THE COLONIAL BANK.

Lyttelton Times, Volume XCVI, Issue 11108, 6 November 1896, Page 6

THE COLONIAL BANK.

APPLICATION BEFORE JUDGE WILLIAMS. REMOVAL OF A LIQUIDATOR. [Per Press Association.] DUNEDIN, Nov. o. His Honor Judge Williams sat in Chambers this morning to hear applications calling upon Mr W. B. Vigors to show cause why he should not be removed from his position as one of the liquidators of the Colonial Bank, on the ground that his removal is desirable in the interests of the liquidation; and on the further ground that he is unfitted for the position by reason of his former relations and dealings as an officer of the bank, and by reason of his subsequent conduct as a liquidator. Mr Young, of Wellington, appeared to support, and Messrs Haggitt and Solomon to oppose. ' As preliminary motions Mr Young applied for summonses to examine Mr Graves, the manager of the bank at Ashburton, and Mr Fisher, who both refused to make the affidavits submitted to them. The Judge inquired if the application for Mr Vigers’s removal was based on evidence with regard to any particular transaction. Mr Haggitt said he did - not know what the grounds of complaint were. The, other side had given no notice, except that the removal would be in the interests of the liquidation. Mn Young replied that the bank’s counsel had received notice that it was intended to rely on evidence to be given by the witnesses. # Mr Haggitt submitted that the liquidators should have notice of specific charges, and not general ones. They complained of the iudefiniteness of the charges. - The Judge said there was no doubt that the charges should have been more definite.

Mr Young: If my friend is unable to meet any of the charges- he can have a postponement. The Judge : You have to make your charges first. It is then for the other side to meet them. . . .

.After argument, Mr Young intimated that the principal charges he relied upon were the oats transaction, the -825,000 draft on Nelson Bros., drawn in August, 1894, and redebited m September, 1895; the cheque of Mr Ward’s of June 30, 1894, on Mr Ward’s private account, paid by credit to the Ward Farmers’ Association the day before balance, the transaction being reversed on J uly 2; the draft on Messrs Brookes, London, for -85000. date unknown, not supported by warrants: and .-As, to Mr Vigers’s conduct since the liquidation,' 1 and on other facts on which the Court had refused to sanction a compromise, which facts Mr Vigers failed to,disclose to the Court.

.Mr Graves said he had no knowledge of any irregularities. Mr Fraser, on behalf of Mr Fisher, said the latter acted on legal advice, but he had never been asked to make an affidavit with respect to any of the matters now referred to by Mr Young. The'.!edge said there was not sufficient evidence laid to justify Mr Graves, being called as a witness. Linder rule 205 there was nothing to show that lie was in a position to give evidence of the nature alleged. Moreover, the particular transae- i. tion shoijld have been brought under lug notice when he -was asked to make an affidavit. The summons against him would be dismissed. So far as Mr Fisher was concerned, the position was different. He was tendered a'' particular affidavit, and there was reason to believe that he could give information with respect to some of thp matters referred to, but he was not asked to give. information respecting the transactions in 1894 and 1895, mentioned by Mr Young. If he was now examined, it must be only in regard to the particular transaction with respect to which he was asked and refused to make an affidavit. The examination must he limited to that. Mr Young applied that Mr Vigors should be cross-examined as to these particular matters as well as others.' . The Judge said he tendered himself as a witness, and would bo subject to crossexamination. Mr Fraser asked to be allowed to appear as Mr Fisher’s counsel, but the Judge refused to such a new departure, for which counsel could produce no authority. Ke might, however, watch the proceedings on Mr Fisher’s behalf. The first witness was William Laurence Simpson, one of the liquidators, who supported his affidavit that Mr Vigiers gave liquidators all information in respect to matters, and kept nothing hack. Witness ’had been liquidator for a month before he found out about the ,£35,000 cheque. He ■noticed it on a visit to Invercargill. The draft of .£SOOO to Brooks was a Bank of New Zealand affair.

To Mr Hag-gitt: The transaction of £35,000 took place in June, 1894. That transaction and the .£35,000 cheque are the subject of a report which will be submitted to the Court. That report is being prepared by the three liquidators. There were reasons for not presenting that report a month or two ago. One reason was that there was an inquiry proceeding by both Houses of Parliament, and we waited to see if we could get! any additional evidence. The report also touches upon the conduct of the directors and officers of the Colonial Bank. Their action or non-action is commented on in the report. Mr Vigors had thrown no obstacles in the way. W. B. Yigers, late inspector of the Colonial Bank,’was cross-examined by Mr Young. He said that lie had not received a cable about ■ opening a credit for the Ward Association. It was willl the Bank of Rev/Zealand. Witness went to Invercargill and saw M 1 ’ Fisher, manager of the Ward Association, telling him that the bank bad a credit under which the General Manager thought be would draw on Messrs John Connell and Co. He gave Mr Fisher to understand that the draft would require to be supported by oat warrants, and the usual insurance cover. M r Fisher agreed to draw for £28,000 or £30,000. lie said that he had ‘ not heard of the credit. The General Manager’s reading of the cable was different from 'that of witness’s. Witness asked Mr Fisher if he could find the oats, and Mr Fisher said he thought he could. The bank had warrants for about 70,000 sacks. These did not show that they were held in trust. The bank had no doubt that they belonged to tho Ward Association. No steps were taken to see if the oats were there. Witness followed tho usual custom in accepting a customer’s word. Mr Fisher was mistaken in saying that the warrants were a.n afterthought. The transaction would appear in the manager’s weekly return. The usual entries were passed, except that the bill was not debited to London. The last account it stood to debit of was British bills. It would appear as a British bill outstanding to the Ward account till paid. Witness ascertained in September that there was no cover. Me knew that the draft was hold over, but did not know why. The account was re-debited in November. If the account was not in funds there would be no advantage in re-debiting it earlier. It was credited to “British bills” on Nov. 13 by instruction of the general manager, Mr M’Keuzie. It would come under the heading of “British bills in transit ” for the purpose of the agreement. It was treated as a bill current. When the Bank of New Zealand took over the business the bill was not in existence. The cable credit could have been used in rothuWig the Ward overdraft by opening a special account. In November, .1895, witness reported to the directors the quantity of oats in store in Invercargill. This was after the directors had found that there was a shortage. Replying to Mr Young, Mr Vigors said : I investigated the Ward Association account in May, 1895. I am under the impression I heard that the account was arranged in a somewhat doubtful manner. J had heard about the £35,000 in connection with the ' account. The £SOOO transaction was this: The Bank

of New. Zealand bought a bill in the open market for .£SOOO, against ; which they took a warrant for 18,000 sacks of oats without sending a man to see if the oats were there. That was under the credit of Mr Brooks. There was a liability on that account, but the liquidators of the Colonial Bank paid it. To Mr Haggitt: When I went ,to Invercargill on the instruction of the general manager to make an arrangement with Mr Fisher I had no reason to doubt Mr Fisher in any way or to doubt that 1 would be fairly and honestly treated in the transaction. I had nothing in my mind about Mr Fisher professing to give me security for the .830,000 draft I was asking for over oats, for which I already held store warrants.. I had no doubt that these oats were free oats. I did not ascertain wliat oats there were in store at the time in, Invercargill. There had been other transactions of a similar kind before. I know that two firms in Dunedin as well as the Bank of New Zealand took no steps to find out if the oats were in existence when they took warrants for them. I did not initiate anything myself, but carried out the instructions of the general manager. There was, no secrecy about the transaction which, so far as I know, was perfectly; legitimate. All that I know wrong was', that I read the cable differently from the' general manager; but be was my senior, officer, and there was the end of it. The transaction was shown every weekit simply awaited Mr Ward’s arrival to put it through.. When Mr Ward arrived, he put a different complexion on it. John Fisher, late manager of the Ward Association, was examined by Mr Young. His explanation of the oats transaction was substantially the same as that given before the Council's Bank Committee. When Mr Vigers told him that the general manager had received a cable, under which he thought the Association could draw to the extent of -830,000, witness thought it was improbable that credit could have been established without his being aware of it. From a conversation with Mr Vigers witness came to the conclusion that a.credit was. opened whereby the Association’s financial transactions would be transferred from New Zealand to Loudon. Witness demurred to giving a draft, but as the bank wished it before the Association’s balancing next day it was cither a case of refusing or giving it, with restrictions mutually agreed upon. He told Mr Vigers that the Association should not be put to any expense. Mr Vigers asked wliat oats were in store, and witness replied 80,000 bags. Mr Vigers then asked for a warrant, and unfortunately witness gave it. On witness’s part the warrants were not meant to cover the credit, but Mr Vigers understood that they were. Witness considered that the credit did not warrant such a transaction. Witness handed the draft to Mr Vigers. To Mr Haggitt; When Mr Vigers came to Invercargill 1 had 70,000 sacks of oats in store, which were pledged for drafts in Loudon. The drafts were on Connell and Brooks. I had had similar transactions with the bank previously, lodging store warrants with the bank as against the drafts. This had gone on for years. On no occasion during which the practice was carried on did any officer of the Colonial Bank, or any person with whom I was dealing in respect to store warrants, come down to inspect the stores to see whether the grain for which I warrants was there, but I think at one time Mr Watson, during one of his visits as inspector of the bank, went through the different stores, and verified at that particular date the number of sacks of grain we held. That would enable him at any time to say whether the oats were there to satisfy drafts or overdrafts in existence. Mr Vigers, in taking our statement that wo had 80,000 sacks in store, acted like everybody else. I understood that in respect to these 80,000 sacks, for which I issued a warrant, I was giving a warrant to

cover warrants previously issued. The reason why I did not get the other warrants back was that we never lifted them. There were 73,000 sacks, for which a great number of warrants were issued, and the warant for 80,000 sacks was to cover the lot. The draft was drawn on the night Mr Vigers went to Invercargill, because I had a draft form given to me in the bank. 1 could not get the other papers together till next day. Mr Birch, manager of the bank in Invercargill, was present when the draft was prepared, and I believe handed Mr Vigers the draft. 1 was not present when Mr Vigers gave instructions to Mr Birch as to what he waste do. It was entirely of my own motion that the store warrant of 80,000 sacks of oats was given as a single warrant. I afterwards mentioned to Mr Birch that it was a foolish thing to do, and 1 said to him that it would create a false impression.

Mr Fisher obtained leave to make an explanation to remove an impression that there bad been irregularities over the £SOOO draft and the £25,000 draft given by Mr Ward. The£sooodraftwasanabsolutely legitimate and proper transaction, and there was cover for it at the time. The £25,000 draft had netting to do v/ikli the Ward Association, and did not-Affect it one way or the other. It was a share transaction, as between Mr Ward and another purchaser. There was some delay after the draft was issued as to the terms of the sale, and this necessitated it being held over. When ultimately settled the purchaser paid the amount in' cash and lifted the draft!

■Mr Young asked whether Mr Fisher had any explanation as tq the £35,000. Mr Fisher answerbd that so far as the Ward Association was concerned it was an absolutely genuine transaction. Messrs Young, Solomon and Haggitt addressed the Court, and Mr Young having replied his Honor delivered judgment, dismissing the motion, A, conversational discussion took place concerning the proceedings calling upon the directors and some officers of the Colonial Bank to show cause why they should not be publicly examined. It appeared that the liquidators would not object provided the examination was in the interest of the liquidation, and it did not interfere with the right of the liquidators to examine if they desired. Eventually Mr Young agreed that the matter should stand over rill the liquidators submitted the promised report to the Court.