AFTERMATH OF EARTHQUAKE

Evening Star, Issue 21710, 3 May 1934, Page 15

AFTERMATH OF EARTHQUAKE

SHEEPFARMER'S FAILURE MEETING OF CREDITORS Attributing bis failure to the extraordinary conditions caused by the earthquake in Hawke’s Bay, where he had engaged in financial transactions, Henry Stokes, sheepfanuer, of Hindis, met his creditors in Dunedin yesterday afternoon, the official assignee (Mr J. M; Adam) presiding. Mr H. S. Adams appeared for the bankrupt. The unsecured creditors were shown at £7,953 18s 4d, and the secured creditors at £28,391 13s Id, the estimated value of securities being set down at £20,041 13s Id. The total deficiency was thus shown at £9,703 18s 4d. The principal unsecured creditors were as follows;—Bank of New South Wales (Napier), £6,800; Lena Stokes (Hindis Valley), £500; and Bank of New South Wales (Dunedin), £350. The principal partnership debts were shown as follows National Mortgage and Agency Co. (Dunedin), £l3O 10s sd; W. Bel! (Cromwell), £B4; and D. A. Jolly and Sons (Cromwell), £37. The list of secured creditors was as follows, the estimated value of security being shown in parentheses where given:—John Thornton Todd, Thomas Richard Moore, Robert M'Mnrray, Isabella Small, Herbert Humphries, and John Humphries (Napier). £(,054 (£6,500); Perpetual Trustees Co., £9,750 (£8,000). The partnership secured creditors were shown: —Late Donald Stalker (Invercargill), £1,290; Wright, Stephenson, and Co. (Dunedin), £4.599 Is 9d; M. Elliott, £3,311 8s 9d; J. Young £770; Charles J. Payne and .another, £660; Public Works Department (Alexandra),’ £lO6. 7s Id; and Vincent County Council (Clyde), £IOO 9a 6d; Lands Department (Dunedin), £750 6s. BANKRUPT’S STATEMENT-. Bankrupt in his statement said that he was now sixty-five years of age. and until 1925 was in business as a tailor in Dunedin. Since then he had been in partnership with his sons in a sheep run in Central Otago. In March, 1928, he met Mr Ernest Swailes, of Napier, printer, and after discussing affairs with hjra took up 2,800 £1 shares in Swailes Ltd., a printing company in Napier, paying the sum of £2,800 cash for these shares; In March, 1929, the capital of the company was increased, arid he received 2,000 additional £1 shares as a bonus distribution. In November, 1930, he agreed ,to purchase 2.000 additional £1 shares from Swailes, and in lieu of paying for them took over a liability of £2,000 secured on the shares ami owing to George William Venables. Bankrupt would not have purchased the shares but for the understanding that he-would not require to pay cash, but could pay out of director’s fees and dividends. On May 20, , 1929, bankrupt executed a guarantee in favour of Herbert Humphries, of Napier, and others in respect of a mortgage given to > the mortgagees by Swailes Ltd. over their premises, to secure the principal sum of £6,500 with interest at 7 per cent., reducible on punctual’payment to 6 per cent. In June, 1928, and September, 1929, he became ft surety to the Bank of New South Wales at Napier on behalf of the company in respect of two cash credit bonds which secured the current overdraft of the company, and the Bank of New South Wales held a debenture over- the whole of the company’s plant, land, and other assets as surety for the overdraft. On February 11, 1930, he guaranteed the personal account of Ernest Swailes with the National Bank of New Zealand Ltd..at Napier. In 1927 he gave a joint guarantee with Frederick William Carr and Ernest Arthur Cash' to Will Appleton, of Wellington, in respect of the rent and covenants under a certain memorandum of lease granted to the Ritz Ltd. in respect of the Appleton Buildings, Manners street, Wellington, The rent payable was £27 per week, and the lease hud still about three and nhalf years to run. He did not receive any consideration for giving any of the guarantees, nor was he given ttily securities. He had never received any dividends or other moneys from Swailes Ltd. . (with the exception of certain travelling expenses), and in the earthquake of 1931 Swailes Ltd. suffered severe loss and damage to property and assets. After the earthquake the Bank of New South Wales appointed a receiver under its debenture, and on March 9, 1931, gave bankrupt notice calling upon him for the payment ot £9,094 18s 9d. Shortly afterwards the property was sold by the receiver for £2,700, representing a heavy loss, as in the balance-sheet at September 30. 1930, the plant and stock were valued at £19,221 Is Bcl. The balance now owing to the Bank of New South Walfes by Swailes Ltd. in respect of the guarantee which bankrupt gave was £6,800.: On August 11, 1931, a summons was issued by the mortgagees against bankrupt for interest and costs amounting to £230 13s, and he confessed judgment. Since the earthquake the mortgagees had expended a portion of the rents collected by them in repairing the premises, which had now been relot, and the rents were received by the mortgagees. After bankrupt made application to the Hawke’s Bay Adjustment Court for relief the court relieved him from all liability in connection with the amount owing to George William Venables and to’the National Bank of New Zealand Ltd. in respect of the guarantee on account of Ernest Swailes. / An order had been made refusing him relief m connection with other matters mentioned in his application, and the mortgagees of the property of Swailes Ltd. had been granted leave to pursue thenremedies under the mortgage. On January 22 last his solicitors, Messrs \dams Bros., received a letter from Messrs Humphries and Humphries, solicitors for the mortgagees, stating that they proposed to issue a bankruptcy notice unless ho made some arrangement for payment of the interest or filed in bankruptcy himself. On February 24 a notice under die Mortgagors’ Relief Act was served on him stating that the mortgagees proposed to issue a bankruptcy notice and to file a creditors’ petition in bankruptcy. He had since then filed a petition for relief in Napier, but the proceedings had not yet been heard. His solicitors bad also made application to the -Bank of Nevv South AVnles to release him from liability under bis guarantee, but it had refused. On March 28, 1927, bankrupt entered into a deed of partnership with his sons, Henry Livingston Stokes and Edwin Spurgeon Stokes, in the business of sheep farmers at Hindis, Otago. Ho had one-third share in this partnership. The runs and sections were held on Crown leases of various tenures, comprising a total of approximately 11.000 acres, and were acquired; by bankrupt and his sons at various times at a total price of about £15,000. with the stock and plant as going concerns. The stock at present consisted of about 3,200 sheep. The secured liabilities of the partnership in connection with the sheep runs

totalled £11,587 13s Id, and the unsecured liabilities of the partnership were £303 18s 6d. Messrs Wright, Stephenson, and Co. Ltd. at present had a man in possession of the farm and tin stock under the powers in their niortgage and chattels security. He had been informed by the manager of the company at Dunedin that in his opinion the farm and stock if put up for sale would not realise more than sufficient to pay the amounts charged thereon. , , , . , '. ~ tn addition to his interest in tin partnership property bankrupt was interested as the tenant in common in tee simple in ecpjal shares with hu brother, J. W. Stokes in part section 54. block XI., Dunedin, containing approximately 18.7 poles. This was mortgaged to the Perpetual Trustees, Estate, and Agency Company of New Zealand Ltd. to secure the sum of £14,000. The sum of £5,500 was borrowed solely and exclusively oh his account, and his interest in the land ivai separatelv charged with the payment of £5,501). Of this amount £3,000 was pub into shares in Swailes Ltd. The total amount of the mortgage chargeable to him was therefore £9,750. On •July 21, 1932, the land was valued at £17,000, and an independent valuation placed the value on August 8, 1932, at £16.500, a further valuation on De cemher 6, 1933. being £16,000. Upon the basis of these valuations his >nforest in the land was not sufficient to pay his share of the mortgages secured thereon. At the present time then were no accounts owing in respect of the land and buildings other than certain current accounts which) had nol yet been sent in. He had no assets other than what were mentioned, with the exception of • a life insurance policy for £3OO, on which £l5O had been borrowed. The debts he owed, in addition to nL liabilities in connection with the Hawke’s Bay transactions, the Ritz guarantee, and his liability in respect of the partnership accounts, were:—Bank of New South Wales (private account), £350; Miss Lena Stokes (Lindis), £500; and legal costs. ■’ 1 He attributed his position solely tu the extraordinary conditions caused by the Hawke’s Bay earthquake and by the pressure which had been brought to hear on him on behalf*of the mortgagees of the Napier property. .In addition his interest in the farm partnership had been adversely affected by the prevailing economic depression, ,n ) instead of proving an assistance the Farm had shown a loss during the last few years. He was of opinion that had the mortgagees in Napier and the Bank of New South Wales allowed further , time and assisted Swailes Ltd. alter the earthquake the company would have been able to continue in business, and he would not have been forced into his present position. KXAMINATIGN BY ASSIGNEE. Examined by the assignee, bankrupt said that he lived on the place at Lindis. A very small portion of the furniture belonged to him—it belonged to his daughter. There had been no call in connection with the guarantee on the Ritz, Ltd. in Wellington, and there was no pjossibility of one being made. All that bankrupt knew about the formation of a new company by Swailes Ltd. was that it had a capital of £SOO. The bankrupt said that he had no assets whatever beyond what were mentioned in his statement. Mr C. J. Payne said that all the creditors were most sympathetic with Mr Stokes ami his partners because of the earthquake at Napier. They did nofc desire to do anything harsh. His clients had entered into possession of the farm just before Easter. Mr C. W. S. Cox (Bank of Veiv South Wales) said that the Princes street property was at one time valued by- the Stokes brothers at £40,000, and later it was reduced to £30,000, so that the present valuation of £16.000 or £IB,OOO was all right based on present rentals. The meeting was adjourned until May ] I to enable the. assignee to look into the position concerning the 'aliens properties.