SUPREME COURT Public Examination Of Company Concluded

Press, Volume CX, Issue 32384, 25 August 1970, Page 10

SUPREME COURT Public Examination Of Company Concluded

The public examination of Stewart Industries, Ltd (in liquidation), concluded yesterday in the Supreme Court before Mr Justice Maccarthur. The examination began on July 27 and was then adjourned until yesterday. The only officer of the company to be examined was the managing director of the company, Edward Samuel Stewart. Mr N. W. Williamson appeared for the Crown and Mr G. S. Brockett for the company. Questioned by Mr Williamson, Mr Stewart said that the company staff prepared the annual returns and then the information was supplied to J. W. K. Lawrence and Company. Clerical workers employed by the company prepared the list of sundry creditors included in the annual accounts as one lump sum. Amounts lent to the company were not included in sundry creditors. That information was already in the hands of J. W. K. Lawrence and Company. The balance sheet for the year ended March 31, 1964, showed sundry creditors as £12,344 4s lOd. That amount was supplied by him to his accountants. He did not know why this amount did not include loans or deposits with the company, as his accountants would have had receipts for these amounts. He signed the returns to the tax department which accompanied the accounts. He did not notice that these loans had not been included in the balance sheet. Mr Stewart would not agree that the £12,334 shown for sundry creditors was consid-

erably understated. Sundry creditors for the previous year was £17,706. Mr Williamsbn: Did it not surprise you, in view of the company’s continued development, which you told us about, that the sundry creditors would have been less in 1964? Mr Stewart: No, I can’t remember what my thoughts were at that time. Sundry creditors were arrived at by going through the statements and invoices on hand. Draft Accounts In the 1964 balance sheet stock on hand was Shown as £26,290. that figure was derived from the total value of components stocked before manufacture, work in progress and completed stock. A stock taking was done each year to ascertain that amount.

Shown a document, Mr Stewart agreed it was a draft set of accounts for the cqmpany .for the year ended March'3l, 1965, which showed sundry creditors as £15,693. He could not recall seeing these draft accounts. Sundry creditors did not show the amount lent to or deposited with the company. Asked if $15,693 considerably understated trade creditors at that time, Mr Stewart said that the preparation of he other balance sheet for the year ended March 31, 1965, bad been done by Mr McGregor, the accountant of the company, and Mr Lawrence. Witness had not been personally consulted or questioned. Mr Stewart agreed that there was a considerable diference in sundry creditors listed in the draft hand-writ-ten balance sheet and the

typed balance sheet attached to the inland revenue return. Mr McGregor’s list showed sundry creditors at £35,536. Mr McGregor had joined the company on July 31, 1965.

Mr Williamson: Surely you would have been aware of the very substantial difference between the actual amount. of trade creditors and the figure supplied to the accountants’—At that time no. Can you tell us why that was—No I’m afraid I couldn’t. It is so long ago. He agreed that the understating of trade creditors would have shown the company’s position better than* it was. Mr Stewart said that he woud not agree that the accounts for the company as at September 14, 1965, showed almost without exception that the company’s products were being sold at a loss. During 1965 the company had diversified into making skis.

Mr Williamson: You are a radio expert. How did you think it was possible that you could properly manufacture skis?—l had some training in the United Kingdom and I spent some nine months on a training programme with Pacific Electrical Industries in a technique known as radio frequency heating. This was used extensively in the woodworking industry- in the lam-

ination of timbers. Ski making was an application very similar to what I had gained experience in.

Overseas Trips From the time the company had been formed until its liquidation be had made four overseas trips. All these trips were paid for from company funds and all the trips were made on company business. Mr Williamson said that the company had only started in 1960 and had trouble so far as capital was concerned. He asked Mr Stewart why it was necessary to go overseas so often. Mr Stewart said that the 1960 trip was to-offer equipment made by the company for sale in Sydney, to investigate the problems associated with small manufacturers of television and to buy components. The 1961 trip to Japan was to obtain ideas for incorporation in the products made by the company. In 1962 it was for a sales mission and investigation of export potential for the company’s products in North America and the Far East. In 1963 the company exhibited its pro-

ducts at the trade fair in Chicago. He felt at the time that tbe first trip, to North America was most successful. He could not recall the exact value of goods sold but the company did obtain repeat business from the initial orders. Because of a lack of understanding by some Government departmente the company was unable to keep abreast of de sign trends and goods were sold to one firm in Winnipeg on the 1963 trip but the firm later refused to accept delivery. The net result of that year was very poor. Sales Territory

The items involved under the heading of travel and entertainment included travelling for the sales staff, :he manager and himself in New Zealand, The sales territory extended from north of Auckland to Invercargill and the expenses embraced rental cars, air fares and hotel accommodation. He covered the territory about once a year and he had a number of visits to Wellington about import licence requirements. Mr Stewart said that he planned no overseas trips in 1965, but it was considered that one would have to be made in connection with the manufacture of skis. •He had no recollection of Mr Robins telling him in August, 1965, that the proposed trip would be a waste of money and that if the company could afford such a trip his money should be repaid at once.

Mr Williamson: Would you agree that when you made the last two trips overseas your company was running on creditors’ money by not paying trade debts?—Around 1962-63 some £6OOO was advanced to the company by the bank for export development. The approach had been made by the bank which said that the money was available for that purpose. To Mr Brockett, Mr Stewart said that the loan had been repaid on the bank’s demand after the company entered into an arrangement with Pacific Factors, Ltd.

Mr Stewart said that he had difficulty in obtaining import licences for a record changer for an export order for Winnipeg. The delay was such that he had to supply equipment with less changes and obtain those parts from a manufacturer in New York.