IN BANKRUPTCY.

Temuka Leader, Issue 2391, 4 August 1892, Page 4

IN BANKRUPTCY.

ROSS, SIM:-, AN 1 ' ' •' The adjourned meeting of t .ik cveuu-otn of Ross, Sims & Co. was held at the Timaru Courthouse on Tuesday, Mr Greenwood, Official Assignee, presiding. There were also present —The Deputy Assignee (Mr Montgomery), the supervisors (Messrs Gibson and Chisholm), and counsel for Assignee and supervisors Mr Kinnerney; the bankrupts, with Mr Hay for Mr Ross, .and Mr White for Mr Sims; Messrs A. and G. Perry, and Mr Smithson for various creditors ; and about twenty creditors. The Assignee called over the names of creditors who had proved their claims. He stated that since the first meeting a great deal of trouble had been taken to prepare as clear a statement as was possible in the time. To profess to have got everything straight and clear in a case of such involved matters would be to profess a great deal too much. Those who had had experience of winding up businesses of this sort, extending over many years, and complicated as these were, between the firm’s accounts and the separate accounts of the partners —and especially when neither the accounts nor the conduct of the persons interested had been satisfactory—would know that it was an extremely difficult matter. However as much had been done as could reasonably be expected in the time. He then read his report, a very lengthy one, from which we extract the following «I have the honor to report that since the first meeting of creditors held on the 20th July, the bankrupts have been examined on oath by myself and the Deputy Official Assignee, with the assistance of the supervisors, and the solicitors representing the estate. The examination was continued on the 21st, and completed on the 28th ult., and was necessarily of a lengthy and searching character, owing to the nature _ of the transactions requiring investigation, and the difficulty of obtaining the necessary information with regard to them, and for other reasons which are hereinafter stated. For the same reasons it was found impossible to conclude the investigation by the time originally fixed lor the adjourned meeting, and it was therefore necessary to adjourn until the present date. An examination of the books of the bankrupts has been made by an accountant (Mr C. S. Fraser) whose report will be placed before you, and lists have been prepared giving detailed particulars as follows :— lie Boss, bims & Co. properties and titles thereto, with valuations of each property made _ by the supervisors; (3) list of securities; (4) list of titles and papers in safe, with amounts owing against same to the firm; (5) list of book debts; (6) list of furniture and effects, with value of same by Mr Radcliffe. He D. M. Boas—(Similar lists of (7) books; (8) properties and valuations; (9) securities ; (10) titles ; (11) book debts, rents, &c.; (12) housebold furniture and effects, with Mr Radcliffe’s valuation). Comparative statements have also been prepared showing the diffeeenees resulting from the revaluation of the property. Ac W. M. Sims—List of household furniture and effects, with valuation by Mr Radcliffe. The bankrupts commenced business in partnership with as land brokers and general commission agents on the 29th September, 1877, Mr films paying £7OO for a half share in the bosinogs then carried on by Mr Ross. The capital consisted of £SOO, of which £250 Was contributed by each partner, and each had an equal share in the business. Mr Sims was agent for the Victoria Insurance Company and manager of the Timaru Building Society, but for the last three years or thereabouts the firm have been the agents for the company. In addition to the business carried on by the firm, Mr Ross carried on a private business of considerable magnitude,acting as attorney for a number of persons from time to time, and sometimes as trustee also. Mr Ross was also Deputy Official Assignee in Bankruptcy, and agent for the Public Trustee. ‘The firm kept the ordinary books required for the business which they carried on, but as thej r have not been balanced for about twelve years, it is impossible without any very lengthy and costly investigation to ascertain whether they correctly represent the transactions of the firm. The most that could be done in the limited time which has been available, was to endeavor to check approximately the filed statements of the bankrupts, and that has been done as far as possible in respect of the transactions of the firm. It has been impossible to check Mr Ross’s transactions, for the reasons stated hereinafter. The result will be seen from the report of Mr C. S. Fraser, the accountant who has made the investigation, and from this it appears that not only have the books not been balanced for the period mentioned, but there has been considerable carelessness in bringing forward balances and otherwise, in the ledger. The necessary conclusion is that during the last twelve years it w- Id be very difficult for the bankrupts ? 3inse’ es to ascertain their real position -the .vere honestly desirous of statii it, w tout making a careful a fd lengl . * im tiga- 1 tion. The books kept by )r R < (or such of them as are *u;> liable) are perfectly useless as » record of his business transactions. They are imperfect and not connected with each other, and it is quite impossible to make up any statement from them or !■> check his transactions in any way by rJovenee to them. There is reason to i-lieve that other books were kept by Mr Boss, but they cannot now be found. He admits having burned some private letters siwy# the trial of the case Bailey v. Ross but no business papers with the exception of an old mortgage of Sc mlan s. Leaves have also apparently been ant out at some of his letter books. The firm kept their banking account with the Bank of New Zealand, Timaru, where also Mr Ross kept his private account up to tne 11th May 1888, when he changed it to the Bank of New South Wales. The firm’s banking account has been overdrawn on an average £1072 during the last six years, reduced during the balancing mouths, (March and September) to .about £459, ; the average during each year, excluding j these months being about £I2OO, and they have been allowed an overdraft by the Bank up to £ISOO, secured since first of May 1885 by letters of Hen over M • Ross’s private property at Caversham near Dunedin. Into this aewwnt all moneys, received on account of trenfe. interests, and principal, derived from mortgage sollected on account of clients, and money received mm&ys for investment on acount of clients, have baon paid except such as have been paid into Mr Rosu’s private account. No trust account was kept, and the moneys received and held on account of clients’ securities and for investment (exclusive o( rents and interest collected) amounted at -j£.<s date of the bankruptcy to £5200 or thereabout*. The firm guaranteed from £8 to £7 per cent per annum on moneys left in their hands for investment, except ;n the case of deposits on which in some instances lower rates were paid. During the’ last

six years the firm have been paying iiiteri.' .c at from 7 to 8 per cent, per annum u • • ;_• ( moneys absorbed in their account.

: n.. ; i exclusive of moneys absorbed in Mr Ross’s private account, amounting to £2550, on which the firm also paid interest at the like rate. The interest paid by the firm on the moneys absorbed in Mr Ross’s account was charged against him in calculating the amount that he was entitled to draw, but did not include the advances on Shears’ and Bonner’s accounts (hereinafter mentioned) for which ho undertook the responsibility. On one occasion (on the Ist July 1890) Mr Ross having drawn about £I2OO more than his share, the account was bidanced by setting off against the excess drawn by Mr Ross a sum of £BSO, the balance of a sum of £9OO sent out to him for investment by Mrs Josephine Bower (a lady residing in Scotland for whom Mr Ross acted as attorney) and which had been paid into the firm’s account, and a sum of £3BO 5s owing to Mr Ross for rent of the firm’s offices . This arrangement was agreed to by both partners, and is recorded in the firm’s books. Mr Sims in his examination stated that he attributed the bankruptcy to bad debts, losses on property, and heavy payments of interest. The bad debts and losses are estimated by Mr Sims at £2280, over a period of fifteen years ; the expenses over the period of six years £2136, and interest paid to clients £1039, the net profit for the past six years £BBI per annum, and the drawings of the partners at about £4OO per annum each. A large portion of the liabilities of the firm and of Mr Ross consists of moneys misappropriated, of which the following are a few of the most important instances.” The report then dealt with these accounts in detail. In Shears’ account it appeared from enteries in the firm’s books and from the evidence of the bankrupts that in December 1887 the firm advanced Mr Shears (who was then leaving the colony and has not since returned) £1723 7s, taking securities corresponding in value in payment. The total amount of the debt is £IOBS 6s 11 d. There is no credit shown against this and apparently no security for the advances. Mr Ross admitted in his examination on oath that on the day that Mr Shears received the cheque he returned £I2OO in cash to him (Ross) and that he paid part of this money into his private account in several sums, and kept the balance in his safe.

Bonner’s account is a complicated one. The late Mr W. Bonner had a piece of land of about twenty acres with a dwelling house at Saltwater Creek. On the 28th March, 1876, Mr Ross leased this land at £65 per annum, payable quarterly, with a purchasing clause of £BOO, and Mr Bouner also from time to time left money with the firm for investment, Mr Ross transferred this lease to his mother, Mrs Mary Ross, and afterwards registered two agreements purporting to be signed by Mr Bonner, reducing the purchase money to £SOO, and to £329 in consideration of Mr Rus.s paying a promissory note for £l7O 16s. Since Bonner’s death in 1884, notwithstanding the alleged arrangement, quarterly payments of £l6 5s have been paid to Mrs Bonner, and £lO 10s annually, interest on a loan of £l5O. In the firm’s books Mrs Bonner is debited and charged interest on the moneys which she is entitled to receive from Mr Ross, as if the money had been lent to her, the result being that a debit balance of £421 16s Id appeared as owing to the firm by Mrs Bonner. Mr Ross admits t,his to be wholly incorrect, and that these should have been charged to him also that Mr Sims spoke to him about the account several times.

In Mr Robert Stanseil’s account it appears a cheque for £SOO was paid over to Mr Stansell, as he was about to leave the colony. This money the assignee thinks was returned to Mrs Ross in cash, but tlxis Mr Ross denies on oath, Subsequent dealings with Stausoll’s property tend to prove the assignee’s supposition.

Mrs Josephine Bower’s account shows that altogether fihp placed £3400 in Ross’s hands for investment. TJ’fi amount was partly used in making various payments for the firm, and part was invested on mortgage. Morrison’s Account-— ln March 1889 and August 1891 Mr Boas obtained £IBO and £IOO from Mr Morrison to advance to specified persons. The money instead was paid into Mr Ross’s private account. The money has not been repaid. There are other instances, but it j.s unnecessary to detail them. The account ja a large one and involves very considerable liability. In the Timaru Building Society’s account it is shown the society advanced £l5O to Mrs Stone; the firm received payments from time to time to defray this loan but did not defray it. Mr Sims obtained an advance from the society for £2OO without the consent of the Board of Directors, but he states with the authority of the chairman. A sum of £2OO paid by Mr John Thompson to Mr Sims for the society w.as also paid into the firm’s private account, «)iSse,:s4 of that of the society. Mr England end tfie Bailey Trust acsoiv ts were also 4es# with. In the latte, it was stated that Mr Boss, as Executor, obtained control of property and securities amounting to about £J 800, of which the only portions remaining upcppyeited or unappropriated on the Ist of June i.art were the sum of £3Bl 3s Id in the Post Otm& Savings Bank, and a mortgage by Mr AVilfinm Baird to Mr Bailey for £IOO ; but on filing an inventory and account of his exWrWrt.lHp Hi the Supreme Court about the 9ih during the pendency of the action Bavte-y e. Boss, Mr Ross showed the balance of tlm rtpst moneys in his hands represented by .securities specially appropriated to the trust estate. £SOO U ■/;}),p amount coming to Mr Ross through his transactions with Mr England have been credited io Ufk estate in trust, and Mr Ross has also paid jute truat .account cash in hand, £142. TllO report then dealt with the Dunedin Aj'cnde properties. Dunedin property,—Mr Robertson (the father of the late Mrs ijosa, aged about 95) has a life interest in this propwi’jbp There is also an annuity of about £4O a year 4,p Mrs Robe-itson charged on the land, commencing from Mr Robertson’s death. Mrs Robertson’,s age is from 60 to 70 years. There is over £J .OO per annum received from rente; exclusive of tho part occupied by Mrs Robertson. The leases commence from different dates, and some will soon run out., when j;h;f returns from the property will be considerably increased.

Arcado Property.—This property is subject it 9 two mortgages, one to Mr F. LeCren for £2OOO, which expired on the Ist June last but wa? renewed by the mortgagee for from 2 to 3 yesfji at £6 10s per cent per annum, and the other' for £3OOll to Mrs Mary Ross, Mr Ross’s mother, which purports to have been executed on the 31 si May J. 887, and transferred to Miss Mary Elh.ahpth Rp-ss, on the Ist November 1889. Mr LeGrpn’s Mortgage includes the land and buildings to the western end of the main building in which Messrs Ross, Sims and Co. had their office. The mortgage to Miss M. B. Kopfi includes the same prpuerty and

is a first mortgage over the Friendly Society’s Dispensary, and the piece of land on the southern side of the arcade between the blacksmith's shop and the western end of the main building before mentioned. The property is a valuable and saleable one, the rents at a fair estimate amounting to about £630 per annum The history of the mortgage to Mrs Mary Ross is involved in a long series of money transactions alleged to have taken place between Mr Ross and his mother, commencing about 1877. The evidence and explanations of Mr Ross were most unsatisfactory, and were not supported by any clear or reliable entries in his books, but the substance of his statement is—that his mother brought out about £4OO with her when she came to the colony, the land on which the Arcade buildings are erected was originally bought by her out of this money, and its accumulations and rents derived from house property transferred by Mr Ross to her; that subsequently when she transferred the property to Mr Ross, she insisted on having the second mortgage for £3OOO, and that the mortgage was afterwards transferred to Miss Mary E. Ross, in consequence of Mr Ross’s wife insisting that this should either be done or that the Dunedin property, which had been transferred to Mr Ross, should be re-transferred for the benefit of the children. It was admitted by Mr Ross that the Arcade buildings were erected partly out of his clients’ moneys, his explanation being that he thought he was justified in doing this as he had plenty of property. The whole of the evidence and circumstances surrounding this transaction are of the most unsatisfactory and suspicious nature, and point very strongly to the conclusion that the whole arrangement was designed for the benefit of Mr Ross himself, but as I am advised that the mortgage held by Miss Ross cannot be supported against the claims of creditors it is for obvious reasons underable to enter more fully into details in this respect. Under these circumstances I have, with the approval of the supervisors, paid the interest (£7O) due on Mr LeCren’s mortgage, and entered a caveat against the mortgage to Miss Ross, to prevent it from being dealt with pending proceedings being taken to test its validity. Mr Ross has not sold any of the buildings in the Arcade with the exception of the Timaru Herald office, sold to Mr E. G. Kerr for £1250. This property was bought by Mr Ross from the Timaru Herald Company about the time when the mortgage for £2OOO was

given to air LeCren, the price being £2IOO, and there was therefore a loss of £BSO on this sale. Mr Kerr has paid £IOSO on account of purchase money, and the balance, £2OO, is under security to Mrs Hossack against morgagea given by her to the Tinuiru Building Society in July last, as collateral securities for moneys claimed by the Society from Mr Sims, Mr Boss, and Messrs and Sims jointly.

General observations—ln my opinion the insolvency of the bankrupts has not been satisfactorily accounted for. The only heavy losses made by Mr Ross appear to have been on the sale of the Timaru Herald office, and Mr Sims’s statement, though admittedly only an approximation, shows that the proportion of bad debts and losses on property during the last 15 years has not been exceptionally heavy. It is true that very high rates of interest have been paid to clients, but notwithstanding this the business, according to Mr Sims’s statement, has been a profitable one, and about 18 months ago he produced a balancesheet to the manager of the Bank of New Zealand showing a surplus to the credit of the firm of about £3OOO. It is only right to state, however, that he explained that this statement was not prepared or checked by himself. It is at present impossible to say what tiie estate will realise. Although the assets in Mr Ross’s estate have been very considerably written down they still show a substantial surplus as against the liabilities mentioned in his filed statement, but no estimate can be made until the proofs are received and the question of Miss Ross’s and Mrs Bower’s claim settled, Tfie claims of creditors between themselves will also require to he adjusted, as those who claim in respect of liabilities alleged to be fraudulently incurred will po doubt seek to rank against the separate as well as the joint estate, on the ground that the liability to them is joint and several.

A long report by Mr C S. Fraser was j-pad, and then a comparative statement of assets and liabilities as made out by supervisors. This showed the deficiency on the firm’s estate to be £3401 instead of £2939, but Mr Chisholm said they had been obliged to take the bankrupts’ estimate of the book debts (the largestasset), pot having had time to investigate it. Ifi Ross’s private estate the debts to unsecured creditors were increased from £2272 to £3159; secured creditors remained the same, at £12,175. Among assets the book debts were increased (by transfers from the firm) from £378 to £694 ; a cheque for collection, £9OO, was added, furniture and effects wore increased from £6OO to £836, but properties were reduced from £20,420 to £15,885, and the net surplus; g’;;s reduced from £6711 to £2027. Very little change was made on Mr Sims’s statement, the furniture being increased from £IOO to £l2-1.

The following are extracts from Mr Fraspr'p }.’epojl .-—lnasmuch as the books have not been balanced fig- ]2 years, I have only been able to investigate portions of the accounts,andl can really only pretend to report on the portions or transactions enquired into. I have not been able to add up any of the books or check entries hpfi} one book to another, except in the cases naruefi. The firm’s books have been kept very neatly'and with the exception of the ledger, but' ‘ this, tfic keystone of book-keeping, is not only not balanced, but not balanceable. Notably intent entries to the Dr. or Cr. of parties'" are' m/t /debited or credited “interest account.” Tina alone g/ould probably throw the balance out hundreds f I compute the amount o moneys at deposit awaiting investment’ etc., at time of bankruptcy, to bo roughly’ £5000! "The is (juito unreliable as regards certain of the accounts, bfit that is caused by matters outside book-keeping. For instance —Mrs Bower : Dr. £421, should be Cr. £405 ; J. Shears, Dr. £IOBS, sinned fie Or. £546; S. Gunn, Dr. £57 Is .6d, should bo Ci’, £JB4. . . . . Mrs Mary Ross’s accounts fix D, iVL Ross’s books : It is impossible to make any SQlpfe.c-tory report on this account, as the books only ahow tr/insaptions from 1878 to 1888, but she appear to fiaye started with no capital in D. M. Ross’s hands, but with a considerable number of properties. There is a steady infiuy of rents (by persons named), which are placed p.o lier credit, but practically no outgoings. ’ During tipps ypars only £l4 is paid for" rates, apd practically nothing for insurance, repairs, etc. Tfie Jast fieffit epigy in this is £77.0, brought from cash booh, jupporting tq be “Mclntosh, principal and interest.” This was posted in duplicate ledger, marked Nj and ruled out, but it wa§ not

posted at all in ledger D, nor can I find any trace of its being posted elsewhere. Memo.—lf this mortgage was for more than one year who paid the interest 1 Mary Elizabeth Boss: No account in ledger. After a few remarks, it was moved by Mr T. Chamberlain, and seconded by Mr W. McKeown :— ;c That the bankrupts l)e publicly examined before the Judge.”—Carried unanimously. Mr W. McKeown moved, a)id Mr D. Caird seconded Assignee be authorised to take such proceedings as he may be advised to test the validity of any mortgage charges on, or any charges against, the estate that he or the supervisors consider it desirable to test.”

Mr Hay made a few remarks on behalf of Miss Hoss’ security, and Mr Kinnerney replied. Mr D. Caird said only a few w r eeks before the bankruptcy lie had arranged to advance £6OO for a building on the Arcade property, and now he found there was a mortgage on the land. The official Assignee said of course due weight would be given to what Mr Hay had said, and to every consideration which would make it inadvisable or unjust to contest any deed. But the whole circumstances of the mortgage appeared to his mind and to the supervisors, as open to very grave suspicion. The question was: Would they give specific power to the assignee and the supervisors to take such steps if they thought them advisable I It was not necessary, as they had such powers, but their resolution brought the matter before them as a distinct issue.

The motion was carried unanimously, as were also the following : Moved by W. Bush and seconded by R. H. Ferguson:—“That any expenses for clerical or other assistance already incurred or that may be required in future, be paid out of the estate, with the sanction of the Official Assignee and supervisors.” Moved by W. McKeown and seconded by D. Caird—“ That the Official Assignee, with the concurrence of the supervisors, realise the estate as speedily as possible consistently with doing so to the best advantage.”

The meeting was then adjourned sine die.