DAVIDSON AND GORDON’S BANKRUPTCY.

New Zealander, Volume XV, Issue 1365, 18 May 1859, Page 2 (Supplement)

DAVIDSON AND GORDON’S BANKRUPTCY.

Wb (the Melbourne Herald ) extract the following judgment of Mr. Commissioner Goulbourn, from a Ute London paper. The case excites more than ordinary interest in consequence of the firm of Messrs. Overend, Gurney, and Co. having been mixed up with the transactions of the insolvents through their Mr. Chapman: and it is believed to have been partly owing to this circumstance, that the last mentioned gentleman has retired from the well-known house in question - This is a case which has occupied the public attention for some time, but owing to the voluminous nature of the evidence at the various examinations in bankruptcy, it has been impossible for us, with our limited space, to go into the merits. On Wednesday last, however, Mr, Commissioner Goulbourn delivered judgment on the bankrupts’ application for their certificates, and as the facts of the case are peculiar, and deserve every publicity, we take this opportunity of giving a brief summary of the heads of the judgment. The bankrupts are described as colonial and metal brokers, of Mincing Lane and elsewhere, and Mr. Goulbourn in his judgment said, speaking of the advantage of publicity in the proceedings in bankruptcy: This very case shows how desirable it is that not only the conduct of the bankrupt, but of those who dealt with him, should be publicly and fully investigated and probed to the very bottom. We have had before us a merchant in the first position, one of the most eminent in the city. There are a great many things no doubt, which have taken place between him and the bankrupts that he would rather not be made public, and no doubt but Mr. Chapman would say, the sooner publicity in such matters was done away with the better. After a very long career, a long administration of the bankruptcy law. I must be permitted to express a hope that publicity will continue, and mat hole and corner proceedings may not be resorted to. The proceedings being under the public eye has a most beneficial result, not only as regards debtors, but creditors. Having made these prefatory remarks, let me now state the case of these bankrupts. The bankrupts (the Commissioner proceeded to say) are both extremely well connected, and must have deeply felt the ignominious punishment which they had suffered, but which was light as compared with the state of the law twenty years ago. One of the charges made against the bankrupts was that of concealing property, and this charge, if proved, would have placed their lives in extreme jeopardy. Hie bankrupts had been in trade originally under the style of Sargant, Gordon, and Co. They failed, and paid a composition, which i must call disreputable, for they paid different amounts of composition, 2s, or 2s. (id., as the case might be. They were again soon in business, and it really must excite astonishment to see the amount with which such men, under such circumstances, were entrusted. It was scarcely to be believed. They had but little capital, a few thousand pounds—£sßoo at the outside—and yet these men, just fresh from insolvency, these adventurers, rushed into trade, and went forward at the rate of £IIIO,OOO or £2C<I,OOO, and during the last year and a half of their trading, turning over a million and a half of money. How is it possible that such persons could get such an amount *f credit under such circumstances? This case is illustrative of the evil, of the great mischief, which has resulted from that outrageous system of overtrading without any capital behind to warrant it. Here were men with £SOOO capital dealing in the way Mr. Hart will stale with Mr. Webb alone. Mr. Hart, Mr. Nicholson’s clerk, then read a paper showing the bankrupts’ dealings with Webb, of the W r est Ham Distillery, ns follows:—In 1849 £112,000, in 1850 £295,000, in 1851 £500,000, in 1852 £598,000, half of the year 1853 £492,01)0.—The Commissioner proceeded: The latter part of their dealings with Webb being at the rate of nearly £1,000,000 per year, and this, too, after their having failed in a disreputable way a few years before; for I call it disreputable where a debtor pays to creditors various rates of composition, 2s. or 2s. (id. more or less, according to their good nature or their cupidity. It is impossible to separate the case of Cole from that of these bankrupts, and I must therefore have regard to it. He is just in the same position. He was a member of the firm of Johnson, Cole, and Co., who failed in the same year os Sargant and Gordon failed in. Cole, like Sargant, Gordon, and Co,, failed disreputably. He acknowledged he had only paid his creditors a small dividend. He gave his creditors something he said. Cole dealt in hundreds of thousands. One might ask how this came to pass ? Cole said, •• In a few months I made £128,000. I was very lucky.” His former failure did not seem to affect his position, tar Cole said he could afford to make Chapman a present of £3OOO, by supplying him with spelter at £ls per ton, for which in the market he would have had to pay £2O or £25 per ton. Cole had no capital—not a single farthing—he was an adventurer. What was this—an adventurer fresh from insolvency going into trade—but staking counters against the ready money of other people. Out what surprises one most is that such persons should get credit, not fromJtcedlcss, thoughtless people, but should be assisted in a second adventure by such a house as that of Messrs. Ovcremt, Gurney, anti Co. Messrs. Ovcrend and Co. were creditors of Sargant, Gordon, and Co., but Mr. Chapman said they did not care about the debt. They scratched it out of their books i they got rid of it, and they went on making advances to an enormous amount to Davidson and Gordon, and to Colo, and by so doing gave them a false and fictitious credit with others. It was absolutely necessary for persons in the position of Davidson and Gordon, and Cole, to get credit, in order to Keep them going, and they did it by having bill* discounted, and by raising money upon any securities they could get bold of. They raised it mainly by means of those warrants which had excited so much interest in the commercial world, lly means of those warrants thousands upon thousands were raised. In the city they were treated as being transferable like a bank note. The house of Ovcrend and Co. took from Cole, and Davidson and Gordon, £228,888 worth of those warrants (nominal worth) Mr. l.lnklater: £370,008. —The Commissioner: From a desire not to overstate, it, seems I have understated. Well, what are these warrants ? Bits of paper, with a nourishing heading. •• Hagan's Sufferance Wharf, Uockhead.’’ Who Hagan is I know not. The learned Commissioner then recited the words of one of those warrants which have often been intblished.

They were transferable by endorsement upon the payment of wharf charges, etc. The person who repiesqptci! Hagan's Sufferance Wharf was one Maltby. Maltby was Cole’s tool and creature, and was placed there to cheat anybody who came in their way. Upon a warrant like this, upon a mere piece of paper, without making inquiries at the wharf to ascertain whether any such goods were there or not, people accepted those warrants, which passed as current in the city of London as batik notes, to the amount of no less a sum than £370,01)0. Surely, one would think the first inquiry ought to be, are these warrants any security at all—are they safe? It was plain that if Cole's plan of raising money on them was lawful the warrants were worthless. Cole said lie took a legal opinion, and found they wete mere waste paper—that as he (Cole) had deposited the goods at ihe wharf, he had a right to withdraw them, though endorsed by the most respectable firm in London. Next came the question, what was to be done with the wharfinger. Surely the wharfinger must be responsible? Hut the wharfinger was told that Mr. Cole’s law was correct, and that he was Justified in allowing Cole to remove the property, and such proceedings went forward year after year for three or four years. Ought not, then, the merchants of the city of London to have been made aware of it ? Could they have been made aware of it ? Of course those who held the warrants could, by the simplest of all means, by seeing whether the goods which the warrants purported to represent wete or were not at the whaif. Cole, and Davidson and Gordon, were acting in concert throughout, at least as long as they could. Davidson and Gordon into that« most imprudent

speculation* the distillery, with Webb. They were soon pressed by difficulties on all sides. They contrived to draw i from their bankers all they could on the security of those bits ] of waste paper. At length the bankers, Messrs. Barnett and ( Hoare, resolved to lend no more, and Messrs. Davidson and Gordon resolved to depart from this country, having, as they said, an excise " extent" upon the distillery for £7<WO or £BOOO. Their funds at Messrs. Barnett and Hoare’s were attached. They resolved then to go away, to commit an offence whtch, . when I first was acquainted with the law of bankruptcy, would have placed their very lives in jeopardy. They helped themselves to their property; they left a part of it with their attorney for the purpose of taking care of the mother of one of the bankrupts, and they took away the rest of the cash, £ISOO, in three bank of England notes of £SOO each. When they went abroad they were followed and pursued in every direction by the assignee and by Mr, Beard, of Manchester, one of their creditors. They assumed various disguises and different names; and at last, the colonial law not being able to deal with them, they, according to the statement of Davidson’s counsel, volunteered to come back, and as soon as they came into England they were arrested. The court, notwithstanding, was asked to certify that they (the bankrupts) had in all thing* conformed to the law of bankruptcy. Five objections were made to this application for certificate. First, that they had failed to do that which it was the first duty of a bankrupt to do—to surrender to their adjudication. This had been one of the first obligation* which a bankiupt was bound to discharge ever since the very beginning of the bankruptcy law, on obtaining protection from arrest, and to give hi* creditors all the assistance in his power towards realising the remains of his estate. These men did not surrender until a long time afterward*. The reason they gave for not sur ( rendering to their bankruptcy was that criminal pioceeding* were taken against them, and that perhaps they might be advised that by surrendering they could not so easily make a defence to the charge. They were soon ordered by this court tc be indicted for having, within three months of their bankruptcy, obtained good* under false pretences. That was a misdemeanour of which these men were found guilty, and were subjected to a severe and ignominious punishment. After some further remark* on this portion of the case, the Commissioner **id: I could very much wish to be spared pronouncing any opinion upon the conduct of Mr. Chapman. The learned Commissioner then explained the disadvantageous position under which Mr. Chapman stood before the court, hi* counsel not being allowed to cross-examine witnesses, or speak in his defence. Mr. Linklater explained that he had done no more than he conceived to be his duty.—The Commissioner quite admitted that, and had not meant to imply one word of censure upon Mr. Linklater, but repeated that Mr. Chapman, owing to his having been summoned only as a witness in bankruptcy, had not an opportunity of explaining or crossexamining. Mr. Linklater had well, faithfully, and ably discharged hi* duty. No one doubted that. But still it must be conceded that Mr. Chapman, without the benefit of counsel being able to speak on his behalf on cross examination, was placed in a most difficult position, and was subjected to an examination so severe as almost to deprive him of hit self-possession, Mr. Lewis (Gordon’s advocate) admitted that if Gordon had stated what Mr. Chapman said he had stated on the 17th of October, Gordon was a spoliator and a robber, and that M would not stultify himself by asking for a certificate from that court for a man whom the court could believe was guilty of such conduct. After commenting at some length upon this part of the case, the learned Commissioner said he was of opinion that Mr. Chapman had spoken the truth, for his evidence was corroborated not only by Mr. Bois, the clerk of Messrs. Overend and Co., a respectable man, but also by the whole facts and circumstances of the case itself. If it were true that Gordon said to Chapman on October 17, 1853, " The warrants arc right, but 1 hare shipped the copper that is to say, the warrants are all tight, but I have " walked off with the copper," why, then, there was surely evident culpability on the part of Gordon. Mr, Chapman said this expression on the part of Gordon came upon him by surprise—that he was •• shocked on hearing his statement,’’ and that he " never would breathe the same air with him again. And I must say there was very remarkable conduct on the part of Mr. Chapman, who concealed, up to the moment he came into the witnessbox, the second interview with Gordon, 1853. This conversation Mr. Chapman had not revealed during seven previous examinations, I think.—Mr. Lewis: During eight before that time.—Commissioner : Seven, eight, or nine, not one word was said before about that interview with Gordon. Mr. Chapman, on being asked about it, said the reason why he then disclosed it was that he had never been asked about it before. Mr. Chapman was undoubtedly a very bad witness; but still this was hardly a satisfactory answer. Had I nothing more to rely upon than the evidence of Mr. Chapman I would have rejected it; but the evidence of Mr. Bois, a respectable man, and indeed the whole circumstance* of the case, go to corroborate it. No doubt Mr. Bois, when examined on the 7lh of December, had not stated the facts which he subsequently disclosed; but it was not improbable that his memory might have been refreshed since the former examination, and that new facts might, by exercising his memory, have been brought within his cognisance. There were these circumstances to be taken into consideration, that between these occurrences and the examination under bankruptcy of Mr. Bois, fifteen years had elapsed, and so far ai the court knew, Mr. Bois was a respectable man. The real question however is, had the bankrupt a guilty knowledge concerning those dock warrants, Gordon might seem in this business to have been the principal agent, but in the affair of Mr. Vaughan Davidson was the chief spokesman. Could it be doubled, after the transaction with Mr. Edwards in July, 1851 (Mr. Edwards having received those warrants, and a “ stop” having been put upon them, threatened to bring Messrs. Davidson and Gordon to the Mansion house, and this claim having, through that threat, been amicably arranged), after Mr. Stovell’s examination, Messrs. Stovell having lost £BOOO by the bankrupts upon these worthless warrants—having, in point of fact, been ruined through them—could it be believed, after all this, that the bankrupts did not know well the nature of those warrant* ? They borrowed money as Ung as they could obtain it from Messrs. Barnett, Hoare, and Co., the bankers, upon those bits of waste paper. Could any Jury believe the bankrupts had not a guilty knowledge of Che nature of those warrants ? 1 feel convinced that they had. As 1 have stated, when Mr. Chapman's evidence stood alone I would have rejected it, because I consider him a* an accomplice after the fact; but confirmed as it is by the evidence of Mr. Bois, and by all the facts and circumstances of the case, there is not a shadow or particle of doubt left in ray mind as to the guilty knowledge of the bankrupt Gordon as to these warrants. The learned Commissioner then went into Mr. Chapman’s evidence at considerable length, and condemned as " the nastiest part of the whole transaction" his haring employed hit tool and creature Cole to buy spelter for him at £ls per ton, which he could not have had at less than £2O or £25 per ton had he gone into the market, in order to conceal from the purchasers of those spurious spelter warrants that the warrants were in reality spurious, and that there were no goods to represent them. By this means they got out of Cole £4OOO, carrying to an extreme the principle which Cole avowed to be that which he acted upon, " Take care of number one.” How could Mr. Chapman have concealed these matters so long, of passing the warrants, knowing them to have been forged? I admit Mr. Chapman stands entiiely acquitted ; but Mr. Chapman was an accessory after the fact, and as such might be indicted. When Mr. Chapman found that Cole had wronged him he ought to have taken up Cole at once; but, instead, Mr. Chapman thought to get out of it the best way he could, and he kept hi* own secret. Gordon said that in the interview of 13th October, 1853, Mr. Chapman said, and it was not denied, "Let us keep this matter between ourselves.” But why should he have kept it a secret ? Why did he not say, you have robbed me of goods worth £60, (t00 or £70,000, ana acted accordingly? But it seems that Mr. Chapman only thought of reducing the amount of his loss: but at what price ? Why, by doing that which has; placed a blot upon hi* escutcheon which time cannot obliterate. What, one of the first merchants of the city of London hearing of fraud and robbery keeping it to himself, not disclosing it to [any living soul, only regarding his own pocket! By so doing Mr. Chapman made himself an accessory after the fact to this most gross and wicked fraud. The learned Commissioner, after adverting to the other circumstances of the case, said he was surprised at the application for a certificate that the bankrupts had conformed to the law and practice of bankruptcy. Could any one think, who had listened to this case, that any English court of justice could certify to so monstrous an untruth? He could not believe it possible. The judgment of the Court was, that 1 the certificate be refused ; but In conformity with the decision in the case of “ Holthouse," decided by the Lords Justices, he was willing to give protection if the assignees assented thereto, thinking ihat the ignominy and severity of the punishment which the bankrupts had already endured was sufficient, together with their prevention from re-entering trade. He would regret if the misery and wretchedness of the bankrupts were to be prolonged by actual imprisonment, or the fear of it, which was still worse.—Mr. Linklater said he was quite willing that the bankrupts should receive protection, and, had, indeed, in unison with the wishes of the trade assignees, intended to ask the Court to accord protection.—The Commissioner, after complimenting Mr. Linklater upon the able and efficient manner in which he had discharged the duties imposed upon him, and saying that the whole commercial community was very much indebted to the assignees and their representative, decided upon making an order such as that made by the Lords Justices in the case of " Expartc Holthouse'*—via., that the certificate should be wholly refused; but that, the assignees consenting, protection would be granted until further orders Ordered accordingly,