THE BANKRUPTCY ACT

New Zealand Herald, Volume L, Issue 15236, 25 February 1913, Page 5

THE BANKRUPTCY ACT

O. E. FARROW IN COURT. ONE MONTH IN GAOL. NOT GUILTY OF GRAVER, CHARGES. Twelve charges of having committed breaches of the Bankruptcy Act were made against Oliver Edward Farrow, of Auckland, at the Supremo Court yesterday, His Honor, Mr. Justice Cooper presiding. Mr. Selwyn Mays conducted the prosecution, while Mr. J. R. Reed, K.C., with him Mr. En dean, appeared for tho accused. Tho individual charges set forth that Farrow contracted certain debts when he had no reasonable probable expectation of being able to pay for the goods secured. These debts were with :— Hardy Brothers, £243 19s lid ; Harry T. Merritt, £94 17a Id ; John Bums and Company, £38 18s 4d : Frederick W. H. Brinsden, £54 18s; Leathern and Hoffman, £15 13s 2d; Henry L. Friend, £80 18s 8d; Faulkner and " Collins, £32 lis 4d ; Premier Joinery Manufacturing Company, £44 12s lid"; Hill and Plummer, £391. 2s sd; Winston*, Limited, £248 Bs. In addition, Farrow was charged with obtaining property on credit, by means of a false balance-sheet, from Winstone, Limited, while the last count charged him with bringing about his bankruptcy by rash and hazardous speculation. Mr. Mays, in opening the case, said that Farrow came to Auckland about seven years ago and worked as a journeyman carpenter. After two years' work, having apparently saved up between £100 and £200, he entered business on his own account. Up to 1910 his books had not been kept very well, but then ho secured an accountant. This man mado out a bal-ance-sheet, showing the position of .affairs on June 30, 1910. when, it was shown, that Farrow was £1800 odd to the bad. His accountant pointed out the seriousness of the position, but the business was kept going until by June 30, 1911, Farrow was in debt to the extent oS a. further £56. Again tho accountant gave a warning, but was unheeded. When Farrow was declared a bankrupt on August 31, 1912, the doficiences had amounted to £3817.

Alleged False Balance-Sheet, Dealing -with, the charge of presenting a false balance-sheet to Winstone, Limited, Mr. Mays said that the statement in questior ' howed a credit of £400 odd. The facts . the affairs appeared to bo that Roy, bankrupt's accountant, drew up a balance-sheet at the request of bankrupt, who was to make entries for stock and amounts received from works in progress. These it-ems were correctly filled in, but an alteration was made in the amount of debts owing by bankrupt.' Roy had then pointed out that the true state of affairs was not shown, but mado up the statement as requi-sd, although he warned the accused against using it. The rash and hazardous speculation consisted of bankrupt's action in accepting contracts at a time when his financial position did not warrant him doing so. Accused's finances. Walter S. Fisher,, official assignee, stilted thai Farrow was adjudicated a bankrupt en August 31, 1912, when he gave his assets as £1981 10s J.Od. and his liabilities as £4743 6s Id. Examination had proved that the deficiency really amounted to £3817 Is 2d. Cross-examined, the assignee stated that the books had been gone through very carefully, and that no signs of misappropriation of. money had been found. H. T. Gome, expert .accountant, stated that he had examined the books of bankrupt. _ From February, 1912, the books were badly kept, and the. purchases were practically unrecorded. There was no evidence, however, of misappropriations of money or of any personal extravagance. The statement handed to Winstone, Ltd., he said, did not show the true position of affairs, the principal error being in the amount owing to accused's creditors, which was out by about £1739. Continuing, ho said that accused had borrowed money, usually at too high rates of interest. Under cross-examination, Mr- Gorrio stated that certain loans raised at 65 per cent, were shortdated. He further stated i that the various interests that Farrow had paid had not materially affected his position. _ Further, he stated that he would not dispute that the difference between the actual state of affairs and what was represented to Winstone, Limited, was, in part, accounted for by the fact that balances duo to sub-contractors for work in progress had been overlooked. An Accountant's Warning. Frank E. Roy, formerly Farrow's accountant, gave evidence - as outlined by Mr. Mays. He stated that the difference between the two statements was accounted for by the fact that the debts for goods purchased in Juno and tho amounts owing to sub-contractors were not included in the rough statement, while there was also the alteration made by Farrow to bo taken into account. Cross-examined, tho witness stated that Farrow seemed to believe honestly he coiHil pick up his losses and pay off his creditors. Witness denied that the. only alteration made by Farrow was the putting in of a sum for discount on debts, and maintained that the amount owing to creditors had been altered. ■ v One Charge Fails. G. Winstone, jnr-, of Winstone, Limited, gave evidence in connection with the placing before him of what was alleged to be a false balance-sheet. During crossexamination it was found that the amount had subsequently been repaid. Therefore His Honor directed the jury to return a verdict of not guilty upon tho charge of having secured the money by means of a false balance-sheet.

Evidence in proof of the debts mentioned in ten of the counts was given by those concerned. This closed the case for the prosecution. Case for the Defence. Mr. J. It. Reed, K.C., called no evidence. In addressing the jury, he dealt first with the charge of rash and hazardous speculation. The position, ho remarked, was that in June, 1910, the state of affairs was explained to Farrow, who was advised to file. This advice was good, but one could not help admiring the pluck of the man, who decided to work on in the belief that he could put his affaire right. If the evidence was that the accused was a gambler or was a man who loafed, he would bo entitled to no sympathy. On the contrary it had been shown that he was a conscientious worker, and that during the past five years he had been absent from his work for a period of a fortnight only. Mr. Reed submitted that the jury could not possibly Bay that Farrow had indulged in rash and hazardous speculation. With regard to the ton charges of having contracted debts which he had no reasonable expectation of being able to repay, counsel contended that Farrow had contracted those debts to enable him to pull his affairs together. Farrow had succeeded in reducing a number of his original debts, and was of opinion at the time that there was a reasonable, prospect of all the debts being repaid. The jury was out for the full four hours, as it could not agree as to whether the accused was guilty of bringing about his bankruptcy by rash and hazardous speculation. His' Honor pointed out that he. had directed the jury to return a, verdici of not guilty on this count. The jury, therefore, found the accused not. guilty of both that charge and the charge of having secured property by the means of a false balance-sheet. 'On the 10 counts of having contracted debts when he had no rea-. sonable prospect of being able to repay tho money, verdicts of guilty were returned.

.His Honor sentenced the prisoner to one month's imprisonment on each of the counts, the sentences to be concurrent. He added that his leniency was duo to the fact that it was understood that there was nothing against Farrow's moral character, and to the fact that the charges involving dishonest practices had been disproved.