MERCER'S BANKRUPTCY

New Zealand Herald, Volume LII, Issue 16030, 23 September 1915, Page 5

MERCER'S BANKRUPTCY

BREACH OF THE ACT.

MONTH'S IMPRISONMENT.

A toung man named George Stewart Mackay, mercer, was charged before Mr. F. V. Frazer, S.M., at the Police Court yesterday that at Auckland on July 26, being adjudged a bankrupt, he did contract a. debt for £50 with Mr. C. H. Archer when he had no reasonable expectation of paying the same together with all his other debts.

Mr. Seiwyn Mays appeared for the official assignee, and Mr. A. E. Skelton tor accused, wfio pleaded guilty. Mr. Maya said that accused commenced business over three years ago with a partner named Johnston. The latter invested £500 and the accused £400, and they purchased the business of Mr. J- S. DicKson in Queen Street. The first five half-yearly balance-sheets showed gross profits varying from 20 to 42 per cent., and the last balance-sheet showed a loss of 40 per cent. The bankrupt had had previous experience in the soft goods trade, but Johnston had none. It was thought the former could make a success of the business if anyone could. Apparently he took over the whole of the stock and fittings without any precautions whatever, and when stock-taking he kept its value up to 20a in the £. In February last the partnership was dissolved, Johnston agreeing to take £250 in settlement of his interests. He only received £50, and left New Zealand. Bankrupt carried on business on his own account till July last. His liabilities amounted to £4450 and his assets to £993 Os sd. From this had to be deducted rent, £324, solicitor's costs, wages, etc., making the preferential charges £414 12s lid. This meant there was about £4000 unsecured, and the dividend worked out at from Is 6d to 2s in the £. When he contracted the debt with Mr. Archer he could not possibly have had any hope of repaying the amount, The £50 was used to stave off certain other claims, and at that time he owed Mr. Archer £33. He was never entitled to regard his gross profits at 20 per cent, let alone 40 per cent. No Financial Ability.

Mr. Skelton said this was a most distressing case, and the facta showed that, though the bankrupt was a young man. of considerable ability, he lacked an understanding of finance. He had been in the soft goods trade for 15 years, and at one time was manager and buyer for the firm of Young and Co. He purchased the business of Mr. J. S. Dickson in 1912. The stock, it was now agreed, was worth 12s 6d in the £, and he took it over at "20s in the £. He also paid £700 for the goodwill of the lease, fittings, etc., and started in a position which was quite nnaDDreciated by himself. Of course, no one blamed Mr. Dickson for obtaining the best price he could for his business. Accused started with capital borrowed under circumstances which did not usually apply in cases such as this. One portion was subscribed by an old friend, who was anxious to get a share in the business. There was no intention of defrauding the persons from whom the money was borrowed, or obtainine money without the lenders having a full knowledge of the position. When Johnston went out of the business he should have really left the whole of his capital, but, as accused had. induced him to come into the business, he arranged to pay him £250. There was no suggestion that accused had gambled with the money, or been extravagant or wasted it on drink. ; His mode of life had always been extremely frugal and this should be taken into consideration by the Court. The accused carried on the business with every hope of seeing it through, despite the fact that he owed large amounts to warehouses in Auckland. In July last he was three months in arrears with his rent. The owners asked for one month's rent on account—£92 17s 3d. -He had only about £40 in hand, and went to Mr. Archer and borrowed £50. He' had since repaid £15. The accused did not appreciate the gravity of his offence at the time. It was purely a matter of cocksureness, not criminal intent. He, therefore, asked that Mackay should be treated leniently. Protection of Businessmen. The magistrate said there was no doubt accused intended to be honest, and had cause to believe that in some way or other he would "weather the storm." The Bankruptcy Act was not intended merely to punish criminal bankrupts, but to pre- j vent rash speculation and rash continuance in business when bankruptcy appeared to be inevitable. It was for the protection of the whole commercial community. The accused certainly contracted | the debt when he had no reasonable expectation of paying it as well as his other debts. The case was not one that called for a severe penalty, and these proceedings in themselves would be a certain amount of punishment. He, however, could not let accused off without some penalty. He would be sentenced to one month's imprisonment without hard labour.