LAW REPORTS.

Dominion, Volume 4, Issue 1099, 11 April 1911, Page 3

LAW REPORTS.

COURT OF APPEAL.

THE DARBY BANKRUPTCY,

QUESTIONS OF BOOK-KEEPING,

Argument in the appeal regarding the bankruptcy of Waller l''rancis Darby, importer, of Aiickluud, occupicd the attention of the Court of Appeal again yesterday. Mr. i\ Earl, with him Jlr. E. W. Burton, appeared for appellant, and Jlr. J- W. Salnioud, Solicitor-General for the Crown. The questions which the Court was asked to dceide were: —

(1) Was (ho Judge right in law in holding !hat there was evidenco to go to the jury upou which they could properly convict the prisoner upon tho first six counts of the indictment (contracting a debt when he could not havo land, at tho time it was contracted, any reasonable or proper expectation of being able to pay it), or upon any of them? (2) Was there evidence to go to the jury upon which they could properly convict tho prisoner upon the seventh count of the indictment? In addition to the argument of the questions of law, appellant moved that it bo ordered that tho verdict in favour of tho prosecution be set aside, and that n new trial 1)3 ordered on the ground that the verdict was against the weight of the evidence. Counsel's Argument, On resuming, Mr. Burton dealt at length with the book-keeping of the bankrupt. From July, 1009, to the period in 1910, when Darby became bankrupt, it was argued that the books were shown to have been fairly well kept.

The Chief Justice: "Some items are shown as credits that should havo been debits. Tiie system, however, may have been right." His Honour added that the two Darby brothers' entries showed that they owed the estate money, whereas the estate really owed them money.

Jlr. Burton: "This is an isolated case, and 110 other case "is mentioned by the Crown."

Mr. Justice Chapman: "The accountant had to go outside to creditors to seo how their claims were made up." Mr. Justice Cooper remarked that he understood that the bills receivable were entered in the bill hook, but there was no information us to what became of them. The accountants had to go outside to ascertain this. There was no information in the books to show what Darby did with the bills, to whom fw had discounted them, or what was done with tho proceeds. Surely, then, tho books were defective.

Mr. Burton stated that no bills had been discounted outside the bank, and that all were entered in the bill books. The Court must give due weight to the evidence that the books wero fairly well kept, and that bankrupt was not failing to keep the necessary books. Mr. Justice Dennislon remarked that, if the books had been properly balanced, discoveries must havo been made.

Mr. Justice Cooper expressed the opinion that it was evident that the "books were never balance]. Mr. Burton contended that there was not the slightest evidence that they were not balanced, and that, 011 the contrary, the balance sheets proved tL'it they were balanced. Mr. Justice Dcnniston: There is a great deal of evidence. It was asked by the Court how the books could possibly have balanced when there was a mistake of .£971 in one statement, and JEM7S in the other. Did this not show that they could not havo been balanced? What a Crown Witness Said. Quoting from the evidence of "Warnock, accountant, ' cabled by the Crown, Mr. Burton i'&i'd e&fi'adts to support his contention that Darby was misled. For instance, Warnoek had said that the statements,, down to January 31, 1910, were statements 'signed by a' public accountant of long experience, and, further, that it-was proper for. a trader who received statements from a public accountant (such as those put in and signed by .bankrupt's accountant Stericker), to rely on those statements. Mr. Justice Edwards: "That is not for him to say." Continuing, Mr. Burton said that due weight must be given to the Crown's evidence on this point, and that "Warnoek had admitted that lie knew that accused was 110 book-keeper, and that; therefore, 110 would bo obliged to rely 011 those whom he employed to-get out his figures. If every balance-sheet showed a surplus, the ordinary trader (according to Warnoek) would be justified in believing that he was solvent. Warnoek had added that, right up till March 31, 1010. Stericker had represented Darby as solvent. Warnoek had also said: "Many of the results given by Stericker to accused have been grossly misleading. Tho blunder as at June 30, 1901), as to bills receivable is inexcusable. . . . Eight up to March, 1910, Stericker was representing (by inaccurate and misleading figures) that the business was solvent."

The Balance-sheets. Referring to the balance-sheets, Warnock had said that there was 110 warning in any of these documents that there mignt be any large error, or that Darby's business might be in an insolvent condition. In tne balance-sheet of December 31, 11108, prepared by Stericker (according to Warnoek/, bills receivable were shown at .£1877, wnereas it should havo been et'bSS. Continuing his evidence 011 this point, Warnoek said: "Tne bills under discount have Been included, though noted as a contingent liability, and tne other small dilference of ili-t is in two December bills again included in January. The mistake is that the whole of tne bills receivable have been brought forward as u tree asset, whereas .iIO'JO of them had really been discounted, and the bankrupt had ; cceivcd tho proceeds. Later there was some writing back. There is no excuse, to my knowledge, for this mistake." Ju another part 01 his cvidonco Warnoek said, "There are two balaucc-shoets supplied to Darby lor the period ending June, 1909. Ono gives the total amount of bills rcccivablc, and the bills discounted, and tho net amount of bills receivable. The other merely gives the net amount. The total amount of bills receivable at that date was .£2B-18, but under discount there was £Wb of that amount. 'The net asset was .£13(3. The business was shown as ,£M7S better olf than it was. ... I cannot understand how these errors can have been made. If a trader is no bookkeeper and accountant himself, he is absolutely in the hands of his bookkeeper or accountant." Mr. Justice Edwards remarked that, although a man might be unable to keep books, he might still have a grasp of financial matters as a business man. Mr. Burton contended that Darby s judgment would bo based on the balancesheets supplied, and proceeded to quote as under from the evidenco of Stericker, the public accountant employed by Darby:— "I admit the error of tho .£971 (i.e., in the December 31, 1908, balance-sheet). The cause of it is in the bills receivable. Bills receivable showed a debit balance of .£1877 6s. 2d. About .£9OO had been discounted and not deducted, and consequently the capital account was that much over-stated. This ought to have been shown in tho books, where it would havo been accessible to mo. But I did not attempt to go behind the starting point. I discovered tho error in August, 1909. I am quite clear that I discovered it after I had given tho June, 1909, bal-ance-sheet to Darby. The entry in the journal shows this. It is dated January 31, 1910." In another part of his evidence Stericker said that lie assumed that the .£1877 was tho net amount of bills receivable, and that that was the mistake. Stericker had also admitted tho mistake in-the balance-sheet of .Tune 30. 1910. Ho had said in his evidence that 110 assumed that X2BIS was the net total of bills receivable. lie admitted responsibility for that error. Stericker did not take the. view that if Darby's true position had been ascertained 011 June 30, 1909, he was insolvent.

The Books and Bookkeeping. Mr. Burton thou proceeded lo quote from the cvidenco of Mr. Holmes (a witness for the Crown), who had said that there was a full set of books which he

and his slaff had had no difficulty in understanding , after they had spent _ u little lime 011 them. In this connection Wnrnock had said that from June 1 lo the end accused's books were fairly well kept. His particular complaint as to the hooks referred to the period prior to June, 1909.

Tho Single Entry Period. Quoting Jlr. Warnock's evidence dealing with the single-entry period, Jlr. Burlon said that Warnoek had stated that he had had unusual difficulty in ascertaining Darby's position because the single-entry books had been badly kept. Had ho been called in in December, 1908, to make a balanee-shcci from these books he could havo done so, but it would have taken time. In Warnock's opinion Stericker was able to construct a balancesheet for the period ending December HI, 190 S. when the books were kept by single entry. Stericker had said Hint many traders kept their books by single entry, and he had also stated that he did not think it exlraordinary that Darliv should have started his business on a capital of <£j(>, and kept his record of it by sir.glo entry. It was clear, Jlr. Burton urged, that from January, 1909, to the end, the books had been kept in such a manner as would enable the bankrupt's exact financial position to be ascertained.

Jlr. Justice Edwards expressed the opinion that Darby must have known that he was flying kites, and that, if he could not keep it up, the business must suffer. Ho must have known that the kite-flying must cease. Jlr. Burton: He always had assets, according to the statements put before him, in stock and book debts far exceeding these bills.

Jlr. Justice Chapman: AVhat. you have quoted is the evidence of Crown witnesses in favour of Darby, who, you contend, may reasonably have been misled by the evidence in the shape of the balance-sheets. Jlr. Burton: That is so, your Hononr. Jlr. Justice Edwards remarked that Darby had not said that it was misleading. • Jlr. Burton contended that it was clear from the evidence that the bnlance-sheels or statements supplied by Stericker to Darby were seriously inenrroet, and must in the ordinary course of things have deceived Darby. It lay upon the Crown to prove that Darby was insolvent. The Chief Justice: No! To prove that he could not pay his debts. Jlr. Burton contended that nothing had been proved. There was only suspicion, as distinguished from proof. On the evidence of the accountant called by the Crown, the books wero fairly well kept during the period mentioned in the charge to tho end, and-the accused was misled by the balance-sheets. He quoted authority to show that the proof required must amount to moral certainty and not suspicion.

At this stage the Chief Justice saiil that the Court would not, at present, enll on the Solicitor-General. If this was thought necessary the Court would do so the following; day. Time would he taken to consider the matter.

THE AUCKLAND TRAM TRAGEDY. WHAT DID THE JURY MEAN? An echo o£ the recent tram fatality in Auckland was heard in the appeal in the case his Majesty the King v. William Ernest Dawe, Mr. J. R. Reed appeared for the appellant, and llr. J. W. Salmoud, Solicitor-Ueneral, for the Crown. At the trial, the jury had found that on or about November 29, 191 J>, at Auckland, the appellant Daivo had committed manslaughter, the result being the death of another tramway employee, Thomas Albert Thompson. Ijawc was a motorman, and his car (No. 58) had collided with car No. 70. The impact was not severe, but had forced ear 70 slightly ahead, and, at the moment of the collision, Thompson was in the act of attempting to couple cars 71 and 70. The impact had crushed his bead between the two buffers, causing instantaneous death. What the Jury Did Find. The verdict of the jury at the Supremo Court trial had been: "AVe consider the accused guilty of neglect of duty, caused by extenuating circumstances, but not gross neglect, and strongly recommend him to mercy." • In answer to a question put by llr. Justice Cooper, the foreman of the jury had stated that they could not unanimously formulite the extenuating circumstances, although they nil agreed that such extenuating circumstances were present.

Tho Points to be Unravelled. The questions for tho consideration of the Court were: (1) Is the verdict of the jury a verdict of "guilty with a recommendation to mercy?" (2) Is it a verdict of "not guilty?" (.1) Is it too inconclusive to be the one or the other?

At tho end of the judge's statement hearing oil the ease, ho said: "If the verdict is too inconclusive the prisoner is to ho retried at the next criminal sittings at Auckland on May 22."

The Pros and Cons of It. Mr.. Salmond submitted that it was clearly a general verdict, and in no shape a special verdict. The point to be decided was whether it was an effective verdict of

"guiltv." Ho submitted: (1) That it was very doubtful whether the common law recognised any distinction between gross negligence and ordinary negligence in a prosecution for manslaughter; (2) that the suggested distinction was obsolete in civil actions, and therefore in all probability obsolete in criminal law also; (3) that it is impracticable, _ and had been expressly eliminated in New Zealand by the Crimes Act. , •

Mr. Heed argued that the evidcnco disclosed that his client was an extremely careful man. But. for an extraordinary combination of circumstances no accident would have happened at all. .Mr. Justice' Denniston: "Was it not clear that tho man was what was termed 'rattled' at the time?"

Mr. Reed: "He had had a shock to his nerves earlier in the day."

Counsel proceeded to argue that the recommendation to mercy was made by the jury because it did not quite know how to express what it felt. He contended that the common law required that neglect should be gross neglect to justify a verdict of guilty. The verdict was one of acquittal, for the jury had negatived gross negligence, and such negligenco as they had found they found to have been caused by extraordinary circumstances. Decision was reserved.

FOGGY VERDICT. ' CASE MUST BE TRIED AGAIN. An interpretation of an ambiguous- verdict in the Talmerston North case, H.M. the King v. Win. Howard, a drover,! otherwise known as Wilson Sheplierd, was .the nest matter dealt with by the Court.

Mr. ,T. W. Salmond, Solicitor-General, appeared for the Crown. He remarked that, in this case, Howard had been tried on two counts—one of theft, and one of receiving a stolen sheep-dog. He had been acquitted on the charga of theft, but convicted on the chargo of receiving. The question reserved for the Court was whether there was evidence to go to the jury on the count for receiving, and (2) whether the verdict of the jury amounted to a verdict of guilty.

The Solicitor-General submitted that there was abundant evidence to go to the jury on either of the counts. The only real point was the second, namely, as to whether it amounted to a verdict of guilty. He argued that even if the written verdict was ambiguous, it was to be read in conjunction with the evidence, and the slimming up.

The Chief Justice was of opinion that I hero was evidence that the case should go to a jury on both counts. The evidence showed that the man knew the dog, and that lie had told another man that the dog had been lost. He had (old one man that' he had bought llie dog for Xlo in I'eilding, and, when he was arrested, lie had stated that ho had bought it for £1 10s., at Waiouru. As to the question of whether there was cvidenco to go lo a jury, his Honour thought that there was. As to tlie verdict, there was an ambiguity. It would be safer fov the Court not to say that there was a

verdict of guilty, but to order a new trial.

Mr. Justice Edwards agreed. A verdict of this kind was generally the result of a compromise in the jury-room, and the jury did not intend to go ono latter further than the finding. The rest of the Bench concurred.

A new trial was ordered on the second count,