SHAW BANKRUPTCY.

Press, Volume XLIX, Issue 14840, 4 December 1913, Page 4

SHAW BANKRUPTCY.

OFFICIAL ASSIGNEE v. TIMARU PROPERTY CO. . - f. CONTINUATION OF THE CASE. Tho hearing of the caae Official Assignee in tho estate.of Walter Shaw, against the Timaru Property Company, a claim to set __sido a contract entered into by Shaw'to .transfer certain properties and equities, was continued at tho Supreme Court yesterday before Mr Justice Dennis-ton. Mr Myers, with him Mr Kinnerney and Mr Weston, nppeared for plaintiff, Mr Skerrett," K.C., with him Mr Cassidy, for the defendant company, and Mr Hosking, K.C.„ with him Mr Acland, for Trevurza. THE DRAFT AGREEMENT. ''.Wilfiam' Mae«regbr, "barrister and solicitor, Dunedin, called by Mr Skerrett, said thkt on October 14th, 1912, i he was consulted by Imrie regarding | the purchase of Shaw's properties I He had known Imrie for a good many years, and had advised him professionullj several times since ho had been iv Timaru.' Ho advised Imrie that it was quite impossible for witness' to deal with the matter at Dunedin, and suggested that probably the best thing would be for Mr Ramsay, a member of the firm, to go to Timaru," see the documents and titles, and prepare any agreement tbat might be come to. Mr Ramsay went to Timaru on- October 16th,. and .did what was suggested. Witness did not concern himself personally with the option of October 18th. In December, a'draft agreement, based on the option camo to his office from Timaru, andilr Ramsay made certain alterations in tho draft on December 17th, the draft as altered was forwarded back to Timaru to Raymond and Campbell. On December 19th he got a 'phono message from Timaru at about 5 o'clock. The 'phone was working '* badly. Mr Campbell .he thought spoke first, and then Mr Imrie took a turn. He could not gather the full significance of the message, and it was arranged that he should go to Timaru the next day to discuss the final form of the agreement. He went to Timaru on December 20th, arriving about 5 o'clock. Ho went straight to the office of the Timaru Property Company, where he saw Mr Imnc, who told him an appointment had been made for S o'clock that niptht at Raymond and Campbell s office. Ho ■ attended along with Sir Campbell, Mr Stringer, and Mr Imrie. and he thought Mr Higgins and Mr F. A. Raymond were in the office. The draft agreement, aa altered, was produced and discussed. A pencilled recital appeared in the draft relating to the making up of the £11,500? That was inserted by Mr C--A. Stringer, who represented Trevurza. Clause 14 of the agreement was also discussed, and certain words struck out by Mr Ramsay. Witness struck Clause 15 out altogether, and a part of Clause 17, which was inserted by Mr Stringer before witness saw the draft. Regarding Clause 14, he ' pointed out that he could 6eo; no object in the words ho objected to, that they formed no part of the option agreement of October, and thai the Property Company knew of no person other than Shaw who had advanced money to Trevurza. '■ He also asked whether they bad any knowledge or suspicion that there was any other -person except Shaw who had advanced the moneys to Treyorza,- and they said, "No." He then "replied what was the use of the words, and that if ho had any suspicion or knowledge on the subject ho would adtise the company not to complete. Regarding the pencilled recital on the first page and Clause 16, a proviso, he said they wore matters whicli were not provided for by the* option agreement, and did not concern

the company, and he must insist on them being struck out-v Clause 17, a pencilled clause, he altered by striking out some words and inserting others. The draft.was settled that evening. INTERVIEW WITH SHAW. ■ Up to that time he had never seen Shaw; he only knew him by repute as a successful young solicitor in Timaru. He saw Shaw the next day at Raymond and Campbell's office on a Southland matter, quite apart from the Timaru matter. Shaw volunteered a statement that he was very pleased the agreement had been fixed up with the Property Company, that his speculations with Trevurza were the only things that had been troubling him, and now that they were at an end ho would get back to his own professional work. Witness had no reason to doubt tho statement. Ho noticed in Shaw nothing different from the ordinary business man. To Mr Myers: He had had no communication from Raymond and Campbell regarding, the matter.? He had nothing td do with tho preparation of the option agreement. Heunderstoodtho draft agreement was drafted by MrO. A. Stringer. Witness's firm were the solicitors for . the Property Company. His firm did not prepare the. transfers from Trevurza to tho Property ' Company. Imrie, when he consulted him in tho first instance, said that Raymond and'Campbell would act for tho company after the contract was fixed up, for there would then bo no conflict of interests with Trevurza. At the conference on October 20th, no one had told him that 'tho question was raised that ShaW was. using; trust moneys. He! raised tho question himself. No one told i him there was any suspicion in the mati ter, otherwise he would have refused to | go on. Ho personally d ; d not submit the ! draft agreement to Shaw. To Mr Skerrett: He was not concerned in any substituted arrangement between ' I Shaw and. Trevurza as to Trevurza's . liability, nor did he have any know-' ledge of any such arrangement. Had he known that trust moneys were invoked, he would certainly Have advised the company to have nothing to do with tho i matter, as there was the risk of their. being involved in litigation, j SHAW IN THI, BOX. i Shaw was then called, and continued his evidence. In reply to Mr Skerrett. witness said his interview with Mr Willie Raymond at which witness made the suggestion to sell for £5000, was some time after July 27th. It might have been August 26th. Some weeks elapsed before Imrie went to see Mr Geo. Raymond, and in the meantime all attempts to settle with Trevurza failed. Ho had the opportunity to dispose of l'revurza's equities, but did not avail himself of v that opportunity. Ho did not remember Imrie bringing a statement setting out the values of the equities. Ho did not remember Imrie saying that they could not expect to get more than £7500 for their equities. Witness told Imrie ho would be lu.ky if he got £4500. and got out of the business. It was with witness's knowledge that Imrie went to see Mr George Raymond regard-, ing _ the disposal of tho equities. Imrio knew then that witness was • prepared to part with his interests for £4500. Imrio returned with the de- ■ finite information that Mr Georgo Ray- f mond would not touch the matter, and t the result of I-nrie's second visit to Mr ' George Raymond was the same. * He heard after he signed the option of , December ISth, that Mr Raymond would not touch the matter for the rea- | son that Trevurza was his client, i Imrie told him that Mr Raymond had • advised him that the matter was of ; such a nature as to make it advisable j that it should be taken up by a • com- ; pany. Up to July 27th. he believed Trevurza would have accepted witness's I offer, by which Trevurza would get from £7000 to £10,000 in equities. That! fell through, however. On October, sth witness knew that Trevurza was will- * in? to sell for £3000. He made no effort to induce Trevurza to take less "i

than the £3000.. .The option of Decern-, ber 6th was an instrndtion to linrie to sell to any company he could form, but he" thought when he signed the option that a company was to be formed consisting of Messrs Imrie, Higgins, and Willie Raymond. He knew that Imrie and Hiagins would tako a substantial share in the company, for that would work in well with tneir commission business. Regarding the indemnity in the contract against undisclosed encumbrances, witness said it was withinhis means of knowledge what the charge** on the properties were. He did hot suggest that the transactions already referred to by him, namely, McDoueall's, Mr Clayton's, Grierson's, and Stewart's, would create in Mr Campbell's or Mr Stringer's minds a suspic-. ion that witness was misusing trust moneys, but that there was nothing but muddling on witness's part. He saw Mr George Raymond on June 4th, but not again till December 21st, Mr Raymond's visit to him was a visit of courtesy. Mr Raymond told him that a man named Trevurza had instructed him to get a squaring up of the accounts between Trevurza and witness. Mt Raymond added that Trevurza said he did not know how he stood with witness. Witness said ho was very glad that Trevurza had put his affairs in •Mr Raymond's hands. He also said he had been so overworked that he had neglected his business, which had got bohind, and had become a sort of nightmare with him.. Mr Raymond said it would bo necessary for Trevurza's account.. # to be .nvestigated, , adding that it would be necessary to.cmj ploy an outsider to conduct the investigation. Ho mentioned to Mr Raymond that his accounts with Trevurza amounted to between £11.000 and £12,000. Mr Raymond asked him where ho had got the money from, and ho replied that he had been receiving i largo sums on deposit. Mr Raymond said that Trevurza had produced a. ; statement showing that his equities were worth £23,000, and added that ho did_not want to go- into Trevurza's business with witness. Witness told Mr Raymond that he would bo all right if he got Trevurza's account settled, j and would then give up speculations, : and attend only to his business. The ! referenco N to deposits was repeated in the presence of Mr Willie Ravraond. Mr Raymond's statement that only certain people would know -anything abont the affair referred to Trevurza's accounts, and not to the deoosita. Mr Raymond also said that when the, accounts were gone into, if there was any financing to be done, he would see/what ho could do. He did not think that the result of the interviews would convey to the minds of Messrs Geo. or Willie Raymond anything more than that witness's affairs wero muddled. Mr Raymond asked him to make a clean breast of it, and he told him that if he got rid of Trevurza's affair he would bo all right. On December ISth Mr C. A. Stringer came to see him regarding the draft agreement and the alterations made therein. At the conference at Raymond and Campbell's office he did not remember Campbell expressing doubts as to whether Trevurza owed witness £11,500. -Witness • thought the principal point in dispute was as to tho trust moneys, and the ■ others were satisfied with the answer ! he gave. i To Mr Hosking: It was while the negotiations were going on that the greater number of misappropriations , took place. To Ifr Mj-ers: Under the first offer I to Trevurza witness was to take over i all the equities. He considered the . properties saleable, and that he would be able to dispose of them gradually. j Ho considered that his offer of £7100 i was really giving Trevurza more than he was entitled to. He applied to j Imrie in October for an advance of i i £350 for a week. Ho told Imrie he did not want to go to the bank for tho money. About a month afterwards he asked Imrie for another advance of the saiAe amount, saying that he would : be short of cash for a day or two.

Gustar Jones, chief auctioneer for the Cafltcrbury Farmers' Co-op- Association, gave evidence that he had valued certain farms with Messrs lal*oot and Scott. In his opinion the values were the ordinary market values, and were based on the ordinary salo conditions of one-third down, and the balance on mortgage. ■ To 3lr Hosking: He knew of no instance of properties bought twelve months ago, and turned over at a Scott, chief auctioneer for the National Mortgage, at Timaru, who valued the properties with Messrs Talbot and Jones, agreed with those two gentlemen in the valuations effected. SHAW DISTRESSED. Shaw came to see him towards the end of November, and told him he was in deep water. He said he was perfectly solvent and worth £10,000 or £11,000 at least. His affairs, however had become so involved that it was necessary he should have money immediately. Shaw assured him that no trust funds were involved. He told Shaw that if his position was as he represented it he, witness, and Mr Tripp would try and find a way to got him out of his difficulty. Shaw was in a very agitated and strange state, so much so that he was hardly coherent. He asked Shaw if ho had had any 6leep , lately, and Shaw replied he had not. He then told Shaw ha had better put \ his mind at rest and get some sleep, and if there was a way of getting him out of his difficulties witness and Mr Tripp would do their best. He asked Shaw to make out a statement of his assets and liabilities and to be sure not to leave out any of his debts, for submission to a meeting between witness, Shaw and Mr Tripp to be held in a few days' time. He thought that Shaw was so unsettled and his mind so disturbed that it would be difficult for him to take a just view of affairs. To Mr Skerrett: After that until the bankruptcy, Shaw nominally remained solicitor to the jpompany. About May, 1912, it was arranged that th© legal work of the company should be transferred to Mr Inglis, Mr Shaw's managing clerk. Shaw had seen him at Mr Tripp's request, to talk over his position. He took it that what Mr Shaw wanted was financial assistance. The statements that Mr Shaw mado then were, to say the least of it, irregular. Ho was quite coherent when he made the statement that he was worth £11,000. To Mr Hosking: After tho bankruptcy he was very much astonished at what Shaw owed. Ho suspected Shaw of being in a muddle some timo before, and was not surprised when he heard what tho affairs were. To his Honour: Mr Tripp did business with Mr Shaw after tho interview in December. MORE VALUATIONS. Henry Hay Webb, land agent, Timaru, stated that, with several other valuers, he made a valuation of the properties included in the agreement. A report was prepared, in whioh two sets of values were given, the first being for a sale on a cash basis, and the second on a sale on terms. An increase of from 10 to 15 per cent, in the prico would be obtained when a property was sold on terms. D. Virtue, town clerk and borough valuer, Timaru, Humphrey Innes Jones, land agent, Timaru, and Harold Francis Morten, land agent and auctioneer, Timaru, who also Valued with Mr Webb and signed tho joint report, agreed with the valuations made. j THE RUSH FOR MONEY. Herbert William Hall, architect, Tima-ru, gave evidence that on Monday, April 14th, ho called at Shaw's offico early and found it full of people anxiously demanding money and not getting it. Charles Howard Tripp, solicitor, Timaru,* stated that ho saw Shaw on December 21st in the evening. Shaw 'phoned him to come to his office. When witness arrived h© found Shaw looking extremely ill; he seemed to havo lapses of memory and spoko spasmodically. Some sentences he did not finish at all. He also threatened to throw himself off the wharf. He did not like to leave Shaw, and kept with him until ho was half way homo. Witness had since the night of December 21st heard that Shaw had signed the agreement on. that day. To Mr Hosking: Shaw told him that evening that .'he bad dropped £5000. Afterwards he had some transactions with Mr Shaw. Ho bought an equity in a property from Shaw a week after the interview, and gave £300 for it. He bought other properties from Shaw at different times following on February 13th. He lent Shaw £300 at 8 per cent, per annum, and expected it back in three weeks Ho attended a. meeting of creditors of Shaw on May 17th, and stated then that his dealings with Shaw were entered into in the bona fide belief that he was solvent; that he thought Shaw was solvent right up to the Sunday when he filed, though he had his woubts about a few things in tl\6 month of March; that Shaw asked assistance from him, and at great inconvenience lie had given it in order to assist Shnw through what he thought was merely a temporary difficulty. He still agreed with that statement. INVESTIGATING THE ACCOUNTS. Edward Charles Martin, accountant, Timaru. stated that ho had made an examination of Show's accounts and position on behalf! jof the Official Assignee. Ho had previously dono somo work for Shaw- in September, 1912, and had received the statement.as mado up by Shaw and Imrio. The last three pages of tho statement wero prepared by witness. The debit balanco when the statement was completed so far aa Trevurza was concerned was £10,013, whioh did not include costs and disbursements. At Shaw's request he marked out the interest and the current balances. Interest up to September 30th came to:, £2100, compared with yearly receipts. Towards the end of November Shaw asked him to make up his books. The books had never been well kept. Trevurza's account 6howed the cash balances well, but there were other matters which did not appear clearly. Since tho bankruptcy ho had gono carefully into the accounts and found that Trenirza'B indebtedness to Shaw on December 21st was £15.100, which included interest arid costs. Shaw's total indebtedness at the time of his bankruptcy was £59,900, the greater part being trust money left with Shaw for investment. There was not much variation in personnel and amount concerning the creditors of Shaw between April loth and December 21st. Ho obtained from Imrie the Government valuations of the properties in tho agreement. Those valuations were mado in June, 1913. Ho then made up a table of values of all tho properties with the exception of one. According to that the valuo of the property to the company was £8174. The Government valuations of the properties, except one, totalled £22,320 to which were added fifteen per 4 n t Mortgages totalled £15,707, and tho equities were £9958. The general effect was that the Company acquired property worth £18,132. Mc checked a statement made up to show tho income produced i y _, r °§ l erties - - The net "-com* was £674 after paying interest on all mortgages. Some of the properties did not show any income. From the Eosition of aJfairs at the time of the anbruptcy, Shaw could not have been solvent on December 21st. He did not notice any difference in Shaw's appearance towards the end of 1912, but he seemed to be irrational in his speech and to wander from one subject to another. - .

PLAINTIFFS CASE CLOSES. Mr Myers said tha** was really the case for the plaintiff He would tender the diaries kept by Shaw. , „ . His Honour agreed to admit the diaries in the meantime, but said ho would not look at them until the qnestion of their admissibib'ty "ft as argued and settled. Throughout tho hearing, Mr Skerrett raised a formal objection to the admission of evidence relating to Shaws condition and state of mind at the time ho signed the agreement, and his Honour noted tho objection. A NON-SUIT POINT. .Mr Skerrett 6aid that he would ask tho Court to hold tnero was no case to answer. His Honour said he was not prepared to non-suit on the objections as to the pleading. It was a most dangerous thing to do, and ho always held that if parties came to the Court with tlie proceedings as they stood, nothing but an absolute necessity should prevent them being heard. He wou.d not non-suit unless satisfied that the facts S roved would not justify tho claim. o thought that Mr Mvers should say exactly what he based his claim on. Mr "Myers said the plaintiff alleged the bargain was an unconscionable ono and that it was an unconscionable one gain which was taken advantage of by the defendant company, who knew, or should have known, it was an unconscionable bargain, and he claimed further that evon that knowledge was unnecessary. His Honour: Suppose a man made a sportine offer, how would it be unconscionable? Mr Myers: That depends on circumstances. We-pay that on the face of this argument it was an unconscionable bargain. His Honour: It must bo coupled with knowledge of values, and that is not on the face of it. Mr Myers: Wo say it is all the moro unconscionable when taken in conjunction with the circumstances. His Honour: What do yoa mean by unconscionable? Do -you charge fraud? .Mr Myors: Wo haven't charged fraud. His Honour: Do you allege fraud? Mr Mvers: We allege that the bargain was an unconscionable one, and say that tho defendant company knew it.' .'■*■•,_ H's Honour: Then it was fran^u'en*? Mr Myers: Yes, but alternatively we ray that their knowledge is not essential to onr succors in the action. His Honour: If it was known to be unconscionable it would be fraud? Mr Myers. Yes. Somo disousS'on *£ook place as to the 00-ritinn of Trevnrz,*. in the matter, and Mr Myers said there were cases to .«-h"w that in triangular tranpaHiions the bargain may he set aside as to one party. DEFEN-OE OUTLTNFD. Mr Skerrett said the consideration of the contract was not in itself so grossly deficient as to be in itself evidence of fraud. Further, there was no evidenco of any oppression, pressure, or surpiise or the taking advantage of any inability of Shaw to contract on equal terms with the defendants. On the contrary, it was claimed that the affair was a business bargain conducted in perfect good faith and far valuable consideration. The Official Assignee had no equity to upset the transfer or assignment of Trovurza's property. Mr Hcsking submitted there must be shown to bo some mental or financial distress on Shaw's part, and that the defendants knew of the existence of that, and took advantage of it. Tho other point was, could Shaw, as against Trevuraa, now turn round and say the transaction must be cancelled? Trevurza's position was that he acted independently of Shaw. Ho submitted that Shaw would have been estopped in any action he might have brought from setting up any inequity in the agreement as against Trevurza.

At this stage the hearing was adjourned until this morning.