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The Pamphlet Collection of Sir Robert Stout: Volume 75

Fifth Day—Wednesday

Fifth Day—Wednesday.

His Honor Mr Justice Williams sat in the Supreme Court yesterday, when the taking of evidence in connection with the proceedings for the liquidation of the J. G. Ward Farmers' Association was continued.

Mr Macdonald (of Invercargill) appeared, with Mr Solomon, for the official liquidator (Mr W. R. Cook); Mr F. R. Chapman, with Mr Theo. Cooper (of Auckland), for the Hon, J. G. Ward and the officers of the Farmers' Association; and Mr Gallaway on behalf of Mr C A. Birch, formerly manager of the Colonial Bank at Invercargill.

Mr Solomon, before continuing the examination of Mr Ward, said that there were two things that he deaired to mention. One matter, which in the rush of things he had omitted to mention, was in connection with the produce account. In connection with that account he showed that by reason of the entries to debit certain profits had been made which had not been made and certain assets created which did not exist, but he forgot to mention that there was creditedto the same account the sum of £67 14s 1d. Were hie learned friends on the other side prepared to give the information be had asked for in regard to Mr Ward's drawings from the business?

Mr Chapman said perhaps Mr Solomon would examine Mr Ward upon that.

Mr Solomon replied in the negative. He asked for the particulars now.

Mr Chapman: We do not understand the question now. An endeavour has been made to furnish the information, but we do not understand on what basis the question Is put.

MrCooper: My Learned friend has given us certainfigures, but we cannot see what basis is represented by them. For instance, a sum of £12,000 has been put in, and we do not see how that has been made up.

Mr Solomon would put that matter in such a way that there could be no misunderstanding about it. At the end of 1895 Mr Ward, as showed by his books and his promissory note, owed the association £55,000. In addition to that Mr Ward had paid into the association as his bankers a sum which the liquidator made out to be £12,000. It might have been a larger sum, but if it were so Mr Ward's position was accentuated. That £12,000 represented the sum Mr Ward was entitled to draw by way of salary, honorarium and otherwise. He (Mr Solomon) wanted to know where that £12,000, as well as the £55,000, had gone.

Mr Ward said that besides the £12,000 there were numerous credits, extending over a period of three years, amounting to several thousands of pounds, There were also debits amounting to many thousands of pounds. Mr Solomon had mentioned a specific amount of debits amounting to £43,000 and credits amounting to £12,000. They could not find items in the books which would tally with Mr Solomon's suggested expenditure of £43,000 or the suggested credits of £12,000. He wanted to know the basis upon which Mr Cook arrived at the two totals of £43,000 and £12,000, for unless he had that they might be working on an entirely different basis to that which Mr Cook has worked upon.

Mr Solomon said he could give all the information which appeared in the books. Mr Ward's payments in of money amounted to £12,000.

Mr Cooper: Will you give us those items?

Mr Solomon: I cannot.

Mr Cooper; Mr Cook can, surely.

Mr Solomon; It was admitted here in the examination by Mr Ward, and it is a very simple matter to arrive at it. Mr Ward's salary of £500 a year in three years amounts to £1500.

His Honor; That was paid in.

Mr Solomon; Yes: I can take you up to £12,000 that be paid in in a moment, But my point is this: that he owes in addition to that £55,000 more, That is a total sum he has drawn out of £67,000.

His Honor: That appears by the books.

Mr Solomon said that the books showed that that amount had been drawn out, but only £47,000 could be traced. He wanted to know what the £67,000 Mr Ward drew out was for—whether it was to pay losses made, payment for himself, or the payment of debts. It bad been stated in a report which could not be put before the court that of that £53,000 £20,000 consisted of debts Mr Ward owed at the time the association was formed, and which he got the association to pay for him. That has been stated distinctly, so that instead of Mr Ward taking over the association's debts, it had been the page 48 other way, mud the association had paid Mr Ward's debts. If it was misleading he (Mr Solomon) could Dot help it. The matter had been dragged out of him. If it was not true no one would be more pleased than the liquidator to find that it was not true.

Mr Cooper again asked for information to give them a basis on which to start their investigation. They wanted the material upon which the £12,000 and the £43,000 were based. With that information they could easily go through the books, but without it it entailed the necessity of going through this whole of the books during the existence of the association, and taking out all the items having reference to Mr Ward and the association.

His Honor: There were a number of drawings out. It is suggested that these drawings out, or some of them, were for the purpose of paying off Mr Ward's liabilities prior to the formation of the association, and the; want to find out if that is so.

Mr Cooper said that the association received considerable sums of money from Mr Ward and disbursed considerable sums for Mr Ward.

Mr Salomon: Of course, but, whatever was disbursed and whatever was received, the result, nevertheless, in fact, is that they disbursed £55 000 more than they received, and the £12,000 is also gone.

His Honor said he understood Mr Cooper to say that more than £12,000 was paid in.

Mr Solomon replied that if Mr Ward paid in more than £12,000 of his private moneys he had more than £67,000 to account for—the £55,000 and the more than £12,000. the more be had paid in the more there was to account for. His (Mr Solomon's) point was that, whereas Mr Ward had received from the association £67,000 more than he gave the association, he (Mr Solomon) could only find out that he had lost £43,000, and the inquiry was as to what he had got the other for.

His Honor asked whether Mr Solomon could give the information.

Mr Solomon answered that he could.

Mr Cooper asked why he had not given it before.

Mr Solomon said that he had not been asked for it, and it was not his place to offer it.

The document was thereupon banded to Mr Cooper.

Mr Solomon said there was one question that he had previously said he might ask. the reason why he had said he would like to consider whether he would put the question was that he considered it at least arguable whether it had reference to the affairs of the association or not; but it had been brought directly before the notice of the liquidator, and it was as much as anything to allow Mr Ward an opportunity of explanation that be now asked his friends whether they wished the question to be asked.

Mr Ward: I understand the whole matter to be gone into.

His Honor suggested that counsel [unclear: shot] consult as to the question.

This being done,

Mr Solomon said: Mr Ward, there was company started in Invercargill in July of [unclear: 188] called the Southland Rope and Twine [unclear: Co] pany. I find on examining the books of [unclear: fe] company that the first cheque written by [unclear: a] company is a cheque for the amount of [unclear: b] money that was paid for its stock—you [unclear: t]accept my assurance that it was so—and [unclear: i] second cheque given by the company is a [unclear: ch] for £6000 and some odd hundreds—[unclear: a] Cooper: "£6464")—paid to you. That is not, Mr Ward?

Witness said that was so, The [unclear: cheq] £3000 was not for the purchase of stocks.? position was this; Mr William Ross at one [unclear: b] owned the Southland Rope and Twine [unclear: fa] in Invercargill, He was carrying on his be ness with the Colonial Bank, which at [unclear: p] ticular juncture would not allow him to [unclear: c] on the manager of the bank, Mr [unclear: Ban] interviewed him (Mr Ward) and asked [unclear: a]to assist Rosa out of his troubles. He [unclear: w] nto the matter, and finally agreed to take [unclear: i] output from Mr Ross of his twine works. [unclear: t] quantity of the twine sold to witness came something over £5000 at the date of the [unclear: t] mation of the company. About this time inspector of the bank disagreed with Mr [unclear: r] and would not carry on his private account connection with his factory. Mr Ross's [unclear: o] draft at the time ran in something like [unclear: £25] which was not for twine stocks at all, but connection with the factory for the [unclear: manufactre] of twine. A second time the head officials [unclear: to] him they would not carry on Mr [unclear: ro] account, and for the purpose of saving [unclear: t] from pressure by the bank witness agreed put the business into a company, [unclear: stipuk] that the stocks he had purchased from Ross should, in the first place, be taken [unclear: to] by the company—that was the stocks of [unclear: a]plus interest and all charges, to the [unclear: dat] company was created the value of the which witness had previously purchased [unclear: in] Mr Ross, as a private individual, with [unclear: into] and charges to date, ran into £6464. As a [unclear: m] of fact, the statement had been made—[unclear: w] he understood Mr Solomon wanted him clear up—the statement had been made Mr Ross that he knew nothing of the [unclear: char] for £6464, but it was a fact that the cheque [unclear: s] signed by Mr William Ross himself, as [unclear: a] Solomon knew.

Mr Solomon: Of course it is.

Mr Ward; Then why did you not say before?

Mr Solomon: Excuse me, if you want [unclear: a] explanation you can have it, but I prefer not give it.

Mr Ward: I do not object to it.

Mr Solomon: Understand, I merely ask questions. I make no comment. I am only acting on my instruction, and have studiously avoided making any comment, but if My Ward wants the explanation I can give it.

Mr Ward: Your Honor, this is a very important matter to me, and I know this question has been put by the liquidator at Mr Ross's request

Mr Solomon said that was not the case. He had made it clear as noonday that he would not put the question unless witness's counsel desired it.

Witness continued: The cheque showed on the face of it the specific purpose for which it set out—£6464 foe 161 tons 11cwt twine, and cheque as per contra entered on the ether side. He stipulated at the formation of the company that this should be taken over. It was not likely he would start a company unless that were done, and compete against his own stock. Mr Ross, he understood, had told the liquidator that when he was shown the entry £6464 it was the first he had seen of it, and gave him a great shock. The fact was Mr Ross had himself signed the cheque. His recollection of the circumstances as to the formation of the company was this: Ross was practically in a difficulty as far as the bank was concerned, and at the time, to get the whole position put on a basis favorable to Ross, witness agreed to put the business into a company, and paid £500 for shares and gave his guarantee, with others, at the back of the account to support it when it was created. The stipulation as to the stock being taken off his hands was made with Rosa, among others. Ross was the principal on the one side, and witness on the other. The stock was taken over, and; the cheque was paid by Ross, and it was singular and remarkable that, although years had passed by, nothing had been said about it until the present juncture. He could not say if he told the bank or anybody about this stipulation. He was to get £40 a ton for the twine, and every-body interested in the matter at the time must have known he was making a profit by the transaction.

Mr Solomon: Was this matter brought before the board of directors of the Rope and Twine Company and sanctioned?—I do not know whether it was brought before the board or not; if so, It will appear in the minutes.

Further examined: Some of the twine was paid for at the rate of £33 a ton and some at £38. He was told by Mr Fisher that some was paid for at £38. He knew nothing of the details himself, and he was bound to take information from those who did know.

Mr Solomon: I suppose we must get it from Mr Fisher. The point is: Is or is it not a fact the board of directors were made aware that you should sell the stock of twine on your hands at a given profit, or whether it was hidden?

Witness: There was nothing hidden about it; and my answer to that specifically is that two of the directors signed that cheque—that Mr William Ross signed it,—and the purpose for which the cheque was given was stated across the face of it.

It was to his obvious interest to sign the cheque P—It would not be his obvious interest to sign a cheques for £6450 unless it was a right cheque to sign. This is nothing whatever to do with the Ward Farmers' Association. It was brought forward as it had been reported that I had improperly got a cheque for £6450.

I was asked to bring the matter forward, and this is all the thanks I get.—I would have brought it forward if you hadn't.

Mr Chapman: Then as to this, Mr Ward, while it in before the court I will ask you this: Did I understand you to say that Ross did not hold stocks in connectiou with this factory himself, but that you had bought (over a series of years) all bis stocks?

Witness: We had bought the whole of the twine stocks?

All in:, manufactured stockss?—All his manufactured stocks.

And what he had of his primary manufacture, his machinery, and his crude material?—That is so, so far as I understand.

Suppose he nad come to grief and gone out of business, you would have had his stock on hand?—That is so.

And probably the only stock held in Southland?—I don't know about that. There might have been other stocks held there, but we would have have had the principal stocks. We should have sold the whole of that stock in connection with our ordinary business perfectly easily.

And this £40 a ton; could you have realised that if you had gained, and supposing he had come down?—The stocks would have been sold by ns at so much per pound to farmers. I cannot give the exact poundage rate at the time, but I am perfectly confident that at a retail price we should have realised that, if not more.

Do you know at what rate the company retailed them?—I cannot say from memory. I don't know whether I have a note of it here.

Itdoes not matter if you don't actually know.—I don't actually know.

The price. I understand you to say, would have covered the cost of charges and so on?—I would not have sold them to the Southland Rope and Twine Company unless they had paid me interest and charges and profit as well. I was under no obligation to Mr Boss of any sort. 1 took £500 of shares in the company, and paid for them, to assist them to come into existence. I personally new charged the Southland Rope and Twine Company a shilling for anything 1 did, and I don't page 50 know why Mr Ross should regard me as a philanthropist in connection with an ordinary matter of business

In reply to further questions, witness said the paragraph in the liquidator's report relative to acquiring the goodwill of the freezing works business fairly stated the position be thought; but the paragraph in question did cot indicate the full position. The inference from the statement was that, although it was stated that the frilling works were established not to be acquired by the Farmers' Automation, that the association did acquire them after ward. That was not quite correct, The association carried on a considerable portion of the business and assisted in creating the business, but it never acquired the Ocean Beach freeing worts at all. Thu paragraph in the liquidation report referring to the agreement to purchase the freezing works was not correct, and he complaint that the report wait in many respects a biassed one. He also complained of the liquidator having italicised certain words in the agreement, no italics appearing in the agreement itself. Next there was a reference to hie appointment at a salary of £500 a year, but that was in accordant with the agreement, in the first instance, in connection with the formation of the company. With reference to the fresh share capital and the capital taken by himself (Mr Ward) Mr Solomon had endeavoured to make out that he (Mr Ward) had paid nothing on his shares, but bn wished to point out, as would be seen by his account with the Farmers' Association, that there had been an appropriation of capital paid in from time to time by himself, and if there were a debit of £1 per share set against himself in the first instance it wan only fair that that appropriation of capital should be regarded as a payment by him of £1 per share. He wished farther to say that no sharebrokers were employed in obtaining shared or in pushing the male of shares, and no brokerage was paid. Nor were there any legal expenses incurred in the formation of the company beyond the payment of the Solicitor's fee. With reference to the liquidator's comment on the issue of fresh capital on May 3l, 1894, the impression was conveyed, whether intentional or not, that there was some motive for showing the proposal to increase the capital. There was a motive, and the motive or intention of that proceeding would hive been readily supplied to the liquidator if he had made any inquiry of him (Mr Ward). It was contemplated at the time to increase the nominal capital from £140,000 to £230,000, with a view in the future to attach perhaps the Ocean Beach Freezing Works to the Farmers' Association as a proprietary institution owned by farming shareholders; and in order to be in readiness to take that step, when considered advisable and feasible, they decided to take authority to increase their nominal capital to £250,000.

His Honor did not think it was suggest that there was anything improper in kb increase of capital.

Hr Solomon: I do not say so.

His Honor: It might have been done for very good reason,

Mr Ward: I am very glad to know that, to cause, as a matter of tot, I have seen it commented on in the opposite direction; indeed, has been commented on all over the Upon the the question of the £100 debenten hypothecated to the Colonial Bank, there [unclear: a]correspondence upon that between the [unclear: manag] of the bank at Invercargill and the association but that correspondence was probably at [unclear: a] hotel. That letter said nothing about hypthecation at all. The position, as a matter fact, was that these £100 debentures we lodged with the Colonial Bank as [unclear: colster] security of the Ward Farmers' Associate There was an agreement in writing that the were to be sold at par, and the proceeds were go to the credit of the association, and [unclear: a] interest was to be charged until they were [unclear: a] As a matter of fact, they were regarded by [unclear: a] (Mr Ward) as though they did not exist [unclear: a] they were sold, and until the association had pay interest on them.

Mr Chapman: In other words, you [unclear: beli] they were free and lodged as collateral [unclear: sec] for an indebtedness which bore [unclear: independe] interest, not at the rate stated in the debt tures, and the bank at the same time it agents to sell them at par and credit the [unclear: ass] with the proceeds.

His Honor: They were lodged with the [unclear: a] collateral security for an advance, hat [unclear: a] did not hear interest. The bank was to [unclear: a] them first.

Mr Chapman: No doubt, a court of [unclear: eq] would deal at with it as a charge in detail.

His Honor: If deposited as [unclear: collat] security it would be open for the bank to [unclear: a] them at any time.

Mr Chapman: Crediting to par; for the They were agents for sale at par.

Mr Solomon: The bank's accounts [unclear: seem] show it is a mere matter of detail that: 20,000 shares were hypothecated, but were [unclear: a] to be treated by the bank as having been [unclear: so]

Mr Chapman: They did not debit [unclear: a] different rate of interest.

Mr Ward: There was no interest on then all. The position is that the £20,000 [unclear: a] interest at the rate of 6 per cent., and [unclear: a] £10,000 worth paid no interest until they [unclear: a] sold.

Examination continued: Referring to £20,000 in connection with the [unclear: deben] which had been placed to his credit, Mr [unclear: a] said that he gave no authority for this to done, or in any way suggested that it should done. In regard to the second lot of 300 [unclear: deb] turts, he had also given no instructions directions as to how they should be treated—[unclear: a] page 51 was, of course, so far as any individual account was concerned.

Mr Chapman said that paragraph 29 of the liquidator's report stated that the statement of liabilities omitted from the capital account the 3000 fully paid-up shares allotted to Mr Ward for the goodwill of the business, which should appear as a liability for £15,000.

Witness replied that it did appear in the balance sheet. It appeared as "Less shares for purchase of business £15,000." The amount of goodwill on the other side of the balance sheet did not appear. One should be set off against the other. If it had been it would have been shown on the liability side. But the £15,000 did appear in the balance sheet.

Mr Chapman said that the next paragraph appeared to make a complaint that certain specific items were not mentioned in the statement of assets in the balance sheet. The report said they were presumably included in the gross. Was it, so far as witness's knowledge and experience went, usual to set out specific items of that kind in a balance sheet?

Witness answered that he did not think it was usual. He had never seen it done. But, as a matter of fact, the whole of these items did appear in the detailed statement attached to the balance sheet, so far as he know. There was the Hokonui Railway and Coal Company, for instance, in the statement of the 30th June, appearing as a debit of £1363 0s 7d. That was the first item, and the others all appeared.

Mr Solomon's point was that these detailed statements did not go before the shareholders.

Mr Chapman said that he was referring not to anything his friend had said but to the liquidator's report, which apparently made a complaint that these detailed items were not set forth in the balance sheets.

Mr Solomon: That is so. That is our point exactly.

Mr Chapman: Now we come to paragraph 32.

Witness: That statement is relative to the entry of £1053, in which the liquidator says that on the 30th June there was a balance of £10,553 4s 3d to the credit of Nelson Bros., and that "on the same date the following entry appears on the debit side of that company's account, 17,753 carcases of mutton in store at date, £10,553 4s 3d.'" And lower down he says: "In October the following entry was made on the credit side of Nelson Bros.' account; 'June 30, invoice reversed, £10,553 4s 3d'; and a corresponding entry was made on the debit side of Mr Ward's Ocean Beach Freezing Works account." As a matter of fact it was agreed as part of the contract between Nelson Bros. and myself that each steamer should clear the works, or, failing to do so, that the balance of the meat should be paid for. The steamer did not absolutely clear the works on the 8th July, but she took 16,408 carcases, valued at £10,308 9s 2d. The steamer shut out a portion of the carcases that Nelson Bros. were entitled to pay for, and, as a matter of fact, at the time the next steamer followed, the balance unpaid at that date amounted to the difference of the invoice, £10,553 4s 3d, which was drawn for correctly in the first instance, and the value of the meat shipped, £10,308 9s 2d. The difference under one system of book keeping would be that the balance would be deducted and carried forward to Nelson Bros.—that is, the amount of the invoice would be deducted from the actual amount that Nelsons were entitled to clear the works for and pay for; but instead of deducting that difference and making the entry so, for the purposes of bookkeeping the entry was reversed and the £10,303 was entered again, and the difference went forward to the next shipment, There was a reversal of entries for the purpose of covering the balance. The amount was due by Nelson Bros. and paid by them, and a full explanation can be given by the accountant when he gives his evidence.

Mr Chapman: The liquidator sets out what may be termed a model balance sheet which he has prepared himself from the books of the association, setting out what he considers the published balance sheet ought to have shown. Is there any particular observation you would make on that?

Witness: I should like to say it will be found that although the official liquidator takes exceptions in his report and calls attention to the fact that certain items ought to be brought to debit before balancing day-interest, among other things, not being brought to the debit-it will be found that when ha brings them to the debit he makes the profit and loss balance exactly the same. Now, that being so, it is not possible, I think, for anyone to come to any other conclusion than that these amounts must have been provided for, or a similar result could not have been provided for, or a similar result could not have been arrived by by the liquidator when he sets the facts out. I know no reason myself why, for instance, in the balance sheet of the liquidator "Cooper and Nephews, England, £1563 18s 3d," is set out. I am certain-and Mr Cook will agree with me-that, unless it is for the purpose of reporting to the court, that in no commercial balance sheet, giving particulars of business, would the balance be set out in this way. I have never seen in done; and I have asked other commercial men questions on the point, and they agree with me. The same remark applies to the detailed items set out among the items in this balance sheet.

Witness continued: As to the statement in the liquidator's report that goods were stated in the association's balance sheet at £25,665 4s 2d, whereas they were in reality £28,682 12s 10d, the association's balance sheet was correct,. page 52 as one item, £3017 18s 6d, was the value of a consignment from Cooper and Nephews The consignment was held for Cooper and Nephews, and was not included In the stocks because it was not the property of the association. He was satisfied that no trading company could possibly make up its balance sheet in the way the liquidator had done.

Mr Chapman: In paragraph 62 there is a statement that "the balance doe to the bank is shown as 'Bank account, £1185 4s 1d,' This represents the amount without accrued interest at the close of business on the 29th June, 1895, the association's balancing day, and includes cheques drawn and not presented."—Well, I wish specifically to draw attention to this fact, and I think the liquidator himself, upon consideration, will see it is so: In the balance sheet where be makes the comment that the £1185 4s 1d (without accrued interest) is debited to the bank he himself in the books of the association draws up a profit and loss statement, and it will be seen that in that profit and loss statement he specifically names "Colonial Bank interest accrued £1843 18s 6d,"and Mr Cook there brings out exactly the same result of profits to the association as is brought out in the balance sheet where he says that amount should appear. Now, unless that amount had been carried to suspense account and interest debited it is not possible for the balance sheet under the different systems to bring about the same results, I repeat that until the time arrived for the actual debit of interest to be charged——

Mr Solomon: Perhaps you are omitting to notice, Mr Ward, that Mr Cook himself says that in making up his results he takes your figures.

Mr Cooper: But he shows the interest.

Witness: My point is this: The liquidator complains that that item of accrued interest is not dealt with as it ought to have been at the time of the balance of the association, and as a matter of fact upon the books. Although he sets it out in detail he brings out the same result.

Mr Cook: I only had the same figures, These are the association's figures.

Witness: It shows, if you bring about the same result, that it was not wrong in the first instance.

Mr Chapman: Then the next paragraph refers the draft on J. Connell and Co., London, for £30,000: "On that day a draft on J. Connell and Co., London, for £30,000 was negotiated by the bank for the association, and the renewed promissory note for £10,000 in the Carswell transaction was discounted. Neither of these transactions is shown in the balance sheet."—My answer to that in simitar to what I have already stated, In the first place, in my absence Mr Fisher intimated to the bank that the question of whether or not that operation was in accordance with what they had indicated to [unclear: m] was to stand over until I was consulted on [unclear: my] return. Alter my return, when was [unclear: con] I stated that the draft was net [unclear: a]go forward, became it was not carried or under the arrangements of the credit as [unclear: fir] by me.

That is, fixed between you and Connell?—Yes: and in addition to that I instructed him that it was not to be brought again to the [unclear: debt] of the association, and I consequently took the over, and I say it was not brought to the [unclear: del] of the association again. Afterwards, when [unclear: th] association was in credit, the draft was [unclear: lit] and the warrant was returned to me.

Then paragraph 71 says: "As an illustration of the importance of this [referring to the previous paragraph], I may mention that the past due bills on the 30th June, 1894, amounted to £2028 7s 2d, while or the 30th June, 1895, they had risen to the large sum of £10,438 19s 8d, and on the 20th June 1896. the date of the liquidation, to £34,639 [unclear: 10s] 10d."—The cause of that was that the company was practically in liquidation for a considerable time before those amounts had swelled up [unclear: a] was for a considerable period really in the hands of the liquidators, and no ordinary business [unclear: a] the company was carried On beyond shrinkage [unclear: a] far as possible, and renewals were not agreed [unclear: t] by the bank: they would not give renewals.

Mr Solomon: Was the company in [unclear: liquidstion] at the balance of 1895?

Mr Chapman: No, in 1896. In paragraph 76 of the liquidator's report the liquidator says: "I am unable to discover any trace of the [unclear: a] warrants which are said to have supported this draft," referring to the draft for £30,000 drawn upon Connell and Co.—That warrant was [unclear: r] turned to me, and as a matter of fact I have it

You have stated in a previous answer that the transaction was left in suspense until you should return to the colony and give instructions as to whether that draft should go forward?—Yes. On my return that operation was distinctly regarded by the bank as for me because they returned me the warrant.

As to the liquidator's observation that he isunable to discover a trace of the oat warrants we see it now to be one warrant. Did the liquidator ask you for it?—No.

Now, in paragraph 79 the report says: "The liquidators of the Colonial Bank, in there interim report observe: 'On the 31st August, 1894. Mr Ward discounted a British bill [unclear: a] Cooper and Nephews for £25,000 and proceeds were placed to his credit. The bill was forwarded in due course to London, but we learn from the inspector's report of 8th May that in had not been presented but was held in London by the bank. The bill was subsequently returned to the colony without having been presented and debited to Mr Ward's account on the 6th September, 1895. And further [unclear: a] page 53 they ask 'With regard to the London draft for £25,000 on Cooper and Nephews, why it was specially instructed that this draft was not presented, and why it was kept in London for nearly 12 months?' I am required by Mr Justice Williams to report on this and also on the transference to London of £16,000 of Mr Ward's indebtedness to the Colonial Bank, and on the giving up of Mrs Barron's guarantees for £5000 on the 4th September, 1895, as set forth in the liquidators' report." In the next paragraph of the liquidator's report he says: "Except to state that Messrs Cooper and Nephews appear on the 31st August. 1894. to be creditors of the association for £3017 8s 8d, I am unable to give the court any information on the matters referred to, m the books of the association contain to record of any of them."—I remark, in the first place, that the books of the association contain no record of them because the association has nothing whatever to do with it. And in dealing with the draft of £25 000 upon Cooper and Nephews first, the following are the circumstances:—When I sold the Ocean Beach Freezing Works. the following is a copy of the agreement signed between myself and the company in reference to the 25.000 shares that I held in the freezing company: "In consideration of the foregoing, and of Nelsons having the control and management of the company business as hereinbefore provided, Nelsons hereby guarantee to the said Joseph George Ward a dividend of not lew than £5 per [unclear: tum] per annum on the sum of £24, 865 (being the value of 4975 £5 shares held by the said Joseph George Ward in the company) for a period of seven years computed from the 1st of January, 1894." Negotiations were going on for the sale of those shares, As amatter of the draft was put in with the security of those £25,000, in round numbers. That draft whsput in with that security, and with a guarantee with regard to the rate of interest, guaranteeing 5 per cent, interest payable for seven years, attached to it the date of the agreement to which I have just referred is the 18th of June, 1894. The letter bearing upon it, so far as the bank is concerned, is as follows:—

page 49
Wellington,

With reference to the demand bill for $25,000 on Messrs W. Cooper and Nephews, Berkham-stead, England, negotiated for you to-day, we underlake and agree with you that on receipt by us of a cablegram, which we have arranged to have sent London, advising us when this bill is duly paid, we shall deliver to you or your appointee, free of lieu, the scrip for £24,865 fully paid-up shares in the Ocean Beach Freezing Company and scrip for £16,000 fully paid-up share in Nelson Bros. (Limited), now held by [unclear: o r] Invercargill branch under letter of [unclear: lfen] from you.

In the first instance purchase was delayed. It was afterwards, however, completed, and £25,000, less the difference I have referred to—viz., £24,800,—was paid into the Colonial Bank at Wellington; and I wish particularly to call attention to the fact that I had the right to take the £16,000 of Nelson's shares under the agreement without any further payment whatever. As a matter of fact, I ought to have taken this £16,000 worth of Nelson's shares out and handed them over to the Farmers' Association at that time in support of my general account, but it was afterwards decided to sell those shares—aslo in Wellington. I should like to state before I leave that question of the 25,000 shares, and at the same time the guarantee of 5 per cent. for seven years, that there was another point in connection with the £25,000. An appointment was made in connection with the sale by which I was to receive £500 per annum, and the following is the letter bearing on the matter:—"June 8, 1894—Referring to sundry proposals for adjustment of the 'Ocean Beach Co., it is understood by the undersigned that you take the position of managing director at a salary of £500 per annum from January 1, 1894" This is signed by W. Wilson an G. L. Sunderland. That is also in connection with the £25,000 to which I have referred. So, in addition, I also had a salary fixed at £500 per annum, I had a right to take Nelson's shares upon that sale being completed, as it was to have; taken them out from the bank.

Witness continued: Regarding the £16000 draft upon Nelson Bros., he wrote to the bank on August 19 a letter in which he gave them directions to send scrip for the 16,000 shares to Loudon for sale. In his letter to the bank in London he limited the price at which the shares were to be sold at £9. He would like to point out in justification of placing that price on them that the year previous Nelson Bros. had paid a dividend of 10 per cent. The frozen meat business afterwards became very much disorganised, and the value of shares fell enormously. the following was the letter he wrote to Mr Cowie, manager of the bank in London:—

Wellington, George Cowie, Esq, London. Dear sir,—

In refernce to my power of attorney, signed by me this day to you, I hereby instruct you to dispos of these shares (Nelson. Bros. and Co., Limited) at or better then £9 per share, but not lower thanthat figure. With the additional financial strength Nelson Bros (Limited) have gained by the recent alteration in their business their shares should go to par, and I trust to you torealise par if you can possibly do so.—J. G. Ward.

page 58

He also wrote privately to one or two gentlemen in London asking them to further the sale of the shares on his behalf. Referring to Mrs Barron's guarantee, he said that that guarantee was given up directly in accordance with the arrangement made by him when the guarantee was given in the first instance by Mrs Barron. Any suggestion that this was a conclusion or a subsidy obtained by him on the guarantee page 54 which he was not entitled to get was absolutely without foundation. The following memorandum in Mr Henry Mackenzie's handwriting was handed to him at the time the guarantee win given:—"The freezing account to come down £2500 a year until £5000 is reached, when we will give up Mrs Barron's guarantee; life policy for £5000 to be assigned to the bank." He had the receipt of the life policy which he took out, and which he at signed to the bank. The account came down below the amount turned, and it was no question of favour to get the guarantee back; it wan a right, As a matter of fact, he did not demand the return of the guarantee, but he would not have paid the cheque into the Colonial Bank at Wellington, Dunedin, Invercargill, or anywhere else unless that arrangement had been first carried out. The transaction was purely a matter of business, in accordance with an arrangement made, and there no favour on the part of the bank extended to him at all. The draft on Cooper nod Nephews was drawn on them in the Brat instance because he had business transactions with them, and because he proposed to constitute them his agents for receiving the proceeds of the sale of the shares in Nelson Bros. (Limited), The draft was not to be presented, in accordance with his letter to the bank, till be cabled, An alteration in the arrange merits, so far as the sale was concerned, was made, and in accordance with the arrangement with the bank that matter was allowed to stand over until after his arrival in England. While he was in England be completed the sale of the shares, and left the payment to stand over until he aimed in the colony. On his return to the colony the money was paid in, and the draft lilted. There wan no reason, so far as be (Mr Ward) was concerned, why the draft could not have been obtained in the first instance. Since the matter was put to me this morning by Mr Solomon, I have both looked into it and made inquiries, and I find that the sale to the Southland Rope and Twine Company was not effected at a profit at all, so far as I was concerned. The pale was the cost at the time plus charges, plus interest and storage, and it left no profit to me. In addition to that I may say that what was paid by me for the twine to Ross in the first instance was not £33 as indicated by Mr Solomon, but the price ran from £38 down to £34 per ton, and I find, moreover, what the selling price at the same time was £42 10s.

At what time?—At the time of the sale by me to the Southland Rope and Twine Company.

You got £40 a ton, but the selling price at that time was higher?—£42 10s a ton.

Irrespective of the question of freedom of contract, supposing that Ross had wholly railed?—That was the selling price at [unclear: th] time, £42 10s a ton.

Now, Mr Ward, continuing the references [unclear: th] the liquidator's report: It is stated that [unclear: no] provision has been made in any of the balance sheets for bad and doubtful debts. Is that the ease That is not the case. Some provision [unclear: in] made in the balance sheets for bad and doubtful debts.

Mr Chapman: The amount is not stated, [unclear: bu] the profits are stated to be after deducting [unclear: b] debts.

Mr Solomon: We could not go into that question, Mr Ward. We will have to go into this at greater length later on. Before we go on I might be able to save a good deal of time by interjecting [unclear: a] question about bad and doubtful debts, Mr Cook shows that £600, I think, was written off for bad and doubtful debts. That is our point—that except the sums written off there it no provision for bad and doubtful debts. If you will look at the report you will see that "as has already been remarked, no provision was made for doubtful debts, but in the year ending the 30th June, 1894, the sum of [unclear: £463] 7s was written off as bad, and in the year ending? 29th June, 1895, £813 17s 4d was so written off." Our point is that irrespective of thesetwo amounts there are thousands and thousand of bad and doubtful debts for which then [unclear: is]no provision.

Mr Chapman: The paragraph I called attention to is that no provision has been made for bad and doubtful debts.

Witness: In that paragraph it says no provision has been made. In one of the last paragraphs it says that some provision has been made.

Mr Chapman:Now, Mr Ward, I think Icome now to the head of the report "methods of finance," You were not asked any questions about these drafts, and I have only one question to ask you, whether you personally have any knowledge or means of explaining a answering these suggestions, that 174 drafts were discounted, representing no business oftheassociation—with no trace of business with the drawees to support any of them—whether you have any personal knowledge of the purpose of these drafts?—I have not gone through then myself and personally investigated these drafts, but I never heard of the association issuing drafts in the way indicated in Mr Cook's repot and I know, from information that has been furnished to me by those who have gone through the books, that the statements [unclear: con] tained in Mr Cook's report are not correct.

Mr Solomon; In all esses?

Witness: I say that in all cases the [unclear: spe] mens indicated by Mr Cook in his report [unclear: th] answer to them is specific and clear, and [unclear: a] show that what is stated by the liquidators contrary to fact; and, as to the 41 drafts page 55 which Mr Solomon says he has personally investigated, I know from an investigation which has been made that the statement he made that they are unsupported by business on the drawees is also contrary to fact.

Mr Chapman: But these facts you do not derive from any investigation of your own?—That is so.. I have no knowledge of the Fact at the time of the drawing, but I know that Mr Fisher and Mr Anderson have traced the drafts individually through the boohs—both those that ate indicated in the report of the liquidator and the 41 additional which Mr Solomon has referred to—and upon that information the statement made m the report is not correct, nor is the statement that was made by Mr Solomon.

Questioned as to the paragraphs of the report dealing with the produce account, witness laid that the detailed information had better be asked from the manager of the association, who was familiar with it. But he might state again that an investigation of the report did not bear out the liquidator's statement in reference to this matter. Items in the books showed that to many material respects that statement was contrary to fact. Proceeding next to the liquidator's remarks in the report on profits from interest, witness said the course adopted was that interest was charged upon all accounts owing to the association at a rate exceeding what was being paid for the accommodation, and stock accounts were subjected to the same method. That was the method adopted by trading houses, and rightly so, as by that means each of the various claves of accounts bore its proper proportion of charges, and at balance time what was shown was the difference between what was received and what was paid, instead of showing all that was received and all that was paid, and be contended that the course followed was the usual one.

Mr Chapman next read to witness that portion of the report in which the liquidator said he had found it necessary to prepare fresh statements of profit and lots, in which he had corrected the improper debite for losses on shipments, interest, and storage; and, continuing. Mr Chapman said: Now, do you agree with the method and results adopted by the liquidator?

Witness: Well I not only do not agree with it, but I am perfectly satisfied as the result of investigations that the liquidator is entirely wrong in many of his conclusions upon this matter. In the first year's statement of profit and loss account, I say that the liquidator started from a wrong basis, and has perpetuated that mistake throughout. For example, the sums £272 Os 6d, £136 Os 3d, £201 7s 4d, and £60, which Mr Cook deducts from profit as wrongly charged, were, when credited to the respective accounts entitled to them, and taken into profit on June, 1893, debited to the "J. G. Ward grain account." The items £459 7s 6d, £147 14s 6d were debited to produce account, and the whole balance of that account, as reported by Mr Cook elsewhere, after being charged up with these two items, was transferred to the debit of the J. G. Ward grain account, by charging Mr Ward up with all stocks on hand at a price, inclusive of above charges, sufficient to cover the entire debit balance, and the produce account was closed, the new J. G. Ward grain account becoming an asset of the association. The first four items mentioned above were also charged to this account, and the whole responsibility of that account devolved upon me, and the whole amounts shown continued in that account till it was finally closed in 1895, up to which date the balance had always been treated as an asset. The balance as shown by Mr Cook of £6997 11s 7d was transferred or merged into the produce account of that year, and against which produce account was credited with £7000, and that entry can be found at page 164 in the Ward Farmers' books—Journal B1.

Mr Solomon: We referred to that.

Witness: Yes. but you have not carried it out, and J. G. Ward's private account is specially referred to in the entry of Journal B. The amounts remained to Mr Ward's credit till the amount was paid in 1895.

Mr Solomon: May I ask what you are reading From?

Witness: From my notes attached to the liquidators report.

His Honor; I understand that he had the report before him, and that he has been through the books. Of course he could hardly be expected to carry all this in his head.

Mr Solomon Of course. I noticed he was reading.

His Honor: That is so. You are reading results that you have made?

Witness: That the officers have made, and that I have gone over since. The amount remained to J. G. Ward's debit when the account was paid in November, 1895, Now, having followed this account from its inception to its close, and having found it actually paid, I do not see how Mr Cook can justify his contention that the amounts were wrongly charged; and how can be deduct amounts which have actually been paid by the person to whom they have been charged? Exactly the same remarks apply to the item £770 1s 2d in the 1894 profit and loss statement, the whole of which, being a collection of sundry losses, was debited through the produce account to the J. G Ward grain account, and was included in the ultimate debit balance of that account when paid in the manner specified already. The item £481 18s 9d, deducted by Mr Cook as having, after being charged to J. G. Ward, been reversed and page 56 borne by the association, requires a different explanation. And here, again, Mr Cook is at fault and has drawn a wrong conclusion, resulting his deciding to deduct from profit shown an amount which, had he traced it to its finale, he would have found was ultimately borne by Mr Ward, as originally charged, and did not devolve upon the association. When the produce account in 1893 was closed and the whole debit of same and stocks representing it were taken over by Mr Ward in the J. G. Ward grain account the total amounted to £27,630 16s 2d, being the price of the grain (£27,135 3s ld), as per Mr Cook's report under produce account, and the several charges for storage, &c., amounting to £695 13, 1d. It was settled for by various payments by Mr Ward amounting to £27,348 17s 5d, leaving a balance of £481 18s 9d, representing a loss on oats, This balance was at various times transferred from one account to another for reasons of which I am not aware, and I only follow the result from the actual entries, ana they are as follows First, Journal page 149—£481 18s 9d debited to J. G. Ward business account, and credited to J. G. Ward grain account, which closed that account for 1893. Second, Journal page 166—£481 18s 9d transferred by redebit to J. G. Ward grain account and credit to J. G. Ward business account, and in J. G. Ward grain account it remained in debit till that account was finally paid off in the manner I have described. It will be noticed that, though transferred on more than one occasion, the amount never passed from my debit, but was ultimately paid by me; so that Mr Cook is absolutely wrong in deducting it from profit. Then £752 12s 5d, deducted by Mr Cook, requires a special reference, as the error made by him over this amount is of such an extraordinary nature as to demand a paragraph to Itself, amounting as it does to what I call an error in perpetuity, This Amount represented at the June, 1893, balance the debit of the J. G. Ward wool account, and as such was taken as an asset, the amount being the balance (loss) created over certain wool transactions being carried on at the time of the formation of the association and completed subsequently. Had the various amounts representing this amount been debited to the profit and loss account as the various losses arose, there is no doubt that the 1893 profit would have been that amount less than actually appeared, and no J. G. Ward wool account would have been created. Up to this point Mr Cook is probably correct in deducting the amount from the 1893 profit, but, having thus deducted it, Mr Cook has entirely lost sight of the fact that our next year's profit was reduced by this amount, and in order to write off the J. G. Ward wool account we wrote off the profit and loss account of that year an equal amount, thus reducing our actually earned profit for that year by that amount, so that if we were wrong in taking into profit in 1893 [unclear: a] have subsequently provided for it out of [unclear: a] profit earned. Now the result of Mr [unclear: c] figures is that, having taken as the basis of [unclear: e] profit and loss statement our amount of [unclear: £4] 19s 1d, he commences to deduct from same [unclear: a] the items I have already described, amounts [unclear: a] in all to £2511 1s 3d. and brings down [unclear: a] balance of £1903 17, 10d as the actual [unclear: p] earned for the year 1893 Supposing that [unclear: a] Mr Cook's contentions are right—and I [unclear: sh] shown that they are all wrong.—Mr Cook [unclear: g] to this point: He has already written ten off [unclear: th] item of £752 12s 5d, and got it out of sight, but [unclear: a] addition to this he piles on the agony in [unclear: a] second year's report by taking our balance [unclear: a] profit earned for the year—£5746 1s 1d—[unclear: a] commences again to deduct various [unclear: amo] which he finds charged up to various [unclear: acco] he denies are entitled to bear them, entirely [unclear: a] getting that the profit so earned of £5746 [unclear: a] is earned after we have charged profit and [unclear: k] account with £752 12s 5d to pay off the old [unclear: a] G. Ward wool account, and that, had we [unclear: be] written off that account, our net profit [unclear: w] have been £5746 1s 1d plus £752 12. 5d, equal £6498 13s 6d; so that if we took too much [unclear: p] the first year, we provided for it out of [unclear: pr] earned the second year. But Mr Cook takes [unclear: is] cognisance of this, and the result is he has [unclear: da] ducted it from first year's profit and duplication the reduction by forgetting to add to the balance of profit earned the amount of £752 12s in written off commission account. Now, if [unclear: t] analysis of that profit and loss account, as [unclear: a] dicated by Mr Cook in his report, is careful, gone into, it will bear out what I have states and if the one item alone that I refer to of [unclear: £f] has been dealt with twice in the way Mr [unclear: c] has dealt with it, it shows clearly he has [unclear: m]a mistake in the report as indicated showing [unclear: a] position of the profit and loss account, [unclear: a] on this point, I want to say this in connected with the contention that I heard Mr [unclear: so] putting to the auditor of the company the [unclear: de] before yesterday. Mr Solomon took, in [unclear: a] grain consignment account, anumber of [unclear: defeat] He specified the ships and the amounts, but [unclear: a] forgot to deal similarly with the surpluses, [unclear: a] gave us only a small portion of them this morning—not all of them.

Mr Salomon: I referred you to all I [unclear: kne] and if there are others I do not know of them.

Witness; On this profit and loss acoout [unclear: a] that is the point I want to emphasise,—Mr [unclear: Sc] mon has got the auditor to state this: that [unclear: el] deflcit upon the consignment accounts to be carried straight to profit and loss [unclear: acou] That would mean, if the system was carried [unclear: at] that in the profit and loss statement in [unclear: th] books of a business of this magnitude page [unclear: aff] page would have to be used solely for the [unclear: car] ing of the debits or credits to profit and [unclear: los] account. Mr Solomon did not do the following page 57 which I think he ought to have done: When he [unclear: was] dealing with the consignment accounts of [unclear: he] association he should have also put to the [unclear: Auditor]-who to my mind was very fogged [unclear: on] the business, that in addition to [unclear: he] consignment of grain there was an [unclear: normous] number of cash sales of grain [unclear: not] dealt with in the consignment account. [unclear: upposing] there had been £10,000 of deflcits [unclear: upon] the consignment brance Mr Solomon is [unclear: lealing] with, and that on the cash sales of grain [unclear: hree] had been £10,000 of profit, what would [unclear: be] the position if Mr Solomon's countention was [unclear: ollowed] out-that you ought to carry the [unclear: deflcit] on the consignment branch only to profit and loss account? It would be that you would [unclear: throw] it out by £10,000 unless you also carried the profit upon cash sales to the credit of the account, when both sides would balance.

Mr Solomon: Certainly not. The position is the same.

Witness: The position is not the same. I say that both amounts should be carried to the debit and credit of produce account, and afterwards whatever deflcit or surplus existed should be carried to profit and loss account. To the cash sales of grain, which are numerous in the books of the association, running into many thousands of pounds, no reference has been made by Mr Solomon or by anyone on his side [unclear: to] the profits of thoses cash sales, and they have not shown where the profits are carried to, for this reason: that where the cash sales of grain are shown you do not get the individual profits of each shipment. You have to wait until the and of the year to find out the profits of each consignment the company has made. What Mr Solomon has been contending for-and he is wrong-is that the deflcit on a consignment of grain ought to be carried straight to the debit of profit and loss instead of being carried to the debit of produce account, ignoring the fact that the profit on cash sales would have to go to the credit of produce account, and that it would be the difference between the debit and credit at the end of the season that would be carried to the profit and loss account. I say that the way in which Mr Solomon placed the matter before the auditor, that officer could not, in the absence of information which was not before him, have been expected to deal with question. Mr Solomon was dealing with the deflcits on consignment account, and not placing the whole of the grain account before him, and this was not fair to the auditor. There are a good many items that have gone to the credit of produce account in the way I say that have not been mentioned by him.

Mr Solomon: Will you get them for us?

Mr Chapman: Yes. The amount brought forward this morning was £87 14s 1d, made up of a number of items.

Mr Solomon: That is so.

Mr Chapman: Was that to include all the items of profit on sale of shipments and cash sales?

Mr Solomon: It would be impossible to show the cash sales. We include all the items shown in the books. Of course, the cash sales go forward in the ordinary way; they get credit for them.

Witness: In profit and loss account?

Mr Solomon: Yes; you have credit for every ounce.

Witness: I would like you to point them out.

His Honor: the person who has had charge of the books will be able to give a full explanation.

Witness: Yes, your Honor. For instance, in that very question I have been speaking about, and which Mr Solomon put before the auditor, he asked that gentleman if a particular sum had not been carried to the debit of produce account, and if it was not allowed to remain there as an asset; and he insisted upon his view by showing the particular item in the book, and the auditor made reply that such was the case. In that question I say that particular item was actually paid for by me, and could not have been carried to the account as he showed, and yet by pressing the auditor Mr Solomon got him to answer "Yes."

Mr Solomon: What is the amount?

Witness: £379.

Mr Chapman: The particular question was put to Mr Hannah as to whether it had been carried forward. Now, Mr Ward, paragraph 121 says: "I now come to the time when at the instance of the liquidators of the Colonial Bank I prepared a statement of the liabilities and assets of the association on the 20th March, 1896." A copy of that statement follows showing a deflciency of £48,456 16s 4d, and valuing the book debts at £47,696 12s 10d, and stock, plant, shares, &c., at various sums. That was the statement made before the company went into liquidation, but while it was, as Mr Ward says, in a state of suspense.

Witness: What I wish to say on this aspect of the liquidator's report is this: If worked out under forced liquidation the deficiency estimated by Mr Cook of £48,456 16s 4d may be correct, but it cannot be accepted as a fair indication of what the business was as a going concern, and I think that that same remark applies to the values of stocks which were written down to a price they were expected to realise under liquidation. I have no hesitation in saying that that value did not approach by many thousands of pounds what a trading concern would make out of them. The valuation of the book debts at the best is only an assumed one, and cannot be said to even approximately assess the amount as it would be under the wing of a going concern.

Examination continued; There were something like 1250 accounts oat of 1750 that bid been paid in full, and a number of theaccounts that were averagely valued at 7s in the pound bad realised 16s 8d in the pound, The gross valuation of those debts was £4662 13s 1d, but they had produced £12,168 9s 3d, so that the surplus on the valuation was £7505 16s 2d, and the total surplus on the 54 accounts was £9229 10s 3d; that was over and Above the valuations. Of 54 of the worst accounts, which werevalued at £5657 13s 6d, there written off £12,351. The amount of these 54 accounts was £18,008 13s 6d, and they bad realised £14,867 3s 9d in the process of liquidation. Now, as a matter of fact, the whole of the debentures (£40,000) had been paid off, and the liquidator had still many thousands of pounds in hand. He did not think, under the circumstances, considering that everything—almost every thing possible—had been written and said about this—

Mr Cook: That is incorrect. Not one penny of the debentures has been paid off

Witness; I understand £40,000 has been placed at the disposal of the liquidators, has it not?

Mr Cook: Not one penny. Your statement is absolutely incorrect.

Witness: Is it not a fact that you have the money to pay the debentures with?

Mr Cook: No. You are entirely wrong about that.

Witness said that the whole of the vat nations of these accounts were based on figures supplied by Mr Cook himself, and the results of those valuations were also based on Mr Cook's own figures, Be bad been informed on thoroughly reliable and independent information that these debentures bad teen paid off, but, of course, be accepted Mr Cook's assurance that that was not so. He thought Mr Cook should state what amount he had already been paid—

Mr Solomon did not like to interrupt the witness but he was now making statements which the liquidator said were alt wrong. The information supplied to Mr Ward was information which in a number of instances the liquidator knew to be absolutely incorrect.

Witness repeated that his valuations were based principally on the figures furnished to him by Mr Cook.

Mr Solomon did not wish to interrupt Mr Ward while making his statement, which was not evidence, being based on statements given to him by outside persons, and which in some particulars was wholly incorrect.

Witness: I do not with to do anything that is unfair to Mr Cook.

Mr Solomon: Pardon me—

Witness: I am addressing the court, not you. The liquidator had drawn up a report that reflected not only on himself but on everybody connected with the Farmers' [unclear: Assoc] and surety as a matter of fairness no one [unclear: a] exception to him now being allowed [unclear: w] the first time an opportunity of dealing [unclear: a] specific items in that report.

Mr Solomon objected to Mr Ward telling [unclear: a] court what he had beard from other people [unclear: a] must be clearly understood that Mr Ward [unclear: a] drawn a number of inferences that were [unclear: a] utely incorrect.

Witness: I can give you the name of [unclear: a] single individual who at this particular owed an account to the association, I [unclear: a] given the values taken at the nine, the [unclear: a] paid since, and the amount paid as profit [unclear: a] I repeat that the figures which I have [unclear: a]the result of an investigation which I have [unclear: a] into the official report as it is now subject inquiry, and personally I should hope that [unclear: a] results will more than justify and better [unclear: a] figures which I have placed before the court [unclear: a]

Mr Chapman read the following extract [unclear: a] liquidator's report;—"In the courses Ward's examination during that applicant was stated that the association had credited with any gains arising from [unclear: ship] but that any losses had been placed to debit of his private account. I have [unclear: a] gated the transactions, and they were [unclear: a] numerous, but I have been unable to [unclear: dis] that any looses made by the association debited to him; on the contrary, I find [unclear: a] the association has borne all its own losses [unclear: a] also find that on the 24th September, [unclear: a] losses on shipments of tallow made on [unclear: a] Ward's private account and amounting to [unclear: £] 17s 3d were debited to the association. [unclear: a]on the 19th February, 1895, a loss of [unclear: £63] on tallow made on a private venture of [unclear: a] Ward's was also borne by the association."

With regard to the statement by the [unclear: a] tor that he bad been unable to discover [unclear: that] losses made by the association upon [unclear: ship] had been debited to Mr Ward. witness would he found that an item of £7000 had debited to him and actually paid by him [unclear: a]matter of tact, the £7000 was included m £65,000 draft, That was admitted, but [unclear: a] paid by him to the association.

Mr Solomon (laughing: You paid it if [unclear: a] call that a payment. You owe it to [unclear: a] else instead of to us.

Mr Cooper: The company got the full [unclear: a] in Cash.

Mr Solomon: The bank took Mr Ward's for £55,000 and let us off the debt.

Witness, continuing, said with [unclear: refern]the statement in the report that "Mr during 1894 was short credited £375 [unclear: a] rent and salary due to him" [unclear: that] cheque was paid to him on the[unclear: a] October 1893 for £375 for one quarter's [unclear: a] and salary to the 30th September 1893, [unclear: a]debited to charges.

Mr Solomon: So that you did get your [unclear: Jsry.]

Witness: But the point is tbit the report [unclear: ys] I was short-credited. The liquidstors' port is rough enough on me, and surely when gave the opportunity of dealing with it and of [unclear: inting] out what is a patent fact and of giving [unclear: erences]——

Mr Solomon: The cheque is in 1893, the port refers to 1894.

Witness: It is for the year ending 1894. That [unclear: ths] year you are referring to in your report. Mr Solomon: You tell us of the £375 and [unclear: e] £7000 but, to stop you for a moment, [unclear: t] anything about the real matters we [unclear: m] plain of; why have you not referred to [unclear: a] losses on tallow, and why have you said thing about this £1500? you have [unclear: omitf] I we complain of, and have addressed your If to things we don't say are wrong.

Witness: I have addressed myself to things [unclear: jay] are right.

Mr Solomon; But not to things we pay are [unclear: rflg.] It is easy enough for you to justify [unclear: itig] we do not complain about What I [unclear: wt] you to do is to justify the things we [unclear: comain] about.

Witness: I think I have justified several [unclear: porta] things.

Mr Solomon: All right. I simply call [unclear: attention] that, if you propose to leave it, I am [unclear: otent]

Witness: I do not propose to leave the items [unclear: 75] and losses on tallow. I find they were [unclear: bited] to the association, and they ought not [unclear: a] have been so debited. They should have [unclear: a] debited to me.

Mr Solomon: So we say.

Witness: I say so too.

Mr Solomon: What we say was, why was [unclear: tbing] said to the shareholders about the [unclear: 1500] of profit? Why was nothing said about [unclear: t]?

Witness: Did it alter the result to the share[unclear: ers]?

Of course it did?—Of course it did not.

[unclear: a] It led them to believe that a profit had been [unclear: a] ode in the ordinary way?—As a matter of [unclear: act] the £1500 did not alter the results to the [unclear: shrehaldera]—the net result was the same.

Mr Solomon: Very well, if you think that is [unclear: efficienta] that is all right.

Witness (the re-examination by Mr Chapman [unclear: sing] continued) said Carswell's purchase was [unclear: commended] by the bank, and there was a di [unclear: net] understanding at the time that the [unclear: nance] required for the account should be [unclear: proved] independent of the Farmers' Association. [unclear: ran] into £30,000 or £40,000, including the wine contract with Mr Cruickshanks. He [unclear: nought] he had a right to complain about the [unclear: riticiam] that had been made of this business the bank knew the accommodation that would [unclear: a] required by this business before the Farmers' Association took it over, and as the result of the report made upon the business there was a complaint that so many thousands were had by the Ward Farmers' Association, the fact being entirely overlooked that £30 000 or £40,000 of that in 1894 was acquired for the purpose of carrying on a business of the bank's. He had heard it stated in an investigation in that court that there was a continuous effort to keep the figures of the Ward Farmers' Association down, and yet the bank, with a thorough knowledge of the business taken over from them, represented repeatedly to the manager of the association the desirability of taking up various accounts to connection with Carswell that ran into many thousands of pounds. In connection with the association, that business of the bank's was responsible for from £36,000 to £40,000.

Then under the heading "The Ocean Beach Freezing Works" it is stated: "In the agreement for taking over Mr Ward's business, care was taken to make it clear tbit the business carried on by the Ocean Beach Freezing Works was exempted from its operation, In the face of this, it is interesting to note that the operations of the association on behalf of Mr Ward's business of freezing were exceedingly heavy, and within three months of the association's incorporation the debit on this account was over £25 000. The association's payments on this account for the balancing periods were as follows:—
For the 7 months ended June 30. 1893 £93,787 18 0
For the 12 months ended June 30, 1894 101,625 18 4
For the 12 months ended June 29, 1895 23,988 0 9
£219,401 17 1

All office work attendant upon the operations of the association for this business, was apparently supplied without any remuneration or profit. The only advantage to the association that I can perceive is, that the purchases of sheep and wool through its agency enabled it to get orders for payment of its accounts from farmers and others, and so deduct any sum due to it, and there would probably be some advantage derived by the association as agents for the carrying companies from the shipments of carcases of mutton."—Well, I think for the purpose of placing the position fairly that when the total amount of accommodation for each period named, there is set out amounting to £219,401 17s 1d, that as a matter of fairness in connection with the Ocean Beach Freezing Works opposite to it should have been stated the association's receipts for the three respective years in settlement of the payments specified were: June 20, 1893. £86,269 14s 2d; June 20, 1894, £94,531 5s 9d; June 20, 1895, £38 877 0s 10d; total, £219,188 0,9d,

Mr Cook: That in set nut in the balances. I have not put it unfairly, I have put the page 60 grow amount and the balances. If you deduct one from the other you have four figures.

Witness: That is so, except that the impression conveyed by this particular portion of the report.

Mr Solomon: Conveyed to whom ?

Witness: To many people the impression conveyed was that the Farmers' Association had practically lost £219,000 during that period, when as a milter of fact the real position is that the greater portion of these amounts were paid directly by Nelson Bros. under an agreement I made with them in connection with the freezing works by which they were to pay a certain rate per lb for sheep. That agreement was carried out, but owing to very severe competition heavy losses were caused. The actual operations referred to were cash payments from Nelson Bros. I do not deny that the figures are correct, but set out as they are they convey an impression that a large sum of money had been used, and I think that the set-off to that might have been shown.

Mr Chapman: The report says that there would "probably be some advantage derived by the association as agents for the carrying companies from the shipments of carcases of mutton."

Witness said that they were worth upwards of ££2000 a year. They consisted of the agency for the Tyser line and for the Shaw, Savill, and Albion Company. The greater portion of the meat was carried by the Tyser line at the rate of 5 per cent., afterwards reduced to 2½ per cent., and the Shaw, Savill Company's general commission on the meat carried was 5 per cent., divided into two parts with another firm.

Mr Cook said that in the commission account he gave credit for that.

Mr Chapman said that the report referred to it in acasual way as some advantage, He had asked Mr Ward what the average earnings of the association were from that source, and the reply wasthat the amount was about £2000 a year.

Witness said that that was largely due to the important fact that, unlike a business carried on by an individual or a firm, there were attached to the association a large number of farmers—about 3000, he thought,—the greater portion of them men who did their business through the association voluntarily. They found facilities given them for freeing and shipping, and it suited them to bring their other ousiness, and this added materially to the business of the association. It bad been stated in the course of this investigation that no proper securities were kept, but as a matter of fact no business in Southland had such opportunities of settling its business weekly, monthly, or quarterly with its clients as this association had; and this was largely due to the fact that a great many sheep were [unclear: pif] through from farmers who came and [unclear: w] up their accounts and brought other [unclear: bu] Indirectly the advantages of this were [unclear: st] mom.

Mr Chapman said that the next [unclear: head] the report, commencing at paragraph 141, [unclear: a] headed "Hokonui Railway and Coal [unclear: ca] (Limited)."

Witness said that the association wanted [unclear: a] to something like the extent of 4000 or [unclear: a] tons, if not more, a year for their own [unclear: a] nesses. The gentleman who came to [unclear: sell] concern in the first instance was very [unclear: a] to get clear of it, and after going into the [unclear: a] witness believed that if a fair output [unclear: co] obtained over what the association [unclear: r] they could make it pay under proper [unclear: a] ment. He got a first-class mining [unclear: engin] report, and sent a careful mine manager [unclear: a] over the property before the purchase. [unclear: a] expenditure ran to a considerable sum, [unclear: b] was a very good business so far as [unclear: on] was concerned, and it was only the [unclear: ca] up of his troubles that prevented [unclear: a] from selling it for £12,000. The coal [unclear: a] was under offer to the representative [unclear: of] English syndicate, and witness had his [unclear: as] ance that his company would have taken mine for £12,000. However, [unclear: circum] transpired which put the coal company [unclear: a] liquidation. But be would like to say [unclear: a] He had seen an affidavit in connection with [unclear: a] company which represented it as not being [unclear: w] more than Is in the pound, He was [unclear: con] dieted on this point by the liquidator a [unclear: day] two ago, but be would here say that [unclear: a] affidavit was upon the value to the [unclear: co] Bank—the value of the debt to the [unclear: Co] Bank,—and he believed that the coal [unclear: co] was going to realise 10s in the pound on [unclear: a] debt.

Mr Chapman said that there was a [unclear: re] in paragraphs 146 and onward to special [unclear: a] accounts.

Witness said that the provision for [unclear: a] trust accounts was set out at length in theport, the concluding paragraph being, "I [unclear: a] find that any such special trust account [unclear: wa] by the association." As a matter [unclear: a] fact it was opened, and publicly [unclear: dis] the time, for the purpose of dealing with [unclear: a] one of the farmers and the association; [unclear: bul] general run of their business with the [unclear: ass] tion was buying and selling, and so far [unclear: a] knew there were no accounts that [unclear: coul] termed trust accounts and that the [unclear: a] ought to have been opened for. At [unclear: any] they had the fact that there were no [unclear: a] upon consignments or upon goods from [unclear: far] that ought to have gone into a trust [unclear: acc] There [unclear: wer he] thought, no such debts, [unclear: a] by Wilson Hall, at the time the association page 61 [unclear: ito] difficulties and there were no losses made [unclear: of]theabsence of a trustaccount.

There is a heading in the report, "Mr Ward's [unclear: taouut,"] under which is stated: "On the [unclear: th] November, 1895, the Colonial Bank credited [unclear: a] association with 'Cash, £55,150.' On the [unclear: ba] day Mr Ward's accounts in the books of [unclear: a] association was credited with 'Cash. [unclear: 55,150,'] living a balance to his credit of £313 [unclear: 2d]—I wish to say upon the question of the [unclear: 55,150] that the association was paid as far as [unclear: a] association was concerned id full—every[unclear: thing] at the debit of my account, including [unclear: interest] and charges,—and I am not going into [unclear: as] other aspect of the matter further than to [unclear: a] that I took over the responsibility at a time then I believed I was able to pay interest on the [unclear: hole] sum. When 1 took it over I signed an agreement undertaking to transfer the whole of [unclear: ay] assets, for whatever they were worth, to the of the account in order to further [unclear: ure] it.

Now, the last matters, Mr Ward, In the [unclear: port] consist of a series of clauses containing [unclear: e] liquidators summary of the causes of in-[unclear: vency] from his own point of view:—I"(1) ln-[unclear: ficieucy] of capital, (2) imprudent advances, [unclear: 3] absortion of the association's capital by Mr [unclear: vard] own business, (4) losses on shipments." [unclear: do]you agree that those are the causes?—[unclear: rding] insufficiencyof capital the [unclear: liquidate] has called attention to the fact that the capital in £12,114, and then he gives the[unclear: ave] amount of the stock that the association was carrying at upwards of £25,000. I [unclear: unk,] to allow the public to understand this[unclear: ort] it should have shown what the uncalled[unclear: tal] was, and that it might also, in fairness,[unclear: a] shown what the credits were that the [unclear: institution] had in connection with the English [unclear: ing] houses with which it was dealing. I say, [unclear: orthtr], that there are many large commercial [unclear: Polities] carrying on business that are [unclear: depenent] to a large extent on the support they get, [unclear: ot] entirely from their banker, but from the [unclear: houses] with which they deal; and it was an [unclear: mportant] aspect of the business of the Ward [unclear: farmers'] Association that it was largely supported in the direction in which I have indicated. If the basis that has been stated, even in[unclear: se] course of this examination, were to be[unclear: take] as the one giving a correct amount of [unclear: pital] for the carrying on of an institution, I [unclear: say] that notwithstanding all the remarks made [unclear: bout] the association, it would be found that [unclear: osme] of the best trading institutions and [unclear: sucial] institutions carrying on business within the colony at the present moment, in [unclear: portion] to the liabilities they have to carry [unclear: on] their capital, the comparison is not against the Ward Farmers' Association, Regarding [unclear: paprudent] advances, both the Hokonui Coal [unclear: oipany] and the Southland Twine Company. [unclear: is] true, did business with the Ward Farmers' Association. The Hokonui Coal Company, as I have indicated, supplied coal at a cheaper rate than we could get it for elsewhere for factories in which the association had no direct pecuniary interest, but ia which it was interested to the extent that they about be successfully carried on. In the case of the Southland Hope and Twine Company similar remarks apply. It was a business that was Largely interwoven with the district, and in which the association's clients and shareholders were to some extent interested. Upon the same question of imprudent advances, in a farmers' business carried Onby an association such as this, it is almost impossible, except in the larger accounts, to do what one would like to see done, or to do what it is apparently thought we ought to have done. It is almost impossible with a wholesale semi-retail business to have the farmers, on whom the association is dependent for trade, practically tied up as far us securities are concerned. In reality, though there were Rome accounts which they were being paid for at periods during the year, it took the place in Southland, to a large client, of a large semi-retail business, and there are a great number of those accounts which I have no hesitation in declaring that, while the officers of the association were familiar with the position of the men, and were able to accurately and fairly gauge their capacities to pay the accounts, a gentleman going into the business and looking through the books inthe first instance would probably have expected to find them secured all round, as they might be in a large wholesale house. As a result of my experience it is impossible—and I know it from conferring with others in the same line of business—to get the class of securities in connection with a business such as this as one would like, The liquidator finds fault with the accounts not being secured, but in practice it is impossible to carry it out thoroughly. There have been advances made in the association which should not have been made, and there have been Losses made, That goes without saying; but it applies to all businesses, and on this question of imprudent advances we are, 1 think, painted perhaps worse than we ought to be. Upon the question of the absorption of the association's capital, as referred to by the liquidator, it is quite Correct that a large amount of capital was required in the carrying on of businesses in my name; but I Aay from the inception of the business, in the first instance, upon its merits, thebusiness Ihad gathered round me was themainstay of the association, and it was known to everyone concerned that the business I formerly held wan the business that gave the association a standing in the place. In addition to the absorption of capital referred to, I say that one of the further causes of the business getting into trouble was the fact that in 1894, page 62 we took up, on the recommendation of the bank, a very large business, amounting to bet we a £30,000 and £40,000. It crippled our finance to a large extent after we had it; it was not anticipated that it would do so, but it added enormously to our burdens. At anyrate I was completely clear of the freezing works and the Rope and Twine Company, and the time was approaching when I would be clear of the Hokonui Railway and Coal Company. In addition to the circumstances stated by the liquidater, it should not be forgotten that we had passed through fire years of troublous times in the agricultural world. We bad passed through a time in which other institutions had suspended payments, and we had tided farmers over difficulties in a time which other institutions there could not and would not have tided them over. I make these remarks by general way of comment on the liquidators statements of the causes of the association's insolvency, and in doing so I am not taking exception to the statements made by him, but it will be recognised that the causes were greater than he has indicated in his report, In addition I should state that while it is and has been a subject of a good deal of attack from a few of the shareholders of the Colonial Bank, I think I ought to mention that during the three years, between the Ward Farmers' Association and my own businesses, we paid the Colonial Bank of New Zealand no less than £39,300 in interest alone.

Mr Solomon: They lost £100,000.

Witness: That is their own fault.

Mr Solomon: It is not much use getting £39,000 if they lose £100,000.

Witness: They attacked the institution themselves, and brought about a good deal of the trouble.

Mr Chapman: Well, at anyrate, there is one question further I wish to ask you, Mr Ward. You heard the examination of Mr Hannah, the auditor?—Yes.

Did you at any time in any way interfere with or influence the auditor in his investigation of the company's accounts, or in the performance of his duties as auditor?—No, I never interfered with the auditor. I never spoke bo him as to how he should audit the Accounts, and I never gave or attempted to give a direction of any sort or kind to him; and he never spoke or communicated with me on any matter in connection with the accounts.

Were you present during his investigations or otherwise when he was performing his duties as auditor?—No, I was never present at any time when he was performing his duties as auditor.

Mr Solomon: I won't detain you long, Mr Ward. First of all, I want to call your attention to the minute book of the Southland Twine Company. I call attention to the personnel of the first meeting, at which there [unclear: atten] Mr John Fisher, who is now associated you in this institution; Dr Hanan, who [unclear: t] director until he died, and who was [unclear: ass] with you in the Hokouui Company; Mr [unclear: 1] the proprietor of the business Mr R.Anderson, who is now associated with [unclear: y] accountant; and one Mr Kenzie.

Witness said that that was so.

Is there any statement in the minute [unclear: bo] the sale of your twine to the [unclear: comp;] anything in the agreement or anywhere [unclear: t] shew that you bad taken that twine?—I [unclear: a] see anything in the minutes.

Witness continued: There was nothing [unclear: t] minutes bearing on the sale of twine so [unclear: f] he knew, nor was it usual to record [unclear: ta]minutes. He read the first two clauses [unclear: o] agreement bet weep himself and the [unclear: Soul] Rope and Twine Company. The first [unclear: a] was an undertaking to take over the dressing, twiner-spinning, and machinery plant otherwise connected with the [unclear: cult] of phormium tenax from William Ross the second clause, among other things, [unclear: p] for the purchase of the manufactured [unclear: pro]. since this matter had cropped up again, [unclear: t] to say that it was agreed, in the first [unclear: ta] by him to take Mr Ross out of a difficult which be had got with the bank; to [unclear: a] him to the extent of £2500 to £3000. was what the one cheque paid to Ross for [unclear: a] was for, and in that there waft no twins [unclear: t] This had nothing whatever to do with [unclear: the] sold to the company. In addition to [unclear: tha] in connection therewith, the company [unclear: a] take over stocks of twine which be held that as a matter of fact was done £6462 was paid for them. As an tional fact, he found on reference to journal of the company, which he not for the first time, that the first entries were this cheque for £6462 and the [unclear: a] for £3000, both of which were signed [unclear: by] Ross as manager of the company. [unclear: Ye] book had been at Mr Ross's disposal for thing like five years, and now at this [unclear: to] for the first time the matter was [unclear: brought] He repeated that one of the specific [unclear: oby] forming that company was to take over stocks of twine. He had already said there was nothing in the minutes on the ject, and he did not think them: be found in the minutes of any [unclear: i] tion any entry of a transaction of kind. Ross owed him now some as a matter of fact, in connection [unclear: withs] ance that he (Mr Ward) had given bin way of financing. By some [unclear: extra] means these bills had got into the posses which they had no right to do—of a gent who had nothing to do with them. H Ward's) firm belief was that Ross, [unclear: w] found that he was likely to be called on; page 63 these bills, had asked the liquidator to inquire into this matter, which was quite outside the affairs of the Farmers' Association. These bills were left amount bis (Mr Ward's) private documents in the liquidator's office, and the; belonged to him entirely, and now formed part of the assets of his estate. He repeated that the arrangement about the purchase of twine was put of the original purpose for which the Twine Company was formed, and Ross was the principal party to it on the other side, and the cheque that was signed by Ross himself showed on its face the specific purpose for which that cheque was drawn. This whole business must have arisen through Ross either communicating with the liquidator or with the liquidator's solicitor. The agreement to purchase the twine was known to one of the directors and to a third party, who became a director. He was not referring to Mr Fisher nor to Mr Ross.

Mr Solomon: You have made a number of statements, Mr Ward, regarding the report in reference to things we do not say are wrong. The charges we have made amount to this: The squaring of accounts by the £21,000 and £35,000 cheques in the 1893 and 1894 balance sheets—tbat we say was wrong; also, the crediting to your account of £18,000 of Brooks's and £6500 of Connell's was wrong. The taking forward of the prodace account as assets was also wrong. The concealing of the amount owing to the bank for Carswell's business is wrong, The taking over by the association of the losses on tallow was wrong. The amount of £1500 forgone by you not having been reported to the shareholders is wrong, and I want an explanation of these, I understand you to say the balancing of entries for 1893 and 1894 is quite correct?

Witness: I give exactly the same answer that I gave before, Mr Solomon. You say that I have not referred to matters which you said are wrong. Ihave answered every matter you put in the list, and I am quite prepared to take each of them again and answer each of them.

The £21,000. Do you say that was a right thing to do?—I say that was done for the purpose of squaring an account due by me at that date to the Ward Farmers' Association.

Do you say that was a right thing to do?—I am not here to give you opinions,

Mr Solomon: It seems to me that Mr Ward is here to opinions. The very object of the elimination is that the Liquidator may he satisfied as to his position, both for the purpose of realising the assets and in order to know what the effect of the action of the officers is.

Mr Chapman asked his Honor to rule as to the regulation of the mode of proceeding, His learned friend had already examined at length upon these questions, and he told Mr Ward in his prefatory statement that he (Mr Chapman) had not asked questions about them. That observation was correct as to many things where it was thought that he (Mr Chapman) would not be justified in taking up time by obtaining a repetition of answers already given to his learned friend in the examination. Why should his friend now be allowed to start and examine Mr Ward apparently over again on matters on which be had already been fully examined and on which he (Mr Chapman) had not examined? His learned friend was now attempting to ask over again a series of questions which be bad already asked and which did not rise in any way out of the series of questions which he (Mr Chapman) had put.

His Honor, after hearing counsel on the point, said: Ican hardly anyobjection to Mr Solomon calling Mr Ward's attention to particular matters which have not been fully explained. It seems to me to be simply a question of waste of time. I understand that Mr Solomon is going to ask about half a dozen questions, and I think that Mr Ward should be prepared to answer them, if there is any question that Mr Ward cannot answer he can simply say "I cannot answer."

Mr Solomon asked his Honor to rule whether it was not proper to ask Mr Ward for opinions.

His Honor: You have a right to ask for opinions. He has a right to say he declines to give an opinion.

Mr Solomon submitted that in an examination of this sort a witness was not allowed to refuse to answer. If the question was a proper question be must answer it. There were certain circumstances under which a witness could decline to answer. He could decline to answer any question that might criminate him.

His Honor: The question of whether a thing is proper or not is relevant, but whether it is proper or not is a circumstance that is entirely independent of a witness's opinion.

Mr Solomon; Well, I will put it in another way, Mr Ward. Have you known of similar things in any other institution—of an account on balancing day being reduced by immense amounts and of these being redebited on the day after?

Witness: I have nothing bo do with other institutions. 1 am under examination about this institution.

Mr Solomon: I ask you, Mr Ward, if you have ever known of such a thing being done in other institutions?

His Honor; I think you should answer, Mr Ward, to the best of your knowledge.

Witness: I could only give an answer upon second-hand information.

Mr Solomon: Well give it, please, Mr Ward.

Witness: Pardon me. Allow me first—I cannot speak from my own knowledge.

Have you ever heard of such a thing as this being done in other institutions, of a debit being reduced on the ere of the balancing day page 64 by thousands and thousands of pounds which ware redebitoed on the day after ?—Yes, I have.

Can you give an instance?—I have heard of a similar thing being done,

Where?—I do not propose to tell you.

But I ask you to tell me?—I do not propose to tell you.

Mr Solomon appealed to his Honor to direct the witness to answer

His Honor: I think, Mr Ward, if you have heard of its being done by another institution you should mention the institution.

Mr Solomon:1 want to know whether it is true or not.

Witness: With all due deference bo your Honor—I recognise my position—I do not think 1 am justified in repeating a thing which came to me confidentially in my own business when Mr Solomon says he may in future be proceeding against me in another direction.

Mr Solomon: If you refuse to answer because it may criminate you there is an end of the matter.

Witness: I do not say anything of the sort.

Mr Solomon: Then I ask that Mr Ward be ordered to answer.

His Honor: I do not see exactly why you should not answer, Mr Ward, unless your answer is that it might criminate you or that it might be used against you in proceedings of a criminal nature.

Witness; I decline to say that.

His Honor: Then, if you decline to say that, I think you should answer.

Mr Chapman: The question might affect some ether institution.

Mr Solomon: That has nothing to do with Mr Ward.

His Honor: That rather impresses me, that we do not want to have brought out what is practically gossip about some other institution which might affect its credit.

Witness: I can name one institution if I am ordered to do so. I can name an important trading institution in the colony, carrying on an important business, which I have every reason to believe has done that which Mr Solomon in questioning me about. They are carrying on a very large business and carrying on a very important business.

His Honor: Is it desirable, Mr Solomon, that the name of some other institution should be mentioned and its credit impeached on what if idle gossip? I should have some difficulty in compelling Mr Ward to answer a question of this kind.

Mr Solomon said that he required the answer to show bona fides.

Mr Cooper submitted that the question was not admissible. By section 128 of the Companies Act the examination was an examination concerning the affaire, dealings, assets, and facts of this company, and Mr Ward was asked concerning the affairs, assets, facts, and [unclear: a]ings of another company.

His Honor said that it would be very [unclear: a] sirable that gossip about some other [unclear: comp] should be brought out as evidence, [unclear: because] might affect the credit of other companies.

Mr Solomon said he would not trench [unclear: a]debatable matter, and he did not [unclear: wist] press the question if hie Honor had any do about it. To witness: Will you answer [unclear: a] other question? In your opinion, was [unclear: a] proper thing to do what you did respecting £20,000 and the ££25,000 ?

Witness: 1 believed it at the time, or [unclear: a] not have done it.

In your opinion now, was it proper?—I not here to give opinions now.

Then you are prepared to give what was opinion then. You will not give it now? said 1 believed at the time it was proper [unclear: a] would not have been done. I am not here give opinions now.

Do you know now any reason why you she have been credited with the amounts?—Yes know that the officer responsible believed [unclear: a] these three accounts were regarded as one [unclear: a] I know that is why he did it

He thought there was no money owing Brooks and Co.?—1 cannot give you thoughts; I have given you my answer.

Witness continued: He could not tell [unclear: a]was in the manager's mind or on what founded his belief. The amount to [unclear: con] and Co. was an amount owing, and as a [unclear: a] of fact the three accounts were actually in pendent one of another.

Mr Salomon: And yet the manager ofinstitution thought they were one?

Witness: I think, Mr Solomon, it is not [unclear: a] of you to put questions to me reflecting [unclear: a] another man who is to give evidence.

Mr Solomon: But you told us—

Witness: Pardon me, I try to answers question, and then you make an [unclear: affirm] statement reflecting upon somebody else [unclear: a] duty I should say, with all deference, is to questions.

Mr Solomon: If I had to teach you [unclear: a]duty the result would have been very [unclear: diffe]

Witness: Is that if our' positions [unclear: a] reversed?

Mr Solomon: You would get off very [unclear: lig] I have no doubt.

Witness; 1 do not think you would.

Mr Solomon; As a matter of fact, [unclear: a] accounts were perfectly independent of [unclear: a] other ?

Witness: So far as I know they were.

Do you as a matter of fact justify [unclear: a] transactions?—I believe the manager of association at the time did what be [unclear: those] was right. I have no doubt that [unclear: whatever] did was done with the best intentions, and I page 65 not say that I do not justify a man tinder such circumstances.

You would justify this because you believe what he did he did with the best intentions?—I have already said I am not going to attempt to justify or otherwise.

Witness, in answer to Further questions, said that he did not know it was a fact that in order to arrive at the amount in the balance sheet they had to take credit for amounts which should not have bean credited. In the absence of proper information he must decline toanswer questions as to individual items, He could cot tell from the information before him whether the item £16,000 was taken credit for as part of the assets or not.

Mr Solomon: Will you tell me what other information you require?

Witness: Well, I should require information placed before me by an accountant, at say rate, who understood his business and I had confidence in.

That is another item that we have complained about. Ton say you don't justify it. You cannot tell me whether it is a fact or not. Are you able to tell me, Mr Ward, looking at these schedules (indication schedules in counsel's hands), whether the fact that you owed the bank £9000 odd upon grain and railage is not shows? I will tell you where the information is in your own schedules, and perhaps you will be able to tell me this There are the schedules (pointing out the schedules) attached to the balance sheet which were banded to me by you. I call your attention to that amount of £9000 to the debit of grain and railage account (as per ledger) in this statement. According to our view of the matter the assets are added up there. Our point is: that the item "advances against shipments" is taken forward as an asset, and so is the prodace account.—Well, I should say that the advances should be taken forward as an asset.

Wall I quite agree with you; bat instead of the whole of the assets and the whole of the liabilities being shown the net ran It is only shown.—You are asking me now upon a certain statement here. You are asking me whether I can tell you if certain things are so. I cannot answer your question. Were you to ask me specifically upon certain points I might be able to say "Yes" or "No," bat I cannot say "Yea" or "No" to your question, as I am not at all sure whether you are properly putting the position.

Do you mean to tell me you cannot by looking at this schedule see that instead of showing the whole of the assets and liabilities the liabilities have been deducted from the assets and the balance shown?—I know as a general statement that the difference between liabilities and assets have been shown in certain esses, but I cannot tell you whether such a thing has been done in particular cases or not. If I were required to do that I would want time to do it.

Can you not age dearly that instead of showing the *bole of those assets on one side and the liability on the other, they have simply shown the difference between the two as an asset?—It appears to be so. I cannot say so positively.

Is that justifiable?—I am not here to say what is justifiable and what is not.

You don't attempt justify it?—I have not said that.

Do you attempt to justify the fact that the losses you made in tallow were charged as losses to the association?—I have said in my examination before that the debit ought not to have gone to the association. It ought have gone to me.

Do you attempt to justify the fact that the shareholders were kept in the dark, that the profits of 1895 were only made by your presenting the institution with £1500?—That is a question I am not here to answer, but as a matter of fact only seven shareholders have taken any exception to what has been dyne. As to entering upon details regarding that business it is not customary or desirable to go into details at a shareholders' meeting, for the very obvious reason that you might wreck the institution.

That is no answer to my question. Did you know yourself, Mr Ward, when that balance sheet was taken out in 1895 that you had made this present to the association P Did Mr Fisher tell you before you signed the balance sheet?—I cannot recollect, I have no doubt be would.

Knowing that—knowing that these dividends could only be made by your making this present, you kept it quiet from the shareholders?—As a matter of fact, the result would have been exactly the same.

I am not asking you that. Knowing that these dividends only could be made by your making a present of £1500 to the association you kept it quiet?—I say that is not so. I have told you the result would be the same in any case.

If you had not been debited with £1500, profits would not have been made,—Wby?

Because the profits were so much less that year.—Pardon me, I say as a matter of fact that dividends would have been paid.

I did not say dividends. I said profits,—You said dividends.

Could you have shown the profits that you did that year without your being debited with £1500?—If £1500 is made by a debit the institution has a right to get the benefit of it.

Could you show profits that 'ear without debising yourself with £1500?—Yes; I say profits could have been shown without debiting myself with £1500.

Show me how?—The Ward Farmers' Association has never written up its stocks, bat if it page 66 wished to put a in intending statement before its shareholders there was nothing to prevent it putting the stocks before the shareholders at a higher valuation than it did.

His Honor: I understand Mr Ward to say that if the association deaired to put misleading statements before the shareholders they could have shown profits without taking into account Mr Ward's £1500.

Mr Solomon: That is quite so.

Witness: I did not say that would have been dune, but I said that could have been done.

As the fact was in order to show the profits which you did make that year you took credit for that £1500?—£1500 was taken credit for.

And that was part of the profits?Yes, as Credit given by me.

And is there anything in the balance sheet to show the public that is the case?—I am not aware whether it is usual.

I do not ask that Bat I am going to answer you. 1 do not know of anything being there, and as a matter of fact I repeat again that it is not usual to give details to shareholders on matters of this sort.

Do you not think it was necesary that the public or the shareholders should know that the position placed before them was only arrived at by you making a present of £1500 to the association?—1 do not think, as far as I am concerned, that I had a right in this particular business to consider the public at all.

Do you know as a matter of fact what amount of book debts—bad and doubtful debts—there was in your institution in June, 1895—I know they were valued by an officer of the bank who inspected the institution at a few thousand pounds.

A few thousand pounds? How many thousands?—I do not know. It was not a large sum, comparatively.

Do you not know that the bank's officer estimated them At £6400?—I do not know it.

Do you not know that your own manager estimated them at £5300?—I do not.

Do you not know that no provision was made for bad debts, except £600 written off?—Provision was made tor bad debts at the time to the extent of what was regarded as proper provision to make.

I put it to you again. These items are the principal items of which we complain—the £21 000 in 1893: the £35,000 in 1894; the wrong debit, as we call it, of £18,000 and £6500 in 1895; the produce account being taken credit for as an asset in 1895; the concealment of the position of matters by this cheque of Carswell's; the grain and railage account; and the looses on tallow, These are the principal things of which we complain. I have put them to you this afternoon again, and I ask you, Do you offer any justification at all of any of these items?—I have already answered every question you have put to me on those individual items. You have made a long statement about them, hut if you want to put [unclear: a] question to me as to any of them, 1 will answer it.

Do you offer to me and to the courts any justification of these items I have mentioned to you?—My answer is that at the time the circumstances came before me 1 believed everything was right.

His Honor; you really want to know whet the Mr Ward has anything further to say about them?

Witness: I have nothing further to say.

Mr Solomon: T put it this way: Does Mr Ward offer any justification?

His Honor: Anything further than what he has said?

Mr Chapman: He wants him to go over it [unclear: a]again.

Hr Solomon; Even if it it so, I submit the the wasting of half an hour is of no importance whatever as compared with the importance of those matters I have named.

Witness: 1 have dealt with every point you have mentioned twice over, and 1 have nothing further to say about them.

Mr Solomon then intimated that Mr Ward examination bad closed, except so far as [unclear: h] statement of the £67,000 was concerned.

Witness said he would gut the [unclear: statemec] ready by to-morrow, if possible.

Mr Solomon remarked that all he wanted [unclear: a] know was the amount of Mr Ward's [unclear: priv] expenditure and the amount of his losses t the 2½ years.

Witness said he would get the informations soon as he could.

In answer to his Honor, Mr Solomon state that his next witness would be Mr Anderson the accountant.

At 4.45 p.m. the court adjourned until [unclear: 1] o'clock next morning.