WOOLBROKER IN COURT.

Press, Volume LXVII, Issue 20381, 30 October 1931, Page 18

WOOLBROKER IN COURT.

CHARGES CONCERNING BANKRUPTCY. LOSSES ON FARM AND BUSINESS The evidence of the accused was the chief feature of the case in which Washington Irving Carney, a woolbroker, was charged that, being a bankrupt, he had by unjustifiable, extravagant living, brought about his bankruptcy, the hearing o£ which was continued in the Supreme Court before his Honour Mfc Justice Adams yesterday. He was also charged" with having contracted a debt of £l7 6s 6d with Eink Taxis, Ltd., and one of £l2 14s with J. E. Hurdley and Son; Ltd., while having no reasonable expectations of ability to pay these and other debts owing by him. Carney, who was represented by Mr W. R, Lascelles, pleaded not guilty. Mr A. W. Brown acted as Crown Prosecutor. Arthur Ambrose Bruce, public accountant, continued his evidence concerning an examination of bankrupt s books. Beplying to Mr Lascelles, he agreed that Carney's drawings had included insurance premiums, schooling fees, rates and taxes,, and dealings in shares.

Mr Lascelles: These last transactions concerned freezing company and other shares connected with prima'ry industry; .which followed the general falling trend.

"Witness continued that the loss, on realisation and on stock had been approximately £IO,OOO for the- farm in the last year. The other years might have shown : a. profit.

Mr LasceUes: A balance-sheet often surprises , even an accountant. You think you have had a good year and the balance-sheet shows you have not? Witness: Tes. - : To Mr Brown: The slump came about the beginning of 1929. Carney should have known by his buying orders the direction of the drift of his business. Debt to Rink Taxis. William Hayward, manager of Eink Taxis, Ltd., produced an account showing that from January, 1931, to May, 1931, Carney Was in debit to the firm to the extent of £l7 16s 6d. The amount had not been, paid, and was part of a total debt o.f £sl which had not been paid.

To Mr .Lascelles, witness said thar Carney had been a customer for manv .Until the times of depression he Aad always found .him a satisfactory customer. , The account was for petrol garaging, . and the occasional dispatch of stores to the farm.

William Alidrew Hurdley, of J. E. Hurdley and- Song, produced an account of £l2'l4s for a frock bbught on March 20th, 1931, by - Mrs Carney for one of the family. To Mr Lascelles, witness said that his dealings had been solely with Mrs Carney. Carney, giving evidence, said that he was 54 years of age, and that he was married, with four children, three of • whom were undejf 16 years of age. His wife had a small income of about £36 a year from her father's estate. Before 1925 he had been for five years managing director of Armour and-Co.'in. New

Zealand, and had been connected with that Arm's •wool business for 30 years. He had started when he was 16 years of age. Nature of the Business. Since 1925 he had been buying Tyool for clients, and at one period had had 36 clients lie was buying wool for. They were big firms in England, the Continent, America,. Canada, and sometimes in Australia. TJntil the depression—--1929-30—he had had a substantial number of clients. Then there had been a decrease, as some of. the firms had gone out of business. His business consisted in getting orders from these firms and shipping the wool to them. His remuneration consisted in commission on these purchases. In good years his turnover would be as much as £400,000, but in 1930 it had been £125,000. This jyas due to the fall in prices. In 1925 Canterbury halfbred wool had realised 33d per pound, but following this prices had fallen, with a slight rise in 1928. A further decline had followed, until last season the same, wool had realised only Cd to Bd. He had never known so long a period of declining prices. If wool was bought here in January, and did not arrive overseas until March, when the market had dropped, very often it did not look as good to the buyer, who tended to turn it down, when the shipper had to look after it on his own account. In good times he was not so liable to rejections. Necessity of Travel. He had had several other losses in the past few years, two cases amounting to £ISOO. He did not think there was any other business with the same amount of overhead expenses, as wool-broking. These included cables, travelling, and hotels. From November to April he would be travelling all the time to and from wool sales all over the country. He also travelled outside the Dominion— it was necessary in order to keep in contact with his clients. About 75 per cent, of the brokers went Home every year. It was a custom of the trade, if one man did not do it, others would, and he would lose his customers.

His other outlay had concerned the farm, share purchases, and a venture of his wife's in another concern, over which he had lost a lot of money. His own shares had all resulted in a loss. He had run three accounts—his wool account, his No. 2 account covering the general trading for Armour and Company, and the M, H. Carney account, for his wife, which covered anything pertaining to the house and living expenses. Then beside that he had most of the time a farm account, until this was taken from the bank and placed in the hands of Dalgety and Company. Mrs Carney had never known what was in the M. H. Carney account, and after the first year he did not think she had signed a cheque. Complicated Accounting. The accounting at his office had been very involved indeed. The wool business had entailed considerable work on the accountancy side—including cables, foreign .exchanges, shipping, and so on. He had- always found his accountant honest and straightforward, and had thought he was absolutely capable. Personally he had never had any experience of book-keeping, for he gave his attention entirely the business side, buying the wool, and communicating with his clients, leaving his accountant practically all the inside work. To know the position of the business he relied on the balance-sheet each year. He 'iad thought the balance-sheet showed tho real position, though after 1929, without any figures, he had realised from the business he was doing that there was a decline. He had'been very much surprised at-the position revealed by the

analysis of accounts after his bankruptcy. The car expenses were mixed in his personal drawings and Mrs Carney's account, often -when they should not have been there. As for pocket money for himself and for Mrs Carney, the amount included in the drawings would be very small—not averaging more than £1" a week for Mrs Carney and 30s for himself. The drawings were never paid in cash to Mrs Carney. Purchase of the Farm. His house in Papanui road had been freehold, and he had taken the Omihi farm of 984 acres at £l7 an acre. There had been a first mortgage .of £9IOO and. a second mortgage of £5500, of which he had paid £SOO in the first six months. The farm had been a good one, and would have made a profit but for the slump. He had spent £llOO on the house, and other money on improvements, and he placed these at about £1 or 30s an acre. He had placed a manager on the farm, living there during the school holidays, and taking a flat in town. In 1929 he had thought he was solvent, though he had considered his position. When the slump came he had made every possible economy, though it was hard to cut down overhead, as it was necessary to travel, to cable, and so on, whether the business was coming in or not. He had reduced his staff, the household wages in 1925-20 being £4lO, in 1920-27 £4OB, in 1927-28 £244, in 1928-29 £l2O, in 1929-30 £9O, and in 1930-31 £l9. The children had been away at private schools. He had thought in 1929, w)icn most of the rejections came in, that business would revive, as it had done in the past. He had endeavoured to carry on as best , lie could. During 1929-30 his bankers or stock agents had not pressed him, but in 1930 the bank had asked him to reduce his overdraft, which he had done. The stock agents had been prepared to carry him on until the shearing of 1931, but the pressure of the mortgagee had precipitated things. Economies in 1930. At the end of 1930 he had given up the flat, and gone to live on the farm. The children had been taken away from school, and his wife had had no assistance in the house,, doing all the work herself. He had then thought that the position was very bad indeed, especially when the mortgagee pushed for his interest and he could not pay, so that the farm had been sold up for £ll 10s per acre in May, 1931. He had then consulted his solicitors. The 1930 balance-sheet had shown that he was "ahead of the game."

The car had been essential to his business, arid as for Hurdley's account, this was brought about by a small children's dance in which Mrs Carney and some of her friends were concerned. Ho had wanted to keep out of it, but his wife had said , that she could pay the account for the dress out of the money due to her from her father's estate.

He did not -gamble—there was chough of £hat in his wool business. I-Ie had not been at a single race meeting in 1930, he did not play cards, nor did he drink to excess. He did not think he ever wasted money, though he and his wife had lived well. The substantial causes of his difficulties were tho farm and tho business, either one of which might have returned to prosperity. Until the farm was sold ho considered he had lost about i£ 11,000 on it, and on tlie wool account and trading £2OOO, and £IOOO on general accounts. His business had suffered through the farm, for money had to be taken from the business for it.

Question of Insolvency. To Mr Brown, Carney said that he had not realised that he was insolvent until 1931, when the farm was sold, lis did not realise .at any period how much the drawings were. The bills went to the office, and were paid by his bookkeeper. He had stopped paying the bulk of his accounts at the end of 1929. Mr Brown: Why did you do this? Carney: Because I needed the money in the business. I thought that I still had assets, and that cash would bo available later. It was merely a shortness of ready cash. - Mr Brown: Did not : tho shortness of ready cash suggest to you that the books were wrong? Carney: No. 1 left the books entirely to Mr Sliutte and Mr Mcßeth at the office. I did not know what I was actually drawing each year. He agreed with Mr Brown that the farm had cost £16,728. He had taken over a first mortgage of £9IOO and a second mortgage of £5500. The stock had been bought at £3500, making the cost in all, £20,200. His house had been handed in at £7OOO, and this, added to £14,000 for the mortgages, brought the total to £21,600. Mr Brown: Did you not then actually receive £ISOO in cash on the transaction? Carney: I do not know, but if the figures are correct, I may have. Continuing, Carney said that he intended to pay any debts he had incurred. He had continued his account with the Rink Taxis because he had thought he was solvent up to May, 1931, when the farm had been sold. Summing up, his Honour said that the evidence showed, according to accused and his counsel, that there were two causes which would have brought about his bankruptcy. These were, the farm, and the loss on it, and the severe depression with its effect on business generally. Unjustifiable extravagance in living did not mean carrying on his business carelessly, or improperly, or speculation in farms. On the other charge there was no evidence that Carney had authorised the debt to Hurdleys.

The jury retired at 2.45 p.m., and, returning at 8 p.m., found Carney guilty on the second count (in respect of the debt to Rink Taxis), and not guilty, on the third count (in respect of the debtto Ilurdley and Sons). There was no agreement no the first count.

Carney was remanded for sentence until Monday morning, on the second count.