H.—3o

16

Mr. James, on page 321, was asked — I suppose you can readily see that a building or buildings might cost half a million to erect and might not be worth £100,000 to sell ? —That is possible. At page 323 he was asked — In other words, if you have a district which is over-provided with freezing-works you can see that none of them would be saleable in the market ? —lt would be a survival of the fittest. In passing, we may mention that Mr. Carney said that, although he had at one time expressed his opinion that Vesteys were getting the place too cheap, he had changed that opinion, and that he thought Vesteys had paid full value for the works. Mr. Thompson, the manager of the Bank of New Zealand at Gisborne, in September, 1923, considered the value of the works as worth from £200,000 to £250,000. It is quite true that he did not personally inspect the works, but the statement is contained in a letter to his head office in connection with an application that Mr. Lysnar made for Mr. Thompson's bank to take over the company's account as mentioned elsewhere. In that letter the following appears : — The chairman of directors stated that the company's works, plant, machinery, &c., were valued by Messrs. James and McCarthy, of Wellington, on the 6th instant, at £400,000. Prom inquiries made by us this figure is excessive : £200,000-£250,000 would, we understand, be nearer the mark, and we are informed that Vesteys consider they could erect similar works at the present time at a cost of £175,000. We refer elsewhere to the evidence of Mr. Thompson, but in passing we would point out here in connection with the value of freezing-works that Mr. Thompson's ideas as to the value of Mr. Lysnar's works were treated by Mr. Lysnar very lightly. It must, however, be remembered that Mr. Thompson in 1923 was the manager at Gisborne of the bank with which the Gisborne Sheep-farmers' Co-operative Company was banking, and that the works of that company had been valued before the 24th June, 1921, as is shown in Appendix N. We think, therefore, that Mr. Thompson should have been better able to reach a fair idea of the value of Mr. Lysnar's works than Mr. Lysnar endeavoured in the course of his final address to lead us to believe. Is Replacement Value Proper Standard ? Mr. Lysnar endeavoured, and very strenuously, to convince your Commissioners that his works were at the time of the sale worth from £400,000 to £450,000, because Messrs. James and McCarthy said that the replacement value of the works was £400,000, and that there was a valuable spring of water. It must be plain, however, that if a freezing plant were erected in an unsuitable locality and in unfavourable conditions, no matter how well equipped, no sensible person would consider it to be worth the cost of replacement value. A large part of the cost of replacement value of such works absolutely disappears immediately the works have been completed. In the case of works which had been built in a suitable location, and in the midst of a district which amply supplied it with stock, and in a district where there is not undue competition, no doubt the cost or replacement value would be a fair value for the works. But if, in that case, through some disaster, the district were denuded of stock and rendered unsuitable for stock-raising, but the works remained physically intact, no sensible person could say that the cost or replacement value of the works was their fair value. It is quite clear that the works had ceased to be a necessity to the district. Partial destruction, by disaster, of the stock, and of suitable natural conditions, would cause a proportionate fall in the real value of the premises. So the advent of a financial slump —the change in economic and financial conditions —rendered the district of Poverty Bay able to support only two works, and not able to support three works, andl that circumstance entirely changed]], the value of those works. Under conditions such as those, it is, in our opinion, quite wrong to think that the fair market value, or fair commercial value, or fair business value—whichever term may be selected —of Mr. Lysnar's works was, in September, 1923, taking into consideration all the facts placed before us, to have been anything like the cost or replacement value.