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    Wn 44.4. September 25, 1858.] T HE X EAD...

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    MB. DIXON'S SPEECH AT THE MEETING OF SHA...

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    Tbe Liverpool Borough Bank. Nisi Prius C...

    page of the bank . " Now , certainly , gentlemen , I think I must say that some observations which have fallen from the plaintiff ' s counsel ,-you mustjreceive with some quaUfication . This was at a time when the bank was believed to be solvent , and when there waa no reason at all to suppose it was not solvent . You must look like men of sense on things of this kind , and give thenva reasonable consideration , and consider how-far people should not take into consideration , if they had not declared a dividend , and declared the whole thing insolvent , what would have occurred . You must give a reasonable consideration to it . I do not think it ought to be your sole guide ; but , nevertheless , it is not a matter to be thrown entirely overboard in the consideration of

    a question of this sort " I acceded to it only on the understanding recorded on the minutes , that the statement to the shareholders should contain a full and correct disclosure of the position of the bank , even although it should disclose the fact that the dividend was declared out of capital . The report that has been presented , well examined , shows the fact , although I do feel that it does not make the statement in the broad terms that ¦ would have been adopted if the intention had been to state that there was a very handsome surplus . " I may state , now , that had it not been for that paragraph in this report , [ speech f ~\ I should have said there was no case to go to the jury , and Should have stopped the case ; but the existence of that paragraph , in my

    judgment , made it a matter in which I thought I could not properly stop the case , but must leave it to you to decide on . I think that paragraph made it evidence to go to you , but if that had not been . there , I should have stopped the case , and said there was no evidence to go to you upon the matter . Gentlemen , there is the whole of the speech , so far as it bears upon this ; and I need not trouble you with the rest . The other evidence in the plaintiffs' case was the production of . that document , which occupied some little , time . Then there was the evidence of Mr . Scott , and the evidence of Mr . Robinson , which I need not trouble you with , and the evidence of Mr ; Tinley , which I have already called your attention to ; and need not trouble you with it further . It seems to me

    that all I have now to do is to read the evidence of the defendant himself , and that will put you entirely in ^ a position to decide upon the case . His statement is this , —— " I am a member of the firm of Isaac Low and Company . I have been four or five years in business in Liverpool . I was before a merchant and a banker at New Orleans . I was in business there thirteen or fourteen years . I hold 1400 shares in the Borough Bank . I purchased some of them in May , 1857 . I purchased more in the same year . I purchased in all 1400 shares in 1857 ; and I purchased a similar number to similar amounts for two of my partners respectively . I purchased 1500 in all during that period . " So that , beyond all manner of doubt , he was a large shareholder in this

    bank , and was concerned in it to the extent which I have mentioned . "I had 900 shares before this . My earliest purchase was in 1854 , and I have parted with none of them . In 1854 I was appointed a director . It was in July or June , 1854 . I continued to be so until the stoppage . I am now one of the liquidators . I found , when I became a director , that the managing directors and the manager really conducted the business . The manager was Mr . Smith ; he was a permanent paid officer . Thero were twelve directors ; there were two managing directors , and the chairman wag ex officio a

    managing director ; in point of fact , the business rested with the manager and the two managing directors . " So that there can be no doubt of the truth of what I mentioned to you at the beginning of my observations upon this case . " Periodical meetings of the general body took place once a week . If a failure had occurred it was mentioned , and the amount of the loss . A fortnightly balance sheet was also laid before them , whiah showed the aggregate amount of assets and liabilities . There was a book also which contained a statement of all the dishonoured bills . Thero was another book containing the amount of bills sent to the discount brokers to

    discount . No means wore furnished to tho directors to ascertain tho correctness , and I believe tho others took theso statements on the credit of tho managing directors . I was dissatisfied with tho amount of information afforded . I bocamo so about tho beginning of I 960 . I set on foot a negotiation to have myself placed on the managing committee . This negotiation failed . I communicated my views to tho others . I communicated my viewa in a formal manner before the board . A minute was made of it then . My suggestion was not adopted . I hail no other knowledge tlian . what I have stated , down to 1867 . A vacancy occurred in the managing ectors in 1867

    dir . I was appointed managing director on tho 4 th of July , 1857 . " That la tho month in whloh this report was made . " I was appointed , and becamo so whiloi was in London . The statement cantained in my speech on this subject Is correct . Whon I oamo to Liverpool I took stops to ascertain what was tho roal etato of tilings . I put myaolf iu communication with Mr . Smith . I took part in tho dieousslon whloh ended , In tho Report of tho 28 th of July . I appllodl to , w , Smith for Information as to tUo losses that had ocourrod . Ha furnished mo with tho paper produced today . I carefully wont over tUo figures and dlsoussod taorn with Mr , Smith . Ho stated to mo that tho paper

    "On the debit side it contains actual losses , partial losses , and doubtful . The steam vessels were two vessels that had been mortgaged to the bank and which they had contracted to sell for 90 , 000 / . ; I , in my own figures struck off 30 v 000 ? . " He says he did not consider that a fair item of deduction , which you can understand better than I can . " The suspense account was profits from commission and interest charged to parties with whom the bank had accounts , but not being of a fully reliable nature the board set them off against possible contingent losses and did not declare them as part of the reserve fund . It was an existing item to the credit of the bank . The reserve fund was what was declared to be payable . I proceeded to consider what dividend ought to be

    contained all the losses likely to happen . I had no reason to doubt the accuracy of the statement . I had no means of correcting it if there was an omission or error . " He again explains the statement . He says ,

    paid for the current half-year . I put down my conclusions in figures . The figures in my handwriting are 334 , 000 * . The debit was stated to be 33 , 000 / . and I added 25 , 0007 . ; this makes a total of 58 , 000 ? . I came to the conclusion , in my own mind , that there should not be , a dividend . I communicated thi $ view to the managing directors of . the board . " Gentlemen , you must not be misled about this dividend . A great deal was said about it ; but it has nothing to do with the matter . The question is , whether there was or not a false or fraudulent representation contained in that paper ; and whether it was a wise or prudent thing to do to declare this dividend , is a matter that has nothing to do with / it , and which you have no concern with . That is entirely a by matter . "I communicated my opinion to the whole body . A draft report was drawn up by the manager , I do not know what has become

    to deceive any one at all conversant with banking business . I think that , with average profits , a dividend might have been made , without infringing on the capital fin the following year ] . The profits , from the 3 ' Oth of to the 27 th of October in rati

    that you must be satisfied reports were generally to brokers , so as to enable people ^ who were desirous of informing themselves of the affairs of the ' bank , to consult and to get information upon it ; for , i £ so , although primarily intended for the proprietors , nevertheless you will have to say whether it was not intended for the information of any one who desired to get information upon the subject . You must make up yonr minds affirmatively upon all these questions before yoi * find for the plaintiffs , and then tbe amount claimed is 142 £ ; and in the . result of your being of opinion that the verdict should be for the plaintiffs , it is for you to say whether tbat is the proper amount of damages . to consider their verdict at ten

    that these issued June , were a greater o than to satisfy what I stated . I have since obtained a great deal of information which 1 had hot arid could not then have had—the information on which this report was prepared . Gentlemen , there is the case . You have heard it , I am sure , most admirably commented on ; and you have finally to decide , on the evidence , these two questions , ¦ —waa that report a false report ? and was it a fraudulent report ? And before the plaintiff is en-r titled to your verdict , he mast satisfy you of both . I have already made those observations to you with respect to the acting upon it , for the purpose of suggesting

    The jury retired nnnutes to six o ' clock . They returned into court in about half an hour , and gave a verdict for the plaintiffs , damages 14 . 21 . 7 s . 6 d . The Attorney-General . —Would yonr lordship stay execution in this case ? The Judge . —There is no law , I apprehend , in it . Sorely there is no cause for any staying execution . The Attorney-General . ;—Perhaps not . The Judge said that in three or four cases , at the request of the counsel ,. he had stayed execution . He begged it might not be accepted as an expression of dissatisfaction on his part with the verdicts . He was not dissatisfied with any of the verdicts that had been given : here . The only objection he had to staying execution was that it was supposed be was dissatisfied with the verdict returned .

    of it . It was drawn up early in July . Iattened . tbe meeting on the 4 th of July . It was an average full meeting of the board . I maintained ray view that there ought to be no dividend , and stated that it was based upon the calculation furnished by Mr . Smith . The majority disagreed with me , and resolved that there should be a dividend . I continued ' myself to be of the same opinion as before . It was stated by Mr . Smith that he wa 3 under the impression that the customers of the bank and the shareholders would be most grievously alarmed by the non-payment of a dividend ; and this statement ¦ was made before I agreed to submit to the majority * . I stated that paying a dividend out of capital was a logical absurdity , which , if they pleased , they might commit ,, provided they placed on record a minute , that by so doing they , did not interfere with giving to the shareholders a fill ! and correct statement of the affairs of the

    The Attomey-GeneraL—I have riot ventured to suggest it . The Judge . —You may have it ; but I do hope that that will not be construed into any expression of my opinion , There can be no reasonable objection to a week .

    bank . I drew a draft resolution to the effect , which was ¦ read , and a report was ultimately prepared in the form different from that which was ultimately published . This is it . " That is a document which has been read . It certainly does go more fully into the matter than the one ultimate ^ published . The first part of it is just the same . " 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 assets then taken over by way of security than the directors could have anticipated , and than the large provision already made for that purpose will meet . While the directors entertain no doubt that the policy of taking

    over these assets waa one by which the interest of the bank was best consulted , they regret to inform the shareholders that the result of a careful revision of these assets leads them to declare that the reserve fund can no longer be considered an item to the credit of the bank , and that thq further amount required to meet these losses , if realised at once , would absorb about 58 , 000 / . of the capital of tho bank . " I have no doubt that was tho 58 , 0001 . which he had taken from the figures . For ( after ) the " capital of the bank" there is a blank left . Then he proceeds to say , " Under theso circumstances the directors were in doubt as to tho propriety of paying any dividend for the last hnlf-year , but concluded to do so on tho ground that tho business of tho past year ,

    taken by itself , warranted their doing bo . " That seems to be tho truth , that tho legitimate profits of tho bank for that year did so . " And that it was advisable to separate ( spread ) tho losses arising from tho affairs of 1854 over a future period , rather than expose tho shareholders to the inconvenience j" thoro are then soveral amendments struck out—" rather than oxposo tho shareholders to tho inconvenience * of < in intermission of any dividond , which somo of them might feel perhaps very severely . The directors do not soe any more impropriety in this course than in that of an individual , after an Unfortunate yoaVs business , supplying his necessary

    expenses out of his trading capital , provided always that tho fact of this being done is fairly and honestly laid before tho shareholders . " That waa tho document which ho prepared , and which ho states ho drew up . A discussion took pl . ioo upon it , It was set asldo , and they did not liko it . " Ultimately , I concurred in what was published . . I boliovotl tho statements in tho report ; to ba truo . I bolieved all tho statements mado in it to bo truo . I liavo sioco acquired a very great deal of information as to tho a ( laird of tho bank . My opinion as to tho profits of tho bank , as stated in that report , was well based . Thoro was nothing in tho report tending

    Wn 44.4. September 25, 1858.] T He X Ead...

    Wn 44 . 4 . September 25 , 1858 . ] T HE X EADEE . 991

    Mb. Dixon's Speech At The Meeting Of Sha...

    MB . DIXON'S SPEECH AT THE MEETING OF SHAREHOLDERS IN FEB ., 1858 . I propose , before proceeding any further , to make a few remarks in my own individual capacity as a Director I cannot but feel that the position in which the Directors are placed is one of very great discredit —( hear , hear)—and I wish , as fully as I can , to explain ray part in the direction . It is now about three and a half years' since I became a director in this bank . At tbe time I was only very recently resident in Liverpool , and tho whole of my commercial life had been spent abroad . It struck me as very strange that the directors—the outside directors—knew nothing of what was going on in the bank , so as to enable them to exercise any

    control over it . Being the youngest man at the board , and the youngest member , I did not feel myself warranted in setting myself in opposition to routine before I had made inquiries as to what was the custom amongst the directors of other banks in the kingdom . I am on delicate ground here , but I feel that I am justified in saying that the practice of tho Directors of this Bank , in respect to not having an insight into its affairs , is not by any moans unusual or exceptional . It is not tho only bank in the kingdom whore the outside directors know little or nothing at all ; still I do not think that the practice in itself is right ; I think that it is vicious and wrong , and that people allowing themselves to bo called directors of an institution ought at tho loast

    to discharge something of tho duty which they take upon themselves . ( Cheers . ) I was dissatisfied with it . About two years ago there was ft negotiation for placing ; me on tho managing committee I have no hesitation in saying that tho negotiation was so backed that it ought to have succeeded . I merely mention this to oxrplain how it is that , having felt the impropriety of tho position occupied by tho directors , I was so long before giving effect to those views which I admit I entertained . Tho negotiation took somo time ; and , while it was pending , sooing that thoro was a prospect of my having

    that degree of information which was required , and an influenco which would enable me to altor tho practice of the bank , I was indisposed to do anything , but wuit tho icsult . Tho nogotlaiiou oamo to nothing . About August , I 860 , Mr . Solinr was appointed managing 1 "' rector . I had known him long , and ftlt that Ms business capacity and qualifications woro such that I was sure that if tho all ' alrs of tho bank woro not pravlous y managed as well as they ought to bo , thoy would groatly benefit by tho assistance ho would give I know nothing of tho afi ' aiw of tho bank , oxooptlnff what wight bo In-

• Citation
  • Leader (1850-1860), Sept. 25, 1858, page 7, in the Nineteenth-Century Serials Edition (2008; 2018) ncse-os.kdl.kcl.ac.uk/periodicals/l/issues/cld_25091858/page/7/