LOSSES ON CONTRACT.

New Zealand Herald, Volume LXIV, Issue 19720, 20 August 1927, Page 15

LOSSES ON CONTRACT.

FAILURE OF BOATBUILDER.

OFFER FOR BUSINESS REFUSED

** NOTHING FOR CREDITORS.** A meeting of creditors in the bankrupt estate of Charles Bailey, jun., boatbuilder, was held yesterday, the official assignee, Mr. G. N. Morris, presiding. Almost every seat in the office was occupied at eleven o'clock, but bankrupt was an hour late in arriving. He stated he did not receive a notice of the meeting, and had only that minute found it was being held.

The schedule showed £I9BO owing to unsecured creditors, and £6665 to secured creditors. The securities were valued at £7532, leaving a surplus of securities of £867. The assets, comprising book debts estimated to produce £ll4, together with the surplus from securities, totalled £9Bl, leaving a deficiency of £999. In a written statement, bankrupt said the business was founded 59 years ago. It had a very varied career, and like most businesses met with serious losses on contracts. In March, 1924, he had an equity in the business of approximately £2OOO, and the plant and buildings were then valued at £3OOO. During 1925 only £SOO was received from trading after the usual 10 per cent, depreciation had been written off. Hi/ drawings were heavy and consequently the balance-sheet disclosed that his capital had been reduced by £250, still leaving £1750 to his credit. In March, 1926, he found his capita! had been further reduced to £llß3, brought about by an excess of drawings over profits from trading. Difficulties in Contract. A balance-sheet taken out in Sepfember, 1926, at the time of entering into the contract with the Tongan Government to build the ketch Hifofua showed a credit balance of £BB3. With this credit and believing the contract would be profitable, he had no hesitation in proceeding with the building of the vessel. This took about 10 months, and a great deal of difficulty was encountered, not only in delay in obtaining machinery, but also in obtaining supplies of timber and other materials at the price estimated. A trading account for the past 10 months, which covered repairs and small contract work, in addition to the Tongan Government contract, showed a loss of £1475, and this, added to his personal drawings, had not only consumed his capital, but also had left him with a deficiency of £llß3. The direct cause of his bankruptcy was loss on the Tongan Government contract.

The official assignee said when the \ bankruptcy first came into his hands, he called a meeting of the largest creditors and it was decided the business should be carried on in the meantime under the direction of Messrs, Endean and Hollo way. The question for creditors to decide was what was to be done with profits made during that period. Tenders had been called for purchase of the business, and the only one received was from Messrs. Endean and Holloway at £1706. "This offer means there will be nothing for the creditors at all," the assignee said. By a large majority, it was decided not to accept the offer. Drawings Frota Business. Examined by the assignee, bankrupt said he had no assets at all outside his business. He took over the business from his father about, 50 years ago. Eour of his sons had been working with him on wages. He admitted that during 1924 and 1925 the sons had drawn out of the business sums amounting to £767, in addition to wages. The price for the Tongan Government contract was £IO.OOO. A Creditor: And a good price, too, for you. Asked by the assignee whether he would accept the contract if he had a chance again, bankrupt said he would not under the same conditions. The ketch was supposed to have been launched before Christmas, but tl.e machinery did not arrive until the end of May. He lost £2OOO on the contract, caused by the delay. The Official Assignee: Have you been paying strict attention to the business since September last ?—Bankrupt said he had been on the job every day. He sometimes visited hotels, but had been doing that for the past 30 years. It never interfered with his work. A Creditor: I know bankrupt has been at his business every day. A committee was appointed to act with the assignee to make arrangements for disposal of the business to the best advantage of creditors, and to settle other matters.