BANKRUPTS CRITICISED

New Zealand Herald, Volume LXIII, Issue 19417, 27 August 1926, Page 15

BANKRUPTS CRITICISED

"MENACE TO THE COMMUNITY." FURNITURE-MAKERS' FAILURE CASE REFERRED TO CROWN. SECRETARY AS GUARANTOR. Many creditors had to stand at a bankruptcy meeting yesterday in the estate of Oscar Lorenzen and Albert Norman Chapman, furniture manufacturers. < The bankrupts have been trading as the Newton Manufacturing Company, and have filed with liabilities totalling £3534 15s 2d They estimate their assets in stock and plant at £1738 13s. Strong criticism of certain features of the bankruptcy was made by the official assignee, Mr. W. S. Fisher, who described men of the bankrupts' type as " a menace to the community." Both bankrupts were stated to have been in financial difficulties prior to undertaking the business. In a written statement bankrupts said thev entered into the business in October, 1924, with £25 capital, besides benches and cramps. In the following February thev found prices too low and decided to kpII direct to the public. So many orders were received that they had to increase the floor space, and last December there was a credit, balance of £SOO. Thev were then affected by competition from nnotlier firm and finance was arranged on tho basis of 20 per cent, on orders, Shop Venture Fails. A shop was started at Newton, but was a complete failure, resulting in a loss of £260. From February the business increased, but this month,, when stock was taken, they decided to consult tho creditors. Some advised them to file, and others to carry on. The failure was attributed to the loss on the shop through competition, the state of trade in the past month and the mistake of "converting a cash business into a time-payment concern. Bankrupts considered thoy could make good if given a chance. Asked whether he had started business while still an undischarged bankrupt, Lorenzen said he was at first working for Chapman, on wages. The Assignee: Who guaranteed your overdraft at the bank?—Lorenzen: Mr. McPherson. Who is he ?—He was our secretary. Bankrupt said he did not know Mr. McPherson before he applied for the position. Payment to the Eanli. The official assignee said the bank passbook showed that £153 had been paid in within three days from the notice of the meeting of creditors. "Do you think it was a right thing to put it into the bank ? Lorenzen t I thought' I was just doing business in the ordinary way. We were tolrl to keep the business running. The Assignee: It was very satisfactory for the bank. A Creditor: Did you do that to safeguard McPherson's deposit ?—No. Lorenzen admitted that he drew £lO 10s a week from the business as wages. The Assignee: Do you think that was the right thing to do with your creditors' money ?—Lorenzen: Other men turned down the job at £8 a week. The Assignee: That was nothing to do with it. Lorenzen was then asked why ho and his partner had used two motor-cars. "They were necessary for the business/' he replied. "One was not quite enough. We had to take customers to the warehouse," The Assignee: Could t'hev not go in a tram ?—They would "not go at all, then. That is something new to me. Bankrupt replied that another firm adopted the same method of persuading customers.* Previous Composition. Chapman was then examined. The Assignee: Is this the first time you have been in monetary trouble ?—No. Did you file on the previous occasion ? •—No, it was a private assignment. What were your liabilities ? —About £IOOO, I think. What did you pay in the £ —was it as much as 10s ?—About that. Was it 12s ?—Not as much as that. Did you never trouble to inquire ? No. It •was, a matter of no interest to you? —I just never found out. A Creditor: Would Mr. Chapman be surprised .-to know that the assignment worked fOut rat 6d in the £? Chapman; in a surprised tone: Go on! ■was that it? (Laughter.) • Bankrupt said he too had drawn £lO a week, but only this year. Previously he drew £5. Chapman was asked whether he had ever discussed with' McPherson the position of his overdraft. He replied that McPherson told them, when the notice of the creditors' meeting was. sent out, to get all the money they could in the bank. A Creditor: Did he say it was to reduce his overdraft ?—No. | One creditor said the bankrupts were not rogues but muddlers. Referring Case to Crown. "I would be inclined to take a sympathetic view," tho assignee said, "if they had not been in financial difficulties before. They ought to have known their position quite well.*' The matter was very serious. The men had been in difficulties before. Yet they started without capital and before long were faced with liabilities exceeding £3OOO. "People who carry on in this way," he added, "are a menace to the community.- They not only hamper their own creditors, but also are a drag on legitimate trading." The meeting appointed the three largfst creditors as a deputation to place the matter before the Crown solicitor, with I view to taking action,