Justice Williams' Judgment.

Manawatu Herald, 18 June 1896, Page 3

Justice Williams' Judgment.

. ■.•■ ■ ■ ?• At Dunedin on Tuesday Judge "Williams refused to sanction the sjale of securities to Messrs Lee-Smith and J. B. Reid of the debt of the J. G. WaTd Farmers' Association. In a lengthy judgment he is particularly severe on the finance of the Association. Referring to the asset (?) of £6,880 Bills Receivable, the judge ■aid "-Mr Ward explained this by saying that the system of dealing with Bills Under Discount and Bills Receivable was unchanged— that the sum of £6880 appearing among the assets of the Association was arrived at by deducting from an undisclosed amount of Bills under Discount. Any person with ,an elementary knowledge of accounts must see that this process is illegitimate. Bills under Discount' represent contingent liabilities. If they not appear in the balance-sheet as an item of liability the effect is to suppress the fact that contingent liabilities exist, and the amount of such liabilities. That, in itself, is a falsification of the bal-ance-sheet. If it were the case that when a man puts his name on the back of a bill, and gets the money for it, he has no more to do with it, the above system would be allowable ; but such is not true, either in law or in fact, as every trader knowa by sad experience. That some traders may habitually make out balance-sheets in this way is possible, just as some traders may unfortunately be guilty of other dishonest practice?, but notwithstanding that, the practice is obviously a dishonest one." The finance of drawing on a Lon<don house for £80,000 on a warrant purporting to represent oats, the judge describes as " This fraud was JJ^t discovered by the Bank till some months later. In the meantime, the Association obtained forbearance from pressure by the Bank." On the balance-sheet the Judge said, " It is impossible to suppose that the framers of this' balancesheet of 29th June, when they put it forward on 7th September, were not aware that it was an utterly false one— something going far beyond the mere rosy statements which too sanguine directors occasionally put forward. If competent businessmen put forward a balance-sheet of tbis kind, the only inference is that they do it for a sinister purpose." Mr Ward's excuses as the reason of giving the Bank a promissory note for £55,150 are swept away by tb« Judge who said " Why this was done I do not understand, as the promissory note would be of little or no value io the Bank. There is nothing to show that Mr Ward had then any property which 13 not included in the present lists of assets. He states that he then considered shares in the Association worth their par value of £28,000. The Association, however, was then, to Mr Ward's knowledge, in difficulties, and their share carried a contingent liability of £82,000. I can hardly, thtrefore, accept Mr Ward's statement as correct." In concluding Judge Williams reviews the whole position and puts it thus : — " It has been shown that the Association obtained credit for a large amount by fraud ; that it put, so far as I can make out this charge of indebtedness, forward an utterly false balance-sheet, and that its r affairs were managed with reckless disregard of ordinary business principles. Of this Association Mr Ward was Managing Director," and he thinks " that the career of the Association should be brought to an end and its proceeding? investigated, and that those who were responsible /or its management should no longer be permitted to roam at large through the business world, i 3 a result so ; obviously desirable in the interests of commercial morality that it ought, if possible, to be attained now."