Mr Ward's Bankruptcy.

Mataura Ensign, Issue 358, 6 November 1897, Page 2

Mr Ward's Bankruptcy.

A SATISFACTORY WHITEWASHING. At a special fitting of- tho District Court, at Inveroargill, yesterday; Mr Ward's application for discharge from bankruptcy was taken. Mr Chapmau, with Mr Macalister, appeared in support, and Mr Sotymon, ou b.v half of the liquidators of the Colonial Bank, to oppose. ! Mr Chapman inquired what was the course of procadure in a ease of this nature. His Honor said that the applicant went into tha box if Mr Solomon desired to ex- . amine him. { I Mr Solomon : I don't think I require any examination. The report of the Assignee is sufficient for my purposes. Continuing, he submitted that on the report of the Assignee ! Mr Ward was not entitled to an- immediate ! or absolute order of djschargi', and further I : that the Court had no power to grant i such order. The probabilities were that ' the opposing creditors would have, been willing to allow the report and recommendation of tho Assignee to guid-3 the Court in coming to a decision on the application, but they considered tbat tbe concluding paragraph of his report was repugnnnt to the facts on which it was based. Iv paragraph 5 tha Assignee stated : "I am not aware of sufficient reason for withholding Mr Ward's discharge." The preceding paragraph (4) stated J that the debtor did not, for the live years preceding the bankruptcy, keep proper books of account, but that a record of his transactions was kept in the books of tbe Ward Farmers' jVssociation, from which, an I other data, his true po.-ition could bo ascertained. He submitted that on this ground Mr Ward should not get his disuhargj, and, further, that it could not be granted. His Honor : Under what clause is that? Mr Solomon ; lam coming to that. Proceeding, he said the facts were well-known. .Mr Ward had been a large trader, with an indebtedness to the Colonial Bank. . Then tho Association was formed, and Mr Ward dealt iv ti largo way, especially in frozen mutton. He did not propose to go into details, as it was not necessary, but to put I before the Court the reasons why tho application should not be granted. It had been admitted by Mr Ward that he agreed with the A-soeiatiou that he should speculate, in oatr, tbnt any profits made should go to the Association, and that, if there were aoy losses, he should bear them. There could be do manner of doubt on tbis point, as it had been sworn by Mr Ward. The result was this : Those transactions covered scores of thousands — be might ' say hundreds of thousands of pounds — and ended in Mr Ward becoming indebted to the Ward Farmers' Association. £55,000. That being the case, it was absolutely inc'umbenff on him to keep proper books. It had been upiformly held by judges throughout the colony that failure to do so was an oVfenco under the Bankruptcy Ace even where there was failure without fraudulent intent. No one thought of suggesting that there wa-s fraudulent iuteut h-.-re, bat he submitted that it was absurd to think that a, in m who dealt with to the extent of hundreds of thousands which might land him in heavy profits or losses shuuld not keep proper books. The business was of a most dangerous character. Judge Williams had laid it down that be would not allow any bankrupt .who carried ou any form of trading to get his discharge unless he did so, and ho cited cases whera imperf ct book-keeping hud been held a grjund for suspending di.-cbarge. He pointed out that under 127 of the Bankruptcy Act tho Judge had very large discretionary powers. The facts were that Mr Ward speculated for years through the Farmers'. Association to the extent of thousands and kept no books of any sort. The Association were not h:s agents, tbe officers were not his servants, and there was no obligation on them to keep proper accounts. , His Honor: Can you-. bring a . ca^e in point? Mr Solomon : I'm afraid Mr Ward's position is perfectly unique. Ha did not know of a case in which the profits and losses were to be dealt with in a similar manner. His Honor remarked that the converse was not altogether unusual. Mr Chapman said they submitted that the books were kept in the accouut of the Ward Farmers' Association. Mr Solomon held th.it Mr "Ward should have kept a set of books of his own. He submitted that Mr Ward was not entitled. to his discharge, that the Court, under the circumstrnces, could not grant it, and that, if it did it was an appealable order. Mr Chapman said that bankrupt did not keep books of accounts for five years prior to the data of bankruptcy, his explanation being tbat he thought, as ho had no business of his own, it was unnecessary lo have a set of books for his private account. While he was in business his books were properly kept and since the disposal of thd business a record of of his transactions had been kept in the books of the Association. The operations he had conducted could be ascertained from them aud other sources from which a set of books could be compiled. Mr Solomon had said that the situation was unique and he (Mr Chapman) statid that there were character.sties about tbe case which put it on a different footing from an ordinary one. 'Bankrupt, five years ago, sold bis business to the Company for shares, and it was thereafter known as tho J. G. Ward Farmers Association, tbo samo stuff being employed. After that date Mr Ward had some dealing?, but it could not be said that he was iv business. Tho same exact record of his t-unsaclioDS was kept as formerly when the business was being carried on by him on his own account, the ooly 1 difference being that instead of being continued in a separate set of books of his own, it was continued by the samo skilled ac'-. couutants, and. every item minutely recorded in tbe books of the Association. Mr Solomon had said that the Association were not Mr Ward's agents, but ho (Mr Chapmin) submitted that they had been, and surely it was not required by the Act that tho books should be his property— all required . being that a correct record of the trausaotioia be kept. His Honor : Bankrupt was a large shareholder in the Association if I remember rightly ? Mr Chapman : He was something like three-quarter owner. He was the owner to the extent of 80 per c;-nt. Mr Solomon : He owed for tha shares ; you should put it that way. Mr Chapman : That isn't so. The shares were paid for. HU Honor : Who held the shares on tbe sh ue-ivgistLT ?— Mr Cbnpmiri :He did, and they were shown a3 paid for. Mr Solomon : No. — Mr Chapman : I think 8). Mr Chapman : He held 8000 shares iv addition to paid-up shares. , His Honor : How many altogether. — Mr Chapman : Eleven thousand. ' His Honor : What are the number of shares in the Cunpaiiy ?-Mr Chapman; Something hke hlfijO or 16,000 were taken up— that is including 11,000 belonging to Mr Ward. Mr Chapman (uantuVuing his addrvgq to tbe Court) said that it had been proved that tbe books had bc-ou perfectly kept. His Honor : The Assignee says that no j complete account can be got from the books, but stated that data was to be obtained from " other sources." Mr Chnyiman : I understand that what was not found in the. books were Mr WsuctSß own personal allowances from the Government, also trifling expenses and such like things. These were in no way eonu< eted with his business transactions, aod, so far as speculations or dealings were concerned, they were entirely kept in the books ■ f the Association — a complete record of them. His Hoi.or : All Mr Ward's transactions were through the Association ?— Mr Chapman : Ye 3. Mr Ward did hot actively interfere with the keeping of the records, but allowed thiugs to continuo as before. His Honor; I have seen soma isolated references in newspaper reports concerning ,the business, but it is impossible that I could follow this case from the beginning, and naturally I am not so well up iv it as counsel. I therefore cau't take these matters for I granted. Tho Assignee does not mako these , statements in regard to tbe employment of j skilled accountants in Mr Ward's business. I The question is not, at any rale, if they were. ; skilled, but what accounts they kept. j " Mr Chapman said that at the meetingof ' creditors the liquidators, who were present, did not in any way challengo the procedure, ! and did not prop.iso any resolution cotrd. mnatory of Sir Ward. If bankrupt were arraigned before a court it cauld not find, even if the court was constituted of hi-: persona] enemies, that he wus guilty of an - offence because there must be some elements oE a crime, beforo such could- be- proved. There was no suggestion that Mr Ward "had done anything improper, the Only suggestion being that, mechanioally spouking, a record ..

""■ "° ii i i i ii. .m - ; -..- . . . ;■ of the.. transactions, was not. kept in " his " "-. Vbooks. Regarding bankrupt's debt to the, •- ■;.:: Association,. it amounted t0 ,'£55,000, but it '.A had batn wholly, paid. It did hot exist now, having been Swiped off. -nearly two! years ago. . -:.-■ i He (counsel) submitted flSat'the whole of the . -" ' A trouble had arisen from the circumstances - connected with- the amalgamation of the -"" '• AA banks, and if matters had been allowed to. A go ou as before, Mr Ward's indebtedness to A the Colonial Bank would havo been enormously reduced. He called. / «%_- --! Joseph George Ward, who stated that vj£" whan he sold out to -the Association they took ■J _v : over all the agencies. Ha gave instructions to thp Association that if losses oa guano transactions were incurred he would -he | charged with them. Such an arrangement might he unusual— Mr Solomon had said so. In reply to. Hi3 Honor: Witness said beheld something like 8000 contributing »har« and | 3000 paid-up shares, the whole of the others | taken up, he thought, being only 5000.. So . I far a? boaring losses was cdncerued, two of r " | the largest firms in the colony— '—(Mr Solomon objected to a as to what . others had done auless ie could be proved in -Z; a legal way). • ... '"■'_'-' Mr Chapman pointed out that Mr Solomon "" had called the arrangement a unique one and. -- * Mr Ward desired to 'explain that it was not so unique as he thought. - - --„ . ■ Witness (continuing) said that when he was in business he had not the time to per- . A : sonally superintend the accounts, and when - A v the concern was transferred to the Association he relied on the same accountants. A It. A. Anderson, accountant, who had been in the service of Mr Ward and subsequently of the Associatiou^also gave evidence, and ? -',:"•■" counsel having again addressed His Honor • ' ... to a similar effect as previously,-th'o hearing closed. .-."- ; > His Honor, in giviug his. decision, said : — . -'-„-'. I am fully aware there" have been numerous - y_ charges of offences by bankrupt in connection w ith the legislation of "the Colonial Bank aad A; of the Ward Farmers' Association, but none of theso are- undor.questionnow, the simple ." ' -, point on which the matter has to be deoided • A being whether or not the bankrupt within three years before tho commencement of bankruptcy failed to Keep such books as are usual aud proper in- a business of the kind carried on by him. Tho situation was very ■ properly described by Mr Solomon as unique. Here we have a man in a large way of busi- "-'• ,"= ness selling out his business ' to a company,- - and himself being- the proprietor of a large : proportion of shares in' the company. . He isthe managing director, and the company take; . ■-.': " ; over, practically the whole of his business excepting certain freezing contracts which are ' -Ay partly carried on by the company but which ~fif> are eventually taken over by the Nelsons.- • It ' appears since thisthat the whole transactions . of the bankrupt have been through the Ward Farmers' Association,- and that the whole of the transactions appear in the books of the , Association. There is no question about. .-■':-?■ these books being .'accurately kept. _. Whatever the character- "of some of the' entries ' - may have been that is not for ms to decide;what I have to decide is whether' any jury, , having consideration for the. whole pf the ... facts before the Court, would find that A- ' A; because the accounts of the' bankrupt wer'ejf A - kepi by a company- of which he" was manag-J, ing director, and in which he was three-'., fourths interested — practically proprietor-^ ' .''" whether any jury would fiod him, 'taking - theso faots Leforc me, guilty .of a charge under subsection 4. Technically, the fact that he allowed his books .to be i kept .by, tho ': A Association . of which*, he 1 .was ."managing"-' director did not amount to a misdemeanor,...■'..'.and I don't think any jury would convict on : . -" -.'..' sucha charge. Tha: is" the buly point of the ' position. What might have been said if. -'. . other matters "were brought forward Ihave ; ! ■ not to decide. There' bas been enough, stated in the press regarding such aco'usations, and : lean only say" I trust that proceedings, if .; they should be takeii elsewhere, will prove - . tbe futility of the accusations. According to the Assignee's report, it appears' to me there i. is no sufficient'eause for. delaying the order - '-. ; of discharge, which I consequently grant.- j;" -