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The Pamphlet Collection of Sir Robert Stout: Volume 74

Mr Vigers Re-Examined

Mr Vigers Re-Examined.

His Honor said at the outset that he desired to ask Mr Vigers one or two questions. (To Mr Vigers) : You went down to Invercargill, I understand, at the end of June to get the association's overdraft reduced, among other things ?

Witness : Yes, your Honor.

And it was then that a cablegram came to Mr Fisher, who was then managing the association, as to the credit which had been opened ?—I think the cable came to the bank, but I am not quite clear about it. It was to the bank, your Honor.

And then Mr Fisher drew on Connell and Co. for the £30,000 and gave warrants for oats purporting to be of that value ?—Yes, representing that value.

The draft was not forwarded to Connell ?—It was to be held over for a few days till Mr Ward's return, and until we had further advice as to the cable. We did not read the cable advice quite clearly as to——.

And that was why it was not forwarded ?—That was why.

When Mr Ward returned, why was it not forwarded then ?—I could not say that.

When did the bank find out that the oats were not there ?—About September.

Not before ?—I believe not. I did not know anything about it till September. I may say that there was no new money given against this bill.

I quite understand. It came off the account ?—From the bank's point of view it was a good transaction. Instead of an unsecured account we got oats as cover.

No doubt it would have been a very good transaction if the oats had been there, but they were not there. That is one point I wanted to ask you about. Then I want to ask, can you give any explanation of the reason why this bill was taken by the Colonial Bank from Mr Ward on the 19th of October ?—I cannot give any explanation at all. It did not come within my province.

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No, it would not come within your province. But I ask you as a banking expert whether you can offer any explanation?—I do not think it comes within the range of ordinary banking.

You are one of the liquidators as well as being a banker. Have you any notion of what paragraph 18 of the agreement means ? What is the point of it ? What is the point of writing off the amount of this particular bill, for the bill was not given on that day?—My own impression is that that was the amount the account was supposed to be short. All the rest was supposed to be good.

That is what puzzles me This account on the 18th was supposed to be bad, hopelessly bad. It looks like that ?—Yes

The next day a promissory note is taken by the bank for that amount. Ordinarily, if a promissory note is given by a man of business, it is supposed that he believes at the time he will be in a position to meet it. Also, when [unclear: a] promissory note is taken by a man of business, as, of course, the representative of the Colonial Bank was, it may be presumed he looks at it as a valuable security. As the circumstances were, which were probably known to both parties, this promissory note was simply a worthless piece of paper, the giving and taking of which seems to have been a farce perpetrated between Mr Ward and Mr Mackenzie for no understandable object. Can you as a banker suggest any explanation of it?—Not as a banker. I can give you my impression I think it was taken by Mr Mackenzie just with a view to retain a hold upon Mr Ward for the amount.

But Mr Ward was not liable to the bank before that ?—No, but he was to the company. That was written off to the company, and the company were credited.

His Honor: I want to get as much light as I can.

Witness : I think it was to retain a hold of Mr Ward.

Mr Young : The draft for £30,000,—was it a promissory note for three months or a draft ?—So far as I remember it was a draft on demand. I am not perfectly certain.

Would it not probably be a draft due in October ?—I do not think so.

Do you know ?—I say I don't think so. I think it was on demand.

Was it returned to the association ?—Probably it was.

Do you know whether it was returned ?—I presume it was. It was debited to them and if they asked for it it would be returned.

Do you know if the draft was included in the item "past due bills " ?—This draft was out of existence. It was redebited to the company. That is all I know of it.

If it was returned it would be a past due bill?—If it was paid it would be a worthless piece of paper.

But it was not paid ?—So far as we are concerned it was paid.

Can you tell me if it was included in the item "past due bills " ?—It was certainly not.

What account was it debited to ?—The J. G. Ward Association's current account.

What puzzles us is that the direct indebtedness to the bank is stated at £9605 in Mr Cook's statement. Should it not include the item of £30,000 ?—No; certainly not.

How is the indebtedness of the association to the bank so small, except in respect to the past due bills ?—The indebtedness in round figures is £72,000. I do not call that small.

It may be included in the item of past due bills?—I have told you it is not included in that item. There is one point yesterday in which I made a mistake in the matter of a date. I said it was on the 13th October, but I find it was on the 13th November when the £30,000 was debited.

What would be the total indebtedness of the association to the bank at the time the £30,000 draft was passed through ?—You mean the overdraft ?

Yes; how was it reduced to £9605? I told you that £55,150 was credited to the account.

The association is still a debtor for £9000 odd. If the indebtedness was £30,000, the crediting with £55,000 would put the association in credit Instead of that the association is in debit £9605. How is that state of affairs accounted for ? Have there been further advances ?—There have been further advances from time to time.

To the extent of £35,000? Is it anything like that, do you know?—I should not think it would be so much as that.

The £55,150 represented the indebtedness of the association to the bank on the 30th November ?—No.

Mr Haggitt: It represented Mr Ward indebtedness to the Ward's Farmers' Association.

Mr Young : You cannot say what the indebtedness of the association to the bank was—Witness : My memory will not carry me back to any particular date.

What advances have been made, roughly speaking, since that was written off? Have there been £30,000?—I do not know of any particular advance—advances to carry on the business.

You see they are still debited with £9605 on the grain and rail account ?—That has been standing for some time.

I want to know what the dealings on the account have been since the £55,000 was credited ?—Everything since that has been the ordinary working of the account.

The crediting of that £55,000 put the association in credit?—It was this way so far as my memory serves me: There was an overdraft, and the £55,000 put the account in credit. Various items seem to have run the account up to £14,000 or £15,000.

Suppose it was £15,000. If you take £55,000 off that, it leaves them in credit £40,00O. You redebit £30,000, and that leaves them in credit £10,000. That has been reduced, you say, by page 29 subsequent dealings until there is a further overdraft of £9000 ?—No. The £9000 has been swing for some time.

Then that £10,000 does not appear anywhere, What has become of it ?—Only speaking from memory, there was about £14,000 overdrawn.

His Honor : Is not this the case, Mr Vigers : The bank took Mr Ward's promissory note for cash so far as the Farmers' Association was concerned. The Farmers' Association now only owe the bank £92,000, whereas before they owed the £55,000 ?

Witness : They took the promissory note and reduced the indebtedness of the company by that amount.

The bank transferred the indebtedness of the company to Mr Ward?—That is so.

His Honor: I confess that until yesterday I did not understand that, for one was informed that on the left-hand side of the "B" list was £78,000, and that on the right hand side there was £55,000. Now it seems there is £90,000 odd in addition to the £55,000.

Witness : In all those lists there is no notice taken of British bills.

His Honor : The misapprehension was natural until the explanation came out yesterday.

Mr Young : The fact is that Mr Ward's promissory note was taken as good as cash ?—Witness : I have not said so.

Is not that the result of the operation on the amount?—I do not think so.

His Honor : This agreement is made on this basis, certainly, that the sum of £92,000 is owed by the association, and £55,000 is owing by Mr Ward.

Mr Young : Can you suggest any reason why the bank should prefer the liability of Mr Ward to that of the company ?—Witness : That matter was entirely done by the general manager. I know nothing about it.

Mr MacGregor: You say that when this transaction took place at Invercargill about the £30,000 you were acting as inspector ?—Yes.

Who was the previous inspector ?—Mr Watson.

Now the president of the Bank of New Zealand ?—Yes.

When did he leave the service of the Colonial Bank?—Some time in 1894—between August and October.

Can you give the exact date ?—Not from memory.

Was he on intimate terms with Mr Ward?

What do you mean by "intimate terms" ?

Was he a friend of Mr Ward's ?—I don't know. He knew him as one business man knows another.

Were you inspector from the time when Mr Watson left until the bank was purchased ?—Yes.

Can you tell us who it was that suggested that this £30,000 draft should be obtained?—Yes; Mr Mackenzie, in consequence of a cable he got in reference to the credit

Have you got the cable?—No; I do not know where it is.

Would it be among the bank's correspondence ?—I suppose so.

And could it be produced if required ?—I think so.

Had you any idea when you went down to Invercargill that this transaction was in any sense a bogus one ?—Not the slightest.

Have you had reason to alter your opinion since ?—How do mean a bogus one ?

That it was not a business transaction; that it was simply a method of bringing the account down to a smaller amount ?—I think it was very good business so far as the bank was concerned.

What was this mysterious difficulty as to the terms of the credit which resulted in the draft not being forwarded ?—The difficulty was that the cable was misread, I think, by the general manager.

Mr Mackenzie?—Yes.

Was it in cipher ?—Yes.

The bank's cipher ?—Yes.

The bank's private cipher?—Yes.

And it was misread by Mr Mackenzie ?—Yes. I do not mean that he misread it, but that the purport was not understood.

It came from the Colonial Bank in London ?—Yes.

Not from the people ?—We should not have acted on it if it had been.

Do you know if Mr Ward was in London at the time ?—He was not.

Do you know who arranged this matter at the other end, in London ?—I do not know.

You tell us the result proved that there was no oats to represent the warrants, and that they were signed by Mr Fisher, the then manager of the association ?—Yes.

Have any proceedings been taken against Mr Fisher in respect to this transaction ?—Not that I know of.

Any steps whatever ?—Not that I know of.

How long was Mr Fisher retained in the service of the association after this transaction was exposed ? When did he leave ?—I do not know the date.

He was kept there for some months after, was he not ?—I do not think so. I do not think so long as that.

You do not know accurately ?—No.

Now, I notice that in the report of the directors of the Colonial Bank submitted to the half-yearly meeting of proprietors on the 25th September 1895 they show a net profit available for distribution of £19,980 2s 10d. Do you know whether the balance sheet from which these figures are taken included the Ward Association account as represented by the balance sheet of the 29th June ?—Our balance sheet would include the association's debt as shown in our books.

Then it would get the benefit of this £30,000 transaction ? It would appear as good in your balance sheets to that extent ?—Yes; it was supposed to be good at that date.

Was it supposed to be good on the 25th September ?—Our balance sheet was dated the 31st August.

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I know that, but I ask you was it supposed to be good on the 25th September when the balance sheet was submitted to the proprietors ? I should say not.

As a matter of fact, did not the directors and the manager know on the date when they presented the report to the shareholders that, so far as the Ward account was concerned, it was at any rate in a much worse position than it was represented in the balance sheet ?—I think so.

To an extent sufficient to wipe out the whole apparent profit for the half year—viz., £19,000 ?—I should not like to say they knew that.

Then I understand that this meeting for the approval of the report was adjourned till some date in November ?—Yes; I think so.

Mr Haggitt: It was adjourned until after the approval of the agreement.

Mr MacGregor: The report was confirmed after the approval of the agreement?—Witness : I do not think I was at that meeting.

Still you knew as a matter of fact it was done ?—I believe so.

So that at the time of the final presentation of the account the directors and the general manager must have known that this Ward account was £55,000 in round numbers worse off than it was represented in the balance sheet ?—At what date ?

The 18th November ?—I presume so.

And no intimation of anything of that sort was given to the shareholders in any form whatever ?—No.

Mr Haggitt: Did the directors know at that time that Mr Ward's promissory note was valueless ?

Witness: I should not think so.

Now about these figures, there is no occasion for any mystery. Before this £55,150 was written off, the account stood at £98,000, or thereabouts, did it not ?—That is how it appears in the "C" list.

Then you wrote off £55,000, which reduced it to £43,000 ?—Yes, in round figures.

The reason of that reduction was that the Bank of New Zealand would take it over at these figures, the £55,000 being written off ?—I think so.

Then you say that in November the £30,000 was debited, bringing the account up to £73,000 ?—Yes.

Then the £20,000 worth of debentures guaranteed to the Colonial Bank would bring it up to £93,000, at which it now stands ?—Yes; £92,850.