THE HONG KONG DAILY PRESS, WEDNESDAY, JANUARY
MR. BREWER'S BOOK-KEEPING.
MORE INTERESTING EVIDENCE.
PRODUCTION OF BALANCE-SHEET CAUSES JUDICIAL REBUKË.
The proceedings against, Mr. Noel Instone Brower at the Supreme Court, before Mr. Justice J. R. Wood, were continued yesterday.
Mr. Brewers giving evidence in his own defence, denied that the Instone Trading Company existed only in name. He claimed that, in connection with the Instone Hank, many applicants for shares actually brought their money with them to pay for the shares in full, but that, being an inexperienced man in banking, he did not want to handle such very large sums, so he only accepted 10 per cent. He considered the balance as good as cash.
A report of yesterday's proceedings is given below.
When the hearing resumed yester. day Mr. S. H. Ross, chartered ac 'countant, was recalled.
Dealing with the company's certi- frate, his Lordship pointed out is stated that the total number of shares allotted was 10,080, all of "which were allocated in considera tion of cash, of which 810 per share "had been paid and a certain sum had been paid in advance of calls, The total amount of cash received by the company in respect of shares issued wholly for cnsh. wäs 8878,750.
The Cash Question Again." His Lordship: Well, now, with your knowledge of the Accounts, if you had been drawing up this certi ficate, how would you have stated Sit 1-1 should not have accepted 2701,10), which is the amount of the cross-entries, as cash.
Could you face the problem as to how you would have worded this certificate —No, I don't think I could,
You see, the Directors were in this position. They had to explain the state of their books in this certi- „ficate to
allotted was 10,080, and the suur of $10 had been paid in respect of each share with security as to the bulance.
Mr. Ross agreed,
His Lordship: Now, why did you tot suggest that?-1 did not think cf it.
The Foreman of the Jury (Mr. Stopani Thomson) intimated that he did not quite understand the ron. nection between the Instone Bank- ing Corporation and the Instone Trading Compar, mentioned in the course" of the evidence.
Promises as Assets. People who took these loans, Mr. Brewer pointed out, were people of mature age, and in their ability to pay these loans he had the fullest belief. He instanced the case of one of the directors, who was a man considerable means and who owned a good deal of property in Hong Kong. Since the liquidation action had been started against him and his property, and there was no question that he was in a posi tion to pay his full 100 per cent, so that a promise by him to pay in full was a valuable asset, nd could be estimated to be worth its full face value.
His Lordship explained the trans- fer of shares and added that so far they had no information as to what
Mr. Brewer pointed out that ali the Company was.
Recalled, the Officer Receiver | applications were invariably treated aniit he had never seen an_appli- | äs valuable documents and were cation for the sharca. Mrs. Brewer kept in a safe-deposit vault, nad no was trustee for certain persons in one individual could get access to Peping who were expected to apply or shares. Mrs. Brewer's shares were sold under agreement to the Instone Trading Company,
His, Lordship: The result, was this-that the Enstone Ranking Corporation became shareholders in the Instone. Trading Company and the Instone Trading Company be- came shareholders in the Instone the Registrar of Com-Banking Corporation —Yes. panies. That was their problem. Well now, with that problem in front of them, what are they going to state-I really cannot answer. It is beyond me.
His Lordship: I sympathise with Four diffealty,
Mr. Ross: The only paint is that they had not received the cash.
Replying to his Lordship as to what other word besides ensh could have been used, Mr. Hoss said if there was a debt due by the Com-
pany.
There was a debt due on the date of the certificate buse they held promissory notes?-Yes, but that time they entered this as enah.
the
Worthless Shares.
Have you discovered anything about the shares in the Inatone What is their Trading Company? value --Nil.
The Official Receiver added that it was a private limited company with two original shareholders.
M. BREWER'S EVIDENCE,
were
them, as there were kept in a box which required two keys.
Mrs. Brewer's Shares,
Mr. Brewer, speaking of the shares liken up by Mrs. Brewer,
said that he had full trust in the directors. They requested her to take $450,000. worth of shares, and she did so as trustee for the com- pany, with no personal benefit to herself.
Their naine W03 a family word, Although they were there only a few months.
Even in Hong Kong, said Mr. Brewer, they were to some extent known, and their importance in Shekki to some extent realised. Before the Shekki branch had closed down, the Inatone Trading Company had been asked by Messrs. Lane, Crawford, through Mr. Jordain, to take up the, agency of the Dodge car there, so that even in Horg. Kong the Company was not un known, and to say that the shares. in the Inatone Trading Company were valueless was to be wise after the event, hecause no one could have said so at the time these events took place.
Mr. Brewer Cross-Examined. Mr. Fitzroy (erosa-examining): Do you suggest that these people came with their money and you re- fused to accept it I said appli estions came for .8%,800,000, and had I not taken steps to stop it, I would have receivad the money. I know definitely that there were several cases where people came with full payments.
You say you refused the cash ther brought unless they took it back as a loan-Absolutely, yes,
22, 1930.
SHARP FIGHTING IN HAINAN.
CANTON GUNBOATS
REPULSED.
THIRD ATTACK ROUTS
THE REBELS.
[FROM OUR OWN CORRESPONDENT.]
CANTON, Jan. 21. Severe fighting is reported to be going on in Hainan Island between landing parties from Admiral Chen Chak'e fotika and the insurgents. The latter are under the leadership of Lu Man and Wu Tao Nao, two ex-officers of the Kwangtang forces. They proclaim loyalty to the Rides and the Kwangei clique and are a part of the anti-Chiang Kai Shek "element controlled by the Kuomintang Extremists. They drove the Government troops from the
Iron-
and some two months ago, taking advantage of the weakness of the Mr Fitzroy then drew witness's marrison, most of the troops having attention to the wording of the ap- been recalled, to take part in the plication form, which read:- I
war against the Ironside ". After captur hereby make application for 8-Kwangst coalition, which sym I propose to use in pay. ing Hainan Island, they crossed to ment of the balance of ——— shares,” southern Kwangtung and joined ete. He asked: Why do roll sax with the Kwangsi troope, establish these people were thrusting money ing their beadquarters in Hoihow. into your hands and you were turn- From there they planned a drive
Is the document ing it away?
or Canton, but abandoned it owing to lack of arms and supplies. They wrongly worded?
remained in Hainan and southern Kwangtung and terrorised the in-
Mr. Brewer: I say it is rightly worded and you are misinterpreting it. I say that these "people" came with the intention to pay the money in full. I said I would only accept money if they would accept a loan. The Torm shows clearly the con- sideration for a loan.
In a series of other questions, Mr. Fitzroy asked why, if a man paid for his shares in fall, were the shares mentioned again in any sub- sequent loan! Mr. Brewer replied that he desired the bank to have a lien on the shares to secure the Ioan. and further that, there should be
on.
In answer to Mr. Justice Wend, witness said these shares were not placed under Unissued Capital because he wanted to be in a posi-misinterpretation of the transac- tion to tell prospective shareholders I that he had "reserved" so many shares for them.. Witness added that Mrs. Brewer accepted the trusteeship of these shares with no pore guarantee than a letter of indemnity,
pany, and a debt due to the Com- 3., Brewer then proceeded with Instone. Trading Company. pany in respect of shares. if they | his own, ease, first reading from Set it off. then they would be en-
Regarding the transfer of Mrs. the report of his public examination titled to call it cash.
to the Instone the passages dealing with the for- Brewer's snares That is what they did here --Butation of the Instone Trading Com Trading Company, witness explain- there was no debt due by the Company and the transfer of shares. ed it had been argued that an im- He then gave evidence, and export and export business in Hong lained the capital flotation of the Kong would be a valuable asset to stone Binking Company. He said the tank if worked in conjunction that applications received with their branches. In Canton totalling 2,800,000. He was ines and Shekki, backed by the branches of the Instone Bank, such' n-com- Mr. Brewer's Questions.
perienced in banking and had been Mr. Brewer then referred to the placed in charge of the bank solely any would, be invaluable. It was for the purpose of organisation. It true that the instone Trading Con- explanations given during
was the directors' intention w ap-
pany had never operated, but it course of the public examination
Had several agencies in hand, M.. as to why the items were enterpoint a fally qualified manager.
Brewer naming a brand of cognac and a cheap line of buyeles, Shekki branch of the bank, was
were the only currency, and for a
established, they thought of form- frug in the pond." Once that was
and in April, 1928, the Trading Company was incorporated in Hong Kong, Jr. Brewer adding that the Sheki bank opened on March 29. The connection; Mr. Brewer claim ed, was direct.
The
When the manager did not appear ed in the books and asked and applications for shares totalling Assuming that to be the legitig9,400,000 were received, he was not mate desire of the Directors of the firm. is there anything prepared to take the responsibility very successful: their banknotes
Mr. Fitzroy: Is it not because you have got no money to make these loans 7
Mr. Brewer? It would have been easy to say so and tell the truth.
Mortgage on a House. Speaking of a house which the Bank bought, the parrchase-price of which was $240.000, Mr. Brewer stated that 800,000 of this was paid. the balance being taken out on mortgage.
Mr. Fitzroy: You say you had ali this money why did you take this mortgage at & per cent. We only paid 7 per cent, and therefore made a small profit.
Asked if it was a fact that one of the directors acted as a broker and bought the house for 8205,000 and resold it to the bank for $240,000, Mr. Brewer said that he did not believe that. No one made a cent but of the firm.
in the books to contradict the fact of nccepting all that cash. I had few months they were the big Fitzroy, was it not a fact that the
no doubt as to the genuineness of the applications but he had a very responsibility of over two millions.
24 Per Cent, Interest. In October, 1928, anked Mr.
firm wanted money and had to pay 24 per rent on a loan of $20,000! so, but the high interest was be- cause he wanted the money im- mediately. Since the trouble in the.
these loans the Company had only real fear of being anddled with the ing an import and export compaby, Mr. Brewer replied that that was
of their being so kept I think the fact that at the time they made received about 827,000 on account of capital. I think it rather upseta the argument here. You had to pay 390,000 for your building and you had only received $27,000 on ac rount of capital at the time you made these loans.
Mr. Brewer repeated his question and his Lordship esked:-Is there anything to contradict it?
M. Ross: No.
Mr. Brewer: Assuming it is the desire of the hook-keeper to obey orders and follow this plau, can you suggest any other way he could have done it than by putting it in the cash account as he has done - No.
Restricting Receipts. Accordingly it was agreed between Mr. Brewer and the directors. to accept 10 per cent, of the
money that was coming in, in order to Mr. prevent too much coming in. Brewer mentioned that later on there would be an experinced bank manager coming in, but at the time he did not want the money in his hands, and did not want the bank to lose interest.
Assuming that these items have been put in the cash account be cause, as you say, you can suggest no other way, would it be justifi- able in your opinion for the person making out the Statutory Report to deny that money having come in as cash and named a Jessër sum as time. having been received-Yes.
Retaining the Bank's Control.. "Now," said Mr. Brewer, "' when
the
Foreman of the Jury: There was
Forceful Personality.
Shekki branch it would have been impossible to get the shareholders' ironer except through the law- courts. which was a slow process.
The foreman of the jury asked we had formed the Instone Trading he the manager, to which Mr. Company we had no wish that the Brewer referred, was not appointed. benefit of all our efforts in opening
Mr. Brewer replied that they had a man who was manager of several our branch and bank should be en banks in Canton in view, but that tirely reaped by outside share-man turned down the job. He was By a scheme whereby, shareholders, who would simply come in holders re-borrowed 80 per cent, of and purchase. So before putting a large shareholder. Another man was to have been approached after what they paid in and signed a Instone Trading Company's the nudit, but the Shekki trouble promissory note for the balance, shares on the market we arranged shareholders were obligated to pay for an exchange of shares between started shortly afterwards, the balance due on the shares in the bank and the Trading Company, never any intention of advertising stead of by regular calls, which which would enable us to maintain would have want a good deal control of the Instone Trading Co the position in the market -No. of preliminaries. This arrangement pany. They therefore transferred enabled the bank to demand the the shares hell by Mrs. Brewer to whole or part of the moner at any the Instone Trading Company, thus getting rid of this onerous trust. But had Mrs. Brewer never held A True Statement. In the event of the Company's "I put the figures 8870,750 in shares in the Inatone Bank, it would Statutory Report having named cash the certificate it the conscientious still have been considered desirable received at the figure you state belief that that is the true and core"
to effect this exchange of shares, (about $60,000) how could the Com- pany have explained its claim rect figure of the cash that we have solely for the purpose of keeping in against individuals to whom it purtion that these payments altered in life.
received, because there is no ques- control a company which we started Mr. Brewer, continuing his evi- ported to have lent 8703,000-You the relationship of the parties one are asking me to assume n fictitious to another. It transferred a non-dence in the afternoon, pointed out entry in the books.
obligatory debt into an obligatory that the shares of the Trading Com debt.. Had I put in any other figure pany were of real value to the in this statutory report than that Bank, as evidenced by the fact that which I did, it would have been in. up to the time of the trouble ined to be in a position to lay hands Shekki there was a book kept correct."
on the money when the manager for application for shares there, arrived. and this amount exceeded 800,000. Foreman of the Jury: If you It would have been much higher wanted money when the new man- had he not insisted on publishing in ager came in, why did you not the papers in Shekki that any ap make a bigger initial call than five plication in excess of 2,000 (shares 1)
per cent Because that would have would not be granted. The import
been more than I could handle." ance of the Instone Trading Com- pany could hardly be exaggerated. It was difficult to realise at present the extent of the interest which then existed between the Bank and
Judge and Witness's Acswers, His Lordship: It isn't a fictitious entry in the sense that nothing happened when the Directors pur ported to have made loans. How Mr. Brewer pointed out that had could they otherwise show it? The this item been other than cash, the whole transaction appears to me to Company would never have main- be fictitious and I cannot my.
tained in action for this loan I cannot help against anyone, because they could His Lordship: feeling that you, as a chartered have said:" You could not have accountant, should be able to make lent it to me, and if you have not some answer. There must be some done so, I cannot pay it on de- true way of stating these facts.and.'
Mr. Ross If the Company makes loans and has not the cash to make loans it seems to me it is not cash, and the entries are fictitious.
His Lordship: Well, that is a matter the jury: have to settle. What is the true way of stating in this certificate the position of the bank as disclosed in the books Assuming that the transactions were
Statutory Report would be correct.
His Lordship suggested it might read that the total number of shares
Defendant went on to say that the whole of the Company's books, from the day of its inception, had treated this item as cash. As a the Trading Company. matter of fnet, payment was made
A Popular Concern, from time to time on this loan. Mr.
The Instone Bank's notes Brewer pointed out that the in- terest paid on this loan did riot tally smaller denomination could not be with the interest paid on uncalled issued fast enough in Shekki, nearly capital; for although it was 8 per 20,000 being taken up every week. doipe Thamarshente hakkies
of
off his indebtness to the bank, but united in their support of the Trad still enjoy interest on uncalleding Company, which was the only foreign company there of any size. capital paid in advance.
The Foreman observed that 'the
habitants. The Canton Govern- ment has long heen wanting to send an expedition to retake the Island, but the military situation made the undertaking impossible until recently.
ELABORATE DEFENCES.
Admiral Chen Chak's flotilla, ne- compacted by two bombing 'planes. forced its way into the harbours of Po Tsing and Tsing Lan." These two ports are well fortified, and after four hours' heavy bombard. ment the Government forces were
retire. forced to
The defence works of the enemy were very Saborate. Trenches" had heen dug and several big feld pieces and a number of machine guns mounted. The Canton gunboats repeated the attack next day hat the enemy still held out, Admiral Cher Chak then ordered a landing at Lin Kao and an attack upon the enemy's rear. This was done with success. marines landed under cover of the warship guns and the insurgents fled towards Kiungehow, the capi tal of the leland. In a telegraphie' report to Military Headquarters, Canton, Admiral 'Chen Chak states that a drive on to Kiungchow was launched on Monday and the city is expected to fall either to-day or Lo-morrow. The dispatch adds that a large quantity of arms and am | minition was captured from the the insurgents and 100 prisoners were taken. ·
The
WEST RIVER TRAFFIC.
ABOVE TENGUSIEN SUSPENDED.
(Wah Tez Yat l'ao).
CANTON, Jan. 1. General Chen Tsai Tong has issued a notification that river traffe above Tenghsien is to be aepended from to day. The Con- suls at Shameen have been notified to this effect.
It appears that the Kwangsi- "Ironsid?" coalition are attempt it to move southward from Liu- chow to attack Sunchow with Wuchow'ne their objective.
in fact was typed, and circulated privately, and, in fact, was typed five at a time.
Judge Bebukes Defendant. Mr. Justice Wood then asked that
Was no statement made to the How did you induce people to public at any time Not until July sign this application form, which 13, 1999, when the balance-sheet was did not benefit them in any way 1-- | printed. By sheer force of personality. form appeared to be of a legal nature, and there would be no ad- the balance-sheet be produced to vantage to anybody signing it. If him and to the members of the jury. people were ao anxious to put their Before his Lordship had asked any
Brewer go to the length of tying money in the firm, why should Mr. question on it, Mr. Brewer objected to the production of this document them up in a legal document? The and, further, to answering questions whole thing could have been done ou it.. by an ordinary business letter.
Mr. Brewer replied that he want-
2
Public Confidence,
In answer to Mr. Justice Wood, witness said that his business was trustee business, like looking after wills, estates, collecting divid ends and rents, and acting as attorney for other people.
Mr. Justice Wood: So that your business depended on public confid- ence-Yee. But I say we had the public's confidence.
For Austraasa warranted an the papere a large and extensive share capital -No. The statement (Continued on next Column.)
Mr. Justice/Wood: Keep quiet. Mr. Brewer: I must protest that this would prejudice
Keep quiet! Wait until you bear the question. It will prejudice, my case and I cannot
His Lordship: Will yon keep quiet?
Mr. Brewer protested no further. He was asked if he noticed that the subscribed capital was 82,613,201. He replied that he knew nothing about that balance-sheet.
Mr. Justice Wood: I accept that, but it purports to be fully-paid shares I don't think so.
That is what it seem to me, and I suggest to you that it is import- ant to the bank to have its capital described in millions -On the con- trary, I consider that that did us great deal of harm, and it was done against my personal wish, xa Isbell explain to you in stare of the proceedings..
The hearing was adjourned until 10.30 a.m. to-day.
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