Tenth Day—Tuesday.

His Honor Mr Justice Williams sat [unclear: in] Supreme Court yesterday, when the [unclear: taking] evidence in connection with the [unclear: proceding] the liquidation of the J. G. Ward [unclear: Farm] Association was continued

Mr Macdonald (of Invercargill), [unclear: appear] with Mr Solomon, tor the official [unclear: liquidator] W. R. Cook); Mr F. R. Chapman, [unclear: with] Theo. Cooper of Auckland), for the [unclear: Hon. J.] Ward and the officers of the Farmers' [unclear: Ass] tion; and Mr Gallaway on behalf of Mr [unclear: C] Birch, formerly manager of the Colonial [unclear: Ba] at Invercargill.

His Honor took his seat on the bench [unclear: a] a.m.

Mr Cooper proceeded at once with [unclear: the] examination of Mr Fisher.

Mr Cooper: I think you have said [unclear: that] Ward had nothing to do with the details [unclear: of] business of the J. G. Ward Farmers' [unclear: Ass] tion?—Witness: Nothing whatever.

They were left entirely to your [unclear: man] ment?—Yes.

The cheques for £6000 and £15,000 in and of £34,000 in 1894, were those [unclear: signel] you or by Mr Ward?—By me.

They were cheques on Mr Ward's [unclear: account] Yes.

You had, I think, authority from Mr [unclear: W] to operate upon his account?—Yes; I [unclear: d] cheques usually on it.

You signed these cheques "J. G. [unclear: Ward], J. Fisher "?—Yes.

You would infer from that that Mr [unclear: Ward] not in Invercargill at the time the [unclear: cheques] given?—Yes, that would be so.

The transfers that were made—the [unclear: £44] proceeds of the debentures that were [unclear: place] Mr Ward's account by the book [unclear: keeper] that done under any instructions or [unclear: auth] from Mr Ward?—Mr Ward never knew [unclear: a] it until it appeared in the liquidator's [unclear: repo]

And the other transfers that you have [unclear: sp] about from Connell's account to [unclear: Bro] page 107 [unclear: ount]?—They were done entirely by me. Mr [unclear: rd] was absent from the colony.

Examination continued: Witness said thai he [unclear: pared] the balance sheet of 1895 entirely upon [unclear: own] responsibility, and no details were sub[unclear: ted] to Mr Ward. He believed that he told Mr [unclear: rd] (in the interview at Wellington) the state [unclear: his] account, but he had no data but his own [unclear: mory] to go on. With reference to the trans[unclear: ion] with Mr Ross, the twine was resold at [unclear: per] ton, and had been bought by Mr Ward [unclear: m] Mr Ross at £35 and £38 per ton—princi[unclear: ly] at £38 per ton. The price it was sold for [unclear: ply] cleared its cost, insurance, and interest [unclear: ges]. Mr Ward made no profit on it. That [unclear: s] only stock of twine that the Southland [unclear: pe] and Twine Company started business [unclear: on], with the exception of a very little raw [unclear: terial]. Mr Ross was the manager of that [unclear: mpany] and also a director. Mr Anderson [unclear: a] not a director, but a shareholder. The [unclear: okkeeper] for the company was Mr Borne, and [unclear: e] bookkeeper was continually in contact with [unclear: Ross], the manager.

In reply to questions concerning drafts [unclear: ness] said that in respect to the draft of 2nd July, 1894, for £300 on Laing, of Napier, their [unclear: ant], oats were shipped to Murray, Roberts, [unclear: Co.], Laing's principals, on the 4th. They [unclear: ew] for £386 6s 11d for these oats, and in that [unclear: t] draft withdrew the one for £300. The [unclear: ft] represented business in hand when it was [unclear: awn]. In Mr Cook's report there was a draft [unclear: t] £300 on Jew, 6th August, 1894. In respect [unclear: that] a shipment of oats was made by the [unclear: auroto], and the draft on Jew was retired. [unclear: e] business in connection with that was [unclear: mpleted] the day after. On September 16 [unclear: ere] was a draft for £300 on Campbell, and [unclear: e] next day they shipped 1000 sacks of [unclear: te] and replaced the draft by one dated 17th [unclear: ptember] for the same amount. Another [unclear: aft] was for £500 on Cave, July 20, 1895. a July 16 they drew £500 on Cave and Co., [unclear: elaide], and on July 20 made four small ship[unclear: ents] of linseed and grain, and drew on those [unclear: ments] for an amount the total of which was [unclear: 506] 15s 10d. A draft Mr Solomon had not [unclear: ferred] to was for £1100 on Laing, the [unclear: sociation's] agent at Napier, and that was on [unclear: e] 7th May 1894; and on the 11th they made [unclear: pments] by the Ohau to various consignees to [unclear: hom]. Mr Laing had sold the cargo, amounting; [unclear: all] to £1016 7s 4d, and retired the draft [unclear: ith] the proceeds. There was business on the [unclear: h] May, 1894, which was carried through [unclear: y] Mr Laing, though the shipments had [unclear: ot] then been made. Another draft was [unclear: h] July 9, 1894—R. O. Young, for £300. [unclear: hey] drew for 300 on Young, and the [unclear: llowing] day made a shipment by the Poherua, [unclear: hich], he believed, was loading that day, the [unclear: voices] amounting to £1100 6s 6d. They paid [unclear: at] and retired the draft on Mr Young. On [unclear: eptember] 24 there was another draft for £200. That was retired on the 11th October by a shipment by the Poherua amounting to £20819s 9d. That business was in hand on September 24, and was part of a contract Mr Young bad fixed up early in the season. On December 3, 1894, they drew on Young for £300. That was retired by a shipment on December 6 by a sailing vessel. They consigned to Mr Young any goods which were on hand at the time, drew a draft, telegraphed the names of the principals, and then they drew for £382 2s 4d, and retired the draft. On March 4, 1895, they drew on A S. Paterson and Co. for £500, and sent consignments of ryegrass on the 19th, 27th, and 29th March, the shipments coming to £639 3s 3d, and then they retired the draft. The business was in hand prior to the 4th March, when the draft was withdrawn. As to the draft on R. O. Young for £300 on June 26, 1893, they retired that draft on June 29 by a very considerable shipment made by the Poherua, amounting to £752 Is 5d. Mr Birch, the manager of the bank, was fully aware of the course that was taken in connection with these drafts. He (witness) did not know anyone was injured by the duplication of the drafts. The course that had been adopted was this: They drew upon agent or principal, and a few days later, when they shipped the goods, they drew a draft and retired the other one instead of sending the original draft, but they did not get any fresh money by that, and the bank was perfectly cognisant of the transaction. There was no one injured, and no one deceived, because the bank knew exactly what they were doing. As for the draft of £6150 on Nelsons, Nelsons had to pay for the mutton which was shut out. That was done under the agreement with Nelsons. If there was more mutton than the ship could take Nelsons had to pay for what was left. That was in accordance with a clause in the agreement.

George Atkinson Birch, examined by Mr Solomon, said he was manager of the Colonial Bank at Invercargill at the time of the initiation of the Ward Farmers' Association. He was aware of Mr Ward's position at that time.

Mr Solomon: At this time—November, 1892—were you pressing Mr Ward to keep his account down?—No; I do not think we were.

Were you willing that he should get extra accommodation?—He got all the accommodation be ever applied for.

And were you consulted as to the initiation of the company by Mr Ward or by Mr Fisher, or by anybody else?—No.

Did you have any conversation with them about it?—No, I cannot remember any. As a matter of fact, Mr Solomon, I was away when Mr Ward's business was merged into the association; I was away on a holiday.

You had conversations with Mr Ward or Mr Fisher after the company came into existence? Yes.

page 108

We have been told by Mr Fisher that within the first few months of the company's initiation debts of Mr Ward's that he owed to you to the extent of £20,000 were paid by the association. Did you know that?—That the bank was being paid Mr Ward's debts at the expense of the association? Certainly not.

What did you think these large sums of money were being paid into Mr Ward's account by the association for?—I can explain a good many of these items, I should say very satisfactorily, in the list read in court yesterday. I was away, as I said before, when the company took over Mr Ward's businesses, but I noticed that there was a cheque for £3000 paid into the credit of Mr Ward. That was supposed to be for wool account. Well, if that was paid in for wool account, where was the wool?—The association took the wool and paid us the money for it.

But we have now been told it was not paid in for the wool account at all It was simply paid in payment of Mr Ward's debt, and nothing was got for it.—That is news to me.

On December 5, 1892, according to a statement furnished by Mr Ward, his debts to the bank were paid to the extent of £20,600, and among the debts to the bank is that £3000 that you thought was to buy wool with. It is certainly put into the wool account, but that is not what it is for.—There was supposed to be wool representing that account.

What steps did you take to find out?—You never do take steps in a thing of that sort.

What did you think the money was for?—I never thought anything about it at all. There was a limit arranged by the head office for the account, and I never looked into the thing.

Why did you not want to know what it was for?—If you had a limit fixed up, I don't care twopence what you did with the money.

What was the limit at the initiation of the company?—There appears to be no limi marked up at the initiation of the account. It have no doubt that there was one three months after-wards—a limit of £45,000.

Had you any instructions from your head office as to what the advances were given for?—No.

Do you mean to say that this company had the right to come to your bank and get advances up to the limit without any inquiry as to the securities?—Yes.

Did it not strike you as being rather rash?—Oh, no.

A company with about £12,000 paid up entirely!—Well, Mr Solomon, it does not matter to me. It was a head office arrangement, and I had to carry it out.

Does it not strike you that that was rather a rash proceeding of the head office?—No; it did not strike me.

Is it not usual with a limit of £45,000 to inquire what a man has got the money for?—Do you mean the branch manager?

No, the bead office?—I have no [unclear: do] head office would have given it to him.

Where did they get the information [unclear: fr] I suppose an application had been [unclear: sent] them.

Tell us what happened when these wanted a £3000 overdraft. Who [unclear: grante] Oh, that application would come [unclear: thourgh]

And you had no means of knowing [unclear: w] was for?—Oh, yes; I would know [unclear: w] was for, because it would be on the [unclear: face] book. It would say an application [unclear: for] for wool account.

To buy wool or for wool bought? [unclear: It] advances against wool.

Would not the bank get the security wool?—No.

We find in five or six months Mr [unclear: War] owed the bank at that time £20,000 [unclear: b] debts paid by the association to the [unclear: e] £20,000?—Yes.

Did the head office know that?—[unclear: N] you mean that the association paid the [unclear: e] Mr Ward to the debit of Mr Ward?

I should say if they paid bis debts [unclear: it] his credit.—I mean to the debit of [unclear: him] books.

Did the bank know within six [unclear: month] the initiation of the association that [unclear: it] Mr Ward's debt to the bank to the [unclear: ex] £20,000, and if so, where did they [unclear: get] formation from?—What do you [unclear: mean] bank—the head office or me?

Call it the whole bank. I don't [unclear: care] is. Did you know?—I knew [unclear: that] amounts had been paid into his credit.

Did you know that it was simply to his debts?—I knew these were. [unclear: Here] items we will take for instance. Mr [unclear: W] a certain limit with the bank under [unclear: the] "sheep account." Well, cheques to [unclear: th] ciation came in to the credit of [unclear: sheep] and wiped it out, but the association, [unclear: t] some, had the sheep.

Don't you know?—I don't know.

So here is £7000 being [unclear: advanced] association and you made no [unclear: inquiry] association got for it?—No; I did not.,

The result being that you got your [unclear: de] and the shareholders of the association [unclear: s] to that extent?—I was not aware of [unclear: th] time.

But you are aware now. That is [unclear: the] it not, so far as that £7000 is [unclear: concert] you got the debt paid and the [unclear: share] of the association suffered. Don't [unclear: you] that now?—Well, I am not prepared [unclear: to]

Well just think a minute, and then [unclear: sa] the net result is.—But, look——

Never mind about looking. Answer: tion. Is that not the net result?—If [unclear: th] the sheep

But they had not.—How do I know [unclear: ta]

Surely you ought to have taken the [unclear: tr] inquire, and, as you are told now, [unclear: ta] page 109 that this is a mere payment of Mr Wards [unclear: t]. I asked Mr Fisher what the associa[unclear: got] for the £7000, and he said the security [unclear: Mr] Ward's shares.—That was unknown to

[unclear: What] officer was it in your bank whose duty [unclear: as] to find this out?—No one's. [unclear: o] supervising officer of the Colonial Bank?—[unclear: a] seem to be going on a wrong thing [unclear: gether]. £45,000 was the limit of that [unclear: ount]. He could do what he liked with those

[unclear: And] you now say that you allowed a thing [unclear: ch] you would not have allowed if you had [unclear: own] the facts. Why did you not know the [unclear: ts]?—I can only explain that the association [unclear: d] the limit.

[unclear: Supposing] you had known that what was [unclear: opening] was that this institution, under [unclear: ir] very eyes, was paying off Mr Ward's [unclear: t], would you have allowed it?—Certainly

[unclear: And] you now say that you allowed a thing [unclear: ch] you would not have allowed if you had [unclear: own] the facts?—I can only explain that the [unclear: ociation] had a limit.

[unclear: You] mean that if you had in your books a [unclear: tement] that a man's limit was to be £45,000 [unclear: would] not feel called upon to make inquiry [unclear: to] the security?—Certainly not. [unclear: And] nobody else does?—Nobody. If a [unclear: it] is fixed up, either with myself or with the [unclear: d] office, it is fixed up at the time. We have [unclear: eneral] manager, and so long as the limit is [unclear: t] exceeded we do not trouble about it [unclear: Is] that usual that banks do not take the [unclear: uble] to see whether clients have security or [unclear: herwise] for the money?—They do not. [unclear: Assuming] there was no security, where was [unclear: e] £20,000 to come from? How could you [unclear: t] it out of the association?—We were not [unclear: king] to the association at all. We were [unclear: king] to Mr Ward.

But the association were paying his debts?—[unclear: a] was our debtor at that time.

Was not the £20,000 you gave to the associa [unclear: n] for the purpose, as you now find, of paying Ward's debts? Is it not a fact that the [unclear: ociation] in the first few months of its exist [unclear: ce] got £20,000 to pay Mr Ward's debts with? [unclear: ou] knew then that Mr Ward owed the Colonial [unclear: ok] just about as much as he could pay?—[unclear: no].

Your own statement shows him to be in-[unclear: vent] at the time, does it not? Or what does [unclear: show]? The total amount of his indebted-[unclear: as], his direct indebtedness, was, I think, £7,000.—£85,000 or £86,000.

And what was the total amount of his assets [unclear: all] sorts whatever?—£38,000.

[unclear: So] that in 1892 Mr Ward owed the Colonial [unclear: nk] £80,000. according to that statement, and had £38,000 to pay it with?—But all the [unclear: curities] are not stated. There was the Ward [unclear: arling] trust, and besides that there were £18,000 or £20,000 worth of oats on band. (After searching some papers): Well I bring it out that the assets exceeded the liabilities by about £11,000.

That is giving credit for the whole of the amount. What is included there?—The Ward Darling trust account and the sheep account.

They are supposed to be assets to the full amount?—Yes.

And these contingent liabilities, to the extent of about £40,000, are not there? All these are put together?—Yes.

So supposing an actual liability of Mr Ward's shareholders then of £87,000 and a contingent liability of £40,000, there was only £11,000 to the good provided the whole of his assets realised the amount placed upon them according to you?

Mr Gallaway: According to that statement.

Witness: There is some other security here somewhere. I cannot make it out from that statement. I have been so long away from the branch.

Mr Solomon: What was Mr Ward's position at that time. Now we find that this £20,000 of his debts are paid by the association?

Witness: Yes.

You did not know that at the time?—I did not.

When did you first hear that Mr Ward's debts had been paid by the association to that extent?—I never heard it until I came to the court here.

Until a couple of days ago?—Yes. I was not aware at the time that the association went into business that the association were financing Mr Ward. I did not know that the association were financing him in respect to the freezer; I thought they were running that as their own business. There was nothing to show me otherwise; the cheques were always drawn by the association.

Did Mr Fisher or Mr Ward ever tell you that Mr Ward was indebted in a large amount to the association?—Certainly not.

Had you any idea that Mr Ward was indebted to the association in a very large amount?—No.

Will you explain, then, what this £20,000 worth of credits being paid into his credit by the association means?—I will tell you. I have explained about the sheep. I understood that there was a sheep account, and that there were sheep in existence to represent the amount of the sheep account. If the association, as I thought, were doing business they would take over the sheep as agents for Mr Ward and pay the money into Mr Ward's account, as it was really Mr Ward's money, because it was the proceeds of the sheep.

But if the association paid the money into Mr Ward's credit on that sheep account, did it not strike you that the reverse was the case—that the association were giving him money to buy sheep with?—No; because he had already page 110 had the money to buy the sheep with; he had had it from the bank. The sheep account was specially arranged. I thought that this payment into Mr Ward's account was the result of sales of sheep by the association. Mr Fisher never told me that the association were running the freezer; nor was there any conversation on the subject between Mr Ward and me, or between Mr Fieher and me. 1 cannot say that I was aware that Mr Ward owed the association any money.

Did you think he owed them any money?—I never thought anything about it; it never struck me.

There was absolutely nothing in your accounts to show that to you?—Not that I ever noticed.

I suppose you thought that in those days Mr Ward was a man pretty well in, did you not?—I did, decidedly.

We will now come to the 1893 balance sheet—the item of £21,000 What were you told, or were you told anything by anyone, about that £21,000 transaction?—As to what?

As to what was going to be done with the cheques?—Yes, 1 was.

Who told you?—So far as my memory serves me, Mr Fisher.

What did he say?—Of course, it is a long time ago, but I think my memory is pretty fresh upon it. So far as I recollect, Mr Fisher—some time before balancing time—said it had been arranged in Dunedin that cheques for about £21,000, or somewhere about that amount, were going to be drawn by Mr Ward and lent to the association.

When was that?—I cannot fix the date, but it was some time near—at any rate within a month of—balancing day.

You do not quite apprehend my question, which was: When did he tell you that these cheques were going to be lent to the association?—He told me that they were to come in on balancing day.

And when were they to go out?—Two days after-wards, or a day or two after-wards.

Did he tell you what the object of it was?—Yes.

What did he say it was?—Simply to reduce the indebtedness of the association.

On balancing day?—Yes.

And to show it as an amount which was really not that that they owed?—He did not say that.

I would not conclude that he did in those words. Of course, you cannot get away from this: that you knew perfectly well what the object was—to show that the money owing by the association to the bank at that date was a different amount to what it really was?—Yes; that was so.

It is quite refreshing to get a straight answer. What did you say to Mr Fisher when he told you that it had been arranged in Dunedin?—"Oh, I suppose it is all right if it has been arranged."

That is equally refreshing. Did you any steps to find out whether it had arranged?—Yes; I saw Mr Mackenzie.

Was that before this?—Yes.

Then you didn't take Mr Fisher's [unclear: won] it?—Oh, no.—(Laughter.)

Not like Mr Anderson and Mr [unclear: Hann] You don't think I would take a [unclear: respon] like that on myself, do you? I would [unclear: los] billet if I did.

What did Mr Mackenzie say to you? told me to pay the cheques.

You told him all about it?—Yes.

Are you sure of that?—I am quite [unclear: cert] it.

I am about to read to you a question [unclear: th] put to Mr Mackenzie on this subject [unclear: wh] was under examination. Perhaps, Mr [unclear: Bir] will be well for you to be careful on this [unclear: B] because it is rather important. I put [unclear: the] tion to Mr Mackenzie in this way:

The liquidators' imputations under the [unclear: be] of Ward Farmers' Association are:—(a) [unclear: T] order to reduce the overdraft of the Farmers' Association for the purpose of balancing on the 30th June, 1893, Mr [unclear: Ward] a cheque on his private account for 21,000 he paid into the credit of the Ward [unclear: Far] Association, but drew it out again and [unclear: p] back to his private account three days [unclear: after] and (6) that a similar transaction took [unclear: pl] the 30th June, 1894.—What was my [unclear: coun] with these transfers? I never heard of [unclear: the] until it was made.

Is that statement of Mr Mackenzie's true is not.

If Mr Mackenzie swears on his oath [unclear: th] never heard of the £21,000 transaction [unclear: on] was done, you say it is not true?—[unclear: Well], he charitable, and say he made a mistake,

We have not been charitable to Mr [unclear: Wr] Mr Fisher. We have had out all [unclear: the] parts, and that should be done with [unclear: every] Is Mr Mackenzie's statement on oath [unclear: th] did not know of that £21,000 transaction it was done true?—No, it is not.

Did you have any doubts in your [unclear: own] whether this was a proper thing to do or [unclear: d] I never thought very much about the first; [unclear: t] action.

You knew what its object was?—Yes.

And what the effect would be?—Yes effect would be that everybody was [unclear: dece] including shareholders of the bank and [unclear: as] tion.

And you consented to such a thing?-[unclear: I] to consent.

You were under the orders of Mr [unclear: Macke] That is so.

At the same time you thought that [unclear: Mr.] was lending the money to the association:-distinctly so.

So that now while you, through [unclear: coerica] Mr Fisher put your heads together to [unclear: de] the shareholders of the Ward Farmers' [unclear: As] tion and the shareholders of the bank and [unclear: e] page 111 body else, Mr Fisher was at the same time deceiving you?—He was; there was no doubt about that.

So it was a case of what we call "cross upon cross?

Mr Solomon at thia stage read the letter (published in our columns on July 16) from Mr Birch to Mr Mackenzie relative to Mr Ward's lending the association £40,000, and in which Mr Birch said that he would take silence as meaning consent.—The transaction witness did not think was a proper thing to do.

Mr Solomon: But you shunted the responsibility on to somebody else?—Yes, of course, I asked for my instructions.

Suppose you had been boss, would you have allowed it?—That is goiog a bit too far.

Mr Gallaway objected to such a question being put.

His Honor: Mr Birch may give a doubtful answer.

Mr Solomon: Supposing the matter was one for your sole consideration would you have allowed it?—Presuming I was in Mr Mackenate's position as head of the bank?

Presuming you could have done this on your owe responsibility without referring the matter to anyone?—I would not have done it.

You see you use these words: "We must Dot show all the overdraft to the public this time"?—Yes. Well, really speaking, these words should not have been in that letter at all.

How did they get in there?—I will tell you bow that happened. I was occasionally in Duuedin, and, of course, saw Mr Mackenzie when I came up, and he was always harping on this account being so high, and he sort of instilled it into my mind that we must not allow the whole losses to go out to the public; and with him continually talking about it, it made me think the same way.

It was Mr Mackenzie's idea that this was to be kept sub rosa?—Oh, yes.

Again, you sent this letter to Mr Mackenzie?—Yes.

And, as far as you knew, silence did give consent, for you heard nothing more about it?—Never a word.

You could not know that Mr Ward got th letter and kept it?—No.

Again, you were led by Mr Fisher to believe that Mr Ward was lending money to the association?—Certainly.

You and he were deceiving the public, and he was at the same time deceiving you?

Witness: I wish you would not say "you" and "he"; you might say "be" and "the bank."

I appreciate your position, but you were the man who consented, although you were bound to?—Yes

But the fact is that he and you, acting under instructions, put your heads together to deceive the public, and at the same time, without your knowledge, he (Mr Fisher) was deceiving you?—That is so.

Had you known the fact then as you know it now, that instead of Mr Ward lending this money to the association he owed the whole of it and a great deal more to the association, you would have considered it your duty to report that?—Certainly.

So far as you were aware the bank were kept completely in the dark as to that also?—Yes.

Did you mention these matters of the £21,000 and the £55,000 to any other officer of the bank or any director of the bank?—No, not to my recollection.

Are you aware whether the directors of the Colonial Bank knew that this was being done?—I cannot say.

The whole matter that was submitted to the public was the printed balance sheet?—Yes.

And there is no means whatever by reason of that balance sheet by which the public or anybody could know anything aoout it?—No.

Have you ever heard before of such a thing being done as putting in a large cheque like this on balancing day?—No, I do not think I have.

Mr Gallaway: Mr Mackenzie swore that he had

Mr Solomon: At any rate you never have?—No.

Witness continued: He could conceive no reason why the draft of £30,000 on Connell and Co. should have been paid in to the credit of Mr Ward. Atter the explanations given by Mr Fisher and Mr Ward, ho could conceive no reason why that should be done. Connell and Co. ought to have been credited with that amount. If the proper entry had been made, Mr Ward would have been shown by that item alone to be £30,000 more in debt than was shown, and the association would have been shown to owe £30,000 more to Connell and Co. than was shown.

Mr Solomon: Are the books of the company in that respect not untrue?—Yes; I suppose they are.

Witness continued: The same remarks applied to the £18,000 and the £6500. The balance sheet for 1895 showed amongst the assets of the company stocks put down to £17,000, and it had now been admitted on oath that the stocks really were £27,000. He had heard the explanation that £10,000 assets had been deducted on the one side and Carswell's bill on the other Carswell's business was sold to the association in 1893. There was an understanding that the stock should be held against the advance, and there was a record of the security in the books. The store warrants, &c, were got in August, 1893, and a part was given up on the 22nd September, 1893.

Further examined: The whole of the balance of security was not gone on September 27, 1893. On the 28th February, 1894, the bank still held page 112 the guano, cornsacks twine, &c, worth £5350. In the balance sheet, instead of showing stocks worth £27,000 as an asset, and liabilities of £10,000 owing to the bank on Carswell's account, the whole liability disappeared and £10,000 was deducted from the asse's. He would not like to say that the balance sheet was untrue in stating the assets and liabilities of the company. One was placed off against the other, and it was rather hard to give an answer, and he could not give one. He did not know of any other case in which the assets were set against the liabilities in a balance sheet, and the balance brought down. He did not look on a proceedirg of that kind as a very grave thing, but if the association had £10,000 more assets and £10,000 more liabilities, and the figures on each side showed £10,000 less, any man of sense would say it was not a true statement. The grain and railage account was a liability of nearly £10,000 owing to the bank, secured by grain warrants. This item was in the same line as the other—a liability struck out and an asset struck out. In the same way, also, the liability on past due bills was eliminated. He supposed the object of making up a balance sheet in that way was to show lower figures. If an association were shown to have £80,000 of debts which must be paid, and £80,000 of assets which might fetch the amount, it would not be in as strong a position as if £60,000 was written off either side. There would be greater liability under the high figures. The smaller they could show the liability, the better the strength of the association was shown to be.

Mr Solomon: I ask you whether putting the position of this association in the manner it is put, instead of putting the affairs of the association as they really were, would not have a manifest effect upon persons thinking of taking shares?

Witness: I don't know, and I can't say.

Do I understand you to say that you can form no opinion upon the subject? You cannot answer that question?—I cannot.

You had an interview with Mr Fisher a little after that?—Yes; in the latter end of August.

Now, just tell me in your own words how the interview arose and what Mr Fisher said to you.—Very well. I will give you the whole history of it. On the evening of the 29th August, 1895, which was a Thursday, I was sitting in my office, and about halfpast 4 there was a gentle knock, and in popped Mr Davidson, the inspector. I said to him. "Hulloa what are you doing down here?" He said: "Don't you know." I replied: "I have not the slightest idea." He said: "I have come down here on special business." I asked: "What is that about?" He said: "I have come down to make an investigation into the Ward Farmers' Association. Have you not got a telegram?" I replied "No," and he said: "Oh, there will be a letter for you in the post office." I said: 'I will get it by-and-bye," but when I went the post office there was no letter. We [unclear: w] talking over the matter, and I raid: "[unclear: We] better make an arrangement for Mr [unclear: Fis] to meet you to-night." He said: "I wish [unclear: y] would." I went to the telephone and [unclear: t] phoned to Mr Fisher that Mr Davidson [unclear: h] arrived to make an investigation into the [unclear: as] ciation's affairs. I said: "He wants to [unclear: m] you at half-past 7. How will that suit?" [unclear: W] Fisher replied: "That will suit nicely." I [unclear: sa] "I suppose you are very glad that he has [unclear: co] down? "He answered: "Yes, very glad." said: "So am I." I then came back to Mr [unclear: Dar] son and we began to talk over the affair. I [unclear: sa] "Davidson, this is a large account, but it [unclear: is] grand account. There is no getting away [unclear: fr] it. I am making grand profits out of it. [unclear: I] very proud of the account. When you [unclear: co] back to me to-morrow after your [unclear: investigate] you will be thoroughly satisfied with [unclear: t] account." That is all that happened just [unclear: th] About 7 o'clock at night there was a ring at [unclear: th] telephone, and it was from Fisher—I [unclear: sa] from his own house. He asked to have [unclear: not] interview with me about 7 o'clock, [unclear: before] saw Mr Davidson. I said: "Very well; [unclear: co] up any time you like." I left instructions [unclear: if] should knock at the door to show him [unclear: str] into my office. He came up about 7 o'[unclear: clock] He said: "I want to see you before Mr [unclear: Das] son comes down tonight. I want to [unclear: tell] something. All things are not right "I [unclear: sa] "What do you mean?" He replied: "[unclear: s] things are not altogether right with the [unclear: a] ciation account." I said: "What do you [unclear: m] by not altogether right?" "Oh," he [unclear: s] "there is a lot of money owing by a [unclear: p] that you know nothing about." I said: "[unclear: M] owes the money? "He replied: "Mr [unclear: Ward] said: "Mr Ward owing money !" He [unclear: answer] "Yes." I said: "That is news to me. [unclear: B] did that come about? Is it much?" "A [unclear: g] bit," he replied. "How much?" I [unclear: as] "£5000?" "More than that." he [unclear: replied] said: "£10,000?" He said: "More than [unclear: th] I said: "£20,000? "He replied: "More [unclear: t] that." I said: "Why don't you say [unclear: str] out what it is?" He said: "It is over £[unclear: 50,000] I said: "That is a nice confession to [unclear: make] me, when you knew that I never dreamt [unclear: t] he owed you any money." He said: "[unclear: Tha] not all either." I asked: "What's [unclear: coming] the back of that?" He said: "I am [unclear: sho] the oats." I inquired: "How much?" [unclear: and] replied: "About 75,000 bags." [unclear: I] had enough.—(Laughter.) Any [unclear: amount], told him to go and see Mr Davidson, [unclear: an] would see him again. He went to [unclear: see] Davidson, and went into investigations. [unclear: N] morning Davidson said: "You know [unclear: it] Fisher said he told you." That is [unclear: w] happened at the interview on the [unclear: evening] the 29th August. Do you want to [unclear: carry] matter further?

page 113

Mr Solomon: I want to know all that passed. Witness: Well one morning between the 29th [unclear: ugust] and the 3rd September he was in the [unclear: ffice] and talking over the accounts. You [unclear: hay] suppose that I got a terrible shock. I said [unclear: him], "However in the name of goodness, [unclear: isher], could Ward run up that amount. What [unclear: the] matter? What has he been doing with [unclear: pe] money?" He said: "To tell you the [unclear: truth], Mr Birch, it is over a long time. I can [unclear: ardly] tell you. There have been losses on the rain and on the freezer—on things of that [unclear: ort]. In fact, I have lied and deceived you for [unclear: he] past five years, and the truth has not been [unclear: n] me." And, by Jove, he spoke the truth, [unclear: the] truth had not been in him. Did he tell you how he had deceived you?—[unclear: yes], by concealing——Yes, I forgot this [unclear: before]. When I asked him what he meant be [unclear: aid] he had been concealing Mr Ward's account [unclear: rom] me. I said: "Why did you not tell me [unclear: hat] Ward was owing you money and creeping [unclear: nto] the association? "He replied: "I dared [unclear: not] do it because if I had told you you would [unclear: ve] reported at once to the head office." I [unclear: id] I certainly would have done so, and he [unclear: answered:] "That would have ruined the [unclear: assciation]." I said: "That did not necessarily [unclear: ollow]—it might not have meant ruin to the [unclear: association]; but in any case you did wrong—[unclear: ery] wrong—in concealing this from me."

Did you ask him whether Mr Ward was party [unclear: o] the concealment?—No; I did not. I had [unclear: plenty] to go through as it was. It is the [unclear: experience] of a lifetime.

Mr Fisher admitted to you that he wilfully [unclear: concealed] the fact of Mr Ward's indebtedness? [unclear: Most] decidedly.

And you recognise now that by the mani[unclear: pulation] of the accounts on balancing day it [unclear: was] impossible for any outsider to know what Mr Ward did owe?—He could not do it.

The freezer account was closed up every year [unclear: and] carried to the credit of Mr Ward's general [unclear: account]?—That is it.

And at the same time that account was [unclear: debited] by some £20,000 or £30,000 or £40,000?—I had instructions to go through the books [unclear: in] September to make up an account of [unclear: matters], and could not do it without informa[unclear: tion].

You have seen, in this investigation, and [unclear: heard] that the books have been balanced up so [unclear: as] to focus (to use Mr Fisher's expression) Mr [unclear: Ward's] account to one point, and you have also [unclear: heard] that, having focussed it, he very nearly [unclear: wiped] it out?—Yes.

Have you any doubt, whoever was responsible, [unclear: that] the object was to conceal Mr Ward's indebtedness?—It must have been for that purpose. Could there be any other object?

Could anyone familiar with the books—the officers of the association themselves—fail to know that the effect of what was done was to conceal this all-important fact from the public?—No, they could not.

Mr Solomon: Of course we know Mr Fisher knows all about it.

The luncheon interval was here taken.

On resuming at 2 o'clock,

Witness said Mr Fisher, when telling him that he was 75,000 sacks of oats short, did not tell him whether or not the amount was exclusive of the 80,000 sacks, represented by Connell's draft. Witness did not make an examination into the affairs of the association; that was done by Mr Davidson. He (witness) went throngh Mr Ward's accounts. Mr Davidson inquired as to the actual quantity of oats.

I suppose you have heard Mr Fisher's explanation as to the warrants for oats; that he borrowed money on the oats, gave warrants for the oats, sold them, and took credit for the moneys?—Yes, I heard it.

Did you ever hear of such a thing as that before, in your experience?—No. It is wrong.

I suppose, when warrants are given for these oats, the oats represented by such warrants become the property, do they not, of the person to whom the warrants were given?—Certainly they do.

Having heard Mr Fisher's explanation, can you tell us whether at this time—June or August—there were any oats at all the property of the association?—I cannot tell you that.

You heard him say, did you not, that all the oats in store affected in that way were more than covered by warrants?—Yes.

Did you ever know of—

Mr Gallaway suggested that the case should be put hypothetically.

Witness: What I was going to say is that, independent of the warrants held by outside people, there was, of course, a warrant held from the association direct for a certain amount of oats which were held in their possession, although these oats belonged to the bank.

Mr Solomon: I know that. Assuming then that what Mr Fisher says is true—that all the oats held in the possession of the association were more than covered by warrants given in respect to them, can it be said that they held any oats of their own?—No, it cannot. I have heard what has been said in court about the produce account, and understand it pretty well.

If there were no oats in store that were not covered by warrants, was there any asset to show for that liability of £16,000 debited to produce account?—If there were no oats and no goods I should say not.

Now about these drafts, you heard what Mr Fisher said about them?—Yes.

Take one typical case. We were told that, instead of the Ward Farmer' Association drawing on their agents for the actual quantity of goods sold, they drew on them for an approximate amount, not intending that the draft should be presented at page 114 all, but intending after-wards to draw for the proper amount on the proper persons, and that when the proper draft was presented the other one was withdrawn, the proper draft then being sent forward. Did you know that that was to be done?—I did.

Was that a proper thing to do?—It was. Mr Fisher has explained it very fairly. They arranged to draw on their agents for produce to be shipped. As soon as the produce is shipped the principals are declared and drafts drawn on the principals.

Do you, as manager of a bank, say that that was a proper thing to do: to draw a draft on a person whom you know is not liable to pay for it?—It is what I did in the circumstances.

Is it done under similar circumstances?—I think so.

Has any case of it having been done come under your personal supervision?—I cannot point to any other case outside of myself. But I may go this far and say that, under similar circumstances, I should do it again. I knew that the draft was not to be presented. The object was this: The account was going up, and although we were not afraid of the account we did not like the figures to go so high. They had a habit of "boxing up" their stock—grain and things of that sort. By the "we" I mean all the bank officials and the head office. I do not include the directors; I don't know anything about them. As I say, they had a habit of accumulating these stocks, and as we thought they were waiting for a too favourable market my instructions from the general manager were to get these amounts reduced, and as regards the oats I bothered Mr Fisher time after time to get rid of this stuff and get the money in, and the only way that occurred to us was to let him do as he was doing—to draw upon his agent and to follow up the draft later on with the stuff to his principals. We did not consider there was any harm in it. I do not see any harm in it at all.

Continuing, under examination, witness said that the drafts were usually drawn on Monday—bank balancing day. There was nothing to stop this being done. Not a mistake of a pound could be made in that sort of business without its being found out. There was nothing wrong about the system—it was anticipating shipments, that was all.

Mr Solomon: Quite so; but they might not have been sent. The shipments had not been made up?—Witness: There was a certain amount of oats and grain there, as the case might be, sold; but of course they were not made up, because you cannot tell what you would get into the steamer. I went througn that business for about six years, and I found it one of the most worrying businesses I was ever in.

Worse than this?—Well, this is pretty You have no idea of what the business in, [unclear: us] you are in the trade yourself.

You know now from Mr Fisher that [unclear: on] ral occasions be drew for £1000 and [unclear: only] £300 worth of stuff?—He was going to [unclear: co] the balance, and the market fell. It [unclear: w] legitimate thing to call back that draft.

Continuing, witness said that if the [unclear: direc] had looked at the correspondence book [unclear: t] would have known about these [unclear: transacti] As an instance of this be read the [unclear: follow] typical letter, copied from the [unclear: corresponds] book of the Colonial Bank:—

October 29, [unclear: 18]

General Manager to Invercargill Manager.

On the under-noted dates you debited [unclear: the] mercial Bank of Australia (Limited), [unclear: Sydney] following remittances:—

October 8—Ward Farmers' Association on R. Campbell, Sydney............

October 15—Ward Farmers' Association on Harrison Jones and Devlin (Limited) ...

October 22—Ward Farmers' Association on Harrison Jones and Devlin (Limited) ...

And on the 26th inst. you credited them [unclear: with] same remittances, all being paid at [unclear: Invert] Please explain this.

On the 1st of November Mr Birch [unclear: replie] follows:—

All these drafts were paid in to credit [unclear: of] association against produce to be shipped, [unclear: to] space being available when the steamer [unclear: an] at the Bluff, they were withdrawn [unclear: tempo] by the association, and will go forward [unclear: later] The £300 one was cleared yesterday [unclear: against] shipped. The space nuisance is a [unclear: dra] nuisance, and the association, after [unclear: being] mised room, are very often shut out.

Mr Solomon: Is it not a practice [unclear: as] bankers to invariably forward drafts [unclear: by] very first mail?—Witness: Not if you [unclear: de] get the bills of lading.

Some of these were held over for four [unclear: me] How do you account for that?

Mr Gallaway: There must be [unclear: some] spondence about it.

Mr Solomon said there was no [unclear: refere] the correspondence about it at all.

Mr Gallaway said that what he [unclear: want] point out was this: When a draft was [unclear: pa] say, at Invercargill or Auckland, [unclear: Sydn] Timbuctoo, the place on which the draft [unclear: w] at once advised, and if the draft did not [unclear: arr] due course the head office would be [unclear: advis] Sydney, Auckland, or Timbuctoo of its arrival, and if the draft was held over [unclear: for] months there must have been some [unclear: expla] given.

Mr Solomon: No such explanation [unclear: c] found in the correspondence, and I [unclear: was] know why the draft was held over?

Witness said there must have been [unclear: a] reason, otherwise it would not have [unclear: been] page 115 over, and there was no concealment from the head office whatever.

Mr Solomon did not suggest that for a moment What he wanted to get at was this: Witness had said the object of the business was to show the account lower on Monday, balancing day, than it was. That must have been to show it to somebody, and who was to be deceived?

Witness said his instructions were to keep the account as low as possible.

Mr Solomon: Is it not obvious that Mr Mackenzie wished to show the account to his directors lower than it really was?

Witness could not say that; he was not answerable for Mr Mackenzie.

Could anybody but the directors be deceived by it?—I do not think they were deceived.

Unless the practice was explained to them they were deceived?—Yes; but I cannot say it was not explained.

I shall ask Mr George M'Lean about this?—Yes, you had better get the information from him.

Then the fact is that the Ward Farmers' Association could not deceive anybody. Mr Mackenzie could not be deceived, you were not deceived, but the directors of the Colonial Bank (unless they were made aware of the practice) would be deceived?

Witness said that he must admit that unless the directors were made aware of the practice they would be deceived as to the state of the association's accounts on the Monday.

In answer to Mr Gallaway, witness said the directors would see the returns every week. They would see every change in the account, as a special return used to go to Invercargill every week for the account. The directors seeing hese returns could not be deceived by the draft, and if they did not see all the returns that was not his (witness's) business. He had nothing to do with the head office. It was the practice to take warrants to cover advances without ascertaining whether there was grain to represent them. That was the usual practice amongst bankers, as far as he knew, and it was the practice recognised by the general manager, the inspector, and everybody else.

Mr Gallaway: Have you in any instance to your knowledge ever kept anything back from the general manager, glossed over anything, or deceived him in any way whatever?

Witness: Not in a single thing. I defy any-one to prove it.

Mr Gallaway: I put this question at the request of Mr Cooper—Did you ever send a copy of that letter which you sent to the general manager to Mr Ward, or to any officer of the association?—Never.

You never told Mr Ward about Mr Fisher's admissions at the time you sent the letter?—No.

This is the other question: Have you been on friendly terms with Mr Fisher since that letter?—I think I have only seen him once. No; I have never seen him till he came down here.

Mr Solomon: There is only one question suggests itself. In replying you hesitated rather in answering the question, "Did you tell Mr Ward about Fishers admissions to you. Did you ever tell Mr Ward about it?—Yes, I did.

When?—Only lately.

How long ago?—I do not know whether I told him before this examination took place or not. It was some very short time ago, at any-rate.

In your letter Mr Anderson's name appears as one of those you thought ought to be punished Have you any complaint to make against Mr Anderson?—No. Of course, as everybody knows, that was a private letter and should never have been exposed to the public. At the time I wrote it I certainly thought Mr Anderson deserved punishment as well for the deceit, but after that I found be did not know so much about the association's business as I had thought, and I recommended him, in fact, after-wards to be left in charge as a sort of acting-manager under my supervision. I am sorry for what I put in that letter about Mr Anderson.

Mr Solomon asked for Mr Ward's promised statement as to how the £20,000 was made up.

Mr Chapman said that Mr Ward preferred to be further examined if Mr Solomon wished it.

Mr Solomon: You promised me the statement. Am I to get it or not?

Mr Chapman: I think my friend Mr Solomon himself, the other day, said he did not think he was entitled to obtain written statements, and Mr Ward cannot give anything further than that, but prefers to be subjected to examination.

Mr Solomon: I have asked Mr Ward to give me a written statement. It my learned friend says he cannot give me an explanation there is an end of it.

His Honor: What you say and what Mr Chapman says is true. You cannot compel him to give a written statement.

Mr Chapman: It cannot be put in a simple form like that. It can only be given as an elaborate and detailed statement explained by examination.

His Honor: There may be good reasons why you cannot give it.

Mr Solomon: That concludes the examination. There is nothing more to do.

Mr Chapman wished to mention that Mr Ward had telegraphed to Wellington to the hotel where Mr Fisher stayed to know the date when he was there, and the answer was: "Arrived afternoon 18th September, 1895; left next morning." He was not there in August at all.

page 116

Mr Solomon said that was not the interview when Mr Ward signed the balance sheet. The balance sheet had been signed and brought down and printed.

Mr Ward said the point upon which Mr Solomon had asked a specific question was as to statements made to him about the £25,000. Mr Fisher had referred to the second interview. When he (Mr Ward) gave evidence, he had said there were two interviews—one in July and one in August. He found now that Mr Fisher was not there in August, but in September. Mr Fisher's reply to Mr Solomon referred to the second visit.

Mr Solomon said if that was so—[unclear: it] obvious it was not so,—but if it was [unclear: so] could get it in some other way. It [unclear: could] prejudice Mr Ward in any way, because fact, if it was a fact, could be brought [unclear: out].

Mr Solomon then mentioned the [unclear: matte] the Hon. G. M'Lean's examination, [unclear: and] Honor decided that this should [unclear: stand] formally until Friday, on the [unclear: understand] that if necessary it should be further [unclear: adjous] until the following Monday.

At 2.30 the court formally [unclear: adjourned] the depositions taken have been signed.