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THE HONG KONG DAILY PRESS, THURSDAY, JANUARY 23, 1930.
ANOTHER VIEW OF WHAT
CONSTITUTES “CASH.”
MR. BREWER CALLS QUALIFIED ACCOUNTANT AS
WITNESS FOR DEFENCE.
LOANS PREFERRED RATHER THAN UNCALLED CAPITAL.
The trial of Mr. Noel Instone. Brewer in connection with a statutory report filed in 1927," relating to the affairs of the Instone Banking Corporation, was continued before Mr. Justice J. R. Wood yesterday,
Mr. Brewer only called one witness for the defence, a chartered accountant who has recent ly commenced practice in Hong Kong. This witness stated that the books of the Bank, from He had been able to follow what he had seen, were kept in an easily understandable form. certain transactions which be had tested without any explanation. This witness stated that, assuming the Company's intention had been to convert uncilled capital into loans payable ac- count, the transactions in, the books were properly dealt with. He also said he would consider the transfer from uncalled capital to loan account, to be theoretically a cash transaction.
1
REPORT OF YESTERDAY'S PROCEEDINGS.
When the tearing was resumed yesterday, Mr. Fitzroy recalled Mr. Brewer and proceeded to question him with regard to applications and allotment of shares to Mrs. Brewer. Mr. Fitzroy suggested that witness did not receive in cash. the $68,000 alleged to be paid to him in con- sideration of a bond-selling right. He also suggested that the subse quent refund of $55,000, was not in
cash.
Mr. Brewer replied that he had a compradore's order on the bank which be duly endorsed and passed on to Mrs. Brewer.
Compradore's Order and Dash. Mr. Fitzroy suggested that the compradore order was never eashed, and Mrs. Brewer could not there fare have paid the 10 per cont. deposit on her shares in cash.
Mr. Brewer replied that the com- pradore order was as good as cash, and that bad he desired he could have cashed it,
In answer to another question, Mr. Brewer said the compradore paid $45,000 in cash into the bank, and could have cashed the order if it had been necessary to do so.
Asked if he was drawing on the compradore's security, Mr. Brewer said he could do so with the com- radore's consent. His cousent was not obtained, but if he had cashed the order it would have been im plied that he consented since the money was in his own hands, and he could have refused to cash the order.
Mr. Fitzrcy: You told us that Ipeople who took up these shares were ready and willing to pay their money. Can you say whether Mrs. Brewer
was able to pay this $132,0001-Most decidedly. If the firm required her to pay the money she would have at once proceeded to collect it from the people who indemnified her.
She may have had to suc, but can you say that at any moment Mrs. Brewer was in possession of that money,1-She was never in posses sion of that amount, and she would never have accepted a liability like
that.
}
His Lordship: And you consider in using that form you had no choice but to put in that figure -— That is my opinion.
was guaranteed. Therefore it is not just a piece of paper.
This completed Mr. Brewer's evi- dence. "
AFTERNOON'S PROCEEDINGS.
"Accountant's Evidence,
His Lordship then referred to Palmer's Precedents" and pointed out that the certificate followed the form so far, and suggested to Mr. Brewer that the addition of words to the effect that the total sum stated to have been paid in advance practice in Hong Kong, was called of calls was a purely voluntary addition of his own.
Mr. Brewer answered it was necessary to add that in order to avoid discrepancy. Mr. Brewer added that he considered it would have been incorrect to have stated that the company received no more than $100,000.
Mr. Erucat Albert Udy, an be- countant who recently commenced
as a witness by Mr. Brewer, in the afternoon.
Witness stated that he was an Associate Member of the Federated Institute of Accountants of Aus- tralia, and also a member of the, Secretaries Association of England. He said he had been licensed to practice in Hong Kong. Witness, Payments in Advance of Call.
in reply to Mr. Brewer, said he His Lordship suggested that the had been a lecturer in the Technical payment in advance of call did not Education Department of Western make the shares fully paid up. Mr. Australia and New South Wales for Brewer replying that the Ordina period of five years, and added ance required the amount received that he was a Justice of Peace in in respect of all shares to be stated. New South Wales.
His Lordship: Your case is that money paid in advance of calls was money paid in respect of shares within this Section 7-Yes.
You claim that the Company had received. 576,750 in cash and the Crown suggest that you have not received that sum and that you knew the Company had not received it. That is the issue between" you and the Crown. Now I have be- fore me an application and also a promissory note for $500. That note was accepted by the Bank in. respect of the second call of five per cent.
Answering Mr. Brewer, witness said he had inspected the books of the Instone Bank in respect of cash transactions prior to April 9, 1927. He had spent a short period over these books with a view to ascer taining if they were properly drawn up, and found that they were so drawn up and kept in easily under- standable eystém. His inspection was made about 2 week ago.
Books Quite Clear. Witneas said he bad tasted several items in the books on the question Therefore the note is the of the conversion of share capital only consideration you received in into" bills receivable, and in the respect of that eal! 1-That is true.
cases he had tested he found that Well, now, don': you agree that the entries were consistent and did your figure of 2670,750 is incorrect show the history of the transactions. in that so far $500 ought to be He had been able to follow the deducted from it 7--No, because that transactions without any explana note is payable on demand. It was tion. accepted as cash and put in the books as such.
Is a Promissory Note Cash? The result was that the Bank had not the money but had a pro- mise to pay in lieu 3-Yes.
You say here that the Bank had
In reply to further questions,wit nces said he had seen a copy of the Statutory Report and a copy of the, application for loan forms. He had given them a certain amount of attention and understood them. Assuming the Company's intention was to convert uncalled capital into tions were properly dealt with in the books, at least insofar as it concerned the cases which he had
To his Lordship, Mr. Eréwer said money 7-We were content to accept loans payable account, the transac
his wife could have paid about $15,000.
the note.
The Bank had not got that $500 Mr. Fitzroy: Did your Statutory in cash. They only had a promis- Report include this 2432,000 na bay-sory note 1-It is a legal argument ing been received for the Company whether we were justified in calling tested.
it cash, ".
in cash 7-Yes.
And yet you knew perfectly well
sound.
You do not agree, then, that the of that money at least 8400.000 figure is incorrect to that extent --- could not possibly be recovered - No. There may be a legal argu- on the contrary, it could be recoverment on that point to see if it is ed, not from the principal, but from I understand you to say that this the guarantors.
His Lordship pointed out that it is not the only note accepted in was Mrs. Brewer who was guaran- respect of the second call! There teed and not the bank, and added are others. the position was that as far as the
bank was concerned they could not
So the jury will know that what ever they decide about that figure have made a claim on the guaranYes. In every case it was a director that it also applies to others - tors of Mrs. Brewer.
of a bank and a substantial man.
Mrs. Brewer's Caak,
"It Never Struck Me."
His Lordship proceeded to ques-
Yes.
Mr. Fitzroy: And yet you return- ed that as a cash payment -Until it was mentioned just now it never tion Mr. Brewer regarding Mrs. struck me that the bank could never Brewer's shares. After proceeding bave used Mrs. Brewer's guarantors, step by step in the transaction His His Lordship pointed out the Lordship asked "Mrs. Brewer pur: Statutory Report stated that the ported to pay $132,000 in cash total amount of cash received by the
It was well known to you that Company in respect of shares issued Mrs. Brewer had not got. 8432,000 17-** wholly for cash was 8870,750. The Yes. She did not possess it. case for the Crown was that that
That was a well-known fact 1- was an incorrect statement. He asked Mr. Brewer:-"After having Yes. Neither of us could have put answered Mr. Fitzroy's questions, up that that amount. do you still hold it is a correct state- ment 1"
1
The Only Figure Possible. Mr. Brewer: I am still of the opinion that it is a correct state ment. I wish to say that I have got to put a figure in. The Govern ment form requires me to put a figure in, and I still maintain that I could put no other figure in. I had written it myself I would probably not have worded it in that
way.
If
Value of Promises to Pay. Mr. Brewer: Which would you consider a better asset for the Com- pany to possess, uncalled capital or such promises to pay on de mand 1-I would take the latter, the promises to pay on demand.
Would you consider them definite- ly a better asset than uncalled capital 1-Yes, if I could call up the money at any moment I would prefer it to uncalled capital.
Mr. Brewer, referring to the loan forms, asked Assuming the signa- tures were those of existing people, would you go so far as to say that a transaction on this form is cor- rectly treated as cash -I say it is
Theoretically" Cash,”
Witness explained that if one locked at the firm's books he would find William Jones, for instance, indebted for a certain amount of share capital. Something occurs. The directors, properly authorised, are permitted to transfer that debt from the share capital account to a
And yet in the report which you loan account," and therefore, theore- drew up you declare that in respect tically a cash transaction did take of those shares, the bank had replace. It could be done in other ceived that money. Can you justify ways," said the witneas, "general- it-Yea, the Bank had loated her ly by an exchange of cheques. By transferring a balance from one ac- that sum and she had paid it back.
In the case of the other directors least, a cash transaction did take count to another, theoretically at you have insisted that they
place." people of substance -Yes,
You consider it of importance - Yes.
are
Mr. Brewer: Is your opinion the same in respect of the transaction But in the case of Mrs. Brewer, 8432,000 1-I would like to say that whereby Mr. Brewer borrowa in an identical position, you admit I am not speaking of the individual. she was not able to pay. Why I am speaking generally, and there- His Lordship consulted the form that not important Because her fore am t ating everybody on the and said he did not think it was a debt was guaranteed by directors in same basis. If the directors allot- Statutory form and he did not think a position to pay. it was in the schedule.
The document she gave was of ted a certain amount of capital to His Lordship: I think what you mail value 7-She could be arrested somebody, the security was greater of that amount was transferred to did, Mr. Brewer, was to get hold of under it, I suppose. one of the text-books of company It seems quite clear that the the loan account.
Witness hore explained that the ultimate result was this. That you directors, of course, should see that represented in the report that the the persons signing to allotments Bank held $432,000 against Mra were capable of paying up the calls Brexsce there when they only bad
andyapide of payingandaran They could have recovered the whole when called upon to do so. amount because her piece of paper
(Continued on Page 10.).
law and found that form,
Mr. Brewer: I was certainly under the impression it was n Statu
A
Mr. Brower agreed with his Lord ship it was only a form suggested in the text-book.
a piece of paper?—I disagree,
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