KERNAHAN TRIAL Accountant And Typist Give Evidence

Press, Volume CIV, Issue 30856, 15 September 1965, Page 10

KERNAHAN TRIAL Accountant And Typist Give Evidence

The trial of a public accountant on 60 charges df dishonesty involving £54,840 7s 5d continued in the Supreme Court yesterday with evidence from another accountant called in to investigate the matter and from the accused’s office staff.

Derek Harold Kernahan, aged 40, a Christchurch public accountant (Mr P. G. S. Penlington, with him Mr G. R. Joyce), is being tried before Mr Justice Haslam and a jury on 48 charges of theft as a servant of £48,970 from W. G. Evans and Company, Ltd., two charges of theft from the same company by failing to account for £5870 7s sd, two charges of falsifying documents, and eight charges of unlawfully drawing documents without authority.

Kernahan’s counsel are assisted by a public accountant, Mr C. W. Evans. Another public accountant, Mr K. S. Jameson, is assisting the Crown Prosecutor (Mr C. M. Roper) and Mr N. W. Williamson.

Giving evidence for the Crown, Maureen Ann Reynish said she was Kernahan’s office manager and typist up to the time of his arrest in January. She was also appointed secretary (with one share) of Helge Lotz, Ltd., South Island Hotels, Ltd., Potgeiter Properties, Ltd., and Canterbury Land Sales, Ltd., in all of which Kernahan was the principal shareholder.

She said she could not say why monthly accounts were not sent to the earth-moving company of W. G. Evans and Company, Ltd. after May, 1964. She did not know whether reports were sent to other companies after that date. Mrs Reynish said she was aware that many cheques were being paid into Kernahan’s company, Janitor Finance, but she had had no discussion with him about that. Evans called frequently at the office, but only about twice after he suffered a stroke early in 1964. Cross-examined Cross-examined by Mr Penlington, Mrs Reynish said letters had been sent by Kernahan to Evans at Benmore in 1960 and 1961 referring to trips Kernhan had made to Benmore to see Evans, offers of visits, and of trips they had made together to Rotorua and Porter’s Pass to see equipment.

She said she had an express instruction to give priority in the office to the affairs of the Evans company. She did not

recall any instructions not to disclose the company’s financial affairs to Evans. She had had no instructions to suppress information from Evans. Mrs Reynish said that Kernahan was the Evans company’s financial adviser and also helped with tendering, seeking staff, and supplying spare parts to Benmore. Two References She agreed that a receipts and payments report to Evans in June,. 1960, included two references to Janitor Finance by name. One was, “fixed deposit, Janitor Finance, six months at 5 per cent, £1000”. A comment at the foot of the page said, “Janitor Finance £lOOO at 5 per cent due 1/6/60.” Mrs Reynish said she could remember typing a batch of monthly reports together, but

could not remember whether they were for the period between November, 1963, and June, 1964. They could have been all sent out together.

She could not remember whether any reports at all were sent in the last half of 1964. She was not given any instructions to keep sending reports. Another reference to Janitor Finance was in a balancesheet sent by Kernahan to Evans for the year ended Febr :ary 29, 1960. Under current assets there was a reference to a deposit of £lO5O with Janitor Finance.

Mrs Reynish said the only time she had spoken to Kernahan since Christmas last year was at a company meeting at her home for Helge Lotz, Ltd., which lasted five minutes and was held in the presence of solicitors. Re-examined In re-examination Mr Roper questioned the witness about the fact that by the end of 1964, £42,000 of Evans’s money was in Janitor Finance. Mrs Reynish said she was not aware how much it would be. Asked whether she was aware at any time how much money was in Janitor Finance, she said it would only be when she typed statements of lodgments with interest accruing. Investigation Brian James Moore, a public accountant, said in evidence that Evans called on him on January 22 this year to find out the financial position of his company. Evans gave him authority to uplift account books from Kernahan. Kernahan was not in town when he went to get the books, and they were given to him by the office manager, Mrs Reynish. The books were not written up to date, but only to February, 1964. At that date it appeared that a total of £39,000 had been transferred to Janitor Finance.

“This explained the questions that were concerning Mr Evans,” said Moore. “The company could net pay its debts and was in a bad financial position. I consulted the company solicitors, and then had to determine whether Mr Evans knew that the money was in Janitor Finance.

“I saw him, and told him I had the books. I asked if he had made any loans to Janitor Finance. He said he hadn’t. 1 asked if he had lent even as much as £5 to Kernahan, and he said, ‘No.’ “Collapsed” “I asked him what he thought of the fact that £39,000 had been drawn out, and at that stage Mr Evans collapsed with shock.” Moore said he did not mention Janitor Finance to Evans. “I didn’t pursue it,” he said. “I assured him that everything would be all right. I was very concerned at the state of his health.” Moore said he went to the police on January 23 and accompanied them to Kernahan’s office to pick up documents to support the account books. He helped the police for about a fortnight. Since then he had continued to act for Evans and his company. Cross-examined To Mr Peniington, Moore said his firm acted for only one finance company. It was the practice with a number of public accountants to act for finance companies, and a practice which he accepted in certain circumstances. “I don’t condone private finance companies of which an accountant is the owner,” Moore said. He said his firm was the registered office of Riccarton Credits, Ltd., Riccarton Acceptance, Ltd., Riccarton Finance Corporation, Mercantile Acceptance, Ltd., Raymond Agencies, Ltd., Riccarton Timber, Ltd., Wholesale Finance Corporation, Ltd., and C.H.P. Holdings, but none of these was a finance company. They had been up to 1962, but at his request they had been wound up and taken over by a big public-listed company. Account Books Questioned about the Evans books, Moore said the cash book was up to date so he was able to tell how' much was to the company by Janitor Finance. “I was concerned,” he said, “because Mr Evans came to me not knowing his position and not able to pay his debts, and yet there was £35,000 on deposit. I wanted to know if he ~ knew that this deposit money was there. His financial situation was desperate. I had inquired, and he was pver the limit at the bank.”

■ Moore said that when he saw Evans at home he ' as not well enough to talk to. “I left him well alone,” he said. “He collapsed, and that indicated that he didn’t know about the £35,000. “When he collapsed I thought it might be fatal shock, and I was concerned that I might have caused it. Yes, he collapsed into a chair, and I could see his heart thumping and I decided to seek outside advice to see what I could do.” He said he called at Evans's

house the next day to look for relevant documents, but found nothing useful. Then he went to see a counsellor of the Society of Accountants and put the matter in his hands. He was advised that he had a duty to act in the best interests of his client. Asked whether he had described Kernahan as “vicious” in the Magistrate’s Court. Moore said it was a fair time ago and that he was upset at the time. He had said that it was a vicious and deliberate attempt to defraud Evans of his money, which had not been located at that time. That had been the reason for bail being opposed. Moore agreed that he had been angry. “I had every reason to be,” he said. “I was accused of prejudging him.” Earlier Contacts Moore said he had had professional contact previously with Kernahan in the matters of an estate, issue of debentures from Sea Fox Marine to Janitor Finance, and Lod Shearer, Ltd. “In connexion with Sea Fox, your relationship was marked with acrimony and bitterness?” asked Mr Penlington. “No,” said Moore. “I tried to help the owner of Sea Fox to try to get out of the hands of Janitor Finance.” He said Janitor Finance had advanced money to Sea Fox Marine and failed to advance other money. Sea Fox went into liquidation largely thanks to Janstor Finance. Crown evidence will continue today.