Receipts were given for cash subscriptions to BL1 They were expressed to be

Receipts were given for cash subscriptions to bl1

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Receipts were given for cash subscriptions to BL1. They were expressed to be "With Thanks From JBL Group of Companies" and there was a stamped endorsement on the face of the receipt: "JBL Consolidated Ltd Trust Account". Receipts were sent to subscribers under cover of a letter of acceptance of the application advising that once the syndicate was fully subscribed documents would be prepared by the legal department and forwarded for execution. In one case (a Mr NW Johnston), $1000 was paid in cash and instructions were given that the remaining $4000 of his subscription should be met from a debenture with JBL Properties Ltd. Between 27 October 1971 and 6 December 1971 nine applicants had subscribed $53,000 in that way. In addition, Consolidated regarded a Mr LG Titford as having invested $6000 in BL1 and on that basis the syndicate was [1984] 1 NZLR 586 page 591 fully subscribed on 6 December 1971. Subsequently, Mr Titford advised Consolidated that he had not wished to join BL1. Following consideration of that advice Consolidated advised the solicitors for the syndicate by letter of 11 April that: "Our Investment Department advises that although Mr Titford originally indicated that he wished to become a member of the above syndicate, he now maintains that this was not the case. Accordingly, Mrs Irene Emma Duggie of 19 Coronation Road, Belmont, Auckland, 9, Housewife, will now be replacing Mr Titford with a contribution of $6,000." That was done a few days later and he was "replaced" in the syndicate by Mrs Duggie. On receipt of cash subscriptions JBL adopted the practice of immediately drawing a cheque for the amount received on the special account into which subscribers' cheques were paid (Consolidated's Trust Clearing Account) in favour of Sargent and Sargent then drew a cheque the same day for the same amount in favour of Consolidated. There was one instance, however, where the cheque went straight to Consolidated and there was no explanation in evidence of why the usual practice was not followed on that occasion. No entries were made in the ledgers of either Consolidated or Sargent to reflect those swapped cheques and in accounting terms the inwards and outwards cheques were simply contra'd one against the other. Even though the accounting procedures within JBL were examined at length at the hearing of criminal charges arising out of the failure of the Group the Government Receiver was not able to ascertain the accounting reasons for the adoption of this curious procedure. Both Sargent and Consolidated were in overdraft at all material times and the Government Receiver was unable to trace the movement of funds which were paid
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6 into Consolidated's General Account. Nevertheless it may well be that, however limited as an accounting procedure, the immediate payment from the Consolidated Trust Clearing Account on to Sargent of the amount received from a subscriber was made in recognition of the assurance given in the brochure that moneys received would be applied as advance payments for the purchase of the land and on account of construction costs.
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