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    990 THE LEABUE. [No. 444, September 25, ...

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    Tbe Liverpool Borough Bank. Nisi Prius C...

    bank as a shareholder , that he would be a bankrupt . That is proved beyond all manner of doubt ; and if these transactions , proved in a public court of justice , are not Sufficient in a town like Liverpool to warn people of the consequences of getting into these concerns , nothing will do it . I have thought it right to make these observations to you , because it appears on the face of these transactions beyond all doubt that that was so ; and , if anything can be a warning to people , that ought to be a warning ; and , if it is not , anyone who deals in such matters as these afterwards must take the

    consequences on his own bead . Now , to ^ e ntitle plaintiff's to your verdict , they must establish two prpposition 3—that the report which was made . in July last ivas a false report , that is , untrue , contrary to the truth ; and , further , not merely that it was false , but that it Was fraudulently made , and with the intention to mislead , and' deceive . For the purpose of maintaining an action of this kind , both these matters are essential . The circumstances of the report itself , not being true , would not be sufficient for the purpose ; there must be , further , that it was done with a fraudulent intention , for the

    purpose of misleading these people . Both these matters are essential to the maintenance of this action . Again , they must further satisfy you that this statement , if false and deceitful , was made with the object to mislead them ; and that is a matter to which I will now call your attention , as being the least important in the case , but still one upon which you are called to decide . A report was made from the directors to the proprietors . It was , therefore , primarily directed to the proprietors , and primarily intended for them ; but if you believe the evidence of Mr . Tinley , that any person who went to the bank * or . any broker who dealt in the shares of this kind ¦ who went to the bank , could get . a copy of this report , Obviously for the purpose as a broker of exhibiting it to

    people who were likely to deal in these shares , it will be for you to say , supposing you are satisfied that this was primarily meant for the proprietors , whether it was not meant for the consideration of any persons who wished to make themselves masters of the affairs of this bank ; and if you are-of that opinion , then it would be a publication to . tiiem—it would be a document issued , and a document issued in the sense that any one wishing to de ^ in the shares of this bank could obtain it with a view of acting upon it . But that depends altogether on the evidence of Mr . Tinley . That both these men did act upon it ( no comment has been made upon that ) there is very little doubt ,. f « r they get a copy of this report from their broker , Mr . Byrne , the plaintiff puts

    bis initials upon it the same day , and no doubt can be cast upon that . That is the first and a very - r ® flfta * eri » l matter in this case , of which I will say nothing more at ptesent , but will proceed to call your attention at once to what is the reai matter . Now , gentlemen , the evidence of the plaintiff was , no doubt , as has been observed by the Attorney-General , very extraordinary ; for in reality the whole of his case , so far as regards the real question in dispute , depends upon written documents . The first document which ' was put in evidence is the report of the 28 th of July , 1857 , which is the report in question . Then yre have in evidence a speech of Mr . Dixon's , which he made at a meeting in February last ; and then follow two documents , being a report of Mr .

    Banner ' s , and the proceedings at another meeting in the month of February . By tins time , I have no doubt jrom what has been stated by the learned counsel for the plaintiffs , you are aware that this case depends on the existence of the facts upon the 28 th of JuJy , and that all these subsequent matters have really very little to do with it ; and if you were to make any inference from the statements contained there by Mr . Banner and others , the ijnpression rather would be in favour of the defendant , because I think you cannot have heard that xepqrt read without thinking that no personal blame rests upon any one . But really that ia so much beside the question , that I will not trouble you further with it . It seems to me that the case lies in the narrowest

    compass that a case ever did lie in . It rests upon the true meaning of the document that was published on the 28 th of July , and on the account which you have in your hand , that was furnished by Mr . Smith , and the evidence of the defendant himself , and the fair inference from it . The whole of the . case rests there : you may dismiss for the purpose of this case the whole of the long reports which have been read to you;— 'they relate to a state of things which was discovered afterwards , and which there ig no reason to suppose Mr . Dixon was acquainted with at the time ; at all events there is no evidence of it ; and you are to try this cause upon the

    evidence before you , and not upon surmise of any sort . So far as the evidence goes , it is directly the contrary . Therefore you will dismiss that from your minds at once . The report Is this : — - ' Liverpool Borough Bank , " - —the directors are named , and it is " Report of the Directors to the Proprietors . " I have made the observations'on that as to the other part of the ease , and will not repeat them . " According to the laat report , the paid-up capital of the bank was 900 , 000 ? ., and the reserve fund was 101 , 775 / . 10 s . lid . " No doubt that is true ; there is no evidence to the contrary . " Since that date two calls of 11 . per share have been paid upon the new shares , making thu capital 1 , 000 , 000 / , The net . profits of the past year , after payment of all ox .

    pensesof management , and after deducting 45 , 825 / . 2 s . Id . for losses by bad debts incurred during the same period , amount to 69 , 3187 . 12 s . 8 d . "—that . is also quite true , —" appropriated as follows : —3 £ per cent . diviT dend upon 950 , 0007 ., 33 , 250 / .: 2 A ditto upon 1 , 000 , 000 / 1 , 25 , 000 / . ; property-tax paid by the bank , 3629 / . 6 s . 8 d .: total , 61 , 879 / . 6 s . * 8 d . Balance carried to Reserve Fund , 7439 / . 6 s . " No doubt that is quite correct . " Nearly the whole of the losses above mentioned have been caused by the frauds of a customer . In winding up the affairs , of 1854 , a year which it is well known was most disastrous to those customers of the Bank who were engaged in the colonial shipping trade , heavier loss has been sustained in the realisation of the assets then

    taken over , by way of security and in the liquidation of estates then considered good , than could possibly have been anticipated . " Some comments have been made in the opening , which were not repeated in reply , by the learned counsel for the plaintiffs upon that , although I do not think they Were well founded ; because if any misconception were likely to arise upon that , it was clearly corrected by the two first lines in the following paragraph : — " The directors have thought it their duty at once to reduce the dividend to the rate of 5 per cent , per annum , on the grounds ; that , taking even the most favourable view of the liquidation of these accounts , the whole of the reserve fund will be required to meet the losses incurred ; " which shows that the accounts were

    not liquidated , but were in the course of liquidation" and that , on the other hand , taking the most unfavourable view consistent with probability , the good current business of the bank will , in their opinion , be sufficient to admit of the regular continuance of the dividend , without encroaching on the capital at the same period in the coming year . " Now , there it is said there is a misstatement , and a fraudulent mis-statement , and if you read this correctly and accurately you will see that what is there really stated is / that in the opinion of the directors there would be sufficient to admit of the actual continuance of the dividend , without encroaching on the capital in the same period of the coming year , and undoubtedly that statement is . a statement , that we

    expect in the next ensuing j r ear there will be no necessity to encroach on the capital , if the profits are continued ^ ; and , according to the evidence of Mr . Dixon , there is nothing to contradict that that is so . But then it is said that that statement would induce any one to suppose , that the then present dividend was not taken put of capital ; and that is where the supposed sting of the matter is . You will find , in one moment , that the rest of the report would certainly not induce any one to purchase in this company ; because it says , " In laying " this statement before the shareholders , the directors desire strongly to impress upon- them that its unsatisfactory character is to be attributed to the affairs of 1854 ; and that , apart from these , the sound and

    legitimate business of the bank would have enabled it to pay the ordinary dividends , and also to add largely to the reserve fund , notwithstanding the losses that have been incurred subsequently to that year . " Undoubtedly the evidence is that that is correct . " They wish also to state their confident expectation , that the change they are making in the policy and regulations of the bank will effectually guard against the recurrence of similar results . Mr . Smith having stated to the directors that his health would not longer permit him to undergo the labour of conducting the details of the manager ' s duties , and having in consequence requested to be relieved from his office , they have with reluctance complied with his wish , and have made arrangements that Mr . Thomas Sellar " trouble

    —Then there are other matters which I need not you with . I should expect that Mr . Sellar would be a very competent person indeed ; and it is perfectly obvious that the plaintiffs , in purchasing these shares , were in some degree influenced by the circumstance that Mr . Sellar had become the manager of this bank . The other evidence , on the part of the plaintiffs , for the purpose of satisfying you that this was a false and fraudulent account , consists of a speech made by Mr . Dixon at a meeting in February last , of which you have a copy , and to which I will very shortly call your attention . Now , the first matter which appears in this speech , and which is indeed confirmed by Mr . Dixon on his oath , is that he in reality , although a Director for some years , know nothing whatever of th . o concerns of this bank up to the beginning of the month 28 th of

    of July ; the report was made on the that month [ and he ] states that whatever information ho got , ho got it during the month anterior to that time . Now , you will see that the earlier parts of this speech , beginning at pages 18 and 19 , have very Uttle to do with the matter , but rolato to a matter that does not touch it . The real point which does touch upon it is about one-third down in page 20 , beginning " Towards the end of June last j" and if you have got that before you , you will find thoro an important matter : —" Towards the end of Juno last , Mr . Gross called upon mo in London , an * Btatcd that Mr . Smith was going to resign , and that Mr . Sejlar was to take his place , and ho asked mo if I would become a managing direotor . I assontod . Immediately on my return to Liverpool my first stop was to inquire into the condition of the bank with respoct to the declaration or nondoclarfttlou of a dividend . Tho statement of the affairs

    of the bank laid before me by Mr . Smith led me to the conclusion that no . dividend ought to bo declared . " That is the document which I now hold in my hand , to which your attention has been most fully called , and which you really are much niore competent to understand than I am . But there are one or two observations that I should like to make upon it , especially on those items whitfh are scored through . You will find that there are sonie items that are scored through . I will not go over what was stated very clearly by the defendant himself ; but you will just observe that the debit of the bankis made 400 , 000 / . I apprehend that in a concern of this kind Mr . Smith was not at all wrong ia

    taking off sundries for contingencies—that is , that the bank might be losers to the extent of 35 , 500 / . beyond 334 , 000 / . I think it is not at all likely to be a wrong estimate , that if they had gone wrong to the extent of 334 , 000 / . they might be behind 35 , 500 / . more , which they did not know of in consequence of the magnitude of the account . But an observation has been made by the learned counsel as to that 30 , 000 / . The defendant tells you that he thought this 30 , 000 / . was unfairly put there as a loss , and I do not think he is wrong in that ; because if there was an actual contract to sell these steamboats for 90 , 000 £ , unless there was some reason to suppose that he was wrong ( nothing like that appears ) if

    they were not sold there might be a further loss of 30 , 000 / . ; but if there was a contract for 90 , 000 / ., it would be hard to say that a man making an estimate of the affairs of the bank should not fairly say why not take credit for the 90 , 000 / . ? That would make the debit of the bank 400 , 000 / . On the other hand there are undivided profits , 25 , 000 / ., and this suspense accouut , 113 , 000 / . You have heard what the nature of that was—that it was debts owing to the bank which they did not choose to consider as certain , or which they had put . as debts due to them , which were otherwise uncertain , as they considered they had a right to put the one against the other . And I have frequently seen in railway accounts this suspense account , but 1 did not know

    what it meant until I was enlightened upon it here today . Here it is ; you are much better acquainted with , it than I am ; and you will be able to say whether it is a proper item to go into this matter or not . Then there is " profits to the 30 th of June , 75 , 000 / . " No doubt that is true . Then there is an actual reserved fund of 102 , 000 / . No doubt that is true . These sums together would make 380 , 500 / ., which would show as against the 400 , 000 / ., which if the 30 , 000 / . were off would make 380 , 000 / ., against 370 , 000 / ., or if the 30 , 000 / . were to stand , would make 20 , 000 / . of deficiency . Then there was added another itein by Mr . Smith— " Forfeited shares 65 , 000 / ., " which is so , I suppose , in point of fact .

    Mr . James : —I beg your lordships pardon , it is 315 , 000 / . Mr . Baron Martin : —I beg pardon , I was considering the forfeited , shares . Mr . Edwin James : —Those are struck out . Mr . Baron Martin . —Yes ; but 1 am speaking of the account which the gentleman had to deal with . Gentlemen , you are to consider the state of Mr . Dixon ' s mind at the time , and you must take the information tliat he had , and give a fair ami liberal consideration to it . It is not as the thing afterwards turned out , but you must give a fair and liberal consideration to his state of mind at that time , when you are trying a question of this dethat is 1

    scription . " Forfeited shares , 65 , 500 / . ; " , presume , there were shares standing forfeited by shareholders , which they had not paid up upon , ami which they had a right to dispose of : and if they sold them at par , those shares at 10 / . would have realised 05 , 500 / ., which they might do for the purpose of making the shares complete . That makes tho sum of 390 , 000 / . There was then profit for tho coming year , 120 , 000 / . ; and then there was a deduction for the dividend , nt five percent ., 70 , 087 / . ; leaving a balance of 49 , 913 / -i n » a that would put a sum of 430 , 413 / ., as against this 400 , 000 / . ; and thoro was tho account struck by Mr . Smith , deducting tho 400 , 000 / ., leaving 30 , 113 / . as u reserve , after paying the 5 per cent , dividend . It ib qu » w obvious , that that was tho statement which wus put before the defendant , on which ho . had to exorcise ma judgment , and that tho ostimato which Mr . bmiiu put . cent tho

    before him was that , after paying 6 por , on ensuing year , there would remain a sum of 33 , ouu < . suiplus boyond that . 1 have boon spoiling over it to-day , and the only objeotion I soo to that is , that it scorns w mo ho leaves short ono dividond for half a year , anu u that was thoro , it would bo , so far us tho estimate , goes , correct . It seems to mo , but I may bo wrong , «»« ""* soom to mako a provision for tluoo half-year * div » aonus , while only two are mentioned horo . Boyond tliat , * « no observation to moke upon it . That » wlia ^ JJ placed in his hands . He goes on to any , — " lhifl f v tho of the case was assented to at a mooting j » k Directors ; but at a mooting afterwards , s """ "' ¦> " voned , tho decision was reversed . " Mr . WooUww * e « J ™ — "Ry the whole of tho Board , or by part t » Dixon says— By tho Board , and to wbloh * ywww , tho motive being that if was very dangorous , i » ' ^ position of tho bank , to run tho risk of tho exel "inon ' that might bo producod by tho non-deularaUon o <¦« dond . It might have resulted in a ran , and tuo am-

    990 The Leabue. [No. 444, September 25, ...

    990 THE LEABUE . [ No . 444 , September 25 , 1858 .

• Citation
  • Leader (1850-1860), Sept. 25, 1858, page 6, in the Nineteenth-Century Serials Edition (2008; 2018) ncse-os.kdl.kcl.ac.uk/periodicals/l/issues/cld_25091858/page/6/