Supreme Court Examination Of Second Company Director Begins

Press, Volume XCIX, Issue 29382, 8 December 1960, Page 12

Supreme Court Examination Of Second Company Director Begins

The public examination of Eric Philp Wills, barrister and solicitor, in his capacity as a director of the Walker Construction Company, Ltd. (now in liquidation) was concluded in the Supreme Court yesterday after he had been giving evidence in answers to questions for 10J hours. The Court then adjourned for 3J hours while Wills checked the Court record of his evidence before testifying that it was a true record. The examination of Geoffrey Wade Walker, a builder, in his capacity as governing-director of the Walker Construction Company, Ltd., was continuing when Mr Justice Macarthur adjourned the Court until today. Mr P. T. Mahon appears for the official liquidator of the company (Mr E. G. Tyler, formerly Official Assignee in Christchurch), on whose application the public examination is being held. Mr E. D. Blundell, of Wellington, with him, Mr R. W. Edgley, represents Wills. Mr B. McClelland appears for Walker. During his re-examination by Mr Blundell, when the Court resumed yesterday, Wills said that he had received nothing from the company by way of director’s fees or managament fees. He reiterated that he considered his firm, Bates, Edgar and Wills, was entitled in law to deduct its legal costs from the company’s assets after the winding-up petition had been lodged. Wills produced affidavits by W. R. Heney and John Bradley, both members of. the creditors’ committee. Teh affidavits were dated August 30, 1956, and referred to a general meeting ‘of creditors. The affidavits said that two members of the creditors’ committee were still of the view that the company should be allowed to carry on. Mr Blundell: In particular, froin the point of view of this examination, there are these two responsible men supporting that view, and being in the position to judge for themselves the worth of the proposals which the company was putting forward. Wills: Yes. That is the position, and no-one would be in a better position to judge than they were. Whether or not they met formally, that they were qualified still to act as a creditors’ committee was resolved at that very meeting on June 29, 1956? That is so. I refer you to the resolution?— That is correct. It directs them to operate until a final dividend had been made. Wills said that It was not until June, 1960, that he first heard of the proceedings and then saw the official liquidator (Mr Tyler). This meeting was at his (Wills’s) invitation. This concluded Wills’s examination. The Court adjourned at 11 a.m. while he read through the Court record of the evidence he had given. When the Court resumed at 3.40 p.m.. Wills acknowledged that the record of his examination wps a true one, that the alterations he had made were correct ones, and that he had signed the record in acknowledgement of its correctness. Walker’s Examination Walker, in answer to Mr Mahon, said he was employed as a builder at present. He was a builder for some years before 1954, and for about five years before that date he employed a firm of public accountants, R. H. Mitchell and Sons to keep his books. The firm prepared annual accounts to show his income and his tax returns were prepared from these accounts It was in 1953 that he first approached Wills with a view to forming a company. The prime factor was that his business was getting very big. His advisors, including several of his principal creditors, told him the turnover was such that it was too big for a private person to handle. Walker said he could not recall if Mitchell had ever advised him that he had made no profit in 1952. Walker said he did not think this correct as returns showed that a tax had been paid in a profit made by him in 1952. Mr Mahon: Do accounts for the financial year ended March 31. 1952, prepared by Mitchell show you made a net profit of £2578 for that year? Walker: Yes.

Do the accounts show you made a profit of £2577 in a property transactions that year?—Yes. Does that not mean that you

made no profit from your building business?—lt would appear to be so. but the property dealing involved a large number of transactions which were integral parts of the business. But the accounts, as .set out, show you made no profit on your trading activities as a builder?— Yes. Did Mitchell discuss this with you?—l- don’t recollect it. Accounts For 1953 Referred to accounts for 1953, Walker agreed that he made a loss of just over £2OOO on his trading accounts. He could not recollect Mitchell referring these trading losses to him but he (Walker) was aware he had made trading losses for "those two years, in particular.” Mr Mahon: Were you aware when the company was incorporated in November. 1954, that you had made a small loss for the financial year ended March 31 1954? Walker: Yes, but I am not an accountant. I am a tradesman. I do not think those accounts are correct, in a way. I knew that the factory and land it was built on cost £28.000 to £30,000. But I was not aware until later that for some reason this had been charged to revenue rather than the capital account. I am not an accountant, and the accounting was out of my hands. Walker said he knew this property was on his books at about £BOOO but that it had cost £20,000 more than was shown. He could not recall Wills telling him that he thought the accounts were incorrectly prepared. Walker said that the accounts set out by Mitchell and Sons, for 1953 and 1954 were certainly incorrect in relation to the Cranford street property. He did not remember this being pointed out to Wills. It was discussed at a later time, he (Walker) was almost sure. “I think I would have disclosed to Wills about the time of incorporation of the company that these accounts were incorrect but I cannot recall it. I would be surprised if I did not discuss my trading accounts with Wills, but I cannot recall doing so. I think the trading losses would probably have been discussed with Wills though I cannot now recall it. “There was never any question about frankness or lack of honesty with Wills at any time,” Walker said. Loss of £4OOO Walker said he knew he had made a trading loss of about £4OOO in the half-year ended September, 1954. He was not particularly worried because of the money that was invested in the Cranford street buildings and property. High advertising costs, in the first half of 1954 he thought, were discussed with Wills and this would be, he considered, in explanation for part of his trading losses said Walker. Mr Mahon: May we take it then, that you discussed your trading losses with Wills, and you consider it almost certain you would have shown your trading accounts to him? Walker: Yes. You are nearly certain you showed your trading accounts to Wills?—Yes, but I could not say on oath that I did. You mean by that, that you cannot recall the occasion when you did?—Yes. Did Wills at any time express concern that you had been making trading losses?—l can’t recall that Walker said his view at the time of incorporation of the company was that his business had been making substantial profits over the previous two years. He could not recall whether R. H Mitchell and Sons, his accountants, shared this view, but they must have as they assisted in the incorporation and took shares. Mr Mahon: They subscribed 30C shares? Walker: I can’t remember, but I would accept that. Were the shares paid for in cash?—To the best of my recollection they were. Weren’t they in lieu of accounting costs?—Not to my knowledge