Mr. James, of Messrs. James, Mellor, and Coleman (London), appeared for Mr. A.C. Palmer, the trustee.
Mr. Denton was not represented legally. None of the creditors appeared.
The Examination
Mr. Denton was examined by the Official Receiver (Mr. A. Ewen.)
The Official Receiver : The amount of your assets over your liabilities at the beginning of the present year was £28,348/10/1, and the deficiency, according to the statement of affairs, at the time of the receiving order was £18,877/1/0? - Debtor : Yes.
So that you really have to account for a loss of £47,225 since January last? – Yes.
You began business in High-street, Rushden, about 40 years ago as a boot and shoe manufacturer? – Yes.
What capital had you? – I had at that time a free capital of £3,500, consisting of £2,000 in cash and £1,500 the value of the premises. In addition I had about £800 which I had accumulated while I was managing the business before my father’s death. I succeeded to the business of my father and carried it on under the name of B. Denton and Son. I have kept a full set of books in connection with B. Denton and Son, but they were not professionally audited.
Profits And Losses
In your private ledger under the date Dec. 31, 1899, there was a profit of £4,304 on the year? – Yes.
There is another account dated May, 1901, which shows a profit of £7,035? – Yes, that would be so.
And in May, 1902, a profit of £8,060? – Yes.
Was it in connection with contracts during the time of the war that you made these heavy profits? – Yes.
Then, according to the accounts in May, 1903, there was a loss of £4,188? – Yes.
In the following year a loss of £137? – Yes.
In December, 1905, a loss of £4,942? – Yes.
And then, under the heading of Denton and Son, in the deficiency account, there is a loss of £4,628, bringing it up to the date when you filed your petition? – Yes.
I have put all the figures together and have deducted the various losses from the profits made during the years I have mentioned, and there has been a net profit in seven years of £5,783? – Yes.
This works out at about £820 per annum profit on an average if you had pooled it? – Yes.
It was an extremely fluctuating business, though a good one? – Yes.
Do you consider it would require as much capital as you have told us you had to work that business properly?
Debtor : Yes, to get the same income.
But in reality this was quite a small portion of the business you had carried on prior to the date of the receiving order? – Yes. But the others were very recent.
F. Noble, Moor-Road
The Official Receiver: You carried on business under the name of F. Noble, Moor-road, Rushden, as a boot and shoe manufacturer? – Mr. Denton: Yes, it was a business I took over from insolvency.
Answering the Official Receiver, Mr, Denton said that in connection with the business of Frederick Noble he employed Mr. Noble as manager. In connection with that business there was a full set of books kept, and they were audited by Messrs. Palmer and Co. a balance-sheet prepared in December, 1903, showed a profit of £506. in 1904 there was a loss of £586, in 1905 a loss of £262, and in 1906 a loss of £694. From December, 1906, to October, 1907, there was a profit of £55. Those figures were arrived at after crediting him with the interest on the capital he had in the business. In all he lost in the years named £981 on the business. The premises belonged to F. Noble when he took over the business, but the bank had charge on them, and he (Mr. Denton) had to pay to the bank the necessary interest.
The Official Receiver: From the date you took over Noble’s business up to the present time you have paid interest on the amount that was due to the bank? – Yes.
You have not paid the bank off? – No.
And the net result is a loss of £981 to the estate? – Yes.
The Joinery Works
The Official Receiver : In 1892 you bought a business called the Rushden Machine Joinery Works? – We called it that afterwards.
Was that an insolvent estate? – Yes, Whitbread’s.
You kept a set of books there under the supervision of your son? – Yes.
Were they audited? – Not professionally audited.
That business has been carried on at a loss? – Yes.
In 1893 the loss was £252; in 1900 the loss was £1,290; in 1904, £176; £1 was lost in 1905; and £72 in 1906; making a total loss in connection with the joinery works, £1,841? – Yes, that is so.
Then you took over one insolvent estate and made a loss of £981, and then took over another and made a loss of £1,841? – Yes.
Lightstrung Cycle Co.
About 1899 you purchased from the trustees of William Okins, a cycle manufacturer, a business which you carried on in the name of the Lightstrung Cycle Company? – Yes.
That Company practically has not resulted in a loss? – No loss that makes any appreciable difference.
The Farm
When your father died he left a farm charged with certain family annuities? – Yes.
You continued this farm on behalf of the family for some time and it was not paying, and then you bought it from your father’s estate? – The larger portion of it; that was 20 years ago.
And you have farmed it ever since? – Yes.
There was no balance sheet? – No, it was merged in my private accounts.
The farm has not been a success? – No, I have lost £150 a year on it for 20 years.
That brings me to a question which I must put to you. Why did you continue year after year facing losses of this kind? – Why should you farm for 20 years at a loss of £150 a year?
Without waiting for an answer the Official Receiver proceeded with other questions.
All these businesses were being carried on at the date of the receiving order; B. Denton and Son, F. Noble, the Joinery Works, and the Lightstrung Cycle Co? – Yes.
The farm and the grocery business had recently been given up? – Yes.
The farm now belongs to the estate? – Yes.
You had also’ other businesses which you had wound up at the date of the receiving order? – Yes, I am afraid I have had a great number of those.
And each one has contributed either by profit or loss to the present state of affairs? – Yes.
Bull’s Factory
You had a boot manufacturing business formerly carried on by Mrs. Bull, in Harborough-road, Rushden? – Yes, about seven years ago I bought this business and carried it on for some years, but I found it was not a success at any time since I had anything to do with it. It was wound up at an estimated loss of £2145 to me.
And that loss must affect the present state of affairs? – Yes.
To whom did the premises belong? – To Henry Bull, but the bank had a lien on the premises. I took it over subject to a mortgage to the bank.
So that ever since you took it over you have been paying interest on the mortgage? – Yes; there were cottages in connection with these premises, and I have taken the rent of these cottages.
Grocery Business
There was also a grocery business at Rushden which originally formed part of the estate of your late father? – Yes.
That, for a considerable number of years, was successful? – Yes.
But the success did not keep up, and you wound it up this year? – Yes.
After running it for several years at what you knew to be a loss? – Yes.
There is at the present time an outstanding liability of £227? – Yes.
You estimate the total loss in connection with the grocery business at £1,500? – Yes.
Why did you go on with that business after you saw it was doing no good? – I had had it for 30 years and it had been a paying business. Naturally I was expecting it would again be a paying concern.
The chief loss in connection with that business was in bad debts? – Yes.
But bad debts arise in all businesses to a great extent from want of supervision, and from trusting people too much? – I suppose so.
Too Many Irons In The Fire
You had so many irons in the fire that it was absolutely impossible, physically impossible, to look properly after all these businesses? – Yes.
And the consequence is that they have practically all been going on year after year resulting in loss? – Yes, during the last five years, but if you go further back, they were all profitable.
Wilkins And Denton
You were also in partnership with Mr. Wilkins in London? – Yes.
Messrs. Wilkins and Denton had a business in town, and it was supplied to a large extent by boots manufactured at B. Denton and Son’s? – Yes, Wilkins and Denton distributed the boots made by B. Denton and Son.
And the business of Wilkins and Denton was a very great success? – Yes. Mr. Denton added that the partnership began in 1890, and the business was turned into a limited liability company in July, 1907. Debtor was then made a director and was allotted shares to the extent of £10,500. Of these £3,000 were allocated to H. T. Wilkins, and held by him as trustee of Wilkins and Denton for any claim they might have against debtor. Six thousand were allotted to Mr. Lilley as collateral security for an advance to F. Noble and Co. Five hundred went to Mrs. Brawn against money due to her.
The Hackney Business
The Official Receiver next questioned Mr. Denton at length about the business which was afterwards called F. Noble and Co., Ltd., leather merchants, Hackney-road, London, N. He bought the business three or four years ago from a man called Matthews, a concern then solvent. The idea of purchasing this business was to provide an outlet for the productions of the moor-road business at Rushden, styled F. Noble. Debtor took over one of Matthews’ employees, a man names Carr, and installed him as manager, and the business was turned into a limited libility company almost immediately. To all intents, it was a one man concern, though Mr. Denton explained that he had an idea of giving his employees an interest in it.
The Official Receiver: This business was a dead failure? – Debtor; Yes.
How much do you estimate you lost in connection with Nobles, Limited? – I should say about £20, 000 ; over £20,000 in the course of four years.
Mr. Denton added that eventually ac meeting of the shareholders and creditors took place and a liability of £16,700 was shown. In addition to which he had given guarantees to the extent of £8,000.
East End Jews
What was the primary cause of the failure of Noble and Co., Ltd.? – Attempting to do an impossibility, I should say.
With an impossible lot of people? – Yes, in the East End of London.
If the Company had tried to find the worst lot of people in the East End of London they could not have been more successful than they were? – No.
Mr. Denton added that the bad debts were due for the most part from East End boot manufacturers, Jews chiefly. It was a very bad egg indeed. Those losses made him very tight at the bank, and people in town began to get shy of Noble and Co., Ltd., and before giving any credit asked for security. They looked to him for that. He guaranteed the amount of goods supplied to Noble and Co., Ltd., to the amount of £8,000 at least. Mr. Lilley also made an advance to that Company of £2,000, for the purpose, as it was then thought, of winding it up and as a collateral security he had more than £8,000 nominal value of book debts. Debtor first began to know the Company was “troublesome” in July this year, though he had heard it from the manager from time to time before. It was not until the half-yearly statement was made in June that he realised the Company would have to be wound up. He had been committed for a very large amount before he knew anything at all about it.
The Official Receiver : Did you take any pains to personally inquire into the standing of these people? – Yes, I urged the manager to watch very carefully so as not to allow the accounts to be increased.
Why did you let it run for 18 months before finding it out? – Well, these debts only cropped up one at a time.
Did you exercise proper supervision over Noble and Co., Ltd.? – I think the answer is quite clear that you did not. The answer may be that you had so many other things that you could not. - Debtor agreed.
During the period of two years there has been bad debts to the extent of £17,684? – Yes.
A Successful Concern
In reply to further questions, debtor said that the firm of Wilkins and Denton was converted into a limited liability company in July last. It was the one success of his venture. His share of the success of the Company was £10,500. all that money had been dealt with in September when the meeting of Noble and Company, Limited, was held. £6,000 had been given to Mr. Lilly, £1,000 was in his own name, £500 to Mrs. Brawn, and £3,000 to Mrs. Wilkins. At that date £3,000 was held as provision against any claim which might be made against him in respect of Wilkins and Denton, but as it was an excellent business he hoped to have the benefit of that £3,000. £6,000 in Wilkins and Denton was also issued to Mr. Lilley as collateral security for £2,000 book debts in Noble and Company, although there was only £2,000 due to him in Noble’s, which debts were worth something, so that he might reasonably have hoped that something over £4,000 of those shares in Wilkins and Denton would ultimately become his estate. That was £7,000, and he had another £1,000 issued to himself, so that at the date of the meeting of Noble and Company in London there was about £7,000 or £8,000 of shares in Wilkins and Denton which were assets of his. Now that sum was not free.
An adjournment was here made for lunch.
After Lunch
The Official Receiver pointed out that there would be £5,000 of the shares in Wilkins and Denton which in September he might call liquid assets.
After the meeting of Noble, Ltd., debtor said he gave his bankers a formal charge on those shares. They were then pressing him to reduce his overdraft, and they already held £5,000 worth of preference shares in F. Noble, Ltd., but they were practically worthless. Debtor said he knew after the meeting of Noble, Ltd., that his affairs were in a very serious position, but he did not think it would come to a wind-up.
The Official Receiver : But in consequence of something you have done about the date of the meeting of Noble and Company, Ltd., the whole of your interest in Wilkins and Denton has been assigned? – Yes.
Overdrafts
You have owed a very large overdraft at the bank for several years past? – For many years, I have always been indebted to them.
In December, 1904, on all your several accounts you were overdrawn by your own figures to the extent of £19,084/10/2? – Yes.
In June, 1905, you were overdrawn over £19,000; in December, 1905, over £19,000; and in June, 1906, the same ; whilst December 1906, you were overdrawn to the extent of £20,759? – Yes.
And at the date of the receiving order you were overdrawn on the accounts you have mentioned to the extent of £23,311/10/0? – Yes.
And in addition there had been a standing loan by the bankers of £10,000? – Yes, for many years.
So that at the date of the receiving order you were overdrawn at the bankers £33,311/10/5? – Yes.
Bank Charges
And, of course, during the years I have mentioned from December, 1904, up to the present time you have had to pay bank charges, interest, and commission? – Yes.
And that has amounted to £1,500 a year? – Yes, and more.
In three years three months the amount you have paid in bank charges, interest, and commission amounts to £5,272/8/6. You have had a standing charge of £1,500 a year before you could look for anything for yourself? – Yes.
And that has been increased year by year in taking over these insolvent properties, and growing like a great snowball? – Yes.
And you had known it? – Yes, certainly.
Worth £60,000 Ten Years Ago
Well, how did you ever hope to be able to get out of these difficulties, Mr. Denton? – Ten years ago I was nominally worth from £50,000 to £60,000.
But in addition you were nominally worth £28,384/10/0 in January this year? – Yes.
And all that has gone, plus a deficiency of £18,877? – Yes, that is so.
So that what it really amounts to on paper is that there has been a loss of £47,225 since the first of January in the present year? – Yes.
You don’t suggest you were worth £28,000 at the beginning of this year? – Yes, I do, certainly.
And that you have lost £47,000 – anyway you like – in this year? – Yes, I do.
I mean to say, the root of the mischief must have been years and years back? – I don’t think so. It has all arisen out of the last three or four years.
Wise After The Event
The Official Receiver : I do not want to make it worse than it is, but the whole of the time for the last four or five years you must have known every night that most of the businesses were going wrong with the exception of Wilkins and Denton, and that you owed £10,000 to £20,000 to the bankers, and you must have known you had invested £20,000 of your own money in Noble, Ltd., and yet, during the first 18 months of Noble, Ltd., all these bad debts come in which are mainly the cause of the present insolvency; and I suggest you have had so many irons in the fire that you have let five out of every six get cold.
Mr. Denton : That is your opinion. Of course I am prepared to accept it. I cannot explain it. If you ask me whether I should do the same things if I started again I should say no, but after the event one is always wiser.
A few questions regarding guarantees were put by Mr. James, after which the examination was closed, subject to the signing of the shorthand writer’s transcript on January 4.
