VERDICT OF GUILTY.

Sun (Christchurch), Volume IV, Issue 1162, 1 November 1917, Page 3

VERDICT OF GUILTY.

THE CRADDOCK CASE. MISAPPROPRIATION OF TRUST MONEYS. THREE YEARS' HARD LABOUR. A verdict of guilty on all four counts in respect to moneys misappropriated from the Booker Estate was returned against Alfred Ernest Craddock, a wellknown Christchurch land agent, in the Supreme Court last evening. Sentence was deferred by his Honour Mr Justice Sim until other charges against the prisoner have been disposed of. This morning a sentence of three years' imprisonment with hard labour was passed. The charges on which Craddock. was found guilty were that on May 1, 1915, being a trustee of the will of Dennis Booker, formerly a farmer, who died at Christchurch on January 15, 1912, he. with intent to defraud, and in violation of his trust, converted the sum of £350 to his own use. and that on March 22, 1916, he fraudulently converted a sum of 190 14'-. which he held on trust under the will of Dennis Booker, to his own use. There were alternative counts of thefi of the same moneys.

Accused pleaded not guilty. , Mr S. G. Raymond. K.C., appeared i for the Crown, and Mr M. J. Gresson ■ defended Craddock. THE PRISONERS EVIDENCE. After the luncheon adjournment, accused gave evidence. He said he began business in Christchurch in 1899 as a land broker. About 18 : months laler he entered into part-: nership with Simes. They put in either 1100 or £l5O each as capital. They took money on deposit from the start. In his first year he had anything from £750 to 11000 of de-i posit money, at varying rates—6, 8, and 10 per cent. These deposit; moneys were usually used for the: purpose of financing sales, to enable the partners to obtain their selling; commission. The deposit moneys | were all lent on second mortgages, j They also received moneys for in-, vestment, and these would be used j for first mortgages. Most of the second mortgages were reducible by 1 instalments, usually monthly. That; was the reason they were taken in I his or his partner's name or their: joint names. Both arranged the! financing. Simes opened the books ■ and then witness kept them for a J time, and finally his sister posted ] them from the cash books. The ac- ! counts were not audited, but they balanced their ledger accounts with' the bank book. No provision was made for a reserve fund-or for depreciation of securities. He thought j that thev always had an overdraft, \ which fluctuated. When the partnership was dissolved witness took! over almost all the securities, j Simes took a few to make up for a deposit of £I9OO in the name of Mrs! E. S. Simes. No balance-sheet was taken out. From March, 1908. to 1 September. 19f9, witness carried on by himself, and then McCrosfie join-; ed him. He had monev on deposit; at that time, but McCrostie took i over none of these liabilities. Witness continued his own books,: and new books were opened for the j firm. As a partnership, further, moneys were received on deposit, l the interest on which wr»::ld be paid : ' out of the firm's funds. On his private deposits he paid the interesthimself. These private books were; kept by Miss Craddock. During the 1 whole of this time Ihey were doing; very good business as a firm. For four vears up to 1914 he and Mc-j Crnstie were makins between £2ooo' and a\HH) a year each. In 1913 Mc-j Crnstie became unwell, and worked! onlv intermittently. In September, j 1914. an arrangement was made by which McCrostie was to cease active work for a year. Witness was! to take the prcfit »«♦'' McCrostie was —»» interest on his monev. The partnership was finally dissolved in September. 1915. At that time witness owed the bank on all his accounts £4600 odd. The bank held securities for all that, and in addi-i tion McCrostie had guaranteed it. I Each guaranteed the firm account,! and McCrostie guaranteed witness's! account. About the end of 1915 he decided to float the business into a company. Witness was to get £ISOO of goodwill and the company was to take over £10.0f!0 of his securities. He considered that bv so doing he would be freeing his seRirities at the bank. The company started operations on June 1. 1916. Under his agreement of dissolution with McCrostie. vitness undertook to pav the bank off. to pnv McCrostie £750, and to release McCrostie's securities at the bank, and to find a further sum. It meant that by the end of December. 1915. he had to find about £3OOO or £9OOO. In Mav. 1916, bis hank overdraft stood at about £7OOO. The bank rnanaser told him he must reduce i it. Between Mav and December of that year he paid in about £SOOO in reduction of the overdraft. From March or April. 1916. the windingno of the late firm of Craddock, McCrostie was nrorco'ing under the liquidators. McCrostie and Stewart.' In September, lOtfi, bis overdraft! was £2600 or £2~"0. The bank released no securities, and be could I not draw on his account. His. secu-j rities were held no with the bank, i with Mr Wildine, and with Stewart' and Beckett. The liotiidators of the; old firm could scarcely realise at j all. as the securities, owintf mainly to the war. were not realisable and I the properties were not saleable. \! tedfer statement «t>n«-<«H the o!d> firm's credits ns co j 238 15/3. and I its debits £21.331 12/-. On that he: considered it quite solvent. He' had statements prepared from hisj own hooks, some at face values and' some at what he thounbt Hie properties were worth. T!"> » statements and mnnv more like them J were taken out with a view to find-; ing what his position «-r»s and what he roidd realise on his securities. Since h<< bnnkrtmfrv be had been 1 through his hocks, and he estimated! that be hid tnst from fWOO to 1 CHt.C't thr. '•«!( .!. n- f .,-i ; ,ti m of pro-i prrlhs and secritios. Most of these were <;: i II"- hooks at the time I of his i;nrtnr r shin with Simes, and'' the d nn-ch'tion bad been "ro'wina ever sire;-. ' ton and hmc, mnnv attempts wen- made to realise (pel s.-rorr! r».,trU-»et'!f but r.nr- of them could !•-»« n ;! ; <fd at anvthine like !>. ■ '-: v dii.s Wben fh<- bank closed i down on him bis credit in ef-| feel stopped. \f (h:< beginning of 1917 some of the deoosifors wanted! renavmenl of sr;ine " r their mnnevs, ami as a result of this pressure he decided to file.

RENNIE'S MORTGAGE. Dealing with Rennie's mortgage, accused said Rennie built the house in 1906, Booker's estate advancing him £350 and Craddock and Simes advancing £SO on second mortgage, which was almost immediately transferred to Joseph Wallace. By October 13, 1911, Rennie was £2O 15/8 in arrears on his interest. Witness had paid that out in interest on the two mortgages ; in excess of what Rennie had paid in. By November, 1913. Rennie was £G6 16/4 in arrear. On April 13, 1915. he was in arrear to the extent of £72 5/-. Rennie owed that to witness personally, in interest and insurances.

To his Honour: Rennie had paid nothing since 1912. Witness paid interest because the second mortgage to Wallace was guaranteed, and the interest was paid to keep the first mortgage alive. Continuing his evidence, witness said that £26 odd was the only sum he had received since 1911 in respect to this property. When Carsick and Co. approached him in .Tulv 1914. he paid £I6OO, but could not pay the full £2OOO, because Rennie's mortgage was not realised. He told Mr Nicholls the position over and over again—that the security was not realisable, and Rennie had left it. He endeavoured all the time to realise it, and eventually arranged a transfer to Miss Barker. His Honour: I see that the mortgage was sold to Miss Barker on May 1. 1915, and then on June 14 Craddock renewed the mortgage for three years, and then transferred it. It's a peculiar way of doing business. To Mr Gresson: Witness said that he guaranteed the second mortgage. He told Mr Nicholls that he had paid the arrears of interest, and had guaranteed Miss Barker's mortgage. The matters outstanding between him and Nicholls were the executors' commission, the release of the trustees, the fact that no acknowledgment of receipt of the £I6OO bv the beneficiaries had been received, the matter of interest, and the guarantee of the mortgage. He was prepared to settle with Nicholls on a payment of £350.

THOUGHT THERE WAS NO RISK. Witness said that when he wrote to Mr Nicholls on June 30, 1916, he had already instructed solicitors to apply to the Supreme Court for leave to sell the property. The interest and commission incl release were the outstanding things between himself and Mr Nicholls which prevented a settlement Mr Nicholls could not give a release as he had no power of attorney until this year. Witness went on trying to sell the property, and this year it was sold for about £485, on terms. He thought the sale was on account of the second mortgagee. He had worked on an overdraft throughout his business career, and when he paid in the £350 on May 3, 1915, he thought there was no risk in paying it into an overdrawn account. On that date his overdraft was £3160. By May of the next year he had received further credit—bringing his overdraft up to £7OOO. He had not kept » trust account at any time. THE CROSS-EXAMINATION. Cross-examined by Mr Raymond, accused said that when he started in business as a land agent he had about £2OO or £3OO of capital. Before that he had been for 15 or 16 Years a law clerk in some of the leading law offices in Christchurch. He had not asked for deposit moneys; they were brought in to him. When he dissolved partnership with Simes he took over the assets as well as the liabilities, but he did not go into them. No balancesheet was prepared then. When he left McCrostie be also took over the assets as well as the liabilities. Just after the dissolution. McCrostie received £4OO from witness. He had received sums of interest from him. In this dissolution McCrostie transferred to witness thousands of pounds of assets. Witness supposed McCrostie was liable still for a large share of the liabilities, but he had got back some of the assets as well. In Januarv. 1916, McCrostie, previously dissatisfied, had olaced the matter in the hands of Messrs Wilding and Acland. In August, 1916, he agreed to give a bill of sale over his furniture to 1.. C. Gardiner. On September 29, 1916. under pressure from Wilding and Acland. he transferred to Stewart and McCrostie practically the whole of his assets, including his life insurance in order to pay the liabilities of Craddock, McCrostie and to pay McCrostie. Witness was then managing director of the company. He did not tell Mr Nicholls that he was transferring these assets. His liabilities were over £17.000. exclusive of the liabilities which Stewart and McCrostie had liouidated bv means of the securities he had transferred to them. The floating of the limited liability companv did not release any of his securities from the bank. The first amount that he had from Mr Roberts was £BOOO. At the time of the bankruptcy it was about £7IOO.

DEALINGS WITH ROBERTS'S SECURITIES. Mr Raymond then put a question relating to the prisoner's dealings with Roberts's securities. Mr Gresson objected to questions concerning those securities. Were they now to go into matters that might be the subject of other charges? . His Honour remarked that Mr Gresson, in his opening address and prisoner in his evidence-in-chief, had covered a pretty wide held. The Crown Prosecutor said that the question was one of fraudulent intent. Aroused had chosen to go into the witness-box. Counsel submitted that it was his duty to go into any transaction which had relation to the question of accused's bona fides. So far as he was aware, no charge had been considered in relation to Roberts's securities. He could not say more than that. Roberts was not in this country. His Honour said that the defence had raised the question of what accused's intent was when he naid the money into the bank. He might ask the jury to infer the intent from accused's conduct in other matters. The whole of his conduct was relevant, not only in this but also in regard to oilier matters. Mr Raymond (to accused): Is this document, dealing with Roberts, a document signed by you?— Yes. Mr Raymond: And that purports to he? Accused: A list of W. J. Roberts's securities at that time. In 15111? Yes. Roberts went away somewhere about that time?— Yes. » And have you not since that lime dealt with practically the whole of those securities, so that he is now without securities? After perusing the document, accused admitted that Roberts was now an unsecured creditor for nearly all

of the £7IOO. The list was of securities for £B4OO. Producing the list which accused had given earlier in the hearing—a list of his own securities —Mr Raymond asked accused whether there were not in that list certain securities which were also in Roberts's list. Accused admitted that there were some. Mr Raymond: That being so, if they were not securities of yours, but Roberts's, why did you include them in your list? Accused: .That was a list of assets available for all my liabilities. All this time, from the time of the dissolution, I was trying to realise on these securities. Roberts knew that couldn't be the list, because he had reduced his capital from £B4OO to £7IOO. He was constantly writing for instalments of capital. Some of these securities depreciated so fast that I didn't know what to do with them. Thev depreciated rapidly from the time Ihey had been in Roberts's list. Mr Raymond then pointed out that certain securities which were included in accused's own list and also in Roberts's were afterwards transferred bv accused to Stewart and McCrostie under the deed of September 29, 1916. QUESTIONS THAT MIGHT INCRIMINATE. In reply to another question, accused said he did not think that Golbcck's was the same mortgage as the one represented to French's trustees as one of the securities in that estate. There were two mortgages ot Golbcck's. Mr Ravmond: I ask you, then, whether the investments which you purported to make in French's estate were not actually made by you and not accounted for by French's trustees? Mr Gresson objected to the question. A charge was laid in regard to French's estate. He objected not only because the epiestion might tend to incriminate Craddock, but also because they were not bound to disclose to the Crown what their defence in regard to the charge in French's estate was. Mr Raymond admitted that Mr Gresson was entitled to advise his client not to answer. But he submitted that in those circumstances his friend should not have put the prisoner in the box. His Honour said he could not rule that the question was inadmissible. Mr Gresson replied that he could not argue that the question was inadmissible, but he did advise his client to refuse to answer on the ground that the question might tend to incriminate him. Prisoner then refused to answer the question. Mr Raymond formally put questions relating to the Adkins and Gallagher cases, and prisoner refused to answer these.

Returning to the charges then before the jury and cross-examining further with regard to Rennie's mortgage, Mr Raymond asked accused how he justified himself in advising a strange client that the security was a sound one if Rennie owed £72 of interest. Accused replied that the property • was good security for £350, and they guaranteed the first mortgage. He had not come to an agreement with Mr Nicholls regarding executors' commission, nor had he gone to the Court for it. He thought that they would get £6O between them, and he debited the £2O against the estate on account. He was not quite sure that if he had gone before the Court for commission after paying the money into his private account he might not have got anything like the commission he expected. Questioned regarding another security, accused admitted thst a Mr Langford had advanced £2od on it but the transfer had not been completed at the time of the bankruptcy. He admitted that he had received different sums on account of Booker's estate, and had paid these in to his own account, and had received the benefit of interest on them.

Mr Raymond: So you had £I2OO of Booker's estate money in your private account on which you did not pay any interest to the beneficiaries?

Accused replied that Mr Nicholls had had a statement of accounts, and had not asked for the interest. In reply to Mr Gresson, Craddock said that the main securities in Roberts's list were in his own name, and, like all other securities, were constantly changing. COUNSEL'S ADDRESS.

In addressing the jury, Mr Gresson contended that the question for the Jury to decide was whether accused intended to steal the money when he banked it. If Craddock believed in May, 1915, that his financial position was sound, and that there was no risk in placing the money in his private account until he was ready to pay it over he was entitled to ah acquittal. Paying the money into anything but a trust account was a foolish thing, but it was not criminal. Craddock had been a fool, but not a dishonest one. He had not concealed the fact that the £350 had been paid to him. Counsel admitted that accused had conducted his business foolishly, and recklessly, but pointed out that bad business methods were not criminal. Craddock had been punished by his bankruptcy for his bad business methods.

i Mr Raymond, in his address to the jury, emphasised that accused was a man with a long experience of lawyers' offices, and must have been well aware of the elementary duties of a trustee. Every man should know that trust money should be kept in a trust account. That was particularly necessary in the case of a man who, like accused, was in a business of the riskiest possible nature. Accused had violated the elementary duties of trusteeship whilst dealing in a business which in his case was not only a gamble but reeking with fraud. Mr Raymond also pointed out that Craddock had received large sums of money on behalf of the Booker estate and had retained them for months without making any effort to find the beneficiaries. Accused's description of his transactions was only a partial one. THE JUDGE'S SUMMING-UP. In summing-up, his Honour said there was no doubt that accused had paid the money into his private and overdrawn account, the effect of which was that he used the money for the purpose of paying a debt of his own to the bank. It was clear that there was a violation of the trust and a conversion of the money lo a use not authorised by the trust. But the main question was whether the jury was satisfied that accused did this with intent to defraud. After referring to the placing, by accused, of various sums of money paid lo him on account of the Booker estate, into his private overdrawn account, thus saving him the pay-

ment of interest, and to the fact that although Booker died in 1912 and probate of his will was obtained early in 1913, there was no evidence of any attempt having been made to find Booker's beneficiaries until the latter communicated, through the Bank of New South Wales, with Garrick, Cowlishaw, Alpers, and Nicholls, in July, 1914, his Honour reviewed the correspondence which had passed between that firm and accused. So far as Booker's estate was concerned, there was no question of selling the property mortgaged by Rennie, because the mortgage had already been transferred to Miss Barker. His Honour also commented that accused's statement that he had guaranteed the mortgage to Miss Barker was quite untrue. As for the matter of the interest which Rennie was in arrears with, that was no* money payable by Booker's estate at all. The mere fact that accused said he had no intention to defraud was not a matter which should weigh with the jury. On the other hand, if accused honestly believed that his financial position when he paid the money into his private account was a sound one, and that he could repay the money, his defence was one for serious consideration and one for the jury to decide in the light of the surrounding circumstances. There was no doubt that accused had made use of the money for his own purposes. The jury had to decide whether the crown had made out to its satisfaction that accused had some fraudulent intention when he paid the trust money into his own account. After a retirement of 40 minutes the jury returned a verdict of guilty on all counts. PASSING 07~ SENTENCE. PLEADS GUILTY TO FURTHER CHARGES. This morning Craddock was charged in respect to the thefts from the French estate and W. J. French, and also in respect to the thefts from Samuel Gallagher (£250 8/-) and Ed. Atkins (£292 13/9).

Mr Gresson intimated that accused would plead guilty in respect to the French estate and.William French. He understood the Crown relied upon these, and that the other charges would not be gone on with. His Honour: The prisoner had better formally plead guilty to those charges. Prisoner did so.

Mr Raymond: They are the first 12 counts. The plea is not guilty as to the other counts. In this case I have satisfied myself that there may be some question as to the remaining counts, and probably the better course would be to get a verdict of "not guilty" in respect to them. His Honour: Just empanel the jury and tender no evidence?

Mr Raymond: I will not tender any evidence.

When the jury was in the box Mr Raymond intimated that he intended to call no evidence in respect to the Gallagher and Atkins charges. At his Honour's direction the jury returned a verdict of "not guilty" in respect to these charges. t Prisoner was then called upon.

Mr Gresson said that as the case now stood it was one of theft involving about £IOOO. He asked that his Honour treat it on that basis. He did not propose to go into the facts. It was a case of the prisoner drifting into theft and not realising the parlous position he was in till it was too late. All counsel could say in mitigation was that prisoner was 48 years of age, and up till the present he had borne a good character. There was no suggestion of drunkenness or of gambling. He submitted that although character could not be an ingredient in determining whether a man was guilty or not guilty, it was one that he could fairly put to his Honour and ask him to consider in inflicting a penalty. The only other matter he wished to suggest to his Honour was that, if possible, whatever sentence was imposed should be one that would permit of the prisoner in future making an attempt to retrieve the past. Prisoner was 18, and had many years of life before him, and counsel asked his Honour to inflict such a sentence as would enable him to do something to retrieve the wrong he had done. His Honour said the sentence of the Court was that prisoner be imprisoned with hard labour for three years. This sentence was in respect to the principal charges on which the prisoner was convicted yesterday. On the alternative charges of which prisoner was found guilty yesterday he would be ordered to be imprisoned till the rising of the Court. A similar sentence, to be concurrent with the other, was imposed in respect to the charges arising out of the French estate and W. French, and on the alternative charges he was sentenced to be imprisoned till the rising of the Court.