THE BANK CASE

Evening Post, Volume CXVII, Issue 51, 1 March 1934, Page 12

THE BANK CASE

FIRST STAGE OVER

FURTHER ALLEGATIONS

ONE DEFENDANT HEAKD

The case for Frederick William Moore againt the Commercial Bank of Australia, Ltd., its manager Edwin Percy Yaldwyn, Athol Pierard, bacteriologist, and Sydney John Hammond, builder, was concluded* at the Supreme Court yesterday afternoon. The hearing of Pierard's defence was also concluded. Pierard alleged that he had signed certain documents at the Commercial Bank, including a guarantee, without leading them, on the assurance of Yaldwyn that- there was no personal liability. The case is being heard by the Chief Justice (Sir Michael Myers). The plaintiff is represented by Mr. H. P. O 'Leary. Mr. P. B. Cooke, with Mr. H. J. V. James, appear for the bank, Mr. G. G. G. Watson for Yaldwin, Mr. A. T. Young for Pierard, and Mr. S. G. Stephenson for Hammond. Moore's case was closed after the accountants- mentioned in yesterday's "Post" had given evidence. In his opening address on behalf of Pierard, Mr. Young said he thought it would be already obvious to the Court that Pierard was not an experienced business" man. He did not go into the Unique Advertising Company on his own. account or for his own gain. He was brought into it because his mother had somewhat foolishly subscribed for shares to the company, and ho was appointed a director with the idea of safeguarding her interest. The company was at all times dominated by Davies. Coming to July 1928, said counsel, it was the company's custom to settle its accounts on the tenth of each month in order /to get its discounts. SHORT OF MONEY. Mr. Pierard would say, said counsel, that as July 10 approached there was not enough money to meet the accounts that were falling due. At that time the company banked with the Bank of New Zealand. There was somewhat of a scramble to get the accounts met on July .10, and Davies and Pierard and Hammond went to . the Bank of New Zealand to execute a guarantee, and saved the company at that date. Mr. Pierard would say he was very uneasy about the situation as it then, existed, and that he was pressing continuously for a release, and that as a result.of pressure Davies made arrangements with the Commercial Bank. Pierard was not present when these arTangements were made, but at the invitation of Davies he on September 1, 1928, went firstly to the Bank of New Zealand to make arrangements to close the accounts at the bank and to release the security which was causing him the uneasiness. He would say that before leaving the Bank of New Zealand he-had an interview with the then manager of the bank (Mr. Reid) who gave him certain, advice., They then crossed the road at the Commercial Bank and Mr. Davies went into Mr. .Yaldwyn's office. Pierard and Hammond remained outside. They were then invited into the . office and the position, was explained to them. THE DEFENCE. It. was alleged that Yaldwyn gave them to understand that the guarantee they were signing did not involve any personal liability. Pierard, said counsel, had no idea that the document he was signing was a guarantee. He would say that from the date the document was signed until October, 1931, there vas never any suggestion made to him by anybody that he was a guarantor of the account. He then received a formal demand from the bank for the guarantee. *He immediately communicated with his solicitors and denied that he was liable. His Honour said .he supposed the truth was that guarantees were signed during the good years in New Zeiiland in such, a light and airy .fashion that no one considered there could be any risk. , "This taking of guarantees I always thought from my own practice—one ■used, to see a great deal of it—was a practice that was carried to excess, but it was done—we all know it was done —it was done rig\it and left," said his Honour. Mr. Young: We say in this instance that there was not a proper disclosure. His Honour: It is no use mi&sing matters. Your case as far as you have gone is a direct charge against the bank manager, and a serious one. Mr. Young: Yes, Sir, I realise that. Mr. Young said that the defences were (1) that the defendant was not aware that the documents he was signing, were in the nature of a personal guarantee; (2) that the defendant was entitled to avoid the guarantee because of the representations that were made at the-time of execution; (3) that the plaintiff was in some way released be-fore-a receiver was put in for the company. . " ' VERSION OF INTERVIEW. Pierard gave evidence along the lines indicated by Mr. Young, and described the visit to Mr. Xaldwyn's office. "Mr. Yaldwyn congratulated us on being directors of the company," he stated, "and said he and his accountant had formed a very high opinion of it and were very impressed by the prospects and that we were lucky to be directors. I was very worried about the suggestion of having to sign more documents, especially after the advice given to me by Mr. Reid. Acting on Mr. Reid's advice, I asked Mr. Yaldwyn'if we were committing ourselves to any personal liability by ' signing these documents. Mr. Yaldwyn said: 'None whatever, gentlemen, this is parely a matter of form.' He said something after that about having to sign.it to, satisfy the directors or someone." ..-.'■ ... Was any indication given to you of the language of the documents you were signing?— Yes. I explained to Mr, Yaldwyn that I had not very much time at my disposal, and asked him if it were necessary to read the documents. He- said no, that he would explain them. Mr. Yaldwyn stated that they were debentures for the mortgage of the company's assets to tho bank for which the bank would give a certain overdraft. Was there any question as to whether it was a proper thing for you to do to sign . tho documents?— Mr. Yaldwyn said it was a proper thing. He finished his remarks by saying it was a proper thing for the directors of a. company to do. THE SIGNING. And with regard to the actual signing, was that witnessed by Mr. -Yaldwyn? Mr. Yaldwyn was" there when .we signed. I think there were two or three lots of papers. They were on the table, and we were shown where to sign. " - . "After the document was signed " , continued witness, "Mr. Yaldwyn said that he and his accountant had carefully gone over the company's books and had also studied some actuarial reports and that they • considered the actuary's figures too low. Ido not know what these figures were, but they .were certainly very high figures. Mr. Yaldwyn again stated that we were -"ltieky to be in such a concern on the ground flooj, and that we would nob

have the same cause of complaint from his bank as we had had from the Bank of New Zealand. He further said that we were lucky to.be out of the clutches of the Bank of New Zealand." Witness said that they then shook hands with Mr. Yaldwyn and left his office. Cross-examined by Mr, Watson, Pierard said that at Mr. Yaldwyn's office they discussed only one document, a debenture, but when Yaldwyn said there was no personal liability he was referring to all the documents. Witness said that he had signed one of the documents at the Unique Advertising Company's office. Mr. Cooke (to witness): Mr. Pierard, you are a little'bit careless about the way you sign documents?— Well, my lawyer has told me. (Laughter.) His Honour (to witness): Well, you may say in future that th» Judge has told you too. (More inighter.) In reply to Mr. O'Leary, Pierard said that Hammond was present when the documents were signed. Mr. O'Leary: What amount of money did you or your family have in this company?—My mother put in £1500. And you lost the whole of it!— Yes. His Honour (to witness):" Mr. Pierard, did you use the expression today "being on the ground floor" in a transaction or concern?—l did. Can you tell me is that expression well-known to you?—No, I did not know what it meant then—l thought it had something to do with this floor patent. (Laughter.) _ I asked afterwards what the word meant and I was laughed at. This concluded Pierard's defence, and the Court adjourned until today. CAUSTIC COMMENT. When the ca3o was resumed tliis morning Mr. Stephenson addressing the Court, said that the evidence Mr. Hammond would give was substantially the same as that given by' Mr. Pierard. Hammond became connected with the Unique Advertising Company on the request of Mrs. .Pierard to represent her on the board of directors. He refused at first and pointed out that he did not feel himself qualified. It was only when Mr. Davies, the manager of the company, assured him that he would teach him, that he agreed to go on the board. His Honour pointed out that the remarks regarding Hammond's business ability were not relevant. Hammond had signed the guarantee, and he was prima facie liable. "The mere fact," said Ms Honour, "if it be a fact—l don't suppose it is likely to be disputed—that he is ignorant and not a proper person to be a director of the business concerned is no defence, of course. You have to go a good deal further than that." Hammond then proceeded to give his evidence, which was similar -to that given by Pierard. Cross-examined by Mr. Watson, Hammond said that when he guaranteed the account of the Unique Advertising Company to the Bank of New Zealand he knew that he was giving his property as security, but he did not understand anything about the "joint and several" part of the guarantee. "When one heais of these things being dono it does not increase one's respect for the present-day banking business," remarked his Honour, who added that this remark did not apply to Mr. Watson's bank. "A company of this kind," he said, "comes along with certain directors who know nothing about the business —it is perfectly obvious that they knew nothing about the business—and they are asked to sign guarantees and mortgages over everything they possess. And this man had no interest in the company!" MAJOR ISSUE OF FACT. Opening the case for the defendant Yaldwyn, Mr. Watson said that the salient facts in dispute were now apparent. His submission, of course, was that the major issue of fact before the Court was whether the representations attributed to Mr. Yaldwyn were in fact made, and s if so whether they induced the plaintiff to enter-into the contract to guarantee the Unique Advertising Company's account. Counsel submitted that if they were answered in favour of the defendant it disposed of the case. , "I may say at the outset," said Mr. Watson, '.'that Mr. Yaldwyn's answer to the plaintiff's case as it now stands is a complete and detailed denial that the statements complained of were made by him—a denial which in my submission will be amply supported not only by Mr. Yaldwyn's evidence, but by the evidence of independent parties who have no interest in this case, certain documentary evidence, arid by an examination of the surrounding circumstances." It was further submitted that upon, the facts, if Mr. Moore'relied on anybody's representations, they were the representations of Mr: Davies, who was having a series of interviews with him at the time he entered into the guarantee, and that the inducement which was offered was an enormously large reward for the guarantee which he believed to be safe. The plaintiff in his case had alleged fraud on the part of Mr. Yaldwyn, and indeed as his case had progressed he had put that in the forefront. To that extent he had taken upon himself the very heavy onus of proof that fell on one who alleged fraud—the onus that he must prove it up to the hilt. Counsel said that he must point out the suspicion with which the Court must view a case which was resurrected at this late stage. Mr. Moore had given the guarantee three years ago, he paid his money two years ago, and. he had admitted that until launching these proceedings he had expressed no complaint to the bank or its officials. THE BANK'S DIARY. Mr. Watson said -that the bank's diary- (which was to be put in at a later stage by Mr. O'Leary) showed that when the Unique Advertising Company transferred its business to the Commercial Bank it had been constantly and carefully watched. It would be shown that the time Mr. Moore gave _ his guarantee the company's account with the bank was in the best position it had ever been in since the bank took it over. The over draft had been reduced from £2000 to £700 and it was to have been wiped off completely in seven weeks. It would be proved that Mr. Moore was a very valued customer of the bank, and it was extremely unlikely that the bank would ever seek to induce him to enter into a transaction which might alter those relations. Mr. Yaldwyn would say without qualification or reservation that he did not at any time or in any way approach Mr. Moore to suggest that he (Moore) should guarantee the account, nor did he suggest to Davies or anyone else that Moore should guarantee the account. The first Yaldwyn heard about the account was on Juno 6, 1928, when Mr. Moore came into the bank and informed Mr. Yaldwyn that he was going to guarantee the account. Evidence would show that that was always Mr. Moore's way of doing business—he did not consult his bank manager in the capacity of financial adviser. A DIFFICULT POSITION. | Mr. Yaldwyn would say that Moore I indicated that he had made this arI rangement with Davids, and he (Yaldwyn) would say that Moore then had the facts and figures of the Unique Advertising Company. Mr. Yaldwyn said to him in effect: "Mr. Moore, the 1 Unique Advertising Company is a client of ours. The Unique Company is in debt to us, arid I prefer not to advise you about the guarantee, but I suggest that you go to 'Mr. Arcus, who" lias been acting in the matter." Mr. Yaldwyn was in a difficult position, as both parties were clients nt the hank. What he did was'lo take the course of an honest and upright banker and rei

fuse to advise him, and told him to go and see Mr. Arcus. Counsel said that these statements would be supported by the entries in the bank's diary. He then went on to explain tho careful manner in which all oral arrangements between tjhe manager of the bank and his clients were entered in the diary. Mr, Arcus, a well-known accountant of high standing in this city, would say quite definitely that Mr. Moore came to him about the affairs of the Unique Advertising Company. Mr. Arcus would say that he showed him facts and figures and spoke disparagingly of the company and its officers, ending up by saying that he could not advise him to'have anything to do with it. Mr. Arcus would say afso_ that he felt and expressed the utmost surprise when he subsequently heard that Moore had signed the guarantee. SURPLUS OVER LIABILITIES. Referring to Moore's evidence, Mr. . Watson said that Moore had expressed the fear of being ".crushed" by the bank as his reason for not complaining. As to that, the bank manager would produce figures to show that his surplus over liabilities at that time was over £50,000, and no man could be asked to believe that he was not a welcome customer to any bank. As to the interview on June 9, Mr. Yaldwyn would say that Moore and Davies came into the bank with the ■ definite information that Moore was going to give a guarantee to the bank for the company's account. For that guarantee Moore was getting a high rate of interest. His Honour, without referring to the merits of Mr. Watson's case, said that the whole transaction was a most .peculiar one. His Honour commented on the fact that the '' Unique Company and Moore were both customers of the bank, and the bank knew that the company was paying 25 per cent, to Moore for accommodation. "NOT A CREDITABLE TRANSACTION." "All the more extraordinary is the conduct of the bank," said his Honour. "I cannot understand it. I cannot understand retaining this very 'unique' company as a customer. That does not say, Mr. Watson, that I; accept Mr. Moore's version. I may think it necessary to make some further comment at a later stage. No lawyer, arid no-busi-ness man, Mr. Watson, can fail to see the effect of that attitude. It is not a creditable transaction from any point of view, whoever succeeds in the action," concluded his Honour. Mr. Watson went on to say that during the period Moore said he was afraid of the power of the bank he was getting very favourable treatment from the bank to the extent that on occasions he had been allowed to overdraw his account by £2000 or £3000 when his limit was only £700. Mr. Watson characterised Moore's attitude as "a. theatrical and venomous outburst, maliciously made, and without foundation when the record of his own account is examined."- Mr. Watson then went on to deal with other phases of the plaintiff's case. (Proceeding.)