SUPREME COURT.
Tuesday, December 14. (BeFore his Hduov Mr Justice Williams.) R~ BROOKS AND CO. V t THE. COLONIAL BANK OF NEW ZEALAND (IN LIQUIDATION). ' Claim upon two bills of exchange accepted on the authority .of documents purporting to be Warrant* for oats held by the J. G. Ward Farmers' Association of New Zealand, Limited (in liquid*tiou) and for an account of the proceeds of oats. Mr Chapman, with Mr J. A. Cook, appeared on behalf of the plaintiffs, H«rbert Brook?, Henry Brooks, and Harry Tabor Brooks, carrying on business in London under the title of Robert Brooks and Co. ; and Sir Robert Stout, with Mr Hageitt and Mr Hosking, appeared on behalf of the defendant bank.
Upon the case being called, Mr Chapman said that, with regard to the two cases of Brooks and Co. v. the Colonial Bank and Connell and Co. v. the Colo aial- Bank, he wished to apply th*t Connell'B case be taken first. Both were fixed for that das'. He did not know whether his friends objected. Sir Robert Stont : Yes. We think that Brooks's case ought to be taken first His Honor : If there is a difference of opinion, the question is which is tha first in number. ' Mr Chapman said that no doubt the rule applied that cases were ordinarily taken in the order in which the writs were issued ; but iv this '-©ate he submitted that there was a reason for taking Connell' i case first. •His Honor : I thiuk there should be affidavits to 1 show the reasons. There. is nothing before me »t nil. If the paities disagree Ido not see that I can interfere with the ordinary course unless there are overwhelming grounds. Mr Chapman said that in Brooks's caie he had i subpoenaed Mr J. G. Ward, who was a member of Parliament, and he bad no reason to doubt tbat Mt W«rd was coming down — ia fact, he understood that "he was coming, but on the previous day he received a telegram from Mr Ward stating that he was kept in Wellington by important public business. Mr Ward said in the telegram : "Do you require a certificate to this effect?" moaning the Speaker's certificate.
His Honor : Of course he is not bound to attend.
Mr Chapman : No ; he says he cannot get down before Friday, so if Connell's ra*e were taken first, presumably we could taki hi* evidence in Brooks's case if it is required. He would be in time for that.
His Honor : You do .not want Mr Ward'B evidence in Connell's case? Mr Chapman : I do not thir.k sp, your Honor. His Honor : Jf Mr Ward is a material and necessary witness for you iv Brooks's case — —
Sir E. Stout: We shall not object to Mr Ward beiiig called on Friday if he is hsre, even if Brooks's case has been closed. ~
Mr Chapman : He received the subpona in plenty of time. His Hon.tr said it could not ba assumed that a mrmber of Parliament would attend ou subpoena. Mr Chapman-paid his application was not altogether new. Whim the casea weie being fixed he applied to bave Connell's taken .ftrot, because ib covered more ground, and it was altogether more convenient to take i<r •first,* principally on the ground tjf the large saving of time, flis firm had written to Messrs Haggitt Bros, and Bient oa the subject, and he understood that JVlr Haggitt's answer was that they should mention ix to the Court.
His Honor : You have some objection, feir Roheit, to the. alteration being made? Sir llobert "Stout : Yes, fir. We have come here specially to meet Brooke's case, and we want to -deal with it first. It will clear t.he ground a ;great deal for Cdttnell's case. H's Honor : It is impossible for rue to tell which will' shorten the proceedings, if taken first. Brooke's 'jase would come on first in ihe ordinary course. If the other *ide are willing that Mr Ward's evidence t-houid be takea even if the case is closed the fact that Mr"Wurd-i< not here to-day will'not prejudice tbe plaintiffs. I think tho case which is first on the list ought to coins' on "first.
'Jhe case of Brooks and Co. "v. the Colonial Bank was then taken.
In this case the statement of claim set out that in or about the year 18)4 the plaintiffs agreed with the J. G. Ward Farmers' Association oTNew Zealand (LitnitecO to allow it to draw upon them and to acoept its drafts upon the following terms, expressed in a letter to the manager of ±he association dated the 6th April, 1894 : "'We are also willing to accept your drafts at 90 days' sight Against bond warrants (which we understand to be certificates that the eoods are in store) to the extent of £20,000 on your undertaking that the shipping documents to the amount of Mich drafts ohaU be sent, forward within two months of bo drawing, you also undertaking that the goo are fully covered by insurance until shipped." This letter was exhibited to the defendant bank, which waa the banker of the associat : oa, and it was thereafter undo stood by the plaintiffs and the association that the ussociation iv ctrKiviu? upon the plaintiffs in terms of the letter should lodge by way of security for any bill or draft so drawn, for the protection as well as of the plaintiffs a? of the purchaser of any such drafts, warrants or documents of title representing -specific ascertained goods entitling the holder of such warrantsto claim and receive them. On orabout the 4th March, 1895. the association drew upon tlie plaintiffs a bill of exchange on London for £4250, payable 90 days after sight, which the association thereafter discounted with the defendant bank at Invercargill. and it was presented by the bank to the plaintiffs in London on or about the 29fch April, 1895, and then hid attached to it a memorandum or certificate made by the bant in the following terms : " Bill for acceptance p £4250. Inveivargill branch holds warrants for lfi.t'oo. «acks oats for . hipment to London, and insurance caver for £4750." The plaintiffs, .relying on the representation contained in the csrtifipate, accepted the bill of exchange, payable on the 3lst ,July, 1895, and at the due date paid the amount to the .bat kin London. The bank's Invercargill branch did not, nor did the bank elsewhere, at the time when the bill of exchange w»s accepted, or at the time when ifc was paid, or at any time, hold such warrants as, by the certificate, it repi esented and induced the plaintiffs to believe that it held, but held a document purporting to be a grain warrant of the association, therehy acknowledging that it held IG.fIOO sacks of unspecified oats for the bank. The association hail since became insolvent and bad gone into liquidation, and was found to bave no oats in its possession which the bank or the plaintiffs were entitled tj claim as forming the specific security for the bill of exchange as represented by the bank, and, as a fact, it had never any oats iv its possession forming such specific security. The value of the said quantity of oats, whether taken at the date when tho draft was drawn or at any time prior to the commencement of the action, assuming them to be in store at Invercargill or the Bluff, was not less than £s'3t)o. The plaintiffs, by reason of the failure of the bank to take from the association warrants for the oats, and by reason of the representation contained in the certificate, had 10-st the value of the oats or the amount of the bill of exchange. For a further cause of action, the plaintiffs alleged that the bank, well knowing that it had not taken and did not, hold warrants, and intending thatthe -plaintiffs should be induced to believe, aud knowing that they did believe, that it held such warrants, and intending to induce them to accept and pay the bill of exchange, and knowing that the statements contained in the certificate were not true, made the statements therein contained, and the -plaintiffs, relying on the statements contained in the certificate, and in the belief that ttey we re "true, accepted the bill of exchange and paid it, and by reason of the falsity of the statements loi>t the security of the oats and the amount of the ( bill of oxchanga. For a .further icause of action theplaintiffs'alleged thatthe association was, at the time when the bill of exchange was accepted »nd also when it was paid, largeyy indebted to the bank, and the bank took from the association delivery of all the oats which the latter pos-e3sed or suffered them to be y sold, and the proceeds to be paid to it to ihe credit of the association, and the bank, in so -doing, knowiugly received the 36,000 sacks of oats which it represented by the ceriificate as being the secuiity for the bill'of exchange for £425'», and applied the prif« ov proceeds thereof in reduction of the indebtedness to >t of the association on other accounts than the
bill of exchange ; and by reason of the premises the plaintiffs had lost the security or tho 16,000 sacks of oats which had been received and appropriated by the ■ bunk. The plaintiffs therefoie claimed an account of the pro seeds of the oats and payment of their valua or of the sum of £4250 aud interest until .payment. Kor a further and separate causa of action, the plaintiffs alleged that on or about the 20th of May, 1895, the association drew upon them a bill of exchange on London payable 00 days after sieht, which -bill the association discounted with the bank -at InvercaTgill. The bill was presented by the bank to tUe p ain tiffs in London on or about July 2, 1835, when it had attached to it the certificate " Invercargill branch holds warrants for SOOO sacks oats for shipment to Lindon and insurance cover p. .£2500." The plaintiffs accepted the bill of exchange, and at the due date paid the amount to the bauk in London. Tha bank did not hold such wai rants as the certificate represented that it held, but held a document purporting to be a grain warrant of the association acknowledging that it held 8000 sa-iki of unspecified oats for the bank. The plaintiffs repaated the allegations made by them in respect of the previous bill of exchange and claimed an account of the proceeds of the oats and payment of their value or the sum of £2250 and interest.
The defendant bank, in the statement of defence, denied the material allegations of the statement of claim, but said that the whole of the letter of the 6th April was not set out in it. They admitted that the letter, was exhibited to them and that they were the bankers of the association, but they &aid that they never were at any time the bankers vt the plaintiffs, and they were never informed by the plaintiffs or, by tlie association, and they never knew that the plaintiffs expected the association to lodge "warrants or documents of title representing specific ascertained good 3as eecurity for any bill or dcaft drawn in terms of the letter. They denied that the ceititicate attached to the bill of exchange contained or implied any statement or representation ihat the association had drawn the bill against warrants entitling it to claim and receive oats to the quantity mentioned in the certificate. They said that at the tim« when the bill was accaptcd and at the time when it was paid that they held at their Inveicargill branch a warraut or certificate from the association relating to the bill to the effect that Ki.OOO sacks of oats for shipment to London were in store, and were covered by insurance by the Cnina Traders' Insurance Corupauy (Limited) to the amount of The defence to the claim in lespccfc of tho bill of exchange fi.r .£2250 wa" similarto the previous one, and the de'frml.mts pleaded that at the tims when the bill Wcis u^ceplstl and at the fcimo when it was paid they held at their liivercargill branch a wairant or c^itificatcfrom Hie association relating to it to the i-ffeet that 8000 sacks of oats for .-hiprnß.'it to London were ia store, and were covered by insurance by the Htandard Insurance Company to the ninount of jMoflO.
sli Chapman, in opeuiDg the case, said that the plaintiffs carried cm business in T.o'idon as merchants and had dealings, in colonial produce. Thej- bad iv tba yeat 3891-05 extensive dealings with tbe Want Farmeib' A^sjciation which ultimately bt ought "them iuto relation with the Colonial l*a->k. In the course of their dealings wiih the Ward Farmers' Association they came to an ar augement which was embodied in a lettsr referred to in the pleadings and daUd the 6th Ap'rP, 1894, and which came to be a facto/ in the case. That letter was referred to Eomelimos as a letter of credit-, ifc was uot a letter of credit, but -it wa^i a letter establiahiag.a.cr-dit between the Ward Farmers' Association and Brooks and Co. The letter was, for the purpose of the transaction out of which this action arose, lodged with the Colonial Bank, 'or, rather, a "copy of -,ifc' was' either loJpre ' with the Colonial Bank or taken by the Colonial "'Batik for ths purpose of certain bills which it authorised the Ward Farmer*' Association to draw. The letter of the 6li A pyil' •was known to the bank »b tho basis of credit, and - was lodged with the bank' for the ver_y purpose of showing the basis of credit and the authority that the association had to draw against docurofsnts other than bills of ladiny. Of course, if a draft was drawn against a bill of lading and there was evidence of sufficiency of the security, a bank would ordinarily purchase it &b a British bill, but in the cibe of a draft against security presumably there woult ordinarily be some special arrangement. Kecuri'iej in the natuje of what were here c tiled bond warrants repiescnied g ods that were not shipped at the time of the transaction, but tbat were to be sluppsd at a later date. The transactions out of wliich the present action arose related to two bills for £125') and .£2250 respectively. Now, with reference to the first of these bills, what happ ned was thi« : A bill dated the 4th of March, ]89j, was diawn, PO days after sighr, for £4250 on the plaintiffs. That bill was lodged with and discounted wifih the O'oloniul Bank, and was sent in to the bank with a letter in these words :—: — " J. G. Ward Farmer™' As>>oeia.tion of jS T ew Zealand (LimitcJ). "luvercargill, 4th MVcb. 1895. "The Manager Colonial Bink of Kew Zs.vlAud Invercargill. "Deir fsir,— The dr.ift for £125^ on Messrs R. Brooks and Co , at 9J days, is drawn under instructions contaiu<jd in their letter to us of the 6di Awiil, IB9J. - ' "(Signed) J. Fisher, manager." The bill was accompanied by certain documents. One of these \va= a document headed, "J. Cr. Ward Grain Warrant," in print, ami certified that Ihe "undermentioned gr.un" hid been received iuto store, and was covered under their general iuwurance policy and held to the order of the Colonial Bink at luv.-rcargill. Then un--ier the-various columns weve the following entries :—: — Mark*. J I Description. I R^markt. Various, j 16,000 j Oats. j For shipment [^ " " | J toLmJon. The 4°c«>nent was signed for the J G. Ward Farmers' Association by J. Fisher, warehouse keerer, BlufF Harbour, and contaiued the note, "This warrant niusfc be produced on delivery Of the grain being required." Then there was a further document representing au iutetim cover by the China Traders' Insurance Company for Jt'47so over 16.0J0 sacks of oats, warranty f.b.a., per steamer from the Bluff to London. That cover was signed by "J. Fuher, a^ent." It was given by the Waul Farmers' Association apparently to the WardJTarmer.' Atsocialion. His Honor : The Ward Farmers' Association were agents fur the China Traders' Company ? Mr Ch»pmin : ICvidently, and they address the corertothe Ward Farmers' A'sociation.
His Honoi : Exactly ; that would be right. Mr Chapman : 1 hen in the second case the bill was datet the 20th of May, 1895, and was for £-2250 90 days after sight. That; was a. similar cover, but was by the Standard Fire and Marine Insurance Company, for wliich the Ward Farmeis' Association were, he supposed, also sgents, and that all had attached to it a document beaded " Grain warraut," which was similar in terms to the other with the entry "Marks, various," except that it was for 8000 sacks of oats, and in the " remarks " column stated that th» grain was " for R. Brooks and Co." The warrants were both set out and were called warrants in the statement of defence. Now, taking the fact that that was the arrangement between Brooks and Co. and the association, it would be mo3t natural that the firm in London should expect to receive these drafts when they came either against bills of lading or evidenced as being against 'what tney called bond warrants. The two bills were presented in London, each with a document attached, as set out in the pleadings, and the acceptance of the plaintiffs vras obtained on the faith of these memoranda. Tlie transactions stood there until the due d»te of the bill, and then in each case the bill was paid by R. Brooks and Co. The bank claimed to make specific allocations of security — that i« to say, of shipmepts of other classes of goods to London iv reduction of these securities.
Sir TL Stout : When do you 6ay they claimed it?
Mr Chapman : In their letters they claimed it. There had been a previous bill drawn on Brooks and Co. for £'iOOO, wliich was paid by Brooks and Co., and was not now in question, the amount of it having been paid to them by shipments of wool and by other means What was done in that case was this : A quantity of rabbifcekins and tallow went Home, and there was a suggestion in the pro twnw iavoice that £538 Is 6d cleared up the
£6000 draft, andthat left £442 17s 7d available to meet the amount of the bill for £4250, and in that way there were— he judged by an inspection of the British bill register of the bauk -three allocations of shipments of that kind to the credit of the bill for £4250 -one for £418 0s 7d, another for £21 17s, and a third j for £326 16* 3d. He did not think that those -amounts would be found to correspond exactly with the realised amounts, but approximately they corresponded with -those amounts. Now he . (Mr Chapman) would point -out that the tickets j attached to the bills stated in positive terras, in I bo many words, tbat the Invercargill branch h«ld •' warrants in one case for 16,000 sacks of oats. for shipment to London, and iv the other case for SOOO sacks ; and in referring to these letters of allocation the bank continued to confirm the statement that the Invercareill branch in fact held warrants applicable for securities for these bills. At a later itage the association got into difficulties, and when matters came to be investigated, and after the bank had gone out of operative existence— in 1895, some tew months after this transaction, the bank had amalgamated with the Bank of New or its business haS been sold to the Bank of Now Zealand —it was found that virtually, so far as utility and value were concerned, what w*s represented as securities wan rtally, he ventured to term it, a myth. When the warrants came to be looked at, tiny were not rciilly warrants at all. In fact it could scarcely be pretended that they ■ were, because the 'first essential of a. warrant was., that it should be an instrument which attachect* to some specific good*, and which not only must ' attach to some j specific goods, 'but could only • attach to fapecitic gouds by mentioning what ■ -specific goods it attached to. What these . documents • really were was that they were a' kind of IOU-a kind of undertaking to .hold a certain quantity of oats. They werejiot ■ symbols of possession or ownership representing' specific. good«, which was exactly what wan-ants should be, an<J they carried the whole notice of their imperfection on their f*ce. The plaintiffs in Loadon never saw these warrants and never had any idea, of what the contents were beyond the i.iiinuuion by the bank th*t the latter held wai rants for 16,000 sacks of oats in one case and for 8001 sacks in tho other case. The only thing that could be said of them -was that they were r kind of und-irtakiug to hold so. much oats, and bsyond the fact that they were stated to be for •shipment there was no description of quality.
His Honor : It is more than an undertaking, is it not? It is a certificate that the grain is there, but it doc< not say what g<aiu.
Mr Chapman : No one taking the warrant to tb.fi store could pick out the oats, and no subordinate officer could act -under th» warrant in the ordinary way and deliver upon it, "but really he submitted that he was not far out in describing it as a kind of I O IT. It certainly was a certificate that grain hirtlieen received into store.
His Honor: It -amounts to a representation that grain to that am rant was there, aud there is an undertaking t-> huld grain to that amount.
Mr Chapman : But if a warrant was to be re-ga-rded as .a symbol of possession or of delivery .of possession, this so-called warrant amouuted to nothing, and iv that sense it was in no sense a security at all. Now, evidence had been giren here itnd iv England which showed what .a warrant necesaarilymusfc be. Mr Stead, a well-known Canterbury grain merchant, l wlio lud dealiugs in grain a >t only in Canterbury, but all through this inland, and. learned counsel thought, in all other parts of New Zealand, taid in his evidence tba+. 1111108* a warrant contained such brands, markrf, aad particulars as cloaily indicated the particular produce against which the advance was made, it was almost valueless. Ia England evidence was given by several pfersOns which was •practically to the same -effect. Learned counsel proceeded 1 to quote from the evidence of a Mr ISryatit, who was, call-id-- before the commissioners. ' .- , Sir R Stout said he did not atliilU that this was relevant evidence, 'but lie" w'ouli table his objection when the nvMenoe'came to bs read. • Mr Chapinau also qm ted from the evidence in-Fingland of n:Mt Dudin, and Bla,?d the Warrauts' were uot intended to be warrants in the ordinary sense. They were promissory in their nature, but there was nothiug in the transaction botweeu the bank aud the Ward Fard Farmers' Association to show that cither in form or in r-ffecb th*se docu-^ nieufr) were either a security or were ever intended to be a-secur/ty. At tha head of the documents "Grain warrants" was certaiuly printed, but to ca.ll them warrants was to misname them. When they came to be examiaed they were not warrants, and did not ftjlfil tha requirements of wftrrauts. Warrant* were securities, and these documents were not. '
His Honor: A bond warrant is a warrant which is security for goods that are in bond, but these jtooils were not in bond. Mr Chapman : Though- they were not termed bond warrants, ' and though that term has 'no higher value it at least has this value, that they oil have in their minds something analogous to a bond warrant.
His Honor : Something exactly the same as a bond warrant, except that the store is not a bonded store.
Mv Chapman : Something that in the terms used in the authorities is equivalent to possession.
His Honor : I suppose a bond warrant is equivalent to possession. Mr Chapman : Yus, your Honor. Learned counsel proceeded to say in the conree of time it cMne t> be discovered by the brak that the Ward Farmero' Association was in difficulties. It was intimated to the bank, he believed, in July that matters were not as they should be ; but the actual discovery of the true state of affairs respecting these oats aud these warrants was' made late -in the month. 1 of August, 1895 "On- the 31st of July one of the bills had been p*id— the one for £42*0. The othefNvas not yet 'paid. It was accepted then, but it' wftg paid-in September. ;Blr Davidson, an- officer of the baDlc, was sent down to report dn the affairs of the association in the interests of the bank, and he found ou investigariou' that the amount of oats in the stores of the Ward Farmers' Association was far short of the amount represented by these -promissory document?. The association seemed to have issued documents of this kind under pressure. The result of all this was that the English acceptors of these bills were entirely misled by these documents handed to them by the bank. Now, it might be suggested that the bauk acted in making ;jdvancus on these documents as other banks had been known to do, and that documents in the -form of those in the present case were sometimes treated a* a security by banks, and that banks made advances upon them. That might be- the case.^ln % town where a bank wo,? situated a banker might make advances, but he always made them up in th« personal credit of the borrower apld upon his stability ; and he might make advances upon any form of document he thought fit. In the present case lite bauk seemed to kave advanced upon the personal credit of -the borrower. It would be difficult to suppose that it ever thought that it was getting particular bags or particular oats. If it choee to do business in that way, well and good, but what the plaintiffs complained of was that it made such a representation to the acceptor in Lnndon as would naturjtlly induce them to believe that the bank held something like what was referred to in the letter establisbing the credit — sometbinglike b >nd warrants/ which necessarily conveyed the idea that marks were on the warrants ; in other words, that they were attached to some -spscific goods.- Now In those circumstances the plaintiffs' concluded that such a, representation as that made it an absolute duty on the p»rt of the bank' that jt should establish a correct representation ; and a representation made ia those circumstances was to be interpreted and ivai equivalent to a waiTanty that the facts stated in the memorandum were true. Furthermore, tTiey were bound to the fact that the bank held the documents and knew what they were, and wh-h that knowledge made a representation which was absolutely incorrect. The plaintiffs furthermore contended that in those circumstances, having made a representation of that kind to a distant person in London, the bank was bound by that representation, and could not be permitted to deny that ft had that quantity of specific- oats against that particular bill. The plaintiffs furthermore contended that ■ the bank obtained those acceptances and obtained this money for a consideration which had wholly f«iled. Now it was coming, to be a matter cf law what w»s » warrant, so commonly were
they undcritood" all over the world. It wad evident from some authorities that the courts were inclined to say that warrants must be a kind olsymbol of possession aud symbol ot owner* ship, and that uothing else would fill that term. Learned counsel cited a number of authorities on, the subject, and then proceeded to say after tho date of the disclosures of the Ward Farmers' A»saelation he thought the bank without disclosing any of these facts to the plaintiffs continued to deal with the association. They not only continued to deal with the association, but to get oats from it, aud carefully concealed from- Brook* and Co. the true state of affaire in New Zealand. It was admitted that the value of the oats mentioned, if they existed, would be sufficient security for th* bills. He had stated already that £779 19a lOd had apparently been allocated to thefirtt bill That would leave on that bill £3417 6s 2d, assuming that those figures were correct. Then assuming that any dividend was paid by the Ward Farmer** Association, either Kobert Brooks and Co. or the Colonial Bank would be entitled to that dividend on the amount owing on the bill ; tend that would have to bo deducted from anything recoverable from the bauk. He understood that that was simplified by the circumstance that, practically speaking, there would be no dividend. There was, however, a Bum of money in the hands of the liquidator, which represented oats sold after a certain date. The oats were sold by the liquidator, and he (learned counsel) understood that there had been no adjudication as to the destination of that sum. Sir Robert Sbmt : I understand that it is not ia •the hand* of the liquidator. ■ ; '. ■ Mr Chapman.: In whose hands, then ? • Sir Robeit Stout: In the hands t)f Cook. and, Gray. Mr Chapman : I understand that Connell an,O Co. ehim and Brooks *nd<J6. claim! \ ' . ' His Honor askei what the claim a'oae out of. i •Mr Chapman said he thought that the fund was created before the Ward Farmers' Association went into liquidation. Mr Cook was put into possession, ihe understood, at the time that \a proposition was under consideration by Messrs Lee Smith and lie id to .buy the assets of the association ; and then it was tbat the o*ts which were then in store were sold and the money nut into the special account. Learned counsel went on to say, assuming that the judglnent of the court was in favour of the plaintiffs, it might .be necessary to work out the matter of damages by means of some subsequent inquiry, as it might be difficult to find out the exact amount. That could stand over until .after the decision. His Honor : You want a d-jcision on the g3neral question ? ■ Mr Chapman :On tv« liability. Sir Robert Stout : I suppose at the end of their case t hey will say which' cause of action they will stand pn. They cauuot stand on. all three. - His Honor : I don't think there is any necessity for an election -is tliere? They may have l\vo or three causes of action. You want to suc>*erd ia tils cause of action which, will give you the ljtrgett measure -of damages. Mr Chapman : Yes, yonr Honor ; and there might bo some difficulty iv fixing the amount of damages. His Honor : I think that is likely whiobeves ground you take. Mr Chapman : Primarily we gay we have lo3t . our bills. We recognise that our loss is Fomething less than that, and it is a question of-Tiovr can any reduction be shown. George Atkinson Birch, who was then called, .said he was formerly manager of the Colonial B»nk at Invercargill, and had 'Occupied- that, position about five years prior to the amalgamation , of the bank with the Snnk of Ttfew Zealand. As riia lasrer.he had dealings witti toe Ward Farmer?,' Association since its initiation, 'ia 3892. «. The association- kept its uccounfc with the Colonial Bink, which acted generally. as its bankers. In the course of bis busings .dealings with the association he purchased three British bills on. Brooks x ond Co. from 'the association. One bill was for MOM, one for £1250. and on.* for £2:50. In forwarding' the bill to. Landon be" forwarded some advices with them. The.document?-pro-duced healled " Grain warr*uU" weredated.on the same date as "the bills, and would be handed in t» the bauk on the same day au tha bill«. The hank I appenrad to have held warrants for 35,900 Jbags from the ICbh. Mvch to the 27th M-y, 1895; against which theyliad advanced money. Thai; was the secorßy for tlie grain taiUge account. He mvor to his knowledge asked Me Fisher if the IRjflOO bag « and 8000 bag* of grain reprcsoot?<i by the warrants in thin cas^were heaped .separately. Mr -Chapman : Why were the warrants taken in that form with the mark " various " ? Witness replied he could not give any reason. He tiuf.tcd to the good faith of the party issuing the warrants to give him the grain wkan he came to claim it. In the ca<se of bond warrant*, whoever might ba the holder, witness wo ild get hia endorsement to the bank. Ho remembered Mr David*on coming to Invercargill to examine into tho affurs of -the J. G Ward Farmers' Association. He arrivad at Invercargill on the .29th August, 1895. His report was made to the head oflic*. At the date when Mr J),ivHson reported tha bank held the warrant for Wil&on Hall's oats. An inspector from the bead office at Dunedin used to coma occasionally to the branch at Invercartfill, and would go through the securities and through the l>ook« to discover any errors or so forth. Witness did not think there was at that time any spscial pressing of the Ward Farmers' Association to reduce their overdraft. They were always being asked to keep it down as much as possible, amd ho supposed they were doing tlie best -they could. He oid not know that there was any particular alteration iutlie working of the Ward Far/nets* Association account after Mr Davidson had reported '' >' ' , Mr Chapman : Didyou in theantervai'betwe<sn ' the end of August and the 18th November (w,hen the Bank of New Zealand took over the Colonial Bank's •business) send any communication to Brooks and' Co. in London, or to your London office to be communicated \o Brooks and Co., as to fhe shortage of oats? Sir B> Stout objected to the question as irrelevant, but ' ' Hi? Honor overruled the objection, of wbicn, however, he took a note. Witness rapliel to the question that there wa3 no communication direct from the Invercargill branch. He dii not himself go into the question of the shortage of oats. He just knew from the figures that were given him what amount of oats lie was supposed at that time to have held under warrant for the bank. He never demanded of Mr Fisher that there should be separated goods or entries in the books. By Sir R. Stout : Witness made no difference between Brooke's warrants and other warrants he got from Mr Fisher. By the ledger he found that the grain ledger account was '£9955 3;! 6d in debit, so that one entry in the security ledger that it had been paid was incorrect. He got no warrants from Mr Fisher, with the exception of the special one of Wilson Hall's that had not "various" marks. He advanced money agaiusb the grain railage account, it being part of the arrangement tbat he should get warrants, and ke made no objection to the form in which he gob the warrants for the bank. He bought British bills other than tho3e on Brooks and Co. that were secured by warrants in the same form as the warrants to Brooks and Co. Until Mr Davidson 8 report he had no cause for suspicion tbat the oats were not iv store to represent the warrants. He knew that a very large trade was being done in oats, and that the association had various store 3. The statement that he held the warrants produced, whatever their effeci might be, was true, and they were the warrants referred to in Ins advice to London, and he believed that they were good warrants representing oats in store. Had he thought the warrants were bad be certainly would not have bought the bills. . Down to Mr Davidson's report witness thought the solvency and prosperity of the Word Association were undoubted, and he was surprised to hear Mr Davidson's report about the oats. The first yitimation he got that there was anything wrong was at the time of Mr Davidson's visit. He had an interview with Mr Fisher at that time, and he then found that he had been deceived by Mr Fisher. On the next day he informed the general manager what lie had discovered. Witness was very much upset at the discovery he had made. Up to the 29fch August he considered that the association was sound and prosperous, and that; the warrants for oats were safe. The fact tbafc the oats were for shipment showed their quality, for it would be folly to ship "bad oats to London^
AU oats were graded, and the bad ones were taken out.
To Mr Chapman : What he meant was that the oats were sorted according to quality, and the London quality went forward. It did not enter .into his consideration where the oats mentioned .in the different warrants were. The oats would have to go to the Bluff for shipment. " ] To Sir R. Stout : There were any number of demand diafts on the colony purchased with warrants attached, but he could not say if the warrants were similar to these. John Fisher, formerly manager of the J. G. Ward Farmers' Association, deposed that he haA dealings with the Colonial Bank while Mr Birch was manager. He drew the drafts (produced) on London for £4250 and £2250. He thought the previous draft of £6000 was drawn against the bill of lading and shipping documents compete, but the other diafts were drawn in terms of the letter of thefich Apiil, 1594. > - # Mr Hiking objected to this evidence being given orally on the ground that there was written evidence on the subject, and he quoted from the advice, dated the 12th March, to R. Brooks and Co. of the draft of the first bill, in which Mr Fisher said it was drawn in terms of the letter of the 6th April and of an arrangement which he assumed had been made in London between Mr Ward and the fiim. Sirß. Stou' said, he did not desire to correct anything, and his point was that the draft was drawn in -terms of the letter of tbe 6th April, 1894, of which the bank knew, and of an arrangement between JBrociks and Co. and Mr Ward, of which the bank knew nothing, and that those bills were drawn partly in pursuance of that letter and paitry iv pursuance of that arrangement. , WTtnecs continued : Mr Ward left Invercargill on the 2. l )th January, and the*fiist bill -wag drawn 'on the 4th -March. Witness had himself no authority in luvercargill to draw other than was contained in the letter of the 6th April, but he knew that Mr Ward would cill on Brooks and Co. in London. Mr Ward returned to Auckland, witness thought, on the Bth July. Witness gave Mr Birch tha warrants for 16,000 sacks and 8000 sacks of oats which were -attached to the British bills. He thought the word "various" in the warrant for the 8000 oats was-- in Mr Birch's handwriting, fle remembered Mr Davidson coming to Invercar«'U to make an investigation of the association* affairs. Witness did not accompany him to the stores. He did not think that the shortage of oats was 73,000 sacks, as reported by Mr Davidson, but his estimate, after going through the figures with Mr Davidson, was that there was an actual shortage of 37,000 sacks. He thought that Mr Davidson had not given the association credit for about 40,000 sacks of oats which they had fully advanced against, and which they considered they were entitled to treat as their own. In the course of his dealings with the bank he frequently gave warrants with the word " various "in the " marks " column. For a long time ihe association had not been in the habit of getting warrants back cancelled. At the time when the warrants were sent in to Mr Birch against the bills of the 4th March and 20th May, 1895, there would be grain to represent the warrants. Farmers sometimes got warrant to cover their oats, which were identified by the original plan being put on the warrant. Farmers' oats were put apart in separate lots, iinless no advice was received from the owner that the oats were for storage, in which case the oats would go in according to the quality grade that they represented among the association's own stocks — they were treated as purchased. If subsequent advice arrived that they were for storage and the association had to deliver them, they would deliver an equal quantity of the same quality. A f ter Mr Davidson came down and reported, the association was restricted in its business a bit by the bank, but otherwise the business went on in the same way. Mi- Chapman : Did the bank got any of the oats? : Witness replied that he thought the bank got them all By tbat he meant that tbe proceeds of tho oats went into the bank, but he would not say that the association did not draw them out again.— (Laughter.) At the date when witness left thp n.sßociation, in March, 1896, he thoueht the association owed Brooks and Co. £5000 plus the bill of £5000 sold to the Bank of New Zealaud, llio letter of the 6fch April, 1894, gave him liberty to draw a clean drafD for -CSOOO under certain conditions, but he did not draw on Brooks and Co. under that authoiity. In ,the case of demand drafts, if he sold graiu of a particular grade the warrant* Was marked with the grade old — A, B. or C as the case might be,— but lie thought that in some cases the warrants were marked similarly to those in the present case, sir Birch never, to witness's knowledge, went to inspect the grain in store, and in the c»se of the warrants issued to him it was only a question of keeping up the quantity. The \varrants were simjjly holding certificates of a given quantity but not of a partioular lot. He believed that iv South Au -tralia they were called holding-certifi-cates. By Mr Hosking : He thought the warrants were iiiite in order when he took them to the bank to negotiate these British bills. He issued them at a time when the warrants, if acted upon, could actually have been fulfilled. They were only issued for a temporary purpose till shipment. The association had no right to hold the cats represented by Ihe warrants to Brooks and Co. for a longer time than the limit. He believed that some an angemeut was made by Brooks and Co. to have these oats sold in the colony, but he could not tell how it was made. He did no L - think they could have gone so far, if -it had been thought cecessary, as to give the marks of the oats mentioned in the warrants. It would have involved puch an enormous amount of trouble that he did not think it could have been done. In 1894 the Ward Association had, bethought, 250,000 sacks of oat 3 coming in during the s ason, which extended from March to October, the busiest months being April, May,' and June When oats were ' intended for shipment the association kept them in no particular store, but at the Bluff, Invercargill, and Grore. Mr Fisher's cross-examination was not concluded when at 5 15 p.m. the court rose until 10.30 a.m. next day. Wednesday, December 15. On the case being resumed, JoSn Fisher, in further cross-examination, said when the association pooled the oats they only considered it important to note the weight, quality, and number of bags. If they were under contract to supply oats of a certain quality or ] grade, and a warrant had been issued for those ] oats containing a particular mark, their practice | was, for convenience, to deliver any oats of the same quality and grade, being aware that the warrant-holder could object, but in practice he lid not. It amounted to a business custom to this extent : that all firms connected with _ shipping oats did it. In view of thi3 practice, if the association had issued a warrant for 5000 sacks of pats for Brooks they ■would consider themselves justified in diverting the 5000 sacks on hand to another order if they had in sight 5000 sacks of similar quality to fill Brooks's warrant. On March 4 they issued the first warrant to Brooks. The grain if not in store would bein sight for it. Witness could not say whether it was in store or not. The storeman's books if entered up to date would show what was actually in the stores, but not was on the line in trucks. To his Honor : The meaning of " oats in sight " was oats that had been absolutely purchased or they knew were coming forward. To Mr Hosking : The bank wished the association to sell t lie oats from the very inception of Mr Davidson's report. Witness's impression as .manager was not that he ought to fell the oats. He thought that if the full quantity was not there that there ought to be an allocation. But instead of that the bank collared the 'lot. The total amount of the bank's warrants were for 55,000 Backs. Witness estimated that 40,< 1 00 sacks were the association's, but they might have been held on account of farmers who owed the association money to the full value. He was not prepared to say whether the purchase notes for these had been signed by the owners or not. The association got the oats, and the bank got the proceeds. The reaEon that the first lot of oats to Brooks were riot shipped was because the market w<is not favourable. From the letter of May 22, 1895, to Brooks and Co., they might gather that **)• oats were the oats of third parties. The
association received several letters after that complaining that the oats had not been sent. The association did not ship any oats at all., Mr Ward being absent, witness got into difficulties with the bank, and ke could not carry on. These difficulties had not arisen before Mr Ward -went to London. Witness did not know at all of any arrangements made by Mr Ward. He might have had word from Mr Ward that he had made arrangements with Brooks. He believed that Mr Ward had the intention of seeing Brooks about taking up the whole of the association's business. He thought that was what he had in his ffiind when he wrote about arrangements being per- I fected. Anyone reading the letter would conclude that he had the information about the i arrangements ; but he could not recall now whether he had or not. Between February and May, 1895, witness did not in any way inform Brooks and Co. of the position of the oati. He could not ' meet their demands, and certain negotiations were carried on by which the association hoped to be able to liquidate Brooks and Co.'s account. Until the negotiations were perfected they did not c immunicate with Brooks and Co. Mr Hosking : You had every hope of these negotiations being catried through, and a settlement with Brooks and Co. being made ? Witness ! That was so. And so in the meantime you felt yourselves at liberty at all events to dispose of these oats as the best thing in the interests of all concerned?— We did not feel ourselves at liberty. It was a case of squeezing us, pretty well. ■ To Mr Chapman : Witness had known of cases where a man had takeu exception to getting any other oats than his own ; but such a thing never arose with a business firm. He bad known of cases where purchasers of oats were satisfied with I such warrants as were given for Brooks and Co.'s oats,' but in some cases the purchasers insisted on distinctive marks. Sometimes there were marks on the warrants which were not on the goods— marks which it was intended to put on the goods when they went out of the warehouse for shipment. If the marks on the warrants corresponded with the actual marks on the bags a purchaser had to get these particular bags if he demanded deliveiy of them. When witness came back from Sydney in November he saw a letter from the bank with instructions to sell the oats. He did not know whether they were actually sold. By the time that Mr Cook took charge in March there were some 9000 sacks left. After Mr Davidson's report the association could not have delivered Brooks's oats on the warrants except by sacrificing somebody «lse. Between the end of August and the time that Mr Cook took charge on March 20, 189G, the association had, roughly sneaking. '31,0 1 0 sacks of oats, and there were 9000 sacks in the store. ilbert Anderson stated that he was employed by the Ward Farmers' Association when Mr Fisher was manager, and In acted as manager when Mr Fisher was absent in October and November, 1895. While witness was manager he sold oats. He could not Fay without going through the books what oats were sold between the date sf Mr Davidson's report and that_ when Messrs Cook and others took charge. He did not kuow that he said that there were enough oats in hand to tati«fy the warrants in July or in May, 1895. At the time witness was manager he did not think he could have delivered 128,000 bags of oats. He received all instructions from the manager of the Colonial Bank about selling oats. The instructions were in writing ; but he thought that he bad previously received verbal instructions, and he asked the manager to put the : instructions in writing. He paid the proceeds of the sale of the oats into the association's account. He did not make any more efforts than usual to sell. He had issued a few warrants. A warrant should set out the goods, the description of them, and any other particulars that would be necessary for the per.--oa who held the warrant to claim. The one w itness bad signed for fulfilled hi-3 description of a warrant. With regard to the warrant for 16,1 00 sacks of oats, it did not give the marks. ' hat was the only difference between it and the one he had,, signed. The holder of it could not claim any particular oats on that warrant. By Sir Robert Stout : Witness had not bad anything to do with warrants in other employments that he had been in. He did not remember ever issuing one with the word "various" in the corner. In the warrant for the 16,000 sacks of oats he had filled in the word "vaiious." When he filled in that word he expected he did so according to directions. He had filled in other warrants. He did not think that the warrant was not any good when he filled it in like that. He could not say whether instructions came by rail on November 1 from Mr Ward to sell oats. It was quite probable that he did get instructions ; but he was not prepared to say whethar he did or not. When he sold oats he sold at the current rates. He was getting money from the bank, and he paid in money. Ho paid in the proceeds of all the sales to the bank. When he made out the warrant for the 16,000 sacks he did not know how many oats were in stoic. He believed all the securities were handed over to the bank at one time, and fliey included crop liens. David George Davidson stated that he was an assistant inspector in the Colonial. Bank" in August, 1895. He remembered being sent down to Invercargill to report as to the position of tbe J. (I. Ward Farmers' Association. The balance sheet v produced contained an estimate of the actual position. In the course of his investigation he hid to examine into the stock* of grain. According to certificates given him the association should have had in. stpre 67,202 sacks. The association had stored on account of owners 12,137 sacks, and they had against payment of bills and debts overdue 20,000 sacks. There was also on account of warrants current 203,299 sacks. Mr Bannerman, assistant accountant of the Bauk of New Zealand, and formerly accountant j of the Colonial Bank, al r o gave In the course of cross-examination he said that in 1895 the Ward Fanners' Association had £55,150 written off their accouot. The association had paid in £11,020 more than they had drawn our, but they had £55,000 carried to their credit during the same period. On November 18 the grain and railage account stood in debit £10,215 2s 2d. William L Simpson, one of the liquidators of the Colonial Bank, who was the next witness, stated in cross-examination that his idea of the £55,150 that had been referred to was that Mr Ward was indebted to the association in that amount, and the bank took Mr Ward's promissory note for the money for ihe benefit of the association. They released the association from payment of the amount and took Mr Ward as the debtor. The transaction had not been a profitable one to the Colonial B*nk. Evidence taken on commission was then put in by Mr Chapman, and_ it was agreed that his Honor should read it himself instead of its being read in court. A. Lee Smith gave evidence as to his experience with regard to the class of instruments used in dealing with grain either by purchase or sale, &c. When in the grain trade his firm used to liave ordinarily the store warrants, with the number of sacks mentioned upon it, the marks, the name of the oits, and as a rule the description of the oats. He considered the warrant produced in the present case a kind of holding warrant ; but it would not enable one to deal in any way with it. The difference between that warrant and one such as was negotiable was that the latter would have some indication as to the character of the goods— some marks so that a person could go and inspect the goods. A bank would not lend on the warrant produced, he thought, except they had a man's personal security. The warrant would merely be taken as a collateral security. He would not deliver on such a warrant, and would not expect to get delivery for it. He had never known of a person failing to obtain delivery on ~a warrant with niarkc At 5 p.m. the court adjourned till 10.30 a.m. the next day. Thursday, December 10. On the case being resumed, A. Cameron, in t^e emp'oy of the New Zealand Loan and Mercantile Agency Company, deposed that the company usually sold grain by sample. The mark of the oats in bulk was on the sample bag, and when anyone bought according to sample the company undertook to deliver the goods with that particular mark .Sometimes a sale note was made out, but oftener not. The sile note contained an acknowledgment of the 6ale irith the marks. The company sometimes issued warrant!
to purchasers. The document produced was the ordinary printed form of warrant the" company used. Witness considered the essentials of a 'warrant the maVfc, the quantity, and tho description of tho grain. In is-.uing a warrant the company always filled up those particulars. The document produced purporting to be a warrant issued by the Ward Farmera' Association .contained the word " various " in the place or the proper brand. Witness had never seen a warrant issued lika that before. If £U"h a warrant was tendered to him lie would not accept it, and he would not buy on it. J By Sir Robert Stout :• The company did not ' issue any warrants until the grain was absolutely sold and paid for. The property did not neces- j sarily pass by the issue of a warrant. If there were no marks on the bags when they came into the company's stores they would put marks on them. The different lots of grain that came in were kept separate. He had never been in a store where hundreds of thousands of b3gs of grain came in from various people for shipment. He had also never had any experience of buying grain under a wairant or of advancing under a warrant. William Henderson, Ducedin manager of the National Mortgage and Agency Company, deposed that iv buying graiu in store the company usually got a sale note. He very rarely had anything to do .with warrants. In purchasing grain the company usually purchased by sample. The bags produced by the previous witness were marked in the manner that sample bags were usually marked. In buying grain the company looked for the deliveiy of the grain according to the sample. Before paying they made an examination of the bulk with the sample. Each brand usually bad a separate sample. The company had received warrants for what they purchased, but th-y did so very rarely here. They usually shipped soon after purchase. In order to get delivery of grain they applied for an order for delivery. The order contained the brand and the quantity of grain. In the course of his experience in the graiu trade witness had seen several warrants. If a storeman had the document marked "16,000 oats, marks various," he could deliver on it if he had the oats free for delivery. Witness understood by a warrant a document which gave security for certain goods which could be identified by description. The mode of identifying oats was by the brand aud the number of bags. James Fotherlngham, grain merchant, stated that he had been io. the trade for about 15 years. In purchasing grain he had sometimes to deal with warrants. Iv making large purchases he had had occasion to obtain advances on warrants, which were treated by banks as negotiable securities. A warrant usually gave a proper description of the grain, the bran^, and the marks. The warrant produced, marked " 16,000 bags of oats, marks various" did not fulfil wittiest* idea of what a warrant should be. It was not a warrant in the proper sense of the term. By Sir Robert Stout : The document for 16,000 bags of oats was a certificate that that amount of oats were in store, and he would expect the store to give that amount of oats of same quality for tEe" 1 document. If the oats were for shipment to London they would be a good class of oats. If there was a prior contract that the oat& were to be shipped to London he would expect them to be shipped. William Richard Cook, liquidator of the Ward Farmera' Association, stated that before he was appointed Tquidator he was put in charge of the association's business by the liquidator of the Colonial B*nk to supervise the bank account. When he went down to Invercargill Mr Anderson, secretary and manager of tbe association, made out Connell's account, showing the value of the oats in the Invercargill, Gor;e, and Bluff s'oras. There were 4570 bags of good feed and 4410 inferior and bad. In making out the statement Mr Anderson put these to the credit of Connell's account, as he said they belonged to ifc. The oats were sold between March 20 and the date of the liquidation, and the proceeds were placed into a trust account that had been opened before witness arrived. The account was called the Ward Fanner*' Association trust account, and it had not been dealt with. By Mr Hosking : The amount to the credit of the trust account was £4987 3a sd. Robert Albert Anderson (recalled) s>ta!ed that he had made out a statement of the oats shipped from September 1, 1895, to November 19, and from November 19 to March 20, 1896 This showed that the oats shipped between September 1 and November amounted to 17,817 sacks, of the value of £6946 2s Bd. Froni November 19 to March 20 35,904 sacks were shipped, of the value of £14,225 14s. The total amount shipped was 53 721 sacks, of the value of £21,171 16s Bd. In addition to that quantity there was 7779 baas of cats shipped, payment for which had baen made prior \o September 1. There were also 8980 bags in store, the property of the association. By Sir Robert Stout : It was quite probable that the bank had a Hen over some of the 53,721 bags. Some 29,582 sacks came into the store between September and March, of the value of £11,267 6s. He believed these oats came in as purchai-es. Mr Chapman intimated that that was all the evidence for the plaintiffs with the exception of the evidence of Mr Ward, who would be here the next day., William E, Reynolds, who waß then called for the defence, stated that he was a grain merchant, and had been in the trade for about nine years. He bad sometimes issued graiu warrants. He was thoroughly conversant with the practice of dealing with oats at the Bluff. The practice there was different to what it v/as here. Fat mers here sold to agents but did not ship. At the Bluff tho firms engaged in the trade were, both buyers and agents. For instance, they bought from fanners at a cash price, or told for the farmers and charged them a commission. When merchants bought on their own account they sometimes kept each lot of grain separate, and .sometimes not. He had frequently seen warrants issued at the Bluff. They invariably had no marks except a mark of quality indicating the grade of the oats. If he were accepting a warrant, he should want a grade mark in the warrant, He had sold largely for shipment to London, but had not shipped on his own account to London. He often had grain warrants from the NationaL^lortgage and Agency Company from the Bluff. The grade mark was the only mark in the column " marks," and there was no other mark on the warrant. That was the usual form of warrant issued at the Bluff. By Mr Chapman : Witness ha.\ never had a warrant from the Bluff marked " various," so far as he remembered. In the way he did his business at the Bluff the marks were nothing to him. j The marks column 'was to be seen in every warrant. It was intended to denote the quality of the grain. j James Tipping stated that he was in charge of the stores of the Ward Association at the Bluff. He kept a rough store book of the grain received into store. At the end of December, 1894, there were 19,571 sacks in store. In February, 1895, x there were 872G sacks. The first sacks began to come in in 1895 on March 4. There were 8726 sacks in store on that date. That was the old season's grain. Only 904 sacks came in on March 4, 1895. On the 20th of May, 1895, there were 45,881 sacks in stoic, and on 29th August 19,744. On June 22, 18P5, the old oats weie gone. Witness had nothing to do with Waddell's store at the Bluff. Accordiug to the books, all oats were cleared from Waddell's store, except. the E grade, in July, 1595, and there were only 1424 sacks of that grade. Witness did uot know who were the owners of the oats in store. The association's own oats were not kept separate by brands, but if they had farmers' oats they kept them separate. lie could distinguish the association's oats from farmers' by marking the front of the stacks. He had nothing to show what was held in Btore for farmers. He did not issue any warrants. By Mr Chapman : In the event of farmers' oats being shipped to London there was no difficulty in keeping each man's lot separately identified. Charles Edward Borne, clerk in the Invercargill office of the Ward Farmers' Association in 1894 and 1895, stated that he kept a record of the grain that came in and went out. In the books were concentrated the Inve-carfiill and Bluff returns, but not the returns from Gore. From the books he could make out what the association held on its own account and what it held on account of farmers. He had nothing to do with the making out of warrants. That was the business of the manager, wlttr kept a warrant
book The last time witn«9i saw tie Warrant ' book was some time in the middle of 189 G. William Howes (in thß employ of Cook and Gray} said he took over certain books and papers belonging to the Ward Farmers' Association when Mr Cook was appointed liquidator. Amongst those book* and papers there was no grain* warrant book. He made special search for such a book, and could not find it. This clo*ed the evidence for the defence, with the exception of some evidence which it was agreed should bo put in on the following day. Sir Robert Stout suggested that the evidence should be proceeded with iv the case of Gonnell and Co. v. the Colonial" Bank, and that the argument on the two cases should be taken together. This course was agreed to, and the court pro ceeacd to consider the next case. JOHN CONNELL AND CO. (LIMITED) V. THE COLONIAL BANK OF NEW ZEALAND. , Claim upon three bills of exchange accepted on the authority of documents purporting to be warrants for oats held by the J. G. Wanl Farmers' Association of New Zealand (Limited), and for an account for the proceeds of oats. Mr Chapman, with Mr J. A Cook, appeared for the plaintiffs ; and Sir Robert Stout, with Mr Haggitt and Mr Hoskiug, for the defendant bauk. The statement of claim set forth that the-plain-tiffs were general merchants carrying on business m the colonies of Victoria and New South Wales and also in London. Por some fime prior and up to the month of July 1893 the plaintiffs had acted as the agents in London, for the J. G. Ward Farmers' Association of New Zealand in handling, selling, and disposing of the produce sbippsd by the association to London, and in buyiug on aocount_ of the association merchandise to be imported into New Zealand. In or about July 1893 an arrangement was made by letter between tho plaintiffs and the association that the association should bo entitled to draw drafts or bills of exchange upon the plaintiffs against ehipmeats of produce which the association might be making to London, if the association wished to do so. at the ruling market values of such produce; such drafts or bills to be accompanied by bill of lading and pro forma invoica for, and insurance policy over, such pioduce ; and that if at any time the association had produce lying awaiting shipment and they were unable to obtain the bill of lading therefor in time for the outgoing mail they might draw agaiiißt the warehouse warrant and insurance policy for such produce, , auch warehouse warrant to be handed to the banker negotiating the draft, who was in due I course to exchange it for a bill of lading. It was understood between the plaintiffs and the association that any warehouse warrant against which drafts or bills. of exchange might be drawn by the association upon the plaintiffs under the said arrangement should operate as a security for the amount of such drafts or bills of exchange, and should represent specific ascertained goods, and entitle the holder of the wan ant to claim and recover the same. The said arrangement was communicated "by the plaintiffs to the defendants, who were tho bankers for the association, and it was expressly explained by the plaintiffs to the defendants that the plaintiffs had not any open account with tho association, and that, therefore, every draft or bill of exchange which might be drawn by ihc association on the plaintiff* was to bo drawn against some specific parcel of goods. Under the said arrangement tho association drew, threa drafts or bills of exchange dated respectively May 28, 1594, Jane 4. 1594, and June 25, IS9I, upon plaintiffs at SO days' sight for the renpective sums of £5250, £5750, aud £2500, and the drafts or bills of exchange were all discounted for the association by the defendants at the laverc*rj;ill branch of their bank. Thn draft for £5250 was presented by the defendant to the plaintiff* in London for acceptance on July 11 1894, and had a memorandum or certificate attached thereto by ornn behalf of defendants in tho following form : " Bill for £5250. Invercartfill branch holds warrants for 15,000 sacks oats for shipment to London, aud insurance cover for £0375. The Colonial Punk of New Zealand. July 11, IS9J." This meant that the plaintiffs should understand, as they in fact did, that the defendants' Inveicargill branch of their bank held warehouse warrants for 15,000 sacks of oats awaiting shipment to London, s»nd that such wan.ints would operate as a specific and valid security for the amount of the draft for £5250 over the 15,000 sacks, properly marked aud capable of identification. The draft for £5750 was presented by the defendants to the plaintiffs in London for acceptaoca on July ?b\ 1K94, and bad a memorandum or certificate attached by or on behalf of the defendants in the following foim :— " For acceptance. B.R. No. 21/1218. £5750. The Colonial Bank of New Zealand, 92 Cannon street, 8.C., hold memo, from branch th*t they have warrant fo.-i 17.000 sacks oats. r. P., £7225" The draft for £2500 was presented by the defendants to the plaintiffs in London for acceptance in August, 1894, and had a memorandum attached thereto by or on behalf of the defendants in the following form:— "B.R, 21/1295, for £2500. Invercargill branch holds wairant for 7000 sack* oalsfor chip ment to London, and insurance cover for £2800 The Colonial Bauk of New Zealand. August 13, 1894." The plaintiffs, relying on and believing the statements in the memoranda, accepted each of the drafts and paid the same at maturity to thp defendants at their London branch. The defendants did not, either at their Invercargill branch or any of their other branches or elsewhere, at the time when' the drafts were acc-pted or when they were paid, hold warehouse warrants ai they by the memoranda represented, but the defendants only held three instruments purporting to be grain warrants of the association, acknowledging that the association held 15,000, 17,000, and 7000 sacks of oats respectively at the association's Bluff btores to the order of the defendants, and no specific marks or brands were mentioned in the said instruments by which the oats to which they referred could be ascertained or identified, and no oats were therefore ever specifically bound by the said three instiuraents. Ths plaintiffs had nev-r obtained possession of or received tho three parcels of oats, or auy of them, or any part thereof. The association was now in liquidation, and was insolvent, and it had been found that it had not any oats in its possession or under its control which the defen lants or the plaintiffs were entitled to claim under 'the before-men-tioned instruments, aud further it never had any oats in its possession forming a specific security. The association was largely indebted to the plaintiffs when each of the three drafts matured and were paid, and the several amounts of the drafts as they were paid were added to the balance then owing by the association to the plaintiffs. The balance had from time to time been reduced by the realisation of produce shipped by the association to the plaintiffs for sale and sold by the plaintiffs, but no appropriation of any moneys hai ever been specifically made by the association against the amounts of the three drafts, or any of them, or any part of them. The association was at the time of going into liquidation indebted to the plaintiffs in the sum of £12,670 (ii 5d or thereabouts, subject to a credit for the proceeds to arise from the sale of some wool and butter consigned by the association to the plaintiffs for sale in London which were then unrealised, but which had i-ince been sold by the plaintiffs, and after giving credit for the amount realised by the sale thereof the association was now indebted to the plaintiffs in the sum of £9117 12a 3d. The value of the oats whether taken at the time when the drafts weie diawn or at any time prior to the commencement of this action, .assuming them to be in store at the Bluff, was not les3 than the balance now owiDg by the association to the plaintiffs. The plaintiffs by reason of the failure of the defendants to take from the association such warrants as would attach specified parcels of oats to the number of 15,000, 17,000, and 7000
sacks respectively, and to enable the same to b« identified, and by reason of the representation* conveyed in the memorandum attached to the three drafts, had lost the value of the oats, or the amounts of the said three drafts. For a further cause of_gciion the plaintiffs alleged that the arrangement between plaintiffs and the, association was made with the knowledge and for the accommodation and advantage of tho defendants as the bankers for tho association, and upon an understanding with the defendant* that they would, as agents for the plaintiffs, look after and protect the interests of the plaintiffs and keep them advised from to time of the financial position of tho association. But thoueh the defendants became aware some months before the association went into liquidation that the association was not holding oats to the extent of the aggregate quantities mentioned in the memoranda before mentioned, and that the financial position of the association had become unsound; the defendants in bieaSh of their understanding with the plaintiffs neglected to look after and protect the interests of the plaintiffs to the extent either of securing for them such oats as the association then held, or of advising them of the, financial position of the association, and thereby the plaintiffs were induced to delay requiring delivery of the oats or payment of the balance of the moneys owing to them by the associatidn,* and the security of the oats ana the said moneys were both lost to the plaintiffs. For a further cause of action the plaintiffs said that the defendants, well knowing that they had not taken-and did not hold either sit'fheir Invercargill b ranch or elsewhere Warehouse warrants such at both the plaintiffs and the defendants understood were meant . by .their .arrangement, and knowing that the statements contained in tbV memoranda attached to the drafts were not true, made the statements contained therein and tha representations conveyed thereby. The plaintiffs relying on the statement's contained in and the representations conveyed by the memoranda, accepted these drafts and in due course paid the same. By reason of th-i falsity of the said statements and representations the plaintiffs lost the security of the oats mentioned in the memoranda and the amount of the three drafts. For a further cau«e of action the plaintiffs said that the association was, at the time the 'three drafts were accepted and paid by the plaintiffs, largely indebted to the defendants ; and the defendants, well knowing the matter before alleged, took from the association delivery of all the oats which the association possessed, Or suffered the same to be sold by the association, and received the proceeds or allowed the same to be paid to the credit of the association with the defendants, and the defendants iv so doing knowingly received the oats, or the proceeds thereof, and applied the same in reduction of the "indebtedness of the association to the defendants on other accounts', by reason whereof the plaintiffs had lost the security of the 15,000, 17,000, and 7000 sacks of oats, which had been recived and applied by the defendants in the manner aforesaid. Wherefore < the plaintiffs claimed — (1) an a'ceount of the procee !s of the said oats ; (2) payment of their value,' or of the sum of £9117 12s 3d. The defendants in their statement of defence denied the material allegations in the statement; of claim, and said/that they never undertook any obligation or duty of any kind to the plaintiffs in respect of any warehouse warrants or insurance policy or order against which drafts or bills of exchange might be drawn by the association upon the plaintiffs, and that there never was any agreement between the plaintiffs and the defendants that the latter should undertake any such obligation or duty, and there never was any consideration from the plaintiffs to the defendants for undertaking any such obligation or duty t« or for or towards the plaintiffs. They denied that by the memoranda attached to the drafts or bill* of exchange they represented to tho plaintiffs that they held waiehouse warrants which wonld or did opa-ate as fcpacific and .valid securities for the amounts of the drafts to which the memoranda were attached over specific p.i reels of oati to the amount of the number of sacks of oats specified in the memoranda, and that the parcels of oats were pioper'y marked and capable of identification, or tv.at any specific marks or brands were mentioned in the warrants by which, the oats could be ascertained or identified. They said at the respective times when tho drafts were discounted for the association by the defendant?, I and at the, times wheu the same were presented ; by the defendants in London for acceptance, and i at the times the same were paid by the plaintiffs at maturity, Uie defendants held at the Invercargill br*uch of the bank warrants which were believed tobe good, valid, and genuine warrants for the delivery of sacks of oats to the numbers mentioned in the memoranda. The defendants denied that the alleged arrangement between the plaintiffs and the association was made with the knowledge or for the accommodation or advantage o£ the defendants as the bankers of the association, or upon an understanding with the defendants that they would, a3 agents, look after and protect the interests of the plaintiffs and keep them advised from time to time of the financial po»ition of the association. They further denied that there was any such understanding, and also that thty were the agents of the plaintiff* for the purpose alleged, or for auy other purpose ; and they said that they were never the bankers for the plaintifl», and there was never any consideration from the plaintiffs to the defendants for acting as agents for the plaintiffs. Defendants denied that they were under any obligation to look after and protect the interests of the plaintiffs to the extent of securing for them such oats as the association held, or of advibiiig the plaintffs of the financial position of the association ; and assuming that they were under such obligation, defendants denied that they neglected to perform it, and they also denied that by reason of their neglecting to do so the plaintiffs were induced to delay, or did delay, requiring delivery of any oats or payment of any moneys owing to them by the association, or that the security "of the oats and the moneys were both lost .to the plaintiffs. In order to shorten the proceedings it was agreed that portions of the evidence in the previous case — viz., such evidence as was applicable and relevant to the present ca«e— should be ad> mi t ted. Mr Chapnmi, in opening the case for the plaintiffs, said the maiu facts were somewhat similar to those in the pievious case. It was a case again of the association dealing with a London house, md of an arrangement made between the association and the London house under which the association was entitled to draw certain drafts upon that house. The letter under which the arrangement was established was dated July 20, 1893, and the transaction, speaking generally, were of an earlier date than those in Brooks s case. In this letter the following passage appeared:— " John Connell and Co." (Limited) to sell all shipments of wool, skins, rye, hemp, tallow, wheat oats, and other produce at a commission of 2 por cent., the commission to include brokerage, cargoes of grain tobe sold at the same commission as parcels. J. C. and Co. (Limited) to see that all charges in London are kept down to the lowest possible level. The association are to be entitled to draw against shipments, if they wish to do so.' at the ruling market rates, their drafts to be. accompanied by bills of lading, pro forma invoice*, and insurance policy. If at spy time the association has produce lying awaiting shipment, and they are unable to obtain bills of lading in time for the outgoing mail, they may draw against warehouse warrant and insurance policy, such warehouse warrant to be handed to the banker negotiating the draft, who will in due course exchange it for bills of lading/, 'ihere weie a large number of transactions between the association and this firm, and each of them was conducted very much in the same i way — that was to say, a dratt was drawn, was-
cashed through the bank, and went Home accom- .1 "panied by shipping documents, except in certain •cases. The letter from which he (learned counsel) | had read an extract waß lodged with the bank in the same way as in Brooks's case, and such bill was dealt with as a separate transaction. There was a letter from the bank at Invercargill to its^ head office on July 20, forwardtng a copy of the letter to which he had referred, to show the authority uuder which the association were drawing on Jchn Connell and Co. The company then, in the same way as in Brooke's case, either .through the medium of this arrangement established by letter, or in the ordinary course of business, would receive the British bills^ apcompanied Tjy bills of lading or accompanied by tome assurance that they were good .bills. In this case there ' were three bill?. .There was a draft for £5250 dated May 28, 1894, and presented July 11 ; a draft fbr £5750 dated June 4, and presented July 26 ; and a draft for JE2500 dated June 25, and August 13. 3.'he evidence of the gentlemen who accex>ted these drafts on behalf of the company was to the effect . that they accepted them on receiving information from the bank similar to that in the other case that' the bank held warrants against them. They Telied upon the statement that the bank accepted a specific security against the drafts, and they aaccepted the drafts and paid accordingly. Th association, through the bank, in .the same way as In the other case, claimed from time to time the right to make specific appropriations of moneys on particular bills ; and several of these appropriations weie made-; 1 At 4;50 pm. the court adjourned until half past 10 next morning. ; : Friday, December 17. The case was reopened for the purpose of obtaining the examination of Joseph George Ward, who, .called by Mr Chapman, deposed that he was managing director of tb« Ward Farmers' Association throughout its career. The association had business relations with Brooks and Co. He remembered the letter of lhat fnm of the 6th of April, 1894, embodying certain•rrangements a-< to drawing. He left the olony for England in 1895, on, he thought, the Ist February. He thought he arriyed in England on March 16, and left again on either the Ist or the 2nd Juxre. He recollected a letter written by him to Brooks and Co. on the 3lßt May, immediately before leaving England. He did not see B:ooks and Co. after writing that letter. Mr Chapman : Can you tell from reading that letter — using it to refresh your memory, if you wquire to -refresh your memory — whether while ' you were in KDgland you altered the arrange-* ments betwe -n "the a-sosiatton and Brooks -and 00. in re»pect to the drawing of drafts upon them? Sir R. Stout objected to the question, which was allowed by his Honor, who, however, took a note of the objection. Witne-6 -replied : No. He saw Brooks and Co. • is London and had conversations with them, but they did not result iv altering the arraDg-ment. There was a communication from the bank to the association— from lie bank manager at In vercarg II to Mr Anderson — with regard to ihe sale of oat', and it was sent to him by Mr Andeivon. By Sir R. Stout : He saw Brooks and Co. three or four times during his stay in London. He wa3 awate that they accepted a draft after he came to Ixmdon. He had interviews with them before the acceptance of that draft, and it w«s very probable that they had con versai ions abiut it. He did not recollect wiring to Mr fisher bsfore the telegram of the 31st May that he had made fresh arrangements with Brooks and Co. Sir ~R.. Stout said there was a letter , by Mr jFishn- to JBroolw and Co. on the 22nd May, fcphich secnied to him to imply -that.' The letter said, "Mn , accordance with, the arrangements between yourselves and our Mr Ward,'" and $o on. [Witness .said he could not -have wired Mr Fisher that he "had perfected arrangements ' with Brooks and Co., for* he had not done so. He jmight have wired that Brooks and Co would continue to accept drafts. The only arrangement Avituess before leaving here proposed to snake was that one or other of the firms. should do the whole of the association's business. To Mr Cbaprnau : Ho advised Brook- and Co. before he left that he was unable to conclude any arrangement with them before he returned here.
It was agreed that evidence in the' case of Gonnell and Co. be admissible in the 'case of Brooks and .Co. aud should be treated as if given in the latter case. JOHN COANELL AND CO (LIMITED) V. THE , COLONIAL BANK OF NEW ZEALAND. Claim upon three bills of exchange accepted on the authority of documents purporting to be warrants for oats held by the J. G. Ward farmers' Association of New Zealand (Limited), and for an account for the proceeds of oats. Mr ChapmaD, with Mr J. A. Cook, appeared for the -plaintiffs ; and Sir Robert Stout, with MrHaggitt and Mr Hocking, for the defendant tank. This case was resumed, counsel calling witnesses on behalf of the plaintiffs. George Atkinson Birch, formerly manager of the Colonial Bank at Invercarcill, said he saw Mr M'Causlaiid, of the firm of Connell and Co., when the latter was in New Zealand. He had uo doubt that he had a conversation witli Mr M'Causlaud about the stability of the Ward Farmers' Association and the kind of business it was doiug. Befoie the association's balance in 1893 there was an exchange of cheques between Mr Ward and the association for £21,000 with the object of reducing the association's account at the bank. That was immediately before the association's balance day. The cheques Were re - exchanged immediately after the balance. Both cheques were given On the same day, and »they were both On the Colonial Bank. The .position of the association in 1895 had nothing to do with-witneßs-'s ceasing>to send Home statements to Connell sand Co. with regard to the securities, neither had -Mr Davidson's investigation anything to do with his not bending Ihess statements JHome. He had no reason to give T»hy the statements did not go. Theie was an alteration in the securities on August 19 by the satisfaction of the £1500 bill and pait reduction of the bill for £5250. He did cot know why a statement did not go Home sh >wine these alterations. It was purely an omission. He gave no instructions that it should not be sent.
By Sir Robert Stout : When witness saw Mr M'Causland he did not agree to purchase any drafts that Connell and Co. agreed to give the WaTd Association. Mr M'Causl&nd did not ask bim to undertake a responsibility on behalf of Connell and Co. He had no dou%t that Mr M'Causland did ask him about the stability of the association. If he did' witness would have said they were in a very good position. He believed they were in a good position right down to the time of Mr Davidson's report, which came upon him as a great surprise. Wituess made no arrangements with Mr M'Causl.ind about accepting drafts. He referied that gentleman to the general manager. Nothing was said about an open account at that time, noryet anything about drawing against specific goods. Wituess remembered seeing one of the Messrs Connell on ITebiuary 4, 1895. Mr Connell told him he had seen Mr Fisher. Witness did not remember what he said about any arrangement he had made with Mr Fisher. He recollected saying to Mr Connell, "So you object to take anything outside of oats?" and Mt Connell replied, "Oh, dear, no; we will take anything -we cm get." Witness did not tell him he would not give up warrants till he had Mr Connell'a permission to do to, or till he found that Connell's claim had been satisfied.
John Fisher, formerly manager of the J. G. "Ward Farmers' Association, deposed that the same course wa3 taken in Connell's case as was taken in Brooks's case with regard to shipping oats. AJb the latter end of 1595 he sent £501)0 to Connell and Co. The money was in the Bauk of New Zsaland, and the association cabled it through their bank in London to Connell and Co. The money was paid to Connell and Co.'s general credit in reduction of the association's total indebtedness to them. Witness did not think that there was any arrangement with Connell and Co. to accept drafts except with a bill of lading. The letter^producei, dated January 24, 1896, was an advice with regard to 350 bales of wool shipped by the Auckland to J. Connell and Co. in further reduction of their account. -By Sir Robert Stout: Witness saw Mt
[ M'Causland when he -was in Invercargill. No doubt Mr M'Causland understood what the association's business was from the conversation lie had with him. Cmnell and Co. were sent the association's trade circular. The letter from Mr Mr M'Causland establishing the arrangement between Connell and Co. and the association was the outcome of a conversation which witness had with Mr M'Causland. Witness believed that Mr M'o*u-land was introduced to him by M> Biich. He asked Mr M'Causland if he would make a concession to draw warrants against oats iv the warehouse. He thought he might have mentioned a limit that he would be entitled to go to, but he did. not know that he did. Judgiu.? by the transactions that took place after the letter which had been referred to had been given, he should think that no limit as to the length he might go was fixed. Witness saw Mr John Conuell in February, 1895, and gave him any information about the association's btisine&s that he asked for. He presumed that he would know that the three drafts had been paid, and that oats had not been sent forward to redeem them. He discussed witn Mr Connell the sending ofy wcol and other produce to meet^ them in the plsroe of oats. Mr Connell agreed to substitute wool and other produce for oats. The association wanted the rigkt to send anything Home It was not a fact that witness was influenced in asking Mr Connell to agree to this by the knowledge that there were not suffi -ient oats in store. He would not say that there were 39.000 bag* of oats in store at the time for Connell and Co. He probably knew that there were not 39,000 bags. He thought it very unlikely that he should be influenced by that fact in asking Mr Cornell to -agree to substitute other pioduce for oats.-because it was the commencement of the new reason, when he_ knew that be would 'have oats coming in. Various things influenced him in not'.eending forward oits. Forgone thing the se<son was advanced, and. oats might not have been suitable for London. Tbi* concluded the evidence for the plaintiffs. William Eric Reynolds gave evidence for the defence, and Sir Hobert Stout put in certain d cuments in connection with the case.. It wan then agreed to take the argument in this case and the previous one on Monday, and at 2 50 t>.tn. the court adjourned till half-past 10 a.m. on Monday.
Monday, December 20. brooks and go v. ,thb colonial bank and john coxxcli, and co, v. the colonial bank. Claim for alleged breach of warranty. Mr Chapman, in addressing the court on behalf of the plaintiffs, said the c»se for the plaintiffs was that the bank, knowing the terms of the arrangement between the plaintiffs in each case and the Ward Farmers! Association, presented each of the drafts as a secured draft. The effect would have been the same if, in the same circumstaucf.s, the drafts bad been .presented in the same .manner and with the same representation as secured draffs, apart from any knowledge of communications between respective plaintiffs and the association. The common ground established by lodging the lettsrwith the bankshowed tbat the drawers of the bills expected them to be accepted, either by bills of lading or by the class of security mentioned in that correspondence. It would, however, have made no substantial difference had the plaintiffs been induced to accept by the representations apart from any special arrangement with the "Ward Fannera' Association. In those circumstances pres it.ting the bills for acceptance was in effect equivalent to requesting the plaintiffs to accept them, and it was a request tor the bank's own interest. They chose fur their own profit to purchase these bills in New Zealand ; and, wishing to obtain .an acceptance and payment of them in they made these rc-prestntaUons -for their, own benefit, and in that way 'it was equivalent to offering something for . c a3e in London, that something being what purported to "be a secured' bill. He (learted counsel) submitted tsiat. the same considerations should apply as would" apply were the bank to offer any subject matter for sale. ' The point was that the bank being interested in obtaining these acceptances, if it made any representation in obtaining them was bound by that representation whether it knew it to be true or false. There were numerous authorities to show lhat if a person made a representation when he was under a duty to do to must take the risk of his representation being correct or incorrect. Supposing the bank had given a memorandum stating that it held warrauts representing oats, and that this .statement at the time in all respects was perfectly correct, and between the date of acceptance and payment the bank, without the authority of the plaintiffs, handed back the warrants to the association In .that case it would still be bound l>y its that it held warrants. Theu v ha v in effeot ensued from a representation of t le i. d made in the present casei was that the plaintiff?, acting upon the representation, got nothing for it. In other words, whatever they paid for what they were tupposed to pin chase, or for what was offered to them, was lost to them, and it was in effect a loss of the whole consideration upon which they had acted. The money was paid for a secured bill, and the failure of the security resulted in a loss of the subject matter of the transaction. He (learned counsel) submitted that the defendants could not be permitted to deny that they held and continued to hold the warrauts, which meant warrants representing an actual and specific class of oats, and which they held in such a way as to be equivalent to oats in their actual rossession. As to that, what would be conveyed to the u,ind of a person accepting a bill upon such a representation as was made in the present cases would "be that the bulk actually held the,go ds, and that these goods were bo held that if they passed into the hands of a third pencil— even an innocent purchaser - for value they could be followed. The natural effect of the representation that the bank held warrants for so many thousand sacks of oats would be to .convey to the mind of any person that it was as good as if the bauk had the oats under its own lock aud key, and would carry with it the implication that any person, absolutely trus-fng to the representation of the exUtence of the warrant, could without any risk make advances upon it. That was exactly whithappaned in the present cases. The I parties were in London. They expected to receive bills from New Zealand secured in one or other of two ways Those two ways were closely alternative to each other— by bill of lading or bond warrant. They were mentioned in the letter, and were bo concatenated that evidently the idea iv the minds of all parlies was that they conveyed the same notion of complete title, and by means of a complete and perfect document of title And so far as Ihe title was concerned he (learned counsel) submitted that it did not matter whether it was a warrant or a bill of lading — i*; was equally go:>tl, and that was what was in the minds of all parties. The representation in these case 3 must be taken with all its surroundings, and it must be considered what it meant and what it naturally conveyed to the plaintiffs. In the case of Brooks the wording, not of the representation but of the pieceding document, was somewhat different, but the expression "against bond warrants which we understand to be certificates that tha goods are in store" could not, lie submitted, mean anything less than the expression that the parties "n*ed from time to time— namely : " warrants," " bond warrants," " store warrants." There was no reason to suppose that the j>arties were there contracting for a defective orinvalid title, and the-object of the expression apparently would be to make it clear that it was intended to be a certificate that the goods were actually in store— exactly wh.t a bond warrant certified. The words were' used in that letter and elsewhere by rhe paities as always, so to speak, in companionship with a reference to the bill of lading as showing that the watrant was intended to be a title analogous to a bill of lading— that was to say, a document which actually leptesented goods, and represented goods in sudi a sense that it was a symbol of possession and ownership, and involved de'ivery of the goods in the ordinary way iv which both our law and the Roman law said that heavy goods were usually delivered. He submitted that no one reading that memorandum, " our Invercaigill branch holds warrants," could ever interpret it otherwise than in the manner he had suggested— that it-was as if the Inverc»rgill branch virtually held the coods. What was a warrant? Primarily at least, he submitted, practically invariably, unless there was some very special ground for suggesting a diff renee, it was an actual instrument of title to specific goods. The definitions in
the different -acts— the Factors' Acts and" the old English Dock Acts, in our Mercantile Law Act ia 1880. and down to the "Sale of Goods Ac. L , 895"— always include I warrants in documents of title. The interpretations come probably all from one source, and all persons who had occasion to de.il with bonded goods — all merchants and all bankers— could be expected to have one ide* on the subject of warrants— that theso represented specific goods. He dared say that there_ were other classes of warrants— no doubt at Chicago, where grain was handled in bulk, some o^her arrangement must prevail, — but that in no way corresponded with any dealings with colonial good?. If the so-called custom at the HlufF was in any sense binding on the people to whom the representation was made in England, the circurastauces showed that it was never intended that when a form of warrant was used, which in itself was framed so as to be the frame or form of a warrant relating to specific jroods, such a document should be used to relate to unspecified goods. Supposing that something had been disclosed in London of the practice at the Bluff to the extent of that document being pinned on to the representation, apart from any particulars being filled in it, would it not necessarily convey to any person's mind that the warrant memta warrant in respect of specified goods? Each of the present ca«es established this : Several persons were called in England who were unanimous in their evidence that what they would understand by a representation that a bank held ' warrants was that the bank held documents representing a title to specific goods, equivalent to giving ifpossession of thetc good<s ; and the particular form of note attached to the bill was known apparently -to London merchants. One of the witnesses was questioned' abmt it, -whether it was not a fact that merchants to whom bills were presented relied on the .position ( f the known drawer, and he said 'they- accepted on the -faith of a ticket or memorandum similar to that annexed to 'these bills. The witness was asked if would rely on the Bolveucy of the person shipping tha goods, and he Said "No"— he would rely on the stability or credit of the bank which presented the bill with such a memorandum attached. Suppos'ng a bank sent out a bill with the ticket attached, " Bill of ladine held against thn draft," that would imply that it held a bill of lading in lespeet ot goods shipped, because it was absolutely contrary to the recognised practice to issue a bill of lading at all until the goods were shipped, and it would imply that the bill of lading was such that the actual goods might be recovered by ineaos of it. A custom to be binding, even to the parties on t*>f> spot, must be uniform and well ettahlished. No doubt, when a man went into a foreign market he was bound by all the ordinary usages of that market, but that very soon reached a limit : and he certainly was not bound by an alleged cuttom, or when ne was not in any way apprised of it; and when, acting under 'it, it conveyed to' the mind a traniaction of a totally different character to that which it was represented to mean. Th-s fact that it was difficult and -troublesome to unter marks did not alter the question in the .smallest degree. A person dealing in London in a certain specific matter mutt be expected to understand it as such things were gi»n«raily undewtnod, not raeiely in London, but in every large market, and he ought not to be bound by an alleged custom of which he could not actually have had any cognisance whatever. It was said that the Ward Association could have sold in the ro!ouy, but he submitted that that made no difference so far as the bank was concerned. If the "Ward Association had permission to sell in the colony— to divert the shipments to any other and -better market the consenting to such a thing strengthened the inference that Brooks.and Co. and Connell and Go. were absolutely relying on the fact that the bank, held the goods on security in such a sense thY it had as good as possession of them. 'Jhe very permission showed (hat.it wa^necessary to go to ths bank to, get back the wa- rants to liberate the goods for shipment. In Gonnell and Co.'s ca?e thcie was the- additional element that the firm were supplieJ by the bank with monthly statements, with which they were lulled. aDd he submitted that there was a contract by MrTJirch oa behalf of the bank to' look after Connell's interest 1 --. He argued also tbat the bank made itself the trustee of the oats for the two firms. Assuming that the warrants had any value whatever and that they were in any sense charges attaching not specfic oats but attaching oats, the bank had a right to have claimed delivery of them, and, knowing that they -were charged, the bank not only allowed the association to sell them but received the money. Mr Cook followed on the same side, and had not concluded his address when the court adjourned at 5 p.m.
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Otago Witness, Issue 2286, 23 December 1897, Page 18
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17,592SUPREME COURT. Otago Witness, Issue 2286, 23 December 1897, Page 18
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