Notebook “Trade and Finance 1869”. VIII. The trial of the Overend, Gurney and Co. directors, 16–17 December 1869, and the withdrawal of the charge against the Mozleys

Newspaper cuttings, from the manuscript, MEGAdigital (MEGA² IV/19).¹ Traducción al español

THE OVEREND, GURNEY, AND CO. PROSECUTION.

The trial of the late directors of Overend, Gurney, and Co. (Limited) on the charge of conspiracy to defraud was again proceeded with yesterday in the Court of Queen’s Bench, Guildhall, before Lord Chief Justice Cockburn.

On the Lord Chief Justice taking his seat,

The Solicitor-General said he saw in the newspapers of that morning a letter written by Mr. Oswald Howell, one of the witnesses in the case, in which he said, “In my cross-examination this afternoon the Solicitor-General most unfairly cited a single paragraph from a report of mine, making it appear to bear a meaning wholly inconsistent with what went before. He made it appear that I had endeavoured to convey an impression to the readers of that report that the directors had sold their shares; he insisted that my having used the words, ‘held shares’ implied that they had held them. In my report I simply stated that Mr. Rennie and the others held shares at the date of the suspension.” Now he was in his lordship’s hands, and in the hands of the jury. He would say nothing about his own character, but he asserted that he in no way misrepresented Mr. Howell, and that he did not in the least desire to convey an impression other than the correct one.

The Lord Chief Justice—The letter is a gross contempt of court.

The Solicitor-General—That is a matter for your lordship; but your lordship will pardon me for calling attention to the publication of this letter, to which I give this public denial.

The Lord Chief Justice—It is a scandal. Is Mr. Howell here?

Mr. Howell (who was sitting among the junior counsel)—I am here.

The Lord Chief Justice—You have been guilty of a gross outrage of all propriety, and of a gross contempt of court. I do not for a moment say that a witness, if he thinks he is treated unfairly and unhandsomely, has not a right to appeal at a subsequent period to public opinion for his vindication, but if he does this pending the proceedings it is a gross contempt of court, and unless you apologise to myself, as the presiding judge, and the Solicitor-General, for the way in which you have acted, I shall commit you.

Mr. Howell—I am exceedingly sorry that I wrote the letter. At the same time I think that two previous passages in my report certainly convey no impression whatever that the directors had sold their shares. I showed the contrary clearly; and last night, when I read over the whole pamphlet to several gentlemen, they said if the whole of it had been laid before the jury, that no gentleman on the jury would suppose that I intended to convey any impression but that they had withdrawn their deposits with the limited company before the collapse.

The Lord Chief Justice—It is quite possible that that may be the proper construction. It may be that you may have thought yourself perfectly justified in clearing yourself from any imputation that was cast upon you; but what I am pointing out to you is, that a witness on whom observations are made may at a future time take an opportunity of clearing himself from imputations cast upon him, but it is highly improper to do so while a trial is going on; and I am astonished that a gentleman who professes to know something of public business should have taken such a course; and I am not quite sure that I ought not to visit your conduct with much more severity than with a mere reproof.

Mr. Robert Slater was then called. He stated that he is a member of Lloyds’, and has office in Cornhill. A few weeks before Overend, Gurney, and Co. (Limited) was formed, Mr. Gordon, one of the defendants, spoke to him, and spoke to him again a day or two before the company was formed. He mentioned to him that his services might be required in the bringing out of a new company in the way in which he had been previously occupied. Had previously been employed by a company with which Mr. Gordon was connected. The name of the company was not mentioned. Next saw Mr. Gordon on this matter on the 12th July, at the offices of the solicitors in Mildred-court. He hardly saw Mr. Gordon, who was engaged with the other gentlemen, but as he passed out he told him that his services would be required to take charge of the share business of Overend, Gurney and Co. (Limited). The next day he attended at the offices of the company, 51, Lombard-street. First saw the prospectus on the 13th, and on that day first knew the names of the directors. Did not receive any instructions that day about the business. Remembered an application being made from the Stock Exchange about a settlement, asking for certain documents. On the 8th of August, 1865, the directors held a meeting, and on reference to the minutes he found that it was resolved that the first five resolutions should be entered in a separate minute book; that a letter having been read from the secretary to the Stock Exchange Committee asking for the documents required by the Stock Exchange Committee for the purposes of a settlement, it was resolved that the secretary be requested to furnish the requisite information. In accordance with that resolution he applied to Mr. Jones, the solicitor, for his assistance to furnish him with such documents as the Stock Exchange might require. Did not remember whether he applied to him in writing or personally, but he believed personally. Believed he got the letter from Mr. Slaughter before the 8th of August. In consequence of his application to the solicitors he received from them the certificate of incorporation and a deed. The other documents that he forwarded to Mr. Slaughter were in his possession before. Could not identify the deed. He saw the indorsement. The same deed that he received from the solicitors he took to the Stock Exchange. With that deed he sent a letter. It was a parchment deed that he sent. Did not then know of the existence of any other deed. Another meeting of the board was held on the 27th July. (The minutes were read stating that Messrs. Wilson, Bristow, and Carpmael, who had been requested by Mr. Gordon to peruse the deeds on behalf of the purchasers, had settled them with the assistance of counsel on both sides, and that they had been executed by the members of the old firm, and it was resolved that the seal of the company should be attached to them.) The allotment of shares was completed on the 28th of July. Mr. Boys was the permanent secretary of the company. Was not aware that the old company had any secretary. Mr. Boys had the management of their continental business. Mr. Bois and witness acted at the same time as secretaries; not together, but separately, each attending to his own class of business. Remembered on various occasions being requested to withdraw from the board-room. That might have happened half a dozen or a dozen times. On some occasions Mr. Boys was requested to supply his place, and sometimes he left the directors alone. He had simply the share business to attend to.

The Lord Chief Justice—When your business was done, the chairman said “You can withdraw,” and Mr. Boys came?—Yes.

When the business of your department was done, you were requested to withdraw?—Yes.

The witness proceeded to say that he saw the seal of the company affixed to the deeds. Was always under the impression that there were three deeds, but he might have been mistaken in that. No. 51, Lombard-street was a different office from 65, Lombard-street, where the money business was carried on. Never to his knowledge saw the deed of covenants, what he might call No. 1 deed, at No. 65, Lombard-street. Had often seen deeds on Mr. Boys’ table. The directors commenced the allotment on the 24th July. The whole of the shares, 83,334, were allotted to the public or to the new directors. Mr. H. F. Barclay had 1,000 shares, Mr. Gibb 1,000, Mr. Gordon 200, Mr. Rennie 40l. There was a memorandum to his name that Messrs. Cavan, Lubbock, and Co., the firm of which he was a member, had 200 of these shares. Mr. Rennie had 200. The members of the old firm took under the agreement 16,666 shares amongst themselves and their former partners. Could not tell whether the numbers were modified without having a copy the register.

The Solicitor-General admitted that 8,300 shares were sold from time to time, adding that they realised 172,633l. 9s. 10d., which amount was carried to the credit of the suspense and guarantee account.

Examination continued—He ceased to be secretary in February, 1866. The last minute in his handwriting was of that date.

Cross-examined by Sir J. Karslake—His business was to take charge of the share list, and that continued the case to the last. The books which he kept had reference entirely to that matter. The temporary office for the registration of shares was No. 51, Lombard-street, the general office of the company being No. 65. The directors met for the allotment of shares at both places. When he ceased to act as secretary the 15l. per share had been paid, and when he took office it was understood that his services would be dispensed with as soon as that had been done. Had been previously engaged in a similar capacity in other companies. The allotment and registration of shares was part of his ordinary business. The total number of applications for shares was, according to his return to Mr. Slaughter, of the Stock Exchange, 224,484, of which 365 were withdrawn. Only 83,000 odd could be allotted, and 16,000 odd were retained by the directors. His attendance on the directors related exclusively to the allotment of shares, and his time was very much occupied with that. Received the deed from Mr. Jones’s firm.

Cross-examined by Mr. Mellish—Did not see Mr. Barclay at the office before the 8th of August. Heard that he accompanied the expedition for the laying of the Atlantic cable. Was present when the two deeds were executed. The resolution for affixing the seal was passed on the 27th July, when Mr. Barclay was absent from England, and the seal had not then been prepared. Mr. Barclay did not read the deed, but signed it after being told that the names of two directors were necessary.

Cross-examined by Mr. Giffard—A wish was expressed by the other directors to Mr. Rennie that he would waive his right to 99 shares, and he consented to do so. Almost all the directors were in a similar position.

By the Lord Chief Justice—Was not aware that Mr. Barclay instantly gave way. Pressure was put on one or two directors at the same time, to give up their right.

Re-examined by Dr. Kenealy—At the time when the directors gave up their rights the shares were at a premium. Mr. Barclay came back to England just before the meeting of the directors on the 8th of August. He (witness) never had a copy of the deed at No. 51. That was not in his department.

The Lord Chief Justice (to witness)—I want to call your attention to the resolution of the directors, that the secretary should furnish to the secretary of the Stock Exchange all particulars that might be required, and obtain Mr. Jones’s assistance for that purpose. Was that the only instruction you received?—The only instruction.

Were you told specifically what deeds or documents you were to send to the Stock Exchange?—No, I was not.

Were you told what deeds or documents you were to apply to the solicitors for?—I was told to get such things as the Stock Exchange required.

Then, as you received a statement from the Stock Exchange of their requirements, so you were instructed by the Board, whose officer you were, to get the necessary documents and other things to satisfy the requirements of the Stock Exchange?—I was.

The witness then withdrew.

Dr. Kenealy said his lordship would remember what had taken place during the trial with regard to the affidavits and answers connected with the proceedings in Chancery. He had since read them, and was perfectly ready to put them in, on the understanding that he would be allowed to comment upon them.

The Lord Chief Justice—You have no objection to their production?

Dr. Kenealy—No, my lord, I am willing to make them part of my own case.

The Solicitor-General said he could not enter into any bargain on the subject.

The Lord Chief Justice thought it would be a pity to interrupt the course of the evidence at that moment.

Dr. Kenealy said he had thought it desirable to inform his lordship of his feeling on the subject as early as possible. He would do what he had stated at whatever time might be deemed most convenient.

Mr. Harding, the official liquidator, examined by Dr. Kenealy—Besides being the official liquidator of the new company he had acted as inspector of the old firm under a deed executed by its members. The amount of cash received on the 83,000 odd shares up to that moment was in round figures 3,277,000l. The liabilities of the limited company on the day of suspension amounted to 18,727,915l. 13s. 8d.

The Lord Chief Justice (to Dr. Kenealy)—What is it that you wish to know?

Dr. Kenealy—I wish to know, my lord, the value of the assets. (To witness)—Taking the balance between the assets and the liabilities, what did they owe at that time?

The Lord Chief Justice—He does not know up to this time what the assets will amount to.

By the Lord Chief Justice—I include in the liabilities all the bills that have been rediscounted.

Dr. Kenealy said the pith of his question was, taking the assets and the liabilities, what was the balance?

The witness—On the 31st of October last the deficiency was 3,066,000l.

Dr. Kenealy—I want to know what was the difference between the assets and the liabilities at the time of the suspension.

The Lord Chief Justice—I don’t think you can have that. It may be very material as regards the financial position of the company, but we have to consider how much of the 18 or 19 millions was got rid of through bills being paid by the parties who were liable.

The witness said he asked Dr. Kenealy on the previous day to tell him what was the nature of the information he would ask for, and he understood him that he would not question him as to anything which was not included in the depositions in the Court of Chancery.

After some further discussion on the point,

Dr. Kenealy, addressing the witness, said—I want to know what was the exact position of the company when they stopped. They owed 18,000,000l.; what were the probable assets?—That depends upon what they have turned out.

Dr. Kenealy—That is not an answer to my question.

The Lord Chief Justice—Can it be answered?

Dr. Kenealy—We know what were the liabilities; I ask what were the probable assets at the time when they stopped?

The Lord Chief Justice—They can only be probable.

The witness here referred to an approximate estimate which he formed in June, 1866, and submitted to the shareholders, with a statement that it could only be approximate.

Dr. Kenealy (to witness)—I ask you as an accountant what was the approximate or probable value of the assets at that time. Nothing can be more simple than that question.

The Lord Chief Justice—Nothing can be more simple than the question, but nothing more difficult than to answer it. If the witness had to append to his report of that time the statement he has mentioned, he can only speak from experience now.

Dr. Kenealy (to witness)—Do you mean to say that at that time you could form no estimate as to the probable value of the assets?—The figures are stated here but they are not cast up.

The Lord Chief Justice—I must say that I think Mr. Harding is doing exactly what is right. He has told you what was the calculation made at the time.

The Solicitor-General observed that the witness said in his report in June, 1866, that no estimate could be made of the claims which would arise against the company in respect of bills re-discounted.

The witness said he could give the result of the estimate which was formed at the time. The assets were estimated as follows:—Cash in hand, 63,621l. 3s. 4d.; bills receivable in hand, 1,149,762l., estimated to realise 1,100,000l.; sundry debtors’ balances, 461,696l. 2s. 5d., estimated to realise 422,000l.; overdue bills in hand, 98,533l. estimated to realise 89,000l.; Overend and Gurney suspense and guarantee account. 2,970,168l.; estimated to realise 2,250,000l.; estimate of furniture, &c., 27,000l.; surplus of security held by creditors, 266,827l.; sundries, 1,214l. The total was 4,220,494l. 10s. 3d. The whole of the liabilities amounted to 18,000,000l. odd. This included contingent liabilities to the amount of 14,000,000l. That was the amount of the bills then current.

Then the assets were 5,000,000l., and the liabilities 14,000,000l.?

Witness—No, the whole of the 14,000,000l. might have been paid by the other parties liable on the bills. It was not all paid. It was impossible to make an estimate of the value of the assets at the time of the stoppage. The advances made by the limited company in respect of the debts of the old firm were 1,175,052l. 13s. 10d. which was debited to the suspense and guarantee account, and there was received by the limited company from the proceeds of the estates of the members of the old firm 529,044l. 4s., and a further sum of 529,015l. 9s. in respect of the excepted accounts. The balance due on the suspense and guarantee account at the time of the stoppage was 2,970,168l. 17s. 10d. On the 31st October last the balance was 2,168,054l. 3s. 7d. There was a book containing a list of guarantees by the old firm. These were not a portion of the liabilities transferred to the new firm. They were contingent liabilities. They were not taken over by the limited company. Many of the guarantees had never become claims, and where the limited company made any advance to enable the old firm to meet claims of this nature the amounts were debited to the suspense and guarantee account. He could not state how much was so paid. The balance-sheets of the old firm which were produced yesterday were schedules containing the balances which appeared in the ledgers. They did not give information as to the actual profit and loss. They were abstracts from certain books. The profit and loss account was kept in another ledger—the private ledger. The private ledger contained the only statements actual profit and loss.

Dr. Kenealy—Looking at that balance-sheet, is there anything which would give anybody any knowledge of the state of the old firm?

Witness—Not on taking up this statement. A stranger looking at this would see a series of items before him, but could come to no conclusion. These are the balances owing to the firm and the balances owing by the firm.

Dr. Kenealy—Do they give you the exact position of the firm?—Not as to the value of the assets.

The Lord Chief Justice—If this is the way in which they carried on their accounts during the time of their prosperity I do not see how the manner of keeping the accounts can be imported into this case as an accusation. What about the private ledger?

Witness—The profit and loss account does not appear in these schedules, but in the private ledger. The private ledger, which he held in his hand, showed that the balance of profit in the half-year ending in July, 1865, was 6,406l., which was carried to the reserve account. The same book showed that in 1864 there was a loss of 348,670l. 16s. 2d., which was also carried to the reserve fund. In 1863 there was a profit of 30,586l. 4s. 8d.; in 1862 a profit of 37,834l.; in 1861 a profit of 229,101l. 12s. 3d.; and in 1860 a profit of 430,345l. 14s. 8d., subject to reduction of 86,000l. for rebate of bills.

In reply to a juryman, the witness said that up to a certain date, 1860, the profit and loss account appeared to have been entered as “interests and commissions.”

By the Lord Chief Justice—Up to 1860 the interests and commissions were carried to the profit and loss account; after that date they appeared to have been carried to an account which showed the position of the firm. The result would be the same. The accounts would equally show the real state of things.

Dr. Kenealy (having handed the private ledger to the witness) asked him what loss that showed in 1862, to which he replied 37,834l. In 1861 (the witness added) there was a balance of profit of 22,910l. 12s. 3d. In 1860 the total profit returned was 430,345l. 14s. 8d., subject to a reduction of 86,000l. for rebate on bills.

Would not anybody reading the books suppose that, on the whole, the firm had been carrying on a very profitable business?—In 1865 the profits came down to 6,000l.

Dr. Kenealy—What was the preceding July, 1865?

The Lord Chief Justice—In 1864 there seems to have been a serious loss, and 1865 the profit was as low as 6,000l.

The Solicitor-General observed that after 1861 the partners did not divide any profit, all the profit that was made being carried to the reserve fund. The books showed a large amount of legitimate profit, but it was dealt with in that way.

The Witness—The books show a large amount under the head of interest.

The Lord Chief Justice—Is that interest realised, or is it interest on what might ultimately cause a loss to the concern?

The Witness—it is all entered as interest.

The Lord Chief Justice—But the question is whether it was interest paid, or interest in expectation.

The Witness—There is no entry in this book, my lord, that would enable me to distinguish. The total amount of interest received in 1863 was 549,000l.

Examination continued—Could not tell whether that represented interest received, or interest that might be received. According to the amounts entered there was an average annual rate of profit for some years before July, 1865.

Can you divide that by five and tell me what is the average?

The Lord Chief Justice thought that could not be done, adding that in one year there was a large loss stated.

The Witness—In 1864 the total amount of interest was 650,000l.

Dr. Kenealy—Then why is only 37,000l. entered as profit?—Certain accounts had not been passed.

The Lord Chief Justice—What we really want to know is what in each of those years, no matter whether it appears in one account or in another, was the real state of the firm, what they had realised either in the shape of profit or of loss. The witness does not appear to know that.

Dr. Kenealy (to witness)—What was the average?

The Lord Chief Justice thought that question was not material. In one year there was a great loss, and that would affect the question of average.

Dr. Kenealy then examined the witness at some length, for the purpose of eliciting explanations with regard to the absence of several leaves or numbers from “the guarantee book,” a book containing copies of letters relating to guarantees entered into by the old company. The witness was understood to say that, notwithstanding the omissions, he believed the record to be perfect. The learned judge examined the book himself, for the purpose of satisfying himself on the point.

By Dr. Kenealy—The date of the transfer to the suspense account of the money paid by the new company for the goodwill was the 31st of July. At the time of the suspension there was nothing standing to the account of Mr. J. H. Gurney in the single deposit book. There was 69l. standing to the credit of Mr. H. E. Gurney.

The witness was then examined as the securities held by the old firm in respect of the excepted accounts. With reference to that of Kelson, Tritton and Co., he stated that he was employed to liquidate their accounts. They were indebted to Overend, Gurney and Co. to the amount of 291,000l. He communicated with Messrs. Overend and Gurney, and asked what securities they had. They gave him a list, which included several bills of lading. He saw Mr. Birkbeck and Mr. J. E. Gurney a second time in reference to this matter, and told them that some of the bills of lading they held were of no value, inasmuch as the goods had been obtained on duplicate bills. He did not think they knew the position their securities were in at that time. Mr. Brikbeck was very angry, and used very strong language. Could not remember exactly what he said, but he seemed very much surprised. He asked witness to ascertain to what extent bills of lading had been used. He made inquiries, and reported to them the extent. Could not at this moment say what it was, but would endeavour to do so to-morrow. He was asked to assist in the realisation of such of the bills of lading as were of value, and did so. Could not say what became of the others. Did not think he had seen them since. Was not sure. They were not handed over to the new company. The liquidation of Kelson, Tritton, and Co.’s affairs continued long after the formation of the limited company.

Dr. Kenealy—These duplicate bills of lading held by them were of no use. I suppose?

The Lord Chief Justice—Yes. True, Kelson and Tritton had made an improper use of the duplicates, buy obtaining the goods by means of them, but as against their estate those in the hands of Overend and Gurney were good.

Dr. Kenealy—When was this?

Witness—In May, 1865.

Did Overend, Gurney, and Co., advance them money after that?—They had stopped payment then. Mr. Kelson was now following some occupation, but he did not know what it was.

Cross-examined by the Solicitor-General—Did not Mr. Birkbeck say he would have these men up at the Mansion-house? Did he not say that he would have nothing to do with another Davidson and Gordon business?—I cannot say; he was very angry.

Did he not subsequently tell you that Mr. John Henry Gurney had taken the opinion of counsel, and that he would not success if he prosecuted them?—I think he did.

Is there any pretence for the insinuation that counsel are instructed to make that after the discovery of these frauds Overend, Gurney, and Co. continued to transact business with these parties?—Not the slightest.

Were the books of the old firm properly kept?—As far as I am aware they were kept with perfect accuracy.

Every information concerning the business is to be got from them?—Yes.

There is nothing from which any one could draw the conclusion that there was an attempt at concealment?—Nothing.

Did they afford you the fullest information upon say matters on which you sought it?—Yes.

Did they assist you in every way in the realisation of their estates that had to be realised to pay debts?—We had all the assistance that we desired.

From the acquaintance with the business, which you have derived from the books, do you think that so far as money-dealing and bill-broking are concerned, it was a very large and lucrative business?—It was a very large business; and upon an average of years it had, in my opinion, been a lucrative one.

Was from 180,000l. to 190,000l. a year a low estimate of the profits of that business?

Dr. Kenealy—I put a question, my lord, as to what was the average profit.

The Solicitor-General (to witness)—Can you tell me from the books what was the turn-over of the money-dealing and bill-broking business in the year?—I think I can. In a going concern like that there were large sums of money paid out. If you mean the turn-over of money I can give it.

The Lord Chief Justice said he supposed that was meant was the actual money used in the course of business—the amount of the transactions?

The Solicitor-General—Yes.

Cross-examination continued—The total amount from 1859 to 1866 was 1,115,876,000l. In the year 1859 the amount turned over was 156,289,774l.; in 1860, 171,099,460l.; in 1861, 138,532,648l.; in 1862, 157,119,856l.; in 1863, 177,262,961l.; in 1864, 198,280,718l.; and up to the 31st July, 1865, 117,300,852l. The turn-over from the 1st of August, 1865, and the 10th May, 1866 (during the existence of the limited company), was 166,155,164l. I should not think a profit of from 180,000l. to 190,000l. an excessive estimate for this turn-over. I have seen figures equal to that, if not much more. The value of the bills discounted from 1859 to 1868 was:—In 1859, 62,106,700l.; in 1860. 62,009,000l.; in 1861, 53,645,000l.; in 1862, 64,314,000l.; in 1863, 66,317,000l.; in 1864, 74,984,000l.; in 1865, up to the 31st July, 41,388,000l.; and from the 1st August, 1865, to the 10th of May, 1866, 56,829,000l.

Did you find in inspecting the books that the legitimate business, that is the money-dealing and bill-broking business, of the new company remained, practically speaking, the same as it was under the old company?—There was a large amount of very good paper.

Are you able to state whether if the money-dealing and bill-broking business had been alone continued and could have been separated from what have been called the excepted accounts, the business would have been a sound and lucrative one?

Witness—You mean in a series of years?

The Solicitor-General—Yes.

Witness—I cannot form an opinion as to the nine months, because it was an exceptional period.

The Solicitor-General—In what way?

Witness—Money rose in value between the formation of the new company and the date of suspension from 3½ to 7 or 8 per cent., and bills which had to be rediscounted must have been rediscounted at a higher rate.

The Lord Chief Justice—That would possibly involve a loss?

Witness—Yes; bills taken one day at 5 per cent. may have been rediscounted at 6 or 7.

The Solicitor-General (to witness)—Of course, a large quantity of such an immense business as that must be done by rediscounting?—Yes. On the 10th of May, 1866, the Bank rate of discount was 8 per cent.; on the 27th of July, 1865, it was 3½.

I suppose that with such a high rate of interest there would always be a withdrawal of deposits?—Yes; to a certain extent.

The witness then gave the dates of the successive additions to the Bank rate of interest between July, 1865, and the 10th of May, 1866.

The Solicitor-General—Then the result was, that so far as rediscounting operations were concerned this new company was brought out at a most unfavourable time?—That is my opinion.

Cross-examination continued—Some of the partners sold part of their private property for the purpose of backing up the suspense account. There was an entry of 150,000l. carried to that account on the 19th of August. On the 16th of September 35,000l. more was added to it, the letters “H. E. G.” being affixed. A very large amount of property had been sold since for the benefit of the creditors. In the first four months of 1866 deposits were withdrawn from the bank at the rate of about 1,000,000l. a month. A great deal more money went out than came in. Between the 1st of August, 1865, and the date of the suspension the company was worse in that respect by nearly 5,000,000l. Between January 27, 1866, and the 10th of the following May there was a diminution of nearly 4,000,000l. There were at that period rumours in commercial circles in London that some of the private property of Messrs. Gurney had been sold, or was being sold.

Was the money which was withdrawn so much cash lost for the purpose of the bank?—Yes.

The Lord Chief Justice—The great bulk of such a business must, I presume, be done with other people’s money, the difference between what they make by it and what they pay for it being the profit. Can you tell me what amount the private property of Messrs. Gurney has realised since the stoppage?—The cash received from the several estates up to the 31st of October amounted to 718,000l.

Were the estates sold under circumstances of great depression?—During the period when they were sold there was very great depression.

Cross-examination continued—The stoppage of the house of Overend and Gurney affected the value of all securities. The private estates had not yet all been sold. It was estimated that what remained would produce sixty or seventy thousand pounds. John Henry Gurney paid 380,000l. out of his property before the stoppage. The house in Lombard-street fetched 27,500l., less expenses. If the period had not been one of depression it would have realised considerably more. The excepted accounts, which were put down roughly at 4,000,000l., and were afterwards valued at 1,000,000l., had realised 530,000l., and were expected to produce about 150,000l. more. The securities sold were all realised at an exceptional period, and he did not think 1,000,000l. was an excessive value to put upon them at the time.

The Solicitor-General—Looking at the business of the company, do you think that 500,000l. was a fair value to give for the goodwill?

Witness—In answer to that I must have regard to the valuations made by the partners at the time of the transfer, valuations of their estates, and also to the amount of money which their credit enabled them to obtain on deposit. The excepted accounts are four millions. They were estimated to produce a little more than a million, and I should have looked to see what there to produce the remaining 2,900,000l.

The Lord Chief Justice—You say that, looking at the state of things, to what they were liable for, and looking, on the other hand, to what they had in the shape of money or securities, they were not in a solvent state, unless you could consider as part of the assets the amount which would be realised by the excepted accounts?—Yes; they would still be 900,000l. short.

Dr. Kenealy—1,900,000l.

The Lord Chief Justice—Then against that there would be the private estates of the different partners?

Witness—Yes.

The Lord Chief Justice—Then there is another item not taken into account, and that is the very large sum paid in on private deposit afterwards.

The Solicitor-General—Yes, over a million.

The Lord Chief Justice—Then it stands thus. In the first place, the excepted accounts amount to four millions: that is reduced to three by the private accounts of the partners; the intrinsic worth of the accounts is another million, and that brings it down to two millions; then there is 500,000l. for the good-will; and then, as against the difference, there is the private estate of the partners?

Witness—Yes.

The Solicitor-General—And the question is whether the private estates of the partners were not worth at the time much more.

Witness—According to the estimates, that would be so.

The Court then adjourned, at 10 minutes to 5 o’clock, till a quarter-past ten this morning.

THE OVEREND, GURNEY, AND CO. PROSECUTION.

This trial was continued yesterday, the Lord Chief Justice taking his seat at 20 minutes past 10.

Mr. Harding’s (the liquidator’s) cross-examination by the Solicitor-General was resumed.

The Solicitor-General—In the case of Kelson, Tritton, and Co. it was suggested, Mr. Harding, by my learned friend (Dr. Kenealy) that the bills of lading were handed over to the new company as assets. Is there any foundation for that?—So far as I know, there is not.

In reply to the Lord Chief Justice, the witness said he had inquired since yesterday of Mr. Boys, who had been his principal assistant in his investigations, whether the bills of lading were in existence, and he (witness) believed they could be found.

The Solicitor-General—Do you know that Mr. Head had 1,000 shares in the company?—He is on the list of contributories for 1,000 shares.

In reply to the Lord Chief Justice, the witness said Mr. Head was a brother-in-law of Mr. Henry Edmund Gurney.

Examination continued—Mr. Head had paid his calls. Had no reason for supposing that the shares were not Mr. Head’s. Since last night he had drawn out a statement of the estimated value of the different assets which were handed over to the new company at the time of the transfer.

Was there at that time 780,000l. standing to the credit of Overend, Gurney, and Co., in the Norwich bank?—It appears so from the books.

Was 196,000l. of that transferred in July to the old bank?—Yes.

The Solicitor-General (in reply to the Lord Chief Justice) observed that the partners in the Norwich Bank were the owners to the extent of one-fourth of the bank of Overend, Gurney, and Co.

The witness, referring to a paper which he held in his hand, said it was rough estimate which had come into his possession as liquidator, of the value of various properties belonging to the partners in Overend, Gurney, and Co.”

Is the value of the land estimated there at 556,000l.?—Yes.

Have you yourself arrived, independently of that paper, at a judgment of the value of the property there referred to?—Yes.

The Lord Chief Justice (to witness)—My mind was very much struck with the statement made by Mr. Rennie before the Lord Mayor. That appears to me a statement of great importance in reference to this cause. Have you been requested by those who conduct the prosecution to ascertain how far that statement was correct? No, my lord. I offered to furnish any information I could both to Mr. Lewis, when he had the conduct of the proceedings, and to others.

The Lord Chief Justice—Somebody ought to have inquired, for if that statement be correct Mr. Rennie is intitled to an immediate acquittal.

By the Solicitor-General—The estimate to which he had referred did not seem to him an exaggerated one. The next item was sundries 613,000l. He had realised some of them, and knew of the existence of others.

Does 613,000l. seem to you a fair or an unfair estimate of the value of those sundries?—If I had made an estimate at the time I should no doubt have taken some of those assets at that or a higher value.

Examination continued—The estimate was fairly made. Some reservation had been sold for 100,000l.; they were put down at rather less. There was contingent reversion of 20,000l. a year which had not been realised; when that fell in it would produce a large amount. More than 97,000l. had been actually realized for the life interests, and the contingent life interests would realize a large amount. Only part of the reservations had been sold. There were special circumstances which affected their value after the suspension. The health of Mr. John Henry Gurney had broken down. The Norwich Bank was an asset belonging to Overend, Gurney, and Co.; and at the time of the suspension it was in great credit, and doing a large business. Had had some means of knowing the value of that bank, and estimated the net profit at between seventy and eighty thousand a year. From information which he had gained he thought 300,000l. was below what country bankers would put down as the value of the goodwill. Some well known bankers valued such a business at five years’ purchase.

Then all those items brought out 2,248,281l. as the value of the property of the private partners at the time of the transfer, irrespective of the value of the excepted accounts, which formed the suspense account?—Yes.

By the Lord Chief Justice—The goodwill of the Norwich Bank was sold in 1866.

The Solicitor-General observed that it was sold under an arrangement that the price to be paid was to depend on the profit realised up to March, 1870, and hence the goodwill did not yet appear as an asset.

Dr. Kenealy said he doubted whether he should make that valuation part of his case.

The Solicitor-General said what he wished to show was that the items of the valuation were not excessive.

The Lord Chief Justice observed that, according to Mr. Howell, the total of the suspense account was 4,051,000l., whereas, according to Mr. Harding, it was 4,213,000l.

The Solicitor-General observed that Mr. Howell omitted some of the accounts, and that was the cause of the difference.

The Solicitor-General (to witness)—Taking the excepted accounts at the nominal amount of 4,213,000l., and their estimated value at 1,080,000l., leaving 3,133,000l., did the private property of the partners make up a surplus of 170,000l.?—An apparent surplus of that amount.

Why do you call the surplus an “apparent surplus?”—It is the difference which appears between the totals. Events have effected the items on realisation.

Turn to the private ledger profit and loss account. In your account of that have you excluded the interest account?—Yes, because the interest was interest was in two books.

Was the profit and loss balance in 1861 from commission, &c., 22,910l. 13s. 3d.?—Those are the figures.

What is the balance of the interest—is it not 238,179l. 12s. 11d.?—Yes.

His Lordship—That is less rebate?—That is so.

The Solicitor-General—That brings out 261,675l. profit for the year 1861.

Witness—That is the balance of the interest and profit and loss account; there was no sum written off for losses of any consequence.

The balance of commissions in the next year was 37,874l., less the balance brought from 1861. Was the balance written off?—It has been brought forward each year. It does not stand by itself in the books.

The balance of interest was 112,516l. less rebate? –Yes.

In 1863 the balance of commission was 30,586l. 4s. 8d.—Yes.

And the balance from 1862 brought forward 37,586l.?—Yes. Then several sums were written off for bad debts.

That reduced the 30,586l. to 12,952l.?—That amount was the produce of the commission account. The balance of interest was 549,556l., less interest in suspense 405,000l. They did not divide the profits, but carried the interest to the reserve account. They were allowed to accumulate from year to year, and in 1864 484,000l. was written off. What I have endeavoured to give is the amount of the earnings of interest on commission, without making deductions in respect of bad debts.

By the Solicitor-General—The profit earned in 1864 was 79,285l. That was the amount earned in that year in business and commissions. 601,000l. was the amount realised for interest and commission in 1861, 1862, 1863, 1864; and the amount which appeared to be written off against that amount for bad debts was 484,315l.

The witness was then examined as to the excepted accounts. The first he was questioned upon was the Atlantic Royal Mail Steam Packet Company, the debt of which stood at the time of the suspension at 83,345l. He said there were four steam vessels taken over from the company, the cost of which was upwards of 700,000l.

Dr. Kenealy—Does that appear from the books of Overend, Gurney, and Co.?

Witness—No.

Dr. Kenealy—Then I object.

The Lord Chief Justice—You are entitled to object, but I am sorry the objection has been taken.

Dr. Kenealy then withdrew the objection.

Witness said he knew the fact from the circumstance of his partner being the liquidator of the Atlantic Steam Company. It also came before him on his preparing the balance-sheet of the Atlantic Royal Mail Company. He knew the amount was large, but could not remember whether it was 700,000l. or 750,000l. He sold them at a very small price, 90,000l., in consequence of the low condition of trade at the time, and the depreciation in the value of all steamships. These steamers were built for passage between Galway and America, to carry out the Galway contract. The East Indian and London Shipping Company’s debt stood at 406,264l. There were seven vessels given in security by the company, which were taken at the value of 175,000l. Certain parties took them over at 126,500l., but they were unable to carry out the contact, and he only received 98,000l. for them. That was at a time of great depression. The company also held some railway securities against some of the excepted accounts. These securities were depreciated more than any others, some being Irish railways. Some had been sold, but a great quantity were still retained, in the hope that the price would rise. These securities comprised shares and Lloyd’s Bonds of the following nominal value:—Portadown and Dungannon, 86,753l.; Kilkenny Junction, 56,700l.; Mid Wales, 53,650l.; Kilrush, 4,000l.; Belfast, Holywell, and Bangor, 122,000l. Those securities were in the account under the name of Mr. J. E. C. Koch, who managed the railway business of Overend, Gurney, and Co.

The Solicitor-General—Mr. Howell stated that on the 27th March Mr. R. Birkbeck withdrew 812l. Was there not a transfer of 47 shares to Mr. Edward Birkbeck, brother of Mr. Robert Birkbeck, on the date?—Yes, on the 29th March there is a transfer to him of 47 shares. The cost was 804l. and the broker’s commission would bring it up to about 812l.

Dr. Kenealy—Had you any connection with Overend and Gurney’s firm?

Witness—Not any, except having to go to them several times on the affairs of Kelson, Tritton, and Co., and the affairs of the East India Shipping Company. At the time of my appointment I did not know them by sight.

By Mr. Serjeant Ballantine—Mr. Barclay was the owner of 1,000 shares. 15l. per share was paid on them at the time of the suspension, and he has paid 25,000l. on them since.

By Mr. Giffard—Mr. Rennie held 201 shares. I was present at the examination before the Lord Mayor. Mr. Rennie made a long statement then. I have not verified the figures in that statement.

Dr. Kenealy—I believe you had various transactions with Overend, Gurney, and Co.?—Witness—Not many.

Dr. Kenealy—Have you received large sums of money from them?—Witness—I received one sum of 5,000l. in July, 1865.

The Lord Chief Justice—What was that for?—Witness—For my own services and expenses as liquidator of the East India and London Shipping Company, and for similar expenses and services of my partner, Mr. Whinnie, in the Atlantic Royal Mail Company. The contract entered into between Overend, Gurney, and Co. and the East India Shipping Company for the transfer of those ships was entered into with the sanction of the Vice-Chancellor, and it was stipulated that Overend, Gurney, and Co. should pay all the costs appertaining to the liquidation. In his opening speech Dr. Kenealy said he was compelled to call me, and that I had received a douceur of 5,000l., and as that may have left an unfavourable impression, I wish to make an explanation. He did not ask me any question about it in his examination in chief. Overend, Gurney, and Co. were the owners of nearly the whole of the shares of the Atlantic Royal Mail Steam Pocket Company, and the only parties entitled to receive the moneys realised in the liquidation. In the month of July I was informed that Mr. Gurney wished to see me. I went there, and Mr. John Edmund Gurney told me the firm were desirous of knowing the expense of the liquidation of these two companies. I was not prepared for the inquiry, but I said I would endeavour to ascertain, but as the matters were not closed it would be difficult to make out an account for the whole period. I consulted my partners on the subject, and went back to see Mr. Gurney, and said to him that, inasmuch as these matters had not been productive of any benefit to them, and as we knew that anything they paid to us would be an addition to the loss they had sustained, we would rather they put their value on the services we had rendered. This was the first transaction we had had with the firm. Mr. Birkbeck said he would consult Mr. John Henry Gurney; that he believed everything had been done to make the best of the two estates, and that I was to go the following day. I went, and he told me they had conferred together, and had come to the conclusion that 5,000l. should be paid for the two matters, provided we did what was necessary to complete the winding up. I said I was prepared to accept whatever they considered the services were worth, and he said, “You had better consult Mr. Whinnie, I shall not pay you to-day.” I consulted my partners, and one of them was not willing to accept that sum, as he thought it would not compensate us, but when I went to the bank a day or two afterwards I said I should not alter the amount. Mr. Birkbeck said the firm would much rather that I was satisfied than dissatisfied, and would give more if I was not satisfied. I said I would accept that sum, and it was subsequently paid to us.

Dr. Kenealy—And you were appointed joint liquidator of the company the following year?

Witness –Yes.

Did the Messrs. Gurney support you in that appointment?—They did.

And by that appointment you and your company will receive a considerable sum of money?—I hope so.

More than 50,000l.?—No, I do not think that our firm will be benefited to the amount of more than 25,000l. or 26,000l. The committee of supervision have considered the question of our remuneration, and have come to a conclusion upon it to recommend to the Vice-Chancellor what our remuneration shall be.

And by that appointment you and your company will receive a considerable sum of money ?—I hope so.

Does that include the amount under the deed of inspection?—No charge is made, or contemplated to be made, in respect of the deed of inspection.

You have been in communication with the former attorney for the prosecution, and you made out the figures for Mr. Rennie. Did you tell him you had made out the figures for him?—No.

Dr. Kenealy (addressing the court)—Now with reference to Mr. Rennie’s figures I will make this offer. Your lordship is aware of the position in which I stand, that I was not instructed till last Friday. If Mr. Giffard will offer testimony as to the correctness of those figures I shall not exercise any right to reply on those figures. I will waive my right of reply in reference to them.

The Lord Chief Justice—I was so much struck with the statement that if the witness were not examined as to the details, I intended to take him myself, step by step, through the whole of Mr. Rennie’s statement.

Mr. Giffard—So far as I am concerned I should have wished that to be done.

The Lord Chief Justice—I fully expected that you would have taken this witness as far as you could through all these matters.

Mr. Giffard—My learned friend has taken him through all these matters except those which Mr. Turquand will speak to. This statement was made on the 27th January last, and I supposed that Dr. Kenealy would offer evidence to negative the figures in it. I apprehend it is not for me to prove them affirmatively.

Dr. Kenealy—I wish to do everything that is reasonable.

The Lord Chief Justice—There is one very important point in reference to Mr. Rennie, as distinguished from the other defendants. Mr. Rennie says, “Before I entered on this negotiation at all, I desired to have information from the old members of the firm as to certain things, and that information determined me to become a member of the firm.” Now, that strikes me as most important with reference to Mr. Rennie’s position in this case, that it should be ascertained how far those statements are real genuine statements, or whether they are delusive, and if it can be shown they are correct, then, putting aside for the moment the case of the other defendants, the question arises whether Mr. Rennie has not quite as much to complain of as any other shareholder who was not a member of the old firm. But when Mr. Turquand comes, perhaps we shall have the matter inquired into.

Dr. Kenealy (to the witness)—Were the old firm solvent at the date of the transfer?

The Lord Chief Justice—He has stated that they were not. There was 4,213,000l. stated as assets, which was not available for realisation under that head. To that extent the company was insolvent. (To the witness)—That, I understand, to be the real position of things?—Yes, my lord.

The Lord Chief Justice—I understand you to say that, even taking into account so much of that item of 4,213,000l. as could be afterwards realised, there still remained a balance against the company, and that to that extent they were insolvent?—Yes, my lord, except so far as their private estates might supply the deficiency.

The Lord Chief Justice—Supposing the old firm, instead of transferring their interest to a new company, had stopped payment at the end of July, 1865, there would have been insolvency to the extent of whatever failed to be realised of that 4,000,000l., so far as the business was concerned?—Yes, so far as the joint estate was concerned.

Dr. Kenealy—If their interest in the Norwich Bank and all the assets of which we have heard so much had been dispose of, would they on the 31st of July have realised 10s. on the pound, or 1s. in the pound, or what?

The Lord Chief Justice—There was a deficiency of 3,000,000l., against which there was 2,000,000l. of private property, and therefore it could not be a question of a 1s. in the pound.

Dr. Kenealy (to witness)—Do you think they could have paid at that time 10s. in the pound?

The Lord Chief Justice—If all their estates had been realised.

Dr. Kenealy—We know that the shareholders have got nothing from that source.

The witness—There may possible be a return to them of four or five pounds a share, reducing the loss to about 2,600,000l.

Dr. Kenealy—Do you say, as an accountant, that they would have paid on the 31st of July as much as 10s. in the pound?—I think the dividend would have been larger than that.

What did they owe to depositors?—To depositors and other creditors they owed on the 31st of July 5,419,000l. They owed as much as 4,000,000l. to depositors alone.

The Lord Chief Justice—Where does that appear?—In a printed paper (referring to a paper in witness’s hand). If the old firm had stopped the secured creditors would not have proved; the unsecured creditors would have proved, and the amount due to them was 4,500,000l.

The witness was entering into details with regard to the deposit accounts, when

The Lord Chief Justice interrupted him by remarking that distinctions of that kind were not material, as whatever might be the form of their liabilities people were insolvent to the extent of what they owed beyond what they had the means of paying.

Dr. Kenealy (to witness)—Do you think there would have been more than 19s. in the pounds?

The Lord Chief Justice—It is not a matter of thought, but a matter of fact.

Dr. Kenealy—Do you say that they would have paid more than 10s. in the pound?—Yes, in my opinion.

Examination continued—Mr. Howell’s statement that there were bills under rediscount on the day of the transfer amounting to 7,077,000l. was correct. Of that amount 2,079,801l. was under discount at Gurney’s bank at Norwich. Of that amount 1,700,000l. was afterwards paid in cash, and 227,000l. was renewed. The apparent loss was 135,000l., but claims had been made against the different estates, and dividends would be received.

Dr. Kenealy—You stated yesterday that about 5,000,000l. was withdrawn between the date of the transfer and the day of suspension, and about 4,000,000l. in the last four months.

(The learned counsel here handed to witness the general ledger, and asked him to look at the entries relating to withdrawals during the periods he had mentioned.)

Examination continued—On the 31st of December, 1865, the amount under the head of single deposits was 2,614,907l.; on the 30th of April, 1866, it was 2,095,518l. On the 31st of December, the loans on security amounted to 7,017,146l.; on the 30th of April, 1866, to 6,413,372l. On the 31st of December, 1865, the balances of country bankers amounted to 5,551,428l.; on the 30th of April, 1866, to 5,199,433l. The sum total of the withdrawals between those two dates was 1,471,157l. Could not say from actual knowledge whether Overend, Gurney, and Co. ceased to discount from the 1st to the 10th of May.

Was it not within the last ten days that the remaining withdrawals took place?—I have not the figures here. There were large withdrawals in the last ten days.

The Lord Chief Justice (to witness)—Do you say that the sum just mentioned is the whole amount that was withdrawn?—During that particular period, my lord.

The Lord Chief Justice—How is it that you spoke of that yesterday as a million a month?—Dr. Kenealy is referring to the figures which are here, and yesterday I was referring to some statistics which were before me. I referred to a book containing weekly accounts of the business of the company.

The Lord Chief Justice—There seems to be some discrepancy. I supposed from your statement yesterday that something beyond the normal rate of withdrawal commenced early in the year, not that the mass took place in the last ten days.

Witness—The amounts for the period selected I did not look to. I looked at the whole period.

The Lord Chief Justice—The impression produced on my mind was, that when it became bruited about that the partners in the old firm were realising their private property a distrust arose in the minds of depositors which induced them to withdraw their money—that that begun early in January, and continued till the period of suspension. Am I now to understand that the mass of the deposits were withdrawn in the last ten days?—It appears so from the figures which Dr. Kenealy has placed before me.

The Lord Chief Justice (addressing Dr. Kenealy) said he thought it would have been much better if he had brought out that state of things in his examination in chief, so that counsel on the other side might have applied their minds to it in cross-examining, instead of reserving the force of such a battery for a subsequent day.

Dr. Kenealy observed that he had not time before to acquaint himself with the facts.

The Lord Chief Justice said the withdrawals formed one of the main points relied upon by Mr. Rennie.

Dr. Kenealy (to witness)—Have you any doubt of the correctness of the figures to which I have referred?—The figures seem to correct. I say that subject to my examination which I may make.

Did the withdrawals in the last ten days amount to 1,108,278l.?

The Solicitor-General said he had before him an abstract of all the books, taken week by week, relating to the withdrawals, and he was assured that a comparison would show it to be accurate. The statement which he was instructed to make the day before was, he was not told, perfectly correct.

Dr. Kenealy observed that if that abstract were correct, the general ledger to which the witness was referring must be incorrect.

Examination continued—On the 30th of April, 1866, the single deposits amounted to 2,095,518l.; on the 10th of May they amounted to 1,856,550l., showing a reduction of 238,963l. The total amount of the withdrawals in the last ten days was 1,108,278l., and the total between the 31st of December, 1865, and the suspension, 2,583,430l.

The Lord Chief Justice said, although no explanation had been afforded of the difference between the statement then made and that made on the previous day, he could not at present treat the book before referred to by Mr. Harding as a fictitious one.

Dr. Kenealy (to witness)—Was not the real cause of the stoppage of the new company the want of power to realise the suspense account?—That question I must answer from subsequent knowledge. From what I learnt subsequently I am of opinion that if they had been able to realise what has been termed the lock-up, there would not have been a suspension.

Dr. Kenealy—If they had not been allowed to be locked up for three years and five months?

The Lord Chief Justice—They were locked up for that time because it was impossible with such debts as those to realise at once. Here were insolvent companies being wound up, and the dividends could not be got from time to time. The real cause of the stoppage was the deficiency of assets required to supply the place of the money that was drawn out. (To witness)—If there had not been a run upon them, they might be going on now?

Witness—Yes, my lord.

The Lord Chief Justice—As I understand the matter, the greater portion of this business was carried on with other people’s money; and if those people distrust, they will take their money away; and if they do not distrust, they will leave it?—It is a question of confidence, my lord.

Examination continued—Did not know whether, from the 30th of April to the 10th of May, 1866, the new company ceased to discount any bills; but, if that were the case, it would cause a withdrawal of deposits. The witness said he could explain why the figures did not agree with the figures he gave yesterday. Dr Kenealy did not deal yesterday with the accounts in the general ledger, nor with the debts. He found that on the 13th January the total amount was 14,192,000l.; on the 10th May it was 9,440,000l., making a difference of 4,752,000l. It was not merely the single deposits that were to be taken into account, but a large number of accounts were to be taken into consideration.

Do you find the name of Mr. George Head amongst the contributories?—Yes, for 1,000 shares.

Look at the list, and see if there is any person who is connexion of the defendants who withdrew his deposit just before the stoppage.

The Solicitor-General objected to the question.

The Lord Chief Justice—When there is a run on bank everyday desires to snatch his own brand from the burning. Here you have a business transferred months before, and the question is whether that transfer was a fraud. I do not think the jury will attach any value to the fact of persons withdrawing their deposit when there is a run on the bank. If it had been near the time of the transfer, and if it were shown that they had deposited money in the bank for the purpose of inducing persons to take shares, that would have been a different thing.

Dr. Kenealy—I feel the force of your lordship’s observations, and will not press the question.

The Solicitor-General—It is said that the bank discounted no bills during the last ten days; just look at the book and see.

Witness—I find that on the 1st of May the amount of the bills discounted was 54,454l.; on the 2nd May, 118,377l.; on the 3rd, 125,153l.; on the 4th, 114,000l. Believed the amount altogether in the ten days was 1,100,000l.

Can you give us any information of the account of Mr. Thomas Howard, whose debt is 331,000l.; was that transferred as a good debt?

Witness—No. It is one of the excepted accounts.

He had been related from his liability, had not he, by a deed executed some time before?—There was a deed.

The Solicitor-General read a proviso in the deed to the effect that nothing contained in the deed should prevent Messrs. Overned, Gurney, and Co. dealing with the securities.

The Lord Chief Justice—Then they released him, but did not release his securities?

The witness said that the property assigned was a mill and some other property in Manchester. A portion had been sold, which realised 7,000l.

There is a debt of J. E. C. Koch, 243,069l. Is that a real debt?

Witness—From this document.

Dr. Kenealy—No; you must confine yourself to the books.

The Solicitor-General—I object entirely to the evidence being merely what the books show.

The Lord Chief Justice—If, in the course of the liquidation, facts have come to his knowledge, he can give evidence of them.

The Solicitor-General—If the question had been asked in that form I should not have objected. I am perfectly contented with the truth of the transaction.

The witness said the books showed it to be in the nature of debt. There were several balances to the debit of an account headed J. E. C. Koch.

Dr. Kenealy—I see an account headed Levant and Black Sea Steam Navigation Company; was there such a company?—There were parties trading under that title.

By Mr. Giffard—On Garaway’s estate (one of the excepted accounts, the debt being 190,977l.) 30,000l. has been received, and a small sum, about 300l., has yet to be received.

The Lord Chief Justice—I should like you to give me a paper showing the profit and loss of the old firm for ten years prior to 1864; and I will now ask you this further question. From all you have seen of the books and accounts of the old firm are you of opinion that if this sum of 4,213,000l. could have been got rid of altogether—I do not mean altogether, because there were certain items to be set against it—in the first place, what the partners had in the firm to their private account; in the second place, what their debts would realise; and, in the third place, what their estate would realise—are you of opinion that if that crisis had not occurred in May, 1866, that that business would still have been a prosperous business?

Witness—I am able to express an opinion on that point with the more confidence, that having last night anticipated to some extent the question your lordship has put to me, I made some extracts from the books. I find that the turn over in the year 1860 was 170,000,000l., the amount of bills discounted was 62,000,000l.; the amount of deposits was 11,800,000l.; the amount of profit divided was 216,000l.; and the amount carried to reserve was 127,000l. In 1859 the turn over was 156,000,000l., the bills discounted 63,000,000l., the amount held on deposit 14,000,000l., the profit divided was 360,000l., and the amount carried to reserve was 82,000l. In the preceding year, 1858, I have not ascertained the amount of the turnover, but the bills discounted amounted to 62,449l., the deposits were 13,600,000l., the profits divided 200,000l., and the amount carried to reserve 53,000l.

The Lord Chief Justice—What I want you to tell me is was there anything to lead you to think that if that business, when the new firm took to it, had been properly conducted as a bill-broking and money-dealing business, without any of its funds being applied to purposes foreign to the nature of such a business—was there anything to prevent that business being conducted as prosperously and as cheaply as it was before?

Witness—I think not. I have given the matter a great deal of consideration, and I am of opinion that if the old firm had not formed themselves into a company it might have been in existence at the present time.

The Lord Chief Justice—That is, perhaps, rather a speculative opinion, unless you have good grounds for it.

Witness—I do not think the position was worse at the time the transfer took place, by the figure, than it was in 1864.

Dr. Kenealy said he wished now to afford explanation as to why the prosecution was unable to call Mr. Edwards.

The Solicitor-General submitted that before his learned friends could give evidence on that point they must show that Mr. Edwards had been subpoenaed, and call upon him upon his subpoena.

The Lord Chief Justice did not think that was necessary.

Mr. Dresten, a medical gentleman, residing at Tunbridge Wells, was then called by Dr. Kenealy. He stated that, as the medical adviser of Mr. Edwards, he knew that he could not attend as a witness without danger to his life, having within the last ten days undergone a serious operation, from the effects of which he had not recovered.

The Lord Chief Justice—That is quite enough.

Mr. Henry Boys, a clerk in the office of the official liquidator, proved that the original draft of the prospectus of the limited company was in the handwriting of Mr. Gordon. He could not tell in whose handwriting was the following interlineations in pencil—“that the company would have the advantage of at once entering into a large and profitable business.” He also proved the handwriting of letters of Mr. Daniel Gurney to Mr. John Henry Gurney, and the signatures of the deed entered into between Mr. Barclay and the other directors on the 2nd of August.

Mr. Peek, being recalled, proved the handwriting of letters from Mr. Birkbeck to himself.

These documents were read by the associate.

The Lord Chief Justice (referring to a letter from Mr. Daniel Gurney to Mr. H. Gurney, relating among other things, to the marriage settlements of his daughters, said that, if he understood the effect of the deeds, whatever might have been Mr. Daniel Gurney’s feeling with respect to the family settlements not being postponed to the security given to the new company, they were nevertheless so postponed; that is, the effect of the deeds was to make the private property liable, notwithstanding his objection.

Robert Witting produced the deed of mutual covenant relating to the rearrangement of the partnership with the Norwich Bank.

Mr. Charles Edward Jones, solicitor to Overend, Gurney, and Co., produced part of the draft of the first deed of transfer prepared by Mr. Braithwaite, who, it was stated, in reply to Dr. Kenealy, was a brother of Mr. Braithwaite, of the firm of Foster and Braithwaite. Many of the sheets were missing, having, as the witness stated, been incorporated with other drafts; and the Lord Chief Justice remarked that it was worthy of notice that Mr. Fooks, the counsel employed after Mr. Braithwaite, had adopted scarcely any part of the original draft. The witness also produced two other deeds. These documents were all put in as part of the case for the prosecution.

The Lord Chief Justice (to Mr. Jones)—It was stated in the prospectus that the deed was lying at your office for inspection. Can you tell me what number of persons went, with the view of taking shares, to inspect that deed?—From 30 to 40.

We have had a resolution of the directors to the effect that the secretary for the share department was to apply to you for the different documents required to satisfy the Stock Exchange. Had you say instructions from, or had you any communications with, any of the directors as to what documents you should give or what documents you should withhold?—None whatever.

Direct or indirect?—Direct or indirect.

With any of them?—With any of them.

In giving Mr. Slaughter the documents which you did give him, did you act upon your own judgment entirely?—Purely.

Mr. Hutchings, solicitor, produced a deed of release between Overend and Gurney and Company and Thomas Howard.

Mr. W. Turquand was then examined—He stated that he is one of the joint liquidators of Overend, Gurney, and Co. (Limited), acting with Mr. Harding. Looking at the list of excepted accounts, he found an item, “Peto and Betts, Arad, 14,000l.” That referred to the cost of the survey for a railway in Turkey. The cost of the survey was 28,000l., and one-half was to be paid by Overend, Gurney, and Co. He believed they did not get the concession, and the 14,000l. was a dead loss. The survey was in or before 1863. Did not know when the concession was finally refused. The Greek and Oriental Steam Company was a company carried on by Mr. Stephanos Zenos. Overend and Gurney made advances to him, and the result was a loss of 144,144l. The ships were taken over from him in 1863, and Zenos, he believed, was released from any further liability. The ships were used afterwards in carrying on the trading of the Levant and Black Sea Steam Company. Could not explain how that amount appeared in the books, seeing there was a release. Believed there was a deed of release. Mr. Birkbeck told him so.

The Lord Chief Justice—Have you the deed?

Dr. Kenealy—No, my lord.

The Lord Chief Justice—But it is your business to produce it.

Dr. Kenealy—I may take what one of the defendants said.

The Lord Chief Justice—It may be a deed providing that the surplus should be paid to Mr. Zenos. You may create a prejudice against the defendants which is not well founded.

Witness—Mr. Birkbeck told me that Mr. Zenos had been released by the firm. The ships taken over from Zenos were subsequently sold. Believed the last ship was sold in 1865, and the result was a loss of 38,211l., charged to the Levant and Black Sea Steam Company. A portion of the fleet was sold on the 2nd July, 1864, for 67,000l., another portion—some barges—for 7,000l., and the ship Pacific, for 25,000l., appeared to have been sold on the 3rd November, 1861, but that must be a mistake. The Millwall Iron Works was another of the excepted accounts. The debt was 510,368l. at the time of the transfer, and 566,489l. at the time of the suspension. The equity of redemption was in the Norwich Bank. Did not know who made over to them the equity of redemption, but he presumed it was the old firm. On that 566,489l. nothing had been realised.

The Lord Chief Justice—Have no means been taken to get it in?

Witness—They hold it as security for the purchase bills. I am sorry to say the value of the works is not as great as the charge upon them. There was a mortgage for 150,000l., and beyond that there is a separate account still outstanding between the old Norwich Bank and Overend, Gurney, and Co.

Dr. Kenealy—It has realised nothing.

Witness—Realised nothing. On Mr. Thomas Howard’s account, 10,000l. had been received. The East India Shipping Company’s account had been increased from 406,264l. to 578,218l. There was a mortgage on the ships for 150,000l., which was paid by the Limited Company before the suspension. That was the way in which the debt was increased.

Cross-examined by the Solicitor-General—Had seen as estimate putting a value on these excepted accounts. It appeared from that that there were some securities held against them. On the total there had been a heavy loss, but in one or two instances they fetched more than the amount. Agreed with Mr. Harding that the failure of Overend and Gurney themselves caused a depreciation in the value of the securities. Was aware of the failure of Pinto, Perez, and Co., and Wallis and Co. Their failure occurred just before the failure of Overend, Gurney, and Co. The effect of the failure of Pinto, Perez, and Co. was to throw back a larger quantity of paper on Overend, Gurney, and Co.

The Lord Chief Justice—I see that the debt of the Millwall Iron Works has increased from 510,000l. to 566,000l., how was that done?

Witness—That I cannot state at once; there are several items right and left, which would have to be gone into.

The Lord Chief Justice—It is important that that should be ascertained, because it may be objected that the new directors threw away the money of the shareholders in advancing more money to these concerns, in fact throwing good money after bad?

Witness—I could not answer the question now without going minutely into the items.

The Lord Chief Justice—Looking at the valuation of the excepted accounts are you of opinion that an exaggerated value was put on them?

Witness—I do not think so. I went over the matter carefully with Mr. Birkbeck, and I came to the conclusion that it was a fair and reasonable valuation to make.

That is your deliberate opinion?—Yes.

After going into the matter?—After going into the matter. I should state that on Mr. Lewis’s account up to the present time we have received 70,000l., and we expect a further amount of 80,000l.

What was the debt of the Atlantic and Royal Mail Steam Company and that of the East India and London Shipping Company estimated at?—The Atlantic Steam Company was put down at 280,000l., and the East India Shipping Company at 175,000l. There were seven ships in the case of the East India Shipping Company, and four in the case of the Atlantic. The tonnage of the ships of the former was 16,318, the tonnage of the Atlantic Steam Company’s ships was 12,029 tons. Was not aware of any offer having been made for those ships before the time of the transfer. Could not tell whether the ships were old or new. Garraway’s estate was estimated to realise 10,000l. It had produced 29,000l.

By Dr. Kenealy—The Atlantic Royal Mail Company’s steamers were also mortgaged to the Imperial Mercantile for 120,000l. The Imperial Mercantile had a claim on the old firm for 120,000l., and they took the ships at 90,000l., leaving them creditors for 30,000l. That 839,000l. would have to be increased by 30,000l., for which the new company had proved.

Dr. Kenealy here offered to put in some affidavits which had been made in some Chancery proceedings. He said he did this in pursuance of the request the Solicitor-General had made that they should be put in, but if he put them in he should reserve his right to reply on them.

The Solicitor-General objected to this.

Dr. Kenealy said he should certainly reserve his right to reply.

The Lord Chief Justice—You must not hold out the olive branch and conceal a dagger under it.

The discussion continued for some time, the Solicitor-General objecting to the affidavits only being put in, and insisting that the whole of the proceedings should be put in or none.

Mr. Mellish made the same objection on behalf of Mr. Barclay.

Mr. Giffard insisted on Mr. Rennie’s answer being put in if any of the other Chancery proceedings were put in.

Ultimately none of the Chancery document were put in, and the last witness,

Mr. J. C. E. Koch was called, and examined by Mr. M. Moir. He stated that the 243,069l. standing against his name, as if he were a debtor for that amount, was not owing by him. He was a mere agent of the company, and different sums were advanced through his agency to Mr. John Alexander Gordon, railway contractor, who failed in 1863, and to other persons, shares being taken as security.

In cross-examination the witness said that many of the shares taken as security were of considerable value.

This closed the case for the prosecution.

The Solicitor-General said, in reply to the Lord Chief Justice, that so far as he could then judge, he should not call any witnesses.

Mr. Mellish said he should have to submit on behalf of Mr. Barclay that there was no case against him.

The Lord Chief Justice (to the jury)—Then I hope, gentlemen, we shall conclude this case on Monday.

The court adjourned at a quarter past five till this morning.

THE BARNED’S BANKING COMPANY PROSECUTION.

Yesterday, for the sixth time, Mr. Charles Mozley and Mr. Lewin Barned Mozley, two of the directors of Barned’s Banking Company, surrendered at the Mansion-house on a charge of conspiracy.

Mr. G. Lewis, jun., conducted the prosecution, and Mr. Serjeant Parry and Mr. Poland conducted the defence.

At the last examination the sitting was occupied by the evidence of Mr. H. W. Banner, an accountant at Liverpool, and one of the official liquidators of the company. Yesterday this witness was recalled, and he entered very fully into the position of the bank both at the time of the transfer to the limited company, and of the failure.

In cross-examination by Mr. Serjeant Parry, the witness said:—Messrs. Barned and Co., to my knowledge, have been carrying on for some years a large and apparently increasing business as bankers. I had every confidence in them. My firm banked with them down to the failure, and are creditors for 7,000l. The defendants were held in the highest estimation in commercial circles as far as I know. I never found any necessity for putting them on their oath. They have readily given me every information that would facilitate the liquidation. Their answers have invariably been true, and have been verified by their books. The defendants have, I know, been completely ruined by this company. The executors of the late Mr. Lewin Mozley lost 20,000l. by it. He was the father of the defendant, Mr. L. B. Mozley. That defendant inherited a fortune, and has lost every farthing of it. I believe they had perfect confidence in the result of the transfer. They have been guilty of no secretion in the books nor of misconduct, so far as I am aware; on the contrary, I consider them most honourable men. The security box was handed to me by them. The securities were kept in such a way that would enable anyone to be easily aware of their nature. I believe every security was handed over. It has never been suggested that any securities were concealed. They consisted mostly of mortgages, bills of lading for produce, and other things. They were at the time of the transfer good and valuable securities, and I have no doubt they would have been generally so considered. Messrs. Barned, in my opinion, were thoroughly justified in looking upon those securities as valuable. I believe that if the debts of the ten firms so repeatedly mentioned in this case had been written off, the defendants would still have been able to carry on their business successfully. They must, however, have had no further dealings with the firms, and quietly realised the securities in hand. There was an increase in all those debts except one during the existence of the company. A strong management would have cut off those large accounts. To continue them was certainly a mistake, but not a fraud. I believe they were continued with no fraudulent motive, but that commercially it was a mistake. In nearly every case of a guarantee good securities were lodged. There was no security for a debt of Lafone of 6,460l. I don’t know of any other such debt. I think they were quite justified in believing the validity of the securities. The turnover, as I have before stated, was 37,000,000l. a year, at least. Country banks always charge commission; ¼ per cent. on the entire debit side was usually the rate in Liverpool, but now it is ⅛th. That was and is a source of considerable profit. They charge, also, interests and discounts on bills. In 1862 the net balance earned by the firm on interests and commissions was 71,503l., in 1863 73,325l., and in 1864 91,367l. That showed a constantly increasing profit. Large fortunes, I know, have been realised out of this firm. The business with 7, 14, and 21 days’ bills was a peculiarly lucrative one, and without risk. It was worth to this bank between 10,000l. and 15,000l. a year. Mr. Charles Mozley paid 100,000l. into his firm just before the transfer. That was to counteract the effect of a serious defalcation and to strengthen the business. It was in March, 1865. After the stoppage Mr. Charles Mozley gave up the Beaconsfield Estate, which has produced 23,000l., and some property in Castle-street, Liverpool, for which we have been offered 50,000l. The former was a fair amount. The Castle-street property has been valued at 75,000l. there was a mortgage on it of 40,000l., but it has been reduced to 20,000l. by the payment to the mortgage of some of the proceeds of the Beaconsfield estate. Mr. Chas. Mozley had also a share, with Mr. Lewin B. Mozley and Mrs. Rebecca Mozley, of the banking premises at Lord-street, worth 69,000l. There is an old mortgage on it of 7,000l. At the time of the transfer 12,000l. stood to his credit, and at the time of the stoppage 4,880l. odd. Mr. L. B. Mozley was entitled to between 30,000l. and 40,000l. under his father’s will. That all went into the bank, and he has lost every farthing of it. At the time of the transfer he paid in 10,000l., and afterwards another 10,000l. At the stoppage 29l. stood to his debit. The executors of his farther had between 20,000l. and 30,000l. in the bank, but it was not transferred to the company. It was kept as a special liability of the firm. The executors have lost nearly the whole of it, with the exception of any little dividend that may be paid. Mr. F. B. Mozley, a relative, has lost 40,000l., and is a ruined man. At the date of the transfer M‘Henry’s bills were estimated at the value they represented. The Bank of England actually discounted his bills up to April, 1866. The Atlantic and Great Western Railway Company failed in 1866. It had not failed either at the transfer or at the issue of the balance-sheet. The bills of J. Baines and Co. were exceedingly good. At the transfer Messrs. Barned had certainly reasonable grounds for believing the bank would prosper; the more so as it was about to receive additional capital. At the stoppage the liabilities of the defendants under their deed were in round figures 883,000l. At the transfer 75,000l. was only owing by them, of which 24,000l. was due to the executors of the late Mr. Lewin Mozley. 49,000l. was covered by good securities, and 1,773l. consisted of small dormant balances not transferred. They owed really 1,770l. in all, exclusive of the family debt. That represented the whole of the liability as far as the public were concerned. They had then no contingent liabilities. Of the debts contracted, 251,000l. was the balance due to the company, which, being reduced by the 160,000l. agreed to be paid as goodwill, really stood at 95,200l. (Mr. Lewis—The deficiency on guarantees only was 1,500,000l.) That amount would be affected by the calls on shares, the 90,000l. worth of omitted acceptances, and the balance of the account generally. The contingent liabilities since the transfer amounted to 270,000l., due principally to nominees of shares whom they had guaranteed. A further item of 184,000l. was covered by securities, and there is no likelihood of any further claim in respect of either of these two accounts. J. Barned and Co. at the transfer had guaranteed only 1,308l. There were also 61,000l. on contingent liabilities, partly secured, and on which no claims are likely to be made. Another sum of 40,000l. is covered. That statement of the account is, to the best of my belief, correct. Mr. Charles Mozley’s separate debt was 283,000l. At the transfer he owed 639l. unsecured, and 53,000l. amply secured; the whole of which has been paid. 173,000l. of the whole debt was due on calls, 50,000l. on guarantees for the company, 2,800l. on calls in other companies, and 3,500l. in disputed shares. Mr. Lewin B. Mozley’s debt is 344,000l. At the transfer his debts were 12,000l., due to his father’s executors. That was an amount he had got in excess of his share, and had put into the company. He was also then liable on guarantees for 15,000l., and they were partly secured. After the transfer 235,000l. was due from him on calls, and 25,000l. on guarantees. Other disputed claims make up the 344,000l. In continuation, the witness, after giving other details, expressed an opinion that the defendants were thoroughly honourable men, and that the transfer was carried out in strict honour. They were thoroughly justified in their belief in the transferred accounts.

Mr. Lewis, at the close of the cross-examination, stated that although the failure of the company was a very proper subject for investigation, after the evidence of Mr. Banner, he would not be justified in pressing the charge. He therefore asked permission to withdraw it.

Sir James Lawrence—I think the prosecution was justified in having a full inquiry where so many interests were involved, and where the matter had caused so much conversation and remark, not merely in the City of London, but throughout the country. At the same I think, after the evidence of Mr. Banner, and after his clear expressions of opinion with regard to the defendants, the prosecutor would have acted wrongly if he had persisted further in the matter.

Mr. Serjeant Parry said the defendants had felt for many years deep regret, not only for the losses sustained by the shareholders, but for the transfer of their business to the company. They had, however, the consciousness of having acted honourably, fairly, and openly, and they were glad to hear that the withdrawal from the prosecution was approved by the court.

Mr. Lewin Barned Mozley, addressing Sir James Lawrence, said, painful as the inquiry had been to himself, his uncle, and to all the family, it was at all events satisfactory that they had at last been allowed a clear judicial inquiry into facts which had been very much misunderstood by the public. That inquiry had been conducted in a fair and impartial manner, and he was satisfied that he and his uncle would stand better now in the estimation of the public than perhaps they had done before.

The summonses were then withdrawn, and the defendants left the justice-room with their friends.

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