Appendix C.

Mr Hosking said there were two [unclear: erro] were probably errors of expression, in [unclear: th] ment which, as it was to be published, [unclear: b] like to have corrected at once. The [unclear: fr] he wished to call attention to was the [unclear: st] that the Colonial Bank shareholders [unclear: w] from further liability on their [unclear: shar] behalf of the Bank of New Zealand, [unclear: he] page 17 phatically to disclaim any such obligation in the part of the Bank of New Zealand by the agreement.

Mr Sim: That is the effect of the agreement.

His Honor: There are doubtless a number if exceptions that could be taken on the cootraction of this agreement, which would take about a week to argue. At all events, you [unclear: dispute] the proposition.

Mr Hosking: Absolutely. No such interpre-[unclear: tion] can be put on the agreement.

Mr Sim: Very well, there is no necessity to [unclear: rgue] it now.

Mr Hosking: Another point is with reference to Ryley's account. It was stated there, in regard to that account, that the bank took 20,000 as cover of the account in the "B" list. I wish it to be put alongside that statement that not only had the bank £20,000 to go and come upon, but they had the "whole ambrella" covered—the whole £327,000 covered. His Honor: Quite so.

Mr Hosking: I make this statement in the interests of the Bank of New Zealand

Mr Sim: It is admitted by the Bank of New Zealand officials that the loss in connection with the account is £20,000.

In reply to his Honor, Mr Solomon said he would like to have a few minutes to continue the investigation of a matter in the books, and asked that he be given till 2 o'clock.

On the court resuming,

The Hon. G. M'Lean, examined by Mr Solomon, gave evidence as follows: He was never managing director of the Colonial Bank. He was chairman of directors. He was in office from 1879 to 1882; he left the bank on the 31st January, 1883; rejoined in 1884; was appointed chairman in January, 1886, and had held the office since. He was chairman from 1879 to 1882 He was not a salaried officer. He had certain fees as a directos. The directors had so much per annum amongst them, and it was divided. He got £500 per [unclear: num]. The total amount was divided amongst the directors as they thought proper, and he could not get any more than they gave him. The amount was fixed by the directors at the express wish of the shareholders. The additional remuneration witness received was for the influence he brought to the bank. He considered red it his duty to preside at board meetings, to preside at the annual meetings of the bank, and to advise the general manager when he asked witness for advice. He considered that he was bound to acquire as close a knowledge of the affairs of the bank as any director could do. He did not pretend to go into the accounts. He had to depend upon the officers for the accounts. He did nob consider it part of his duty to look after the executive work of the bank. He would, however, deem it his duty to take exception to any men getting too much accommodation. He considered that the business of the board of directors, and it was his business to bring it before the board. It was, as he had said in his statement, his duty to know the business of the bank. He took steps to know the position of the bank. He never had any secrets from the otber directors. When anything cropped up that he thought they required to know and the general manager brought it before witness, he (Mr M'Lean) would see that it was put before them. He should not think the other directors were as familiar with the position of the bank as he was. The general position was brought before them by the general manager and was known to all of them.

Mr Solomon: Then had you or had you not more knowledge of the position of the bank than your colleagues on the board had?

Witness: Anything that was necessary to know if I knew it they knew it.

So all they knew you knew?—I am not speaking about details, but as to the general position and principle of the bank. They were taken into your confidence?—Yes, 1 had no secret from any director.

Further examined, witness said one of the most important things in connection with the bank was to set out in its yearly or half-yearly balance sheet its proper position. That was required by the deed under which the bank existed. That deed required that in the balance sheet the directors must make due and proper provision for bad and doubtful debts. Witness was an old banker, and was perfectly familiar with banking affairs.

Mr Solomon: Did the directors of this institution from time to time make what was in their opinion sufficient allowance for bad and doubtful debts?

Witness: They did, so far as was asked from them. They made every provision that was asked from them.

Did the directors themselves form an estimate of what was due and proper provision for bad and doubtful debts?—No. They could not form an estimate of what was due.

Do you know that it was required of them by the deed of settlement?—That would be an impossibility for the directors to go over £2,700,000 of debts and pick them out. That would be impossible.

You have told me that the deed ot settlement requires that the directors should make what they estimated to be a proper allowance for bad and doubtful debts in their balance sheet?—So far as they knew.

Section 103 of the deed of settlement says:—"In making up the balance sheet to be submitted to every half-yearly meeting, it shall be the duty of the directors to deduct from the gross profits of the half-year immediately preceding, or to charge against reserve fund, not page 18 only all debts due to the company which shall appear to the board of directors to be bad debts, but also all such as shall appear to them to be of a seriously doubtful character; and in case any such debts shall after-wards be recovered, the amount thereof shall be again carried to the credit of the reserve fund, or carried to the credit of profit and loss, as the directors may in their discretion think fit." I suppose you knew of the existence of that clause?—Oh, yes.

So it is the duty of the directors to deduct from the profits of the half-year, or to deduct from the gross proceeds, the debts which shall appear to the boa' d to be either bad or seriously doubtful. Now, I ask you, Did the board form an estimate themselves of what were bad and seriously doubtful on balancing days?—It would be impossible for the board to form their own opinion of it. They have to rely on their officers selecting these bad debts, and they can ask any questions, and the general manager would require to answer them. You see it would be impossible for the directors to go over £2,700,000 worth of advances and pick them out for themselves. The thing could not be done.

But they have to form an estimate from some means?—Yes.

Did the board form an estimate of what were bad and seriously doubtful debts?—I have set out in my statement the process we went through to form an estimate. Everything that was brought forward by the general manager and asked to be written off was written off at once without demur.

Did you or other of the directors yourselves form an estimate of what were bad and doubtful debts?—No; we could not form our own estimate. We took the estimates as they were produced by our officers and general manager.

Then you formed no estimate yourselves?—No; and we could not form an estimate. It would be an impossibility for the directors to do it.

Can you tell me what information the general manager had in coming to a conclusion as to how much should be written off?—Well, he would find the information supplied in the balance books.

What are they?—The half-yearly balance books from the different branches.

By all the officers?—By the bank managers and inspectors, and it would be sifted up to himself through all these officers.

In reply to further questions, witness said the general manager had the description in the balance books of every debt; and he had the estimates of the branch managers and inspectors. The duties of the branch managers in their half-yearly reports was to set out the position of accounts in respect to bills discounted, overdrafts, &c. It was also their duty to estimate what were good and bad debts. The inspectors would make an estimate from formation supplied by the branch manager. The inspectors would make an inspection of different branches, but they could only round a certain number of branches in the [unclear: y] The estimates of bad and doubtful debts [unclear: w] made in the first instance by the [unclear: bre] managers, then reviewed by the inspector [unclear: w] after-wards by the general manager. The spector did not report to the board, but to general manager, and the branch managers reported to the general manager. Any [unclear: d] likely to loom in the distance would be ported on at the same time. The sub-[unclear: ins] also reported and forwarded their reports the general manager, either through the [unclear: ber] managers or the inspector. These [unclear: esti] were made by means of reports either [unclear: by] inspectors, branch managers, or sub-[unclear: inspec] unless the board ordered a special report [unclear: t] made. The instructions to make these [unclear: f] mates came from the general manager, there were no instructions as to how [unclear: the] mates were to be made up; they made [unclear: t] according to their own ideas. The [unclear: estim] of the inspectors and the general manager given effect to as far as the latter [unclear: thos] that they should be given effect to. [unclear: Th] general manager recommended what [unclear: sho] written off, and it was written off [unclear: accordin] These estimates were always made up [unclear: a] liquidation basis. He presumed that [unclear: al] officers knew that. Every bank did that [unclear: a] directors wanted to know the worst [unclear: positia] case of a smash up of everything. [unclear: Ever] spector knew that his estimate had to [unclear: be] up on a liquidation basis, and every [unclear: dis] understood that that was so.

Mr Sim remarked that confirmatory [unclear: evi] on this point was given by Mr [unclear: Macker] his examination.

Witness repeated that the inspector of [unclear: e] bank had to make his estimate of [unclear: bac] doubtful debts on a liquidation basis, [unclear: and] as a going concern. He (witness) [unclear: was] know what it would take to smash up, to [unclear: a] everything interest producing, and to [unclear: see] they really stood. Nowhere in his [unclear: experi] were such estimates made up except [unclear: on] dation basis. The amount to be [unclear: writt] was decided at the head office on the [unclear: adve] the general manager. The general [unclear: mu] culled all the information from [unclear: these] by the branch managers and [unclear: inspector] satisfied himself what was required [unclear: b] written off. The general manager [unclear: broop] recommendation before the board, [unclear: and] wrote them off. The whole [unclear: responsibility] thrown on the general manager, because [unclear: he] the principal officer to advise the board. [unclear: t] should they get a subordinate officer to [unclear: a] them? They most either take the [unclear: gi] manager's advice, or dismiss him. [unclear: Wha] general manager, having gone into the [unclear: w] page 19 question, arrived at what were bad and doubtful debts he brought the matter before the board and asked for appropriations.

Mr Solomon: I ask you why did not you get the inspector to give to the general manager an estimate of what ought to be written off?—Well, I presume the general manager in discussing it with the inspector would come to his decision.

Witness continued: He presumed there were Instructions to that effect. There were certain duties laid down for the inspector, manager, and general manager, and these it was supposed they would carry out. The inspectors and branch managers would send estimates of what in their opinion were proper debts to be written off; and that estimate would be made on a liquidation basis. A new inspector or a new manager would make a clean sweep so as to start with a clear field. If the advice they gave was taken, everything would disappear, and never be heard of again. When he (witness) was manager of a bank he would estimate his bad debts far in excess of what they were likely to turn out, so that he could show them in the way all liquidators and everybody else was doing, what a clever fellow he was to bring things out better than he had stated. That was what every branch manager and inspector would do if allowed. The general manager would question the inspector and managers, and have correspondence with them, upon which he would form his own conclusion as to what should be written off.

Mr Solomon: You wrote off the amount he wanted?—He would bring the list of bad debts be wanted written off and would submit it to the board, and then the board would write it off.

Do not let us misunderstand each other. What was done was this: reports and estimates were submitted by the inspector and the branch manager to the general manager, and he took each steps as he thought proper to satisfy himself they were correct?—Yes.

And he then would come to the board with lists—what lists, these or others?—No, the list he had made up himself, culled from the estimates of what it was proper to write off, and that amount was written off at once. The hoard would sanction the writing off.

No discussion?—They would ask questions about them, but I know in our case we never refused to write off everything the general manager asked.

Witness continued: Questions would be asked but the board never refused to accept what the general manager made up. It was not a fact that the amount to be written off was in every case fixed before the lists of bad debts were submitted to the directors at all.

Mr Solomon: Very well, we will see. On Wednesday, 5th September, 1888, the general manager submitted the result of the half year?—Yes.

Showing what the gross profits were?—Yes.

It was resolved to divide this in these proportions—£14,000 to pay dividends; appropriated to bad and doubtful debts, £17,000; and balance carried forward?—Yes.

Is it not the fact that that list was only made up after it had been decided to pay £14,000 in dividends?—I should not think so. The general manager must have had it in his mind because he asks for the amount he wants for bad and doubtful debts.

Witness continued: The general manager must have had the lists before him, because he made an estimate and asked for the amount he wanted. If more money had been wanted it would have been given. Had the general manager asked for more it would have come out of the dividend, the private reserve, which at times was large, or they would have gone to the reserve fund. Provision as required would have been made.

Mr Solomon: Is it not as plain as possible to any business man that it is only when the amount that is actually going to be written off is decided, that Mr Mackenzie squares his list with the amount that it has already been decided to write off?—No, it is not.

Now, on the 4th December, 1889, the statement of gross profit was laid before you?—Yes £27,711 0s 9d.

On the same day it was decided to divide that in this way: £14,000 in dividends, £1000 to the reserve fund, £8350 to bad and doubtful debts and £4561 carried forward?—Yes.

Did you have any list before you made up by the manager?—I do not say we would.

Mr Sim said his friend was confusing the allocation and the writing off.

Witness: The two things are completely separate, and you want to bungle them together so as to mystify.

Mr Solomon: Oh, no. I will put it this way, Mr M'Lean: When the reports of the inspectors and the branch managers were submitted to the general manager, he make up a list of what he wanted written off, and he brought that list to you and you wrote it off?—Yes, but I know what you are coming to. You are trying to mystify by putting them together, but I won't have you put it that way. I am as good a bookkeeper as you.—(Laughter.)

That may be so, Mr M'Lean; I never pretend to that. I am a simple, innocent lawyer—nothing more.—What you want is to get at the truth, and your cross-examination is a perversion of the truth.

His Honor thought that what was to be inferred from the minutes was this: The general manager, without producing a list, stated the amount he considered proper to be written off as bad and doubtful debts, and that the directors assent to that without seeing the list, but the list was subsequently produced. The general manager knowing the amount it was page 20 intended to write off, though he did not produce the list, would probably have made up a list in order to ascertain the amount.

Mr Solomon: I think your Honor does not understand the position.

Witness: Your Honor has stated the position exactly.

Mr Solomon: In nearly every case what happened was that the general manager brought down a statement of the gross profits which were divided up by the directors?—On his recommendation.

We will come to that in a moment. Whether it is on his recommendation or not, it is a fact that when he brings up a statement of the gross profits it is divided up into dividend, reserve fund, bad and doubtful debts, and amount carried forward?—Yes.

And a few days after-wards, in nearly every instance, a list comes up which is very nearly, if not quite, the same amount as the amount the directors have recommended to be carried to bad and doubtful debts?—The directors did not recommend; they did as they were recommended to do. Now you have had your say, Mr Solomon, let me say something. The general manager asked for a certain amount for bad and doubtful debts. If he had said he wanted £12,000 instead of £8000 he would have got it. The extra amount asked for would have been taken out of the amount to be carried forward, or out of the amount set apart for dividends, and if that was not enough the private reserves would have been resorted to, and if that was not enough the reserve fund would be drawn on.

You say, then, that the lists were brought to the directors, and the directors wrote off those amounts?—Exactly.

Why were the lists not submitted to the directors when the writingoff was made?

Mr Sim: They were, but when the allocation was made they were not submitted.

Mr Solomon: I ask the witness why were the lists not placed before the directors when the directors made up their minds how much was to be written off?—I do not know the reason. They do not need to have the lists. If the general manager wants so much for his bad debts he asks the directors for that appropriation and gets it.

But, if the amount the general manager wants written off for bad debts is made up from these lists, it is strange, is it not, that these lists should not be handed to you?—I do not know that there is any strangeness about it.

Take any case you like then. Take the case in the book which is now open on the table. On that date there is no list of any sort before the directors?—No.

Witness continued: They had nothing else before them in that amount other than the general manager's recommendation of what was required for bad debts. The amount recommended as being necessary was passed [unclear: at] meeting of directors, and then, during [unclear: the] lowing half-year, the directors, with the [unclear: gen] manager, went over the accounts. They [unclear: co] not get the balance books from the [unclear: bran] until after their statement was out. [unclear: Press] to where they got the information from [unclear: t] guided the directors in coming to the [unclear: con] sion that the sum written off was the [unclear: con] amount, witness said that they had the [unclear: infor] tion that the general manager asked [unclear: for] amount. In March, 1890, when £14,000 appropriated for dividends, £5000 [unclear: for] debts, and £3800 carried forward. [unclear: t] information on which this was [unclear: done] the same—the general manager's [unclear: applicat] In each case when the general mauager [unclear: m] application he was asked if he [unclear: recommend] that appropriation for bad and doubtful [unclear: de] He had never asked the general [unclear: manager] it was that his estimates of the [unclear: provisions] should be made for bad and doubtful [unclear: d] were so very much less than the [unclear: estimat] the branch managers and inspectors, [unclear: beca] be did not know that they were less [unclear: that] estimates of the branch managers and [unclear: ins] tors. The statement of Mr Mackenzie [unclear: on] that the directors refused to accept the [unclear: insf] tions of the branch managers and [unclear: inspectors] to what provision they considered [unclear: was] sary to be made for bad and doubtful [unclear: acc] and preferred to make a valuation of [unclear: their] was not true It was not true that the [unclear: d] tors formed their own conclusions as [unclear: to] was the correct amount to be [unclear: writter] What Mr Mackenzie meant was that the [unclear: di] tors went over the balance books [unclear: wirh] during the half-year and would have a [unclear: bri] eye view of the position of the bank. [unclear: That] quite a different thing to bringing up a [unclear: list]

Mr Solomon: Can you show me, Mr [unclear: M'la] in any part of your minute books at all [unclear: t] Mr Mackenzie, except in one instance [unclear: th] shall think it proper to draw your [unclear: attention] ever recommended the amount to be [unclear: wit] off—the amount which your directors [unclear: res] to write off?

Witness: How could we state the [unclear: amo] ho did not ask for it? Every amount [unclear: that] written off was written off on the [unclear: recomme] tion of the general manager. So far [unclear: as] minutes showed, it was the directors [unclear: a] decided how the gross profits should be [unclear: divi] Everything the directors did was done [unclear: on] recommendation of their principal [unclear: exec] officer.

Mr Solomon: Mr Mackenzie does not [unclear: says]

Witness: I do not care what Mr [unclear: Mact] says. That is what was done. I do [unclear: not] Mr Mackenzie ever said he did not [unclear: recon] the appropriations.

Examination continued: The minutes [unclear: w] not necessarily show that the general [unclear: mas] recommended how the gross profits [unclear: shou] page 21 [unclear: divided], because the directors would not appro[unclear: priate] the profits without his advice. If the [unclear: genral] said "I want so much more for bad and [unclear: doutful] debts" the directors would give it; if [unclear: he] wanted more than that, they would take it [unclear: out] of the private reserves; if he said that was [unclear: not] sufficient and he wanted more, it would [unclear: some] out of the "carry forward"; and if he [unclear: wanted] more, they would take it out of the [unclear: reserve] fund.

Mr Solomon: In face of the fact that in not [unclear: one] of the minute books of the bank does it appear that it was the general manager's recommendation that these profits were divided, you [unclear: still] insist that it was he who asked for it and [unclear: you] did it on his asking?

Witness replied in the affirmative. Further [unclear: questioned], he said that Mr Watson (the chief inspector) prepared some estimates of what were termed bad debts, but they were not really bad debts. They were estimates of properties, and of what the bank would realise if they were [unclear: smashed] up. The inspector classed them as bad debts, but witness would not have so classed them. Some of these statements were submitted to the directors. Witness had seen some of them. He would give a sample of what these estimates were—the one (produced) of the 29th February, 1888. As Mr Solomon would see the recommendations were all scored down and alterations were made in red ink, and no one, witness thought, would call that an estimate such as would be submitted to a board of directors. The inspector called it "The inspector's estimate of bad debts for February, 1838," but in it he did not separate the bad from the doubtful. There were scorings out in in and alterations made. One of the properties marked at £2591 was altered to £900. Witness did not suppose that anyone would call that a sheet to put before directors. He thought that two or three of the other inspectors' estimates of bad debts were placed before the directors. They, however, were not made up for the purpose of writing off. They were made up to show if these properties were smashed up how much it would take to cover them. They were not placed before the directors for that purpose. The directors were not going to take any inspector's estimate. This man came from Ceylon to assume charge of the inspectors; he knew little or nothing then of the affairs; he was going to take the responsibility of the branches, and he wanted to have a clean sheet. There must have been other estimates of bad debts, besides the one produced, made up by Mr Watson, but witness did not know of any. These lists were for presentation to the general manager, and, as witness had said, they were only scroll lists, and were never entered in a book.

Mr Solomon: Although the chief inspector went on reporting year by year thousands of pounds of bad debts, the reports were never given to the directors?

Witness: I knew of several.

Did the general board of directors know?—Two or three were laid on the table.

In answer to further questions, Witness said as they were on estimates he would like to give the value of a few estimates. The debts in the "D" list had been estimated as absolutely worthless, but they were going to get £40,000 out of these. There had been a lot of very clever men making estimates, and he had before him a sample of the estimates formed. There was a debt of £789. It was estimated to produce £500, and it brought in the whole amount. A debt of £1789 was estimated to be worth £557, but it brought in £1785 A debt of £66 was valued at nothing, but it brought in the full amount. Another debt of £104, valued at nothing, also brought in £104. A debt of £78, valued at nothing, brought in £78. A debt of £1276, valued at £500, brought in £1050. A debt of £184, valued at £42, brought in £181. A debt of £780, valued at £250, brought in £788. He had lost all faith in estimates himself.

Mr Solomon: On the 7th of January, 1887, I see you say at a meeting of the shareholders of the bank: "Like other people, we have not escaped making bad debts, but we have duly provided for them, and in order to make the best of the times we have added considerably to our inspection; so that we are taking every precaution to look after the affairs of the bank." I suppose that refers to the appointment of Mr Watson?

Witness: Yes.

Then I understand you to say that, although you told your shareholders that you were taking the precaution of providing against bad debts by appointing Mr Watson, Mr Watson's estimate of bad debts was never laid before the directors at all?—These were not asked for the purpose of the board.

I want to know is it, or is it not, a fact that these were not submitted to the directors?—No; they have not been submitted. I quite admit that. Some of them were. Three of them were.

These are the bad and doubtful debt statements (producing the statements)?—Those were never submitted to the board. They were for private information.

What were submitted to the board?—Those balance books, which contained everything.

Did they show what in the opinion of the managers were bad debts?—They gave the securities against them, and showed what might turn out as bad.

Are they made on a liquidation basis, or on a going concern basis?—They bring out the bad debts on a liquidation basis.

Is there any thing before the directors to show what is the position of this bank as a going page 22 concern?—You have to take it on the worst basis you can take it on to show that you are in a safe position.

Mr Solomon: Was there anything submitted in order to show what the position of this bank was as a going concern?

Witness replied that he did not take it that any of those reports took it as a going concern. There was nothing of any sort laid before the directors to show what the position of the bank as a going concern was. He (witness) understood that the reports were made on a liquidation basis. The directors always acted on the advice of the general manager, and presumed that he got his information from the inspectors. So far as he, as chairman of directors, was concerned, he did not know that anybody bad put before them the position of the bank as a going concern. He took it that everything submitted showed what the account or property would realise at once. Having all the valuations—which were things taken at their 'worst—on a liquidation basis before him he could assume the value of the bank as a going concern himself. He repeated that every report, which came before the directors concerning all these bad debts were estimates of accounts if they needed to be worked out, and of what they would realise under these circumstances. As the directors had before them a report showing things at their worst, it was a great deal better than a statement by the staff of the position of the bank as a going concern. They knew perfectly well what the position as a going concern was, seeing that the amount it was realising by way of profits, besides putting aside all in the list produced as not taking anything into profits. The bank must be in a sound position, making the profits they did. The bank was solvent. The estimate of bad debts in 1889 (£82,000) was not all bad debts; properties had to be taken off that. It was only an estimate, in the opinion of the person who made it. Those were the values of the properties at the time they were made, in the inspector's opinion, but values fluctuated very much in the course of a few instances. He instanced as a case in point his own house, which for property tax purposes had been valued in one year at £10,000, and in another year at £9000; but now it was down to £4000. Now he (Mr M'Lean) would be very glad if anybody would take over his house at that figure. It was not every man who would say that. Of course, if times were good again his house would be worth a great deal more than it was now valued at. These inspector's reports never went before the directors; they went before the general manager. What came before the directors were the branch managers' balance books. In 1882 the inspector estimated the bad debts for that year at £72,000. Witness had never seen the lists from the branch managers; they were not submitted to the directors. On 31st July 1889, the manager's estimate of bad debts [unclear: w] £82,900, and the inspector's estimate [unclear: w] £72,000. The lists would not have been of [unclear: an] use, and he did not know why they [unclear: we] obtained. That year £18,000 had been [unclear: writt] off, but as he had explained in his statement they had to take off the property accounts [unclear: first] Mr Watson had estimated the value of [unclear: t] properties, but they did not take his [unclear: estiman] for that. If the general manager had said [unclear: th] estimate of bad debts had been right [unclear: t] amount would have been written off, be [unclear: t] consequences what they might. The [unclear: gener] manager was responsible.

Mr Solomon: Did it not occur to you [unclear: th] there was personal responsibility?—[unclear: There] personal responsibility for the conduct of [unclear: t] bank. We take the responsibility of [unclear: go] over the balance books every half-year [unclear: as] asked about the accounts. We went over [unclear: t] balance books, taking all the securities.

Why did you disregard to such an [unclear: enorm] extent the estimate of the inspector?—[unclear: We] not disregard it. The general manager [unclear: too] the recommendation of the inspector, [unclear: and] was for him to say how much of [unclear: that] approved.

And you took his word for it?—Naturally [unclear: T] is our adviser.

In 1890 the bad debts are [unclear: estimated] £86,000, and doubtful £32,000. At the [unclear: sa] time on 31st August, 1890, you will find [unclear: th] your branch managers show a summary of [unclear: a] and doubtful debts £81,000.

Mr Sim: Mr M'Lean says that these [unclear: retu] were not before the board. You are [unclear: ask;] about documents that never came before [unclear: him]

Mr Solomon: Allow me, Mr Sim——

Mr Sim: But I object.

His Honor: Mr Solomon's point is that [unclear: th] ought to have been.

Mr Sim: If they were not, what is the [unclear: use] asking about them.

Mr Solomon: I am the judge of that.

Mr Sim: Subject to the ruling of the [unclear: court]

Mr Solomon: Of course we are all [unclear: subject] the ruling of the court. Surely, your [unclear: Honor], is perfectly obvious. Here are the [unclear: estimate] submitted every half-year showing the [unclear: braek] managers' opinions of the bad debts. I [unclear: ask] M'Lean to look at this now.

Mr M'Lean: Why did you not ask Mr [unclear: M'Lean] kenzie why he ignored them?

Mr Solomon: I did ask him and his [unclear: rep] was "It had nothing to do with me; it [unclear: was] matter for the directors."

Witness: Is the general manager a [unclear: cipher]

Mr Solomon: You asked me a [unclear: question] I told you the answer.

Witness: If he was not fit to advise [unclear: he] not fit to be there.

Mr Solomon: Do you not know [unclear: perfect] well that what Mr Mackenzie did say was [unclear: th] page 23 was nothing to do with him; that it was a [unclear: matter] for the directors?—I do not think his S[unclear: vidence] went as far as that. I do no: think [unclear: he] report goes nearly so far as that.

Witness continued: He did not think he had [unclear: ver] said that Mr Mackenzie had said he had [unclear: othing] to do with this. What he had stated [unclear: was] that Mr Mackenzie said it was the direc[unclear: ors'] business; but he (witness) did not agree [unclear: with] that. It was for the general manager to [unclear: advise] the directors. The lists, as he had said, were never laid before them. The balance books, which gave far more information, were [unclear: aid] before them.

Mr Solomon: The inspector reckoned in 1890 [unclear: that] you had bad debts amounting to £86,000?

Witness: Yes.

And what did the branch managers estimate?—£81,000.

What did you write off?—£7080 But those estimates we declined to take, as they were simply the estimate of the values of the properties.

In 1891 the inspector estimates the bad debts at £74,000?—Yes, and he makes provision for £88,800. The estimate of the managers was £74,050, but you must understand that these estimates take in a lot of the properties which were working themselves out.

And you wrote off—how much?—Whatever was asked for would be written off.

£20,000. Don't you know that?—You can put the list in a lump, if you like. We will admit it, with the explanation that the statements in it comprise a large number of properties—the property account—belonging to the back. I told the shareholders all about them.

Then in 1892 the inspector's estimate of bad debts was £65,000?—It is an estimate of bad debts after valuing the properties.

Yes, after giving credit for properties held against them?—Yes; it is the valuation in his animation.

Your manager's estimate of bad debts that year was £80,000?—I cannot say.

Take the inspector's report for 1892?—There is not an inspector's report; it is an inspector's estimate.

Call it what you like. On that date what is his estimate of bad debts?—£75,000, and he has got provision for £80,000.

Including the reserve fund?—Yes.

Witness (continuing) said that in January, 1892, the manager's reports estimated the bad debts at £78,000, and in February, 1892, at £61,000. That half-year £22,000 odd was written off. In 1893, according to the reports now before him, he saw that the inspector estimated the bad debts at £58,000. He did not know anything about the branch managers' reports, never having seen them. As a matter of fact they were lists, and were not reports at all. They purported to be from the managers of the branches, and were the estimates of the values of properties if they were realised upon at once. He did not hold that the valuations were correct. If in 1892 the bank had been wound up and the properties sacrificed and sold for what they would bring, the result would perhaps have been, as Mr Mackenzie's report seemed to show, that the £50,000 reserve fund would have gone, with the exception of £9000, but there was no reason why the properties should be sacrificed. It was conceded by everyone that that was what was meant by Mr Mackenzie's estimate. Another thing was that in the reports the bad debts and doubtful debts were not separated, and if that were done it would be seen that the position was much better. The general manager had said that 50 per cent. of the debts were bad, but that was not the proper way to make an estimate. Besides in addition to the reserve fund they had £58,000 of private reserve which was available for providing for bad debts. What he said was, that even by Mr Solomon's own showing the bank had £30,000 left out of the reserve fund. That was not by including what had been reported as bad. Going on to 1894, the inspectors' estimate of bad debts in October of at year was £74,000, and the manager's: timate was £68,000 Witness did not accept that inspector's estimate at all The year 1893 was the year of the terrible crisis. In 1894 a new inspector came, and witness said to toe general manager that after the crisis, after the hauling in of £500,000 of deposits, the advances must be weakened, and witness asked the general manager to send the new inspector to every branch to value everything in the books, and show what the position was. He brought witness this estimate, taken from the branch managers' reports, and witness told him he would not accept the estimate. Witness saw that the increase in book debts was an increase in property accounts, which was not what was wanted at all. Then it was decided that Mr Vigers should go and inspect the branches personally, and he was to bring up a report of exactly what he found. That report was brought up on the 31st May, 1895. There was no difference in the position of the bank between 1893 and 1895 that witness knew of. In April, 1894, the sum of £11,988 was written off, and in October £7700, and that included landed property at Outram, £2009.

Mr Solomon: You have explained to me that you do not recognise the inspector's writings off. I say that in 1894 the inspector reported or estimated—call it what you like-that the bad debts of the bank were £74,000.

Mr Sim: That was after all the writings off.

Mr Solomon: No, no; so much the worse if it is so.

Mr Sim: Mr Vigers's estimate was made up in October, and all the writings off were before October.

page 24

Mr Solomon: The inspectors reported £70,000, and you wrote off £19,000. The managers having reported £67,000 or £70,000, where did you get your information from?

Witness: We did not know that the managers reported that.

Why?—Because we never had that.

You had the books?—It was not focussed in the books.

Mr Solomon: Surely to goodness, Mr M'Lean, you, the directors, or the manager, whoever it was—I am trying hard to fiud out who is responsible, and I find a difficulty in doing so, but it makes no difference to me whether it was you or Mr Mackenzie—I want to know the fact——

Witness: I say we did not know these focussed managers' reports. I say that this report of Mr Vigers was not what I asked for, and was worth nothing.

You did not accept the inspector's report?—I would not accept any report than a man would sit down and fire off in half an hour.

Will you tell me where you got the information on which you acted in writing off?—We got it presented by the general manager. We went over the balance books with him, and he explained every account over £500.

Did you know in going over the balance books that the managers had stated that in their opinion, instead of £19,000 of bad debts, there were £70,000?—How could we know? We knew that we were satisfied, and the explanation of the general manager, that we were writing off a proper amount.

Supposing that you knew then what you know now, that the totals in the balance books showed that in the opinions of the managers there were at that time £70,000 of bad debts, would you then be satisfied to write off £19,000?—I dispute that there were £74,000 of bad debts. I have absolutely disputed that. Besides, we knew that we had all the private reserves.

Do you not see now that in 1894 the managers reported to the general manager that in their opinion there were bad debts in the books of the bank to the extent of £70,000, and that you only wrote off £19,000 P—And if you still persist in misrepresenting what I say, there were all the reserves against it.

Whatever reserves there might be it does not alter the fact, does it, that there were so many bad debts?—I say this, that they were not bad debts.

They were what the managers called bad debts?—There was £74,730 here against them.

They were put down as bad debts?—On a liquidation basis, yes.

I do not care on what basis. They were not put down as bad debts by the directors?—Because they were not bad debts; and I brought forward the securities in 1894 and threw them on the table for the shareholders to look at all the properties, and they [unclear: co] have any of them they liked at the figures. [unclear: T] directors had the branch managers' [unclear: bala] books before them at the time, and with [unclear: the] books before them they asked the [unclear: geo] manager, who satisfied them that he had [unclear: m] fair provision up to that time for bad [unclear: debts].

Now that I have shown you what the [unclear: de] of these books are, do you still think [unclear: t] that was sufficient provision?—No. I [unclear: say] Supposing the general manager——

Please give a direct answer [unclear: to] question?—I cannot answer yes or [unclear: n] Suppose the general manager had [unclear: bro] up that estimate to the directors [unclear: t] said to us: "These are all the bad [unclear: de] I want them written off" I say that [unclear: what] the amount came to the directors would [unclear: b] written the amouot to.

I understand you to say—indeed, [unclear: you] told me so half a dozen times before—[unclear: that] directors trusted implicitly to the [unclear: gen] manager?—I never said that.

Witness continued: He did not know [unclear: that] estimate in the branch manager's report [unclear: in] was correct. It was impossible to go [unclear: back] years and place matters in exactly the [unclear: po] they were at that date. He could [unclear: not] whether the branch manager's estimate [unclear: of] debts in that year was correct, unless a [unclear: ren] tion of the properties had been gone into. [unclear: T] branch manager was probably newly [unclear: appoin] and wanted every dead property out [unclear: of] books, and therefore put them all down [unclear: as] He knew himself in the crisis of 1865—[unclear: whe] was in charge of the Bank of New [unclear: Zea] here—when a large number of persons [unclear: fr] that that bank made losses to the [unclear: exte] £150,000 in their books. He advised [unclear: hi] spector that there would be heavy losses, [unclear: be] the end there was only a loss of £60. [unclear: He] peated that when they made up the [unclear: ba] sheet of 1894 they thought they had [unclear: made] provision for all bad debts. In 1895 [unclear: wo] proper time to make a revaluation of [unclear: all] perties, and in that year they took [unclear: proper] and wrote of everything. Looking now [unclear: a] figures of the branch managers, which [unclear: he] never seen before, and assuming them [unclear: to] correct, he admitted that they had not [unclear: n] sufficient provision for these bad [unclear: de] If he had seen these [unclear: figures] might not have consented to [unclear: wr] off what they did in 1894 as [unclear: sufficient] 1895 Mr Vigers made a personal [unclear: inspec] and after his report was received they [unclear: b] that more would have to be written [unclear: off] had been They did not accept Mr [unclear: Viq] estimate of bad debts (£91,000). He [unclear: had] creased the losses on certain properties, [unclear: w] they had to write back next year. For [unclear: ins] Mr Vigers increased a property from £48 £8500, and the losses on the [unclear: property] year, after his visitation, were [unclear: reduced] page 25 £7900 Another property set down at £2000 [unclear: r] Vigers wrote up to £5000, and next year, [unclear: fter] making a personal inspection of it be put [unclear: t] back to £3000. Whenever he (Mr M'Lean) [unclear: aw] that, he would not accept the report. It [unclear: was] not the fact that in 1894 they wrote off [unclear: ne] quarter of what their branch managers re-[unclear: erted] as estimates of bad debts. They wrote off 19,000 that year: and they knew of no difference [unclear: n] the position of the bank. He repeated that [unclear: he] directors did not know what the branch [unclear: mangers'] estimates were; these reports were [unclear: never] put before them. It was the branch [unclear: balance] books they had before them, and in [unclear: these] the thing was focussed. He did not know [unclear: whether] these estimates agreed with the branch [unclear: balance] books. All be could say was that the [unclear: position] of the batik had not altered, and to heir knowledge they had made plenty of [unclear: proision].

Mr Solomon: If, instead of writing off a marter of what the managers reported as bad [unclear: lebrs], you bad written off half of it you could lot have declared a dividend at all?

Witness: Yes; but the directors did not debit that it was bad. To know the amount hat was bad they would have had to go into the evaluation of all the properties. If they had not trusted to the manager they must have sicked it out from the balance books; that would have got it, but that was the business of the manager. The manager asked for appropriations tor bad debts, and the sum asked for was [unclear: ranted]. The bad debts on a liquidation basis [unclear: or] 1894 were reported as £68,000. and they at Mackenzie's request wrote off £19,000 He did not know at the time that that amount of bad debts bad been reported. If when that was done they took the property accounts into con[unclear: sideration], there was not so much wrong

Mr Solomon: Are you content to put it that [unclear: ay], "not so much wrong"?—No. I say [unclear: here] is provision.

In the reserve fund, do you mean?—Oh, here is to carry forward and private reserves.

But that is not what I am talking about. I [unclear: m] not talking about whether the bank was going [unclear: o] burst, but whether you wrote off sufficient of [unclear: our] profits in the way of bad debts?—If you have a lot of money in private reserves you [unclear: on't] write it off; you keep that against any [unclear: keli]hood of bad debts.

Witness continued: He had given examples [unclear: n] his statement of the way in which [unclear: hese] debts had been dealt with. They [unclear: were] not written off until the properties were [unclear: realised]; but if the properties were sold, and [unclear: they] never refused a reasonable offer, the [unclear: balance] would be immediately written off. But rproperties would not be sacrificed. The value of the property would be taken to be the ordi[unclear: ary] market value, and what that was would [unclear: be] decided by their principal people. This [unclear: estimate] would be made out by the manager for the time being, and it would appear in his half-yearly report. The manager would put in the property as it stood, as if of the value, and if the security was good that was the value as at that date. That estimate would stand until depreciation was shown. He (witness) did not admit that the bad debts shown to the extent of £70,000 or £80,000 were bad debts. It was not a case of writing down property and sacrificing the lot. In the case of shares, for instance, they might be put in at £25s per share, and perhaps in a month they would go up to £5. Supposing a man had a house that cost him £3000 to build, it might bring him in £150 a year, and yet would probably not fetch £1000, but he would not let it go for £1000.

Mr Solomon: That is not the point, what you would sell the property at, but what provision you make against it. If you have a debt in your books, and against it you have a house worth only £1000, surely you can only call it £1000?

Mr Sim: What Mr M'Lean means is that if the rent from the house is going on to extinguish the deficiency, you do not write it off.

Witness proceeded to relate a case in which a property account showed a surplus on realisation.

Mr Solomon asked whether it was not the case that the amount written off at the period referred to was a quarter of what the manager had estimated to be the true amount of the bad debts.

Witness replied that that would be on a liquidation basis. Continuing, he said that in 1895 they had Mr Vigers's report. That showed they had £90,000 or bad debts, besides £44,000 doubtful, and Mr Vigors estimated the provision to be £95,653.

Mr Solomon: You prepared a balance sheet, then?

Witness: Yes.

Do you say it is a true balance sheet?—As far as we were able to make it.

Did you wipe out these debts?—We could not wipe them out without a vote of the shareholders.

Here we have "Bills discounted and other debts due to bank." Don't you know that £100,000 of these were bad?—They were not bad, because there was provision against them.

How do you mean "they were not bad because there was provision against them"?—We had provision, but not enough provision, and we could not touch that balance sheet without a resolution of the shareholders.

Further questioned, witness said that besides the reserve fund they had the amount carried forward and the profit for the half year (£20,000), and a lot of odds and ends.

Mr Solomon: I ask you again, was that a true balance sheet?

page 26

Witness: Yes, so far as the books of the bank were concerned.

Did you not know at the time that you were including £100,000 of debts you knew to be bad?—They were debts in the list.

Did you not know, Mr M'Lean, that you were including in this £100 000 worth of debts that you knew to be bad?—No; I did not know. We were going to accept it that they were bad from Mr Vigers and make provision for them.

Never mind what provision you were going to make for them. You knew that you were including £100,000 worth of bad debts.—And we had £90,000 provision against them.

You were including £100,000 of debts that you knew to be valueless?—We did not know them to be valueless. I wish to call your attention to the fact that that is a balance sheet made up from the books of the bank, and we had no power to touch that balance sheet.

What do you mean by touching it?—We had no power to alter it by taking money from the reserve fund and capital. I never knew of any case where the reserve fund was written off without a resolution of the shareholders.

You know perfectly well that your reserve fund at that date was gone. I quite understand what your object in the matter was, and there might be a great deal to be said as to what light was the correct one, but let us get at the facts. I will do you perfect justice on the other matter in a moment or two. You mean that you were on the verge of selling this bank to the Bank of New Zealand?—That is so.

If you had shown the true state of affairs as they existed then there might have been a run on the bank, and the bank would have gone into liquidation?—That might have been so, but that is a different point altogether. I say you cannot reduce your capital without a resolution of the shareholders.

Why not wipe out the reserve fund?—I have never known a reserve fund taken without a resolution of the shareholders; and we have no power to touch that balance sheet before we go to the shareholders and ask them to do it.

You knew you made this quantity of bad debts?—We were determined then to make provision for everything Mr Vigers said, and more than that. We were going to take a considerable sum for contingencies.

Mr Vigers reported that you had made £90,000 of bad debts. That is so?—I don't know that he reported He said that is the valuation. We had £95,000 to provide for them without touching capital at all.

Don't you see that in your balance sheet of '95 you don't touch the reserve at all. Look at what you say to the shareholders in your report. Although, as a matter of fact, you had made £90,000 worth of bad debts, what you say in your balance sheet is this: That the gross profits, after making provision for bad [unclear: sa] doubtful debts is so much. He says that [unclear: is] mistake.—We could not help that. In [unclear: our] port you will see that "after making [unclear: provi] for bad and doubtful debts "is struck out [unclear: of] That was an intimation alone, if nothing [unclear: m] had been done, to the shareholders that [unclear: the] was danger ahead. Then that balance [unclear: sheet] not issued until the 21st, and four days [unclear: after] wards at the meeting I told them that if [unclear: th] sale did not come off we would have to go [unclear: is] the position and make a proposal.

Although you had £90,000 of bad [unclear: debts'] your report you say that the net profits [unclear: for] half-year are so much, leaving available £19,000 and you knew perfectly well that the whole [unclear: t] profits, reserve fund, and everything was [unclear: sw] away.—That is not so. We told them [unclear: that] would go into the position of the bank if [unclear: the] did not come off. We could not have [unclear: ga] further at that time. There was a run [unclear: on] Bulk of New Zealand, and there was a [unclear: run] ourselves virtually. Our deposits were [unclear: ga] out, and the Government had to bring in [unclear: t] Note Issue Act in order to stop the [unclear: run] Bank of New Zealand. And that [unclear: was] position. Suppose we had done what you [unclear: sa] tell the shareholders. Tae shareholders [unclear: k] perfectly well that we were going [unclear: into] position of the bank, and I told them [unclear: as] as one could tell them.

What did you tell them? The [unclear: re] says: "Pending the result of [unclear: negotia] opened by the Bank of New Zealand [unclear: for] purchase of this bank as and from [unclear: the] August, 1895, it is not the intention [unclear: of] directors at present to deal with the [unclear: balance] And you show a balance available for [unclear: t] tribution?—We say that we made it.

Is that profit?—We had made it.

But in order to make it you have to [unclear: sh] that you had discovered £90,000 of bad [unclear: debt] No; I do not admit that.

What profits are you making?—I [unclear: told] shareholders that if that sale did not [unclear: come] we would have to go into the position [unclear: of] bank.

Very well. Was that not a strong [unclear: intima] to the shareholders that there was a run [unclear: on] Bank of New Zealand and that our [unclear: depa] were going out?—Would you have [unclear: given] more intimation than that You [unclear: call] deceiving the shareholders. I don't [unclear: call] deceiving.

The fact was that Mr Mackenzie had [unclear: wri] to you that £150,000 was necessary to [unclear: cle] the bank. Did he not?—I told him [unclear: before] I was determined not to pay any [unclear: divide] the bank was to clean up, and that £10,000 more was wanted as a contingent reserve, [unclear: s] to make sure we had plenty to go upon.

Although you and Mr Mackenzie [unclear: th] you woufd require £100,000 to £150,000 clean up the bank in August, 1895, [unclear: your] page 27 [unclear: ished] report attached to your balance sheet [unclear: thow] that the net profits of the bank are £21,000, and that there is £19,000 available for distribution?—No.

That is what your report shows.—It was not available for distribution.

What was it available for?—To wipe off bad debts with.

And not a single syllable was said to any-body to lead them to believe you had any bad [unclear: debts]—Yes; it was struck out of the directors' report.

Not out of the balance sheet.—We are not responsible for that.

The fact is that Mr Vigers's report made it [unclear: clear] to you that you would have to wipe out [unclear: all] the profits for the half year, the reserve fund, and call down the capital, if you could not sell to the bank?—Oh, no; we could have managed without touching the capital.

You would have had to write off the reserve found and all the profits, if Mr Vigers's story was true?—Yes, that is so.

And the trifling matter of the Ward Farmers' Association had not then been discovered?—Yes.

Did you know the full amount of it in May, 1895?—It was not in Mr Vigers's estimate.

So that outside altogether the loss you were going to make by the Ward Association the reserve fund was gone?—It was hardly contem[unclear: plated] that there would be a loss on the Ward Farmers' Association.

But the fact remains that, according to Mr Vigers's report, the reserve fund of the Colonial Bank was gone?—According to that report it was gone.

And you did not doubt it?—No, but whether I doubted it or not I was going to accept it, and I was going to add a lot to it.

I understand your position, Mr M'Lean, and it may as well be put fairly before the public. Instead of wiping out the reserve fund in the balance sheet you thought it would have been disastrous to show the real state of affairs, and In the interests of the shareholders you con[unclear: cealed] it?—I do not admit that I concealed anything. I admit that we could not pay a dividend after Mr Vigers's report came in, and we had no intention of doing it.

Well, you accepted Mr Vigers's report, and at that time you knew you had £90,000 of bad [unclear: debts]?—I wanted to accept it, because it was my wish to write down everything that it was necessary to write down.

Did the other directors know that you were excluding these bad debts from the balance sheet?

Mr Sim: They were included.

Mr Solomon: They were not written off; [unclear: they] should have been excluded. (To witness:) Did they know what was being done?—They all knew what was being done.

And they all knew of Mr Vigers's report?—Yes.

Did they know that the balance sheet was being issued without any provision being made for the £90,000 of bad debts reported on by Mr Vigers?—I do not know. I could not speak for the other directors. It is likely they did know.

Didn't you take them into your confidence?—I was in Wellington at the time, and those who were there I took into my confidence.

Who were they?—Mr Stewart, Mr Reynolds——

Did Mr Stewart know about this report?—He knew of it, because I put it on the minutes. He objected to it being on the minutes without consideration, and it was never brought before the directors for cousideration. It was never brought before them, because we were going to accept that and a great deal more to put the bank into a position to fight a bank with Government money.

Was Mr Downie Stewart, for instance, a party to passing it?—You could see by his name being in the minutes whether he was or not.

Further examined, witness said: At the meeting of directors on the 14th of September, 1895, there were present—Messrs Reynolds, Stewart, Larnach, the general manager, and witness (in the chair). Mr Stewart, when he consented to the balance sheet being passed at that meeting, had not had an opportunity of considering Mr Vigers's report. The report was put on the minutes of that meeting, but Mr Stewart objected to that because the directors bad not considered it. That was at the meeting in Dunedin in June. At the September meeting Mr Stewart knew that £90,000 of the debts were bad, and he also knew that there was £90,000 provision against it. His reason for assuming that Mr Stewart knew about Mr Vigers's report was that he (Mr Stewart) had objected to it being put on the minutes when it was without its first being discussed and considered by the directors. He did not say that so long as no diversion was made that he had no reason to object, but he acquiesced in what was done. It was proper to put the balance sheet in that state before the shareholders, for it would require a special resolution of the shareholders to enable them to do what was required. In the case of a person wanting to buy shares in the bank he would have noticed the run on the Bank of New Zealand, and that money was going out of the Colonial Bank, and also be would have sufficient notice of the state of the bank by the report saying that pending the negotiations with the Bank of New Zealand, they would not deal with the balance. Four days after-wards it was clearly reported that the directors were going into the position of the bank if the negotiations did not come off. Those Words were in witness's speech of September 25. They had not given effect to page 28 Mr Vigers's recommendation because they could not write down the capital of the bank without a special resolution of the shareholders. The directors had not discussed amongst themselves the advisability of taken money from the reserve fund. He could mention a dozen cases where banks had taken moneys from their reserve funds on the vote of the shareholders, and mentioned the Westminster Bank and several of the Melbourne banks. He could not say that Mr Lanark knew about Mr Vigors having reported that there were £90,000 of bad debts, but he was at the meeting of directors when that report was put on the minutes. He wished it to be distinctly understood that the state of the balance sheet did not make any difference to the Bank of New Zealand, because they took over the business account by account and did not take the balance sheet as a whole at all. The accounts were all taken over on a liquidation basis, and there was no deception of anybody.

Mr Solomon: There was no suggestion that the Bank of New Zealand were deceived?

Witness: Oh, yes. It was suggested all over the country that we had sold them an insolvent bank.

Mr Honking: It is not suggested by the Bank of New Zealand.

Mr Solomon: What I suggest is that the true position was withheld from the share-holders and from the public. I do not know about the Bank of New Zealand.

His Honor: They bought all your good business and left you the bad. I understand that they believe they have made a very good bargain.

Witness: They have got the reserves and can wallow in money; but of course they may "do it up." At all events they bought a bank with the second business in the colony.

The court rose at 5:25 p.m. to sit again next morning at 11 o'clock.