B.O.N.'S BANKRUPTCY

Bay of Plenty Beacon, Volume 1, Issue 12, 17 May 1939, Page 5

8.0.N.'S BANKRUPTCY

£2487. DEFICIT

BREACH OF LAW ALLEGED

CREDITORS' MOTION FAILS

The bankruptcy petitions of Stanley John Olsen, Walter Henry Bigwood and Leslie Charles Newman, ais individuals, and of the 8.0. N. Construction Company, the company in which they were partners were dis'Ciissed on Monday when the official .assignee, Mr A. W. Watters, pre. -.sided over a meeting of creditors in the Whakatane Courthouse. As a result of the meeting it wa<; decided to set up a committee to assist the, official asignee. f Mr Davies, representing the National Timber Co., also introduced i a motion that the papers relative to rt he c as e be sent to the Crown with a view to action being taken for breaches •of the Bankruptcy Act. This was • opposed by other creditors, and the motion was lost on a vote being taken. i Mr Watters said it would be neces. - sary to deal with four estates —those of the partners individually, and that of the 8.0. N. Company. Deficiency Mr Watters said that the estimat- . cd deficiency, according to tlie debt- • ors' statement, was £2487 17s. The total assets consisted of book debts * •of £3019 10s 5d } estimated to produce. £2700, and a surplus from securities from securities in the hands of the 1 • -security holders of £231 4s 4d. Unsecured creditors had £5416 Is 4d o\v.ing to themj and secured creditors £98 15s Bd, the estimated value cf securities being £330. They commenced business on Oct- - obex 1, 1937. All were skilled carpenters. Their only . capital, apart - from tools valued at £30 ? was the j sum of £90. At the end of the first year they had made a profit. They took on State house .work and pri- • vate work, but this proved unre- . munerative. High Wages They had estimated, contract prices -,-on, the basis of personal labour, but Tiad to engage men and pay high •wages. With their lack of capital Ihey found a difiiculty in financing ■certain contracts, owing to progress payments being held up, w 7 ith the result that they lost trade discounts. There were a number of jobs which were near including " houses for L. M. Birch, Mrs G. -•Creeke and S. J. Olsen, one of the • partners. Bigwood's Position Walter Henry Bigwood's personal - statement showed liabilities to un. secured creditors of £80 7s 4d. The assets were stock in trade £10, book . debts £100, cash in hand £1 7s 5:1 7 . J "the surplus being £31 0s Id. Bigwood said he had worked as a carpenter for Boon, Sullivan, Luke Ltd before joining the firm of 8.0.N For 12 months thereafter he had " been interested in a taxi business. He had disposed of the taxi and a sum of £100 was owing to him or; it. His bankruptcy was solely due to his connection with 8.0. N. Company Stanley John Olson said his liabilities amounted to £574 19s Sd owing to unsecured creditors. His as.. rf sets were stock in trade £S, property £550. The firm of 8.0.N, was building him a house on a section in Vic- • toria Avenue and he owed the sum of £550. He had arranged for a Gov. . -ernment mortgage but progress paymerits had not been received from the State Advances department under its mortgage. His bankruptev was solely due to connection with the firm of 8.0. N. Third Partner Leslie Charles Newman gave his ; assets as stock in triade S4 cash LI 16s Bd, his liabilities to unsecured -creditors wer e nil, and he owed £400 to sccured creditors. At the time of |f . entering 'the partnership from the employ of 800n } Sullivan and Luke his position was solvent, his onlv liabilities being £200 owing under mortgage to the State Advances Department. His bankruptcy l wp,s solejT 'y 'kie to his connection with 8.0. N. ."Mr Watters said there, were some large amounts owing as book debts It* must be remembered that some o! the were incomplete and it would be necessary to look into ¥ the cost of completion. Then there was the question of liens which would have to be proved. With the various, -ou'alifications at the moment it was •Impossible to make an estimate of -any dividend.'

State Housing Payments Apart from the question of liens there-was''-the-complication that the Stnite housing contracts enabled the State to refuse to pay out to the builder, and instead make payments to people who supplied goods or to the sub-contractors. If that was so it was the duty of the assignee to make representations to the State for the amount owing to be paid in ' for the benefit of the creditors. Newman produced a balance sheet, which showed the first year's trading. Under this the net profit was shown, as over £800. Newman explained that the partners drew £5 10s a week each for the first year. The money was drawn fortnightly or when it was available. Since the end of the first year they had drawn vai'v ing amounts, but had not exceeded £6 a week. He was sure that there were no large liabilities left out of account when, the balance sheet was drawn up. Olscn said tlie stock in trade and plant was worth £900. Deficiency Might be Less If this was verified, said Mr Watters, the paper deficiency would be reduced to £1700 or £1800. A complete schedule of every job would be necessary. The loss had apparently been made over the last six months. It was all very well saying that the losses were due to paying high wages } but he must satisfy himself how the big losses were sustained. What was needed were figures. After the luncheon adjournment Newman said that the firm first became rather pressed formoney around August or September. They were able to meet their accounts during almost the whole of the first year.. On October 1 they had about seven contracts, one of which was for three houses. First Lien The first lien was put on, on May t on Davis' job by R. O. Oxenham. They had not been sued. Their credit was stopped in February 1939 by A. M. Patterson and Co. Ltd. They had dealt with timber firms as they found most convenient f-r delivery to specified jobs and had not placed orders for goods with fresh firms because their former suppliers h x ad refused credit. There was a time when 'the bank would only allow wages cheques to be paid. This was while the bank w r as cutting out the overdraft. Newman said that they did not "i> allse that they would have to bankrupt until Mr Armstrong, their solicitor, advised them to take this course. They did not accept the advice altogether, a,s bj T hard work and reducing the number of their .'mplovees they hoped to pull out of the position. They realised now that it would have been impossible to carry on. Dividend not 10s. Mr Watters said that one might imagine that if all the assets were realisable and all the creditors came in as unsecured tl'ie dividend might be 10s in the pound. Howevei\ it would be much less. The creditors were anxious to know how such heavy losses were made in the last six months, and why the position was allowed to drift. Newman, said that if we.«;t closely into jobs they could say on what jobs they lost money and hou much they did lose. When estimating they took everything into ae. comift and compared the figures with the actual cost afterwards. The only item on which there was always a big discrepancy was wages. Earlier Creditors Knew To Mr Otley Newman said that they had no cash when they started. They acquainted the earliest creditors with the position. The majority of the other suppliers came to them and asked for orders. They were not acquainted with the position of the company if they did not ask for it. Verbal Partnership There was only a verbal partnership agreement. They- did not consult anyone for advice in carrying on in the early stages of the business. They made about S3 on one contract and lost about £400 or £500 on others. The State contracts were competitive ones. Nothing seemed to go right with the jobs. Contracts were disorganised while waiting for fibrous plaster and joinery. When tendering for the jobs thev allowed the trade discounts as profits on the job?, but these did not eventuate. Mr Creeke's Job Concerning Creeke's job, Olsen said that they had received money front

Mr Creeke which had been paid into the general fund and used to pay - timber merchants and wages. It had not been paid to sub-contractors as he agreed Mr Creeke probably thought it would b6. Mr Otley said that possibly Mr Creeke would be liable to pay up to 25 per cent of the sub-contractor's claim. To Mr Davies Newman said -hac they had not disclosed to the National Timber Co that their company was in an unsound position. In February they realised thev would have a, job to pay their way but they did not disclose this. Subterfuge "You thought a subterfuge would be more honourable than, a straight out order for the money owing?"' asked Mr Davies. Newman said that they had offered an ordei just before they tiled, in ignorance of the fact that this would have been an offence under the Act. Newman said he made the books uyj periodically. He had placed no funds in the Post Office in his wife's name. Her account was smaller than his. The furniture in his home had been bought in his wife's name. Bigwood on oath, cross-examined by Mr Davies, said he went to Arapuni to get timber from Smythe Brothers and Borer because it wa.3 not possible to get suitable timber elsewhere for joinery. He knew they were having difficulty in meeting accounts but thought the position was fairly sound. He knew that money coming in was applied to past debts and not allocated to the particular job. Balancing Books To a question from Mr Waiters Newman said that the books were not "definitely" balanced after the balance sheet was brought out. Asked what he meant by "definitely" be said they had gone through the books and prepared a statement of affairs in December and March. In December they appeared to be solvent. By March a number of contracts had been finalised and others were near, ing completion. He estimated that they were £900 in debt. They had r.o j further statement unitil they decided to file. Earlier, they had decided the only thing to do was to reduce their employees and work longer hours personally. They had worked through tTu< Easter holidays and until 12 o'clock at night. Mr Davies then moved that a committee of supervisors be set up to assist the Official Assignee, to consist of three two from Whakatane and one from Rolorua. Those appointed were Mr A. J. Mclsaacs and Mr Fenton, and Mi" Pitts, secretary of the National Timber Co. Mr Davies then moved that the files be placed in the hands of Mie Crown Prosecutor, and if in his opinion there was a case to answer for breach of the bankruptcy laws, that action should be taken against the partners. Ostriches Mr Davies said that the men knew very well what position tliev were in. ft had been up to them to disclose it • o their creditors. Their attitude had dimply been that of the ostrich putting its head in a bush and hopiug that things would come off well. Mr Smythe seconded the motion. Mr F. Prideaux said he was opposed to the motion. In his opinion creditors might be somewhat to blame, Mr B. S. Barry said that hi* clients felt that this action should not be;, taken. The cause of the bankruptcy had been muddling along without capital. There was no suggestion of sharp practice. There) was no question of concealed assets t so no good would be done by passing the resolution,. The Official Assignee had full powers to deal with the matter. The motion was lost on the voicer-. and when Mr Davies asked for a show of hands it suffered a similar fate. Assignee's Powers Mr Watters said it was his duiv* to consider all the facts carefully in bankruptcy proceedings. In cases where there it seemed that a deliberate breach had occurred he sen I the particulars to the Crown Prosecutor. ' THE HUHU Maori workmen, as they split drift wood at The Heads yesterday, gathered many large and fat huliu grubs and carefully placed them in a bag. "Very sweet kai.,'> said one man, a,nd 1 another volunteered that they were great bait for schnapper or tuna. What their ultimate fate would fte could only be guessed but those who : have been brave enough to try them 1 say that they are not bad eating, and, looking at the subject in a detached way, there seems no reason why they should not be.