WELLINGTON NEWS

Hokitika Guardian, 28 August 1926, Page 1

WELLINGTON NEWS

DEPOSITS WITH COMPANIES

(Special to “ Guardian.”)

WELLINGTON. August 25The petition presented to Parliament on behalf of those who depsoited money with the Wairarapa Farmers’ Meat Company (in liquidation) opens up a large question. The facts may be briefly recounted. The Wairarapa Meat Company accepted deposits from certain of the people in the district, the total of such deposits being approximately £31,000. The depositors had no special security, in fact no security at all, and at most they could merely rank as creditors, and not even preferential creditors. The Company was also indebted to the Bank of New Zealand for advances, but the Bank like all banks obtained security, and thus became a secured creditor although it was afterwards shown that the Bank had not obtained sufficient security to cover the amount ol its advances. 'When the Company went into liquidation the Bank exercised its right as a secured creditor, with the result that the depositors lost tho whole amount of their deposits. Now the aggrieved depositors have petitioned Parliament for a compassionate allowance of £1 Q,OOO for pro rata distribution among the depositors. It was pointed out by the Chairman of the Committee that investigated the petition that if the State granted the prayer of the petitioners there was no doubt it would receive many similar applications from all parts of New Zealand. It must he remembered that the unfortunate depositors were not obliged to make deposits with the Meat Company. They could, had they desired, have placed their funds on deposit with one or the other of the joint stock banks, hut they preferred the Mont Company possibly because they were I offered a little higher rate of interest than could he obtained from a bank, and possibly a little hit of local patriotism iiillueiieed them. They lost their money and they have no one to blame for the loss hut themselves. That somo of them have lost their lifesavings and have thus suffered groat hardships is beside the point. They are not the only ones who have suffered losses through meat companies. The Wellington Moat Company’s shareholders have suffered to a greater degree and through the deliberate action of the Government in preventing the sale of the works to Borthwick, which sale should have given tho shareholders about 8s in the C. By the action of the Government they have lost this and have very little hope of carrying on. The Wairarapa petitioners are not entitled to any consideration from the State even on moral grounds. As a general rule it may he said that a mail makes a deposit with a hank or a company because lie wishes to be relieved of the- trouble and anxiety ot himself investing tho amount. To induce or make it worth while for some one else to invest the amount, ho deposits it with that someone else at a low rate of interest. Those who deposited money with the Meat Company knew or should have known that the Company would invest the amount in its own business and therefore the strength of the business was their only security. The Bank of New Zealand also accepted deposits and some of those deposits are lent to the Meat Company, but the Bank protected its depositors by getting security for its advances. Boiled down the question is should those who made deposits with the Meat Company get. any advantage at the expense of those who made deposits with the Bank. Il is a very difficult problem no matter iron! what angle it is viewed. Prevention, however, is better than cure, and wiiat is urgently needed is an amendment of the Companies’ Act. Because the Bank accept free and fixed deposits practically trust hinds', they are compelled by law to publish at the close of each quarter a statement showing their average assets and liabilities, and this is spoken of as the Banking Returns. The statements are practically quarterly balance sheets, and depositors can see exactly how each hank stands. There are quite a number of companies which accept fixed deposits, there are others which accept both fixed and free deposits and make advances and thus dn a small hanking business. The Companies Act should ho amended to make it compulsory for all companies accepting deposits to publish quarterly statements like the hanks. This is the law in New South Wales and should he the law here. These companies now compete unfairly with the banks for deposits.