THE COLONIAL BANK.

Otago Daily Times, Issue 10598, 19 February 1896, Page 4

THE COLONIAL BANK.

OFFICIAL LIQUIDATORS.

The question of the appointment of official liquidators to succeed the provisional liquidators of the Colonial Bank of New Zealand came before his Honor Mr Justice Williams in Chambers yesterday on a motion nude on behalf of the directors of the bank for the permanent appointment •of the gentlemen who are acting provisionally a-i liquidators. Mr B. C Haggitt appeared for thu directors in support of the niution; Mr W. C. MacGregor appeared on behalf of Mr William Learmond'and other shareholders to oppose, as did also Mr T. Young (of Wellington), who represented Mr C. Fraaer, a shareholder supporting the cl;ums of Mr Braund (of Wellington) ; and Mr J. I. M. Fraaer appeared for Messrs Hugh Adam and K. Cogliill, shareholders who favour,the appointment of the gentlemen recommended by the directors.

Mr Haggitt said that his Honor had fixed to-day for the hearing i.f an application for the appointment of the official liquidators, and instructed that an advertisement; to that effect should be inserted in the G-.7,etteand the local newspapers, which had been done

Mr .MacGregor rdmarkod that it was esiential, before the court conld inform itself as to whether these gentlemen wereproperto be appointed, that the court should satisfy itself as to certain allegations made against them. The must decisive way to make inquiry into those allegations was to b»v« an investigation of tho liobks. If the court said it saw no good ground for such an inspection of the b^oks, then coiin el still had grounds which he wished to raise and support by affidavit against the fitness of the gentlemen proposed. His Honor thought Mr MacGregor would have been prepared to put in an affidavit any objections he knew of, apart from any information he might ilerive from ah inspection. Mr MacGregor hod not. done so. All his affidavits were in support of his application for an inspection, but aa regarded the peisoni.ol of the gentlemen proposed by his frieud hs had said nothing, and counsel had very serimw mid unfavourable objections to at least two of them. Thu gentlemen he rep eseoted did not wish, however, to put such reasons on affidavit unless compelled to do to

His Honor said if there were any questions of that kind it was merely a matter of giving time to file the affidavits. He would like to know, however, before further putting off the matter, what were the allegations counsel proposed to maintain.

Mr MacQregor'a position was this: Jf the inspection was. granted he was satisfied that the leault would be tantamount to the allegations he desired to bring forward, but if his Honor thought there was no need for an inspection counsel would have to put these charges on affidavit. He did not think his friend would like him to place on affidavit anything that would reflect on these gentleman. Mr .Haggitt would not object in the slightest degree to that being done. Anything that could be brought against them ought to be made known. AtrFraier said his clients favoured the appointment of the provisional liquidators as the official liquidators. Mr Young said his client had filled an affidavit against the provisional liquidators, nud alsj showing that he had demanded an inspection and that it had been refused to him. He thought that if an inspection were granted he would persuade hrs Honor that the statements in the affidavit were absolutely true, and fur that reason council supported the application for inspection pending the appointment of official liquidators. The effect of the inspection might be such as to affect his Honor's decision, and show whether thess men were at to be appointed. Mr If raser remark-jd that it was entirely speculative ; Mr Haggitt said his friend had admitted that he wished an inspection to find if there was anything ugaiDst the liquidators. _ Mr MacUregor contended that at the last meeting it was understood that he would have the opportunity later on of applying for- inspection, a"d if an inspection were granted, counsel confidently assumed there would be no necessity for hling any affidavits in the matter. His Honor said that two affidavits had been filed by other parties, and he supposed they were the same. MrMacGregor replied that suoh was uot the case. The other parties had not the same information. . . His Honor: If you really have important mfoi mation to give the court probably you ought to have an opportunity of affording that information. But the court would have to be satisfied before further delaying the proceedings that there was some important information in your possession of which the court ought to be cognisant. Mr Haggitt: What can there be ? AH these gentlemen have been before the public for the last 30 years or more, and surely there is nothing against auy of them. Mr MscUrcftor: No, nothing as to character, but simply with regard to conduct in this matter. I refrain from saying anything, however, at present, and rely on the fact that only the application for inspection was to be gone on with to-day.

His Honor: If anything about these gentlemen can be established by affidavit we ought to have it, and if you can furnish the court with it I think you should do so as noon as possible, because it is a bad thing for everybody that such suggestions should bo flying about that are not substantiated by affidavit. If yon, as counsel, state that there are any facts not before the cjurt, aud say that you are prepared to verify them by affidavit, then you should have an opportunity of doing so, and tlu; court should have an opportunity of having those ructs placed ou record. You cannot ask Wore tbaii'thit, can you ? '* Mr 'MacGregor: 1 was certainly under the impression, and so was my friend, that only the summons for inspection was to come on to-day Mr Haggitt: What was the good, then, of fixing a day 1 Mr Young said that he had no objection to an adjournment for the purpose of inspection. His Honor: However, there is no reason why the two tilings should not come on togethar today. If as wi go on the court considers that there Bhould be an order for inspection, the order can be mode. It is not suggested that at present the court has ail the materials for making that order. Then, if the court doss not think the order of inspection should he made, and there is any reason for supposing that there are any further facts not at present before it, but which should be before it, as to the qualifications of any of the gentlemen suegested as liquidators, then, if the court considers it necessary, it can adjourn the matter of appointment until those fucts are before it. Mr Haggitt submitted that they ought to kDow now what bin friend accused these gentlemen of.

His Honor: Perhaps Mr MacGregor will state what he wishes lo urge. Mr MacGregor: I will, if you wish. His Honor:1 Well, it sb.ould.be done at some stage of the proceedings. Jlr Haggitt: It would be batter said now. His Honor: Probably thai would be beat. What ie it, Mr MacGregor? T Mr M.icGrcgor: Well, as regards one of them, Mr Latnach, our instructions are that he was. on the date of the winding-up, largely indebted to the baiik. His Honor: That in suggested in an affidavit already tiled. Mr Haggitt: And contradicted. Mr MacGregor : No contradiction has as yet been filed to that, and no explanation is given to the court regarding that fact, and the cases show that it is very material, in determining the question of appointing liquidator*, whether a debtor should be appointed. It is alleged that MrLarnuch is not now indebted. But the curt his % right to know how and when hs paid oft' his debt; whother, for example, out of the divicond these liquidators paid. As regards Mr Vipers, wo have nothing to nay against him, excepting that he is an official of the hark. Mr Ram<My has been put forward and poaest as a rcpresufitati'/s cf the independent shareholder,?, but we wish to male; It cltar that he in no cents represents them He took part in th« meeting of independent sharsholders. and i.ctwl as chsiirmuu, and h<-. w?.s spokesman of the deputation to the director with regard to the appointment of aH out.-itle liquidator ; but he ha< not now the confidence of any of them. Further, he stated puhliclj-, or ksi/h----publicly, that he woaW not accept the position of liquidator if it were offered to him, und thai he would have nothiug to do with any liquidation cr liquidators who would take proceedings against the directors or any of thsm. The.=w," I submit, are facts which the <:ourt oufjlit to bts iufurintd of. Further, with regard to the account of the meeting, us to the way ccrtaiu per ons were treated, something should be put on rocurd. I havo refrained from putting these things on ntiidavit, in the hops that it would not be necessa-y to go into personal matters. But they should come before the court. There are isolated fucti

in support of the allegation that the pevsoni named are mdcpsndent, lutd I submit they should not be appointed. Mr Hivgjritt asked whether the motion was to go nn.

His Honor : Belter (to on and we will see. Mr Haggitt asked how it; could be an objection to a man that be was at some antecedent time indebted to the bank. Mr MacGregror : He was indebted when the winding-up was fixed on. Mr Young: It is suggested that the dividend helped him to pay off. His Honor; We had better take the two together. Mr Hagf-itt, in arguing in support of th'o mot ion, said that in trje first place he would call attention to the fact that the three gentlemen who now acted as provisional liquidators were recommended and proposed by the whole of the directors of the bank, the holders of sfi:!B shares, irrespective altogether of the fact that the directors had charge of these proceedings. It was the p-aetice at Home, in all these mutters under the Companies Act, to regard the recommendation of the petitioners in making the appointment of official liquidatots. Vice-chancellor Mali as s?.id he wished it to be understood as a genera' rule in futuie that "if they who had the cavria;;o of the order proposed a fit and proper person for the purpose, such person wa< to be the official liquidator, notwithstanding the qualifications of any other person proposed to be Dominate'!." According to recognised nil-, the perron nominated by the petitioner would, cceterix paribue, he appointed. After citing other authorities the learned counsel submitted that it was the recognised rule of the court that the person nominated by the petitioner would cmteris paribxis. he appointed. There was alto a later rule established to the effect that tbe persons interested in the winning-upof a company were the persons whosa wishes ought to be considered in an application for the appointment of liquidators. There ware several cases both in England and Victoria wherein that rule had been distinctly recognised, nnrt one ca«s had occurred in New Zealand in re the Mercantile and Finance Agency Company. The principle was that creditors had a right, to manage their own affairs, and if they selected persons as liquidators the court would adopt the selection. The Vic'orian rasa referred to met the objection made to Mr larnach on the ground that he was at one time indebted to the bank. It was in re the Royal Standard Investment Company. In that matter the person selected waa at the time a debtor to the company, and it was decided that that was not a bar to Ins appointment, though it wa« m*de a condition that he should pay the dobt. Mr Justice Hodges said : '' Is not the real position this : That the pers"us interested in the winding-tip are tie persons win ought to be considered." In regard to the present application they had in favour of ths threa gentleman now acting asvirovisioaal liquidators the very circumstances which the courts at Home had decided ware the circumstances which ought to influence the court in making the appointment. First came the fact that these gentlemen were nominated by those who had charge of the proceedings, then the fact, that the only persons who were interested in" the windingup had considered them fit and proper persons for the appointment, and recommended them to the court by an overwhelming majority. The next point to which he would draw attention was the personal fitness of tbe gentlemen who had been acting as provisional liquidator*. In that connection learned counsel read an affidavit by Mr G-orge M'Lean, who detailed Mr i Larnach's banking tocperit nee, and referred to tha fact of his haviug acted as sole liquidator of the j Otago Bank. The affidavit also stated thfct Mr | Laronch was not indebted or liable to tha Colo- 1 nial Bank in any amount whatever. ■ I His Honor: What is th« date of that affidavit ? | >lr Hugsitt: The 3rd February, ISW. The affidavit stated that Mr Larnarh was the holier of 183J share?, which' he hud held for nearly five i years;. Mr Vigers, the affidavit wont on to say, i b»rl been known to MrM'Lean for 14 years. Ft ; 15 years he had been in the employment of the j bank in various capacities Fur four years he i had been manager at Dunedin, and for the last 12 ' month's was appointed inspector for the whole of , the colony. Mr Viger* hat, however, only acted a 1? i inspector for six montlis out of the 12. The ; general manager and inspect.'*' were so much j away in Wellington in connection with the am*l- j gamation of the banks, that Mr Vigort remaioel ! on, managing the Dunedin branch for the first ! six months out of the 12. i Mr MacGregnr suppo.-ed Mr Vigcrs would be 1 acting as general manager. i Mr Haggitt said in the absence of the others hs | probably would lie. | Mr MacGregor: Then his position would be I more responsible His Honor: Waa Mr Vigers acting general niainii'er 1 Mr Hatigitt could not say. Mr M'Lean then I said that, he had known Mr Hamsay for more ! than 30 years, that Mr K»ms»y hurt at variou- : times been appointed an litor of the baok, but h« i had not bee.-i auditor since February V&i, ami ' that Mr Ramsay was nominated liy the directors i as a provisional liquidator in consequence of the j representation of a deputation of shareholders to ; the directors. Mr MacGregor : That is denied. Mr Hsggitt said that as to the mDOtiug of shareholders he need not refer to tho position of the bank. It was known and recognised that there were no creditors, and the only per-jous who had any interest in the liqnidnti-n proceedings were the shareholders, uuil the best results of tie liquidation for them would be obtained by thos; who saved most out of tho tire.

His Honor : The B.ink of New Zealand may l.a a creditor under certain contingencies. Mr Haggitt: The contingencies c.vnuot arise. His Honor remarked that it did not appear any- ■ where that he could make out what amount v.';;<. i held over in respect to the "C" list—wli:ii amount of the £327,305 was held iv respect of tin: "C" list and what amount in respect of the "T>" list. Mr Hoggitt: I am afraid that is information . that nobody csn get. i His Honor: Nobody can get! Why not? The : total amount of the "C" list has been ms''o .public already and tho total amount of the"jj" list has been made public, but the amounts retained in respect of each list have not been made ! public. : |Mr Haggitt said one sum was held in respect of j both lists. There was no separate sum for each, j There was £327.305 held ia all. If any of the ' items of the " B " list were paid off the amount held in respect of those amounts went to swell the balance held in respect of others. Since the liquidators were appointed the Bank of New Z-m- I land had taken over accounts in the "B" list, | representing £56,000, which went to swell the | marginal gum held in respect of other accounts. ; None of the accounts in the "C'liit bad b;i;u I ■increased since the agreement. He did not quite ace, however, what this had to do with t>iu matter. His Honor: There is no reason why the court ' should not know it. - ' ! Mr Haggitt: If your Honor wants the infoiuia- j tion I'll get it for you with pleasure. j Mr MncGregor: This is one teason why we want an inspection. Mr Haggitt: You cannot have an inspection. His Honor remarked that the amount ia the " C " list was mentioned somewhere. Mr MacGregor: £38,000. His Honor: But what is held in respect of that does not appear. It may be that of the £327,305 only the £305 is ho hold. Mr Haggitt: Then the geueral agreement covers the balance. His Honor: Supposing that were so, that only the £305 is held in respect of that lint, it would | mean that the Colonial Baok would not only losj ■ the £303, but if there should be any deficiency in the £!«,000 beyond the £1105 the Colonial Bank : would havu to find it-. Mr Higgitt said that would be assuming there wor** no securities against the "C " list, but as a matter of fact there were such securities. If his Honor n quired the information he would procure it, but it would have to be by way of certifioto. The next thiDg he desired to call attention to wns the care which Irnd been taken in calling the

! meeting to ascertain that everybody got a circular [ and a form of proxy to exercise the right to vote ■ both as to the number of liquidators and as to tha persons who .should be appointed. la that conI nection he wo.ild refer to an affidavit by' Hugh Adam, but the liquidators, wished,to state that I they knew nothing about the affidavit which had been filed by Mr Fraser on account of Hugh Adaon, and that they did not wish to be identified with it. Mr Adata swore that on the 24th December' 1595 he posted a circular letter addressed to each of the proprietors in the colonies, and both the circular and proxy form left it optional to the shareholders to send the proxy form to whomsoever they thought fit. Mr MacGri'eor: Yes, but they only mention one set of candidates. Mr Hagpfitt then read the affidavit of the provisional liquidators as to the meeting of shareholders on the 22nd January and the result of the j ballot of shareholders for the recommendation to j the court of the official liquidators, and said that i at that meeting 143,234 nhares were represented out of about 175,000, the full number which could have been represented. MrMacGrcgor: That is a matter about which we wish to inquire. ■ » . Mr Haggitt said the remaining share 3 were heM by persons outside the colony, who, so far as was known, had no representatives in the colony. The. affidavits to which he had referred were the affidavits filed in support of the appointment of : the provisional liquidators. The last affidavit showed the pains which had been taken to make the meeting thoroughly representative, and 1 the result, which showed that the share- I holders declared by an enormous majority j in favour of the appointment as official ! liquidators of the three gentlemen who had acted as provisional liquidators. There had been no .reason of any kind assigned ou affidavit or other- i wise why these gentlemen should not be appointed. The only suggestion made was the suggestion that on an iaapection of the bank's j books it might turn out that something mi«ht be i found that would show that it.might not bs the best thi.DE if these Rontlemen were appointed, j He submitted that an inspection of books had •never been allowed for such a purpose, and that ! an inspection had neiftjr Ikom allowed before the j appointment of liquidators at all. What were I the allegations on which this application for an ! inspection was made? There was nothing lief ore c lm ™ the aU"Kations in the affidavit of Mr WiUuun Brown wh'ub learned counsel from ■ I his psrusal of it, woui.i jay was a speech which I Mr Brown had intended to make at toe meefin" I of shareholders when the agreement was before it. There was nothing in the affidavit but a speech agaioat the adoption of the aereement It was a criticism of liie balance sheets of the I bank aad of various cUuses of the agreement i and it pointed out inconsistencies in the attitude oF the chairman at one time and at another What that had to do with the appointment of liquidators remained to be seen. | *, Bi? *f ouor fought the eufuestinn was that if i the balance sheet of August 1835 was a correct ! i IV1^"; 6 shwt' th- e ,31>l8 WM a very batl bargain— i i tbattb.B terms ot the agreement of sale were iacon- ! sistent with tha statements , in' that balan-e I I sheet. , Mr H»ggitt: You can prove anything by ( iifiures. Some people make out that tho Banlc j of New Zealand paid £75,000 for coodwill, but according to Mr Brown, instead of that there was a cons'derable deficienc-y. Mi- MacGregor: No; he says that £75,000 was I paid for the goodwill. Mr Higgito: Then it must be a gnod bir»ain I HjVH.inor ohaerved that thn balance sheet 1 showed that a large sum—a sum of £17,000—was I duo to the bank, all of which was supposed to be j good. The agreement treated a large proportion nt r.nU as bad and another proportion as I doubtful. Mr H»g«itt said Mr Brown assumed that some of the accounts were bad and that others were doubtful, whereas tho reason why the Baalt of Nsw Z-.aland did not take over those accounts was that they were not current accounts—that

was to i-ay, they were not any longer operating a-counts. These accounts had to be liquidated, | and they were coming in pretty fash as it was. It j was a mistake to suppose that the " D " list was I bad. There was one further point to whinh he j wished to refer, and that was tbat when the provij sional liquidators were appointed official liquidai to-s, if they should be, it did not mean that th-y j were appointed for ever. If they misbehaved j themselves, or if it was proved that they withheld information which they ought to give,"or if they 1 lefused to take proceedings against the directors or anybody tlte, which they ought to take ! His Ilooor: Nobody can tell whether they , ought to take action until the materials ia the '■ hands of the liquidators are known. Mr Ha°gitt: There might be ground then, and . it was a ground which had been taken in some of tho cases, for applying to remove the liquidators and to appoint othi-rs in their place. That would be the time for an application for inspection of the ■ books. ; Mr MaeGregor: We would be met with the I same answer, " Where is your evidence?" : Mr Hfigcitt maintained that an application for i the- inspection of the books, in order that itinight ' be seen whether it would lie right or wrong to ] appoint certain persons as liquidators, was abso- ■ lutely unheard of. Whatever the state of his I account at the time the liquidation proceedings were commenced, Mr Larnach was uot at the ! pres-mt time »nd had not been for some lime past ; indebted to the company in one shiliics, Dor was 1 Mr Vigers, nor was Mr li&nray. LearißtJ council j read th.- affidavits of Mr V. 11. Braund anri Mr W. I 0. MitcGregor and tbe answering affidavit of the provisional liquidators, and.- summing up his j position, submitted that Messrs Larnach, Vigers, j and fUmsny wre nominated by the directors of I the bank to take charge of the liquidation pro- ; ccedings, and, according to tho English cases, ; tbey had the first claim if they were otherwise • fit and proper persons for the position. If it were > the fact, as the cases seemed to show, that the j court paid every regard to the representations of j the parties who were interested in the'windingi up proceeding.", the fact that those who won i entirely interested and only interested had by i an enormous majority expressed an opinion ia { favour of the continuance of these gentlemen as permanent liquidators would, he submitted, have I considerable weight vnth the court. Then tho ! affidavits set our facts which showed that, th« ! provisional liquidators were eminently qualified I to exercise th« duties of official liquidators, and i not ouly from their pluvious experience and their j knowledge of the offsirs of the bank, but from I their general character and in every other way ia j which it could be expected that persons would )be qualified to hold such an' office. There wai no i per.-oval suggestion against them, oxc«pt the j ridiculous one that Mr Laruach at one time was j indebted to the bank ia a sum which seemed to i have been psid, aud the further suggestion that I if the books of the bank were thoroughly investi- ! gated by someone or other—by whom was not j said—something might be_ found- out which would ! show that it would be inexpedient to appoint I these gentlemen. That was the only ground cf objection that was put forward, and he submitted that, on the Btrength of the affidavits in favour of the appointment of tha provisional' liquidators, and on the strength of the decided cases, the J provisional liquidators were the proper persons to be appointed official liquidators, and that they had a decided claim for appointment on the material which was before the court. Mr J. F. M. Fraser said he did not propose to take up much time, as weight did not necessarily accompany prolixity. The circumstances vcr.; unusual, and required special consideratios. T^.e i liquidation of the bank with its assets was a v.?rc ! deiicate matter. He thought his' Honor would come to the conclusion that the agreemrnt wus I what might be roughly termed a " give-an/.-tar-R agreement," o.ie 'hat required to be carried out by fair men on both sides, and the results ..f which, so far as tbe shareholders of the Coloni-1 Bank were conc^riiei, might be very serious';.aftVcte'i by the appointment, of men of extreme opinions, or of men who had no stake i'l ths concern. He conceived it possible that even at this dato what had been done had already affected the estate prejudicially, ann there was no rfoubt its contiinwtio'i would result in still further injury. There was very little law affecting tins r>o*ition. The law seemed to be that the' court deferred with) a certain reasonable limits to the wishes- cf the shareholders, aud only dissented froiu their expressed wi-h when the interests of the shareholders called for it. In the present csse the shareholders had nominated thre^ gentlemen by a very substantial majority. Tbey had done this with' all the materials before them. They had voted after the receipt of mom or l<?ss inflammatory and onesided circulars. They bsd voted after reading more or le.-s misl-radin? leaders in the press, ar.ri the court might well consider that the individual '■ shareholders bad well weighed their votes in this ! matter. At the present time his Honor might ; safely assume that nil the material was before him ! —all the artillery th-it could be pot had bsen i brought to bear on the mutter, and th- fact that | his learned friend (Mr Mur.G cgor) had that morn- : ing fired a blank charge was oviaot.ee. that tiie ; Huuuunitian for the artuck wis exhausted. As t.i ! the objections all that coutd be allseed against Sir ! Vigers was that he w.ts an official, but that did : not prejudice him in hlr Braund'.; eyes, since Mr ; P.Mund had votrd for him. Air kam s ay was a Perfectly independent man, his interests lying in shipping matter*, ttiicl being uneon-

■. moted with JuetcancUe interests. Mr Ramc-ay ■ h-,;d beea Rood enough to be chairman ■a', a meeting of ciuueutient shareholders, . ;u\d had reprea.jnted ihoiu, and, that beinsr so, j iie was-surely qualified to reprosont them ou tht> board. There was really nothing serious directed against Mr Ramsay, and the hostility iually appeared tn lie presented Rgr.ivast Mr i Liniach. An affidavit had been filsd stat- , ing thut wheu the winding-up coinmticccd Mr , Lwuach wa< indehted to the -bank. What ■ eirthly importance .that statKiuent cuuld have, Sfoina; that lie was nut now indobk'd, the learned . counsel confts^ed his inability to discover. But ; Rupoosing ha was largely indebted—and ha • evidently was not,—he was absolute'}' frp« from ; any other business complications. The learned • counsel theu, after a very free criticism of the j opposing candidates—particularly Mr tinund, I whom couusel described as coming up unexpectetUy, i'aust. like, through a trap dnor from nowhere—concluded by appealing lo hi? Honor to appoint as permanent liquidators the men who j had been chosen by thn bulk of the shareholders jat a properly-convened and fair ineetiDg, after I much adverse criticism by the press and by i circaliirs. Mr Young, in opposing the motion, said that his clients rtC'guised that the late directors and officials of the bank hold high positions in Dunerlin, and wure greatly r^spceteifc Auy reflections ! cast upon them would be entirely in regard to tho I mismanagement of tho Colonial Uauk. Probably I the excuse was that all that had been done had | bean done in the bait interests of the shereliolders, but nil the same, fasts and figures would ba shown which would prove mismanagement and misrepresentation. There were no rases, so far as he could lind, for the non-appointment of liquidators ; but it was obvious th»t reasons for the removal of liqnitlato™ must bu strongar than the reasons which would warrant the. court in refusing to appoint them. The ltmrned couusel tlvn cited a number uf kirn's allowing what grounds courts had deemed sufficient to justify the removal of liquidators. On the authority of these ca^os, lie submitted that the court would not appoint as { liquidators persons whol hod previously be«:* ! mixed up with the bonk, aud who, i{ they found out itoms of mii*miiU«Kemf nt and misivpresont'i- : tiou in tho balance sheet and accounts, would not bo likely to expose tlinm. It was possible thfto had been mismanagement in any coucorn, and tlio persons mixeil up with tha concern hud bcoimt prac-.tically pin-ties to wh.it had bt-» .

going on—at" any rate, they had .been cugniaant. of it,—»nd if they -ware appointed liquidators they were the' class of persons who were not likely 4o ferret out those little things which wouid probably Ret them' into trouble. The balance sheets afforded reasonable grounds to assume that there had been mismanagement, and the whole of the actions of the directors showed a suspicious anxiety to gat the paiticuliir persons th»y ka-1 nominated appointed liquidators of thi bank'- Then there was the application for power to compromise. That was sufficient. It was evident that there was ft desire to compromise, and that the directom were anxious that these men should ba appointed liquidators with power to compromise with somebody. At the meeting of the shareholders Mr Ramsay hid been tho self-constituted chairman ; whereas the chairman should have been appointed by Ms Hoaor. : His Honor : This masting was held by the provisional liquidators of thair own motion. Mr Younß: I understood it was held by direotion of your Honor ; it was so stated in the circnHr. . . .- .

His Honor: I suggested before the permanent liquidators were appointed there should be a meeting. The meeting I contemplated of courao was a meeting in accordance with the act. I never supposed a tnectiag would be held on their account; but if they iield a meeting and cot the sense of the shareholders at- that meeting the irregularity is trivial. If the meeting was fair and gave everybody a:\ opportunity of expressing their opinion, [ shonid uot object to it because it was not held iv.ider the act. '■

Mr MacGrefor: VW httggest that it did not secure that fai:' 2X|>rt« ; ii*.n of opinion. Atr Youui? fcontinuii^;) submitted that the meeting had b=eu *iewlutely controlled by Mr Rsmsoy, the r.orei*<« of the late directors ,of the bank; that the three-tors had had a distinct advantage in.seiuilii; our. circulars; and that ■ the statement loaae it/ Mr Ramsay at the meeting showed Xhe portion was a delicate one. Dealins with the personal element, the learned counsel eaid that Mr jL,arnacli was a directoi actually up to the time of liquidation, and it was evident that if he was not a paxty to the balar.ca sheets and reports insu^d he ought to hay« been, and it was a breach, of duty not to have mails himself aware of all the circumstances. Aa to Mr Larnach's recent indebtedness to the bank ha said nothing, as he did not rely upon it, thoagh be understood his learned friend Mr M»cGregor did. What he relied upon w«s- Mr Larnach's leialion to the bank,-and of his friendly and busiaess relations to the other directors of the bank who had practically mismanaged its affairs. The same objections applied to Mr Vigers, who \vsu proittbly acting genen:! manager in the absence of Mr Mackenzie, and it was evident he mnst have had a hand in tb<? compilation of the balance sheets. Then Mr Barmsay had been an aaditcr, and must have been '.iirncttj? reßponaible for the correctness of the bottxee sheets. He was informed Mr Kamsay so acted in February and August 1891. His Honor: That i; a long time asto. It is before the Australian basking cri3iis took place. Mr Young said he was goitg to EMggeet that ihe deficiency now inrut be the result of accumulations for years that had not been written off. .

His Honor : The anditor is responsible only for the performance of the duties the deed of settlement imposes an him. Mr Young then refsrrfcd to the matter of the duties of auditor;;, suggesting tbeir- negligent performance, and h« E.iso relied inwn what, was set out in an affidavit to the effect that Mr Ramsay had said he irr.rM not fe»kfi a seat on the board to attack the directors of the bank. Ho urged that thiß wits a most important disqualification of Mr RiMssy, and remarked that it wassupported by an afl'i-'Rvit by Mr MacGrcgor sad others. learned counsel then directed the attention ef the court to Mr Braund's circular to the shareholders, wherein were set out inconsistencies in the statements m3de by Mr M'Lean, as chairman of directors, and he pointed out that dividends were paid by the h*clr ior the last six years antil February 1895, while a profit was shown ia August 1835. Mr Wuzaja fiad from time to time assured the shaiehoWars that they were doing a good business, and that they were strong. He ; void them that on. the 27th March IW3. and six I months later the bank sold out at an obviocs dis-. ! advantage. Tliese statements were no doubt, macla by Mr MTv»n far the best;, but there ws« a most I naive admission by bim at the meeting cc tha j S2nd January last: " I mean to say that I mada no statement which, could uot ba verified, but there was a danger ii evi:ry statement InißiJo. Suppose I had come and 3iiid with a poor mouth, ' Tho capital mint be written down.' Then, I ventare to say, the probability is that.the doora of the bank would not have been open for threa du>s. And -where wenjH the shareholders have been then? Instead »f :eneiving a good amount I for your sharen, the pm'.isbility.is you won!d nil have been paying c?.ilj." Apiwectly that was an admission that lie btd bi'nn misleadinir tho shareholders for some time p"st. So far as tho original shareholders aud the !:hi'-reh.oiders who s-^ld in good time were concerned, thero was no reason to grumble, but the shareholders who bocjht later on the strength of the representations which had been made to th6!n had reason to grumblo. It was the duty of directors to show to shareholders the exact statement of their affairs, and I Mr fit' Lean's statement vtrs an admission tbat, as ! he (Mr Jl'Lean) thought for the best interests 01 the shareholders, he had not dope that. Coming ti the figures, learned connsel directed attention t» the balance sheet issued as of the 3lst August I 1595, and audited as bcir.g correct. There was an ! item in that balance sh?st of bank fumitora and I stationery valued at £9717. but in the agreement I with the Bank of New Zealand that was taken i over at £6250. Tbat ¥ss a small item, but ie j showed that what the Colonial Bank's directors said to their shareholders was. worth nearly £10^110 I they sold for a little cv-t £8900. By a clausn in. I the deed of settlement the directors should have I shown bad and doubt "n! debts, but they had not shown any, and tbey had allowed for none. As was shown by a escalation in Mr Brannd's circular, the bank's rtirect liabilities on tbe 31st i August 1895 were mado up of the whole of the I items on the debtor side of the balance sheet [ minus £400,000 capital, the reserve fund, an.i the prolits in hand. '•'■.'■■ His Honor: According to Mr Braund's statement the amount the bank owed was £2,516,256. I Mr Young assented, and said tbftt the HsbSities as taken over by the Bank of New Zealand, as shown by Mr Watsc-n's report attached to the agreement, wers £S,s'i9 281. The difference between the direct liabilities and.the. liabilities taken over by the Bante of New Zealand was £<W2, which was not taJj.en over. Coming to tfea j next item—bills discounted and all other- debta due to the bank—the Amount comprised in the I lists "A," "B." "C," and "D" was £1,731,549. Of thst £928,197 w»3 cr-ntAitwd in the "A" list, and was taken over complexly. The "B " and I "O" lists amounted to a liitlc over £700.000, and against that £S?7,0()t) wm reserved by ths agreeinsnt. His Honor -'woaW rsmamber that the £700.000 had to be divided into two-thegood sod . the prot.ftbiybad. ' ' His Honor; It ought to be split. Mr Haggitt: That is the way it is done. Mr Young said the " D " list was of coures abso lutely bad. His Honor would see that them wai £102,327 of bad and doubtful debts, according ti i the admission of the Colonial Bank, for if th«ss had not been bad and doubtful the Cnlonial Bank W"uld have been able to sell them forthoir fu'fl value ; and therefore tbe bargain was a bad one, Curbusly enough, in clause 25 of the agreement, the selling bank guaranteed that the balinca sheet of the 31st Augnrt 3895 contained a traa statement, except for any variations which might ba shown in the agreement. That statement of the 31st Augrust was good enough for the shareholder.", but it wsa nor, ?ood enough for a enarantee. In Mr Watson's report there was a very in- : definite s-ugsestion th*t the Colonial Bank anticipated that there. wokH lie a further snm for distribution our. of the £.'!:!7,305. It was ohviousthat there were in the ln-.-ks of the bank tod and doubtful debts, and the balucce sheet of Ar.gust 1595 was stamped «s bi-ins incorrect to that very large extent. It was improbable that that sum became bad and doulnfu! within years of tna time at which it was actually written off. It would appear thst '«>• bad and doubtful debta. w«-e £102,000 »nd £.&i,m -that v/aa £429,«00.' <>f the assets of the company, £42!>,flffl) wasie. rn-Esntpd by thete "J(," "O." snd "D" list 3, £*27,(lOO being written off the "B" and "C" lists and £102,000 off the " V)" list. His Honor: It deaeecU ujwn what tho value of tbe accounts in the " E " and " C " lists ia. • Mr Young submitted thst on the admission of tbe bank themselves those accounts were of little v:>lue, thfi strongest point being the agreement to sell on such terms, for tbe presumption was that the Colonial Bwk director* were doing the best t.h.-y could for their shareholders. Then they had lost the reserve fund and the amount standing to profit on the 31ft August 1835. . . His Honor pointed out that, the Colonial Back had got £133,000 from the Bank of New; Zealand. Mr Yaiins said it mu^t be assumed that th« gr.odwill was worth something. Mr Braund assumed that the amount paid for goodwill was £ 5,' (10, because that was the amount that filled up the gap. ■ ■ At this stage (5.4 a p.m.) it was agreed to adjourn further argument till Thursday.