DISTRICT COURT.

Temuka Leader, Issue 2398, 20 August 1892, Page 2

DISTRICT COURT.

TlMAßU— Wednesday, August 17tii. (Before His Honor Judge Ward.) IN BANK HUI’TIJY. The following is the conclusion of D. M. Ross’ examination by Mr Kinneruey :

Building Svjciety transactions Was attorney for Mrs Ellen Stone, now Houston. In November 1880 applied to the Society for an advance of £159 on some property, perhaps the Commercial Hotel, f ir Mrs Stone, and. obtained it. Guaranteed it by his cheque. As her attorney signed a mortgage for the £159. Collected Mrs Stones’s rents and interests t>t the time. Cqjlectedsufiicient to pay off that advance, and subsequently debited her account with the £l5O, as if it were paid to the Building Society; supposed that was it. Did not know whether it was paid off or not, knew it now. (His Honor ; You were her attorney and a director oj the society ; dq you ipean to say you did not know whether it was paid off or not.) The sum was settled by her with the firm. Did not. pay the money to the Building Society, Did not know why. The mortgage-to the society was paid off by Mr Hay. Suppose 1 at the time the firm had paid it off. Did not kuqw anything about it; ' did not,

personally look into it at the time. Had only lately discovered that the £l5O was not paid. (Mr Kinnerney: We will hear what Mr Sims has to say about that.) Knew now that the amount had been transferred to Ross, Sims and Co.’s account; did not know then. Personally did not go into the matter; did not think the board of directors knew how much was owing on the property. Did not tell Sims ho ought to have got rid of that mortgage along time ago, that he ought not to have produced that mortgage; ought not have let it be seen. Told him it ought to have been settled long ago by the firm paying the money. (Mr Hay : There is a transaction in the books showing that the Building Society made a loan of £2OO to the firm. There was no resolution about it but the cheque was signed by two directors. His Honour : Then those two directors have probably rendered themselves liable for the amount if it has been lost). The Stone mortgage was not registered. The society’s practice was to register mortgages. Thought there had been temporary loans not registered. This was supposed to be a temporary one. His Honour: And it proved a very permanent one. Witness : In February 1890 Sims told me he got £2OO from the society. Knew there was no resolution of the directors authorising it. Messrs Jackson (chairman) and LeCren signed the cheques. Did not think it had ever been repaid. Was attorney for Mr W. Bush. Collected £BO for him, which ought to have been paid to the Building Society. Was Bush’s attorney till he returned from Home. That money should have been paid to Bush’s credit with the society. Did not know till the investigation, that it had not been so paid. Did not suggest that Sims did wrong wilfully iu not paying it over. Did not remember going over the linn’s account against Mr Bush before it was rendered to him (in which Bush was charged with the £BO as paid.) The firm acted as agents for Mr Briscoe. Did not know that the firm collected £BO for him which ought to have been paid to the society for him to meet interest charges, but was not paid. Had a mortgage himself to the society. The interest had been allowed to get into arrears about a year, and to the extent of £IOO. Thought it was brought before the board that his interest was in arrear. Did not think it a fact that it was never mentioned. Mr John Thompson held eight investing shares, and took the money, £2OO, in February last. Did not see the money. It was paid into the firm’s account he learned. Sims told him Thomson had withdrawn the money from the firm and paid it into the Society. Sims told him Thomp son had called and taken up the £2OO from the Society and agreed to leave it with the firm ; but that he came again and got a building society’s receipt for it, and Sims asked him for a cheque to get the money for the society. Understood the society’s receipt was outstanding, but the society had never got the money; it remained in the firm’s account.

Knew Mr H. Durand. In May 1888 got a cheque for £7OO from him. May have told him it was to be advanced for a mortgage to Goldie. That might be on the butt of the cheque. This was the same Goldie who was also mortgaged to Bush, and the Durand loan was, before the flush mortgage iiad been paid off. Did not advance Durand’s money to Goldie as he did not want it. Paid it into his private account. Told Durand of it and he got it back in instalments—£loo first, then £4OO, and the balance later—lately. Might have told Durand that Bush wanted to get rid of the mortgage as it was available to certain persons claiming from him on a trust. Probably told him that Bush wanted to real! e everything. Did not know whether he had told Sims lie had got Durand’s £7OO. Had given Durand a few articles lately. He wished for a settlement. Gave him an old-fashioned gold watch of Mr Bower’s, a silver locket, and other things. Mr Kiunerney : Did not some of these things belong to other people ? Witness : Could not say; took them out of a drawer and did not examine them. Was not well at the time : would swear he did not give him some tools belonging to Murdoch’s bankrupt estate. Gave a clock that had belonged to Mrs Sanderson as a wedding present. Supposed it had become his. He had lent money on them. His Honor. Then you were a sort of unlicensed pawnbroker.

Witnes : As a fact released the things from the pawnbroker ; was never offered payment for them by Mrs Sanderson, only wished she had. His daughter gave the clock away, a small thing worth about ss. (Mr Kinnerney said it was worth much more than that.) Toll Durand he could have two gnus and a gig; anything he liked to settle. Offered him anything he liked as lie offered to take the children. Told Durand the Dailey case would ruin him, and asked if he and a few others would make a syndicate to take everyand pay everything. Durand was not to pay cash to Miss iluss for the gnns and gig ; they were to go for a balance of £SO ho owed to Daraul. Durand did agree to give Miss Hess £SO as a present for settling up with him. .Diivuid did not owe Miss lloss any tiling. Thought it was a pure kindness on Durand’s part. Believed Durand gave her £45, and she had used it to make arrangements for board. Told Durand not. to tell the Assignee about those transactions ; there was not much in them, a lot of old locktts and things. Might have told Durand not to disclose the gifts to the Assignee. They had some passional e talk about it. Never told Durand lie wished Mrs Sanderson’s locket and other tilings had been destroyed. Did not know that if waa Mrs Sanderson’s,

C. Rutledge’s case. The firm acted as agent for C. Rutledge, Sergeant of Police, Invercargill. One Pills had given mortgage to Rutledge for £IOO, which ho was going to pay olf in October, 1889. Knew of the paying oil". (Letter from Rutledge, instructing the firm to “ invest the £lO9 on first mortgage on freehold security and not otherwise j if not kipdjy forward it to me.”) A reply was sen‘| that they hoped to get a good, investment, and in the meantime they would allow him 8 per cent, Tljo money had never boon in vested and remained jn the firing account, and ha had been paid interest, Riuledge was agreeable to it. Mr IC’imsrncy ; Thera was no letter withdrawing those instructions. Wit,nes.j : There was a letter from Rutledge’s solicitor pointing out that the firm were criminally responsible for neglecting to invest as instructed. Therg was another Rutledge iportgago to Mr Bowman for £4O. This was transferred to him (Ross) in Juno 1891. Bought the property, 20 acres, from Bowmam for a small sum, subject to t]io mortgage, Wrote op the Jrd Juno to IVfr Bullock Ashburton, tolling him ho wished to sell It On the Gth Sims wrote for the firm to Rutledge, asking him to send up the mortgage, as it was to bo paid off. In December 1891, a letter was sent to Rutledge, stating that “Bowman’s amount has not yet been paid to us.” Had ta&en the property ovey sh; mouthy

before. The deeds were not put through. No harm had been done. Rutledge had been paid off and there was the property clear. In February 1892, Sims wrote to Rutledge, “ This matter has not yet been settled with Bowman,” but they sent their own cheque for the amount. Was trustee with the Rev. Mr Brady for a Mrs Taylor. In November 1891 received £SO and £45 on account of that estate. Mrs Taylor left it with Mr Sims, and had been receiving interest on it. She knew it was paid into the firm’s account. E. L. England’s case —Gob £I9OO now in the bank at Cupar, Scotland, in this way, S ene two years ago E. L. England came to him and stated ho had a reversionary interest in a property in London, subject to the life interest of his step-father, aged 60. He asked for advances, and after seeing his letters agreed to make him advances. England also left some silver plate as a collateral security. England owned money to various tradespeople, and he (Ross) agi’eed to pay them off up to £l5O or £2OO. Was to get half the interest. Subsequently England agreed to convey the whole interest to him, if he would give him a freehold farm, square his advances, guarantee him £SO at the bank, and give him back his plate. England got £7OO or £BOO for his interest in what had panned out £I9OO. Had drawn on the proceeds £SOO for Mrs Bower, £SOO for the Bailey trust to clear England’s farm, and £SOO in favor of the Bank of New South Wales. That left about £3OO. Mrs Mary Ross —Had carried on transactions in the name of his mother from 1870. Did not know that all the transactions were recorded. She was advanced in years—66 in 1876. She had never been engaged in business before. Opened an account in her name in February 1887. Had £4OO belonging to her at the time, though it was not shown in the account. She got more from his sisters. There was £2OO cash received in July 1887. Mr Ormsby also had £2OO of hors. Mr Kiunerney : Whore is all the rest of the capital that runs up to a balance of over £2000 '! Witness : It had not been balanced up ; bad gone to the other (lost ledger.) Mr Kinnerney : Why did you want to open another ledger when there is so much space yet to fill up in this one 1 Witness : Could not point out where the other £2OO of his mother’s capital was entered. It might be in some other book. There must have been another book before the one referred to. Did not keep the books himself. Did not keep any full account of his mother’s business; it was rather haphazard. She used to deal in mortgages. Believed his mother's capital was represented by £2OO in his hands, and the £2OO Mr Ormsby had. The account in the book was closed in 1890 with a credit balance of £2441. His Honor : A very good profit in four years out of £4OO. Witness : It was made out of speculations in property. He helped her, no doubt. Closed the account in 1890 because the property*was transferred to him except one property which she refused to transfer. She held cottages in William street which he had given her. Some she sold on mortgages. She had shops at the front of the Arcade. He bought the Arcade property for her, by her request, in 1877, at £2500. The terms were £BOO cash; she gave her £4OO, and a for £4OO was discounted. He had her £4OO hi his banking abcount. Mr LeCreu got £BOO cash by cheque. Mrs Ross gave the bill to Boss, Sims and Co., or to D. M. Ross, and it was discounted. He met the bill when due. Mrs Ross gave a mortgage to Mr LeCren for the balance £I7OO. It was subsequently reduced, gradually worked down to £BOO. He paid the money fi’om proceeds of the sale of the cottages. Did not keep any record of where the money came from ; so it seemed. Certainly he paid it on Mrs Ross’s account. She had no banking account. Mr Kinnerney pointed out that tlxei’e were nxaiiy entries in Mrs Ross’s account down to 1890, but none of payments on this propery. Witnest; The real estate transactions did not seem to be put down there. The Arcade -property was afterwards transferred to him. He wanted to buy the Herald office and urged her to transfer it so that he could borrow £2OOO upon it. She would not unless he released the Dunedin propex’ty fx’om the Bank, saying he was robbing the children. She said he was to give her a mortgage over it to her, so that she could see the children right. Mr LeCren had the first mortgage and she got a second mortgage. She considered he ought to give £IOOO for the moneys he had of hers, and £2OOO for the second mortgage, making £3OOO, equal to the value of the Dunedin property. There was £IOOO owing to her, and the £2OOO was in consideration of the transfer of her interest in the Arcade property. The £2OOO for her interest would be subject to the £2OOO mortgage to be raised upon it. Did not dispute that he owed her £IOOO. Valued the

property at £SOOO, Bought it at £2500 in the same state. She insisted on getting the mortgage for £3Q9O and he gave it to her. Had contemplated building on the Arcade. Did not contemplate using other people’s money for building. Knew that any improvements would belong to the mortgagee. Believed he had plenty of his own. Had spent clients’ money on the buildings, some of Mrs Bower’s, but she had agreed to leave the use of the money to him. (Power of attorney produced and read, showing that Ross was appointed to invest the moneys “ on the sure and undoubted security of freeh dd land.”) His Honour ; The case is perfectly clear. He was appointed attorney to invest on freehold security, and he used the money to pay his own debts. Witness : Could not name any other client whoso money went into the buildings, nor how much of this money had gone into them. Valued the property at £SOOO, the full amount of the two mortgages. There was no “ unearned increment ” in that. Land values had gone down a bit. Mrs Ross transferred her mortgages tq her grand-daughter, Miss Ross, a mqiitlj or two before she died. It was her wish, not his. He had his wife’s property in Dunedin to pledge to the bank, so ho did not want the Arcade property. His wife was also ill, and she wished the children to bo secured, Considered ljiinself quite secure- -seven or eight thousand to'the good, at least. Had no idea of bankruptcy at that time. Originally obtained a (iMusfcr of Hie Dunedin property from Ids wife to enable him to iinaiice on for overdrafts ; it was only to lie a temporary transfer raid not to lie registered ; the property was to bo handed back as soon as the bank was cleared oil. Those arrangements were n ut made to protect himself in ease anything should go wrong with him through using clients’ money; certainly not; had no idea of ft. I', Parke tson put a property in his hands for sale and it was sold to Mr Prosser, Believed Parker.sou agreed to let it go for the debt that was on it, a mortgage to the Building Society. (Letter from Sims to Parkerson, 13th May, 1802, road, explaining that highest price glibr-id was £2OO, and at that price they

had agreed to sell it to Prosser. The duet to the society was £259 155.) Did not remember that Px-osser got £2OO left on mortgage with the society. Could not say exactly what the purclxase price was. It might have been £270, and £lO deducted as commission. Prosser agreed to pay £lO commission. Never read that letter befox-e, and did not know what account was sent to Parkerson. Did not touch the accounts.

His Honour: It seems you did not touch anything but your clients money. The block of Prosser’s receipt for £270 put in. Witness : Knew nothing more about it. Did not know that Pax-kerson was not told about the £lO commission. R might be that the £7O or part of it, was to go to the Society. Did not see that it did go. He ought to have seen to it, but did not. It .vent into the firm’s account. Pai’kei’son was included in the filed list of cx’editors. Had no time to see if the list was correct, before be swore to its truth. Supposed any errors could be corx’ected afterward.

His Honour : Commit perjury first and then find out the tx’uth afterwards. Witness : Did not make out the list himself. E Parkerson £64 15s lOd, was one of the creditors ; that arose out of this transaction. Had not kept a full and proper account of his transactions. He could understand his books ; other people could not without help ; they would be likely to make mistakes. Had kept a cash book (produced). Mr Kiunerney: That is only a rents book.

Witness: The clerk kept it. Could not say whether any Arcade property tx-ansactious were recorded in it. Left the books to the clerks. Had a rough book for the clerks to post up from. Ought to have kept a full account perhaps, but was rather careless .about it. There was one little ledger missing, with accounts since 1880 ; thought it must be iu the office somewhere. Admitted that it would be impossible to make a correct statement from any books he bad kept. Might be able to do it himself with the- aid of the bank book and cheque books. Last saw the missing ledger a few months ago, upstairs among the bankruptcy books he believed. He would be glad to help to look for it.

W. M. Sims was then called to the box and examined by Mr Kinnerney : Was a partner in the firm of Ross, Sims & Co. Had charge of the books the last three oxfour years. Previously they were kept by a clerk, he being busy with insurance and the Building Society The books had not been balanced for five oxsix years ; certainly it was not so long as 12 years. Mr Fraser’s report was not coxTect in that. Was surprised to see that statement iu the report. Did not remember telling the Assignee that the books had not been balanced for 12 years. Had seen that two or three balances of Mr Morrison’s had not been brought forward.

Mr Kiimorncy : Five or six; making £350.

Agreed that whatever Mr Fraser found was correct, £l5O of that was to the credit of another party, Dierck. There were four credit and one debit omitted, the difference being £ 1.70, so far as he was concerned. According to the ledger Mrs Bonner owed over £4OO. She got cheques from time to time, and he thought they were advances. Spoke to Ross several times about sending for a cheque, and Ross said don’t do that—he would speak to her. Ross did not tell him till the bankruptcy that this was his account. Ross never told him the money was Mrs Bonner’s own. Told Ross they must charge her interest as the firm were lying out of the money, and Ross agreed. Knew nothing of how the account originated. Remembered Shears getting £I7OO odd in two cheques. The consideration for that money was a number of securities. (Entries in books referred to). The firm, he thought, got value for the £I7OO in those securities. The cheques were met. Ross handed him a letter of credit for £OOO (believed it was Mrs Bower’s money) and a cheque of Mr Morrison’s for £4OO. Put these into the bank for the pu pose of helping to meet the cheques given to Shears. Ross must have known that the cheques could not have been met without them. The banker sent word that the account would be largely overdrawn if the cheques were cashed. This meant that more than the £IOOO must be paid in. The firm had some other money of Mrs Bower’s, about £250, not £9OO, at that time. The £9OO was reducec} to £250. Bid not know what Morrison gave the £4OO cheque for. Ross gave it him and told him to pay it in, and credit the amount to Morrison, The dates showed that Ross had had the Cueqne for two months ! life had never seen it before the day he paid it in. Ross did not tell him Shears banded him back £I2OO, Knew nothing about that. When the £I7OO was paid the account was square, and ruled off, After that payments were made on Shears’ account till the amount came to over £IOOO, Spoke to Ross about it several times, that as the firm was overdrawn and they were paying interest at the bank, they ought to be getting something from Shears, Ross always said it was all right, but they could do nothing ; but he never mentioned the £I2OO returned to him. Shortly before the bankruptcy, when making up a statement for the private meeting, Ross told him the account should be charged to, him; but he did not mention the £I2OO till after the filing. He did not hear of it until the assignee’s examination. Knew something about Stausoll’s affairs. Certain properties were sold for him. There was a mortgage of £750 to the society. Stansell wanted £IOOO, but the society would not give more than £750. A cheque of Mr Hay’s for £SOO was paid to Stansell on account of Bush, by Ross. Never saw the money back again. It never came back to the firm, he was certain. Had nothing to do with the transaction. Was told it was huua fulr, but had doubts about it. Would not have advanced anything on the second mortgage himself. Raw the transfer from Bushin blank, shortly before the bankruptcy. (Mr Kinueruey showed the transfer filled in and registered for D. M. Ross July last). Attributed the firm’s bankruptcy to bad debts and heavy interest (T to 8 per cent) on other people’s money they hold, about £SOOO. The firm was also paying on Airs Bower’s money hold by Russ. The firm also paid interest on £olso bold by Russ. Besides tins there worn Urn payments on Slmars's and Bonner’s accounts, the two amounting to £ISOO, Always thought tfio business was paying. They drew about £4OO a year each, witness slightly less. Put his salary as manager of the Building Society and all other earnings into the firm’s accounts. The payments to Banner and Shears wore not reckoned in Ross’s drawings, Last year gave a statement to the manager of the bank showing the firm to bo £BO4I to the good. This year filed a statement £3OOO to the bad. Included in the former the apparent debts of Shears and Bonner, whatever they were at the time. Did not make opt the former statement; a clerk did it, and ho did not verify it; had not time. The average bank overdraft had been £l2O0 2

' .Mid thev mid 8 per cent, upon that Oould not say how often the account had been in credit during the last six years ; not very often. . . His Honor : A town firm doing business on overdraft must be in a bad way. . , Witness: Mr Morrison always consulted Mr Ross about his dealings. Prepared the half-yearly statements for Morrison, and Ross always saw them. A rough statement was made out first, and Ross and Morrison would consult over it in Ross’s private room. Had some slight recollection of £IBO got Morrison to lend to Briscoe. Believed Ross got that money. Gave a receipt for £250 to Morrison for money to be lent on a mortgage on property in Thcodocia street. The mortgage was countermanded. Morrison saw the property and disapproved of it, and the money was paid into the firm’s account. One of them either Ross or Moi’rison —told him that the security was not good enough, and he preferred the firm’s guarantee. If Moirisou said he believed all along his money had been invested on that property he would not contradict him; he would conclude that it was Ross who told him that. Saw a cheque of Morrison’s for £l7O for Dieck. That went into the firm’s account without security to Morrison. In the account given to Morrison in December Dierk’s name was mentioned, but he already owed Morrison £l5O apart from the cheque referred to. Did not tell Morrison the cheque was not invested. Did not know the history of W. Glue’s business. It was done through Ross’s room. Mr Kiunerney : Mr Ross told us you knew most about some of these things, this one among them. Witness : Mr Ross fixed up this thing. Knew that there was this business in hand ; knew that there was £6O of Morrison’s money in it somewhere, and put it in the statement. (There was a good deal of confusion over this business the security being a sort of shuttlecock between Glue, Graudi, Mrs McCoomb, and the last under another name.) Morrison’s £6O paid oft Grandi, Graudi signed a transfer in blank, Mrs McCoomb was the buyer from Grandi, and she was to repay the £6O by instalments, and had paid £ls. Did not include principal moneys repaid in the statements, because he had been instructed not to do so, by either Ross or Morrison —nor principal received in small instalments. His Honour said the account was a gross fraud on the face of it, as the statement showed that interest had been paid on the whole £6O when £ls had been paid off. Witness : it was always done in Morrison’s case. Morrison too had told him not to include such principal repayments ; he held the firm responsible for the interest. The Puttick entry came under the same explanation. His Honour ; You were instructed by Morrison to put fraudulent entries in his statement '!

Witness : Several other loans were similarly treated for the same reason. Morrison did not want to draw the principal, so the statomonts were to show only interest, Remembered a loan of £l5O by the Building Society to Mrs Stone, guaranteed by Ross’s cheque. It snould have been Ross’s cheque but the firm’s was given instead. A mortgage was prepared but was not registered. Understood it was not to be ; could not remember now from whom he understood that. The mortgages on the hotel were paid off except this £l5O, and this liability was transferred to the debt of Ross, Sims, and Co. in the Building Society’s books. The firm debited Mrs Stone with that amount, but did not pay it to the society as it should have done. Got a cheque for £2OO from the society that had not been parsed by the board. The chairman, Mr Jackson, came in one morning, and he said to him : “ Ross, Sims & Co. could do with £2OO, and the Building Society has money lying idle.” Mr Jackson said: “ I suppose you are all right,” and signed a cheqve. Mr Lecrer., “the first director I (guild find,” also signed it, and it was paid to the firm’s accdun t, If there had been any other transactions like this they had been subsequently confirmed. This had not been confirmed. It was not brought before the board at all. Remembered money being collected for Mr Bush that ought to have been paid to the Building Society but were paid into the firm’s account and remained there, The trustees of the Oddfellows, Messrs Cullmann and Beggoft, paid in £l5O to take OYiff a mortgage held by the SOOWty. q rm was fo held the agreement a** to rate of interest was signed; *IVj agreement was not signed, and the money remained in the firm’s hands, and went into current account. Ross, not he, arranged the Parkerson-Prosser purchase, he (Sims) only doing the last thing in receiving the money and giving a receipt. His Honor : And Ross says he knew nothing about it, because you did it. Witness : The payment was £7O, £lO of which was for commission.

Mr White said that the receipt showed that £lO of the £7O was for commission.

His Honor spoke very strongly about the Erin’s client not being told the exact truth.

The Briscoe affair was briefly inquired mto, and then the Thompson case. Witness said J. Thompson came to take his money (£200) out of the society. He wanted to leave it so that neither he nor his wife could get it. Gave him the firm’s receipt, and he went away to consider in whose name it should be, his wife’s or his own, In two or three days he came back and said ho had decided to leave it with the society, and so he gave him the society’s receipt for it. Could not pay the money as he could not draw it. Told Ross about it ; pressrd him several times, but he would do nothing, and the money remained in the firm’s account. There were other cases of a similar kind. Had frequently asked Ross tq put these things right, and was put oil with evasive answers. Had done everything possible himself to get them righted. At the last his friends had come forward and secured the Building Society against any loss. This clo«ed Mr Kinnernery’s examination of the bankrupt, and Mr White said he would put no questions to his client at this stage. Mr Kinnovncy asked His Honour to Ex a date fertile adjournment, and Tuesday, 30th instant was fixed upon. Mr Hay asked that if c -urges were fo; mulcted they should bo notified to llio linnkrnpts, and liis Honour dirocled lli.-u charges to be brought against D. M. Boss he handed to Mr Hay, and any charges against W. M, Minis to Mr 'White, by Tuesday 23rd.

Mv Kinnornoy intimated that charges would certainly be made against Ross ; ho \v;is not prepared tesay that charges would not be formulated against Sims.

Mr White applied for an order for payment of costs of Deputy- Assignee’s solicitor in obtaining a judgment for the Assignee and creditors in Ryrne Day ley’s estate. —Granted,