W. R. Waters' Case in the Bankruptcy Court.

Evening Post, Volume XXXIV, Issue 2, 2 July 1887, Page 2

W. R. Waters' Case in the Bankruptcy Court.

NO ORDER MADE. Tho caso of W. R. Waters was ooncludod in tho Bankruptcy Court shortly boforo 9 o'clock last ovening. Mr. Bell having closed his caso, Mr. Skerrott examined tho bankrupt at Bome> length. The debtor doposed that ho opened a setof books in January, 1883. Mr. Vivian w*B> recommended to him as a good book-keoper. Mr. Vivian, who received a salary of £150, kept tho books by doublo ontry. He was pcrfeotly solvent in the beginning of 1883. He was surprised to find in June, 1885, that Mr. Vivian had not written off ovor £2000 for bnd debts. He always considered his bookß well kept, and be always roliod on the balance-sheets drawn out. The object of the balance-sheets was to show Ids position. It was obvious to him now that the balancosheots wero not roliable. He considered that he was. solvent at iho end of June, 1385. He concluded that from tho statements mado to him by his book-keeper. On the 3let Maroh, 1886, he did not dearly understand Mb position, but he thoroughly believed that he was solvent. He renumbered distinotly that the book-keeper assured him that the balance-sheet correctly showed his financial position, and congratulated him upon the state of his affairs. Tho books included evory itom of recoipt and expenditure. Mr. 801 l admitted at this stage that he could not prove 'fraud with regard to tho second entry about M'Ewon, as it was possible it might have boen mado inadvertently. Ho pointed out, however, that the original ontry was fictitious, but as it was not made within four months of the bankruptoy tho charge of fraud in respoot to it could not stand. Tho examination of tho debtor was resumed. He deposed that he had been in tho habit of advancing the late Mr. Geo. Dixon large Bums of monoy. Before Mr. iOixon loft for Auokland witness advanood him throo sums of money amounting to £160. Mr. Dixon said the amount was not sufficient and witnoss therefore borrowed £160 from his wife and gave it to him. The £160 was Mb (witness') privato money. There was no ontry in the books of money borrowed from Mrs. Waters. Mra. Waters had £200 or £300 of her own When he advanced Mr. Dixon the second £160 Mr. Dixon gave his cheque as an acknowledgment, and on witness presenting it to Mrs. Dixon after her husband's death, it was paid. Evory shilling in oonneotion with Dixon's estate had passed througli tho books. Tho aooount sales had boen taken from his offlco, and ho beliovod they wero in the possession of tho Official Assignoo. Thoro nood bo no difficulty in obtaining copieß of tho aooount sales from Mr. Isaacs. Evory penny drawn and overy artiole that had gono out of tho store for the houso had boon ontored in the books. Witness did his own_ travelling. Tho business of a wino and spirit merchant requirod a good doal of pushing, and tbo amounts charged to his account included the expenditure incurred in pushing tho business. Tho amount ho had takon from tho business in cash and goods was £3301 10s 7d for tho throo yoars and ton months prior to the bankruptoy. Tho amount of his oxpondituro for tho year 1885-6 was £725 10s. The stock at tho period of tho bankruptcy was larger than at any provious period. Ho met all his bills up to Ootobor hist. William M'Lean, auctioneer, doposed thai tho sale of goods took place on the sth of August. He askod tho debtor for some goods for tho salo, and the debtor sent somo in. Witnoss sold them and sent in account sales to tbo debtor. Mr. Bell asked tho witness whoso goods thoy woro Tho witnoss ropliod that he asked the debtor to lot him havo somo goods, and Waters consontod. There was somo tea loft ovor, and ho asked tho dobtor to take it back. Tho debtor agrddd. Af tor the aale , ho wont -to tho debtor and nskod him to allow a commission, as thoro had not boon a good sale, and nothing was saorificod, A commission was charged. Mr. Skerrott recalled Mr. Vivian, tho late book-koopor, and examined him as to the manner in which tho books woro kept. His Honour obsorvod that a merchant could not, of oourao, bo mado responsible for tho incompotonoy of his book-koopor, and on tho other hand he (his Honour) might havo to say that the bankrupt ought to havo known of theao things. . In his address Mr. Skerrott said ho took it that tho Court would not oxeroiso its summary jurisdiction in a oase where there was a conflict of doubt. He submitted that there, was a conflict of doubt in tho present instance To secure oonviotion of a bankrupt it was noccssary to show that %hero was a particular dobt, and that when he in-/ * ourrod it he hod no reasonable prospect or paying it. In tho case against Waters, Mr Bell bad, he submitted, failed to brine. fV 5 ward such proof. He submitted rhnfljjr obvious that the debtor oould not bo pr- , .^ under tho Act for oarrying on of when ho know ho was insolvent,/- />J>J2iV'Vfc Mr. Bell had failed to prove aspeci6 Q %ag«j^ in respect to the incurring of a speoino ttbtjc^BS He quoted several casos in which hi« oun« tention that it was necessary to prove that a dobtor had no reasonable or probable expectation of paying a particular liability, had been uphold on section 159 of the Englith Aot of 1861, of whioh seotion 171 of nhe Now Zealand Aot is' a oopy. The Legislature, he said, hod oarelossly adopted tho old Act instead of that of 1883. Counsel further contended that the charge against tho debtor of having failed to keep proper bookß of account had failed. He submitted that there was every reason to believe that the dobtor intended his books to be usual and reasonable books of account. He admitted that no proper balance-Bhecit had been takon out, but argued that that did not doprivo the books of tne character of being usual and reasonable books of aooount. Alluding to the obtaining of goods from Messrs. W. & G. Turnbull A Co., Mr. Skerrett contended that the charge against his client hod failed. Mr. 801 l admitted that tho cases cited by Mr. Skerrett seemed to him to bo very much to the point, and if they wero binding, conclusive. His Honour observed, with roforonce to tho transfer of the Globe Mining Company shares, that although the transaction was wrong under the bankruptoy law, it could not be regarded as a criminal act. In giving judgment, bis Hononr said the first charge was that " he could not havo bad, at the time when the debts inonrred by him in the year 1886 were inonrred, *ny reasonable or probable expectation of being able to pay tho same." If subseotion 17 of the 171 st section inoluded the case of a bankrupt carrying on business long after he could not have had any reasonable or probable expectation of paying 20s in the £, his opinion was that Mr. Waters would have to be convicted, for he was perfectly satisfied that when the statement, of assets and liabilities was made up in March, 188G, the debtor must havo been aware ho was hopolessly insolvent. The omissions in it were so glaring and so obvious that it was impos'siblo any man with tho least knowledge 1 of his own affairs could fail to boo that at that timo ho was in an insolvent condition. But ho waa satisfied by the authorities cited by Mr. Skerrett that the mere fact that o> bankrupt continued to carry on business long after he knew himself to be insolvent would not justify him in convicting that man under the subsection. It was an unsatisfactory state of the law, but he had not to make the law— he sat there to administer it ; and he considered himself bound by the authorities cited, and to say that tho case as proved did not come within tho subsootion. The next charge he thought it necessary to notice was the third — "That he, within three years from the commencement of his bankruptoy, failed to keep usual and reasonable books and accounts, setting forth truthfully the state of hia business transactions." He fully accepted Mr. Komber's opinion that those books had been disgracefully kept, and that nothing could have balanced them, por was any attempt made to balance them. This subsection spoke not simply about usual and reasonable books, but of " usual" and reasonable books and accounts, setting forth truthfully the state of his business transactions. Now, he was not prepared to say that theEe books did not truthfully set forth the state of tho transactions of the bankrupt. The books did, with the exception of tho fake entry in M'Ewen's caee, B-at forth fully the state of tho transactions. The entry wao rectified prior to the bankruptoy, and his opinion of the matter was that Air. Waters thought bettor of it and somo time before ho filed — thongh after he was in difficulties — he corrected tho entry in such a way as to show the actual state of his indebtedness to the Northern Land and Loan Company. No doubt the correction came somewhat late, but it was made, nnd he should give the bankrupt the benefit of it. He had already said that the omission to strike out the entry to goods account was probably a clerical one. He did not think the debtor had any fraudulent object in leaving ', there. Referring to the charge of obtaining goods on credit from W. & G. Turnbull &. Co. by means of false pretences, his Honour said he preferred to accept the testimony of Messrs. Cock and Beid in preference to that of the debtor. He had, however, still to consider whether he ought to deal with this case by committing the bankrupt. The transaction was a- peculiar one, inasmuch as the bankrupt discharged one debt while he incurred another. He thought the matter came within the letter of the section, but he had ft discretion in acting upon these penal clauses, and he was of opinion, having regard to the facts, that he ought not solely on that account to commit the bankrupt to prison. As to other charges, he had already dealt with them, for Mr. 801 l had intimated that he could not insist upon them. In concluding, his Hononr said he did not see his way to exercise the summary powers of committing the bankrupt. He should undoubtedly have exercised it had subsection 2 of section 171 applied to the case, but he felt bound, on the English authorities, to say that the section did not apply, and he was not satisfied to deal with tho case under the other bections. The whole matter could come up before the Conrt when the bankrupt applied for his discharge. Meantime, he did not see his way to exercise the summary jurisdiction given him. In saying this, he wished to express his entire approval of the course that had been taken on behalf of the creditors who imd applied to the Court. The circumstances were such as amply justified the investigation that had taken place, and although he did not exercise summary jurisdiction, he had not a single word of censuro for those who were prosecuting. On the contrary, he thought they were entirely within their duty, and what they had done was to the advantage of the public. On the application of Mr. Bell, acting for the Official Assignee, his Honour declared the examination finished and the bankruptoy closed, so that the bankrupt's allowance should cease. It was agreed that applications by tko Official Assignee and Mr. Skerrett for oosta should be heard at a Liter date. The Court then rose.

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