracity of his words. He sal - Colonial H&nk was "exceptionally strong’ and that the Directors Client enquiry"; that it had a reserve fund equal to 17 pe-cent Ul and that * no other hank could show anything near that proportion .
This, of course, was all so much claptrap, designed to deceive and thro ' Oust in the n » the deluded Shareholders.
■ *** KUC WyOB OX UtUUuuu But he went on to tell his -pea about the agreement that had about
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a fortnight previously been laid before Parliament,
He said negociatlons took place " resulting in conditions of seal garaatlon under which the Colonial Bank shareholders were to be freed from further liability and receive £400,000 fully paid up shares in the Burn. of j, # . Zealand, the Colonial Bank assets and liabilities to be taken over by the Bank of Now Zealand. The Government having sought to impose additional condl. tlons which were deemed objectionable by the Directors of the Colonial Bank the Directors at once put an and to the negociatlons."
This was an acceptable proposal. It would have given the Colonial Bank shareholders fully paid up shares in the Bank of Hew Zealand pound for pound with their holding in the Colonial Bank of Hew Zealand, instead of the Five shillings and sixpence in the £ which they have received under the agr««. for sale a year later, and they would have had the security of the State's guarantee.
The Hon. Geo. McLean has told us what caused the scheme to fall throng It was the " additional conditions" which the Government " sought to Impose' , and which " were deemed objectionable ",
It would be interesting to know what these objectionable conditions really were. The reader should note that they were sought to be imposed by to Government, not by the Bank of New Zealand!
Can there be a doubt as to their nature, taking what followed Into consideration?
The reader knows that a year later the salvation of Ur. hard was brought about by the writing off under the Banking Act of £56,150, the effect of which was to avert the consequences of the ex-Manrglng Director having need the funds of the Association for his own private purposes.
Vthat did ills Honor Mr* Justice Williams say on this point? Here is on extract from his judgment of June 1896;- " His (Mr.hard's) private account with the Association was in debit £5%150, shoring that h0 freely used the credit of the Association for his own private ventures,"
Now the Official Liquidator has placed It on record in the Supreme Court that Mr, hard’s use of his Association’s funds was " in the face o. an agreement entered into when he floated himself into a Joint-stock conp&W,
185,
that he would not use its funds for the purpose of his Ocean Beach Freezing lorks.
There has been no attempt by Mr, Ward to refute the serious charge of sleenplying monies Implied In these words of the Judge and Liquidator; and one can thus well comprehend how dangerous was the situation in which the exHanaglng Director of the Ward Association had placed himself.
Had the Banking Act 1895 not been passed, or had it not Included the special clause releasing the Association from £55,150 of its debt to the Colonial Bank, Mr.’.'ard in turn end as an essential part and condition of the arraagenent being released from his debt to his Association, the shareholders of that Association might have, ar.d no doubt would have, token summary proceedings against him which might have cobs him his liberty.
T&re was, at any rate, the risk looming large on tto horizon,, and it bad to be avoided at all hazards, even at the cost of the honor of Parliament,
The fact that a loss which would have fc lien on the shoulders of the shareholders of the Ward Association was transferred to the shoulders of the Colonial Bank shareholders was a detail compared to the salvation of the hero o. the hour.
It was known that the Bank of New Zealand would, or might, refuse to takeover the Ward Association’s account, and that the Association would in all probability go into liquidation when the truth would be known end the trouble »ould commence o
It was no* concidored safe, bo far as the amount of Mr. 1 his Asoocla,tloa wrc concerned, "to count upon tb? Court s to ***** off, bo, the time being ripe, and the Colonial Ban’: directors on their kaoeB » It was done by the lawf':! and effective means of an Act of Parliament.
That those who engineered this infanous arrangene-u ,Mt Splayed the wisdom of the serpent is proved by the Court s refusal ““'tiop either of the two compromises of the Ward indebtedness which were before it.
Tile effect of clause 18 of the Beak Agreement was to ne-- ** U ' for there ■:ar. -.o more Justification for converts a loss f- t,W4 *-V oion lato a 1063 o; th 9 Bank , than there would he for cenpeMlug "• 4 b r Aqt of Parliament to pay Mr, B'a butcher's bill.
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The whole transaction was unconstitutional and iniquitous, and i 8 proof positive that Mr, Ward was in a tight place, otherwise such a blot would never have fallen upon the Colony's statute book.
The clause which saved Mr.Ward was the following:-
* With respect to the accounts appearing In the said "o’ u st the selling bank shall Indemnify and protect the purchasing h uk against any loss or deficiency on the realisation of such accounts respectively, provided that the purchasing bank shall, immediately on this contract taking effect, write off the amounts standing in the rigat-hand column of the "C" list, and credit the respective accounts in such list with the amounts so written off "
It is singular that no notice was taken of this clause in the louse, There is nothing very ambiguous in the wording of it either. All that Is missing is the name of the party who was being specially legislated for. Tte astute minds of some of the members of the Opposition Party should surely aa?e been equal to the occasion.
But the vision of these gentlemen was not clear enough to enable them to see a hole through a ladder, or was it an illustration of the proverb-*None are so blind as those who tent-sis"? Before concluding thlf-Hchapt r, th ■ rV.dei should b) in possession cf none sworn tanti ony of ' r; Vlr-**rt>- cne of the deponed liquidators- when before.Mr.Justice Williams.
Referring to the promissory note given by Mr,hard for the £65,150 written off, the Judge asked:" What is the point of writing off the amount of this particular bill?", and Ur.Vlgers answered:" My own impression is that thf was the amount the account ( Ward Association's) was supposed to be short. A 1 the rest was supposed to be good".
Mr.Vigers appears to have suggested by th*s that the writing off of 555,150 had no connection with the fact that it was the exact amount of Wr. Ward's private debt to his Association, and left it to be inferred by the Coui and others that it was a mere coincidence that the amounts agreed to a pound*
All the rest ( of the Association's debt) , said Mr-Vlgens,"** B supposed to be good".
187.
This testimony was given only about eight months after the Bank Agreement was executed, yet, as one of the liquidators, he was then askinj tte Court to sanction the writing off of nearly £50,000 morel
Ig It reasonable to expect the thoughtful to believe that Mr.Viger, »as totally ignorant of the fact that the amount written off was the exact mount of Mr.Hard's debt to his Association, and that at that time it was blown that a very much larger sum would be required to clean up the Association's account with the Bank?
203
Chapter Xlll.
The Anomalies of the Law.
If a man would register all his opinions upon love, politics, religion and learning what a bundle of inconsistencies and contradictions would appear at lasti- Swift.
Having been honored at his first public meeting by a perfect bevy of fully-fledged and half-fl .ddged solicitors and their shorthand reporters, the writer of this work thought it advisable to be himself armed with a relkn report of his utterances, in case any of the reporters were a little hart of hearing and made a mistake or two.
Accordingly, he made various efforts to secure the services of act: independent and competent reporter. But this was no easy matter, and be -as f at length compelled to fall back upon i»r. 2. J. Le Grove, who has had an office in Wellington for many years, upon tne window of which is inscribed * professional shorthand writer", thus indicating that the man inside was open to engagement by the public upon his usual terms.
Mr. C. J. Le Grove is considered to be tne most competent and reliable professional reporter in the city, and as the writer at times speaks at what is considered a fairly rapid rate, it was important to him to have a quite capable reporter.
Conscious, however, of the fact that Hr. Le Grove derived a large portion of his business- both as a shorthand writer and vendor of typing aaclii from the Government, and knowing the way the Government has- not only of distributing its favors amongst the faithful but of also takirg them away frcs ,J faithless, the »rlter of this work had qualms about the fairness of engaging that gentleman.
There was, however, no alternative open to him. Selying, therefore, upon his favorable experience of ur. Le Grove on a previous occasion when be 1 reported a very strong speech for a certain aspirant for parliamentary honor, the writer engaged him to make a verbatim report of the speech to be deli' rt in the Town Hall, Wellington, on 27th September 1»05 and to supply the *ritewlth a typewritten transcript of the report.
204
The fee was fixed at five guineas for an estimated speech of two hours which tine was not exceeded.
The writer had previously delivered two addresses on the sane subject and both of the 'Wellington ne/spapers had re "rained from publishing tne natter contained in those speeches, alleging that the present state of the libel law prevented their doing so. This kackneyed phrase is one to which Wellington newspaper readers have long since become accustomed, and it is not now accepted as evidence by any means that the matter refused publication is really libellous.
'owever, the 'Wellington dailies did report in a general way, and Indicated vorv clearly w.nd unmistakably that the .riser's remarks were of a vary strong character and that specific charges of uttering false balancesheets, etc, had been brought against certain individuals whose names were not uentioned.
It was thus common knowledge that the address which was to be delivered on 27th September would in all probability be at least as strong as the previous addresses, and ..r.Le Grove oust have been remarkably unobservant if he had not the same knowledge respecting their tenor and strength.
But his son, ,r.Le C-rove- to whom the Government is also much indebted for valuable services rendered, and who as agent tor his father actually nade the verbatim report- afterwards maintained in Court that he had no Ho?., when the contract was entered into to supply a transcript, that the speech ift " likely to be of a character which he subsequently assumed to be libellous.
The verbatim report was, however, in due course taken, and ar.Le drove Jailor ann the writer le't the Town fall toretner homeward bound.
fir. T. "aylor, a. H. H., had acted as impromptu chairman at the aBs tln r and had asked the reporter to supply him with a copy of the speech, Possibly intending to bring tne hatter before the House la the Interest of the Colonial hank shareholders *
Alluding to this request, yomi Mr.lio Grove asked whether he oinht the copy for which Hr.Taylor had asked. He admitted in Court that he 11(1 30 because he wanted to make a hit out of the celebrated Prohibitionist. ,l! " ,rl tor seid * Ho*; if my copy was supplied at all, It would be BUPP *“»e 'Titer,
205
The transcript was to have been delivered to the writer 3-11 two time, but after several delays, which were always excused by all e ed o- buslness , Mr * Grove positively declined to fulfil his nis contract in O' the following letter:-
3rd October 1905.- "On a perusal of my notes of your a ddresi - M the Colonial Bank proceedings, I find that there is so much that Is de -’ Wa . concerning several men in important places, including injustice Killian J \ whose Court I am an officer, that I deemed It prudent to take legal advl c ] J to the position I would be placed in if I typed my shorthand notes and handeo the transcript to you. I am advised that, while you are not to be made crlmW ly liable for slander since no criminal action lies against a man for Bpoiet defamation. I should be liable under the Criminal Law for having written the defamatory statements referred to, and having handed them to you for public tion. I am advised that it would be i.-prudent for ne to place myself In J a bositlon. I have no purpose to serve in this matter save that of following j ny ordinary calllng » and I decline to be exposed to the risk of the proceedin'; which, I am advised, may be taken against me. For these reasons I must respect, miy deoline t0 the notes I have of your address!
pon receipt or this letter the writer commenced an action to recover damages for breach of contract.
‘he caae wa * heard and the defendant, whilst admitting the contract, claimed that he was justified in re-using to deliver what he alleged to he defamatory natter to the plaintiff because the defendant became aware, after entering into the contract, that it was to be circulated amongst the shareholthe Bank, and that, were he to carry out the contract, he would be assisting the Plaintiff to commit a civil wrong on persons * high In office’.
only witness for the defence was young Mr, Le Grove, who made tea shorthand renort o*<j _,. + .* - - , n as evidence a transcription of certain alleged I extracts fron that report.
hose extracts are set out here in full, in order that the reader ,-tj form his own opinion as to the merits nentc 0.. tho case. The fact that they nert 3iere extracts, the context w Q -i„ context being carefully omitted ( which was objected to at the trial) should be noted.
BUt ' aUhoUfih inaccu ™ te in places, the extracts are on the whole
191
correct, as far as they go, and the writer repeats „ a repeats and confl TOB here in wrHin every word that ho then spoke. He Is , 16 ?rePared to to justify every charge which he nade at the meeting of 27th <3ento-*v s tfl S ®Ptenber 1905 or at any other neeting.
Where the report is inaccurate hj. inaccurate, the writer has commented within brackets
• He noved the Court for an order to seine ( should read W) those books that are going to be bum on tbe Ist Kovr. ud „ were told then that our order was reused on the ground that the permanent liquidators were appointed. They were appointed by the Bane judge who refused our order and they were specially charged with the duty o: making a searching investigation into the past managenent of the Bank with a view to discovering whetheWad been nisfeasanoe or breach of trust on the part of the Directors or officers of the bank, and they ./ere also specially charged by that same Judge with the duty of commencing such proceedings either criainal or civil as they nay be advised, and yet that same Judge said they had done their duty and we had no cause of oopplalnt. ( The words "and yet that sane Judge down to the word " complaint" were never used hy the writer, nor words to that effect. Moreover the Judge has never nade use of such words, so far as the writer is aware). We say they have not done their duty and we shareholders have not had the protection ot the Court we ought to have got. The Act says that the Court may °* its own notion do certain things and what we say is- that the Court should of its own notion have seen that certain things were done.
That is quite palpable, the misfeasance and breach of trust that the Directors of this bank have been guilty of. It can be proved by the “hold of their official documents and by the utterances of the President Of the bark The provisional liquidators were given a distinct advantage "ron the start, and it is interesting to read what the Judge said on this very point, and yet notwithstanding his remarks th_ Judge appointed these provisional liquidators ( This reiers t° the provisional liquidators having access to the share register
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for the purpose of canvassing shareholders for nroxies aj-d rerußinf! s i El _ lar access to the shareholders nho were 'unportlng the claim? n<other caadi. dates). The liquidation mbs taken out of the hands of our ovn liquidat the Act of 1901 end placed in the hands of an official who was an officer of y, Court and at the sane tine a servant of the Government This I think shows how harmful au"t be the effect of this Act if von you CODBiigy that ( should read ’ th-'e case of") a company which is in liquidation in a Minister of the Crown la heavily involved, it is impossible to say that tha4 official of the Court being also a servant of the Government, is completely-^ 1 to do his duty When the Official Assignee asked the Court’s If sanction to distribute this Sll,ooo as a final dividend, I maintain that the Court should in consequence of its previous serious charge to the liquidator?*'’ have made enquiries, but the Court did not do so, and it -ranted the order.,,,* We maintain that was a disqualification, and the whole thing should have been ' gone over again, but yet the Court appointed these men ( This ro ers also * to the provisional liquidators’ refusal to give the shareholders access to we * share register) There is no room for doubt that there .is " mis- easanoe and breach of trust on the part of the Directors and officer* of j that hank( the Colonial Bank) The shareholders whom I ret* sent are unable to bear the cost of any proceedings against these delinquent!' : irectoro I ea y pp a p a grave charge lies against the Official Assignee as an officer oi the Court and servant of the Crown, for palpable neglect of duty, and also against Kir. Vigers who -was one of the liquidator od an Inspector o- the >ank With a view to paving the uay for the -imposition of objectionable conditions ( these were the objectionable f conditions’ referred to by the fon.Geo. -cLean), I say certain appointments ' to -he Bant of few Zealand. Hr. Watson, who was previously Inspector the Colonial Bank, was appointed on 12th October 1894- about the tine of fi> legislation I am sneaking of- President of the Bank of New Zealand. He van J appointed by the Ministry, and not by the .directors, and he exercised his vjto ( iven to him by the Government) in a way which rendered him liable to the V charge of being personally Interested in the acts which he did ran., -c Jons r ;i erred to were the purcha.se by the Bonk of New Zealand
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of «2 0,000 debentures of the Ward Association, also a draft for ,£5,000 drawn by the Association or Brooks & Co., London, which was supposed to have oats to cover It, but the oats were of the "phantom" brand already mentioned in this sort) The whole thing was a deliberate fraud ( this refers to the »riling off of the £55,160 by the Banking Act, to save Mr.Ward) concocted and contrived and carried out for the express purpose of preventing a prosecution for their funds, and further, sums were actually written off to snob an extent that some shareholders were actually moving for a prosecution and the affidavits were actually filed but were withdrawn by threats of linages If they dared to proceed with this prosecution ( This refers to the McCaughan Incident- alias the "Mysterious Han from Melbourne" with ihloh the reader is familiar) These things can only be compared, and they are identical, with the transactions of yihitakor Wright at Home, the principle la the same ( although the amounts are different), but Whitaker .’right got seven years { this refers to the figure manipulations and bogus cheque and draft transactions between the Association, the Colonial Bank and Mr, Ward, which had all been particularised by the speaker -!.r,Le Grove omitted to note that the speaker added " I do not say Mr, Ward ought to have got seven years, but I do Ba j that he ought to have undergone his trial") Now I an going to close up by formally charging, as I previously did, the Directors who put their signatures to this balance-sheet { to Blst August 1895) of the Colonial Bank, “d particularly the Hon.Geo. McLean, after ( should read "with ) having Ea4e ( should read "issued) a balance-sheet which he and others knew to be ?als e. r Qn alive t0 (ny responsibility for ) the statements I make on “Milo platform. There is proof that the Directors knew the balance-sheet Us f »lse before they submitted it to the shareholders; they did an act which Wags them within the statutes of the colony, and I think something should be to compel them to disgorge some of the funds which they distributed year lfter year out of capital. I can ( should read “ could") read you statements '°y the Hon.Geo.McLean which would prove to you how utterly false these Glance-sheets of the Colonial Bank were"...
U Bi n be seen that read as they were hy the Court, the above extracts ”" re The Magistrate, however, took upon hinsel* the V * 'in my opinion these extracts contain a iarge anount of libellous
19%.
matter".
Surely, in the absence of any evidence supporting the theory the statements in the extracts were not true, the Court was not justified 1 1 finding them to be libellous.
If statements concerning any nan- no matter uhether’hleh In of-i',* or otherwise- are true in substance and in fact, and are made in tha public interest and without malice, they are justifiable and there is no llbal
The writer is prepared to prove the accuracy of any charge that le made at either of his mootings, and s.s they are all set out in this work it writing, there can be no difficulty in bringing him to book if any person 1% nay consider that his "honor and fan-'* have been sullied chooses to cross nJ with him.
The Magistrate having found the words contained in the extracts lilt] lous, tho persons libelled or d famed have every encouragement to proceed.
livery word, excepting tho errors pointed out within brackets, Is repeated horc in writing, and th writer invites any p ; rson to mak; the stte-t to prove that what ho has spoken or written is untrue and unjustifiable.
The .Magistrate, in upholding the defendant's refusal to carry oat tu contract on tho ground that the plaintiff was going to malts an unlawful us-, o' the report" has taken upon hlmdolf a greater function than is allowed toi Supreme Court Judge, namely of deciding what is usually left to a Jury, udttc ‘root of th d Magistrate’s decision is to practically grant an injunction restraining the plaintiff from publishing a .frtting or print of a speech on the ground that in his opinion it contains libellous matter.
Now a Supreme Court Judge has not the power to grant an injunction restraining tho publication of any actually libellous writing or print unless a Jury has first found the matter contained in the publication to be libellous, and bo fore a Jury can find any such verdict, they must hoar the ari-daW for and against.
Yf.*t tho Wan 1 strata hat* found extracts fron a sp<*ocb libellous without ascertaining the context and without -taking evidence of any kind ei® 1 ■' to support the defendant's allegation that the statements wore unjustifiably 01 " to support the plaintiff's claim that they wore to be justified.
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Thls decision is of importance and would have been appealed against had not the opinion of an eminent counsel, Hr.Hartln Chapman, been too adverse.
As the point is interesting, the opinion is set out -in full:-
I very much doubt if ilr.Braund would succeed on appeal. I assume the transcription of the shorthand notes would be defamatory of some one. If Mr.Le drove were to transcribe them and deliver the transcript to any person but the one ( if only one) defamed that would be a publication by Mr.Be Grove, Tho only possible ground of contention I can see against this being a publication by Mr. Le Grove would be the fact that lir. Le Grove is employed by iu'r.Braund and the delivery to Hr.Braund would be the delivery to his employer. I do not think this would be a good ground: See Odger on Slander p,160. If Mr. Le Grove were to hand the transcript to Mr. Braund he would therefore be publishing a libel- doing an illegal thing- if so I think the agreement to do so cannot be enforced. There is a further ground Hr. Braund desired to have the transcript for the purpose of showing others- in other words for the purpose of publishing defamatory writings. This is an illegal pur pose, and a contract for an illegal purpose can be repudiated by either party. I an therefore not able to say that I think Mr. Braund has a reason able chance of success on appeal. Wellington. October 31st 1905."
Thus, according to the authorities, it would seem that a clerk is not justified in handing to his employer the transcript of a letter 0.. of a y “tter which has been dictated to him by bis employer if it contains anything or libellous and if it is to go out of the office to a person other '■•‘an the person defamed or libelled.
Jhirthe If the enployer dismisses the clerk for re. isln,, to '•Wired of him. the employer would presumably lay himself open to an ICtlon ? °r wrongful dismissal because he was requiring his do—llle M thing’, namely, to ’ publish a libel’ by handing back to him in wrntm £ e *ords which he had just spoken to his cleric.
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Again, if the clerk doBs hand the transcript to his employer, h e may be prosecuted for criminal libel.
Truly the law has its anomalies!
Now let us consider what bearing this Magisterial decision has npct the Criminal Code N0.2 Act which has Just been passed.
The Act says that before making any order In respect of any offence of criminal defamation, *the Judge or Magistrate making such order shall be satisfied that there is reasonable ground for a prosecution".
Vhat kind of evidence would a Judge or Magistrate require in order to satisfy himself that there was “ reasonable ground for a prosecution"?
The evidence would necessarily be that of a person or persona present at the meeting at which the alleged defamatory words were spoken.
Before application can be made for an order to prosecute, notice must be served upon the person to be prosecuted in order that he may have an opportunity of being heard.
Supposing the person alleged to have been defamed is a politician and that two persons are prepared to be suborned to give false testimony in order to gratify the desires of their political patron ; and supposing that in order to get their patron's critic out of the way, they agree to read into their shorthand notes words distinctly libellous that the speaker never uttered
Application is then made to the Magistrate's Court for a prosecution order, and the two witnesses produce their transcripts which agree in every detail as to the alleged slanderous words.
The accused Is heard In his defence and swears that he never utter'd those words. Possibly he Is able to bring sone other person or persons to swear that they did not hear the words complained of spoken, although it is not unlikely that nobody would be willing in certain cases to be found as a witness for the accused against the prosecutor.
But, be this as it uny, of what value would evidence of this hi nt * be when placed in the scale with two shorthand reports made by seemingly reputable persons? V/ould the Magistrate not accept the evidence of the Of course he would.
Supposing,however, that the witnesses for the accused were al so aW ‘
197.
M produce shorthand reports of the speech and that their reports showed that the words complained of were not spoken, the position would be very different sod the Magistrate would be bound to dismiss the application, on the ground 0 f conflict of testimony, unless, of course, he chose to believe the shorthend reports for the prosecution and disbelieve those for the defence.
But unfortunately the law laid down by the Wellington Magistrate's Court in the case just referred to precludes an accused person from obtaining any such evidence for his protection, and whilst any number of shorthand reporters may swarm Into a meeting with the set purpose of misrepresenting the speake: to their patrons, the speaker is debarred by law from arming himself against th aachlnatloas of those whom he is exposing.
The reader nay say that It would be Impossible to procure persons o? any repute at all to bear false witness in a case of the kind, but the writer Is of a contrary opinion and believes that there are plenty of persons In belllngton who would be willing for a consideration to conspire to remove by incarceration a nan who was proving a source of danger to anyone sufficiently ' high In office*.
The proof of this elwn of the tines is to be found in Hansard ( N0.35 1906-P.875). Sir Joseph bard, referring to the writer's meeting in the Town •Ml, Veiling ton, said:- * Then members of ay family were introduced into this speech by this man at his meeting.......!.
Mr.Taylor:- " No reference to them whatever .
Sir Joseph Ward:- “ I have a record of It here and what 1 say 4 s true •
Sir Joseph had previously said;- Would any nenbsr o_ Alievs that in connection with this very meeting which the nenbe- for Christthttrch city presided over I had taken verbatim every word uttered.
Surely nothing could be clearer than this- that -j- 1 -- Joseph report of the writer’s speech ( the writer would much like to kno.f ,ho supplied the report) In which It appeared " nembors 01 nis xPM-l'J Stacked.
Now, either Sir Joseph ward was lying " ben he mß,io jh% “ 1 ‘ 6 or the reporter lied when he transcribed the words constituting 1
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reference to Sir Joseph bard's family.
Whoever was the liar on that occasion, however, the reader win stand that there is real danger when a Bill of the nature of the Criminal Cods N0.2 can get through Parliament and unscrupulous mon are in power- men who have stood at nothing in the past in order to save themselves from exposure and ruin and who will stand at nothing.
In face of Sir Joseph bard's admission that false testimony is possible- and his statement in the House can only be construed as an admission to that effect- and in view of the machinery of the present Criminal Code, a san O L would not be brave but foolish to go upon the public platform and give his sworn enemies the chance for which they have battled so deteratnedly and long, of putting into his mouth words which he never spoke and so securing hlo Inprl. li sonment.
The proper course for a man in such a position is to do what the • writer is doing, hacely, recording upon paper that which cannot be added to or altered, and which he is prepared to stand by and to justify.
But why did not the House insert a clause in the Criminal Code iio.2 Bill rendering it a privileged act for a reporter to hand a transcript of a ■ speaker's speech to the speaker? The decision of the idaglstrate's Court In tw writer's case had been given and was a matter of general comment before the Bill was through the Committee stage.
Is it not a remarkable thing tnat whilst every member either directlj or indirectly seemed anxious that something should b8 done to protect the nan exposed from the public platform, not a single member appears to nave thought of protecting the man who exposes him!
Referring to the writer's action in the natter of the Colonial Banl, Sir Joseph V/ard said in the House:-" I do not blame the creature who has ed me for making his living by such means- he has a right to make it in that way if he thinks proper..,."
?hiß species of gutter language is quite up to the vorthy knlgnt 6 very best style, The writer dismisses it, however, with the remark that he I s prouder of practically having given his tine to an effort to expose the treaty in which Sir Joseph ward has taken a leading part, than ho would be of achieviif
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malth after being responsible for the loss of over £lOO,OOO of the savings of the Colonial Hank shareholders and refusing in his hour of triumph over justice to contribute one penny piece by way of refund to tne widow and the orphan!
I further, the writer would rather rest under the accusation of Sir Joseph hard than under the condemnation of His Honor Hr. Justice Villiansl
Before closing this work the writer desires to record that the report tint all the iSnglish creditors of Sir Joseph ward and his Association had been paid tsenty shillings in the pound, which was freely circulated two or three years ago and has been hammered into the public ear persistently ever since, was denied by one of the largest Knglish creditors- Mr, Brooks of Brooks a Co.-in conversation with the writer when he cane out here some time ago, after the report was in circulation.
The sane gentleman laughed at the idea that the English creditors had umented Sir Joseph with a carriage and nalr as a mark of their appreciation of his honorable treatment of their claims.
Sir Joseph has just stated In the House ( Hansard H0.33-1905- p. 875) " I bare paid every creditor in tne Colonies twenty shillings in the pound . This, unfortunately for the Colonial Bank shareholders, is not true.
The writer has been charged by Sir Joseph bard with having made absolutely untrue " statements upon the public platform, bno would the nader rather believe- Sir Joseph or the writer?
THS IiND.
Cyclostyle,! and Published by the writer, Victor Maurice Braund, Aooo 4 Peatherston Street, Wellington, New Zealand.
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Bibliographic details
APA: Braund, Victor M. (Victor Maurice). (1905). A romance of trade and politics : (an object lesson for the young). V.M. Braund.
Chicago: Braund, Victor M. (Victor Maurice). A romance of trade and politics : (an object lesson for the young). Wellington, N.Z.: V.M. Braund, 1905.
MLA: Braund, Victor M. (Victor Maurice). A romance of trade and politics : (an object lesson for the young). V.M. Braund, 1905.
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71,630
A romance of trade and politics : (an object lesson for the young) Braund, Victor M. (Victor Maurice), V.M. Braund, Wellington, N.Z., 1905
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