Auditor Involved In Claim for Losses

Sun (Auckland), Volume III, Issue 675, 29 May 1929, Page 8

Auditor Involved In Claim for Losses

BUILDING SOCIETY’S FUNDS SHAREHOLDERS’ DECISION * (From Out Oicn Correspondent) ' WHANGAREI, Tuesday. The affairs of the Whangarei Building Society have been in the public eye for some time past. Some months ago funds were missing, and the former secretary was charged in the Supreme and acquitted. Action against a former auditor was authorised when the society met by requisition to discuss the action taken by the directors in collecting the missing funds. The chairman of directors. Mr. IT. W. Crawford, presided, and invited spokesmen for the requisitionists to state their case. Mr. J. E. Rive said that it had come as a great shock to a majority of the shareholders to hear, when the proceeding’s in the Supreme Court in connection with the shortage in the society’s funds had failed, that the matter was not being allowed to drop. The requisitionists were prepared to lose their few shillings rather than pursue a man who they were convinced had not got any of the missing money. He heard that Mr. Rust was to be sued. It might be legal to take action against Mr. Rust, but it certainly seemed very wrong to try to make him responsible for such a large sum. MOTION TO STAY PROCEEDINGS Most shareholders were willing to forego a few shillings, aded the speaker, rather than place a crushing burden on an old and esteemed resident of Whangarei. He moved: “That, having heard the discussion in reference to Mr. Rust’s position, this meeting of shareholders direct, and authorise the directors to withdraw proceedings to make Mr. Rust bankrupt, and to takeno further action in the society’s claim against Mr. Rust.” Mr. C. H. Chissell seconded the motion. Mr. Shandley said he had known Mr. Rust for 45 years, and would be sorry to see him made a scapegoat for someone else’& wrongdoing. In reply to Mr. H. E. G. Smith, the secretary referred in detail to entries in the ledger which Mr, Rust had admitted in evidence were in his handwriting. '

Referring to one book entry, Mr. Reid said if the amount had been shown at .£2,800 instead of £3,200 the cash in hand would have been correspondingly increased by £ 400. The 1926 balance sheet showed cash in hand and in hand and in bank £366, when the actual position was balance in bank £l3O. That meant there was £236 cash in hand, according to the balance sheet, but in reality, if the loans had not been over-estimated, cash in hand and in the bank should have shown £766. Instead of showing the position, the entries showed £366 £l3O in bank, and £236 cash in hand. That £4OO was rectified on. the next page .in a very peculiar manner. On page 5 of the disbursements cash book, the second entry of the following year, t' '

the £4OO mentioned was rectified by the first loan cheque having been called a cash transfer, and not being put into the loans column. It was originally shown in the ‘'loans’* column. then scratched out. and entered in the “miscellaneous” column as a cash transfer. ANALYSIS OF BANK BALANCES The secretary then gave a statement showing an analysis of the bank balances for the years 1925, 1926, and 1927, taken from the audited balance sheets, which revealed irregularities.. Mr. Rive protested that the meeting had been called to consider the shareholders’ attitude toward Mr. Rust. ''We believe,” he said, “that the work was done in the interests of the society, and the legal aspect has been gone into by better heads than ours.” The Chairman:- That’s quite right, but surely you don’t want shareholders to vote on something they don’t understand? To Mr. Briggs, the chairman said the directprs were quite satisfied with the balance sheet as presented by the auditor. Mr. Briggs: I pointed out at the time that the balance sheet was wrong, and still you were satisfied. Don’t you think it was your duty to go into the matter properly? That was two years before the real trouble came. The Chairman:- The meeting approved of the balance sheet. Mr. Hosking: The explanation was given by the auditor, and it satisfied the meeting. I admit Mr. Briggs was the one man who stood out. All the others- considered Mr. Rust's explanation was satisfactory. Mr. Briggs: If the directors had seen £4OO was wrong, would you have sat still and said it was all right because the auditor said it was? DID NOT KNOW ABOUT £4OO The Chairman: We did not know' about the £4OO until the investigating auditors made their report. We only know these things now. Mr. Rive: As the Supreme Court exonerated the late secretary, aiid Mr. Rust, has confessed judgment for the amount claimed, it would be only fair if we let the matter drop. Mr. W. Heather moved as an amendment that the action taken by the directors to date be approved, and that they continue the proceedings. NO SENTIMENT Mr. Roseman, in seconding the amendment, said an auditor was paid to watch his employer’s interests, and sentiment could not be allowed to enter into the matter. The chairman ruled that the amendment was a direct negative. Mr. H. R. G. Smith said the supporters of the motion had not advanced any arguments to influence kirn. The late auditor had either deliberately closed his eyes, or been so negligent that he did not care whether he closed them or not. "In what state would Mr. Rust be left if he is made bankrupt?” A Voice: Be thrown on the street. Mi*. Smith: I would like that made more clear, because I don’t think it is the case. CHAIRMAN SYMPATHETIC The Chairman: It is not competent for me to answer. lam as sympathetic as any man, but the directors have been put in a position of trust, and must s carry on unless you instruct them not to do so. If you carry the motion, all the proceedings will be abandoned, and we will have to pay our costs, and, in all probability, repay the South British Insurance Company. It seems to me a great pity that, seven days after receiving the writ, the late auditor should have given away a property he possessed." It. would not have been necessary if lie had;asked the directorsto compromise, or faced the Supreme Cpurt to have found the full amount. If they had come to us with any reasonable proposition of settlement, we as directors would have accepted it, or asked you to do so. They have not done that “TO THE BITTER END”

An offer was made, added the speaker, by a representative of the family, to give £2OO in full settlement. but we could not accept that, as it would not have covered our legal expenses. We have done what wo believed to be right to the 480 members who put their money into the society. The directors have exercised the utmost care regarding securities, but the

fortnightly payments of members is not a thins that we can be expected to watch. That is for the auditor MONEY SLIPPED AWAY Mr. Chissell: Do you think that, for a matter of, «£ 3; to each shareholder, it is worth while risking- sending a man of 70 years into the grave? The Chairman: It is nearer " 4 a head. Mr. Chissell: I can t afford to give much away, but I am prepared to forego my share, and pay £4, for the most distressed subscriber we have. Mr. D. A. McLean said the directors had only lost sympathy with'Mr. Rust when he let them down by refusing to hand over the books. Personally, he was sorry the proceedings were necessary, but ft was not in the interests of the shareholders or the community that these things should be allowed to pass. On the vote being taken, it resulted in the motion being defeated by 43 to 36. The chairman said he was very glad the meeting had been held. The-share-holders had taken a burden off the directors’ shoulders. • The majority of those present at this meeting.” said the chairman, ‘‘have said we must go on. lam sorry for the petitioners and the auditor.’ It is very regrettable. It is a matter none of us can be proud or happy about. The law is inevitable, and must take its course.” The meeting decided to refund to the petitioners £5 they had pc id as a deposit.