COLONIAL BANK LIQUIDATION.

Poverty Bay Herald, Volume XXIII, Issue 7652, 10 June 1896, Page 4

COLONIAL BANK LIQUIDATION.

Sft^'- J.' -d3.\. WARD. FARMERS' jjpfeir V. ASSOCIATION. ; llsf-.THE WITNESS-BOX. |||j?B&;si-.tlie report of- Friday's proceedings ||ipi;tfre.Supreroe Court, Dunedin, appearing iOtago Daily Times, we make tracts, which amplify the IPpßtimmßry already received through the IBPwsS;, Association : — |p|p=;»irtseph'' George Ward was sworn.' |j|?i< Mt Young; having handed to the witness pg.tno^;.balancersHeet of the J. G. Ward Association at the end of June gislßs}s, "asked : Will you say by whom that pf-j.yas -prepared ? p;^ Witness : So far as I know by the then gv.;man»ger. . pjr.^Whd'was the manager?— Mr John .suppose you were aware of ita coo-j^-.teptt[t-t-X -waa aware of the state of the |c-t>alMice-Bheet as placed before me, but ,'X- nobibf. the details the balance-sheet was ri-i made up from. . jKt-V.- Did you sign it ?-I did. |j;,' Mr Young handed to the witness the §£ balance-sheets of the Association to the g; .end of June 1894 and to the end of June ||:1893. ~ (To witness :) You were aware of s%thb ''Contents of theue and you signed g^'thenS?— ln exactly the same manner, yes. ll^XYbu notice that the direct liability to iSCthe Colonial Bank in 1893 is shown at |&1i26,2!r8 Ga 7d, in 1894 at L 26.584 8s lOd, |j|iand'ia;June 1895 at Lllßs 4s Id. Do fi^yoti know whether the Association's in££debtedn,csß to the Bank at the end of June £^1895, was more than Lllßs 4s Id— direct £,^indebtedness I mean? -Well, I cannot LcJ give' you any specific figures at that date, v bat I can say this in a general way : that .so tho Association held very large credits £* outside of the Colonial Bank - one credit i/fait L 50.000 and another for something :i like L 40.000 under which the Colonial y ' "Bank had no responsibility whatever. tJ . What was the L 40.000 credit ? -It was g&a general London credit. £X.'." From one of the London houses ? - Yes. s; t ; .:And the othnr credit ?— lt was L 50,000 f~\ from another London house. . . . > •:." Mr Young : I want to account for the ~>: fact that L 25.000 waß owing to the Bank -v in 1893, L 26.000 in 1894, and only LllOO > : in Jpne 1895. J His Honor : That is in addition to the i ;-;• L 40.000 of debentures ; and in October "" 1895 there was L32,0C0 odd owing to the i ■ Bank in addition to the debentures. ;; 1 Mr Young : There is af sudden drop of ; -jl about L25.C00, and an increase again of ; 1- slightly more than L 25.000. ::;/,' Hia Honor : Yes, L 30.009. !? .. iMr Young : That is what lam hammer- ,':' ing at, and cannot quite understand the '_'-'• explanation, Do you know whether it % was a discount of a draft, Mr Ward ? : . Witness : Well, my impression is that ;£".- no draft went forward at all. What is it <_; 'teat you are trying to get out, Mr Young ? I? : You are. trying to ascertain why there was •;; a difference between the indebtedness of ;V the Association after the balance-sheet - "as against Hhe date of the balance-sheet. si": As a matter of faot, some time after the v - balance-sheet was issued I was advised \'> for the first time by the manager that '' heavy losses had been made— he estimated ;v the losses at L 25.000. I immediately -TZ- Sflvised the Bank, and requested them > : . to have an investigation made. This was v-: '. done," and their estimate of the loss was • L 55,150. y ; Would you consider that was informing L\. the shareholders of the real position ?— I ; was not here at the time the balance..r aheeb was made out. £:.S;Are ypn not responsible?— l was not :v heie at, the time. As a matter of faot, I r»\am told it/was the usual thing to do. ; '/Did it not strike you as a peculiar thing V > when you were signing tho balance-sheet v -.that the items did nob appear ? — No, I r; could not, know the whole of the de- ;: .tails. . . . . ■'i :--;.' Aro y° ur outside creditors accepting ,f any compromise?—! have had no communication of any kind and no overtures ; of any kind outside the proposal between the liquidators of the Bank and Messrs ': Reid and Smith. .... y ■'.. You were apparently carrying on busi- -,-:. ness outside of the company. — No, I was !-._ . nofc I have said that shipments were --. debited to me and the losses were debited i : to me. The losses were not ascertained • till November. They were said to have V run into L 20.000 or L 30.030. InNovember they were said to have run into : L 60.000. What position did you take up with ;: regard to the shipments?— l took over , the losses. I was desirous of seeing the f. -■ Association made a success, and thought J • the losses would have been repaid. : r YoUD K aal£e . d what was his income. Mr Ward replied that, roughly speak- ; ing, his income was close on LSOOO a year. ...■What was left after paying hia private •;. expenses went into the Association. , Mr Young: Did the Association hold :.-. any security from you for the indebted- . ness to them for this L 55.000 ?— The whole, of the scrip that I had in the Association remained with them. In fact the indebtedness bo far as I was aware was L 65.000. Mr Macgregor : Can you tell us, Mr , Ward, what is the amount you are personally indebted to the Colonial Bank „ . f or ? -The statement is here. Is it correct that you are liable in the first instance for a L 65.000 bill ? -Yes, I am liable for L 55.000. ■Then for the L 20.000 guarantee ? -Yes. And the L6OOO guaranteed for the - Hokonui Company ?-I am liable, with others, for that. j And for the L 16.000 draft dishonored ? ', That makes altogether L 96.160 ?— Yes. ' - but the draft was not dishonored. I don't know where you got that bit of information from. It was a draft in! course of transit, and when the amalgamation took place the Bank became responsible for it. But you are personally responsible to the Bank for the L 96.000 on paper 1— Yes, that is so. And against that you have property worth, in round numbers, L4ooo?— That '. is the value of the property. . . So that at present you are hopelessly insolvent ?— That is according to my books. When did you first become aware of . your position ?— I think it was in August. I ' • • • . L 92.000 is the Association's indebtedness? -Yes. _ *? addition to that there is a sum of L 55,000 written off? His Honor : In addition to that?— No. .;.:■ ■ Mr Macgregor: The total amount Mr Ward got from the Bank was L 92.000 plus L 55.000. Is not that so? .:•: Mr Ward : That is so. , ;f - ' Then tKere is L 16.000 on this draft ?— ; ,,;,Yes.- ■ :; i'» And LBOQO on account of the Hokonui " Company? -Yes. „ ; : Th»t gives L 168.000 altogether ?— Yes. ■.'. So that fhe Colonial Bank or the ;•>; liquidators atand to lose LIOI.OOO ?— That iV'.iflao, '.-.. '.'. :;._. ? y.*':[ The; .stjtefrent of assets and liabilities ;"'•„. of the iifisooiation shows a debit balance |; : : in tauhd figures of L 60.000. Nine months r & pwviously.you thought the Company to be > J t fjr>.*P..ja r flpucishirfg condition, solvent, and iO#ving, bonuses toshareholders and salaried JlfpfHcerH-Yes.. you account for the enormous disS^S?P* n .°y. '— l admit the disoropanoy is ?WS???.nj o . u . 8 ». tllat M the only word' to use. to say that within a very s y:;:BUprt.;;pßripd — within three years— the &>^ r ty>%of.the losses had been made. F4"?4'i>Thß.=Aßsooiation'had only been in exis|^^tenoe;rthitee.':ye«rs,aud. seven months?— P&*» e^ min BPPWepof the Association was, S%iS*'y9 ud :- ( J UMti <>nt very. good. My ' own * wry valuable business m

1889, my net profit being L9OOO. '-Mr McGregor asked how these enormous losses oarae about. 'Mr Ward replied that the manager j attributed them to losses upon shipments, to lossos in connection with freezing operations, and to depreciation in value. What do you attribute it to 1 ?— To the same causes, but I did not know it at the i time. Now that the loss has been ascertained can you give us any explanation for it ? — Not any other explanation than I have given. If I had know the position was anything like it was I would not have gone on at all So you have got life insurance policies amounting to Lll.OOO l -That is so. How long have these been taken up? — One about ten years or more, the other about three years. Those are all the policies you hold? — Yes, I have an accident policy. Asked why he had used his influence to bring about the offer made by Messrs Lee Smith and Reid to purchase the debts and assets, Mr Ward replied that it was with the view of preventing disaster to many settlers, which would ensue if the Association went into liquidation. And you would go through the Court ? — I should say the Association would have to go into liquidation, and I would have to accept tho inevitable myself. Mr Young : Do you think that in every case it is better that people should be bolstered up than that they should go bankrupt ? -I did not say so, but I think that compelling people to go bankrupt means the ruin of other people. It is desirable to prevent that if possible. In the evidence of Mr Cook (of Cook and Gray, accountants) this passage occurs — Do you think there had been reckless trading I— That is the only word for it. To a very large extent 1 —Yes. That is, advances were made that prudent men would have taken security over the crops for, and no security was taken. Can you say over what period that reckless trading was going on ? — No, I would not like to say. I think you can say that probably nearly for two years, I found no securities after 1894. In the evidence of W. B. Vigers, one of the liquidators, who was inspector of the Colonial Bank, this passage occurs — Mr Young : Were you aware of the bogus draft for L 30.000 ?— What do you call a bogus draft ? A draft which never went on. — I was aware of a draft which never went on. I do not know that it was bogus. Is it not the same thing ?— I do not think so. Why did it not go on ? -The draft was drawn on a credit for L 30.000, supported by warrants for oats that went to the credit of the Association. A draft on whom I—John1 — John Connell and Co. It was practically a discount ?— Yes. What was the date? -About the 29th or 30th June. On the balance day apparently I—lt1 — It was on one of those two days. His Honor : It was on the bank balance day. That had the effect of reducing the overdraft to Lllßs. Mr Young : What became of the draft ? —It was afterwards recharged to the Ward Farmers' Association. Was it cancelled ? — Yes, written back. Can you say how soon after June 29 it was written back ? — lt was October 13th. Should it not have gone to London in June 1 - It did not go. Why ? — lt was not quite clear as to the terms of credit. It was done by cable. Do you know what was the value of the oats?— No; I suppose it would be fair market value. That had the effect of making the Ward Association balance-sheet considerably more favorable than it otherwise would have been?— Yes, it did not show the contingent liability. Do you know at whose suggestion the transaction was carried out ? — The bank's. — Mine. How did it happen that this transaction occurred on the balance day ? — Because he cable came that morning. Was the cable in reply to another cable ' —I do nob know. Is it not a fact that you went to Invercargill to insist that the account should be reduced as nearly as possiblo to credit ? — Very possibly we wanted the account in credit. And this providential cable arrived on the day you want down I—On1 — On the morning before, I think. I understand arrangements were made in London to have theae credits 1 Arrangements with Mr Ward ?— Probably. There is an extraordinary coincidence as to the dates. Do you know where the cable was from ?— I could not say. How was it that the draft remained hung up for so many months without the transaction being settled ?— I suppose because it was not convenient to find the oats. The oats were not forthcoming. Where were the oats which were represented to be in the warrants ? — They were supposed to be in the stores. Were they ?— I do not know. Have you any reason to believe they were ?— Afterwards I had reason to believe they were not. So that this L 30.000 bill was lying in the bank safe with a parcel of worthless bonds attached to it?— We did not know that. His Honor : Were the bonds worthless when you got them ?— They were not so to our knowledge. Were they as a matter of fact ?-I believe so. Who signed the warrants ? — The manager of the Ward Company.