THE J. G. WARD COMPANY'S LIQUIDATION MR. WARD'S ANSWER TO THE LIQUIDATOR.

Evening Post, Volume LIV, Issue 19, 22 July 1897, Page 2

THE J. G. WARD COMPANY'S LIQUIDATION MR. WARD'S ANSWER TO THE LIQUIDATOR.

EXPLANATION^ ON VABIOTJB POINTS. XHE PAMOUS OATS WARRANTS FORTHCOMING. THE MAIN CHARGES STILL UNANSWERED. [BY TELEGBAPH— PBBSB ASSOCIATION.] DUNEDIN, 2lßt July. ' The examination of the Hon. J. G. Ward in reference to tbe affairs of the J. G. Ward farmers' Association was resumed to-day. Mr. Wajd was questioned in reference to the transactions in regard tP the taking over of tbe business of Rpss's Twine Factory at Invercargill. He said he gave two cheques, one for £3000 and the other for £6462, for the purchase o| the stooks sold by bis company. As to the first oheque, Mr. Ross, was practically in difficulties, owing to pressure from the Colonial Bank, and he (Mr. Ward) agreed to assist him by the formation of the Twine Company. In doing, so he stipulated with Mr. Ross that the stooks purchased in the first instance by himself as a private individual should be taken over by the new company, plu? interest and nil charges to date. If Mr, Solomon stated that it was correct that he bad to pay^ £33 7? per ton for this twine he would absolutely deny it. He had this iwinein hau.d. for, some time. He had not the slightest doubt that the directors knew he was, to receive the profit on it- The company was "formed for a twofold purpose — to relieve Ross's account, which was a jcongested one, and to dispose of the stocks (Of twine. He held a second cheque for £6462 signed by Mr. Ross himself and Mr. Fisher, who was one of the directors, and on its face the specific purchase was shown, ?' Twine, as per warrants." He now learned •that somfrof this twine has heen bought by him from Ross at £38 per ton. There was nothing hidden about the transaction for the purchase of the twine, since the specific purpose of the cheque was shown, signed by the manager and one director. Examined as to the matters in the liquidator's report, Mr. Ward said there was an inference in qne paragraph that the freezing works, when established, were not to be acquired by the Association, but that the Jatter had afterwards acquired them. It was pot a fact. It had never been acquired by %he Association, but the latter had carried on a portion of the business on commission. He cdmplairied that the liquidator's report in many respects was biased, and led to incorrect inferences being circulated throughout the country as to the motives for increasing tbe share capital. As to the increase of the share capital from £100,000 to £250,000, resolutions were formally recorded with a view in the future of attaching the freezing works to the Association as a proprietary concern owned by the farming shareholders, and that step was taken in readiness when the time was opportune. The Judge said there was no suggestion of anything improper in increasing the capital. Mr. Solomon concurred. Mr. Ward said he was glad to hear that, because of the comments in another direction made throughout the colon)'. Under examination regarding Mrs. Barren's guarantee for £5000, Mr. Ward said the guarantee was given strictly in accordance with arrangements made by him, and the suggestion that it was done for the purpose of obtaining from the Bank a guarantee lie jfw not entitled to get was without foundation. [The memorandum from Mr. H;. -Mackenzie prodnced.] The guarantee was surrendered when the amount so guaranteed came down tfo below the amount named, as a pure matter of business. There was no faV-dur otfthe part of the Bank. With refers enee to' the liquidator's comments on the creation, of fresh share capital and the capital taken by himself (Mr. Ward), Mr Solomon had, endeavoured to make out that he (Mr. Ward) had paid nothing on his shares, but he wished to point out, as would be seen by his' account with the Fanners' Association, that there had been an appropriation of capital paid'in from time to time by himself, aucLif there were a debit of £1 per share set agaiqst himrelf it was only fair- that that appropriation of capital should he regarded as,. a payment by him of £1 per share. Updo the- question of the 100 debentures hypothecated to the Colonial Bank, the position was that these 100 debentures were lodged v.if,h the Colonial Bank as collateral sec^ity of the general account of the Facers' Association. There was an agreement in writing that they were to be sold at par^jate proceeds to go to the credit of the Association, and no interest io be charged until ifteywere sold. As a matter of fact the^weiKf regarded by him (Mr. Ward) as thougfi they did not exist until' they were sold, and until the Association had to pay interest, on them. In other words, he regarded ,'them as free, being lodged as collateral security for an indebtedness which bore independent interest, not at the rate stated "in' the debentures, and the bank at the - sums- time were agent 9to sell them at par. Referring to the £20,000 proceeds placed to his credit, he said he gaye no authority fop this to be done, or in any way suggested that it should be done. In regard to the second lot of 2000 debentures, be had given no instructions or directions as to how they should be treated. That was, of course, so far as any individual account was concerned. The 3000 fully paid-up shares allotted to him for goodwill did appear in the balance-sheet. Tbe amount of good¦vyill on the other side did not appear, but one should be set off against the other. A* to the complaint of certain specific items not being mentioned as assets in the balance-sheet, but which the liquidator presumed were included in the gross, he had not seen this done, nor waa it usual,' hut ;is a matter of fact they all appeared in the detailed statement attached to tbe balance-sheet. One of these was the Hokonui Railway and Coal Company, &1363: Regarding the ; statement thai, there had been omitted frotrf the balance-sheet £10,554 due to Nelson Bros., as against that there were 7753 carcases of mutton in store. The arrangement in the contract with Messrs.' Nelson Bros, was that eaoh steamer should clear the works, or failing that, the balance of meat should be paid for. The steamer did pot absolutely clear the works on the Bfcti July, but' she took 18,408 carcases, valued at £10,308 9s 3d. The steamer shut oat a portion of the, caroases that Nelson Bros, were entitled to pay for, and by the time the next steamer followed the balance unpaid at that date amounted to the difference of tho invoice, £10,653, which was drawn correctly in the first instance, and the value of the meat shipped, £10,308. The difference under one system of book-keeping would be that the balance would be deducted and carried forward to Nelson Bros. That was, the amount of tbe invoice would be deducted from the actual amount that Nelsons were entitled to clear the works for and pay for- But instead of deducting that difference and making the entry so for the purposes of book-koeping, the entry was reversed, and the £10,308 was entered again, and the difference went forward to the next shipment. As to the liquidator's model balancesheet, the witness pointed out that, although tbe report said certain things ought to bo brought to debit before balancing day, interest among other things, it would bo found, when to debit by the liquidator, that he riiade the profit and loss balance the e&mij. The conclusion was that these amounts must have been provided for or a similar result could not have been arrived at, 1 Unless for reporting to the Court, no commercial' balance-sheet would be set out

in tho way the liquidator Had done. * He had asked other commercial men questions on tho .point, and they agreed ) with ; him. The same remark applied to the detailed items set out among the items in this balaucesheet. He was quite satisfied that no trading company could possibly make a balapqe-sheet as the, liquidator had done. As to that amount due Jjo' Cooper and Nephews, £3017, value of consignment of sheep dip, that consignment* yas held ; ol their own account. " It was not the Association^ stock, therefore it was not put injto the stock account. He'did riot/ kubk whetW portion of that consignment had been surrendered by the liquidator under, order of the Court, but he had heard so. As to the balance of interest due to tho Bank, it was usual to show only the balance after deducting the interest due to the Assobiation.rSQr Interest 1 on the shareholders' accounts. liquidator brought out 'exactly the sainj Results in regard to the profits as the Association, therefore there was nothing wropg l <{nMhe Association's, figures. ; ,- As to ConnelPs draft, Mr. Ward said :— In my absence Mr. Fisher intimateijto.the Bank that the question of whether or not that operation was in accordance with what it had indicated to me was to stand over until I was consulted on my return. After my return, when I was consulted, I stated that the draft was not to go forward, because it was not carried out under arrangements of the credit as fixed by me. " " " - Mr. Solomon— That is*, fixed t botween you and Connell ?* ' - - ' Mr. Ward— Yes ; and in addition to that I instructed him that it was not to be brought again to the debit of the Association, and 1 consequently took that over, and I say it was not brought to the debit of the Association again afterwards. When the Association was in credit the draft was lifted and the warrant returned to me. • The witness exhibited oats warrants for £30,000 supporting Mr. Comjell'sp draft, which the liquidator said he haa been unable to djsco,ver. These, warrants were returned, to him when tbe draft was lifted., The liquidator never asked for the- warrants. As to the large increase on the amount of past due bills in 1896, that was accounted for by the fact that for a considerable period the Association was practically in liquidation. The ordinary business was shrinking, and renewals were not agreed to by 'the Bank. Referring the giving up of Mrs. Barren's guarantee, ' he said that it was given up directly in accordance with the arrangement made by him when the guarantee was given in the first instance. Any "suggestion that this was a concession or a subsidy obtained by him on the guarantee which he was not entitled to get was absolutely without foundation. The following memorandum in Mr M'Kenzie's handwriting was' handed to him at the time the guarantee was given . — « (The freezing account to come down £2300 a year until £5000 is reached, when we will give up Mrs. Barron's guarantee life policy(for £5000 to-be 'assigned, to the bank." He had the 'receipt of the life policy, which he took out and which he assigned to the Bank. The* account came down below the amount named, and it was no question of favour to get the guarantee back. It was a right. A? a, matter of • fact, he did not demand the' return of the guarantee, but he would not have paid the cheque into the Colonial Bank at Wellington, to Dunedin, Invercargill, or anywhere else unjess that arrangement bad been first carried out. The transaction was purely a matter of business in accordance with an arrangement made, and there was no favour on the part of the Bank at all. The draft on Cooper and Nephews was drawn on them in the first instance because he had business transactions with them, and proposed to constitute them his agents for receiving the proceeds of the sales of his shares in Nelson Brothers. The" draft was not to be presented, in accordance with his letter to the Bank, till he cabled. The alteration, so far as the sale of the shares was concerned, was made, but in accordance with an arrangement with the Bank that matter was allowed to stand over until after bis arrival from England. Wiien be was in England he completed the sale of the shares, leaving tlje. payment to stand over till his return. On his return to the colony the money was paid in and the draft lifted. Speaking not from his own knowledge, T but from the information given by Mr. Fisher and Mr. Anderson, the witness declared that the statements in the report that 174. drafts were discounted with no drafts on the business to the drawers to support any of them was contrary to fact, and, similarly, the statement of Mr. Solomon 1 concerning the 41 additional drafts was contrary to fact. Provision was made in the balance-sheet for bad and doubtful debts, and the profits sho ( wn were arrived at after, deducting such debts. The items could be traced correctly all through the books, as' Messrs. Fisher and Anderson would be ; ahlei to show. ¦ As to the profit and' loss account,! he was' perfectly satisfied, after investi-i gation, that -the liquidator was entirely wrong in his conclusion on that matter, as he had started on a -wrong basis. In the first year's account it w.as -wrong of the liquidator to deduct from toe profit and loss account items charged/ to Ward's grain account and paid for by. him in cash. If the account was carefully gone into it would bear' out What he .jsta.ted. The auditor had- admitted under pressure that the deficits upon .consignments pats ought to be carried to the debit of jprofit and loss, but in conducing a business "of Jhis< magnitude to do so would entail very 'heavy i labour on the bookkeepers. Counßel oiight to I have taken into ennsideratidn when question-, ing the auditor the quantities of cash sales, and not dealt with the consignment account alone. As to the deficiency on the estate, estimated by the liquidator at £48,000; that might be correct, but it could not be accepted as a fair indication of the business as a going concern. The same applied to the value of the stocks, which had been greatly written down for liquidation. One thousand two hundred and fifty accounts owing to the Association out of 1750 had been paid in full, and a number valued at 7s in the pound had realised 16s Bd. There was still a balance of 3000 accounts io be realised on. The gross estimate of the valuation of the debts was £4662}. They had paid already £12,168, showing a surplus over the valuation of £7505. On 54 accounts there was £9229 over and above the valuation, and on 54 of the worst accounts/ valued at ,£5657, there had been written $ 12,350, yet- they had -realised £14,887. Under the liquidation debentures of £40,000 bad been, paid off. Mr. Cook said that was absolutely incorrect. He had not the money to do it. The witness said , his results were arrived at upon the liquidator's own figures, and he bad independent authority for saying the debentures had been paid off. He, however, accepted the correction. As to the statement that the losses made by him had been debited to tho Association, that was incorrect, and he had actually paid £7000, which had been debited to him. Mr. Solomon said this was included in tbe £55,000 draft. The witness explained with reference to tbe Carswell purchase that the Bank liad undertaken to provide the finance required. Apart from the Association, the responsibility ran into £30,000 or £40,000. He complained that the Bank knew the accommodation required before the Association took the business, over, which was token >- up on the representations made. It nad been overlooked that this £30,000 or £,40,000 was put before the Association in carrying on another business of the Bank. As to the statement that an attempt had been nude to keep down the figures of the Association, he repeated that the Bank had thorough knowledge of Carswell's business. As to the comments of the liquidator on the freezing works, ho indicated a great ad van tage> to the Association by the connection, which was worth at least £2000 a year to it. Owing to

1 severe competition the works had resulted in a heavy loss to witness. In reference to the Hokonui Coal Qompany, he had acquired this [ mine to,enable large savings be made in running the various f actorie^in which the Association was interested. Had time been given he Relieved he could have sold for 312,000. He understood thati^was going to realise in hquidatipn 10s in the pound, while it had been put down as worth not more than Is. Regnrdipg the summarj pf causes of tbe insolvency— insufficient capital, impruaent advances, and absorption of the Association's capital in Mr. Ward's business— the witnes? said tb,e, qauses of the downfall of the Association , were the incessant attacks , on tfi. The institution had large aredits in, connection with trading houses it was dealing with, and this was an important aspect when the charge of insufficient capital was made. If comparison were made with 'some of the best trading institutions in tho country in regard to the proportion of liabilities to capital the comparison was not againsfc the Ward Assooiation. As to imprudent advances, some of the amounts were,Jarge, bnij the officers were able to gauge thY ability of the debtors to pay, and were never in, douty a.ho^ f th.em. Some bad debts had fo'be made,' as in' every business. As to the absorption of the capital in his business, fiovd the inception the business ' he had gathered round him was the mainstay of the Association. A further cav^se of the downfall was the taking over of a large business which crippled their finance and added enormously to their liabilities. Had he been allowed tithe he would have got clear. Five years' bad times had also helped. He had paid the Colonial Bank in three years in interest alone £39,000. He had never interfered with or spoken to the auditor c as to how. he., shoujd audit the. accounts. The auditor acted quite independently. " ' • Mr. Solomon then stmmisfrised the charges as follows :— Squaring accounts at balance time, the Carswell uusiness, debiting losses'on tallow to the Association, and £1500 foregone hy Mr. Ward not being < reported to the shareholders. Counsel asked, whether the witness considered these actions were right. Mr. Ward said he was there to answer facts, not to give opinions. • Mr. Solomon pressed for an answer, and asked if the witness knew any other institution where the account had been so- reduced on balancing day. The witness said he had nothing to do with other institutions. After discussion, and a number of other questions bearing on the same point, the witpess, declined to give an answer such as, he said, counsel evidently wished to get. His Honour said he did not see why the witness jshjould; not answer, unless he was apprehensive that the answer might be used against him. , . The witness declined to answer the question. His Honour said it was undesirable to bring in the name of any other company whose credit might be affected. Mr. Solomon repeated the question if I witness thought it was a proper thing to do what was done in respect to the £21,000. The witness said he believed i>o at the time, or he would not have done it. , Counsel put the questions relating to the i various matters covered in his summary of ' the charges, to which witness said he had already answered, and he had nothing further to say. I This closed Mr. Ward's examination. ,' Mr. Anderson, Secretary of the Association, is the next witness.