Malpractices Alleged By Company Director

Press, Volume XCVII, Issue 28532, 11 March 1958, Page 14

Malpractices Alleged By Company Director

(New Zealand Press Association)

PALMERSTON NORTH, March 10. Serious malpractices in the operation of a prominent Palmerston North hardware firm, Hay and Watson, Ltd., were alleged in the Supreme Court at Palmerston North by a director and former assistant-manager of the business. Mervyn John Barrett, who petitioned that the affairs of the company be wound up. Barrett said in his affidavit and in his sworn evidence that concealment of sales had been made under the administration of the managing-director, Richard Willett Hay, throughout the 12 years Barrett was in the employ of the company.

In cross-examination, Barrett said that at the end of the 12 years, the Inland Revenue Department had been defrauded “by something like £50,000 in tax.” He said the improper practices were in three categories: suppressed sales involving no less than £33,000, a buying commission fund set up in England amounting to some £ 6000, and understatements of stock in trade in the balance-sheet which, to 1956, amounted to £90,000. The hearing of the petition for winding-up began in the Supreme Court this morning before Mr Justice Haslam. Barrett was the only witness to have been heard when the Court adjourned until 10 aun. tomorrow. The petitioner is represented by Mr A. M. Ongley. For the respondent. Richard Willett Hay, Mr W. E. Leicester, of Wellington, is appearing with Mr O. W. Graham, of Palmerston North. Barrett said under cross-exam-ination that he had been a party to the malpractices, but claimed that they had been carried out under the administration of Hay. Respondent's Denial

In an affidavit filed in opposition to the petition. Hay denied that he had been the author of malpractices. He said the petitioner had full control of all the financial affairs of the company, and he had accepted Barrett’s advice on all financial questions. Hie affairs of the company were now being investigated by the Inland Revenue Department. Barrett said in his petition that Hay and Watson, Ltd., was incorporated in 1937. The nominal capital of the company was £32,500 in £1 shares. The shares were held by Hay (19,578), Eileen Veronica Hay (7351), and Barrett (5571). The shareholders were the directors of the company.

Barrett claimed that before he joined the company Hay had established a fund by the practice of suppressing sales made by the company and failing to enter such sales in the books of the company or in its balance-sheets or profit and loss accounts. He retained the proceeds of such sales in cash.

This practice was continued by the company during the 12 years he was employed there. A large sum of money was paid into the fund in cash, and considerable sums were withdrawn by Hay for his own and the company’s purposes without any record of such payments or withdrawals being entered in the company’s books or accounts.

Barrett also claimed that Hay charged against the earnings of the company a rate of buying commission higher than the rate actually paid by the company to its buying agents in England. The balance-sheet for the year ended December 31. 1944, Barrett

said, showed that the company had a capital of £3OOO. Its stock was valued at £10,147, and its land and buildings were valued at £3735. Its turnover was £56,597, and it made a profit of £621. At that time the company had a further liability of £4600 which was not disclosed in the books or balance-sheet. At December 31, 1956, the company’s capital had increased to £32,500, its stock was valued at £116,594, and its land and buildings at £50,000, and its turnover was £214,520, with a profit of £10,926 for the year.