THE J. G. WARD ASSOCIATION.

Otago Witness, Issue 2295, 24 February 1898, Page 24

THE J. G. WARD ASSOCIATION.

LIABILITY FOX COSTS. j The ques-ion of the ('ability of the debenture- j holders to pay Ifce cost 3 incurred in the examination of the H>n, J. G-. Ward and others in July last came on for argjment before his , Honor Mr Justice Williams ou Friday ab a sitting in Chambers. Tne matter came up in the form of a , fciitnunonb, which aolted i («) Tn*i» tLe costs, charge?, and expenses of the iflic al liquidates: of and mci'lcntal to Che ! examination ut 'ha Hon. J. G. Waco', Jocn j Fisbcr, tlobcfo Andrirson, James iSwart Haunah, and G'-Orgc A. Birch, including remuneration j to the said offic al liquidator tor preparing for I aud atceuciiog tlie saut exaoiiuation, to be taken on liOD'Cb to the official liquidators L>t the Colonial Ba^ik us tha holders hi the deosntures 1 issued by the agsociasioo, that the fflioial j liquidator^ bu ab liberty to abteud tbe taxation a^d be heaid thereon, d,ad tb.it the said costs, charge;', aud expenses, including suca renaunera- . ton as ait'r<-S'>id, when taxed bf, wirh the costs, ! charges aiid espouses ot winding-up proceed- j jngs, a tirs . caarge on all the fcf>sct3 in the ; iiaods, t>r which may come into the hand?, of j t&e siid . ilio ai liqu.d*lor or tbe Ss.id associa- ( ti jn \n ;j.iorijy to tiiusaid daueiicurta or ia the , j,keru-.uv s*.5 *. [ (6) TLab tLe r^raumracion allowed to the : «aid oinuul liquidator be increased £b per cent, i o;i ihe aru unb of ail moneys froca time to | time jeceivc 1 by s iai m respect of the ao^tfcs ia ' hie Land-^, aud wiiiua may come iuto his baods, j and that t,LO sa.de, tojj'ither wich the cost*, ' eh---. ge-, and expc-n^ & 3 ft vje wi-idmg-up pro- ! c-ediugo, oe a di/nr, chargs upou hh the assets ia priorit',- ro t,he er.id dcbsnr.ured, and ■ (c) That the costs ci aad inci<lenial to tbia : apuUeatiou be costs ia tht> wiudmg up, and be i a tii'Su charpte. I Upon tiie grounds (1) Thab the onducb of > f^uoli exdrain,ition was undertaken by r<h ,• official j liquidator by the sanction or oin csion oi trie > couil ; (2) ».a tbe'tru^t deed by wbica the pay- ' merit oc Lhe deb^uturda 13 8f cured upon the j assets of the association provides tot ' the pay- \ ment in priority to t l ie dubenturos cf the cos 3 ] and espeuses incurred iv the exeeutioa cf tha ! trusts thereof, aud a commission by way of re- ' nmaerdUon not exceading 5 pr-r cent, of all , raoneya received und^r tbe trust 1 ?. , ;SrH)skmg, 'vith Mr Woocihouse (instructed by Mr V. M. Macdonaid, of Inverca.rgiil), ap-* pearedia &uijporb or the summons fo- tue offi- • c al liquidator (Mr W. R. Co 3k; ; Mr S"m, with ' ?<U- fcj. Brent, appeared foe the hqaid %sior3 of J tho G-sloniel Bibk; auc! Mr J. A. C -ok ap- j peartd f-jr ?.2e-srs Connell and C\ and Btooks •.:vl Ho , two of the largest; creditors of the j Wird A-!Soc>at.i -v. ! Z»ic fiosxiiK-, in opening the cisc, said this \ on tiopk-mber 21 la 3' the official liquidator applied to the cuutb f>r aa order to pay to th-3 debi'iiture-holdors £30,000 ia hind, on condition tint fchc cosb«, charges, and expensea of 1 the windtng-np be Rdmitted to be a first j charge on th>=! assess of che association, and be , : llowert ivcoordiDgly. Taat order was mare by consent". Two nc three days afterwards the ; I quidaS'ir (Hr CojU) received a letter i'rom the j offic, al liquidators of tho Colonial B .nk stating (hat when ihey cousen^.ed to the ord-r they intendea to consent only to fcno cost.a — charge s and expanses of realising os\ bhe assets — and did not include the c sis ot ihe examination of J. GWard and others. Af er further correspon- i dence the position came xonnd to be thab it was acknowledged th*t the question oJ those particular csts was not before the minds of either ', party when tha order vrai apphsd fur j His Honor : T&ab was acknowledged ? j Mr Hoskiog : Yes, on either side, ai^d ib was 1 seen thab ib would be neoosnary to come before ' the court in order that special attention iaigbb 1 be called to tho^e spe^-i^l coals and ask for an ] ore'e-. He <iii nob really think that 2I was ! 1 intended Ly the or." = ua.l sumtiioiia to ask tor the co«ts oi tba exasnrtation, as th<;re was sonw , doubt as to whf:th?r the persons who asked for 1 the exiraivi-xtiou sh- uld not be charged with j costs. Xhj:ir, however, was nob a material ques- ! 1 tion at the i)ro.icut timo. The question of ! whether the costs should tike priority to bhe 1 (lebentmv-'^olderrf. fvs it w«s doubtful whether | , there would bs t-.ny free assetF, was the real j question ut is&u?. Tl lh.3rc were co fret) asset", [ and these coa^ vrtiv not fo come oul of the , n?aet* of the dcrbenl':re-holders, the liquidator ! woul- 1 . La.\e to ]-ay tae money one ol iiis own . poik-**. Mr S in : Is oo^i no'o follow. Mr H sklntr : Tat m bp, for there is authority to show tha.t tle colicibor for the l.quid*t>r has no claim agaiuafc the liquidator. j liis Honor : Mau7 ol these coits are nob i 1 S'll'cK'.rt,' cosij*. ' Mr 110-king: He had to pay £109 to got wirnesies here, sud Lhere wei-ejdao h>fcf 1 txposea ! for clerks and othets amountiug to £1-7. Tha 1 1 shorthand writers' ftea canr;c to £141, bub thpy ] j had noli yet been paid. Mr Cook has no desire i Io shelter himself under technicalities which ! might enable him tj aay "I am not liable for I it." Fie wishes to s~.c tb.fse people paid, and , would pay th- m r.uJ ot his own pceisxt, whether the court oider ib or nob, but befo:e he made

such payment oufc of the funds he desired to have the opinion of the court. Mr Hofking then gave a shorb history of fee facts which led up to Mr Cook's appointment aa sole official Fquidator and the proceedings subsequently taken. The proper course for the liquidators of the Colonial Bank to have taken was fco have had an official receiver appointed. They preferred, however, to hive an official l'quidator. To a receiver they would have had to pay 5 per cent , bub they had a liquidator to whom they paid 2J per cent. When the Colonial B*nk liquidators set liquidation proceedings iv motion they musb ba taken to know that he had cerrain statutory duties to perform, and could iiofe be heard to say they did not know what they were, beciuae they Wbre liquidators thenaselves. As th-jy had taken the course of having liquidation foe realising these securities, and had pub in a liquidator to do the work of a receiver, they musb necessarily know he bad to discharge certain statutory duties, an-i musb, on the ordinary principle of indemnity, indemnify him against the expenses h° must incur in the dhcharge of his statutory -duties. His Honor aaked whether, if there were no debentures and there was a very small proportiou of assets to liabilities, and the costs were in excess of the asset 3, the suggestion was that the petitioning creditors who set the liquidation in motion, and through whose instrumentality the liquidator bad bsen appointed, would be bound to indemnify the liquidator. | Mr Hoiking : No. He did not contend Ihafc the official liquidators were even personally bound, b cause the cases showed that all the parties who act under a liquidation contract oa the credit of the fuad. It waa not a qmstion. rf personal credit at ail ; so that the jiquida'crr contractpd to act on the crddii of the fund, and not on the personal liability 01 tha person who asked him bo act as liquidator. In f»uch a ease he took the risk, and wa3 bound to b-ia." the 10-;s. But here the Colonial Bank liquidators "lad already h"»d Mr Cook for three months in j operation running the busi.iess with the vjawof | frying to aell it, and the moment it was found | it could not be sold the bank sail they wanted Mr Cook to act as the sole efficial liquidator, > and Mr Cos 1 ? iv consequence did so acb. Was it for a moment suppjsed that; the ifquidator was to bear the costs he might be pub to out of ' his own pockffcp There were sufficient facts to show that Mr Oook was the nominee of the Colonial Bxnk liquidators, and was employed by (.hem. 1 His Honor : You cr.annt bay that he v-jsf, emnloyed by th(-m iv the sense of being tCci: servant. I Ml- Hooking said that wan s>; but t^ey 1p.2 | asked him to pi -tee himself in the p isition oi t liquidator i i order that th*)V by tbis means tniiht be able to realise their securities. In consequence of hi * being placed in th.it j position th^ learned counsel su'omibced that the J Colonial Bink liquidator* were bound to pay j the liquidator of this company, aot the mpi'« i co its oi: realising, bub all tha incidental liabilities he migh* su«.tain by re-tson of the pcHt'ou which they had asked him to occupy, j If these charges w^rs not incidental to tha duties* of liquidator then, of course, the j argument -to toma extent failed. Xhen the j costs in this particular case really were due to i r a lVioin which the Colouial Bank and tb.o I Ward Asscei'itbn had with each chcr, acd uhc i r^iations between the bark anri tin Ward i Association were *o inbiaute than one coula uoi; i be '.vcund np withiut an iaveal igation ni ilia : affairs of tbe other. The Colonial Ba-ik j I'qnidators were anxious to have tb/a ' p oceedinga conducted by Me Salomon ; j th-y wanted thaD 'for tb^ir cwa pur- ! posu", and the int'Vlependence of th^ I two liquidations w*3 fiiown by the facs . that; the examination of tbe Hon. Georpe I M'Leiu was postponed because it was c-n- • sidered that material banefib would aiisa from I tho Ward examinations if Mr M 'Lean's | followed later, n.nd no doubt if it had not been | for the evidence of Mr M 'Lean dispelling some j illusions they would have examined other ' people in conhtqusECd of the examination of Mi 1 ; Wfi-d. I Sir Woodhouoe said Mo Cx.k hid already i paid since the date of liquidation on account ot | debentures £30, 000, and ou account of part due | bills £13.463. He estimated the value of what ' he had v-u r-j realise Wii £22,416, making & ! total of £65,834- since liquidation. Tbe £22.4-16 ■ included a certain propo tion of pasl duft biliS br-ionciafj to the ba ik, which be e»fima""ed at-. £7000. "Hia Honor wou'd see that left £lb,ooo * available lur tie d'-bsTtores. The debenune-' ' were orig.trtlly £50,000, and f hers was acorn -"i ' ntec-s^. to tha extent of something like £2000, ' and afrer dr due-ting the £30,000 alr«*iuv pad, that left £22,000 still due, for wticU i sh^re t--ai on'v nvtilsb'e £15 000, fehowi»g a ! deficknev of £7000 Wiih refecenc-j t> ti.e i item of pist flu-i bil's, it should bs explained tnat a 5a 5 the dite of liquidation there was & large amount owing to tie association on past due bill* which were held by the Colouial I Bank. The amounb repressed by these bills [ was included with associate no assets as baok r debt 3, but the bills belonged io tha bank, who were entitled to all mow'vs received in resptet of them in ar.dition Iv other (iebetiture seourit"'. ' The sums recovered ia pa.3o due bills ware paid over to the bank as tbe liquidators received them, and the bank had i-.lready had £13,463 c.n thab account-, aud would receive £7000 more. In addibion to the sums pair! «rd <"timated. amoanting togeihtsr to £65,884, i ihere was a turn m », trust accr.uut of £4987 33 5.1, which was clumed by every part\ in tne proceedings coiinecfel with tbe Ward Farmer*' j liquidation. The Colonial Bask clsirae i it, j the fessociatiou's liquidator claimed it, M.-sars I Connell and Go. claimed it, and Messrs Brooks ! aud Co. claimed it ; bub even if the assoc iation received it t: ere would still nob ibe enough to pay tho debenture's. His 1 Honor had referred to the value pi seed on i the assets when it wes proposed to .^eli 'hem io Mtssrs JRtid and Smith iv March 1C96 The , udtimatfii value then was £67 000, at d Mr 1 Cook's liquidation would produce about £10,000 ' ini'e than thab, for in addition co the sum of ! £65 884 received aud to be recfived since the 1 q ndation, he had b-tween the date of the J proposed sale to Me?.srs Il'-id and Smith and the j commencement of the HqnidaHi n realised and i pa-'d fo tbe Colonial B^nk two sums of £3599 and £7847, mckii.g tsge'her £11,446, vbiru, added to the £65,884, made a to'nl of £77,330 — that is to say, some £10,000 ryo^e lhau the valna'.ion mare at the (ime of the proposed sale of the assets. At the present time, as the above figures showed, ihere were no free assets, as the reeeipU would nob be enough to p«iy the debentures and thopcs--du" bills. Astoihelegal aspect, he would point out that all the prccsedi ings taken and all the expenses incurred were in | connection with the realisation of the assets o£ the p.'m ciation, which would be available to ! Hip, debenture holders; and therefore oa that i ground, in addition to other grounds, the co^ts j should be payable out of the assets. He (Mr Woodhouse) understood that the results of the examinations were at any tafca to prevent tho ! liquidator from embirkirgin one or two actions , which would have proved fruitless, i Mr Sim submitted that the pHintiff ha"3 I&iled altogether to sho.v that the present; case

„^-r'«6s,"

came under the general rule of the case cited by Mr HoskiDg. Mr Cook had incurred the expenses of the examination, and he now asked the courb to make an order to satisfy the coats of that examination out of the property of a person who in point of law or in point of equity was not bound to satisfy them at all. In the present case the honour of the court was not involved iv the matter at all, because no order was ever made about the costs of the examination. It was Mr Cook's duty to raise the point and ask his Honor ■where the payment of the costs was to come from. Now, when he found that he had not got the funds to pay the costs, he sought to make those costs a charge upon those who were nob entitled to pay them. It was absurd to say that Mr Cook took the proceedings at the request; of the Colonial Bank. Mr Cook wa3 an appointed officer of the court and under the control of the court, and if he wanted to gefc any indemnity from the Colonial Bank liquidators he should have asked for it Iv was absurd to suggest that the examination was undertaken for the purpose of obtaining assets. It was really undertaken .by eoms con tributaries who wanted to "get at" Mr Ward or some gentlemen connected with the association. Thav was shown by the lines upon which the examination was conducted. The examination was s. piece of forensic fireworks. The liquidator was not responsible for the firewerks, because he would not conduct the ex iminatioii : but it was ' absurd to suggest that the examination could be regarded as being undertaken in any way for the realisation or preservation of the assets. His iriendhad altogether failed to establish a case on the first branch of the summons. Then with regard to the other branch, it was admittedly laid for the purpose of Becurinir,iF possible, the costs of the examination. What his learned friend's argument practically amounted to was this : •• We recognise that j we cannot recsive the«e costs ss costs of the '■ examination, but ws ask the court to give them j in a back-door way by increasing our commis- j aion." That was to say, admitting that Mr Cook's services were not worth more than 2-£ \ per cent, on the amounts realised, he had, ! unfortunately, put himself into the position j of Laving to psy the costs of the j examination and having no funds to pay I them out of. Tiie court should there- | fore increase his remuneration to 5 per cent, j If as a matter of fact the remuneration already j fixed by the court was inadequate, Mr Cook ! could make application in the proper wfty ; but what; was here asked for was that the court in a blind way indemnify Mr Coot for these expenses. On both ground?, he submitted, the present application must fail. Mr J. A. Cook said thnt, in view of the figares submitted to the ootirt for the first Hme j that afternoon, the creditors outside the Colo- | rial Bank aud the holders of past due bills had ; apparently no interest; in the proceedings, but i wers entirely gnufffd out. His object in ap- ' pearing was to protesb against the cost of the crimination beiug a charge upon the free assets, but as there were no iree assets it would be of no avail to object. The examination bad not been for the purpose of searching out assets ; iior had it been buggested during the inquiry that there was anything concealed. If any free asaets turned up or the assets realised more than was expected, the creditors wished to be —in a position to object fo theee costs being included in the charges aad. expensefi of liquidation. The creditors he represented had requested thftb the inquiry be limited to the diecovery of assets, and the liquidator had been warned that the creditors objected to an examination being conducted at their expense into the commercial irregularities m&ntioued in th-! Eeport. Mr Hoskicg;, in reply, said wish regard to Mr i Siru'd contention that never once in the Bng- ' Jiflh cases dealt with was there « queetiou of contract, nor had the debenture-holders by j their conduct lent themselves to the larger ! obligation. The whole point was that the i debeature-holders in this case had by their , conduct Isnt thera*elveß to the larger obligation, and that ws.s the only view that was consistent with fcb.o whole proceedings. If ths liquidator had entered upon these proceedings without an order of the court they might; have said he had exceeded his duty, but the liquidator had been brought before the courb. He had hardly had tiKid to reflect upon matters before seven obscure shareholders brought a pecition ; ->ito court to r'ofc-3 him to say whether he con- ' eidered an examination was neceesary or nob. I? the liquidator had paid that he'did not coafider au examination necessary it would have come as a &hock. The liquidator had nob come brfore the court to state that an examination was necessary. He simply said he did not object to the application, but if thete was to be a chance of the costs coming out of the estate he could not allow third parlies to ransack the estate, huh musb conduct the examination in order to protect ib. Th«.t was the position he had taken up ; and as it appeared that the examination would be directed, instead of allowing the people to have an order iv their favour to conduct tbe examination witboat control on his part he had conducted it po r.s not to give up the control. The circumstances wefe auch that an order was bound to b? ma'k Had it not been made there would have been a failure to cany i out the spirit of the provisions o£ the Cumpaoieg Act; and the court;, it ■waa admitted, would never have allowed that to be done. Tne point, was that, suppose before the examii'aHoa had taken place Mr Cook had gone to tbe liquidators of the Colonial Bank and said he did not know where the eo&ts ■were to come from for tbe examination, wou'il they have said that they could not agree ta it ? He questioned very much if the liquidators of the Colonial Batik, in view of all the circumstances, would have ventured to take up the position, which would have meant preventing an examination being held. His Honor said that was not necessarily bo. If the Colonial Bank liquidators had esid chat the 3' did not care for an examination then tha liquidator would have asked for directions, aud would probably have been told that he was not to proceed unless he gob an indemnity from the persons who originally asked foe the examination. Me Hosking, continuing, said that it waa plainly a»sumed that the costs would come out of the assets, and the Colonial Bank liquidators must have known that they must come out of their assets. If they did not, then ib was clear they did not understand 4beir own accounts. Learned counsel . also dealt with the question of the alternative request, and submitted that if the application refused it certainly would be without prejudice to any further application on the merits, because of the additional trouble incidental to his office which the liquidator bad been pub to, apart from the mere question of realising the assets. Counsel argued the matter of law at Borne length, maintaining that this case was clearly distinguishable from the cases that had been cited, and that the present was one in -which justice required that bhe official liquidator should have these expenses paid out of the ogßets of the Ward Association. Hi» Honor reserved judgment.