DISTRICT COURT.

Taranaki Daily News, Volume XXXXII, Issue 20, 18 October 1900, Page 3

DISTRICT COURT.

Wbmbsday, October 17.—Before His Honour District Judge Kettle. IK BANKRUPTCY. Re W. D. Scott, of Opunake. Mr. Welsh, of Hawera appeared for the creditors. Mr. Roy, who appeared for the bankrupt, raised the question of a public examination being held. He referred to certain proofs, and said that at the September meeting creditors had voted on their original proofs, although a portion of their securities had been reduced. This affected the passing of the resolution for a public examination. His Honour said that a certificate : had been filed embodying the resolution, : and he could not go behind it. If the '. bankrupt were an honest man he would court public examination. . i Mr. Roy said that the public exami- . nation was, in a way, a sort of criminal i business. He was not attempting to i bluff an examination, but contended i that as a matter of principle everything : should be done properly and in order, i Had the votes been properly recorded, i the resolution calling for a public examination would not have been i passed. ; His Honour said it appeared to him i that the public examination should ' have taken place earlier. Even supposing the resolution was not properly i passed it would be only delaying i matters, as sooner or later the bankrupt < would have to be publisly examined. i W. D. Scott, the bankrupt, was then 1 sworn and examined by Mr. Welsh. . He said he had been in buei- < ness as an auctioneer, at Opunake, '. until he was adjudicated a bankrupt, i He had filed a statement of his affairs. ' He was examined on oath on April 6th : (the signed statement of his evidence was put in). On 20th December he i was further examined, did not think i he was then on oath (minutes of his i evidence produced and handed to wit- < ness to read over). He made those ! statements, and now repeated them on < oath. The list of assets and liabilities I were, to the best of his knowledge, i correct. Commenced business as a i commission agent in May, 1891, but : bad no capital—was about £SO in debt. : Had previously been salesman in a store and had some knowledge of bookkeeping. He was successful in the first year of his business. Started auctioneering in 1895. Had been doing well, i.e., made a living, in the interval. Had no means of shewing his position in 1895. Thought he could make up an approximate statement. Felt he was solvent and had no need to make up balance-sheet. Had kept a ledger and journal—no cash book. Could not say what assets he had on starting as an auctioneer. If given time could prepare a statement. To His Honour: He was solvent then. To Mr. Welsh: Had no cash or land or auction mart. He leased a mart. At first he used temporary yards, and three months afterwards erected yards on land bought for him through Mr. T. Knowles, with whom witness had contra account—the understanding , being that when accounts were settled l witness should give him credit for £6O, and the land should be transferred to I him. Witness paid rates, and the land I was in witness' name on the rolls, I though Knowles held the land on trust [ for him. . To His Honor: Had paid no rent for

the land nor any interest. To Mr. Welsh : Had asked Knowles to transfer land to him, but could not remember when. Thought it was about 1897, but Knowles said he could not as he had mortgaged it. Witness was not satisfied, and told Knowles to get the title at once. Subsequently Knowles told witness he had made him secure by will. Was satisfied that he could always get the deeds on payment of £6O. After the guarantors closed down on him he asked Knowles for a settlement of accounts, involving a transfer of the land. His Honor : I assume the Assignee has placed a caveat on the land, Deputy Official Assignee: No. His Honor: Why not. It appears to be worth £4OO. I am sorry for the poor creditors if that is the way affairs are managed. Mr. Davies said that Mr. Knowles refused to do anything in the matter. His Honour: The bankrupt's statement seems quite clear and bears the impress of truth. The creditors should have been protected and a caveat lodged. Witness (to Mr. Welsh): In July 1897, his mother advanced £IOOO. I' was paid into the Bank. There was re limit of duration of the loan, whiel could be recalled at any time. He pak £7 per cent, interest. Told his mothei if she required security he wou'd give s charge on the mart and saioyards pro perty. Thought he did not give s receipt for the amount. At that timi he had purchased the mart. There w«i a mortgage on it for £350, and it wa worth £SOO. The yards were wortl about £500; that being his expendi turo on them. He paid the interest ti • bis mother half-yearly. Wanting frrsl a?sis*ance he went to Me-srs. ! ambi Rogers, and Middleton, to guarantei , the Bank up to £ISOO on his account . They consented readily, He told Me

- Lambie he was doing so well that he 1 required more capital, He thought he p was perfectly solvent, but took no steps - to ascertain his exact position. The , Bank was not then pressing him, but i had refused further credit without , security. Rogers retired from the guarantee and Mrs. Scott came in, the amount being raised to £2300, Required further discount limit. To His Honour: He considered he was doing a safe thing in asking the : guarantors to beoome security. He ' made his aflairs as rosy as he could, ' but believed his position to be good. , To Mr. Welsh: Had given a rough statements of his affairs to the Bank ] 1 on several occasions. The first was ]

prior to the guarantee being given. ' Did not keep copies of tke statements. Gould not say whether or not he gave a statement before the seoend guarantee was given. Could not say when he first discovered he was drifting. Thought it was in 1897 or 1898. Creditors did not press till 1899. Never discovered when his losses exceeded his profits. The filed statement showed a deficiency of £3825. That was the first time he had made up a statement except those given to the Bank. His books did not show his position, but could have made it up in two or three days, Did not keep a trust account. There was not an auction on the coast that did so. His Honor: Every business man having money in trust should keep a trust account. There is a statutory obligation to do so. Some day the question will be raised as to the liability of the Banks for trust moneys. To Mr. Welsh: J. Nicholson was the first to press him in November 1898. It was for some hundreds of pounds. Did not consider he was then in a shaky position. It was only the question of money coming in. His Honour: It was a case of one lot of trust money coming in and paying for the other until at last the business went "pop " and those who came last suffered. To Mr. Welsh: All money paid to him was paid into his general account. About November, 1898, only Nicholson pressed. Manning pressed him subsequently for £IOO. Had only re- , ceived part of proceeds of sale of Manning's stock. Did not pay Manning as it was not the oustom to pay sals accounts in part. From beginning of 1898 was always short of money. Was secretary of the Oaonui Dairy Com- < pany.' Cheques of the Company were signed by the chairman and himself. Order cheques payable to the Company ; were endorsed only by himself. Did > not think there was a minute that the i ohairman should endorse cheques. The ■ chairman never endorsed any of such cheques. The Company's account was kept at the same bank as his own. About 14th April, 1899, he received a cheque for €SOO odd from J. B. MoEwen for butter. It was payable to the Company's order. He endorsed the cheque and paid it into his private < account, Mr. Sqijth was the Bank Manager and knew who it was from and what for. Probably he had I some 'conversation' with Mr, Smith about how his' (witness') account stood on the.mornxng the.oheque was paid in. Told Smith that he had money at his ' office which he could make use of until ' his demand draft on Morrow was cashed—meaning the cheque of the Oaonui Company—whioh he paid in afterwards. The manager said nothing to him about the cheque. He was trusting'to Morrow's draft being met. He was short of money at the time. He was overdrawn about £BOO at the time. The guarantee tor £I3OO was in existence,. -There was no arrangement with the Bank as to the overdraft. There were Bills under discount iit the time. The draft on J. Morro^was, dishonoured and had not since been met. At that time Morrow owed him from £I2OO to £I4OO and now owed over £9OO. Tried to collect money to replace the Oaonui Company's cheque. Did not tell the Company what he had done. As far as he knew the Bank Manager kept the matter ijecret. The amount was entered in thai Company's cash book as received* Ifrwas unaccounted for till November. 'There was a meeting of the directors 'every #ionth but the books were not looked at. In November he paid the money back as it had been discovered that he had been using it. To pay the amount he got in some debts and borrowed from friends. Connor lent £IOO, Buckthought £IOO, Newman £SO, Rogers £25. As far as he remembered he paid the whole amount to the Company's secretary in cash. The £2OO collected was not the proceeds of sales but of debts. He could not say positively how much of the £2OO con-

sisted of proceeds of cattle sales. Received some moneys which did not pass through the Bank but were paid tc vendors direct. Did not bsrrow £25 from Mr. Smith of the BaDk of New Zealand. Smith owed witness a small amount. Denied that Smith lent him £25 or any other sum to make up the amount for the Dairy Company. Smith owed him £2 lis and paid it on December 6th. When the Bank account was closed the guarantors assisted him to try and carry on the sales, and arranged for opening a No 2 account. He stated from the Kostrum that a, new account had been opened and the business reorganised, and vendors would be paid immediately after

the sale. He denied that he told his 1 clients that all moneys would be paid into the No. 2 account. His object 1 was to allay feelings of distrust. The whole of the cash takings were not paid into No. 2 banking account. Part of ' the receipts went to pay expenses, ' His Honour: After opening that ' account did you pay all trnst creditors. Witness: Yes. His Honour: Did you take other h people's trust money to pay trust credi--3 tors—that is, rob Peter to pay Paul. J Witness: No. After the No. 2 * account was opened all trust money r was paid over. tt To Mr.'Wehh: In December he " offered a compromise of 7s 6d in the £, a part in cash and part in bills. The 1 creditors required him to assign his s estate, the as-ignment to be of no * effect if the 7s 6d in the £ were paid, Only a few were willing to accept. " Suhsfquently, he refused to sign, but 0 afterwards ili.l so conditionaly, the 1 deed being held by the Batik, i To His Honour: Did not file then e because he was hoping to pull through. ; - To Mr. Welsh: Tried to raise the ■• ??64Mha£fro».foiwds* WenfctoJ

O'Connor, Buckthought, and Knowles, but they refused. To His Honour: Did nat at once tell his creditors. They could hare had the deed if they called for it, Tindall, a storekeeper at Kaponga, came to him and offered if witness could get a clearance and discharge he would give him .£4OO and take him on as a manager at .£2OO a year. The .£4OO was to go to the creditors. Witness could not get a release, and Tindall arranged to bay the yards from Knowles. Tindall is carrying on the business, and witness was employed by him. To Mr. Welsh: Told Tindall the position of matters as to Knowles' possession of the yards. To His Honour: The yards are leased for 5 years by Knowles to Tin-

dall. Knowles receives the rent. His Honour: If what you say is true the property is yours, and I can't see why the matter has not been looked into before by the Official Assignee. To His Honour: Knowles never claimed the property as his own, To Mr. Welsh: Was anxious to have a transfer of the yards so as to band the property to his creditors. To His Honour: JProbably Tindall would not have started had he not employed witness. His Honour: If the assignee did not exert himself why did not you exert yourself to secure the property to your creditors. Witness: Knowles took advice'as to holding on to the property. Mr. Roy drew attention to the fact that Knowles appeared as a creditor for a large amount. To His Honour: Could prove positively that the yards belonged to him, At this stage Mr. Davies applied for a caveat. His Honour: It is about time you began to move, Mr. Davies. Witness, to Mr. Welsh; Business yards and goodwill, with his services, were put down at .£2OOO. The stock in the mart was sold to different people. He paid the money into his general account. Tindall purchased =£3o worth. The money went into the general account, It is not shown in the books. Nearly the whole of the stock was sold to Tindall, who took over the balance of the stock and paid cash.. Could not say how much of that was paid into No. 2 account, but could swear part of it was. In. November, 1898, he drew en tMiddleton for £600; the draft was 'unpaid. Subsequently saw Middleton, who agreed to let him have £350. .Witness was to give security over the mart, a section, and the saleyards. Did not tell Middleton he had no title to the saleyards. Smith was present at the interview and wrote out the letter. Would swear that Smith did not know from him how the saleyard title stood. Did not tell Middleton because he did not consider it necessary, ] His Honour intimated that the bankrupt must make up a cash account distinguishing trust moneys. Witness (to Mr. Welsh): The .£3O paid to Humphries in December waß for a horse sold; it was an old account, No entry of the transaction was in his books, , His Honour: How many transactions of this sert are there which are not entered, ' Witness: A lot of them. . To Mr. Welsh: Morrow gave me a bill for £7O for cattle bought, and subsequently paid in money or stock, but I did not lift the bill and Morrow had to pay twice over. Others who were taxed like this were:—B. O'Sulllivan, £7O; Birchel, Fiva, £SO: McGregor, £35; Evans, £4O, There were othere, and he would make out a list; also a list of all trust creditors. The Court adjourned until to-day. =====