Fourth Day—Monday.

The cue was resumed on Monday morning

Mr Solomon asked if Mr Chapman and Mr Cooper were prepared to go on with Mr Ward's examination on the drafts, and

Mr Chapman replied that they were not.

Mr Solomon said that before he went any further he proposed to proceed with Mr Hannah's examination. For reasons that were obvious to him, however, it was necessary that Mr Ward's examination should then be completed as far as possible.

Mr Chapman said that only one third of the drafts submitted by his learned friend had been investigated.

His Honor: So far as the drafts go, you cannot expect Mr Ward to give much information. You most get that information from Mr Fisher.

Mr Chapman said that what Mr Ward could say would be simply the result of Mr Fisher's examination of Them, for personally he (Mr Ward) knew nothing of the explanation.

His Honor: That is what I thought.

Mr Solomon asked when they could have the statement as to the £67,000, and as to Mr Ward's petition at the time the company was started.

Mr Chapman said he could not tell that. Mr Fisher would make the investigations when he could find time.

Mr Solomon said he could not have Mr Ward's examination indefinitely postponed in that way. They could proceed with Mr Ward's examination on every point except that.

Mr Chapman said he did not know how far Mr Ward's examination was finished, and they had not gone into the position at all as to how far it would be necessary to re-examine him. He was going to ask that time should be allowed to go over the evidence and see how far it was necessary to examine Mr Ward.

Mr Solomon said it was quite proper that Mr Ward should get whatever time was necessary. His point was that until Mr Ward's examination was disposed of the examination of the other witnesses should not be proceeded with. He thought he had a right to get Mr Ward's explanation of these circumstances independently before he had an opportunity of hearing the explanations of the others.

After farther discussion,

His Honor said Mr Solomon could go on with his examination of Mr Hannah and then of Mr Ward as far as be could, and after any reasonable interval that was desired Mr Chapman could re-examine Mr Ward. That allowed Mr Solomon to get Mr Ward's independent explanation of the matters about which he had been questioned. Other witnesses could then be called, and if Mr Ward desired to be recalled after that to make an explanation as to any particular matters one could then see how far it would be reasonable to allow such an explanation.

Mr Solomon said he would have no objection to that course.

Mr Chapman mentioned another matter. His learned friend wished to examine Mr Ward as to a sum of £67,000, but the necessary investigation to enable Mr Ward bo answer could not very well be made without an inspection of his several accounts in the Colonial Bank books. The books were in the hands of the Bank of New Zealand, the manager of which raised no objection to such an inspection.

His Honor said that that being so the books could be examined.

The examination of J. E. Hannah, auditor of the books of the association, was then continued. Witness said it was the fact that in the Farmers' Association in 1895 the past due bills of the institution were treated as bills under discount. They were held by the bank as overdue bills, but not charged to any account. When the bills were dishonoured the amounts were debited to the customers' accounts, so that part of the assets was the amount owing to the company by their clients. He believed that past due bills were debited to customers' accounts. Asked as to whether if the true position were stated, it would not have shown £10,000 more assets, debts owing to the firm, and £10,000 more liability to the bank, witness said that that account was in the same position as the others. It would be as Mr Solomon stated if not conceded. The item £2133 7s 7d, in the produce account of June, 1895, which was the excess of debit over credit, was put in as an asset of the association, but it was not so shown in the balance sheet. The consignment account showed the difference between the two sides of the account, and he thought he was justified in so stating it, and not showing the actual difference been assets and liabilities. He did not recollect ever having before seen a balance sheet like the one produced to him. In the illustration placed before him the sum of £10,000 due to the bank in connection with one of the stocks was not shown as a liability, page 44 but the amount was simply deducted from stocks in the bilance sheet.

Do you not thick now that it is a very important thing indeed to show not the excess of assets over liabilities, but the actual amount of assets sad the actual amount of liabilities?—Yes it is. The unliquidated assets were always open to doubt.

But is it not of the highest importance that the shareholders of the institution should know the actual amount which the institution owed?—Yes.

Do you not now see that the result of that—no matter who did it—was absolutely to hide from the shareholders the immense amount of debt which the institution carried on its shoulders—no matter who is to blame for it, or what was the intention?—I thought that the statements here would have been submitted to the shareholders along with the balance sheet.

Do you not see that the result of what was done was to completely conceal the immense amount of debt which the institution was bearing?—Yes, I can see that now.

Now look at this report which bears your certificate as auditor. After hearing what has been brought under your notice here, would you have signed that voucher in these terms?—At that time I

I am not asking you that. Would you sign that report to-day, after hearing what has now been brought under your notice?—Probably, I would not.

Is that all you can say?—I would not sign it.

Then why did you sign it?—Taken in conjunction with each other I had satisfied myself that the amount was there, I cannot recollect anything about the conversations that took place with the manager at that time. I was induced to allow it to be done through what I was told by the manager and secretary.

Now, so far, I have confined my investigations to this one point: that the accounts have so far produced in one flense a proper result, because the balance of the calculations is correct. What we have complained of so far is that is stead of the actual assets and the actual liabilities being shown, only the surplus is shown, I want now to take you to a much more serious aspect of the matter, and to inquire if the balance sheets do not show assets which did not exist, and profits that have not been made?—They do not to my knowledge.

Witness continued: £16,000 assets were placed to the debit of the produce account, and the record of product was concealed. Referring to the Bluff store, witness said that one side of the Bluff store account showed total outgoings amounting to £1309, and incomings, which was really only repayment of an overcharge, 10s 8d. The profit and loss Account shows a loss of £309. He knew that £1000 was placed to the debit of that account, and thereby became one of the assets of the association. There was such an asset, because the year's storage of the [unclear: ga] had increased its cost to the association. [unclear: t] charge of £1000 for storage was a fair one, [unclear: a] it increased the price at which the grain [unclear: wa] have to be sold.

His Honor: It is a case of bad bookkeeping I suppose?

Mr Solomon: No, your Honor. But for [unclear: ta] £1000 they could not have paid a [unclear: dividen] Take the item £500 for interest. The effects that was to make these oats worth £500 [unclear: mot] because the money earned nothing so long [unclear: a] the grain was stored and cost you that [unclear: g]interest. You have added that £500 to [unclear: t] value of the stock, have you not?

Witness: Yes; that was taken in as [unclear: i] asset. He did not know that losses to [unclear: ti] extent of thousands of pounds had been [unclear: on]cealed. It appeared from an entry in [unclear: th] journal that a loss of £204 15s 3d had been made an a shipment of oats out of the Crusade He did not recollect the item. The on[unclear: a] explanation he could give with regard to it [unclear: m] that it had been treated as an asset.

Mr Solomon: Is it a true entry—is it not deliberately untrue entry?

Witness: I cannot explain it.

That is no answer to my question. Is [unclear: n] that a deliberately untrue entry of an [unclear: as] that does not exist at all?—That is so.

In reply to further questions, witness [unclear: s] that a deficit of £800 17s10d on a shipment of oats out of the ship Esther, which had been carried forward to produce account, should have been shown as a debit to profit and loss it the oats in baud did not cover the loss.

Mr Solomon; What you mean to say is the the profits made out of those oats should [unclear: ha] been reduced by the loss on those oats. It order to conceal that loss, instead of deducting that loss from profits that had been made, is it not a fact that they carried it to the debit of produce account to create another asset that did not exist at all?

Witness: That is the amount of debit to that account.

Witness was examined at length on the detailed entries showing debits to produce account amounting to £2544 for the year 1894-95, the effect of which was to misstate the accounts by setting out assets which did not exist, thus concealing the losses. The list produced showed a loss on tallow of £391 17s 10d in Mr Ward's own account. It was posted direct as a debit to the produce account and treated as an asset of the association.

Mr Solomon: Here is another one. "J. G. Ward loss £92 9s," carried "forward as a debit to the produce account. Here also—"J. G. Ward £109 10s 5d" and "J. G. Ward £63 [unclear: a] 9d "carried forward—a total of £657 7s on these four items. Here, again, deficiency on oats by Hauroto, £33 17s 7d; by the Tarawera, £84 11s9d; by the Rotokino, £13 18s 7d; by the Sarah page 45 and Mary, £90 3s 5d; by the Rotokino, £36 16s 2d—all to the debit of produce Again, £4 4s 3d deficit W. M'Kinnon's oats; £152 3s 4d deficit on Harrison, Jones, and Devlin's oats, tarried forward to produce account—a total loss of over £2544 in 1894-95, and a total from June of 1895 until the 21st June of 1896 of £4512 18s. And I want to go back now to the Stums up to July 1894. I commenced at 1895, your Honor, because I was then dealing with that balance sheet.

His Honor: What is the amount?

Mr Solomon: £770 in 1894. (To witness:: So far as these items are concerned, I again ask you, is it not clear that if these are losses made by the association they should be debited to profit and loss?

Witness: They should have found their way there, undoubtedly.

And as a result of this process they continued not to find their way to profit and loss?—They are chargedto the produce account there, no doubt.

And treated as if they were there?—No answer.

And the result of these two things is that the books of the institution show more profits than were made and by the same sum more assets than the association possessed. The company's profits are shown to amount to more than was really made?—Unless there is some explanation it does. I do not know of any.

Is it not a fact, also, that by that process the company's assets are shown to be more by that amount than it really possessed?—On the face of it it does. The debit side of the produce account represented what the goods had cost, and should show what the stocks in hand cost. The entries would do no harm at all if they took in as assets only such stocks an were in hand at stock-taking. There should be goods to represent the goods taken forward. He took no steps to see that the goods said to be in hand were there, and did not think it was part of bin duty as auditor to ascertain what stocks were in hand There must have been stock sheets, but on Looking now it did not appear so. The entries produced represented the amount at which these assets had been taken in. He could not say whether the goods were there or not. the same practice was adopted in 1894, the sum of £459 7s 6d having been credited to storage, and in the same wav debited to the produce account. On June 26, 1893, the produce debit of £147 14s 6d was credited as charges, and taken to the debit of that account in the same way. The supplementary entries made on June 30, 1895, were probably items that had been overlooked during the year. For the year it amounted to £48,000, He could not say that he had inquired particularly into each one, but he would have done so generally. They were balancing entries

Mr Solomon; Is that a proper thing to do ?For instance, here is a sum of £7000 transferred in one lump from Mr Ward and entered as a credit. What vouchers are there for these? Where are your ticks opposite to them?—Witness: I do not know.

You would place a tick opposite each item, would you not, if you bad gone through them?—They are not there.

When did you go through them?—I can't be sure, 1 think I saw them.

Now there is one other thing I want to draw your attention to. You must have noticed that from this ledger the pages from 367 to 372 have been torn out; and here is a memorandum saying that no entries had been made on the pages torn out?—I did not see that.

Now, look at thin reference in the journal: "lnvercargi11 store account, June"30 (balancing day), profit and loss account £842 14, 7d, ledger folio 369." That folio is not there, but in its place is a memorandum saving that the leaves are taken out, there being no entries on them?

Witness: It does not appear anywhere else.

Witness added that be had no recollection of seeing the memorandum which Mr Solomon had read from the ledger. The memorandum could not have been there when he went throng the books.

Mr Chapman asked if Mr Solomon said that the entries which, according to the journal, should have appeared on the missing leaver did not appear any where.

Mr Solomon: No. What I say is that there are two leaves taken out, and at the same time there is a memorandum at the top which in manifestly not true. 1 am going to try and And out who knows about them.

Now I want you to look at this please: "Ocean Beach Freezing Works." What was the debit of that account at the time of the balance sheet of 1893? £7513, that is it, is it not?—There is a transferon the other side. £900 odd, That appears on both sides, but there was transferred to J. G. Ward's private account on that day £7518, so that on the balancing day of 1893 there was taken out of the freezing works and debited to J. G. Ward £7000 odd, and immediately afterwards it is recredited to Ward and taken back to the freezing works. If that operation had not been done, Mr Hannah, and this item had been carried forward in the ordinary way to the Ocean Beach Freezing Works, it would appear in these schedules, would it not ?—Yes, it would.

And any of the directors of the company could see that the freezing works were being carried on by the association?—I do not know of that; that the Ocean Beach works were a creditor.

That the Ocean Beach Freezing Works were a creditor of the association at that time for £7000. The effect of these entries was to conceal that fact altogether? As the matter is page 46 now, no one wold tell that the works were being carried on by the association at all or that the works owed the association any money at the time?—That is so.

And, of course, contemporaneously with that, you knew now that not only was the fact of the association running this show absolutely kept secret, but at the same time Warden account was reduced by £21,000?—Yes, I know that now.

Now, go on to 1895,—The same thing has happened.

To the extent of how much?—£14,612.

At that time the freezing works owed the association £14,009, and on balancing day that amount was transferred to Mr Ward's private account and redebited afterwards?—I do not know that it was redebited.

At any rate, it is debited. Again the effect of what was done in 1894 is to bide even from the directors the fact that the freezing works were being run by the association?—If it was not redebited it must have been in Mr Ward's [unclear: unt] It is not redebited to the freezing works.

Yes. I know that, but 1 am speaking about this account. Was not the effect of that closing entry to hide from the directors of the association the fact that on that day the freezing works owed the association £14,000; and, in fact, to hide altogether that the freezing works were being run by the association?—I cannot say if that was the object.

I do not ask what the object was. Is there anything in the balance sheet of 1894 or in the schedules attached to show that the business was being run at all?—That is transferred absolutely to Mr Ward.

Answer my question. That is transferred absolutely to Mr Ward. And is there anything to show the directors of this institution that these freezing works were being carried on by them?—Nothing there to show.

First of all Mr Ward s account is debited with £14,000, and contemporaneously with that the balance of debts is reduced by £35,000?—Yes.

So not only is the fact of those works being run concealed, but the state of Mr Ward's account is concealed at the same time?—Yes.

Were you ever shown, Mr Hannah, any register of securities?—No.

Did you not think it necessary to inquire for those? Show me the list of book debts for 1895. You see that list [referring to the list produced] is first of all called book debts, is it not?—Yes.

And it shows a total amount of £36,000?—Yes.

Now I find it subdivided into £29,000 of advances, which you told us were secured debts, and £6288 of unsecured debts. I find on looking at page 29 of this book that the Hokonui Railway Company is a debtor to the association far £3919 Ibs 5d, and on page U I find that [unclear: t] Southland Rope and Twine Company is a [unclear: debt] for £2079, making atotal indebtedness [unclear: beta] these two of £6000. The total amount of [unclear: ab] debts unsecured is only £6288. Take the amounts. Did you not think it necessary satisfy yourself in some way that those among were advances against shipments?—I [unclear: da] recollect.

Did you make any inquiries for a register securities? I suppose you usually find is company there is such a thing?—Yes.

What were you told when you inquired! I don't recollect.

You don't recollect inquiring?—I [unclear: d] recollect.

Do you remember what oats were in store? As to the oats in store I took the [unclear: mana] word as to what oats were there.

You took the manager's word that the were oats in store to the extent of that £16,0 worth of produce?—Yes.

Do you think it at all proper to put in [unclear: a] association's books the fact that they [unclear: ab] £16,000 worth of oats in store and take [unclear: o] the manager's word tor it?—I must have [unclear: sa] fied myself at the time, but I cannot say [unclear: no]

Surely we are entitled to some more [unclear: pa] cularity than that. You say you must [unclear: h]satisfied yourself in some way. What step [unclear: d]you take to get anything beyond the manage word?—I don't know that I did.

Did you not know that a very few most after this the oats in stock, according to [unclear: a] books, were some £16,000 short?—I did [unclear: b] know that.

Mr Solomon intimated that he was [unclear: finish] with Mr Hannah's examination, and Mr [unclear: Ch] man said he did not propose to ask any [unclear: questions].

Mr Solomon said that so far as Mr Ward [unclear: a]concerned he had no more questions to [unclear: a] except the questions relating to his person position. That was to say, he desired [unclear: him] supply details as to how he stood at the [unclear: instion] of the company, and also with a [unclear: statem] of how the £67,000 was made up. Of course was probable that time was wanted for the There was only one other question he [unclear: m] want to put to Mr Ward, and he (Mr [unclear: Solome] would like time to consider whether it [unclear: a] advisable to put it.

Mr Chapman: What is the question?

Mr Solomon: 1 say 1 may want to put [unclear: a] other question, but I have not made up my [unclear: m] to that. Otherwise I have finished Mr Ward examination.

Mr Chapman, in reply to his Honor, said the were not prepared to go on with Mr Ward's, examination. They would have to [unclear: coos] what topics must be gone into, and what [unclear: ft] ther subjects they should examine upon, and he felt that they must wait till Mr Ward's [unclear: exa] nation closed before they could consider that page 47 Mr Solomon suggested that an adjournment should be mule till Wednesday, as, in his opinion, that would give Mr Ward ample time.

Mr Chapman applied, on behalf of Mr Ward, for access to books and documents.

Mr Solomon asked if Mr Chapman agreed to an adjournment until Wednesday morning.

His Honor thought Mr Chapman ought to be ready to go on on Wednesday.

Mr Chapman: Ihope so. The newmatter ismainly that which baa still to come.

Mr Solomon: There is no new matter that I know of except one neat question. The other new matter 1 have indicated before, and all that I want is an answer.

The court then adjourned until Wednesday forenoon, it being understood that Mr Ward and his advisers should have access to the books and documents under the supervision of the deputyregistrar of the court.