THE J. G. WARD COMPANY'S LIQUIDATION.

Evening Post, Volume LIV, Issue 21, 24 July 1897, Page 5

THE J. G. WARD COMPANY'S LIQUIDATION.

♦ THE MANAGER GIVES INTERESTING EVIDENCE.

HIS DIFFERENCE WITH THE COMPANY'S BANKER.' [BY TELEGHAPH — PEESS ASSOCIATION.] Dunedin, 23rd July. Mr. Fisher, manager of the Ward Association, said in his examination that he had been manager of the Association since its inception. His duties were not defined by anybody. Mr. Ward, as managing director, initiated the policy, arranged the finance, and generally acted the part of general managing director. In Mr. Ward's absence Mr. Green was acting chairman of directors, but no deputy-managing director was appointed as provided by the articles of association, he (Mr. Fisher) partially taking over I the duties of managing director when Mx Ward was away. When questioned closely as to the state of. Mr. Ward's account not having been disclosed to the directors, the wituess said — " I think other documents (other than the books) were placed at the disposal of the directors." He did not think there was any system of concealment by which the affairs of the company were never brought before the shareholders or directors, It was stated in the original prospectus of .the Association that the sale did not inolude the freezing works, but that Mr. Ward would conduct the business of freezing himself. There was no loss td the Association on the freezing 'account, although, unfortunately, Mr. Ward had suffered heavy loss thereon. Witness acted as Mr. .Ward's agent and attorney. He had no recollection of being told that the cheque for £21,000 given in 1893 was to be drawn out again next day, but more than probably he was. He did not recollect Mr. Birch, manager for the Colonial Bank at Invercargill, telling him the money was being lent to the Association for the balance day by Mr. Ward. As to the further payment in of a cheque for £35,000 at the balance day of 1894 he had no recollection. He was told that Mr. Ward wafe alsd lending this amount. Mr. Birch knew that Mr. Ward owed a large amount, but he could not say whether he knew the amount. The Bank must have known his position, on account of the large cheques going through its books. They knew that Mr. Ward owed large sums for calls on his shares, and also that such sums were debited to him with the approval of the Bank. Mr. Ward told him he had told the Bank this, but Mr. Birch never told him that Mr. Ward owed large sums to the Association. His Honour suggested that the Bank knew Mr. Ward was carrying on the freezer on' his own account, and would also know they were not finding the finance for it, and if cheques were passing into Mr. Ward's account it was reasonable to infer that the Association were financing Mr. Ward if Association cheques were passing in. If the Association was not financing that account, that would account for Mr. Ward's account being in debit. Mr. Birch's letter of 3rd September, 1895, relating to his interview with Mr. Fisher, was read, and in reply the witness said he could not be responsible for the expressions contained in the letter. There was a modicum of truth in it. He did not tell Mr. Birch Mr. Ward was ruined, but thought he was from £20,000 to £25,000 behind in the interval between his departure and return from England. , He did not consider Mr. Ward was ruined, although there might be a question as to whether he could pay his debts. He had no means of knowing what Mr. Ward's outside resources were. Pressed as to whether Mr.. Ward had other assets, the witness said he took Mr. Ward's word when he told him he could pa) f the Association £55,000. His properties had cost £-38,000. There was an undertaking to mortgage them, but not an actual mortgage. No doubt in the interval of his going to England his position had weakened. It was pnly his own assumption that there were losses on floating the consignments. In connection with the Ocean Beach Company there were drawbacks to the extent of £9000 which had to be met. He could not gay what Mr. Ward had lost, but in 1894 he considered him perfectly good. He did not recollect telling Mr. Ward in Wellington that losses had arisen to the amount of £25,000. He recollected telling him there was an actual loss of £7000 accounted tor and in addition there were losses on the freezer. Counsel then put the "following question :—": — " Is it true that all this £55,000 were losses of the Association, as Mr. Ward has said, and that he took the responsibility on his own shoulders ?" • Witness replied : "If Mr. Ward, knowing . the £55,000 did not entirely represent the losses of the Association, swore that it was losses, it would not be correct." Outside of the £7000 referred to he could not point to one shilling that Mr. Ward took upon his own shoulders of the losses of the Association. He did not consider it was his duty to tell the directors of Mr. Ward's position. He went to Wellington on his way to Auckland and on other business, and if Mr. Ward had sworn that in consequence of what he (witness) told him he deemed it necessary to invite the Bank to make an investigation^ then he must have told him something about his accounts, but he would not say positively, as it was two years ago. If it was not in the minute* it was probable that not a word was said to the directors officially about Mr. Ward's position, (The minute-book was shown to witness.) He said it was not recorded, and he repeated that he did not consider it was his duty to. inform the directors or shareholders. He did not hear of Inspector Davidson's report to the Colonial Bank until after the Association's report was presented to its shareholders, and it did not strike him that his keeping this information in his own breast was a concealmeut of affairs 'from the shareholders. Mr. Ward may have done so, but he would not regard' his action as concealment. As to the £21,000 cheque given to the Colonial Bank at the balance day of 1893, there was nothing in the balance-sheet to show the directors that the overdraft at the Colonial Bank was £47,000 one day and £26,000 the next. There was no reference to it in the minutes, aud as the cheque had been paid there was no reason why there should be. Mr. Ward must have reported the fact that he had placed £20,000 of debentures with the Bank of New Zealand and £20,000 with the Colonial Bank. Mr. Anderson was away at the time, and he did not speak to him till the end of the year, so that the amount was left at Mr. Ward's credit until then. The draft on Connell and Co. for £30,000 was drawn at Mr. Vigers's request, and the amount was placed to Mr. Ward's account specially for him, under a letter of credit, which he never saw until afterwards. He w almost certain he gave instructions that il >o«e accounts should be transferred, as it would not have been done without his instructions. He treated Mr. Ward's £25,000, Mr. Brooks'? £18,500, and Mr. Connell's £6500 as one account, considering they had been drawn originally under Mr. Ward's personality, and the whole of the grain and produde had been entirely in connection with Mr. Ward. This transaction had the effect ol keeping an amount of £25,000 out of the balance-sheet. Mr. "Ward gave him instructions that all these transactions were to be treated as one, and he considered it his duty to take the losses on his own shoulders. The £25,000 was included in the £55,000 promissory note to the Colonial Bank, and there was no loss to the Association in consequence. He had no instructions to transfer these sums back, and never. told- Mr. Ward or anyone it had been done until long afterwards. He thought it was a perfectly right thing to do at the

time, and would do exactly the same thing again under similar circumstances, and if authority was wanted for such transaction he would refer counsel to Mr. Cook, the liquidator. * Mr. Solomon— Never mind Mr. Cook. If you have anything to say about Mr. Cook you can tell your counsel. He thought it was only right to inform the witness that the items formed the gravamen of- the whole thing, and the liquidator suggested that . therein was deliberate falsification. 1 , He asked for the explanation again. \ Witness repeated that 1 he considered the three accounts were practically one, and, lie transferred Messrs. .Brooks and Coquoll's credits to the credit of Mr. Ward, with the result that the former's oredit disappeared, and the hitter's debit also disappeared. Mr. Solomon (to ■ witness) — The effect was to square Mr. Ward's account ? Witness said-tbat was the effect.' There 1 was no agreement or contract that Mr. Ward , should pay the amount owing by the Association to Connell and Brooks. He knew the Association owed that money, .to those people, and he treated the three accounts as One. As Mr. Ward took the risk of the London shipments if large losses occurred on them, this was the reason they were not shown in the balance. With the exception v of the Ward Association, he had never trans- i ferred accounts in such a way as this at balance day. The directors were never taken into confidence in these transactions, and in the whole of his experience he never knew of the directors » inspecting the books. They could have found out all about the matter if they had looked at the books. Closely quefcjiionedas to the effect of Mr. Ward having foregone £1500 of salary in 1895, the witness contended that the amount had been paid afterwards, and the Association was justified in makjng the appropriation for dividends, aiid that the charges should not have been increased proportionately. He did this, under the power of attorney" Mr, Ward had given him, on his own responsibility, and it was irrevocable. He told Mr. • Ward afterwards. He could not say when he .told Mr. Ward — whether before or after the compilation of the balance. The effect was to show that the business had made a profit of £1500, and he contended that as a profit he was right in showing it, and there was no concealment or untruth in the balance-sheet as to the "profits" actually made. At this stage the question of the Connell and Brooks drafts again cropped up in reference to a remark of hfs Honour. Mr. Solomon said the effect of the transfer to wipe out Mr. Ward's indebtedness. Witness said Mr. Ward had not been wiped out yet, and Mr. Solomon said after the enquiry was over he would take the opportunity of saying that it was a very difficult thing indeed to wipe out so brave a man as Mr. Ward. The witness, further examined, said he kept full accounts of the stocks as far as he thought proper, but did not keep a prope^' stock-book. It was one of the things he, failed in in bookkeeping. He could not tell what oats were in stock, but in June, 1895, there were about 92,000 sacks belonging to the Association and others in stock. ( In August, 1895, Mr. Davidson, the Bank Inspector, came down and conferred with " him, and satisfied himself as to what oats were in hand. If he said they were 35,000 Bhort he -was wrong, a3 witness Relieved they had something like 70,000 sacks. A statement was here handed to the witness showing that in the thrree months between June and August, 1895, 3000 more sacks of -oats were purchased than sold. He would not deny the accuracy of that, but said he believed he told Mr. Davidson he had not enough oats on hand to meet the warrants issued against them. He corrected the first statement, aud thought he had 90,000 sacks as against warrants for 126,000 sacks held for other persons. He affirmed that these oats were in store when the warrants were originally given, "but in the interval the money had been used. Thp people holding the drafts would think the oats were in stcfe as represented by the warrants; but it- did not follow that the Association had no oats of its own, as the 96,000 sack? included 16,000 sacks belonging to the Association. A long discussion took place between the witness and counsel on the method, of showing stocks in hand, and eventually the matter was left in this position, that it was purely a matter of bookkeeping. Witness was asked why a certain loss on tallow in 1895 made by Mr. Ward had been debited to the Association, and pointed out that this took place in September, after the balance. Counsel said he would not then go into the matter. Witness explained why £1000 for Bluff storage had been included in /the produce account.- To the storage account were first debited all payments made at the Bluff for storage (and also wages) of grain held under warrants and otherwise, and at the end of the produce account was debited with the storage on the lot. He "admitted that by paying that £1000 to credit of the produce account the assets on the Association were increased by that amount, but said that it was absolutely incorrect that there was a loss of £4000 on the produce account. He explained the method by which such account was made up, and contended there were more than £16,000 worth of oats in hand to represent the balance stated. They took as their value the market value at the time. He would swear .that there were oats to the value of £16,000 (more than 30,000 bags) in store in June, 1895. If Mr. Birch, Invercargill manager of the Colonial Bank, said in his letter to Mr. Mackenzie, general manager, that he (Mr. Fisher) "owned up to being 36,000 bag? short, exclusive of the 80,000 bags attached to a British bill," he could not accept the responsibility of what Mr. Birch said. He could not say he would contradict the statement, and he did not believe it was true. Witness was closely pressed as to whether he would' contradict what Mr. Birch said on oath, and said he would not do so. He did not believe Mr. Birch's statement was correct. The latter must have made a great mistake. He would swear that the further statement in the same letter "that he (Mr. Fisher) had lied and deceived him (Mr, Birch) hundreds of times during the past five years " was not true. Counsel, continuing, quoting from the letter—" He (Mr. Fisher) says the truth has not been in him." Is that true, Mr. Pisher?" Witness— l cannot say I would contradict him, but if Mr. Birch would take the responsibility of swearing to that he would swear to anything. Mr. Solomon called the witness's attention to the statements he made before the Legislative Council Committee regarding the quantity of oats belonging to the Association in June, 1895, when witness said that certain stocks of oats did not entirely belong to the Association, which held them as warehousemen for the Bank, Asked as to how he could now say they had a right to take them -in as an asset, the witness said some were held as advances for the -Bank, and some of the Association's were included. He held that his answer was perfectly correct, and he was right in taking credit ,for the oats in question as an asset. A large portion of Mr. Ward's losses were created through the Carswell purchase on account of oats included in that purchase. He belieVed this formed part of the £7000 deficiency, but would not swear it. Mr. Ward paid Carswell for the oats, which were afterwards worked through the Association. He did not say (as stated in the Legislative Council report of his evidence before the Banking Committee) that all the oats bought by the Association had to be debited to Mr. Ward, but Mr. Ward had to stand the racket on all oats, providing the Association did not feel equal to it. The, Court adjourned at 4.30, Mr. Fisher's examination not being completed, F

J^nedix, 1 his Day. This morning Mr. Ward h<inued in a statement of his losses and expenditure from Ist September, 1892, to 30th June, 1896. Mr. Solomon .-asked for particulars of £20,000 put down as paid to the Colonial Bank. Mr. Fishery examination was resumed. He said he whs- told by Mr. Birch when drawing the -dheques at the balance time of 1893 and 18^4 that they were to be taken out - the day after>'He could not recollect whether the two cheques for paying in and drawing out u ere handed tp the Bank simultaneously, but would not contradict Mr. Birch if he said they were. Mr. Birch did not tell him > tiiat th.c object of the transaction was to prevent his (Mr. Birch's) shareholders or the ti'ublio seeing the true state of the overdraft. He could not commit himself to saying he formed an opinion as to the object of the cheques being given. He considered that when he gave the warrants for the oats he had taken proper precautions to ascertain that the oats were there. Counfel pressed the witness as to whether 'theoiits transaction did not amount to the , fact that the proceeds of oats which had , been pledged to customers were sold, and i the money put to the Association's credit. / The witness admitted that it amounted to , that. He did not thiuk there was any / excuse for the proceeding, but still contended f ■ that they werejustified for taking credit for the oats in stock. The account was taken at £16,243 in the assets. Did not examine miriutely the stock-lists or 'the storeman, but got approximately the amounts in store, ' and reckoned them as nearly as possible according to current prices. Could not tell -why he pub in as assets ttre^stock if it was not iii hand. Had no doubt he told Mr. Ward in Wellington before the balancesheet came out in 1895 that he owed the Association £55,000.