A FARMER’S FAILURE.

Hawera Star, Volume XLVIII, 16 August 1924, Page 8

A FARMER’S FAILURE.

GRIM IXAL PROSECUTION. ALLEGED FALSE STATEMENTS. AND FRAUDULENT OMISSIONS. The trial was commenced in the Supreme Court yesterday before the Chief Justice, Sir Robert Stout, of George Samuel Hobbs, farmer and stock dealer, of Waitoitoi,-on. a series of charges alleging certain irregularities in his dealings within a certain period pror to his bankruptcy, which took place on December 17, 1921. Mr. C. H. Weston conducted the prosecution, and Mr. R-. H. Quilliam appeared for the accused, who pleaded not guilty. There were ten counts in the indictment, which alleged that Hobbs: Three years before the commencement of his bankruptcy failed to keep proper books. Put a creditor, the Bank of New Zealand, to unnecessary expense by a frivolous and vexatious defence to an action to recover £2943 135,6 d. Within two years before the' presentation of his bankruptcy petition made false entries in a document relating to his financial position, stating his indebtedness to Newton King to be £1200; whereas it was approxi- • mutely £5175, and to Levin and Co. to be £250, whereas it was approximately £2600. Made material omissions in a verbal statement relating to his financial position to Albert James Kellow, by stating his indebtedness to the New Zealand Loan and Mercantile Agency Co. to be £6OO, whereas it was approximately £2865; stating that his indebtedness to Newton King Ltd., was £IOOO, and to Newton King nothing, whereas be owed Newton King, Ltd., nothing, and Newton King approximately. £5305 ; not stating that he owed Cecil James Hawke n, of Mokoia, the sum of

£3750; stating that his indebtedness to the Bank of New Zealand was £350. whereas it was approximately £2798. Fraudulently omitted from a written statement of his financial position given by him to the Bank of New Zealand at Inglewood his indebtedness to Levin and Co., Ltd., which was approximately £2750, and to the New Zealand Loan and Mercantile Agency Co., approximately £3400. Mr. Quilliam raised a point that the oral statements to Keliow were not statements within the meaning of the Act under which the proceedings were taken, and also that the statements referred to in the Act- meant the statements made by the bankrupt to the Deputy Official Assignee in connection with his bankruptcy. Air. Weston said that, read literally, lie thought the Act- applied to the statements referred to, but he thought perhaps the point should be referred to the Court of Appeal for a ruling. He thought, however, that the case as it stood should go to the jury. His Honor said he would direct the jury to take the counts separately, but in any case he would not rule on the point, but reserve it for the Appeal Court. Mr. Quilliam raised the further question as to whether -an omission could be a material misstatement. His Honor said that would be reserved. but at the moment the objection looked fatal. Mr. Weston then, proceeded to explain the principal features of the case, which he ,said related to what might be called a “heavy failure, M * . Tlie charges, apart from those relating to books 1 and the vexatious defence, centred round two alleged false balance-sheets given to the Bank of New Zealand in July. 1920, and in August 1921, respectively, and an alleged false .statement given to Levin " Feildin fU on October 10, 1900 Mr. Weston said Hobbs was adjudia bankrupt on December 17, 1921, on the petition of the Bank of New Zealand. Only £lB9 was realised from the liquid assets, apart from assets in the hands of secured creditors. lor unsecured creditors who Droved at £9184, there was thus available. _ £lB9, less expenses. The securities were not sufficient to pay 20s in the £ to the secured creditors, who °" ec * t<l v s r y largo amount, ihe story of the ea-se dated back to the year 1919, when the accused obtaiued an oevrdraft of £I2OO from the tbe’fnPi V £°? ,aml at Inglewood on the faith of a balance-sheet and on the security of the guarantee of two gentlemen, accused’s brother, Air. J. £. Hobbs, and another man. A verbal agreement was made with the wonfp 1 - M, ‘ Hutton) that Hobbs would give, a,s supporting security, a •second sub-mortgage over a mortgage held from Johnston brothers, of DurIfi Road ; The security did not e.x,st thon 1,1 that s lmpe, but in the

[ course of a few -weeks it was adjusted Thd understanding, which was not carried out, v r as that the bank was to be given a second sub-mortgage. Three and a-half months later the amount of Hobbs’ overdraft- had jumped from £I2OO to £3500, so that the bank was practically an unsecured creditor for a sum of £2300. Under instruction, the manager pressed for security.

In addition to his indebtedness to the bank, it appeared —although the various creditors did not know the true position—Hobbs was indebted heavily to Air Newton King, the Loan and Mercantile Agency, and Levin unci (Jo., Fe-ikiing. On April 14, 1920, Hobbs gave the Loan, and Alercantiie Agency of Hawera what purported to be a- lien over the mortgage from the Johnstons without disclosing the fact to the bank.

In July, 1920, Hobbs gave to the Bank of New Zealand a statement which, among other items, showed indebtedness on open account of £2040. Tiiat ihueoteclness showed Air King’s debt to be £I2OO. pud that- of Levin and Co. to be £256, ‘wliereas, as a matter ot fact, Air King’s claim at that moment was for £5150, and that ul Levin and Co. for £2550, while the Loan and Mercantile Agency’s claim of £3400 was not disclosed at all. These omissions materially affected a surplus of £11,851 which was shown. : On the face of it. the statement was reassuring, and thejnamige-r was also assured that Hobbs mther would sell Johnston bi others’ mortgage, in which case the bank would receive the proceeds, or else would give the bank the security asked for.

.By exchange for a property at Waverley Hobbs obtained a property from Air AlcL-iiien, of Toko, and immediately he secured the equitable ownership he resold to three purchasers. On the face of it the transaction showed a very large profit to Hobbs, and lie gave the bank an order oh his solicitors to hand it any proceeds of the sales. The Toko property was also held out to Levitt and Co., who were pressing Hobbs, as a means by which their debt could be liquidated. Finance caused considerable difficulty in connection with the completion of the Toko transaction, and settlement dragged on until well into 1921. *

On October 10, 1920, a representative of Levin and Co. (Mr Keliow) met Hobbs at Hawera and obtained a verbal statement, noting the points in writing at the time. Later he had the statemerit typed and forwarded a copy to Hobbs for signature, but it was never signed. Mr Keliow would depose that Hobbs told him that his indebtedness to the Loan and Alercantiie Agency Go. was £7OO, to -Newton King, Ltd., £IOOO, and to the Bank of New Zealand £350, whereas at that time his true indebtedness to the Loan and Alercantiie Agency was £3850, to Mr Newton King £5250, and to the Bank of New Zealand £2784. There was no mention at all of his indebtedness to Air Cecil Hawken (£3750). The discrepancies reduced .an alleged credit balance! of £4535 to a debit balance. Mr' Keliow returned to Feilding to some extent reassured of the position. Detailing the •subsequent proceedings, Air Weston said that the bank issued a writ, and the utmost surprise was caused bv the filing of a defence alleging that nothing was owing to the bank. The bank promptly moVbd to have the defence struck out as being frivolous and vexations, and an order to that effect was made by His Honor Mr Justice Hosking. Three days before he was adjudicated a bankrupt, Hobbs signed a mortgage to the Loan and Alercantiie Agency which purported to complete their dead of lien of'April 14, 1920. The sneaker was instructed that the Loan and Mercantile claim had priority over that of the hank, and also that. Air King’s position could he attacked in bankruptcy. The defence to the bank’s writ was also put in, it was alleged to delay the proceedings and irive time to other creditors to secure their debts. On June 2, 1921, a settlement in connection with the Toko' took place, and at Stratford Hobbs signed a security to Air Newton King over the property for an existing debN ot about £SOOO and a further advance of £3fi(K) odd. It would be shown that hei still led the bank and Levin and Lo. to believe that the moneys coming from the Toko property were at their | disposal and would wipe out their indebtedness. In July lie actually gave Levin and Co. a olie-one for the total nmoulit ol their indchtness, and it was dishonoured. ft was not until August that the hank manager found that he not only could not get definite couki n \ atlo !' <Voi r Hobbs ’ ,mt nether could he do so trom the iatter’s solicitors in Hawera. Becoming alarmed 17. 1 1 [ W 1 l ' Vie ' V f d V 1 ® Aitovs on August th-Who L ext, 'aoted the information nor’ sec-in- i <™l.

11l a statement made by Hobbs to the hank manager and !in insnector on August 31. the full indebtedness to - fi Han ken. Mr King, and the Loan •im Alercantiie Agency apparently was

shown, but the- debt owing to Levin and Co (£2750) was omitted. Evidence was then given by J. S. S. Aledley, D.0.A., at New Plymouth, to the effect that Hobbs' proved debts to unsecured creditors amounted to £9184 4s 3d. and to secured creditors £9339 11s lOd. The assets that passed through his hands realised £lB9 18s lOd, out of which the expenses of the bankruptcy would have to be paid. The bankrupt’s statement showed secured creditors £23,800, and unsecured £9447 Is Id, with property valued at £l2O. The witness said that the assets included in the- securities proved insufficient to pay the secured creditors. He also- gave evidence as to the? hooks surrendered by the bankrupt. Mr Aledley also sa.icl that the value of the security for the debts to secured creditors was £21.960, leaving a deficit of £IB4O. and the total debts in the estate were £11,289 Is Id. C. H. M ynvard, public- accountant, said that it was impossible to arrive at Hobbs’- position from the books he had had m his possession. He characterised as ridiculous the assertion that a book-keeper would compliment anvon e on such books. A list of books tiiat a farmer should keep was (recounted by the witness, who added that while some farmers employed accountants to look after tlreir ‘ books there wer e many others whose hooks were not of great value The defence set up by Hobbs to the bankruptcy petition and the steps frhn'L t 0 ‘ H T e tlle defeMce se t aside as moloirs and vexatious were described ih-in of * scbolso, b * member of the b-i V H SolC,tws acted for the the object oK was” to gain valuable to H?bbs and ,e Cn d€aUn2S of Hobbs "'ith Levin 'ui! Z°‘t "' erp recounted in detail bv Albert Janies Keliow, who then Jo bThfs fi°rm X to U obf the nK ‘ asu r s - take " their account on ther Set f emeilt of opening SesT. lines ° f fcolinsel, « o’clock rtif 11 " was adjourned tiV 10 thisjnorning— Taranaki Herald.