The Sun.
London, England, 1849-04-12 00:00:00

your PO

FRIDAY, DIARcu 9.

Joint Examination of the Auditors, Messrs. TucB.
BARSToW and HENRY IZICHARDSON.
Mr. Prance—This committee is appoints d to investi•
gate " the statement of Great North of England Pur-
chae Account," to 25th January, 18-19, to which your
signatures are appended as having been audited and
allowed, we presume this implies previous examination?
—We did previously examine it.
Mr. Pnince—The first entry in the statement on the
Dr. side of the account is 832 100/. shares, averaging
2341. 14s. Old. per share, tofal 195,2711. 175. 3d. HeW
did you examine the latter item ?—We took the book.

Mr. Prance—To what book do you refer ?—To $
bo,,k entitled G. N. E. Purchase, now on the table.
Mr.Prance—The first item states the average of the
1001. shares to be 234/. 14s. Old. per share, from what
documents did you arrive at this conclusion ?—We did
not calculate the average, but we saw that the sum total
and the items composing it were correct, namelfs
195.2711. 173. 3d.

Mr. Love—Did you compare the entries in the ledger
with the contracts?—No, we did not. We compared
them with the banker's books and the directors' cheques.
Mr. Love—You took no means, then, to ascertain that
the 832 1001. shares actually cost the company on the
average 234/. 14s. 04 i.?--We took no means to ascertaia
the average ; as previously stated in reply to Mr.
Prance's question, we considered it only our duty to se:
certain that the sum total was correct, and corresponded
with the banker's book and the directors' cheques.
Mr. Prance—Are you aware that your signature to
the account rendered included the fact that the average
price was 2341. 14s. Old., and which fact should be ill'
eluded in your attestation to the printed statement pre'
sented to the half-yearly meeting?—We were not aware
that there was any intention of including the average
price in the statement; there was a conversation, and Mr'
Close said the average was so and so, but we ourselves
went no farther than the books showed—that is, the bona
fide cost of the shares.
Mr. Love—Had any other sums been inserted in the,
journal as due to individuals, and paid to them, would
you have considered the fact of the payment correspond'
ing with the entry in the journal conclusive as to the
correctness of the account?--We do not understand the
question.
Mr. Love—Have you examined the journal?—We
and compared the journal with the cheques and the
banker's book.

Mr. Love—What mode do you usually adopt to prat/
that you have examined a book?—We first compote,
the items in book with :the cheques and the banker
book, cast the accounts, and then sign it.
Mr. Love—Have you so examined the book marked
Journal No. I?—We have examined it, but we haLle
a
omitted to sign it, but we have signed the result in the
ledger._
•

Mr. LoNe—Then you would not undertake to say 03/
all the itvrns iu the journal are correct?—We belief°
they are correct. We compared them with the cheque,t,
Mr. Love—What mode did you adopt to aseertsoi
that the purchases entered in the journal of the Great
North of England shares were correct?—The cheques°
the directors.

Mr. Love—Did you not compare the purchases will
the contracts?—No. We thought that the business 0
the directors.
Mr. Love—Have you assumed the fact of payment bi
the directors as evidence of correctness?—Yis.
Mr. Love—ln the entry of shares bought of Georg;
Baker and SOD, amounting to 19,8051. 4s. 4d., will%
vouchers did you compare with that account?—Nona
the directors' cheques; we never looked at the broker,
contracts at all; we thought that the duty of the °P,
rectors.

Mr. Love—Then, in fact, you did not examine or co 03;
pare any one of the contracts with the entries in tha
journal for the purchase of the Great North of Englao
shares, amounting to 747,7851. 14s. ld ?—We did not. •
Mr. Shield—Then in fact did you limit yolk. exalt,
nation of the Great North of England Purchase Aecoll°
to the verification of the fact that the directors had ac;
tually paid the sums of money they professed to h 5
paid on account of these shares?—Yes, we did.
hal
f
yearly Love—Within what period, before the last ha
yearly meeting, did the directors furnish you with t"ke
statement of the Great North of England Purchase Auve
count for examination?--We saw the accounts for the
first time on the 6 h of February, and audited theo3:°o-
that day, as well as thin revenue and construct°
accounts.

Mr. Love—You are aware that ycu are appointed nucli°
tors by the general body of the proprietors, for the C 5'i:
mination of accounts rendered to you by the directiq
that the proprietors might have some security for the,..l;
correctness?—.Yes, and we executed our duty to the
of our ability.
Mr. Prance—Do you consider it consistent with 1.11:
duty delegated to you by the general body of propel
~s
tors, that you should confine your verification to 0"0,
fact, whereas the document to which your signalll.
was attached included a large variety of facts ,slllc
o
3
are actually included in your attestation?—We inquired
into every fact which we considered it our duty to 1"
quire into.
Mr. Prance—You stated that you audited and e%fiel
mined, in one day, the Great North of England 1111";
chase Ace punt, as well as the construction and revel
accoants. If so short a time was allowed to you,
of
you not conceive it was a duty you owed to yourself%
to refuse to attest the accounts unless sufficient tip
and means were allowed you for their investigation?
We believed we fully and fairly examined the account;
Mr. Love—Your name appears, by the printed Stiltn
went, to be appended to the Great North of Englll"is
Purchase Account. Did you sign any document of will%
this professes to be a copy, or which may be supposed
be a copy?—We do no; know that we signed any taboi
form similar to the printed account; but we exarnitleo
and signed, in the ledger now before us, every item fr°
which this tabular statement is constructed. of
Mr. Clayton—Where did you examine the itero,o
broker's commission, and from whence are the particular
items forming that charge collected?—We examined,d
at I,a4e 10 in the ledger, and we collected the partial'
items from the journal.
Mr. Lave—Are there, in the books themselves, $l3l/
marks of yours to feel assured that you arrived at the
conclusion at the time you audited the accounts?—Car
t:
tainly, our initials are affixed to the commission accoon
page 16, ledger.
Mr. Love—Are you aware that the sum of 171. rdf,
included in the commission account to which you releo"
and which you state you have examined, is not the oil
that was paid to Baker and San for brokerage, 113„flo
being the whole sum alleged to be paid to them in t"
ledger?—We are not aware that it is not the sum.
Mr. Love—Be so good as to look at the eighteen et/Pnif
tracts now exhibited to you, and see what amount "
brokerage is charged therein.-741. 9s. sd.
Mr. Love—flow can that agree with the entry made;
p. 16, ledger, which you say you examined?—We C11';
not explain, as we never before saw the contracts 00,0
put into our hands. We believe Mr. Close will be able
explain.
Ou the succeeding day the auditors handed to 11
committee the following statement, drawn up and sig°e
by themselves, which they requested the committee to 4p
pond to their evidence:—
04
We submit that we have fully and fairly seem' .0
our duty as auditors,' having compared every entry
the journal of payments and receipts with the bankero
pass book and vouchers, and afterwards gone thro9go
the ledger, seeing that every item was entered under 10
proper head; that we have cast up all Vie sums, and sfed
that they corn sponded, and particularly in thejoirna'li-i
the Great North of England Purchase, as is evidenced,"
the payments being regularly ticked; having been CO
pared with the directors' cheques and banker's pass hti
with which they actually agree, and which we consit':,
suffiiient vouchers for those accounts. We did not of
amine the contrzets of sale of the brokers, considerl3
them entirely within the province and jurisdiction of 1,..u4
directors, and we submit that the accounts, as audited
us, contain a true and just exposition of the pecuoill"
affairs of the company., '
Mr. CLOSE'S Re-examination continued.
Mr. Prance—You stated, in your first day's exarol°-e$
tion, that you were ordered by Mr. Hudson to dedu
from the price charged for Great North of Eagitt
share,, the profit he had made by the transaction. Wl'-
means had you of knowing what profit he had made? 0
I understood Mr. Hudson that the profit was betviee
7,0001. and 8,000/.

, -
Mr. Clayton—You have stated that you fixed the
price of Mr. Hudson's 151. shares purchased by the en,
pany at 23!. 10s. per share, on the assumption that a
Plews had valued those shares at 24/. 3s. 6d. per shar;;;
If you had known that Mr. Plews 's valuation gilo
21/. ss. 33 per share, what sum, acting on Mr. Hudsella
instructions to keep below Mr. Plew s valuation, 1.0 i
„I.r
you have fixed the price of the 151 shares sold by Si;
Hudson to the company?—My opinion is that the Pr '-
would have been put down at 211. per share. e
Mr. Clayton—What, therefore, is the excess of Pric
r,
beyond 211. per share charged to the company for 3'
Hudson's 151. shares, and what is the aggregate araoelnt
of such exees,?—The excess of price is 2/. 10s. per
share, and aggregate amount of excess, 7,185/.
Mr. Clayton—Was the sum of 2,874/. returned btry
Mr. Hudson to the company on the 19th of FebrOri
lest as part of that excess?—yes.
"
Mr. Clayton—You have stated in answer to a questing,,,;
put by Mr. Prance, that if Mr. Hudson had sold ~,
share .s in the ordinary way, he must have paid broke,
age; if the company had purchased the shares inj,
ordinary way, must they not have paid brokerage?---i
and it was on this consideration that I put down to
brokerage charged and included in the director's cheirl
paid to Mr. Hudson. re'
Mr. Love—Y,at state that the sum of 2,8741. wa3,01,,
paid by Mr. Hudson to the company on the 19th ,0
ruary, as part of the excess charged on the 15/. 011;i
sold by him ; why was not the whole sum of 711

repaid on that k.ay ?—I 112,i not diseJvered too extant ot
the error.

Mr: France—Agsign a date to your cli,covery of the
error.--On the 20 h of afccr the Tnctinfr,.
Love—You have stat,2ii, hallyou pur,hased shares
In the marliet to the arnatmt c ic,rgel to
you would h,tvo been charged a c)ratuission ; woul.l the
commission in that cast: be so much tts y oil have Enid to
Mr. Hudson ?—This was the first transaction, and at
that time I coni:idorcd it wa; th 3 comini,3sion which

would have been charged.
Mr. Love—Are you not aware th:lt all the princip d
brokers with whom you havo (kali. have el!arged ouly
half the rate paid to Mr. Hudson ?—Yes, of course ;
George Baker and Son, and others.
Mr. Prance—Do you state the ground of the error in-
to which you had fallen in your supposed estimate o'
Mr. Plews, that you added to 21 an item of 31. 39. 6d.,
which appears at the foot of that statement ?—Yes.
Mr. Prance—lf this be a true explanation, why was
not the same principle applied to the 1001. shares, and
also to the 401. shared, viz., iu the case of the 100/shar.s.

adding to 2361. 103. (see Mr. PleN's statement), the
amount 161. 17s. 61., similarly appended at the foot at the
statement, with the 3/. 33. 6d., a; applying to the 13/.
shares, which would thus have brought out the price o,
the 1001. shares 253/. 7s. 6d., and to the 401. share-sadd

tho sum 111. 125., similarly appearing at the foot of tilt
page, which would thus make their price 72/. 123. pe:
share?—Because I took the result of the detailed

lation of the 100/. shares and 40/. shares as given un Mr.
Plow's piper.
Mr. Clayton—ls there any detailed calculation of the
151. shares on Mr. Plow's paper?—No.
Mr. Prance—ln your opinion, as a principle of equity.
ought not Mr. Hudson to have been content with a nega-
tive advantage of escaping the nec,:ssity of paying
commission, without adding theret•) thc positivo advan-
tage of receiving a commission ?-I.Torler the circum•
stances, when the transaction occurrei, I thought Mr.
Hudson was entitled to the commission. _ _

Mr.. Shield---1-Is there
.any principle of equity which

prescribes the duty of either receiving or not receiving
brokerage, or is such a receipt or non receipt a mere
matter of bargain or of calculation with reference to cir•
cumstances?—l am not aware of any such principle.
Mr. Love—My reason for asking you why you
charged a commission in this particular instance is, that
Mr. Hudson individually is the seller to himstit, a$

trustee to the York, Nevrcautle, and B•rwick share•

holders, and do you not conceive that this is a circum

stance which would render the charge of commission an
unjust one? If I had, at the time of the transaction,

seen it in the light you now put it, I should not have
charged it without full authority.
Mr. GEORGE HUDSON'S Examination.
Mr. Prance—Do you desire to offer anything by way
of explanation of a sale of Gre it North of England
shares, debited to the York, Newcastle, and Berwick

Company, 131,8671. 9s. 3d?—lf the committee thing pro-
per to ask me any questions respecting this matter, I
shall be very happy to answer them, and also to give
them any information in my power.
Mr. Love—Did the board of directors authoriv, you to
purchase these chares, and if so, at what period?—lrn-
rued iately after the meeting, on the 26th of October, 1846,
to the best of my recollection, a board meeting was held,
and a general instruction was given to me to carry out
the resolution of that meeting to purchase the shares, in
accordance with the plan which had bee❑ submitted to
the meeting of proprietors, by which the stock was cre-
ated for the express purpose of such purchase; for it
would be impossible to meet the payment of Great North
of England shares by raising a capital of three millions
and a half in in one day, that is, on the Ist July, 1850.
Mr. Love—When did you sell these shares to the
company?-0o the day after the meeting.
Mr. Love—Did you formally acquaint the board that
you, individually, had sold to the company. of which you
were chairman and trustee, certain Great North of Eng-
land shares, amounting to 131,867/. 9s. 3d. in October,
1848?—No; nor did I acquaint them with the purchase
of any other shares during the whole of the time it was
under my management. Before I made the sale or fixed
the price at which I would dispose of the shares to the
company, Mr. Plews and Mr. Oxley were requested by
me and the board to furnish an estimate at what price
it would be advantageous for the company to purchase
the sliares; to the best of my belie`' and conviction I
charged them at a lower price than that estimate; I did
not then think, nor do I now think, that inasmuch as the
company were compelled to be purchasers in 1850, my
position.did prevent me being a seller, at a proper price,
as any other individual, and I also felt I had strong
claims on the company for the best price they could
afford to give, inasmuch as I bad given up to the com-
pany a very large sum guaranteed, which I held in my
own right, amounting to 3,2501. a year, which would
have produced me a very considerable income.

Mr-. Love—Are you aware that there is no minute
made by the directors either on the 26th October, 1846,
or at any other time, that they had requested Mr. Plews
and Mr. Oxley to furnish estimates of the value of Great
North of England shares?—l am not aware that there
is; but there is no doubt of the fact that such instruction
was given.

Mr. Love—You have stated that the shareholders of
the York, Newcastle, and Berwick Railway, at the spe-
cial meeting authorised the purchase of Great North of
Engler d Railway shares; can you point out any parti-
cular resolution to that eff,ct?—l refer you to Resolution
No. 2at that meeting, taken more particularly in con-
nexion with the statements I made to the meeting, and
at the York and North Midland meeting held on the
same day and place.
Mr. Love—ls not resolution No. 2, to which von have
referred, strictly limited to a provision for the purchase
of the Great North of England Company's railway and
works, and not to a particular purchase of the shares?—
)consider the resolution of proprietors expressly autho-
rised the purchase of shares; I could only purchase the
railway and works by the purchase of the shares.
Mr. Prance—The principle of the calculation adopted
by Mr. Plews is to ascertain that if money borrowed at
five per cent. was invested in Great North of England
shares at certain prices, what profit would have accrued
to the purchaser when paid off at 250/. in July, 1850;
the results, assuming that his calculations were arithme-
tically correct, were that 100/. shares at the price of
2361. 103. would have left a profit of 71. 55.; 401. shares
at 61/. would have left a profit of 21. 18s.; 15/. shares at
211. would have left a profit of ss. 31—how can such a
calculation be applicable to the duty which devolved on
you, viz., to have purchased for the company, of which
you were trustee, shares at the lowest possible price,and
would not the average price which had prevailed on the
Stock Exchange of London for a certain period, say six
months preceding, have been a fairer principle than that
of Mr. Plew's calculation?—Experience has taught me
that in attempting to buy any large quantity of good
shares, it is utterly impossible to obtain them without ma-
terially advancing the price. I give an instance: last Sa-
turday I wrote to two brokers in London to purchase Great
North of England shares at about the price of the day;
the answers I have got are, that they are unable to make
any purchases whatever, though the Stock Exchange
List showed sales on that day. I believe, but for the un-
fortunate error respecting the 151. shares, the sum paid
to me for my shares would not be more than 500/. above
the market value at that time.
Mr. Prance—Would not your experience have equally
led you to the discovery that any considerable sale, such
as yours to the company, would have had the effect of
depressing the price, and that a similar difficulty of find-
ing purchasers would have been felt, as you now describe,
in finding sellers?—Under ordinary circumstances I think
it possible it might have that effect; but with the resolu-
tion of the Newcastle and Berwick Company promul-
gated in the London Stock Exchange, I don't think that
the offset would be to lower the price; on the contrary,
to raise it, in consequence of the company being known
to be large buyers of the shares.
Mr. Clayton—What written evidence is there that the
share which have been purchased for the company have
been so purchased and aro so held?—l put in a deed of
trust, slated January 25, 1849, executed under the seal
of the company by myself and my colleagues, and by
three directors of the York, Newcastle, and Berwick
Company.
Mr. Love—What is the unfortunate error you refer to
with regard to the 15/ shares?—ln fixing the price which
I thought in fairness I ought to receive from the com-
pany, the prices estimated by Mr. Plows, and shown to
me by Mr. Close, was 24/. 34. 6 I. per share as a price at
which it was advantageous_ for the company to purchase;
I then directed Mr. Close to put them down to the com-
pany at 231. 10s. per share, and I never discovered that
there was any error, or doubted that the transaction was
perfectly correct, until Monday morning before the meet-
ing coming to York, I was looking at the average put in
the statement, it struck me that the average looked very
high, but before the statement was sent out, it was sub•
mitted to a meeting of the board, and although some of
the directors went into the calculations, yet none of them
made any remark as to the high average of those shares.
Upon arriving in York, I went into Mr. Close's office,
and I stated to him that the average looked very high,
and asked of whom had been bought the largest number
of those shares. Ile referred to the books of the
company, and stated they, were principally bought of
me. I said, then turn to see what are the prices given
fur the same description of shares to other parties; upon
Which, seeing that the shares taken of ma were at a
higher price than those taken of otherpartideisa,tellyraidndl,
must pay the 1/. call due upon them .mnie
after the meeting, you and I must go car,:fully into that
account, and we must have the matte set rigihrt,ecbeuivtedl
cannot attend to it until after the meeting
no intimation from any party whatever
shares, or
there was
anything wrong in the price of the he
statement ; and although I felt that something was
'Wrong, I was not aware until afterwards of the extent of
that wrong. Had it been my intention to have concealed
or to have taken an advantage of the company, it would
have been very easy to have published that account in a
manner that the error would not have been so palpable.i
Mr. Love—Why did you not mention, when you had
Proceeded so far as to move the adoption of the report
at the half-yearly meeting held on the 20th of February
last, TUE FACT that there was an error in the statement
of the Great North of England purchase account?-one
reason was, that I was not aware of the extent of the
error; but still I regret that I di I not at once state that
an error had been discovered.
Mr. Love—Did you repay by the &neve now pro-
duced, to the Ycrk, Newcastle, and Uerwick Company,
Iho sum of 2,8741., being 1/. per share on 2,874 Great
North of England 151. shares sold by you to the com-
PanY ?—I did.
Mr. Prance—What induced you to fix on this parti-
cular sum of 11. per share as the limit of your over-
eharge?—l did not fix it as the limit of the overcharge,
but I paid the 11. 1e share as being unpaid on the calls,
and I distinctly stated in paying the 1/., I would go care-
fully into the matter after the meeting, and correct any
father error that might exist.
Mr. Love—To whom did you make this communica-
tion?--To Mr. Close.
Mr. Prance—Am I to understand that the sum of 1/.
Was simply a payment on account towards an error, the
total amount of which was hereafter to be ascertained,
and the balance then to be paid?—Most distinctly so.