BANKRUPTCY ACT BROKEN

Wanganui Chronicle, Volume 83, Issue 38, 15 February 1939, Page 12

BANKRUPTCY ACT BROKEN

MARTON MAN GUILTY FAILURE TO KEEP PROPER BOOKS OF ACCOUNTS ACQUITTED OF UNLAWFULLY INCURRING DEBTS A breach of the Bankruptcy Act was proved against Robert Wakefield Harris, aged 54, land agent and farmer, of Marton, when a jury in the Supreme Court at Wanganui yes terday found him guilty el failing to keep proper books of accounts. The verdict was accompanied by a recommendation to mercy and the jury acquitted the accused of a second charge alleged against him, that of incurring debts when insolvent. Harris was remanded for sentence after bis counsel had made a plea on his behalf for probation. His Honour, Mr. Justice Reed presided. Mr. N. R. Bain, Crown prosecutor at Wanganui, appeared for the Crown. Mr. J. M. Gordon, Palmerston North, represented the accused. The jury empanelled was: Messrs. Roy B. Dobbs, foreman), John Armstrong, Charles G. Davis, Frederick Davis, Percival G. Hamilton, Aubrey A. Candish, Pete Carmichael, John Halligan, Herbert W. Hawke, Robert Garner. Spencer Wooding and Charles Howard. Public Examination. Arthur Evan Dobbie, Registrar of the Supreme Court at Wanganui, said the accused was adjudged bankrupt on a creditor's petition on August 3, 1938. He was publicly examined by witness on October 27, 1938. Witness had been delegated by a judge of the Court to conduct such examination. Two books of account were produced by witness and also notes of evidence taken at the examination. These notes showed that accused had been a land agent carrying on business at Marton. His statement showed an estimated deficiency of £7152 10s 4d. Bankrupt had stated that he thought his daughter had started keeping the books in 1933.

Bryan Martel Silk. Deputy Official Assignee at Wanganui, said that at the first meeting of creditors a resolution was passed that bankrupt be publicly examined. At that examination his statements were put in and his books of account. Witness said he had investigated the books and he had not been able to find any records in those books of monies borrowed by bankrupt from his wife or other monies referred to since March 31, 1932. Statements of receipts submitted to the public examination by bankrupt were produced by witness. The first covered a period of from February 24, 1938 to July 9. 1938. This showed income from commission £49 14s lOd. rent £6l and sale of mo'tor-car £6O. The second statement covered a period of from April 1, 1937 to February 24, 1938. In this the income from commission was shown as £377 Ils 7d, and loan from O. L. Harris £2O. Payments into amounted to £3BO. The third statement dealt with a period from April 1, 1936. to March 37, 1937. Commission during that time, amounting to £253 Is 3d had been received. Grazing fees totalled £231, rent £154 and the sale of a second mortgage £3O. The outgoings totalled £690. Between April 1935 and March 1936. witness said that accused had received £498 9s 6d in commission. £lO9 5s from rent and £75 from a loan. The outgoings during that period were £706. None of the items mentioned in the firm statements referred to had been entered in the books. State of the Books. Witness . had been through the books. They had been correctly kept until March 31, 1932. Since then there were no entries except for certain trust monies received by Mr. Harris. The ledger had not been posted since 1932. Mr. Bain: How did you find the books in respect to disclosing the bankrupt’s position—They would disclose nothing at all. “From the cheque butts and bank pass book it would be possible to prepare a statement of his receipts and payments during the period, but it would not be possible to show what his assets and liabilities were,” said

witness. Accused had admitted that in 1935 his unsecured creditors amounted to £6600.

Witness detailed debts incurred by bankrupt in the three years prior to his bankruptcy: Bishop, £2 9s; A. G. Harris, £2O; G. T. Lound, £25 13s 3d; McKenzie, £29 9s; T. S. C. Prince (grocer), £l5 18s 4d; T. J. McElwain, £3B 9s 2d; Lloyd’s Ltd. (drapers), £62 7s lid (not more than £3 10s of this was incurred in the three year period, according to bankrupt’s statement). “All these debts are still owing by bankrupt,” said witness. “At the time of incurring these debts bankrupt had a number of unsatisfied judgments against him.” witness said: D.I.C. £27 7s 6d (October 1935); W. G Winchcombe, £2O 14s 9d (February, 1934); W. B. Lanscombe, £l6 5s 2d (October 1935); Estate S. B. Abey, £8 4s 7d (January, 1936).

Mr. Bain: Are you able to say whether all those judgment debts are still outstanding?—Yes, they are.

At the time the bankrupt incurred those debts he was insolvent. Is that what you say?—Yes. Witness detailed other debts which were referred to by bankrupt on his original statement to his creditors. These had not been referred to at the public examination.

Mr. Gordon objected to them being accepted as evidence, as there was no admission of the dates on which they had been contracted. Bankrupt admitted the liability but not the dates on which the debts were incurred. Mr. Bain: Were you able to find any records of farming transactions in those books?—No. His Honour: Are these books such as are kept by a land agent or a farmer?—They are, up to March 31. 1932, but not after that. Trust Funds. Mr. Gordon: So far as you know his trust funds have been properly received and disbursed?—You have no knowledge to the contrary ?—No. To Mr. Gordon witness said that books were only records They could be kept in loose-leaf form. Witness had been able to give an accurate statement of bankrupt’s liabilities as far as it was possible to do from the books and records. Witness, under

further cross-examination, detailed mortgage held by bankrupt which had been wiped off because of mortgagors obtaining relief under existing legislation. Harris had applied for relief as a farmer mortgagor in respect of a Turakina property, but it had been held that he was not a farmer mortgagor, but a land agent. Mr. Gordon: Even though the bulk of his income at that time was from farming operations?—l believe so. Had he been held to be a farmer mortgagor and was granted relief he would have been able to pay many of these debts?—Yes. Mr. Gordon questioned witness as to bank pay-in books which bankrupt’s daughter had handed in. Mr. Gordon: Where are those books. Mr. Silk?—They are a.t my office. Mr. Gordon: So there are other books besides these in Court? —Yes. but merely bank pay-en books used when paying the money in to the bank. Yes. but they have a person’s name, amounts and a date? —Yes. Mr. Gordon: I suggest to you that bankrupt’s books are better kept than the average farmer’s or land agent's books?—Up to that date, March 31. 1932. And since that date his records are above the average land agent's or farmer's records? —No, I would not say that. Would you say they are above the average?—No, below the average. But not very much below it?—That is rather a difficult question to answer. Mr. Bain: Is it correct that these books do not disclose the bankrupt's earning since 1932? —Yes. They do not disclose them at all. His Honour: Is it correct to say that the cash book hasn’t been written up at all? —Yes. Effect of the Slump. In his address to the jury Mr. Gordon said that the bankruptcy had been brought about by circumstances over which the accused had no control. He was a victim of the slump and legislation which had been enacted because of that slump. In 1937, according to his own estimates, he certainly had assets amounting to £7OOO or £BOOO. “But, unfortunately, he was a soldier and a sailor, too,” said counsel. "He was both a farmer and a land agent and had not been able to get the relief available to a farmer."

Counsel said that prior to 1932 the keeping of the books was costing bankrupt £5 io £6 a week and be had tried to save that. The mortgages, about which so much fuss was being made because they were not entered up year after year, were not bringing in anything at that time, but bankrupt said in his statement that at anytime, given reasonable time, he could give a statement of his position. The main point was that: a mortgage of £2700 was not entered in a book. “Why should it be entered in a book?" counsel asked, pointing out that the D.O.A. himself had admitted that the solicitors did have some record of those mortgages. Regarding the charge alleging the incurring of debts while having no reasonable prospect of paying them, counsel said that if it had not been for the legislation accused would have had every prospect of paying those debts. Counsel said that all the books handed in by bankrupt had not been produced. His Honour: Merely pay-in slips. They are not here and they don't matter very much. Books Must Be Kept His Honour said that no doubt everybody would sympathise with a man who had been hurt by 7 a slump and had to go bankrupt. But that had nothing io do with the position in this case. The Bankruptcy Act compelled people to keep books for the protection of traders. It: does not matter if the books are kept by an accountant and that accountantfails to do his duty—l he proprietor would still be responsible. Fault might be accidental. His Honour said, quoting from a decision of the Court of Appeal of New Zealand, but a statutory obligation was imposed on people who traded to keep proper books of account. It was an offence not to do so. His Honour directed the jury's attention to the evidence of the D.0.A., showing that several items received, and detailed in four statements covering separate periods, haci not been ntered in the books. Properbooks of account were such as could enable the financial position of a person to be determined and were not such as would require the services of a skilled accountant to determine that position. With regard Io the second count. His Honour said that if a person who was insolvent incurred a debt, no matter how small it was, he committed an offence. The jury was absent Iwo hours and ten minutes, including an hour for lunch, and returned with a verdict of guilty on the first count, that of failing to keep proper books of account and not guilty on Ihe second count, that of contracting debts when insolvent. Probation Asked For

“The prisoner is a married man, 54 years of age, and has had a fifth standard education," said Mr. Gordon, making a plea for probation. “He has a wife and three daughters, the youngest of whom is 19 years of age. It would appear that no one has suffered as a result of his failure to keep books in a proper way. I have had the privilege of reading the Marton probation officer's report and I would suggest that a good deal of it has been based on hearsay. The public examination of the bankrupt and his wife and the bankrupt’s meeting of creditors has engendered a good deal of talk, and, no doubt, the probation officer's report has been based on hearsay arising therefrom. A conviction to a man in Mr. Harris’ position is, in itself, a severe punishment. His wife is now running the land agency business and will employ the prisoner. To my knowledge she is keeping proper books of account and it is a great pity that she did not enter the business sooner and see that he took more interest in the internal part of it. He is a good salesman, but has not had the education to enable him to keep proper books of account. As a result of this it is probable that he will not be able to

obtain a land agent’s licence again. He is not a gambler and is not subject to the imbibing of intoxicating liquors.” His Honour quoted a passage from the probation officer’s report alleging that the bankrupt and his family had been living beyond their means. “I don’t think that can be attributed to the accused,” Mr. Gordon replied. "His wife has an income of her own. What did tend to stir up a lot of criticism was that she bought a new car. She bought that out of her own money, which she had a perfect right to do. The fact of a new car coming into the business at that stage and the talk about this bankruptcy no doubt caused the probation officer's report to be based on hearsay.” “I think the jury was lenient with him in not finding him guilty on the second count, you know," His Honour observed. “There was a large number of tradesmen’s bills incurred when he knew he was insolvent.” "But the jury did dispose of that,” Mr. Gordon replied, adding that, of his own knowledge, he knew that accused had been a good salesman, showing remarkable aptitude. No doubt he thought the tide would turn. Counsel was sure that if probation was granted him there would never be a repetition of what had happened. “The difficulty I have is not that it may not happen again so far as he is concerned, but that proper bocks of account must be kept by traders and whether or not it is a case where I should inflict some penalty as a warning to other traders that they must keep proper books,” His Honour said. “The keeping of proper books is the basis of the whole of the bankruptcy law. I think I would like to consider it until to-morrow morning." *