PROFIT ON FLANNEL
CASE AGAINST GEORGE AND
KERSLEY
DECISION. RESERVED
Tho hearing of tho charge brought by tho Board of Trade..agiinst George and Kersley, Ltd., was concluded in the Magistrate's. Court yesterday afternoon, before Mr. E. Page, S.M.
Mr. P. S. K. Macassey, of the Crown Law Office, appeared for the Department, and the defendants wcro represented by Sir John Findlay, K.C., and Mr. M. Myers.
George and Kersley wire charged under section 21 of the War Regulations Act. 1918, that on September 3 they sold to Una Audrey Bethel flannel known as No. 5 Shetland at a price which was unreasonably high, tho opportunity of obtaining such prico in New Zeak.nd having arisen by reason of a scarcity of such goods in New Zealand caused by war conditions. When tho case was before tho Court on Friday Sir John Fimliay opened for tho defence, and intimated that he would call evidence. Before proceeding, tho Magistrate said ho gathered from tho evidence led by Mr. Macassey that he did not suggest that this material could not liavo been obtained elsewhere, that is. at other shops. Mr. Macassoy replied that it could havo been purchased at other shops, but there was, a scarcity of material/ in the market. Sir John Findlay: Not only had they the flannel then, but they have also got it in stock now. Mr. Macassey wanted to amend tho information, but Sir Johu Findlay objected, and pointed out that the whole of the cross-examination was in respect to the information as laid, and if it was desired to amend the information they could withdraw it and swear it again.
Miss Bethel, recalled by Mr.. Macassey, said that sho carried r, sample of tho flannel and found that she could get it in the principal shops in Cuba Street and Lambton (Juay. ■ David James Constable, employed by defendants and in charge- of the Manchester department of the firm, said that he costed tho goods of his department, and fixed tho selling prices, which were left to his discretion. His instructions were to aim at a, return of 33 1-3 per cent, on the turnover, which would bo 50 per cent, on cost. It was quite impossible to fix a uniform profit on all goods; it was necessary to averago so that there would be more on some goods than on others. He fixed the selling price of tho ilannel tiiat was sold to Miss Bethel. lie produced samples of ilannel fold by tho firm. - Thev had of the No. 5 Shetland about 100' yards on September 3, and nearly (ho whole of it was still in stock. Hardly any of it. had been sold. Ho had in stock quantities of four other colonial flannels; altogether about GOO yards. The flnnnols were purchased at different times. Tho No. 5 Shetland was purchased at Is. 7Jd., and. the other flannels were purchased at Is. OJd. to Is. lljd. per yard. So far as value was concornod. No. 5 Shetland was best value, although it cost tlio firm less. A cheaper (in value) line of flannel had to bo sold at a lower rate of profit. Flannel had to bo sold on tho texture and weight, and tho No. 5 flannel was much better in that ivspect than the other four samples of colonial flannel. Ho endeavoured to get 50 per cent, on tlio other flannels, but found ho could not get that, and tlicrcforo he had to nuit tlieso other, flannels at Is. lid. and 2s. 3d., which would leave no profit, and the No. 5 Shetland at li. 3d. would not inako up the profit. To Mr. Macassey: He ordered the No. 5 Shetland from the. Pel one Mills, and received only two rolls. Ho had not sold any of the Is. lid. and 26. 3d. flannel since September 3.' To His 'Worship: Thu other flannels came from other woollen mills than tho Petono Mills.
Alexander Pringlo Smith, managing director James Smith. Ltd., Cuba Street, said ho had had 30 years' experience of tho trade. He was of opinion that tho No. 5 Shetland was of batter grade than the other four samples; they would not stock tho latter in Cuba Street. If he had tho poorer samples in stock lie would Tmvo to sell them at a reduced prico and average on other flannels. That was, tho loss occasioned by the reduction ou tho unsaloablo flannel would bo recovered as far as possible on tho saleable flannel. This was tho general rule in the trade; in fact, it was universal.
Mr. Macassey protested that the evidence was irrelevant, and called attention to section 21 of the War Regulations Act, under which tho information w:>s laid.
After some argument the Magistrate said he would admit the evidence provisionally, and hear argument later on.
Witness, continuing, snid that an English flannel of No. 5 Shetland quality would cost 4s. landed. Goods casting Is. 10i-d. were often sold at ss. Gd. a yard. That was dono generally in tho trade, and especially in the.Manchester department. They did that with respect to table damask. If they could not do Hint they would not import the stutf. "They averaged on table damask. If they could not average on the stuck tho trade would buy up tho cheaper lines and leave them with tho high-price stock. By averaging the peoplo got the best of it, mid were treated fairly. Prior to the war his firm was averaging 83 1-3 per cent, on the turnover, while last year it was only 30 per cent. There was no combination in the drapery trade; in fact, there was keen competition.
To Mr. Mucassey; The expenses ilirttl increased by 5.7 per cent, over the general turnover. It was legitimate to'level up on flannel of tho "bread-and-butter" Hue. They had dono il on flannelette; thoy had levelled up to tho extent of 100 per cent. He would have 6old tho No. 5 Shetland at 3s. 3d., if he ihad been landed with the other GOO yards mentioned. It was usual to average flannels with flannels, and not with sheeting or other goods. In comparison, with, the market vnluo of to-day, he did not consider 3s. 3d. for the No. 5 Shetland was excessive Ho was selling tho samo flannel at 2s.'Gd. a yard.- Iv depended upon circumstances whether 300 per cent, on flannel was fair or otherwise. They were not importing English flannel; they wero getting enough flannel from tho local mills to carry on. Hs expected his flannel section to pay. To a certain extent there was a scarcity of flannel because of there being no English imports, I but the local mills supplied sufficient to 1 carry on.
Sir John Findlay: Supposing you hac four inferior flannels in stock, and yoi found, as George and Kcrsley found, thai you could not niako a profit on thorn do you think you would continuo to scl the No. 5 Shetland at 2s. Gd.?
Witness; No; wo could not. T/horo would be a loss on our flannel section. Continuing, witness said that bo felt he had a right to chargo any prion he pleased for his flannels, but it would be foolish to ask such prices as would drivo his customers away. His prices would bo regulated to meet competition. Francis Henry Mather, a director of George and Kersley, Ltd., said that the evidenco given by David James Constable, the head of the Manchester department, and his statements ns *;o the profits to' bo made by him wore correct. Tho Manchester 'department was the poorest paying department of the business. The gross average profit of this department m the period 191-1-1R wai 3WI per cent., and tho expenses 28.G1 per cent., showing a net profit of 5.8 per cent., which was not regarded as good. They had a loss in this department, but on the averngo no department had shown a loss over the whole war period. The average profits and expenses and the net. profits wore given in a statement which was submitted to the Crown rolicilor and to His Worship, but not rcid in Court. The expenses of the firm, \vi:nes.>. stated, hod increased by ,£'(10(111 or .C'T'lflfl -a year. There "■ere some lilies that wore sold ]>v his firm at less than were fold bv nlhor houses, but that could be said of every firiV"
T'i Mr. Macassey: The ratio expense: to turnover had not dccrr-:i="d. He hr.i not the figure': of gros? pnifi!-; and cv nensos for each of Hi" pnsl five vpnrs but they could be supplied. There wouh be Iwo governing faelors in averaging oi n "bread and butter line," one bein; the tjualilv of the goods and the othe the snlenbi'ify of I he nods. Every drn per created his own "bread and butter'
or "catch" line. In averaging up they must put the average on a goal selling line. It was generally agreed in tho Eoftgonds trade that 3,'t 1-Ii per cent, on the turnover was tho least Hint could bo safely relied upon lo yield a profit. This concluded the case for the defence.
Mr. Myers pointed out that if tho 100 yards of No. 5 Shetland held in stock by George and Kersley was sold at ,'!s. 3d. a yard, it, would yield a profit of 4JB Is. fid., and taking the GOO yards of other flannels costing 2s. on the averngo and sold nt 2s. Gd. on the average, thorn would ho a profit of JIIO, that was a profit of JJIS 2s. Gd. on a. turnover of .CGB, which was not 3S per cent. Sir John Findlay, in addressing tho Court, said that the Crown relied upon tho idea that tho prosecution was enfillet to take every article sold mid inm\ii-> with respect to each whether Iho price was reasonable or otherwise, quite irrespective of the necessity of a business to average on the goods, the averaging which was admitted by the witnesses for the Crown, and without this averaging business could not bo carried on. In the play of the markets unless a business could level up or level down prices it could not carry on. Supposing that Georgo and Kersley had been lucky enough to 'liavo had in stock at tho outbreak of the war a large quantity of this flannel purchased at lOkl. a. yard, and enough to carry them over until tho termination of hostilities, and the wholesale price went up to Is. 7d. a yard, and in respect to which tho Crown stales that 2s. Gd. is a fair selling price; if George and Kersley charged 2s. Gd. for tho flannel that cost thorn 101(1. beforetho wax they would liavo been making 300 per cent. Ho wanted to know how tho Crown would treat such a case. Were they to offer at 50 per cent, inereaso and have their stock bought up by olhcv traders and they to make wont on it? George and Kersley said: "No, we will ask tho regular pTico and lower tho prices en otlier goods so as to average tho profits." He referred to tho price of war books, which were necessarily high during tho war because tho booksellers knew tho prices, would slump when tho war ended, and the prices had. slumped by about 50 per cent.,.and so the booksellers made an avorage profit. The Crown mis asking His Worship to place an interpretation on the Statute which would liavo the effect of destroying business. Ho contended that the Court must look at the transaction on tho basis of tho business as a. whole. They could not arrive n.t the net profit by merely looking at the gross profit. Ho know'of a case where a gross profit of .£150,000 showed a net loss of .£II,OBO. Counsel then dealt with tho working of section 21 of tho Act and the inference to be drawn from it. This was the first caso in this country where a presiding judgo had been asked to say what was a fair price. The Legislature had acknowledged that tho Act was defectivo and this -was shown by the Board of Trndo Bill, which was designed to rectify tho defect of the very section under which the. information was laid. Mr. Macassey submitted that section 21 subsection J referred to tho rate of commercial profit, and did not contemplate tho levelling up of prices. It referred to goods and not to the. business. Even if tho defendants were entitled to level up, they should liavo levelled u» to within a reasonablo limit. It was clear from the evidence given that drapers did not lovol up on "bread and butter" lines. Was it reasonable to charge for an article in demand by the working classes a prico that was 100 per c «it. above the cost price? His Worship reserved liis decision.
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Dominion, Volume 12, Issue 301, 16 September 1919, Page 6
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2,147PROFIT ON FLANNEL Dominion, Volume 12, Issue 301, 16 September 1919, Page 6
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