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pace of the bank . " Now , certainly , gentlemen , I think I must say that some observations which have fallen from the plaintiff ' s counsel , you must receive with some Qualification . This was at a time when the bank was believed to be solvent , and when there was no reason at ' all to suppose it was not solvent . You must look like men of sense on things of this kind , and give them a 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 treasonable consideration to it . I do not think it onght to be your sole guide ; but , nevertheless * it is not a matter to be thrown entirely overboard in the consideration of
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 , "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 , 'OOOfc * ' 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 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 , 000 / . ; 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 this 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
of it . It was drawn up early in July . I attened the meeting on the 4 tli of July . It was an average full meeting of the board . I maintained my view that there ought to be no dividend , and stated that it was based upon the calculation furnished by Mr . Smith . The majoritv disagreed with me , and resolved that there should be adividend .. I continued myself to be of the same opinion as before . It was stated by Mr . Smith that he was 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 full and correct statement of the affairs of the
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 ultimately published . The first part of it is just the same . " In winding up the affairs of 1854 , a year winch it is well known was most disastous 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 was 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 the further amount required to meet these losses , if realised at once , would absorb about 58 , 000 / . of the capital of the bank . " I have no doubt that was the 58 , 000 / . which he had taken from the fi # uros . For ( after ) the " capital of the bank" thero is a blank left . Then ho proceeds to say , " Under these circumstances the directors were in doubt ns to the propriety of paying any dividend for the last hulf-year , but concluded to do so on the ground that tho busint'ss of the past year ,
taken by itself , warranted their doing ho . JLhataeems to bo tho truth , that the legitimate protUs of the bunk for that year did so . "And that it was advisable to separate ( sproiul ) tho losses arising from tho affairs of 1851 over a future period , rnthpr than expose tho ( shareholders to tho inconvenience ; " thoro arc I lion several an i end incuts struck out— " rnthar than oxpoao tho shareholders to tho inconvenioiico of an iiitcnnisiifon of any dividend , which soinu of thorn might feol perhaps very sovorely . The directors do not two any nioro impropriety in this ooui'ho than in that of an individual , after an unfortunate year ' s bunliioss , supplying his uocoasnrv
oxpoiirii's out of his trading capital , provided always that tlut tout of this baUw dono In 1 ' ^ rlv and . hiinnadKJiikL TJFioTG tlur SharolioUloii * . ' 1 hat was tho document which ho prcpiiml , and which ho status ho drow up . A dibouHrtiou took pi , ico upon it . It wns sot libido , and ihoy did not Ilko it . " Ultimately , I concurred in what wuh published . 1 boliovod tho statements in the report to bo iruo . 1 buliuvod all tho Htatomonta nindo In it t <) bo true I havo ainuo acquired a voiy groat deal of information no to tho ultulrd of tho hunk . My opinion as to tho prollts of tho bank , as tttutod in that report , was well bused . Thoro was nothing in . tho report tbndiug
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 ?] 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 j'ou to decide
on . I thiuk that paragraph made it evidence to go to you , but if that had not been there , I should have Btopped 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 . 1 purchased in all 1400 shares hi 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 wa 3 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 bo 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 . Thoro were twelve directors ; there were two managing directors , and the chairman was ex qfficio a managing director ; in point of fact , the business rested with tho manager and tho two managing directors . " So that thoro can be no doubt of tho truth of what I mentioned to you at the beginning of my observations upon
this caso . " Periodical meetings of tho general body took place once a week . If a failure had occurred it was mentioned , and tho amount of the loss . A fortnightly balance sheet was also laid before them , which showed tho aggregate amount of assets and liabilities . Thoro was a book also which contained a statement of all tho dishonoured bills . Thero was another hook containing tho amount of bills sent to the discount brokers to discount . No means woro furnished to the directors to ascertain tho correctness ) and I believe'the others took these statements on the credit of the managing directors . I was dissatisfied with tho amount of information
afforded , I became so about tho beginning of 1850 . I set on foot a negotiation to havo myself placed on tho managing committee . This negotiation failed . 1 communicated my views to the othcrd . I communicated my views in a formal manner before tho board . A minuto was made of it than . My suggestion wna not adopted . I had no other knowledge than what I havo stated , down to 1857 / A vacancy occurred in tho managing directors in 1857 . I was appointed managing director on tho 4 th of July , 1857 . " That is tho month
in which this report was nnulo . " I was appointed , and JtoflMUJ ^ i ~ wJiUo , 4 ~ wud < in , ~ LoiKlpn 7 ^^ tainod in my speech on thia subject ia covrcot . Whon I oamo to Uvorpool I took stops to aacortain what was ihu real Btuto of thinga . I put myaoil ! in communication with Mr . Smith . I took part in tho diaausaion which ondod in tho Report of tho 28 lh of July . I applied to Mr . Smith for information as to tho loaaoa that hud occurred . Ho furnished mo with tho paper produced today . I carefully wont ovor tho figures and d , laou » aot | thorn , witU Mr .. Smith . Ho stated to mo that tUo nunor
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MR . DIXON'S SPEECH AT THE MEETING OF SHAREHOLDERS IN FEB ., 1858 . I propose , before proceeding anj r 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 discredits —( hear , hear)—and I wish , as fully as I can , to explain ray part in the direction . It is now about three and a lialf years since I became a director in this bank . At the time I was only very recently resident in Liverpool , and the 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 oa 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 nrvself in opposition to routine before I had made inquiries as to what was the custom amongst the directors of other banks iii the kingdom . I am on delicato ground bore , but I fuel that I a , m justified in saying that the practice of the Directors of this Bank , ia respect to not having an insight into its affairs , is not by any means unusual or exceptional . It is not tho only bank in the kingdom whore tho 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 least
to discharge something of tho duty which they take upon themselves . ( Cheers . ) I was dissatisfied with it . About two years ago thoro was a negotiation for placing mo on the managing committee . I havo no hesitation in saying that the negotiation was so baokod that It ought to havo succeeded . I merely mention this to explain how it is that , having felt tho impropriety of tho position occupied by tho directors , I was so long before piving effect to those viows which I admit 1 entertained . Tho negotiation took soino time ; and , while it was pending , seeing- that thero was a prospect of my having '
^ tliftUUogipvo . ofi-infoniiiation- ^ vliioh i ^ v « s"ireqiiiretJrTind-aTrinlhu'iieo which would enablo mo to altor tho practice o £ tho bank , I was indlsposoii to do anything-, but wait tha iosult . Tho negotiation came to nothing . About August , 1860 , Mr . Sollnr was appointed managing director . . I had known hint long , mid fait tlmt hla business capaofty and qualifications woro such that I was suro that if tho affairs of tho bunk woro » ot previous y mnnnffod ua well ua they ought to bo , thoy would greatly benefit by tho assistance ho would give . I know nothing of tho allhira of tho bank , excepting what might bo in-
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than to satisfy what I stated . I have since obtained a great deal of information which l . had not and 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 ,- —was that report a false report ? and was it a fraudulent report ? And before the plaintiff is entitled 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 that you must be satisfied that these reports were issued
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 [ in the following year ] . The profits , from the 80 tb of June to the 27 th of October , were in a greater ratio
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 , if so , although primarily intended for the proprietors , nevertheless you will have to say whether it was Tiot intended for the information of any one who desired to get information upon the subject . You must make up your minds affirmatively upon all these questions before yon find for the plaintiffs , and then the 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 that is the proper amount of damages .
The jury retired to consider their verdict at ten minutes to six o ' clock . They returned into court in about half an hour , and gave a verdict for thb plaintiffs , damages l 4 . 2 L . 7 a . 6 d . The Attorney-General . —Would your lordship stay execution in this case ? . The Judge . —There is no- law , I apprehend , in it . Surely 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 mm
. v wa x ** v ^ v ' v vv * m vvc * The Attorney-General . —I have not 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 . ¦
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No . 444 , September 25 , 1858 . 1 THE . LEADEB . 991
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Citation
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Leader (1850-1860), Sept. 25, 1858, page 991, in the Nineteenth-Century Serials Edition (2008; 2018) ncse.ac.uk/periodicals/l/issues/vm2-ncseproduct2261/page/7/
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