“MOST PECULIAR”

Poverty Bay Herald, Volume LXI, Issue 18336, 2 March 1934, Page 7

“MOST PECULIAR”

BANKING TRANSACTION COMMENTS BY JUDGE ALLEGATION OF FRAUD (Per Press Association.) WELLINGTON, this (lay. When the action was continued in %e Supreme Court yesterday in which allegations of fraud are made against the Commercial 'Bank of Australia, Limited, and its manager, Edwin Percy Yaldwyn, in a case in which Frederick William Moore, a merchant, of Wellington, is claiming £I4IS with, interest, from the-bank, Yaldwin, Athol Pierard, a bacteriologist, of Wellington, and Sidney John Hammond, a builder, of Wellington. Mr S. G. Stephenson, counsel for Hammond, said Hammond, be'eame connected with the Unique Advertising Company on the request of Mrs Pierard to represent her on the board of directors. He refused at first, and it was only when Davies, the manager of the company, assured him that he would teach him, that he agreed to go on the board. 'His Honor pointed out that remarks regarding Ilammond’s business ability were not relevant. Hammond had signed the guarantee, and he was prima facie liable. “The more fact,” said His Honor, “if it be a fact—l don’t suppose it is likely to be disputed—that he was ignorant and not a proper person to be a director of the business concerned, is not a defence, of course. You have to go a good deal further than that.” . Hammond then proceeded to give evidence similar to that given by pierard. RESPECT NOT INCREASED Cross-examined by Mr Watson, Hammond said that when he guaranteed the account of the Unique Advertising Company to the Bank of New Zealand he knew he was giving his property as security, but he did not understand anything about the “joint and several” part of the guarantee. "“When one hears of these things being done, it does not increase one’s respect for the present-day banking business,” remarked His Honor, who added that this remark did not apply to Mr Watson’s bank. “A company of this kind,” he said, “comes along with certain directors who know nothing about the business—it is perfectly obvious that they knew nothing about the business —and they are asked to sign guarantees and mortgages over everything they possoss, and this man had no interest in the company.”

Opening-the case for the defendant Yaldwyn, Mr Watson said his submission was that the major issue of fact before tthe court was whether the representations attributed to Yaldwyn wereyin fact, made; and, if -so, ; whet her they induced the plaintiff to enter into the contract to guarantee the Unique Advertising Company’s account. Yaldwyn’s answer t 6 the plaintiff's case was a complete and detailed denial that the statements complained of -were made by him. He further submitted that if* Moore replied on anybody’s representations, they-were the. representations of Davies, who was having a series of interviews with him at the ■ fini'c he entered into the guarantee, and that the inducement which was offered was an enormously large reward for a guarantee which ho believed t> be safe.

BANKER REFUSED ADVICE When the Unique Advertising Company transferred its business to the Commercial Bank, said counsel, it had been constantly and carefully watched. Yaldwyn would say, without qualification or reservation, that ho did not at anv time, or in any way, approach Moore to suggest that Moore should guarantee the account, nor did he suggest to Davies or anyone else that Moore should guarantee the account. The first Yaldwyn heard about the account ,was on June 6, 1928, when Moore came into the bank and informed Yaldwyn that ho was going to guarantee the account. He did not consult his bank manager in the capacity of a financial adviser. ■ Yaldwyn was in a difficult position, a;, both parties were clients 'of the bank. What he did, was to take the course of an honest, upright banker, and refused to advise him. 1 He told him to go and sec Arcus, who would say quite definitely that Moore came to him about the affairs of the'Unique Advertising Company. Arcus would say that he showed him the facts and figures, and spoke disparagingly of the company and its officers, ending up by saying that he could not advise him to have anything to do with it. His Honor, without referring, to the merits of Mr. Watson’s case, said that the whole transaction was a most peculiar one. His Honor commented on the fact that the “Unique” company and Moore were both customers of the bank, and the bank knew that the company was paying 25 per cent to Moore for accommodation. “VERY UNIQUE COMPANY” “All the moro extraordinary is the conduct of the bank,” said His Honor. “I cannot understand it. I cannot understand retaining this very unique company as a customer. That does not say that I accept Moore’s version. I may think it necessary to make some further comment at a later stage. No lawyer and no business man can fail to see the effect of that attitude. It is not a creditable transaction from any point of view, whoever succeeds in the action,” concluded His Honor. Mr Watson went on to say that during the period Moore said he was afraid of the power of the bank, he was getting very favorable treatment from the bank to the extent that on occasions he had been allowed to overdraw his account by £2OOO or £2OOO, when the limit was only £7OO. Mr Watson characterised Moore’s attitude as “a theatrical and venomous outburst, maliciously made, and without foundation, when the record of his own account is examined.” “My broad submission is,” said Mr Watson, “that Moore has utterly failed to dispel the suspicion that attaches to the whole of his claim. Either the claim is the wilful fabrication of an astute man, or Moore may have been revolving the matter over in his mind until he confused, the representations made by Davies, a man of dominating personality, with Yaldwyn’s statements. DEFENDANT’S EVIDENCE Edwin Percy Yaldwyn said that he had 46 years’ banking experience, and Moore was for 12 years a customer of the bank. He had never acted as Moore’s financial adviser, nor had his advice been sought. As a principle of banking ethics, he refused ti state what Moore’s financial position had been, but mentioned that he was a wealthy man. He had not asked that Moore or anyone else should guarantee the company’s account, and he first heard that Moore was to do so when he came and told him. He accepted the guarantee and gave an overdraft limit of £ISOO, because Moore desired it, and because the company pointed out that they required extra accommodation to properly finance the business, which was feeling the strain of large reductions of overdraft. His Honor: What was your own opinion as. to the propriety of .a person guaranteeing on those terms? The witness: Although I was aware that such companies in Australia were earning dividends up to 35 per cent, I was not satisfied that a company would continue to gain such profits in New Zealand. To Mr Young, he said that he did not form a high opinion of the company. He realisod that it was of an experimental character. He did not recall telling Pierard and Hammond that they were lucky to be directors of such a concern, and had not the slightest recollection of telling them they would have no personal liability under the guarantee. The case will be resumed to-day.