BANKRUPTCY COURT.

New Zealand Times, Volume XLIII, Issue 7270, 12 September 1884, Page 8

BANKRUPTCY COURT.

Monday, September 8. (Before His Honor Hr Justice Richmond.) IN UK WILLIAM WARINO TAYLOR. Mr Shaw appeared for the bankrupt ; Mr Travers on behalf of the Official Assignee, and Mr Gully on heha'f of certain creditors. Hi* Honor : This is an adjourned examination is it not. Tin Mr Shaw ; Yes your Honor. I should point out that at the last examination the cort wuh put before the hon*o, the bankrupt being cross-examined by Mr Stuart and Mr Howards before the original examination hud taken place. Hi* Honor : That appears to bo the common practice, and it certainly gives the bankrupt the advantage of replying. The cross-examination of the bankrupt shows where the wo.ik points arc, and it ia much better for it to be taken first. It baa been my practice for many years. Mr Shaw : I understand, your Honor, that since ttiis Court sat last on this the creditors in the estate have had a meeting, and, under the prnvi-inns of the Act, they have instruetbd the Official A*signce to further examine the bankrupt. I would suggest that that examination should bo taken now. jyf r Travers expressed his willingness to adopt this suggestion, and at once commenced the examination of the bankrupt, William Waring Taylor, the bankrupt, having been sworn, deposed as follows : —I was carrying on business in Wellington as a general merchant. I kept a ledger, a journal, a cash hook, n talcs book, a purchases book, Block book, and a variety of others. I also acted a* trustee for a number of persona during that period. I used these trust funds as I did my general accounts, keeping separate accounts in my books tor each of the trusts. X kept a house account amongst others. My accounts for tho most part were regularly balanced. lam also the owner of a station called Manawa, for which I kept a separate account. X could state tho present balance on this account, but I cannot say from memory tho latest date at which, prior to my bankruptcy, the account was balanced. The ledger .was then produced, Mr Travers : Do you not find that the account for this estate ha* not been ruled off since July, 1877? The bankrupt : X think it is exceedingly likely. (Having looked at tho ledger.) The latest date at which it appears to have been ruled offer balanced is June, 1877. X was spending considerable sums on that estate, using Urn funds at tho bank for that and other purposes, I was trustee for May's estate, and also for that of tho late Mr W, 13. Rhodes. Mr Shaw : I would poiut nut to your Honor that the representative of Rhodes' estate has not proved, and consequently has no locus standi in the Court, His Honor : The whole o the bankrupt s assets and liabilities must oorno before the Court. Of course, Ido not know that this is »liability. . Examination continued : T wa* agent for Mrs Ann Rhodes and Mrs Moorhouse (wlieu Miss Rhodes) ; also, for Mr T. Lloyd, the Rev Mr Duncan, and a trust called Blyth’s trust. It is a fact that in the early part of the year 1833 I was debtor to the estate of the late Mr VV. B. Rhodes in a sum of £9OOO, through the refunding of certain mortgages. At the same date I was indebted to Mrs Moorhouse (then Miss Rhodes) in a sura, approximately, over £II,OOO, and to Mrs Rhodes £lO,OllO. The latter sum waa paid partly by » transfer of shares and partly by a transfer of caih. The shares were in the Bank of Now Zealand, and X became possessed of them iu trust under the will of the late James May. I transferred tho whole of those shares into my books in. my own name. The amount of shares transferred to Mrs Rhodes, X think was 200 or 300, worth about £22 each. Amongst the amounts debited to Miss Rhodes was a sum of £5415 on account of Canterbury mortgages. Those mortgages were held by me a* trustee in May’s estate. As a fact the mortgages were never settled, and the amount of these, or the bulk of it, was called in and received by me. In an account subiequently rendered to Mias Rhodes, I credited her with the interest. In September, 1882, I-received from Miss Rhodes a sum' of £stlll 6s lOd, £SOO odd from the Trust and Loan Company, and £ISOO from Rhodes’ trustees. I represented to her that it was invested in the following mortgages t —Fulton, £ISOO ; Taplin, £250, and Hales, £3OO. Air Travers : As a matter of fact, did those mortgage* have any existence at all? The bankrupt : Yes, they formed part of May’* estate, although the entry of them was fictitious, because they were never transferred to Miss Moorhouse. Mr Travers ; When did you first find yourself in monetary difficulties ? The bankrupt ; You will scarcely credit it, but I never found myself in monetary difficulties till within a month before my bankruptcy. I scarcely expect that to be believed, but I make it on oath, and my conviction was that l.wus worth a great deal of money. His'“Honor : X understand you did nl make a periodical balance-sheet ? The bankrupt; I took'memoranda from my books, which satisfied me as to my position. Hie Honor : But to be worth anything, that memoranda would have to bo complete. The fact is, then, that you did not face the amount of your indebtedness iu respect te these various trust fundsThe bankrupt : No ; I never looked at them altogether. On the Ist March, 1884. I made up a statement of my assets and liabilities for the National Bank, of which a correct copy is made in the report of the Assignee. There are no trust accounts, I think, in it. Mr Travers Why did you omit from that statement your liabilities to May’s and other estates ?

The bankrupt : Tho statement was on approximate one. The bank urged me to give a statement ot my position, and I pointed out that X should require a reasonable time to prepare it. Mr Mitehie, the manager, then asked me to let him have tho statement on the following day, and I did so. I knew that in 1870 I was worth .610.000, and that since 1873 I

had made by land sales upwards of £7OOO, and had turned over about £320,000 in business, irrespective of sales of land or agency moneys. The trust accounts, however, were left out of that statement, and it was therefore misleading, fleet I gone into my position with regard to trust accounts, I should, no doubt, have found myself insolvent in March last. His Honor ; I think the bank shares must have gone to the credit in May’s estate. They are credited in some account. By Hr Travers : My indebtedness to the National Bank on the Ist May, 1831, will be found in my books. Between the Ist of March and tbo date of my bankruptcy X did not, I believe, increase my balance at that bank. I have had transactions with J. and W. Walker, of Wolverhampton, and I applied to them for accommodation in April last to a considerable srnonnt, which they refused. I have seen a copy of their letter (produced), charging me with fraudulent bankruptcy, I think. I read that letter jn a very cursory manner, for when I received ft I thought “ This is written by an creditor,” and consequently did not trouble with it. I dishonored several of their bills, I know, amounting to about £2200, including the £IOOO I had drawn. I asked them for £2OOO, and they telegraphed a refusal. I had accordingly to dishonor bills. I was agent for the Kev. William Duncan, to whom I represented that I bad invested or arranged for the investment on mortgage of a sum of £SOO odd belonging to ilm, and from time to time paid him interest supposed to be accruing. That was also the case in regard to £I2OO in Blyth's estate. Negotiations were pendio" with a man named Napier for the investment of £250 of Mr Duncan’s money; and the arrangement was never completed, although the amount appears on the books. A mistake was made in the Official Assignee s report in reference to this ; it was a man named Napier, not a person in Napier who was concerned. I also transacted business for a person named Bridges. This requires exactly the same explanation. An arrangement was made for investment of £350 to a person named ! McKenzie, and the amount appears in Bridges' account, although the money was not invested.

Mr Travers : Wo find hero Mr Jamas Butnss debited with £8395 8s lOd without any corresponding credit.

Mr Taylor : That is one of the items upon which the Official Assignee, although ho mutt repeatedly have seen it, bail never a„ked me for any information. I have over and over ag'i.u volunteered information, and have been over and over told again that none was required. Bornes was indebted to me for tho amount of a mortgage. Tho books are perfectly legible to an accountant, although probably difficult from a legal point of view. If is Honor : Well, 1 cannot say that X can understand them, and I have b,.en used to keeping accounts of this aort tor many years. Mr Graham ; I should like to explain, your Honor, that the sole object of this examination is to show that the books have not been properly kept, for if they bad, anyone would have been able to take them up and understand the entry iu regard to the business. The bankrupt : Doe* the Assignee assume that there ba* been any fraud ?

Mr Graham : Oh no. His Honor : There is no asset to be looked for?

The Assignee : No. His Honor : Well, I have taken no note of this part of the examination. It aeems to be simply a question of bookkeepiog. Examination continued ; The Manawa run consist* of 12,000 to 13,000 acres, and i* capable of carrying at the present time—and 1 know the place better than anyone else—- ) 5,000 nbeep, besides the cattle on it now—about 900 head. There are about 500 sheep on it now. On these facts X base the estimate iu my statement. The ultimate carrying capacity of that run ia 20,000 sheep. Your Honor may not be versed in agricultural matters, but I may say that this is little more than a sheep and a half to the acre. I bad a valuation from Mr Lowes, of Maaterton, professional valuator, that the freehold alone was worth £27,000. 'The Block now on the place is worth nearly £SOOO. These are the reasons for my estimate. The property tax valuation of the run was £10,200, which we accepted. His Honor : At that rate there would be nothing to pay nnder that tax, seeing that £16,000 would just cover the encumbrances ? Thu Bankrupt : Yes ; that is so. This concluded Mr Travers’ examination. By Mr Shaw : The stock-taking toqjc my staff six weeks, and selling prices were put down. In my schedule X stated the gross amount, with a note that “ these are sale prices.” I allowed a difference for tho cost of realising. It was not a fictitious stocktaking or a fictitious valuing, I do not know whether this is the proper time to say that I offered my services or those of my staff to assist in realising the stock. They were, however, refused. My takings for tho last four years were £33,600, £37,500, £37,800, aud £26,700. dating to the lust twelve mouths, during which our Wanganui branch was closed. Hy bad debts have not amounted to 24 per cent, of the sales, and X consider that my business has been managed successfully and with due care and ability. I estimate the Manawa Run at over £36,000. I have undervalued it because its present value is not equalled by its present return, Tho cause of the paucity of stook is the presence of scabby Hocks nil arouud. (A statement of the bankrupt's position, prepared by himself, was hauded in, Mr Taylor remarking Hint it showed a deficiency of £18,000.) Examination continued : I have had the agency for the Northern Insurance Company for the last twenty years. The company was aware that I kept no saparate banking account. Mr Dalrymple’s money I put through my own accouut, with his knowledge. He ia my son-in-law. Mr Lloyd is a banker ia Birmingham, aud he never made any demand upon me so

long as ho got the interest. Messrs Levin and Izard, as Mr Lloyd's attorneys, applied for an accouut, and got it. It is not true, as stated by the Assignee, that they “/applied for a statement of accounts, but failed to obtain same.” The amount of £339 to Mr Muroh is not a trust account, I owe my sister, Mary Taylor, £3OIB, which I had invested for her, I should not havo invested it had I not thought it a sate investment. My impression is that the mortgage representing tho investment in Blyth’s estate was made, but I am not positive. There wore two other trustees io that estate (Mr Watt, of Wanganui, aud Mr Spinks, of Wellington), and the arrangements were made with their knowledge. The security In connection with the Duncan

moneys was banded over to Mrs Moorhouae. I do not think you will find the statement of transfer to Mrs Moorhouae in the books. The books were balanced in 1873 or 1879, though not to show clearly the profit and loss. Memorandum books were kept in my sate for my own information in regard to my position, which, lam sorry to say, I cannot find. The scheme for the distribution of shares was drawn up by my solicitor's (Mr Brandon) advice. He instructed me afterwards that I would have to file. The bankrupt, asked by Mr Shaw whether he wished to say anything, said : X should like to have bad the balance.sheet which I prepared audited privately. I made an attempt to get it audited by Mr Bowles, but I received a note from the Official Assignee to the effect that as the work had been interfered with seriously by the investigations of myself and Mr Berry, he could allow no conditions to be entered into for the auditing as proposed by me, as he (Mr Graham) must have access tp the books. If Mr Graham had furnished me with a copy of his statement, 1 should have been able to get it verified or proved. Within an hour after receiving the Assignee’s note I took my books down to him, and he undertook to have them gone into at once. That was about one o’clock on Saturday, and as there is such a discrepancy between my statement and that of the Assignee, I think my counsel is quite justified in applying for the concession I ask. Ilia Honor : But is not the discrepancy a matter of valuation alone \ The bankrupt: No. Bis Honor ; Do you say, then, that the liabilities have been exaggerated in the statement of the Assignee ? The bankrupt; J have every reason to believe that my books were neyer bolanced by the Assignee at all. The gravamen of his charge is that I must have known for years past'that I was insolvent. (Here the bankrupt, who was imperfectly heard, was understood to say that he had made a profit on the May estate of £IO,OOO or £12,000.) Upon my word (be continued) it is a hard thing to say, but I believe the Assignee has been instigated hj personal motives. Mr Travers ; No motives at all of the kind. The Assignee is an officer of the court. The bankrupt : Well, X do not know, but that atony rate is the conclusion I have come to. His Honor (to Mr Travers) : Have you seen this statement prepared by Mr Taylor? Mr Travers : Yes, your Hopor, we have an analysis of it, and it is entirely fallacious as to the bankrupt’s position. His Honor : Well at present we have got no further than this examination. The next regular business will be the application for discharge, and then will bo time enough to critically examine £his last statement. Mr Shaw: The object .of Mr Taylor, yonr Honor, is that ho shall be examined by some independent person. Of course to Mr Taylor it is material whether his liabilities are correctly valued at £IB,OOO or £IO,OOO. HU Honor : As regards that, we shall know by the next sitting what the assets have realised. As regards the liabilities, they are all lamped, I see, in Mr Tayior’p statement. The question is really, whether they have been misstated by the Assignee, If so, it is a pure accident, and cau bo easily rectified. In accordance with a request by his Honor, the bankrupt handed in the books from which

be had made the statement. His Honor ; Very well 5 I shall be able, probably, to maka some comment on the matter myself. At present I do not see the propriely of calliog in another accountant. It is the Official Assignee’s duty to present a fair account, and he could have no possible reason for leaning against the bankrupt. If a difference of opinion still exists on the application for discharge beiog considered, there is nothing to prevent the bankrupt calling in an accountant. Mr Shaw : Practically Mr Taylor wants to satisfy your Honor that bis statements are correcl. The bankrupt: I want to show more than that ; I want to show that Mr Graham’s are incorrect.

Mr Travers: The Assignee only got Mr Taylor’s statement on Saturday. Ho is advised, however, that it is full of fallacy - His Honor : If it appears that there is any real ground for appointing an independent auditor, it might be done. After all, matters of book-keeping are of minor importance in a case like this.

Mr Shaw pointed out that the feelings of the bankrupt would be intensified, were it stated that he had failed for a greater amount than he really had. Mr Travers ; What we say is, that the bankrupt would have found in March last, that he was really indebted to the extent of £40,000 or £60,000. His Honor : Whether he was indebted or not, the question of trust accounts will stand unaffected. Mr Travers : Certainly. I would point out that it is a question, also, of the inaccuracy of the statement made by Mr Taylor. The ledger shows that Mr Taylor was indebted to bU sister in a sum of .over £3OOO, while the amount is set down in his statement to the bank as £ISOO, Thus it ha? been impossible to arrive at any correct balance-sheet of the 1 accounts. The Assignee should have bad an : opportunity of examining and criticising Mr Taylor’s statement, which will be fojind entirely fallacious. JJis Honor : There is a matter of extreme impoj;tapcc referred to in the report of the Assignee in reference to sections 163 and 171. Nothing W been said upon that point to-day, but I preanmo Jit tot intended to say anything, " ” 11 u ,

Mr Travers : No, your Honor. His Honor : Then we bad better leave the matter.

At thi» stage the examination was adjourned till the 20th instant, and the Court rose at 2 o’clock.