BIG DEFICIT.

Star (Christchurch), Issue 12063, 18 July 1917, Page 5

BIG DEFICIT.

CRADDOCK'S CREDITORS MEET,

INTERESTING STATEMENT BY

BANKRUPT

JllO first mooting of creditors in the bankrupt estate, of A. E. C'raddock was hold in the Magistrate's Court this artomoon before tho Official Assignee T. D. Kendall). There was a fairly large gathering of creditors, and the Bar was strongly represented. .Mr W. E. Mills represented Miss Alary .fane Wallace and others; Mr Xicholls represented the beneficiaries of ''lie Hooker Estate: Mr C. S. Thomas represented Messrs H. J. Johns and W. tf. Roberts; Mr Mosley represented Messrs* R. Robertson and J, Pa rices; Mr W. J. Hunter represented the legal firm of Franks and Hunter; Mr Neave represented Mr 1/. C. Gardner and was present, also as a. .Toditor: Mr M'Dougall represented Messrs S. Gallagher and J. [>. Petersen; Mr .J. A. Cassidy represented Mrs Ellen Bryant; Mr F. K. Hunt represented Mr W. Dumbell (Wellington); Mr .Fpham represented French's Trust and Mr Mitebenson; Mr F. .1. Malley represented certain creditors appearing in the schedule; Mr Wilding represented Mr J. M'Crostie; .Mr R. H. Ward represented Messrs Weston and Sons. Mr Salter appeared for the trustees of tho Khirley Methodist. Church. Mr IN!. J. Greason appeared for tho. bankrupt. The Assignee said that the statement of assets and liabilities was only approximate as the bankrupt had stated that it. was impossible to prepare an accurate statement. The approximate statement showed a total of £17,084 15s Id owing to unsecured creditors. The total assets, mainly real estate, are set down at £'3ooß. On those figures., consequently, there was a deficiency of £14,076, hut this cannot be taken to represent the actual position. Tho following is the debtor's summary ; DEBIT. £ s. d. £ s. d. Unpenned creditors 17,084 15 1 Secured creditor? . 30T2 0 0 Estimated value of securities . . 4."inn 0 ft Surplus to contra . .VJS 0 0 Total liabilities . . . £17,05.1 15 1 CREDIT. £ E. rl. Book debts £lll7, estimated to produce .... 700 0 0 Furniture 1 000 0 i> Property . . . . . 780 0 0 Surplus from securities in bands of several creditors . . . 52fi 0 0 Total assets . . . £!0OS 0 0 S ECURED CI!E DTTORS. The secured creditors are ns follow: Estimated Amount value of of Security. debt. £ s. d. £ s. rl. Howdnn's Trust, eure Gould, Beaumont and Co., first, mortgage over Wood chester . 4500 0 0 24 nf1 0 0 Interest ... 72 0 0 L. C. Gardiner, earn Lane, and Neave, second morf-jnin , over Woodchcsfer . 1500 0 0 £ISOO 0 0 £307-2 0 0 There is also an item, "L. ('. Gardiner. bill of sale over furniture at A\ oodchester, collateral with mortgage." but no figures are supplied, as the actual position lias not hee.n ascertained. There are no figures to an item, "C. L. M'Orostio and J. M. Stewart, as assignees under a deed of assignment, of all the assets of A. F>. C'raddock and the firm of C'raddock and M'Crostie for the purpose of winding up the old firm and liquidating its liabilities." This firm was in existence before, the present firm of C'raddock, M'Crostie Company, Lid., was formed, and was merged into it. U NSEC I'll El> CR EDITORS.

Total .... £17,03-1 15 I Tlio debtor states that- lie cannot ascertain the position of the following persons' accounts at presentAY. F. A. Andrews. Sydenham ; .T. Parkes, 1 ■"/). Wordsworth Street. Sydenham : 0, r!jillap;]ior, 6'l Fisher Street, "Beckenliain ; J. S. Peterson, 250. Wilson's Koad, Sydenham ; H. S. Johns, fl6, Queen Street-, Sydenham; E. Adkins, />O. Hume Street., Sydenham; A. J. Voice, Templet on ; Miss "Webb, Stanmoro Road. Limvood. ESTIMATED VALUE OF PROPERTIES.

Tile, following is the list of properties, representing real estate, and the estimated values:— £ a. d. Section a*. £uirmer, purchapod from Bells Vuo Estnto for .£3OO, (£IOO paid) 100 0 0 Section, Ascot subdivision, New Brighton 55 0 0 Section, North Avon Koad, Richmond 50 0 0 Fifty shares in Premier Picture Company, Now Brighton . 50 0 0 Equity in property, Tailored Street, Linwood 100 0 0 Equities in pvopcrtios taken over by Craddock, M'CrOstie, Ltd. . 400 0 0 Equity in Mrs Tree's property . 25 0 0 Total 2760 0 0 The values of tlio following items cannot at present be estimated:— Equity in property, George Street, New Brighton; surplus from assets assigned to Stewart and M'Orostie as

liquidators of the firm of Craddock and M'Crostie.

BANKRUPT ON OATH.

HISTORY OF THE FIRM

The bankrupt in bis sworn statement said:—

"1 began business on my own account, in 1890 as a land broker and land agent. After about eighteen months I was joined by Mr W. Simes, and carried on business in partnership with him until about 1903. "When T began business my capital was £3OO to £SOO, and I think Simes put a little capital in also. The books of the firm wore, kept by Miss Craddock. Simes and I were on equal shares, and the business averaged about £IOOO per annum. "We used to do a good deal of inventing for various clients. In many cases clients would simply deposit money with us at interest, and that money would be used in financing the various sales put through, or in advancing against properties on second mortgage. If, for instance, a man purchased a property for £350 and could only pay £SO down, wo would arrange a first mortgage up to two-thirds of the value of the security, and would advance sufficient on second mortgage to enable the sale to bo completed. Most of Olliver's money was used in this way. In nearly all these? cases we would take the second mortgage in the name of A. E. Craddbel<; or Craddock and Simes. " No audit of the accounts was made, but each month J) statement would be prepared showing all debits and credits on the. ledger. This statement, however, made no provision for possible depreciation on securities, nor would it provide for bad debts. No reserve fund for this purpose was set aside, If, for instance, we received £IOOO from Mrs Olliver on deposit, a credit entry would be made in her ledger account. As advances were made, the person to whom the advance was made would be debited, and it' the whole amount was advanced the debts would equal the. credit of £IOOO. As regards the interest clue on the £IOOO, Mrs'Olliver would be credited with interest each quarter, and as the payment was ma do sbe would be debited. This payment* to Mrs Olliver would be made out of interest received from the. several borrowers, or, if a shortage, out. of commissions earned for the month before dividing tho profits. Xo balance-sheet was prepared when Simes went out. I paid him some small sum, T think £IOO. mid i took over all liabilities of the late firm. No investigation _ of securities took place, and no provision was made for depreciation, and as n matter of fact some of these securities are still impossible, of realisation. No reserve fund was set aside. The. old bank account, was closed, and a new A. E. Craddock account opened. "We had always had an overdraft at the bank, and to secram this some of these various securities were, deposited with the bank. With the moneys advanced by the, bank further securities would be taken, and bad all securities realised their facn value depositors and the bank would have boe n paid in full. "I traded as A. F-. Craddock for about two years, and then M'Crostie joined me in August, 1000. At that time I iiad an overdraft. M'Crostie paid £1250 for hi< half share in business. No balance-sheet was prepared showing position of depositors' accounts or advances accounts, and be took no share in them. We opened an account in the name of Craddock, M'Crostie Coy. at the bank, and each put in either £250 or £SOO. Meantime my old A. K. Craddock account remained overdrawn, with the bank holding securities against it. and in addition M'Crostie guaranteed it. New books of account were opened for the firm, upon which we both operated. Tho old depositors' accounts still remained in my private A. E. Craddock ledger, and interest on these was always paid by my own cheque, and debited to my account. Similarly interest arising from tbose securities was always paid :into my private, account and passed through my private ledger. I think that any moneys received or deposited subsequent to this date wont to the firm's account, and interest on them would be paid by the firm. The position then was that I. in my capacity as A. E. Craddock, paid interest on all moneys which I had received before M'Crostie joined me, and these payments were'shown in my private books. Side by side with this, f, as a. member of the* firm, became liable for all deposits received by the firm, interest on which «"as paid by the linn's cheque. We divided profits each month, and mine were paid into my private ac-

COlllll'. " W'hon M'Crostie joined me I drew somewhere about £IOOO :i year out of the business, which subsequently rose to nbout £ISOO. M'Crostie remained with nio in active work iill August, 191.'}, when li«-> worked intermittently. In ]Ol4 he became a slopping partner, and in August. 101."), partnership was dissolved T Pood of dissolution provided for £750 1o be paid for goodwill, aud M'Crostic's ledger credits were taken nt i'i.'WO. f. was to pay off the bank overdrafts, which amounted to £7OOO odd bv the end of December, 1015, and to pn'v M'Crostie £750 on same date and the sum of £IOOO within fourteen days of demand and provide approved securities for balance on same date. The positiou then was:- '• 1 had to find by the end of the year the sum of £BBSO and approved .securities for £I3OO. 1 took over all liabilities anil the securities at their face value. ■\l (lint time I t<»ok out a statement showing the estimated value ol securities and L estimated them at £21.000. 1 considered this was ample to meet Hand and M'Crostic's claims of the late linn's liabilities. " 1 immediately began trying to realise the second mortgages iUid equities which L held, but found, owing to the war, that they were unrcalisuble, and 1 could raise no money. Early in 1016 M'Crostie went to Gould, Beaumont, and consulted "Wilding and Aclaud. At ihe snnie time the bank intimated that I must reduce the amount by £4OOO. I had previously decided to form the business into a company early in the year. 1 did eo on terms that the company should pay me £3OOO for goodwill and lease and take over £IO,OOO worth of approved securities. " The company uplifted £2500 of securities from 'inc and 1 paid the amount into the bank, i ako borrowed £ISOO from L. C\ Gardiner and gave him a second mortgage over my house and an undertaking to give a bill of sale over furniture if called on. I still kept on paying into the bank as 1 could to further reduce the overdraft. •'M'Crostie was wanting a settlement, and -when 1 paid the £4OOO into the bank the. bank closed down on the account and stopped my drawing. Tho bank released no seeurit ; es, but demanded further security, and I deposited all I had. ,; Wilding and Acland were pressing for a settlement ana wanted mo to give M'Crostie security. I had no securities left, and executed an agreement to assign al 1 my property and whatever surplus assets the bank and Gould, Beaumont held, to .M'Crostie and Stewart, to wind up the affairs of the old firm and pay its liabilities. "1 still thought tlipre. would be a largo surplus after the bank was satistied. M'Crostie. and Stewart had just tho same difficulty in realising the securities, and the bank kept, pressing mo and also the depositors of the firm of Craddock, M'Crostie. Gardiner was also pressing, and in May of this year I had to execute a bill or sale in tt-rms of my agreement. This ho hold unregistered for twenty days to enable me to find the money, but I was unablo to do so. He registered the bill of sale and I then filed. CAUSES OF FAILURE.

"I attribute my present position to the depreciation of my securities. I estimate that [ have lost n. sum of about £BOOO to £IO.OOO in investments which have not materialised. " After the dissolution of each of

my partnerships I took over all liabilities without investigating the position of the securities and whether they were depreciating. In addition, the profits of the business were divided at. face value, without taking into consideration had debts', with the result that when I took over the liabilities I bore the whole- brunt of the had debts. "I also did not sufficiently take intc account or make provision for the large sum of money I was paying yearly by way of interest to depositors. This would have amounted to about £IOOO per annum, and my living expenses and tlie upkeep of my property, which I could not sell, would have exceeded the balance of my income. "T never had a. statement prepared showing what, amount J was paying out/ a. year in interest to depositors, and did nor. realise that, it was so larg* a sum. as T considered I was receiving written off for bad investments, and provide for it*. J was always trying to realise, the. securities, but found thorn unsalable.

" T never had a statement taken out to ascertain what amounts had to-be written off for bad investraens, and until I prepared my preliminary statement had no idea that losses to such an extent, had been made, and the great part of my losses have been made on securities retained by me since I began business, so I have been bearing the. burden of the depreciation ever since the commencement. " Owing to the war a. further depre nation in securities took place and I was unable to deal with them'in any wav. J

"\\hen T dissolved with M'Crostie, a statement was taken out from the ? n\n° f , £' e firm ' vllich snowed at. -L-0.442 and liabilities at £'20,946. These wore the face values appearing m the books. I„ addition, I took out an estimate of my own securities outside those held by the firm, and these amounted to £IB,OOO. On these figures, even allowing for a certain amount of depreciation, J considered I was solCr ,n ''l hOAre ™r. the assets of Craddock. M'Crostie came to be investigated it was found that thev could be. written down to £14.510. and W n thou .nclnded some bad and doubtful tems. My own securities were found to depreciate in a similar manner." . r„nrc Ass >pee'g. request the bankOre so, U st " tement *«s read by Mr methoT m C M° SSOII added that the method of bookkeeping, which the ankrupt believed to be\be sole canS l' S ,a \ l " rioo >™* io *afc* a 'list- of 1 ve,"r Crod,tS fr ° m tllo «"* ".ill-\eai or yea,-, and if the credits (•verbalanced the debits U «- C,eaUS o/l i 1...+ ii a *; Jits it was assumIts nrfl^'r 1 - One "of the denot t,i- ? mot,,od lvas that it did sec,,,; i "?- '' iCCOlint depreciation of bo. unt.es I<o r instance, after a time J «<m o £IOOO credited to M? s (MUI r would be represented, not b/cash, no 1 t„il ,rj, r' Tll ° *P eaker «"** would h i S , a . gfi say whethe r there o on or a crpdit ' a <ter tho portion of , Vas investigated. Bankrupt, private books had been for > eh e. days ,„ the hands of an accountant Jt pas impossible to make a de, mute statement now, because £ some cases payments had been made toT L Craddock and later payments to the linn of Craddock and M'Crostie. Mr Ore son went on toj-crommend that as tl? f co " c ™ d ,"> the formation of Co some H C, ' i,dd - oCk ' • Al ' Crostie and no int.?! ° l W ?" Cltor should appointed o investigate the affairs of uccLtors. Bankrupt, desired speaker to express his personal regret for tho state into which hi, aftairs had Us liabilities i„ tuU as soon as pos-

Mr Salter produced the title deerL v,7*J i l "' °' Y Meth <«ifet ChnWh.lfed a th'f J'' 0 J"! dosxred himtcr sa.s that they ielt it their moral duty £] of the church, rhfch was a gift by. n.ont ;S atod that M'Crostie, who Sari pd Ins business career as a farmer sold out owmg to ill-health in 1907 H 0 entered the employ of Craddock and bimes as ~ land .salesman. The firm oi Craddock and Simes was dissolved, and .Mr M'Crostio u-as admitted to partnership on payment of £19.50 which went into Craddock's private account, M'C.ostie had no experience of financial affairs. When it became necessary to finance the business M-Lrostie deposited a number of good securities, first mortgages to the value of about £4OOO, with the bank, and Craddock also deposited securities. M'Crostie believed that Craddock's securities were as pood as his own and. Craddock always assured M'Crostie that his private estate was more than sufficieftr to rover all liabilities. When M'Crostie went, out of the partnership he left his £4OOO worth of securities and a further £-.3000 in the business at 6 per cent, and further guaranteed Craddock's account at the bank. There was no reason (o believe that Craddock wilfully misled his partner. This was two years ago. Later M'Crostie sold out, ffe was to receive £7oo, as against the £'l2oo he had paid in' and Craddock was to assume all liabilities. Craddock failed to meet the terms of settlement-, and M'Crostie for the first time in the history of the matter consulted a solicitor. About April, 1916, Craddock promoted a new company to take over the business, and M'Crostie. then learned for the first time, that, Craddock bad large private liabilities. Later ho learned that Craddock had used a considerable amount of the firm's asset's to discharge his private liabilities. On July 20, 1916, a statement showed that there were assets amounting to £32,500. enough to cover all liabilities and leave Craddock a surplus of oyer £7OOO. When Craddock was finally compelled to make an assignment of tile partnership estate ho retained certain private assets, and maintained that they were .sufficient to cover his private liabilities. If Craddock were insolvent at the date of the dissolution of the partnership M'Crostie had a prior claim on the partnership account to other creditors. After the dissolution some of the securities were realised, and some thousands of pounds of liabilities were met. The bank brought pressure to bear. Gould. Beaumont and Co. took over 5 the liabilities, and there was now owing to that firm over £6OOO. Messrs M'Crostio and Stewart had always taken the view as liquidators that their first duty was to the creditors of the old firm.

The Official Assignee said it would now be open to creditors to a.sk questions. The offer of the Shirley Methodist. Church Trustees was a very creditable one, and it was for the creditors tn say whether the offer should he accepted. He understood the amount involved was about £BO. . • On the motion of Mr Hunter the offer wa« accepted with the thanks of the creditors, and the fixing of a price for the land was left in the hands of the Official Assignee. Mr Neave made a statement regarding the mortgage of £ISOO on bankrupt's house property, and a further bill'of sale given over the furniture, fits said that while the security as against the land would stand. Mr L. C, Gardiner would relinquish his hold over the furniture. proceeding.)

The following is a list, of unsecured creditors :— Kmeaid and Co., grocers, Christchurch 7 13 & \V. Jones, nurseryman, Christchurch 1 a 6 A. JiaHipk/ii, contractor, Christchurch IIS 11 0 W. Irving, Burgeon, Christchurch Hospital Board, Christchurch . 17 7 G 3 3 I; WilTrid Levi and Jackson, solicitor?, Wellington 0 2 0 La no and Relive, solicitors, Christchurch .... 13 6 G B. Terry, hotel proprietor, Ch ri?t church .... 1 0 0 Xew Zealand Fanners' Co-oper-ative Association, Christchurcli o 17 0 Quill, Morris and Co., spirit merchants, C'hristchurch . 6 4 0 A. J. White and Co., Christchurch , 84 10 1 John Thornton, bootmaker, Christchurcli .... 5 0 11 T. S. AWston a lid Son, solicitors, Christchurcli 7 11 0 Ward and Co., brewers, Christchurch 1 9 0 J. BaJlantyne and Co., drapers, Christchurch .... '235 10 7 J. S. AtKinson, dentist, Chri'tchurch 3 IS 0 V). ]. C., drapers, Christchurch . 20 o 11 l'\ 11. Steele, butcher, Christrhurcll fi 7 Gould, B»Fiiimnnt and Co., agents, Christchurch 72 10 6 Whitcombe and Tombs, booksellers, Christchurch 2 i 7 Kerr and Bnrnett, nurserymen, Christchvrch .... 1 10 0 Franks, Hun tor and Lyon, solicitors, Christchurch . 9 IS 1) Ilulbcit and Co., mercers, Christchuii h .... 6 0 10 M. F. 1'e La Cour, motor mechanic, Christchurch 0 1G 0 ,T. I). Watson, storekeeper, Sumner 6 6 0 Johnson and Couzins, tent makers. Christchurch fi 1 4 Christchurch .... 80 C 6 W. Sey and Sons, decorators, Heath and Co., drapers, Christchurch 17 1 11 Mrs .1. Oliver, Shirley 3-200 0 0 Uev W. Oliver, Shirley 900 0 u \Y". .1. Roberts, care Mr C. h. Thomas, Chriatehurch . . 7)00 0 0 Mrs Ot'.vay, Patoka . 300 0 0 Yorko's Kstate, Christchurch •101) 0 0 Quinn's Kstate, Christchurch 300 0 0 French's Kstate, enre W. J. French, Sydenham 7.30 0 V A. J. Hutchinson, care Mr C. S. Thomas, Christchurch )700 0 u Booker's Estate, care Garrick and Co., Christchurch 400 0 0 Walsh's Estate, care H. Hambleton, Greymouth . 29 17 6 A. M. Dumbell, Fcntherston Terrace, Wellington . OO j 10 0 W. D. Dumbell, FeatTierston Terrace, Wellington 25G 1(5 6 Miss Wallace, Cnnon Street, St Albr.ns ' 331 5 0