NO PROPER BOOKS.

Press, Volume LXVI, Issue 19852, 13 February 1930, Page 6

NO PROPER BOOKS.

BANKRUPT GROCER.

OFFICIAL ASSIGNEE'S STRONG

COMMENT.

Severe criticism of a bankrupts book-keeping methods was made by the Official Assignee (Mr W. Hlarte) at a meeting of creditors yest-erday in the bankrupt estate of James Stevenson, a storekeeper, of Geraldine. Mr T. C. Farnie, of Geraldine, appeared for bankrupt, five creditors being present. The financial statement showed that the total debts owing to unsecured creditors amounted to £697 lis 3d. There were 110 secured creditors. Stock-in-trade was valued at £2OO 8s 4d; book debts, £BB lis sd, were estimated to produce £BO, cash in bank totalled £1 13s 7<l, making the total assets £282 Is lid, which left a total deficiency of £415 9s 4d. The principal unsecured creditors were: R. Wilson and Co., Timaru, £370 4s; Oswald M. Smith, Dunedin, £9O 9s lid; Benjamins, Ltd., Christchurch, £4O os 4d; Sargood, Son, and Ewan, Ltd., Christchurch, £35; Teinuka Dairy Co., £22 13s ld_; Aitchison, Steans and Co., Christchurch, £l6; John Edmonds, Timaru, £l4= 4s lOd ; Mercantile Industries, Ltd., Dunedin. £2O ss; trustees of the late Mr W'illiam Harrison, Winchester, £6 0s sd; Geraldine Dairy Co., £6 16s 4d; McLeod Bros., Ltd., Dunedin, £9 17s Id; Mackerras and Hazlett, Dunedin, £6: T. H. Green, Christchurch, £l3 10s 6d; and Australasian Seed Co., Auckland, £l2.

Bankrupt's Statement. In the course of a sworn statement, bankrupt said that on April 20th, 1928, he took over, from R. Pugh, the business of a general storekeeper at Geraldine, at a valuation of £2OO for the stock. Prior to doing this bankrupt was employed as assistant in the grocery department of C.F.C.A. at Geraldint>.

The arrangement with Mr Pugh was that bankrupt was to pay £SO deposit, and the balance in monthly instalments. Until July, 1929, bankrupt estimated that his monthly takings (cash and credit) averaged roughly about £l3O. After this date his returns showed a falling off, because of business depression. Bankrupt also found that lie had not examined sufficiently the stock he had purchased from Mr Pugh. Some of the lines were unsaleable, and groceries such as sago, flour ,and oatmeal were damaged by mice. Bankrupt estimated that he had lost £SO on the stock purchased from Mr Pugh. He explained that certain groceries had to be sold at prices less than cost. The takings from the shop were paid regularly into the bank every few days tip to October 21st, 1929,, as shown by his bank pass book. Bankrupt's payments mostly were made by cheque. After October his credit was stopped by the merchants, and ho was under the necessity of replenishing his stock by cash payments. Two months after he started in business, his wife became very ill and had to be moved to Braeside Hospital for an operation and other treatment. She remained in hospital for eight or nine weeks. When she returned home bankrupt had to employ a nurse and assistance in the house. The doctor's bill for the operation and treatment was £7l, while the amount charged by the hospital was £26. Payment of these expenses had kept bankrupt back. Until her illness bankrupt's wife had helped him in the shop. Nothing but bare household expenses was, ta.ken out of the shop. Bankrupt went on to say that, because he was behind in his payments to • merchants, he obtained no dis''counts, and, therefore, the profits were 'insufficient to carrv on the business properly. Bankrupt struggled along expecting to do more business, but he found later that the only thing to do was to file, especially as judgments had been obtained against him. A distress warrant had just been issued for £l3 10s 6d, and bankrupt had to file to protect the rest of his creditors. He attributed his bankruptcy to the fact that he had paid too much for the original stock, to loss of discounts through inability to meet creditors accounts promptly, to insufficient profits a$ a result of keen competition, and to expenses connected with illness in his family. Examined "by Assignee.

To the Official Assignee: Bankrupt had paid Mr Pugh £123 in cash, including the £SO deposit. Mr Pugh had taken the balance of the purchase price, about £BO, in goods at cost price. Bankrupt admitted that the purchase might have been bad buying on his part. He did not suggest that he had been "taken down, but ho had not looked into the matter closely enough. Bankrupt estimated that ho had lost about £l<so worth of stock, which had been damaged by mice. If a commercial traveller had asked him his position last July, he could have told him from his account book. He started business with about £SO capital. The Assignee remarked that £BO seemed a very liberal estimate of the amount recoverable from book debts. In his experience, never more than 50 per cent, of the book debts were recoverable.

Continuing, the Assignee asked what proof there was in the book produced that bankrupt owed the amounts claimed. Suppose he disputed them? Bankrupt: I have all tho accounts in the shop, and I checked them. I knew how I stood, as I filed the accounts. If an auditor came in I could tell him my position from that book. The Assignee: I defy any auditor to get a balance from that book. I contend your bankruptcy is due to the fact that you kept insufficient books. Bankrupt admittod that he went on till his credit was exhausted. He knew within the last six months that he was losing money. Ho denied that he had been insolvent from tho start.

The Assignee: You have been in business 18 months, and in that time have incurred liabilities to the extent of £7OO, roughly. You have been going back ever since you started. Bankrupt:. I drew nothing out of the bank. I took household expenses only from the till.

The Assignee: Suppose the creditors refuse to believe you ? How can you prove how much you took when you have no record?

Bankrupt: I took approximately £1 a week. We didn't waste anything, and lived very sparingly. I lost money owing to debts, and owing to the fact that I lost trade discounts in purchasing stock as I could not pay the accounts monthly. The Assignee: You relied on your memory. You. drew out cash instead of by cheque. The creditors are entitled to think the worst. In answer to a question, bankrupt said that his wife owned the furniture. He had no assets at all, and no prospects. Only £SO Capital. Mr Tait, for Messrs R. Wilson and Co., tho principal creditor, said that if he had understood that bankrupt had only paid £SO when he commenced business, his firm would not have advanced slock. He understood from the bankrupt that he had sufficient capital to start the business. To the Assignee: In April last he had a credit of close on £2OO. Mr Tait: The majority of the debts have been incurred sinco then. The Assignee: You havo drifted back £SOO since April. Your books, or book —there is only one produced—really aid not disclose tho position in regard to the money you owed. Bankrupt: I did not mislead Mr Tait wilfully. The Assignee: If you had kept books properly your position would havo been

shown to every penny. The whole question is what has become of the takings. Bankrupt said that he did not know what his purchases had been. He paid cash when his credit was stopped. Tho Assignee: Your only asset was your, ability to securo credit.

Misrepresentation Alleged. Mr C. Hilton, representing Oswald Smith and Co., said that in January last bankrupt had told him that his customers owed him £220, whereas there was only £BO owing now. Tho Assignee: That is, bankrupt secured credit by representing that his customers' book debts were much greater than they really were. Bankrupt absolutely denied that he had misrepresented the position. Mr Hilton: Bankrupt showed mc a list of book debts amounting to £220. I took his word for it. 1 On tho motion of Messrs Tait and Whitely the Assignee was instructed to sell the stoek-in-trade by auction at Geraldine. Official Assignee's Remarks. The Assignee: I think it is a great pity that when a man opens up a business that the firms do not see him started with proper books. Lack of properly kept books only lands a man in trouble. It is a pity the Chamber of Commerce or some such body does not take it up. Does the meeting wish to express an opinion? On the face of it, bankrupt appears to have committed a breach of the Bankruptcy Act. If he >had kept proper books he would have known his position three months after he. commenced business.

Mr Farnie: Like a lot of small men he relied on his bank-book to show his position. The Assignee: He relied on his ability to secure credit.

Mr Dunn said that he thought the statements made to merchants were misleading, but probably not intentionally.

The Assignee: I do not think any bankrupt should get away with it. He should not make statements which were not supported.by the evidence of his books.

Mr Farnie suggested that under the circumstances, and seeing what bankrupt_ had gone through, it would be a gracious act if the creditors went no further.

The Assignee: It is a great pity bankrupt did not keep pVoper books. Bankrupt: Not wilfully! The Assignee: No, negligently! I say the matter should not stop here, and I would like to know the opinion of the creditors. Mr Tait moved and Mr Hilton seconded: "*That tho creditors do not approve of the methods adopted by bank rupt in keeping his books, and that the Official Assignee refer the matter to the Crown Solicitor."

Mr Farnie put up another plea on behalf of his client, and the movers consented to the withdrawal of the recommendation to the Official Assignee, and the motion was then carried unanimously.