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The Pamphlet Collection of Sir Robert Stout: Volume 74

Mr Haggitt's Opening

Mr Haggitt's Opening.

Mr Haggitt, opening in support of the summons, said that though the agreement was dated the 1st June the terms of the agreement were actually arrived at on the 19th March.

His Honor: There was no binding agreement till the 1st June.

Mr Haggitt said that there was no formal agreement until that date, but it was founded on negotiations which commenced on the 19th March. That was the starting point, the date of the balance sheet which was prepared. The terms of the agreement were as follows :—

Whereas the J. G. Ward Farmers' Association of New Zealand, Limited (hereinafter referred to as the "said association") were customers of the Colonial Bank of New Zealand (hereinafter called the "said bank"), and kept an account current with the said bank at its Invercargill branch and also at its Gore branch, and the said account was one of the accounts appearing in the "C" list referred to in clause 18 of the agreement dated the 18th October 1895, made and entered into between the said bank and the Bank of New Zealand, and approved by the Parliament of New Zealand, as mentioned and contained in "The Bank of New Zealand and Banking Act Amendment Act 1895." And whereas the Bank of New Zealand has refused to take over the said account of the said association, and the said liquidators have, pursuant to said clause 18 of the said agreement, required the Bank of New Zealand to realise or liquidate the said account, and whereas the said liquidators lately employed Mr William Richard Cook, of the firm of Cook and Gray, Dunedin, accountants, &c., to investigate the affairs of the association, and Mr W. R. Cook has investigated the said affairs accordingly, and has prepared and submitted a statement showing the result of his investigations and the state of the liabilities and assets of the association as at March 20, 1896. (Copy of statement annexed.) And whereas the Colonial Bank guaranteed the Bank of New Zealand payment of the debentures amounting to £20,000, firstly mentioned in the statement of liabilities and assets, which bear interest at the rate of 6 per cent., and the association on March 20, 1896. were indebted to the bank (inclusive of the page 2 £20,000) in the sum of £92,170 9s 2d, which also includes the liability of the association in respect to bills under discount with the bank. And whereas the Colonial Bank, having paid the £20,000 to the Bank of New Zealand, holds as security for the said indebtedness debentures amounting to £20,000 (so guaranteed as aforesaid), discharged from the said guarantee further debentures of the association amounting to £30,000, and the guarantee of the Hon. J. G. Ward for payment of the account of the association in the Colonial Bank to the extent of £20,000. And whereas the Colonial Bank holds the promissory note of the Hon. J. G. Ward, payable on demand, for £55,150, being the amount written off the account of the association in terms of clause 18 of the agreement of October 18, 1895, And whereas the Hon. J G Ward is also indebted to the Colonial Bank in the sum of £16,000, or thereabouts, in respect to a draft on London for that amount, which was in transitu on the date of the agreement of October 1895, and is guaranteed to the Bank of New Zealand underclause 25 of the said agreement, and the Colonial Bank holds as against this draft and as security for the same 1600 shares in Nelson Bros, and Company (Limited). And whereas the Hokonui Railway and Coal Company (Limited) are indebted to the Colonial Bank in the sum of £4900 or thereabouts on the foot of the account current of said company with the Colonial Bank, and the Colonial Bank holds as security for such indebtedness the joint and several guarantees of the Hon. J. G. Ward, Frederick William Thompson (of Christchurch, dentist), the late Arthur Sedgley Hanan (of Invercargill, surgeon, deceased), and John Hayes (of Hokonui, mine manager). And whereas Alfred Lee Smith and James Bennie Reid have proposed to the liquidators the purchase of the debt of the association to the Colonial Bank as on March 20, 1896, and all securities for same, or any part thereof, held by or on behalf of the said bank, and also the promissory note of the Hon J. G. Ward and the said debt or sum of £16,000, or thereabouts, due by the Hon. J. G. Ward to the bank, and all securities for the same respectively, or any part thereof, held by or on behalf of the Colonial Bank, and also the debt of the Hokonui Railway and Coal Company, and all securities for the same, or any part thereof, held by or on behalf of the bank at the sum of £62,750. And whereas the liquidators, having investigated the affairs of the association, and being satisfied that it will be beneficial to the bank that the offer of A. L. Smith and J. B. Reid should be accepted, have, in pursuance of all powers and authorities vested in them as official liquidators, agreed to accept the same, subject to the sanction of the judge of the Supreme Court at Dunedin, and to the conditions and agreements hereinafter contained. Now it is hereby agreed by and between the parties hereto as follows:—
1.The said liquidators shall, so soon as practicable, but in any event before June 30, 1896, apply to the judge in Chambers to sanction this agreement.
2.Subject to such sanction being obtained, the liquidators shall sell to A. L. Smith and J. B. Reid, and the latter shall purchase from the liquidators for £62,750 (1) the debt due by the association to the Colonial Bank on March 20, 1896, and all securities and guarantees for the same, or any part thereof, held by the bank, or the liquidators, or by any corporation or person whomsoever on behalf of the bank. (2) The promissory note of the Hon. J. G. Ward for £55,150, payable on demand, and also the debt of £16,000 due by him to the bank, and all securities for the same respectively, or for any part thereof, held by the bank or the liquidators, or by any corporation or person whomsoever on behalf of the bank. (3) The debt due by the Hokonui Railways and Coal Company (Limited) to the bank, and all securities and guarantees for the same, or any part thereof, held by the bank or the liquidators, or by any corporation or person whomsoever on behalf of the bank. (4) All claims of the bank against the association, the Hon. J. G. Ward, and the Hokonui Railway and Coal Company.
3.Upon this agreement being sanctioned by the judge, the said A, L. Smith and J. B. Reid shall within fourteen days after such sanction pay to the liquidators the sum of £62,750 in cash.
4.In the meantime, as from March 20 last, the business of the association has been, and until payment is made of the purchase money, in case this agreement shall be sanctioned by the judge, and shall be carried on under the join supervision of W. R. Cook on behalf of the liquidators, and of A. L. Smith and J. B. Reid or some person appointed by them in that behalf in their interests. And any moneys which the liquidators may have advanced, or authorised the Bank of New Zealand to advance, for the purpose of the business after March 20, 1896, or may here-after advance, or authorise the Bank of New Zealand to advance, for the same purposes until this agreement shall be sanctioned by the judge, shall, if the said sanction be obtained, but not otherwise, be refunded by A. L. Smith and J. B. Reid at the time of the payment of the purchace money, and any reduction made in the amount the account of the association after the date aforesaid shall be deducted from the amount of the purchase money
5.On payment of the purchase money the liquidators shall do and execute and cause to be done and executed at the cost and charges in all things of A. L. Smith and J. B Reid (including the costs of and incident to perusal and obtaining execution by the liquidators and all other parties all such acts and deeds as may be necessary for transferring to and vesting in A. L. Smith and J. B. Reid, or as they shall direct, the debts, securities, and premises herein before mentioned and agreed to be sold.
6.In case this agreement shall not be sanctioned by the judge it shall cease and determine.
7.The said A. L. Smith and J. B. Reid shall, on or before the day of the date of this agreement deposit with the liquidators £500, which, in the event of the sanction of the judge to this agreement being refused, shall be repaid to them, but in the event of the completion of the purchase shall be accepted as part payment of the purchase money.
8.In case this agreement shall be sanctioned by the judge, and the said A. L. Smith and J. B. Reid shall fail to pay the £62,750 in cash within the time limited for that purpose, or within such further time not exceeding 24 days after such sanction as the parties here to may agree upon, this agreement shall cease and determine, and the £500 shall be absolutely forfeited to the liquidators as and for liquidated damages, and shall be accepted by them in full satisfaction of and as compensation for all damages in respect such determination.
9.The liquidators shall in their own or in the name of the bank, as the case may require, endorse to A. L. Smith and J. B. Reid the promissory note of the Hon. J. G. Ward for £55,150, and any other promissory notes or negotiable instruments which the bank may now or at the time payment of the purchase money hold in respect page 3 to or as representing the said debts hereby agreed to be sold, or any of them or any part or parts thereof respectively; but every such endorsement shall be without recourse to or against the bank or the liquidators.
10.If this agreement be sanctioned by the judge, the liquidators shall be bound to pay off the amount due by them to the Bank of New Zealand in respect to the debt of the association, so as to put themselves in a position to assign the same to A. L Smith and J. B. Reid, but they shall not be required in such assignment or otherwise to enter into any covenant for title with A. L. Smith and J. B. Reid, nor shall the bank be so required.
11.At the time of the completion of the purchase A. L Smith and J. B. Reid, their executors, administrators, or assigns will procure from the association and hand to the liquidators a deed of covenant by the association for themselves, successors, and assigns with the liquidators that the association, their successors, or assigns shall and will, at all reasonable times, until the liquidation of the Colonial Bank shall be closed, upon the request of the liquidators, and also shall and will, in the course of any proceeding against any director, manager, official, or other officer, or any member or shareholder of the Colonial Bank, under section 226 or 228 of "The Companies Act 1882," produce and cause to be produced to the liquidatoia or to such person or persons as they shall direct and at such places as they shall direct, all the books, papers, and documents of the association containing any entry, memorandum, or minute relating to or concerning the dealings and transactions between the association and the Colonial Bank, and between the association and the Hon. J. G. Ward from the time of the opening of the account current kept by the association with the bank down to the date of this agreement, and shall allow the liquidators or such person or persons as they shall direct, at all reasonable times, to inspect and make copies of or extracts from all or any of the books, papers, and documents.
12.In case this agreement shall be sanctioned by the judge, the said A. L. Smith and J. B. Reid shall take upon themselves all the liability (if any) of the Colonial Bank to John Connell and Co. (Limited), and to Messrs Robert Brooks and Co. in respect to and arising out of all and every or any of the transactions and business affairs between the association and John Connell and Co. (Limited) and between the association and Robert Brooks and Co., in which the Colonial Bank has been concerned or implicated, and will indemnify and save harmless the bank and the liquidators therefrom, and of and from all actions, suits, damages, claims, and demands whatsoever arising therefrom or thereout, but so that any moneys which the bank or the liquidators may have to pay under any guarantee or other arrangement made between the Colonial Bank and the Bank of New Zealand arising out of a certain transaction in oats on account of Robert Brooks and Co. shall be repaid without interest to the bank or the liquidators within 18 months from the date on which this agreement shall be sanctioned by the judge.
13.Nothing in this agreement is to prejudice the right of the liquidators to dispute, as between the Colonial Bank and the Bank of New Zealand, the liability of the last-mentioned bank to the liquidators in respect to a sum of £5052 ls 4d debited by the Bank of New Zealand to the account of the association on December 31, 1895, without the authority or consent of the liquidators, and if this sum of £5052 ls 4d shall be found to have been improperly charged to the account of the association, so far as the Colonial Bank and the liquidators are concerned, the liquidators shall not be bound to assign that portion of the debt of the association to A. L. Smith and J. B. Reid until the question between the said banks has been settled and determined. And notwithstanding anything in this agreement contained, the liquidators shall be at liberty to deduct this £5032 ls 4d or so much thereof as shall be found not to be properly chargeable to the Colonial Bank as between that bank and the Bank of New Zealand, from the claim of the Bank of New Zealand and against the Colonial Bank in any settlement of accounts between the said banks. And if the amount of the debt due by the association to the Colonial Bank, agreed to be hereby assigned, shall be reduced by reason of this clause, the liquidators shall pay to A. L. Smith and J. B. Reid a sum equal to 11s in the pound on the amount by which the said debt shall be so reduced.

Mr Haggitt next quoted clause 18 of the agreement between the two banks, which is as follows :—

With respect to the accounts appearing in the said "C" list, the selling bank shall indemnify and protect the purchasing bank against any loss or deficiency on the realisation of such accounts respectively, provided that the purchasing bank shall, immediately on this contract taking effect, write off the amounts standing in the right-hand column of the " C " list, and credit the respective accounts in such list with the amounts so written off. The purchasing bank shall have the option, within three months from the date of this contract taking effect, to take over all or any of the said accounts in the said " C " list, and in the event of the purchasing bank deciding to take over any such account the selling bank shall stand released from its agreement to indemnify and protect as aforesaid. The selling bank may at any time require the purchasing bank to elect whether such bank will take over all or any of the accounts in the "C" list or reject the same, and in the event of the purchasing bank refusing to take over all or any of such accounts the selling bank shall be entitled to take over the accounts so rejected, with all securities in respect thereof, on payment of the amount owing on such accounts or account respectively, or require the purchasing bank to realise or liquidate the account or accounts which the purchasing bank refuses to take over, and any deficiency arising on such liquidation shall be made good by the selling bank.

Under that clause the Colonial Bank had the whole risk of the J. G. Ward Farmers' Association, it being one of the accounts in the " C " list. In order to obtain possession of the account and be in a position to transfer it to the purchasers, they would require to pay to the Bank of New Zealand the whole amount of the account, some £92,000 odd.

His Honor : Yes, but they have not to absolutely pay it over, because the Bank of New Zealand retains.

Mr Haggitt said it was just the same thing, because the difference between the amount of the account which was taken over and the amount received from the purchasers had to be made up.

His Honor asked what was the point in the first part of writing off the amount standing in page 4 the right-hand column of the "C" list? Why was not the whole liability put in the right-hand column ?

Mr Haggitt said that was one of the mysteries of liquidation which would be explained when he read the affidavit.

Mr Young said the amount of indebtedness in the left-hand column was considered good, that in the right-hand column bad.

His Honor : That is the case with the " B " list certainly. I wondered if the whole amount in the " C " list was considered bad.

Mr Haggitt said no. The £55,000 was written off altogether as a condition to the Colonial Bank guaranteeing. The only explanation that was offered was in Mr Ward's affidavit. There was an amount written off, and there was a promissory note given, and that was all they knew of the matter. The rest of the account was guaranteed by the Colonial Bank, so that the Colonial Bank was liable for the whole. Then the Bank of New Zealand had the option during three months of taking over the account. If it did not, the Colonial Bank had the right to require the Bank of New Zealand to elect whether they would take it over or not, and if it refused, the Colonial Bank was entitled to take over the account itself or call upon the Bank of New Zealand to liquidate it. The recitals of the agreement showed that the Bank of New Zealand had positively declined to take over the account, and that the liquidators had called upon the Bank of New Zealand to liquidate the account when these negotiations commenced.

His Honor : The Colonial Bank is now liable to pay to the Bank of New Zealand the difference between the amount which is treated as good and the total amount of the indebtedness.

Mr Haggitt: Yes, £92,000 odd; and there is a sum of £5000 besides in connection with the Hokonui Railway and Coal Company.

Mr MacGregor : That makes up £98,000.

Mr Haggitt next drew his Honor's attention to the affidavit made by the liquidators, which was as follows :—
"We, William Brown Vigers, of Dunedin, in the provincial district of Otago, in the colony of New Zealand, bank inspector, Keith Ramsay, of Dunedin aforesaid, chipping agent, and William Lawrence Simpson, of Dunedin aforesaid, accountant, the official liquidators of the above-named bank, severally make oath and say as follows :—
1.The J. G. Ward Farmers' Association of New Zealand (Limited) was a customer of the Colonial Bank of New Zealand, and kept an account current with the said bank at its Invercargill branch, and also at its Gore branch, and the said account was one of the accounts appearing in the 'C' list, referred to in clause 18 of the agreement, dated October 18, 1895, made and entered into between the said bank and the Bank of New Zealand, and approved by the Parliament of New Zealand, as mentioned and contained in ' The Bank of New Zealand and Banking Act Amendment Act 1895.'
2.Immediately on the said agreement taking effect the Bank of New Zealand wrote of the amount standing in the right-hand column of the said 'C' list against the account of the said association, and credited the account of the said association with the sum of £55,150 being the amount so written off.
3.The Colonial Bank of New Zealand is bound by the terms of the said agreement to indemnify and protect the Bank of New Zealand against any loss or deficiency in the realisation of the account of the said association.
4.The Bank of New Zealand did not within three months from the date of the said contract taking effect take over the account of the said association.
5.We, as such official liquidators as afore-said, after the expiration of the said three months from the date of the said contract taking effect, required the said Bank of New Zealand to take over the said account of the said association or to reject the same, and the Bank of New Zealand refused to take over the said account, and we thereupon requested the Bank of New Zealand to realise or liquidate the said account.
6.Afterwards and on or about the 6th day of March last past we employed Messieurs Cook and Gray, of Dunedin, accountants, trade assignees and financial agents, to investigate the affairs of the said association on our behalf and Mr William Richard Cook, one of the said firm, made such investigation, and reported to us that the accounts of the said association, as valued by him at the 20th day of March last past, showed a deficiency of assets to meet liabilities amounting to £48,456 16s 4d. A copy of the statement of the assets and liabilities of the said association, as prepared and submitted to us by the said William Richard Cook, is hereto annexed and marked with the letter 'A.'
7.We have ourselves investigated the affairs of the said association, and we believe that the result arrived at by the said William Richard Cook as to the amount of the liabilities and the value of the assets of the said association, including his estimate of the value of the uncalled capital of the said association, is virtually correct, although we are of opinion that his estimate of the value of the book debts would not be realised if the said association were to be put into liquidation.
8.The Colonial Bank of New Zealand guaranteed to the Bank of New Zealand payment of the sum of £20,000 advanced by the Bank of New Zealand to the said associate upon its debentures, and also the interest thereon, which amounts to £600 every half year. The currency of the said debentures is 10 years. The liability of the said association to the Colonial Bank of New Zealand, including the amount of these debentures, was on the 20th day of March last past £92,179 9s 2d.
9.The securities held by the Colonial Bank of New Zealand for the said indebtedness are the said debentures to the amount of £20,000 page 5 presently held by the Bank of New Zealand, further debentures to the amount of £30,000 held by the Colonial Bank of New Zealand, and the guarantee of the Honourable Joseph George Ward for payment of the overdraft of the said association up to the amount of £20,000.
10.The Colonial Bank of New Zealand also holds the promissory note of the Honourable Joseph George Ward, dated 19th October 1895, for the sum of £55,150, payable on demand. This promissory note represents the amount written off the account of the said association, and credited to it as stated in paragraph 2 of this our affidavit.
11.Toe Honourable Joseph George Ward is indebted to the Colonial Bank of New Zealand in the sum of £16,000 or thereabouts in respect of a draft on London for that amount, which was in transitu on the day of the date of the said agreement of the 18th day of October 1895.
12.The payment of this draft is guaranteed by the Colonial Bank of New Zealand to the Bank of New Zealand under clause 25 of the said agreement, and the only security held as against the said draft is 1600 shares in the company called Nelson Bros. (Limited). These shares were paid-up to the amount £10 each, and were, we are informed and believe, estimated to be of the value of £9 each at the time of the negotiation of the said draft, but at the time of the arrival of the said draft in London their value was considerably less, and the said shares at the present time are practically unsaleable.
13.The Hokonui Railway and Coal Company (Limited) is one of the clients or customers of the said association, and is largely indebted to the said association; the said company is also indebted to the Colonial Bank of New Zealand in the sum of £4900 or thereabouts on its account current with the said bank. The only security the said bank has for the said indebtedness is a guarantee of the said Joseph George Ward, Frederick William Thompson (of Christchurch, dentist), the late Dr Hanan (of Invercargill, surgeon, deceased), and John Hayes (of Hokonui, mine manager). We understand that the executors of the late Dr Hanan dispute any liability under the said guarantee on the ground that the account of the said company was continued to be carried on after the death of the said Dr Hanan, and that the amount owing at the time of the death of the said Dr Hanan has been discharged by payments since made to the credit of the account, and the present liability has all arisen since the death of the said Dr Hanan. We have ascertained that such is the fact, and we are advised by our solicitors that, although the other guarantors are still liable on their guarantee, it is very doubtful whether the executors of the late Dr Hanan can be held liable under the circumstances. As the result of our inquiries and investigations into this account we verily believe that, even if we have a good legal claim against the guarantors other than Dr Hanan, and were to proceed to exhaust them, we should not be able to obtain from the estates of the whole of them the sum of £1000; whilst if we were to take steps to wind up the said company we should not get even ls in the pound from its available assets.
14.It is of the utmost importance to the successful liquidation of the Colonial Bank of New Zealand to be rid of the account of the said association and the liability to the Bank of New Zealand, arising out of the liquidation thereof under clause 18 of the said agreement of the 18th day of October 1895.
15.We are satisfied that the said Joseph George Ward is not in a position to pay any appreciable sum in respect of the amount of his liabilities to the Colonial Bank of New Zealand, and that in point of fact his promissory note and his guarantee are both valueless to the said bank as securities. We have procured from the said Joseph George Ward an affidavit as to his means, and a statement setting forth his financial position
16.We are satisfied that the sum of £62,750 in cash, with their guarantee of £5000 in respect of a parcel of oats which should have been shipped to Messrs R. Brooks and Co., made to us by Messieurs Alfred Lee Smith and James Bennie Reid, for the purchase of the debt due by The J. G. Ward Farmers' Association of New Zealand (Limited) to the said bank, and the securities for the same and the other debts and securities mentioned in the agreement bearing date the first day of June 1896, made and entered into by us with the said Alfred Lee Smith and James Bennie Reid, which agreement is now produced and shown to us and marked with the letter 'B,' is more than we can by any other means realise for the same, and we believe that it will be beneficial to the said bank that the offer of the said Alfred Lee Smith and James Bennie Reid be accepted, and the said agreeement given effect to and carried out.

"A"

Statement of Liabilities and Assets of the J. G. Ward Farmers' Association of New Zealand (Limited), Invercargill, as at 20th March 1896:—
Liabilities.
Bank of New Zealand debentures £20,000 0 0
Colonial Bank of New Zealand £20,000 0 0
Grain and rail account 9,605 0 0
Local bills 8,312 4 0
Inland bills 951 1 7
Colonial bills 425 0 0
Past due bills 32,856 3 7
72,179 9 1
Sundry creditors 18,970 5 12
Trade accounts (local) 1,099 6 7
Wages 186 0 0
Bank of New Zealand unpresented cheques 362 5 6
£112,797 7 2
Contingent liabilities, as per list £5,198 16 3page 6
Assets.
Book debts £47,696 12 10
Stocks 12,680 0 0
Plants 1,151 1 3
Shares in saleyards 50 7 6
Waddel's property 2,500 0 0
New Zealand Land Company's scrip 233 9 3
Bank New Zealand, special account, credit £17 0 0
Bank New Zealand, ordinary account, credit 12 0 0
29 0 0
Deficiency 48,456 16 4
£112,797 7 2
Memo.—Estimated value of uncalled capital, exclusive of J. G. Ward's share, as per list £8,457 0 0

Wm. R. Cook.

His Honor said that one of the recitals of the agreement spoke of the association as owing £20,000 to the Bank of New Zealand on debentures and £30,000 to the Colonial Bank. Why did not they include the £50,000 in the liabilities ? The statement of assets and liabilities showed only £40,000.

Mr Haggitt said that £10,000 did not appear, because the bank held them and had a lien upon them in respect to the account.

His Honor: That does not account for the other £10,000.

Mr Haggitt said the indebtedness appeared in respect of them in the Colonial Bank's account. They had never been issued, except the £20,000 which the Bank of New Zealand got—the £20,000 which the Colonial Bank guaranteed under this agreement. Then they got another £20,000, which they bought, and there were the £10,000 held against the general indebtedness.

His Honor : The general indebtedness does not appear in the balance sheet.

Mr Woodhouse : The general indebtedness was shown at £72,000.

Mr MacGregor said that nobody reading the balance sheet would imagine the £50,000 worth of debentures had been issued. Then they had the affidavit of William Richard Cook, which was as follows :—
"I, William Richard Cook, of Dunedin, in the provincial district of Otago, in the colony of New Zealand, accountant, make oath and say :
1.I and William Gray, of Wellington, in the colony of New Zealand, accountant, carry on business in co-partnership at Dunedin aforesaid, and also at Wellington aforesaid, and also at Auckland and Christchurch, in the colony of New Zealand, as accountants, trade assignees, and financial agents, under the style and firm of ' Cook and Gray.'
2.I was employed by the official liquidators of the Colonial Bank of New Zealand to investigate the affairs of the J. G. Ward Farmers' Association of New Zealand (Limited), and to make a full and searching inquiry as to the assets and liabilities of the said company, and the value of the same, and also into the value of certain securities held by the Colonial Bank of New Zealand as against the account current kept by the said company with the said bank.
3.I investigated the affairs of the said company accordingly, and made up a statement of the assets and liabilities of the said company as at the 20th day of March 1896, and the paper writing hereunto annexed marked ' A ' is a true copy of the statement so prepared by me, and contains to the best of my knowledge, information, and belief a full and correct account of all the property and effects (real and personal) of which the said company was possessed or in which the said company had any share or interest in possession, reversion, or expectancy on the said 20th day of March 1896.
4.The greater part of the deficiency, amounting to £48,456 16s 4d, shown in and by the said statement is caused through losses made in book debts, which amount in all to £85,070 16s 6d, of which amount, after making searching inquiries, I deem necessary to write off £37,374 3s 8d as absolutely bad and worthless, leaving a balance of £47,696 12s 10d estimated as good. I found that indiscriminate credit had been given and little or no security taken, and I felt positive that in writing off the amount above stated I have written off no more than I should have done in order to arrive at a true and just value of the book debts of the company as on that date.
5.In a memorandum at foot of the said statement, I have estimated the value of the uncalled capital of the company at £8457. I arrived at this estimate after making searching inquiries as to the position of the present holders of the shares in the company, and I feel certain that my estimate of the value of the uncalled capital is as nearly correct as possible.
6.In valuing the stocks at £12,680, I have taken the oats, seeds, and guanos at their then market prices, and the rest of the stock at cost, with the exception of binder twine, oils, and separators, on which, as the result of inquiries made by me, I have put a just and fair value. I have written off £666 for old and depreciated goods, and have valued the stocks as a whole at what I verily believed to be their true and correct value.
7.The plant and office furniture stand in the books at £2302, but the same are not fairly worth more than one-half of that amount, and I have taken them in accordingly at £1151 ls 3d, which I verily believe to be their true and correct value.
8.I ascertained that the last year's operations of the Hokonui Railway and Coal Company (Limited) resulted in a loss of £1100, The bank overdraft amounts to £4900 or thereabouts, for which the bank holds the guarantee of the Honourable Joseph George Ward, the late Dr Hanan, Mr Frederick William Thompson (of Christchurch, dentist), and one John Hayes (of Hokonui, mine manager), the liability under which is, as I am informed, disputed on legal grounds. Beyond what (if anything) may be recoverable on their guarantee the debt is of little value.page 7
9.I am aware of the offer made by Messieurs Alfred Lee Smith and James Bennie Reid to the official liquidators of the Colonial Bank of New Zealand for the purchase of the debts of the J. G. Ward Farmers' Association of New Zealand (Limited) and the securities for the same on the 20th day of March last past, and I have read the agreement for sale and purchase, dated the 1st day of June 1896, entered into and made between the said liquidators and the said Alfred Lee Smith and James Bennie Reid, and I am certain, as the result of my investigations on behalf of the said official liquidators, that amount offered by the said Alfred Lee Smith and James Bennie Reid for the several debts and securities mentioned in the said agreement, as on the said 20th day of March last, is more than could have been realised for the same had the said company been then forced into liquidation."
Then there was the affidavit of Robert A. Anderson, manager of the J. G. Ward Farmers' Association, which was as follows :—
"I, Robert Albert Anderson, of Invercargill, in the provincial district of Otago, in the colony of New Zealand, manager of the J. G Ward Farmers' Association of New Zealand (Limited), at Invercargill aforesaid, make oath and say:—
1.I was in the month of February 1896 appointed manager of the J. G. Ward Farmers' Association of New Zealand (Limited) in the place of John Fisher, the former manager of the said company, who had held that office from the time the said company was incorporated and commenced business up to shortly before the time of my appointment.
2.I have read the statement of the assets and liabilities of the J. G. Ward Farmers' Association of New Zealand (Limited) as at the 20th day of March 1896 prepared by Mr William Richard Cook, of the firm of Cook and Gray, and also the copy of the said statement annexed to the affidavit of the said William Richard Cook sworn herein on the second day of June 1896.
3.The said statement contains a full and true account of all the liabilities of the said company as on the said 20th day of March 1896, and also a full and true account as on that day of all the property and effects, real and personal, of which the said company was possessed, or in which the said company had any share or interest in possession, reversion, or expectancy.
4.I know of no property whatsoever, real or personal, of any description belonging to the said company, or in which the said company has any interest whatsoever, which is not included in the said statement.
5.The said company has not to my knowledge made away with, encumbered, or charged or in any manner parted with any part of its property or effects, real or personal, since the month of December 1895, when the said above-mentioned bank went into liquidation, save in the ordinary way of business and in the course of carrying on its business in the usual manner in which businesses of a like character or description are carried on."
Then there were the affidavits of Messrs Thompson and Hayes. Mr Thompson's affidavit was as follows :—
"I, Frederick William Thompson, of Christchurch, in the provincial district of Canterbury and colony of New Zealand, dentist, make oa h and say :
1.In connection with Dr Hanan (of Invercargill, surgeon, now deceased), the Honourable Joseph George Ward (of Invercargill, aforesaid), and John Hayes (of Hokonui, mine manager), I signed a guarantee to the Colonial Bank of New Zealand guaranteeing the account of the Hokonui Railway and Coal Company (Limited) with the said bank to the extent of £5000.
2.The said Dr Hanan died on or about the 17th day of April 1894, and the said account so guaranteed as aforesaid was, I am informed and believe, carried on by the said bank alter his death, and I have been informed that by reason thereof, or by some other means, the said guarantee is no longer enforceable against the representatives of the said Dr Hanan or against the remaining guarantors.
3.The total value of the property possessed by me, after deducting the encumbrances thereon, does not exceed the sum of £250, and the debts and liabilities owing by me, exclusive of any liability in respect of the said guarantee, amount to the sum of £250.
4.If I am liable on the said guarantee to pay the sum of £4900 I am utterly unable to pay that amount, or any part thereof, in excess of the sum of £250.
The affidavit of John Hayes, the other guarantor of the account of the Hokonui Railway and Coal Company, was as follows :—
"I, John Hayes, of Hokonui, in the provincial district of Otago, in the colony of New Zealand, mine manager, make oath and say :
1.In conjunction with Dr Hanan (of Invercargill, surgeon, now deceased), the Honourable Joseph George Ward (of Invercargill, aforesaid), and Frederick William Thompson (of Christchurch, dentist), I signed a guarantee to the Colonial Bank of New Zealand guaranteeing the account of the Hokonui Railway and Coal Company (Limited) with the said bank to the extent of £5000.
2.The said Dr Hanan died on or about the 17th day of April 1894, and the said account so guaranteed as aforesaid was, I am informed and believe, carried on by the said bank after his death, and I have been informed that by reason thereof, or by some other means, the said guarantee is no longer enforceable against the representatives of the said Dr Hanan or against the remaining guarantors.
3.The total value of the property of all kinds possessed by me does not exceed the sum of £200, and the debts and liabilities owing by me exclusive, of any liability in respect of the said guarantee amount to the sum of £230.page 8
4.If I am liable on the said guarantee to pay the sum of £4900 I am utterly unable to pay that amount or any part thereof."

Mr Hayes, continued Mr Haggitt, was one of the directors of the Ward Farmers' Association.

His Honor : Who are the directors of the Ward Farmers' Association ?

Mr Haggitt said he could not tell.

One of the gentlemen at the table handed his Honor a circular containing the names.

Mr Haggitt: I have heard incidentally that the only man of any means among them at all is Mr Thomas Green, of Gore

Mr Haggitt said they next came to the affidavit of the Hon. J. G. Ward, which was as follows:—
I, the Honourable Joseph George Ward, of Invercargill, in the provincial district of Otago, in the colony of New Zealand, managing director of the J. G. Ward Farmers' Association of New Zealand (Limited), make oath and say:
1.The Colonial Bank of New Zealand holds my promissory note for the sum of £55,150, which amount was credited to the account of the J. G. Ward Farmers' Association of New Zealand (Limited) in the books of the said bank.
2.I was personally debited in the books of the said association with certain losses incurred in carrying on the business of the said association and of the Ocean Beach Freezing Works, and the said promissory note represents the amount standing to my debit in the books of the said association at the time I signed the said promissory note; and I signed the said promissory note at the request of the general manager of the said bank, and the amount of the said promissory note has been credited to me in the books of the said association.
3.Previously to giving the said promissory note I had signed a guarantee to the Colonial Bank of New Zealand guaranteeing the account of the said association with the said bank to the extent of £20,000.
4.In conjunction with Dr Hanan, of Invercargill, and others I signed a guarantee to the said bank guaranteeing the account of the Hokonui Railway and Coal Company (Limited) to the extent of £5000 The said Dr Hanan died in the month of April 1894, and the said bank continued to carry on the said account of the said company after his death, and I have been informed that the guarantee given by the said Dr Hanan and myself and others has in consequence thereof, or for some other reason, become legally unenforceable, and that no one is any longer legally liable in respect thereof.
5.I am indebted to the Colonial Bank of New Zealand in the sum of £16,000 or thereabouts, in respect of a draft on London for that amount which was in transit at the time when the agreement for sale and purchase, dated 18th October 1895, between the Colonial Bank of New Zealand and the Bank of New Zealand, was made and entered into. At the time when the Colonial Bank of New Zealand negotiated the said draft for me they had as security 1600 shares of Nelson Brothers (Limited), which were then of the value of £10 each. The said shares are still held by the said bank, but have now fallen in value to £2 10s per share, and, so far as I can see, without any prospect of rising again, and I am informed that the said share are now unsaleable.
6.Since the formation of the J. G. Ward Farmers' Association of New Zealand (Limited) all the moneys which I have received from all sources have been paid into the said association.
7.The paper writing now shown to me, and marked with the letter ' A ' contains a full and true account of all the property and effects, real and personal, which I possessed, or in which I had any share or interest in possession, reversion, or expectancy, at the time the Colonial Bank of New Zealand went into liquidation in the month of December 1895, and as nearly as I can ascertain the full and true value thereof and the encumbrances thereon. And the said paper writing also contains a correct statement of my liabilities at the date of the said liquidation and at the present time.
8.I have no property whatsoever real or personal of any description, nor am I entitled either in possession or reversion to any share or interest in any property whatsoever which is not included in the said statement, and I have not parted with or agreed to sell any part of my property or effects real or personal since the Colonial Bank of New Zealand went into liquidation as aforesaid.
9.I have used my best efforts and all my influence with my friends to bring about the offer made by Messieurs Alfred Lee Smith and James Bennie Reid to the official liquidators of the Colonial Bank of New Zealand for the purchase of the debt and securities for the same of the J. G Ward Farmers' Association of New Zealand (Limited), and the several other debts and securities mentioned in the agreement entered into between the said Alfred Lee Smith and James Bennie Reid and the said liquidators."

Mr Haggitt said the statement of property of the Hon. Mr Ward, referred to in his affidavit, showed that the value of all his properties, after deducting the direct encumbrance upon them, was £4250 The statement of liabilities showed direct liabilities £87,490 and contingent liabilities amounting to £38,513 more, or £126,000 altogether. Attached to this was a statement of various properties showing a total value of £18,000 subject to encumbrances amounting to £14 150, leaving a surplus of £3850 odd, and all these properties were subject to the further encumbrance contained in a letter given by Mr Ward to the general manager of the Colonial Bank, dated the 19th October 1895, by which Mr Ward agreed to give the bank security over all his properties for the amount owing by him or by the Ward Farmers' Association to the bank. He (Mr Haggitt) did not know that it would serve the slightest purpose to go into the details of that page 9 statement. A1I that his Honor would want would be the totals, but the details were all set out; each property being valued separately. That was the position of matters. The official liquidators, who were officers of the court, had investigated this matter personally, and had employed a person whom they believed to be the most competent person they could get to investigate the affairs of this association on their behalf, with the view of enabling them to make such arrangements as they ought to make in the interests of the bank. They had come to the conclusion that they ought to accept the proposal as it was better than they were likely to do for themselves if they forced the company into liquidation. Therefore they recommended the count in the affidavits, which he thought were pretty strong, to sanction them carrying out the agreement which they produced. There was one thing he would like to mention, and that was that this matter was not one to be judged simply by the statement of the accounts of the association. There were people connected with those accounts who were also debtors to the bank, and if the association were to go into liquidation it would bring down a lot of people who otherwise, if the association continued to exist, would be able to carry on, and the liquidators would by that means be paid in full certain debts on which they feared considerable losses would be sustained if through the Ward farmers' Association going into liquidation, the persons indebted to them were brought into difficulties. The matter should be considered not only in its aspect as between the association and the Colonial Bank, but also as to what the result would be to other persons if the association was brought to a stop.

His Honor: Yes; the indirect result to the Colonial Bank. You say that persons who are shareholders in this company are debtors of the Colonial Bank, and that if pressed at once to pay up on their shares they will not be able to meet their liabilities to the Colonial Bank ?

Mr Haggitt said : It will cause a universal smash. One failure would lead to another, and it is not only those persons who are directly indebted to the bank who would be affected, but others who are creditors of those persons who are connected with the association. It would also affect the prices of produce to a considerable extent.

His Honor: One has only to look at the matter in the interests of the liquidation.

Mr Haggitt: It would affect those interests very much. Every man who fails generally brings down or cripples half a dozen others as well, and the result of this association coming to grief would be to cripple half Southland. Besides, it would affect the prices of produce all over Otago. The liquidators personally were quite indifferent as to what the result of this application might be. They were quite satisfied that no other mode of dealing with this question would produce anything like such good results as the acceptance of this offer. It would at once relieve them of one of their greatest difficulties, inasmuch as the whole question of the liability under clause 18 would be put a stop to. They would know exactly what that liability was—there would be no further liability; nothing to be provided for beyond that. The dividend already paid would be absolutely safe, and the "D" list and the surplus of the "B" list accounts would be distributed amongst the shareholders. That would be the result of getting rid of this debt of the Ward Farmers' Association. They had the liquidators present, and Mr Cook and the Hon. J. G. Ward in attendance, ready to be cross-examined if the other side desired. He had had an intimation from Mr Young that he did desire that. As to Mr Young's affidavits filed that morning, they could not be read, as they were wrongly entitled, and perjury could not be assigned on them, and as they apparently contained some it was just as well to take the objection.

His Honor : If there is any objection they can be amended and resworn.

Mr Young : It is not our fault.

His Honor: There is no blame to anybody. They had to be sworn in a hurry.

Mr Haggitt said that he did not impute blame at all, but he maintained that they were wrongly entitled. How Mr Braund could state that in his opinion the interests of of the shareholders of the bank would be served by forcing the Hokonui Company into liquidation, and that the liquidators should exhaust their remedy against Mr Ward—how Mr Braund could swear that on the information at his disposal passed his (Mr Haggitt's) comprehension. By looking at the results of the work performed by Mr Cook and the liquidators, Mr Braund had come to a diametrically opposite conclusion to that which they had come to, and without having the means of forming a correct opinion as to what the ultimate consequence of putting these various companies into liquidation would mean.

His Honor: The real point of Mr Braund's affidavit seems to be this, apart from his expressions of opinion : that the Ward Farmers' Association in 1895 issued a balance sheet which showed them to be not only in a solvent, but in a prosperous, position, and they declared a dividend; and then that a few months after the result is as stated in the affidavit. That is a matter which possibly may require an explanation, and that explanation would be sought naturally in the course of the examination of the persons who made the affidavits.

Mr Haggitt was very much disposed to believe with Mr Braund that these balance sheets were not correct, and the liquidators, he understood, held the same opinion.

Mr MacGregor : They are signed by Mr Ward and Mr Anderson, who have sworn affidavits.

Mr Haggitt: That does not affect the present case.

His Honor : No; but the point now is that the assets of the association are worth next to nothing.

Mr Haggitt: Not quite that.

page 12

His Honor; Where does that appear in the statement of liabilities ?

Mr Young : I want to account for the fact that £26,000 was owing to the bank in 1893, £26,000 in 1894, and only £1100 in 1895.

His Honor: That is in addition to the £40,000 of debentures; and in October, 1895, there was £32,000 odd owing to the bank in addition to the debentures.

Mr Young : There is a sudden drop of about £25,000, and an increase again of slightly more than £25,000 ?

His Honor: Yes, £30,000.

Mr Young: That is what I am hammering at, and I cannot quite understand the explanation. Do you know whether it was a discount of a draft, Mr Ward ?

Witness: Well, my impression is that no draft went forward at all. What is it that you are trying to get out, Mr Young? You are trying to ascertain why there was a difference between the indebtedness of the association after the balance sheet as against the date of the balance sheet. As a matter of fact, sometime after the balance sheet was issued I was advised for the first time by the manager that heavy losses had been made—I was in Wellington at the time,—and he estimated the losses at £25,000. I immediately advised the bank, and requested them to have an investigation made. This was done, and their estimate of the loss was £55,150.

That was after your return ?—I was not here when the balance sheet was made up.

You would have information as to how it was made up ? You had to sign it. Would you not have information as to the draft ?—No. In a general way the liability would pass away from the association.

His Honor: In the balance sheet, though the bank account is reduced, a liability should surely appear to the holder of the credit.

Witness : All I can say, speaking for myself, is that I did not authorise anything of the kind to be done, and I did not know that such a thing would be done.

Mr Young; The balance sheet was prepared when you were away in England ?—It was prepared when I was in England, and submitted to me for signature on my return.

I suppose you had vouchers before you ?—That is a matter for the auditor. If I were to go into the details of the accounts it would take six months.

Did not the big falling-off in the indebtedness strike you ?—I do not exactly know. I considered that the matter was all right or I would not have signed.

Did it not strike you as peculiar fact that there had been such a large reduction ?—There had been a change in the system, for one thing. In the balance sheet to which his Honor has referred there is an apparent reduction of liabilities. The system of dealing with bills under discount and bills receivable is changed. As I understand it, in the usual way bills under discount are looked on as bills sold, and are deducted from bills receivable. That is the ordinary thing to do, and it ought to have been done from the start.

Mr Young: I do not quite follow you yet.

Witness: It is quite usual for bills discounted to be regarded as sold, and instead of the total amount appearing the difference between bills discounted and bills receivable is shown.

His Honor : If you discount a bill you do not consider there is a further liability on it. That is what it comes to, Mr Ward. If joint stock companies do not put bills discounted among their liabilities they are in effect treating them as if they are no liability. You say it is the usual way of doing it ?—I understand it is the usual way. You credit the man from whom you get the bill, and you debit bills receivable.

Mr Young : You endorse the bill to the bank ?—It depends upon whether it is a good bill or not. The natural thing for the bank is to ask for an endorsement.

How do you account again for the increase in the liability to the bank ? On June 29, 1895 there were negotiations for the Bank of New Zealand to take over the Colonial Bank, but after the balance sheet was prepared the direct liability to the bank increased to £32,856.-should like to say here that I have not been in communication either with the liquidators or the directors of either bank or Mr Cook, have never gone near any of them and I have not been at any of the investigations.

Mr Young: What I want to ascertain from the balance sheet is the amount of the over-draft at the time it was prepared.

His Honor: The liquidators will be able to tell you that. The Colonial Bank books will show. This statement represents the statement of accounts practically as it was in October.

Mr Young : Yes, but there is a vast difference between the balance sheet of June 1895 and the balance sheet of October 1895, as found by the liquidators.

Witness : I cannot give details of it because I had nothing to do with the details.

You are responsible, as having signed the balance sheet.—Still, you ask me for details and I cannot give them to you.

Another peculiar thing is that the 1893 and 1894 balance sheets show items of bills under discount and drafts against shipments. In June 1893 these were £32,000 and £12,000, and in 1894 they were £51,000 and £33,000. Those seem to have entirely disappeared from the balance sheet of 1895 ?—Again I can only speak in a general way. If there were £54,000 worth of goods afloat against which bills were issued in 1894, and these ran off, then when the next balance sheet was made, and there were no goods afloat, there would be no drafts against shipments.

Do you know as a matter of fact whether there was more business or less during June 1895 than before ?—I should say there was more, but I cannot speak positively, That does not affect the question of what was afloat.

His Honor: It looks to me, on Comparing the two balance sheets, as if this was done: page 13 In the balance sheet for the year ending June 30, 1894, the association has "Drafts against shipments £51,000" among the liabilities, and among the assets there is " Advances against produce afloat, £74,000," leaving a difference of £23,000. In the balance sheet for the year ending the 29th of June 1895 there are no drafts against shipments among the liabilities, but among the assets are advances against produce afloat to the amount of £34,430. It looks rather as if, before compiling the balance, they had set off drafts against shipments against the advances and put the balance in the assets.

Mr Young: That is what we suggest.

His Honor: Just the same as Mr Ward has suggested in the case of the bills under discount, In 1894 the bills under discount were £33,000 and the bills receivable were £37,400, leaving a balance of about £4000. In the 1895 balance sheet there are no bills under discount, but the bills receivable are £6870. That looks as if the difference was arrived at in the same way.

Mr Young: We say it is arrived at by a process of reduction.

His Honor: A process of subtraction before the balance sheet is compiled.

Mr Young: Do you know, Mr Ward, whether that is so—whether the items were deducted from one another ?—Witness : I understand that was done so far as the bills under discount and bills receivable are concerned.

Would you consider that was informing the shareholders of the exact position ?—I was not here at the time the balance sheet was made out.

And you are not responsible ?—I was not here at the time. As a matter of fact, I am told it is quite a usual thing to do.

The same thing is said of the drafts against shipments ?—I cannot speak of my own knowledge. So far as I understand it, the direct liability of the association against a special account disappeared altogether, but I was not here.

Did it not strike you as a peculiar thing when you were signing the balance sheet that the items did not appear ?—No. I could not know the whole of the details.

There is a marked difference, too, between the total assets of the company. In 1893 they were shown at £87,000 odd, in 1894 they were shown at £166.000 odd, and in 1895 they were shown at £87,000. That is an extraordinary discrepancy. Have you any explanation of that?—I cannot give details. Speaking in quite a general way, in one of those years there probably were considerable advances against stock purchased for the freezing work. Next year they may have disappeared. As a matter of fact a payment of £25,000 was made, which went to the association.

Would that reduce the assets ?—If you make a sale, surely you reduce the assets.

The goodwill account does not seem to have been written down much. Is it not usual to write it down ?—It depends on circumstances.

As a general rule, the goodwill is shown originally and written down in a few years ? In showing the assets of a company, is it not usual year by year to write it down ? In this case it was written down by paid-up shares ?—You cannot write it down by paid-up shares.

Mr Young: The value to the company should be written down ?

His Honor: That is a question of discretion. You cannot lay down any cast-iron rule.

Mr Young : It is a question of prudence.

Witness : I should like to say that I recognise the examination I am being subjected to, and if the opportunity is given to me I should like to make a statement bearing on the matter.

His Honor : Certainly you may do that.

Mr Young : Would you mind stating what is your private indebtedness to the Colonial Bank ?—Witness : £16,000.

What is the guarantee ?—It was an advance against 1600 of Nelson Brothers' shares.

Anything else ?—So far as I am concerned there is £6750 which the Colonial Bank has transferred to the Bank of New Zealand but which I have not.

That is an advance since the agreement was entered into ?—No, it is not. There has been no transaction since then. There was the advance of £16,000, independent of interest, against Nelson Bros.' shares, and there was an advance of £6750 standing against the whole of my ordinary securities in the Colonial Bank. That £6750 has, I understand, been transferred to the Bank of New Zealand.

His Honor : I understand it is in the " A "list.

Mr Woodhouse : It is well secured.

Mr Young : The bank look on it as perfectly good ?—Witness : I cannot tell you. I have nat been advised either by the Bank of New Zealand or by the Colonial Bank if that is the case.

Are your outside creditors accepting a compromise ?—I have not got any, except those on the list.

That shows none but contingent liabilities ?—That is so.

Have you offered any compromise to them ?—The contingent creditors are not in the position of asking me for anything at the moment. There are shares referred to in different matters. To answer the question, I have had no communication of any kind, and no overtures of any kind outside the proposal between the liquidators of the bank and Messrs Reid and Smith.

Are Messrs Reid and Smith agents for you in any respect in this purchase ?—Not further than the fact that they are endeavouring to help me out of a difficult position. They volunteered to come forward.

Do you mean that they are agents to some extent ?—They are not agents in the sense of being paid.

Is there any arrangement by which you are to take over the assets ?—There is no arrangement of the sort.

Is there no understanding?—There is no understanding; on the contrary, I believe that Messrs Reid and Smith are to control the page 14 business themselves. At any rate, to be perfectly plain, I have given up everything I have, and I have done everything I could to get out of it.

Debentures were issued previous to June 1895 of £40,000 ?—Yes.

Why were these debentures issued ?—To ensure fixity of the finance.

In what way was it done by debentures ?—In the usual way. Inscribed shares are not often an acceptable investment.

You mean to say that debentures were more convenient to get off than inscribed shares ?—Yes.

I notice in one of your reports you suggest that the capital of the company should be self-contained. Is it better for a company to have its capital self-contained ?—In my experience I should say it was.

Then the capital of your company in 1895 appears to have been £4200 ? If the balance sheet says so it is so.

£8000 was paid off. That left £4230. Your paid-up shares represent the goodwill. Did you pay £1 a share ?—I did

In cash ?—Yes.

Do you know when they were allotted ?—I cannot tell you now.

The overdraft of the association has been latterly £163,000 ?—It never had an overdraft of £163,000. It never had an overdraft of £100,000.

What would be the liabilities of the bank ?—I cannot tell you upon memory.

You say it was never over £100,000.—You are asking a question which would have to be answered by reference to the books of the association.

Can you say whether the liability to the bank was ever over £100,000?—The direct liabilities to the bank? I cannot tell, but I don't think it was.

Do you remember when the £55,000 was written off ?—I could not tell you that without reference to the documents.

Can you say by reference to any documents what was the association's liability to the bank ? The whole of the detailed information has been got by the liquidators.

You recommended your debentures as a first-class investment to the shareholders ?—So they were. . .

You borrowed from the association apparently ?—I did not in the ordinary sense borrow. I paid everything I had into the association. I paid altogether £27,000 into the association during the time it was in existence.

There was a current account ?—There was a current account in my name.

What was the total debit in the current account?—The total debit in the current account in my name in November I think was £55,000. Included in that were the whole of the investments and losses that had been made in various shipments that had been debited to me.

You were apparently carrying on business outside of the company ?—No; I was not. I have said the shipments were debited to me and the losses were debited to me.

His Honor : I cannot see how that was done for the shipments were made on behalf of the company.

Mr Ward: They were not made on the association's behalf.

Then they were made on your behalf?—It practically was so. . . .

Mr Young: The losses were not ascertained ?-The losses were not ascertained till November. They were said to have run into £20,000 or £30,000 In November last there were said to be £50,000.

What position do you take up with regard that account and with regard to shipments? I took over the losses. I was advised to do it, and I agreed to take over the looses.

Voluntarily ?-I took them over when I was advised it was the case.

Mr Young asked if it was because the dealings were in Mr Ward's name ?

Mr Ward replied in the negative, and state that it was because he was desirous of seeing the association made a success, and he thought that the greater portion of the losses would he been repaid. He did not anticipate then that there would be a loss of £14,000 on Nelson Bros.' shares.

You had a special advance against Nelson Bros.' shares apparently ?—That is so.

You received an advance on account of your paid-up shares ?—I paid everything I got the association, except what was sufficient my own use.

What income did you get as manager ?—I income was about £1000 from all sources. . .

Your income was £500 as managing director—I had £16,000 worth of shares in Nelson Bros', which previous to my having them I paid 10 per cent., but which paid me one year 4 per cent. Then I had my ordinary emendments from my official position, amounting £800 and £200.

His Honor : At what time ?

Mr Ward : At the time Mr Young is refering to. He proceeded to say that, rough speaking, his income was close on £5000 a year. What was left after paying his private expense went into the association.

What you say is that the association everything. The moneys you received you paid to the credit account in reduction of your liabilities to the association. Your income, then, would appear in the books of the association ?—Yes.

Mr Young: Did you have a banking association of your own ?

Mr Ward : I had the private account refer to.

Did you pay your income into that No; 1 did not pay my income into that the system of ingoings and outgoings was done through the association.

You took out what you wanted to live upon? That is so.

Did the association hold any security from you for your indebtedness to them for this page 15 £55,000 ?—The whole of the scrip that I had in the association remained with them. In fact, the indebtedness, so far as I was aware, was £55,000.

Did that £55,000 represent any losses taken over by the association from you ?—Previous to when ?

When the association took over your business. No; I don't think so.

Mr Young asked what an item of £20,000 represented.

Mr Ward replied it was a guarantee given to secure a joint account of the association.

On what date was that given ?—I cannot give the date.

On what occasion was it given ? Was there any particular stock for it ?—It was given for the purpose of an additional security of the account; and, speaking from memory, I think it was given two years ago It was an increased guarantee. I am under the impression that I give a guarantee of £5000. and I afterwards increased that. I think that is the position.

Was the guarantee against any particular business ?—No; it was for the purpose of securing the association.

Do you remember getting a letter from Mr Murray shortly before the bill passed the House?—I had a great many letters from Mr Murray.

There was a letter guaranteeing that the Bank of New Zealand would see you through ?—I should give that a most absolute and positive contradiction. If I had chosen to conceal my postion and to have covered up my private affairs then I could have done it. But I would not do that; and if I had done as is suggested by some people I could have prevented my affairs from being before the judge or anybody. Anything of that kind is absolutely unfounded.

I am speaking from instructions; and I am informed that that was so, and want to know whether there was such a letter or not ?—There was no such letter as that at anyrate.

No letter at any time?—No such letter to that effect.

Or a similar effect ?—Nor a similar effect so far as I know. Without trusting to my memory I can be sure of it, because I have the whole of my letters here.

Mr Young said he would ask his Honor to ask Mr Ward the question at another time.

His Honor: Mr Ward might be asked the question at another time when he has gone through the correspondence. Unless you have information from Mr Murray I don't see how any person can say what are in the letters.

Mr Young: I am not at liberty to say what is the source of my information, of course.

His Honor: I don't see how anybody but Mr Murray could tell what was in Mr Murray's letters.

Mr Young (to Mr Ward); Did the association hold any security for that £55,000 ?

Mr Ward : Only what I have told you.

His Honor: The shares ?

Mr Ward : The paid-up shares.

Mr Young: I suppose the members of the association are pretty substantial as a whole, are they not ?—Some of them are, of course.

It is a company of very respectable farmers, as a rule, who could pay 20 in the pound ?—I can only give you my impression.

Sundry creditors, £18,970; are a lot of them shareholders in the company ?—That is my impression.

Mr MacGregor : Can you tell us, Mr Ward, what is the amount you are personally indebted to the Colonial Bank for ?

Mr Ward : The statement is here.

Is it correct that you are liable in the first instance for a £55,000 bill?—Yes, I am liable for £55,000.

Then for the £20,000 guarantee ?—Yes.

And the £5000 guaranteed to the Hokonui Railway and Coal Company ?—I am liable with others for that.

And for the £16,000 draft dishonoured ? That makes altogether £96,150 ?—Yes; but the draft was not dishonoured. I don't know where you got that bit of information from. It was a draft in course of transit, and when the amalgamation took place the bank became responsible for it.

But you are personally responsible to the bank for the £96,000 on paper ?—Yes, that is so.

And against that you have property worth, in round numbers, £4000 ?—That is the value of the property.

So that at present you are hopelessly insolvent ?—That is so according to my books.

When did you become aware of your position ?—I first became aware of the responsibilities I had on my shoulders when I became aware of the loss of the Farmers' Association. I think it was in August.

When did you come back from England ?—In July.

When you saw the Colonial Bank, what person do you mean ?—The general manager.

Who was that at that time ?—There is only one general manager.

Mr Mackenzie ?—Yes. As soon as I found that the loss was £25,000 I asked that an investigation might be made. It was after my arrival from England.

Was this a communication to Mr Mackenzie ?—It was a verbal communication made in Wellington.

An investigation of your affairs was then made on behalf of the bank ?—Yes; and a loss disclosed of £55,150—that is so far as the association is concerned.

Now as regards the sale, I suppose you were fully aware of the terms of the sale—the projected sale to Messrs Lee Smith and Reid ?—Yes.

We are told that the purchase was written down to £67,000.—Yes; £62,000 and £5000.

The total amount of debts that they are to take over, if I make it out rightly, is £168,000. Can you tell me whether that is correct?—I should like to see the statement.

£92,000 is the association's indebtedness ?—Yes.

page 16

In addition to that there is the sum of £55,000 written off ?

His Honor : In addition to that ?—No.

Mr MacGregor : I take it to be so. It was obviously written off the association account. Is that correct ?

Mr Ward : Yes.

His Honor: You say that £55,000 is to be added to the £92,000.

Mr Woodhouse: It was a debt of Mr Ward's.

Mr MacGregor : The total amount Mr Ward got from the bank was £92,000 plus £55,000. Is that not so ?

Mr Ward : That is so.

Then there is £16,000 on this draft ?—Yes.

And £5000 on account of the Hokonui Railway Company ?—Yes.

That gives £168,000 altogether ?—Yes.

So that the Colonial Bank or the liquidators stand to lose £101,000 ?—That is so.

Mr MacGregor asked if Mr Ward had seen the statement of assets and liabilities of the J. G. Ward Association ?—Mr Ward replied in the affirmative.

Do you agree with that as being a correct statement of the association's finance ?—I have not been through it. I have never been with Mr Cook or anybody else and gone through the association's finance.

Do you say it gives the correct position of the affairs of the association ?—I accept their assurance that it is so.

It shows a debit balance in round figures of £50,000. Nine months previously you thought the company to be in a flourishing condition, solvent, and giving bonuses to shareholders and salaried officers ?—Yes.

Can you account for the enormous discrepancy?—I admit the discrepancy is enormous, that is the only word to use. He proceeded to say within a very short period—within three years—the whole of the losses of the association had been made.

The association had been only in existence three years and seven months ?—The earning power of the association was, beyond question, very good. My own business was a very valuable business in 1889, my net profit being £9000.

Mr MacGregor asked how these enormous losses came about.

Mr Ward replied that the manager attributed them to losses upon shipments, to losses in connection with freezing operations, and to depreciation in value.

What do you attribute it to ? Do you leave it to this gentleman alone ?—I attribute it to the same causes, but I did not know it at the time.

Now that the loss has been ascertained, can you give us any explanation for it ?—Not any other explanation than I have given. If I had known the position or anything like what it was, of course I should not have gone on at all.

You signed the balance sheet and appear as managing director and chairman. Do you act as chairman while you are in the Government ?—I did not give the business any large personal control, and could not, as a matter of fact, if I had been upon the spot and attending to the business. But matters were put before me, and I really depended on others who were responsible for me.

Mr Fisher, you say, has left you. Where is he?—He is in Invercargill.

Mr Anderson, is he still in Invercargill?—Yes.

Is he a reliable man ?—He is a very good man.

He says he has gone through the balance sheet, and he finds Mr Cook's balance sheet is correct. Can you account for that ?—I can scarcely be expected to explain Mr Cook action.

There are two separate accounts—Brook and Connell. Are those the two you refer to?—Yes.

What are the positions of those accounts at the time of the liquidation :—In what respect?

Were they on the debit or credit ?—There would be on debit.

To what extent?—The figures would be—the one £7000 and the other £16,000.

That is one of the liabilities that Reid and Smith proposed to take over ?—Yes, I assume that they take them over.

You say with reference to these private accounts that they are taking them over with your consent simply in terms of the statutory agreement ?—Yes.

Have you had any further advances since then ?—I have not drawn upon the account at all

Have you drawn upon any account ?—I have not drawn upon any account. The liability upon £16,000 has increased by £364, from interest.

Have you another bank account ?—I have another bank account.

Where ?—At the Bank of New South Wales.

You have filed an affidavit setting forth you position. You are quite sure you have include everything ?—Yes.

Is your life insured ?—Yes, and I told Mr Woodhouse to have an amended statement made with the surrender value of my life insurance policy included. That was worth £400.

So you have got life insurance policies amounting to £11,000 ?—That is so.

How long have these been taken up ?—On about 10 years or more; the other about three years.

How many payments have you made?—I should think about five or six half-yearly payments.

Those are all the policies you hold ?—Yes, have an accident policy.

What about the bank account at the Bank New South Wales ? Is it in credit ?—It cannot be more than £40 or £50.

Have you had any property during the last three years in the name of any person beside yourself ?—I have had an interest in a property during the last three years. That is included there.

In any others ?—No, no others. I have put page 17 in everything I know of, and in addition to that I have offered to give everything I have.

We have heard a great deal about a draft put through to reduce your overdraft. There was some suggestion of that sort; do you know anything about that ?

Mr Ward replied that the association held credits outside of the bank for considerable sums, and, as he understood it, transfers were made against the special account. No draft went forward at all.

What became of the draft ?—The transfer was made, and the dra't did not go forward. After my arrival in the colony, when I knew that that transaction had taken place, I declined to let the draft go forward.

You say that this took place while you were in England?—Yes; I was not here.

That was about the time of the balance in June 1895 ?—The last balance.

About this purchase. Do you know what is intended to be done with this business assuming is purchased ?—Mr Ward replied that so far as he knew it was to be reconstructed.

And the firm put into a new liability company?—So far as I know. It certainly could not be carried on as it was.

Was money going from the Bank of New England ?—There is no arrangement with the bank so far as I know.

Are you not to be retained in the new company ?

Mr Ward replied that he had to recognise the fact that he was worth nothing.

Mr MacGregor: Don't you think the new proprietors will take advantage of your experience in connection with running this new company ?

Mr Ward : One of the conditions is that Mr Smith and Mr Reid are to control the business themselves. If you mean is it any collateral advantage to me, it is not.

Mr Woodhouse: You know Messrs Lee smith and Reid pretty well, Mr Ward ?—I do.

You know their capabilities ?—Yes.

Mr Lee Smith, for instance, is a man who has had a great deal to do with organising companies ?—That is so.

And successfully ?—Yes, very successfully.

In fact, you may say it is a gift he has ?—I should say it is.

Mr Reid is a man of large business experience, and he has had to do with companies of a similar nature to this one ?—Yes.

They are men who if they conduct things personally will practically do better than anyone else ?—Yes.

You have nothing to do with any new arrangement they make, and get no benefit from it?—None whatever.

And you give up everything ?—Quite so.

With regard to the affairs of this association, do you know anything of the accounts—of the number of accounts, for instance; are there many of them ?—I understand there are 1750 different accounts owing to the association.

And I suppose you may say a large number of small accounts like that are not easily collected?—It would be difficult to collect them.

Have you formed any idea what the liquidation of a company of this sort would cost supposing it went into liquidation ?—Well, that would depend very much upon very many matters. I should say it would cost from £5000 to £10,000, but it is difficult to estimate.

His Honor : It must be apparent to everybody that liquidation would be a costly and troublesome matter.

Mr Woodhouse : The object of the agreement is to avoid that. As to this £55,000 which has been referred to as the amount written off between the two banks, I want to know if you had anything to do with that arrangement ?—I had not. I did not know of it until after the agreement was laid upon the table of the House. As the matter has been referred to I should like to state briefly the position so far as I am personally concerned. In connection with the banking legislation I did not in any way, so far as my personal affairs are concerned, ask for consideration either from the Colonial Bank or the Bank of New Zealand; neither did I ask that any account in which I was interested should be provided for or taken over. In addition to that I asked for no concession whatever from either the Colonial Bank or the Bank of New Zealand. I might be permitted, as this is a matter of importance to me, to read these three letters that I have; one signed by three directors of the Bank of New Zealand, one by the president of the Bank of New Zealand, and the other by the general manager of the Colonial Bank, now the general manager of the Bank of New Zealand. It has been insinuated that I was conoiving with the men upon both sides to look after my private interests in connection with this bank amalgamation. My troubles have been great enough, and I should like at once to say that the insinuation is absolutely unfounded. I have the letters here.

Mr Young: Of course it is competent for Mr Ward to make any explanation, but any correspondence of other people with hi u, I think, can scarcely be evidence in this matter.

His Honor : It is not strictly evidence, no doubt, but I think under the circumstances what Mr Ward is bringing forward now could hardly affect my decision upon the particular point in question one way or the other, could it ? But Mr Ward's character has been impeached to a certain extent, and though the matter is not strictly evidence I do not see why it should not be put forward in this matter.

Mr Young: The only thing is that we are unable to cross-examine the people who have written the letters on the value of the statements made by them, or by what means they were induced to make them. If your Honor thinks the letters should go in as evidence, I do not object.

His Honor: I do not think they should go in as evidence, but Mr Ward can read them as page 18 part of his statement. He rather wants them to go forth to the world than to influence my opinion.

Mr Young: We say that these letters are from the persons who were aware of the facts, and who are probably mixed up with any advances or irregularities in connection with the association.

Mr Ward: Mr Braund refers to this matter in his affidavit.

His Honor : I think it is fair that Mr Ward should be allowed to read them, though they are not strictly evidence.

Mr Ward : I wrote this letter on the 23rd of May 1896 to Mr Watson :—

Dear Sir,—In view of the fact that Messrs Stout and Duthie have made statements reflecting upon me in connection with the Bank of New Zealand's purchase of the Colonial Bank, I shall be glad if you would kindly give me replies to the following queries on the subject:—
1.Whether, at the time of the bank legislation, I was in any way consulted as to the terms of the proposed agreement between the two banks?
2.Whether I made any representations to have any account to which I was interested placed in any particular list ?
3.Whether I was advised as to where or how it was intended to deal with any account in which I was interested ?
4.Whether I or any member of the Government were cognisant of the position in which any account was placed when taken over ?

You will, no doubt, fully appreciate the importance it is to me, and, I presume, to yourself also, that I should be in a position to fully and authoritatively answer what has been said; and therefore your replies as to these matters of fact will enable me to deal with the subject.—I am, &c.,

J. G. Ward.

That is addressed to the president of the Bank of New Zealand, and the same questions were put to the manager of the Bank of New Zealand and the directors. In reply I received the following reply :—

Wellington,

The Hon. J. G. Ward.

Dear Sir,—I have received your letter of the 23rd inst., and now reply seriatim to your queries as follows:—
1.So far as I know you were not at the time of the banking legislation consulted as to the terms of the agreement which afterwards took place between the two banks, nor were you consulted on that particular matter at any subsequent time.
2.I am not aware that you made any representations to have any account in which you were interested placed in any particular list.
3.You were not advised by me, or, so far as I know, by anyone else, as to where or how it was intended to deal with any account whatsoever.
4.I am not aware that you, or any other member of the Goverment, were cognisant of the position in which any account was placed when taken over.

—I am, &c.,

W. Watson, President.

The reply from the directors of the Bank of New Zealand was as follows:—" We have perused your letter of 23rd inst. to Mr Watson, and his reply, with which we concur, as representing our views as well as his."

Mr H. Mackenzie replied : " Yon were certainly not consulted by me at the time of the banking legislation in regard to the proposed agreement between the two banks, and I have no knowledge of your having been consulted by anyone else. You made no representation to me, nor to my knowledge to anyone else, to have any account in which you were interested placed in any particular list. You were not, to the best of my knowledge, advised as to where or how it was intended to deal with any account. So far as I am aware, neither you nor any member of the Government was cognisant of the position in which any account was placed when taken over." I desire to mention this because I notice Mr Braund affidavit this morning refers to it, the suggestion being that I had, for the purpose of arranging my own private affairs, used my position in connection with the banking legislation.

Mr Young : The inference intended was that you were aware of the circumstance.

Mr Ward : I was not aware.

Mr Young: It was supposed, being in charge of the bill, that you were.

Mr Ward : The insinuation has been made that I was aware of it, but, as a matter of fact I was not. When first advised that the loss of the Farmers' Association were from £20,000 to £25,000 I had no idea, however, that the were going to run it to £65,000, and when they were ascertained to be £55,000 I took the responsibility upon my shoulders, believing the time that I should be able to provide for them. As a matter of fact, investigation showed that it was impossible to provide for them, but I was not aware of that at the time of the proposed agreement between the two banks. I was not consulted, and took no part whatever in it. I think it only fair to myself I should like to say, further, as it is a matter of importance to me, that 1 should think most people on very slight knowledge of the circumstances would at once see that if I had been consulted, and if I had been anxious to use my position or to bring pressure to bear in relation to my private affairs, it is highly improbable would have consented to one of the most difficult accounts being put on to the list to be repaid within three months, while almost every other account had three years to be repaid in Instead of having specially favourable treatment, I think my treatment the very reverse, and much worse than that extended to most the people whose affairs were dealt with.

Examined by Mr Haggitt, Mr Ward said: know the shareholders of the association pretty well, and my opinion is that the effect upon them and upon people not immediately connected with the association would be very serious if the association were put in liquidation I believe it would adversely and very material affect a number of people. It would also influence the produce market, because it would force on to the market the products of those connected with the association if pressure were brought to bear upon them.

Mr Haggitt: The effect of putting the company into liquidation, then, would extend page 19 pretty generally, I suppose, throughout the South Island ?

Mr Ward: In my opinion it would.

Tell us what your personal opinion is as to the offer made by Mr Smith and Mr Reid. Is it one which should be accepted?—As against liquidation my opinion is that it is—as against liquidation. It would take a long time to liquidate the Farmers' Association. Anyone who knows anything about country life and considers that 1750 settlers with their all are practically involved, will understand that liquidation would extend over a very considerable period, and I should say that it is impossible for anyone to tell what the losses might be.

Do you think that many people who would be ruined by the company going into liquidation will be able to pull through if the association were carried on in another way ?—There are many settlers who otherwise would be ruined who unquestionably would be able to pull through by arrangement with the association under reconstruction

Mr MacGregor : You tell us you have nothing to gain from the purchase ?—No.

Why is it you say " I have used my best efforts and all my influence with my friends to bring about the offer made by Messrs Alfred Lee Smith and J. B. Reid to the official liquidators of the colonial Bank" ?—I would answer that by asking you another question. Why is it I have paid everything I have got, and which I was not called upon to pay, in support of the association for the last year or two ? It was with a view of preventing disaster to many settlers, and I think I was morally bound to use both my own influence and that of my friends to keep the association going in the interests of the people.

But why should you use your influence to get your friends to make an offer you say you have no interest in ?—Because I did not want the association to go down.

It has nothing to do with the balance sheets put forward by the J. G. Ward Association ?—Nothing whatever. I want as far as I possibly can to see that a number of people whose future to a large extent is involved are not ruined. I want to stand by them if I can, and I cannot do anything myself in the way of money guarantees. I think they would be helped by that offer, and if the offer is not accepted the association will go into liquidation.

And you would go through the court ?—I should say the J. G. Ward Association would have to go into liquidation, and I should have to accept the inevitable myself.

Why should Mr Ward's friends give assistance if not to assist Mr Ward—that is what I want to know ?—You may as well ask me why a great many people should be prevented from insolvency. I believe such a disastrous one would effect the colony as a whole.

Mr Young : Do you think that in every case it is better people should be bolstered up than that they should go bankrupt ?—I did not say so; but I think that if compelling people to go bankrupt means the rain of other people it is desirable to prevent that if possible.