THE COLONIAL BANK.

New Zealand Mail, Issue 1747, 30 August 1905, Page 53

THE COLONIAL BANK.

ITS LIQUIDATION. A QUESTION OF £355,000. DEMAND _ FOR INQUIRY. In the House of Representatives on Friday, the Public Petitions Committee recommended Parliament to give effect to the petition of William Barrow and other shareholders of the Colonial Bank, who asked for an inquiry into the liquidation of the bank. Mr Herdman reminded hon members that last session the committee recommended that a similar petition be referred to the Government for favourable consideration. This Session the committee recommended that the petii tion be given effect to. They were told to exhaust all legal remedies. This they had done. The report of the Official Assignee was regarded by the shareholders as extremely unsatisfactory, and threw no light upon the proceedings of the liquidators. He appealed to the Premier to give effect to the prayer of the petitioners. The sum of £355,000 had disappeared, and the petitioners had a right to assume one of two things—• either that the balance-sheet put forward by the directors prior to the liquidation was untrue, or that the liquidators in realising the concern had been guilty of gross and culpable negligence. He suggested that in the interests of public and commercial morality it was the duty of the Government to give effect to the prayer of the petitioners for inquiry. Mr Seddon said the hon member ought to have told the House what occurred as between the Bank of New Zealand and the Colonial Bank, and if he had gone into particulars as to the agreement that was entered into, he would then have shown the House how that money had disappeared. He had no hesitation in saying that the shareholders of the Colonial Bank lost a good deal of their capital in the arrangement with the Bank of New Zealand. That arrangement favoured the latter bank, and entailed a very heavy loss indeed to the shareholders of the Colonial Bank. He believed that had the directors of the Bank of New Zealand been dealing with, their own capital they would have dealt with this question in a very different manner. The directors were liberal in the extreme in dealing with some of these accounts. If fault was to be found at all, it would be found in the making of the arrangement with the Bank of New! Zealand. An hon member: Who made the arrangement ? Mr Seddon: It was made between the directors of the two institutions, and agreed to at the time, he believed, by the shareholders of the Colonial Bank. The very fact of what the colony did in respect to the Bank of New Zealand depreciated the .value of th© Colonial Bank stock; in fact, it was a mattes of history that, had it not been for the course taken in regard to the Bank of New Zealand by the State, there would have been no necessity for the step taken in respect to the Colonial Bank. He thought he was right in saying thaft had the Colonial Bank remained intact, and come to no agreement with the Bank of New Zealand, and carried on its own business, there would have been

no need for the investigation asked, for. Trig opinion, however, was that there had not been the great loss of capital that was stated to have taken plaoe. Ten years had* elapsed, and the lion member for Mount Ida should have told the House the changes that had actually taken place. Both the liquidators of the Colonial Bank originally appointed and the Official Assignee were tied up by. the agreement made as between the Bank of New Zealand and the Colonial Bank. • Mr Wilford: The one man who understood it was put off. - Mr Seddon believed that had the Hon Mr Larnach been left with a free hand the loss of capital that ensued would have been prevented. The liquidation took place under the direction of- the Supreme Court, and surely the hon member did not wish to cast a reflection upon the Court-. But after all that had taken place, what could the Government do? The Court had dissolved the bank, which was a thing of the past, and the Government was, therefore, powerless in respect to the matter. The hon member wanted the Government to go into these accounts and records, but he (the Premier) believed it would be a waste of time. It should have been shown that the Court was not justified ia dissolving the bank, and that there was further information which the Court should have obtained, but no attempt had been made to do that. So fa" as the Bank of New Zealand director. were concerned and their management in respect to taking over the Colonial Bank, they did remarkably well. As to the adjustment of the accounts, had less liberality been exercised, there might have been some more money for tihe shareholders of the Colonial Bank, though he could not say positively, without full knowledge. No inquiry, however, -would alter the facts of the case, for the question had gone before the Supreme Court, and with Mr Justice Williams as the head of that Court he did not think there was much left for the Government to do. The dissolution of the Colonial Bank would not have been granted by his Honor if there had been necessity for further inquiry.

Mr. Taylor said the petition revived Old memories of the banking legislation of some years ago. It was perfectly clear to any lay mind that in regard to this matter there was cause for inquiry. It had taken all these years for the truth to filter through. There was a deficiency of £355,000. Where had. it gone to ? Who had had the money ? The report of the official liquidators disclosed no details, but only a net result. Mr Watson could have told the House who had robbed the shareholders but the only chance they ever had of learning, the inner history of the disappearance of this large sum was when the amount of Mr Watson’s retiring allowance was raised from what the Parliament proposed to give him and What he practically demanded as the price of his silence. On November Ist the records of the Colonial Bank would be destroyed, and not a vestige left. The facts were such as to warrant the Ministry in instituting an immediate inquiry. All the Government had to do -vvjas to remain apathetic until November, and all the records would be lost.

. Mr Wilford maintained that th© assets of the Colonial Bank had been absolutely wasted by th© liquidators, and the shareholders had reason to complain ; £47,000 (Riley, £22,000; Meek, £22,000; Himitangi estate, £3000) in one swoop had been sacrificed—and these were only a few instances.

Mr Duthie moved to add to the report of the committee, “And meanwhile the House desires that the Government should take steps to prevent the destruction of the Colonial Bank’s hooks and papers, with a view to having a thorough investigation and inquiry into the liquidation of the bank before the Ist November next.” He considered that there had been other influences at work besides the arrangement between the directors of the two bank's. The position was controlled by the Ministry of the day, Which was identified with the disposal of the assets, and therefore there was reason to see that justice should be done. The shareholders had lost their money, and they had a right to see the thing cleared up. Mr Massey seconded Mr Duthie’s amendment. The Hon W. Hall-Jones suggested the withdrawal of the amendment, with a view to letting the matter go back to the committee to hear further evidence. After further debate, Mr Seddon pointed out that there was no evidence whatever brought before the committee, and yet the House was asked to make further investigation. He was being asked to be a party to carrying an amendment that the Government was to take steps to order that the records should not bo destroyed without a tittle of evidence being submitted, and this after a Judge of the Supreme Court had ordered the records to be destroyed within six months. He was asked to vote that the Judge had ordered wrongly, without any evidence, but simply on the bald statement of the petitioners. The House should hesitate before it reversed the decision of a Judge of the Supreme Court. Hie question "was “talked out” by the afternoon adjournment.

DEBATE IN THE COUNCIL. In the Legislative Council the Hon Mr Jenkinson moved, “That the petition of W. Barron and two other shareholders and contributories of the late Colonial Bank of New Zealand be referred to tihe Government for consideration, in accordance with the recommendation contained in the report of the Public Petitions Committee brought up on the 24th inst.” The mover said the causes that led to the winding up of the bank were easily found. He thought he was speaking the minds of the committee when he said the causes were the almost criminal management of the Bank of New Zealand. There was no doubt of this, because the Bank of New Zealand had to appeal to the Government for protection. The shareholders of the Colonial Bank were apprehensive that something was wrong, and that what was happening to the banks in other colonies would happen to their bank, and they tried to get rid of the shares. The depositors knew these circumstances, and there was no reason to appoint a commission of inquiry to find out why the bank went into liquidation. The facts were plain. The managers and directors were soieiy to blame. The matter should be pressed upon the Government much, more forcibly than hitherto.

The Hon G. Jones said it was evident that if the previous speaker had been free to act he would not have moved the motion. He would probably have moved that the petition be "sent back to the committee in order that it might get more mature consideration. He (Mr Jones) moved an amendment in that direction. There had been a change oi attitude on the part of the committee. The Government had acted supinely. The committee, he thought, had surrendered their independence of thought. The petitioners had endeavoured to get the matter settled in a proper manner, but had been thwarted on every hand. A question of commercial morality was involved. There seemed to be a prima facie case of some sort against the liquidators. He would not say that wrong had been done, but money had been misappropriated in a very funny maiiner. The guardians of our public morality should set up a committee of inquiry.

The Hon J. Rigg seconded the amendment. He said the whole question as to the unsatisfactory state of affairs had been thrown upon the liquidators. He objected to this. The sum of £230,000 had disappeared which had never come into the hands of the liquidators at all. An investigation into the whole of the transactions was necessary—both in regard to the conduct of the Colonial Bank and also into the conduct of the liquidators. The balance-sheets and statements made by the directors were unsatisfactory, to say the least. Unless something was done speedily the books and records of the Colonial Bank would be destroyed. The six months allowed would expire on November 2nd. If that destruction took place, any proof of fraud that might exist would expire. The time had certainly arrived when the Government should clear up what was a public scandal.

The Hon Mi* Pinkerton said he would vote for the report being sent back to the committee.

The Hon Colonel Pitt hoped the Council would consider the question carefully. He quite agreed with the Hon Mr Jenkinson that it was not of the slightest use to inquire into the causes that led to the winding-up of the Colonial Bank. A period of ten years had expired. Prior to ffiat, shareholders had had opportunities of ascertaining the position of the bank. He did not think it reasonable to ask the colony to undertake an extensive anu expensive inquiry into the causes of winding-up. The Hon Mr Jones: You have recommended it.

The Hon Colonel Pitt, continuing, said tlier© was a similar matter . ef or© the Council last year. The Hon Mr Lee Smith ' had given evidence before the committee, and it was abundantly clear from his evidence that the loss had arisen in this way: A large number of current accounts had been withdrawn from the Colonial Bank, and the Bank of New Zealand had been asked to carry on for them from time to time. It appeared that the accounts had been sold, and the loss arose. He did not understand that there was anything criminal in the matter. The liquidation had gone from bad to worse, and why should the colony be asked to go to the expense of an inquiry. It had been competent in the past for shareholders to ask for and get any information they required. The Hon Mr Jones: They could not get it. The Hon Colonel Pitt said if shareholders had neglected their opportunities in this respect it was not fair after this lapse of time to ask the colony to undertake such an expensive inquiry, and no purpose could be served by adopting such a course. The Hon Mr Jones: You agreed last year. The Hon Colonel Pitt: What does it matter what was agreed to last year? The report of the Petitions Committee was there, and he believed that if the report was referred back again, a similar report would be brought back. Members should look at the matter

in a practical business way, and an inquiry should not be granted, as shareholders and petitioners had neglected their opportunities. The Hon Mr Bolt said the liquidation of the bank ivas proceeding, and only a. report was required. An act was passed, however, and the power was taken from their hands and given to the Official Assignee. The shareholders had been placed in a very awkward position, and this alone was sufficient for an inquiry. He thought something approaching very closely to fraudulency had taken plaoe. There was no reason simply because mud had been stirred up why Parliament should not investigate. The more mud stirred up the greater need for inquiry. Pai’liament, he thought, should certainly do something. He thought there was very little need of a Petitions Committee if it could only brmg down a report similar to this one. There mignt not have been any crime committed, hut no member could say there had not been.

The Hon T. Kelly agreed with the Atto rn ey-G e-n eral.

The Hon G. McLean said the shareholders had sold to the Bank of New Zealand because they had not backbone enough to carry on when all the Australian hanks were tumbling down. The people who were petitioning now were the very pepple who had assisted to appoint the liquidators. The Hon Mr Trask said the present petitioners were only three out of many thousands, and it would be unwise to grant an inquiry. The Hon Mr Jenkinson believed wnat was wanted was an inquiry into the action of the liquidators who had spent £400,000, whilst the shareholders had got £IIO,OOO. The amendment was lost by 23 votes to 0, and the motion was agreed to.